Document:

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                                                                  EXECUTION COPY

                     MERRILL LYNCH MORTGAGE INVESTORS, INC.
                                    Depositor

                          WILSHIRE CREDIT CORPORATION,
                                    Servicer

                                       and

                             WELLS FARGO BANK, N.A.
                                     Trustee

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

                         POOLING AND SERVICING AGREEMENT
                             Dated as of May 1, 2005

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

                     MERRILL LYNCH MORTGAGE INVESTORS TRUST,
            MORTGAGE LOAN ASSET-BACKED CERTIFICATES, SERIES 2005-WMC2
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                                TABLE OF CONTENTS

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ARTICLE I DEFINITIONS .......................................................................................................1

ARTICLE II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES.....................................................48

           SECTION 2.01.     Conveyance of Mortgage Loans...................................................................48

           Section 2.02.     Acceptance by the Trustee of the Mortgage Loans................................................50

           Section 2.03.     Representations, Warranties and Covenants of the Depositor.....................................51

           Section 2.04.     Representations and Warranties of the Servicer.................................................55

           Section 2.05.     Substitutions and Repurchases of Mortgage Loans which are not "Qualified Mortgages"............56

           Section 2.06.     Authentication and Delivery of Certificates....................................................57

           Section 2.07.     REMIC Elections................................................................................57

           Section 2.08.     [RESERVED].....................................................................................61

           Section 2.09.     Covenants of the Servicer......................................................................61

           Section 2.10.     [RESERVED].....................................................................................61

           Section 2.11.     Permitted Activities of the Trust..............................................................61

           Section 2.12.     Qualifying Special Purpose Entity..............................................................61

ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS..................................................................61

           Section 3.01.     Servicer to Service Mortgage Loans.............................................................61

           Section 3.02.     Servicing and Subservicing; Enforcement of the Obligations of Servicer.........................63

           Section 3.03.     Rights of the Depositor and the Trustee in Respect of the Servicer.............................63

           Section 3.04.     Trustee to Act as Servicer.....................................................................64

           Section 3.05.     Collection of Mortgage Loan Payments; Collection Account; Certificate Account..................64

           Section 3.06.     Collection of Taxes, Assessments and Similar Items; Escrow Accounts............................68

           Section 3.07.     Access to Certain Documentation and Information Regarding the Mortgage Loans...................68

           Section 3.08.     Permitted Withdrawals from the Collection Account and Certificate Account......................68

           Section 3.09.     [RESERVED].....................................................................................70
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           Section 3.10.     Maintenance of Hazard Insurance................................................................70

           Section 3.11.     Enforcement of Due-On-Sale Clauses; Assumption Agreements......................................71

           Section 3.12.     Realization Upon Defaulted Mortgage Loans; Determination of Excess Proceeds; Special
                             Loss Mitigation................................................................................72

           Section 3.13.     Trustee to Cooperate; Release of Mortgage Files................................................76

           Section 3.14.     Documents, Records and Funds in Possession of Servicer to be Held for the Trustee..............77

           Section 3.15.     Servicing Compensation.........................................................................77

           Section 3.16.     Access to Certain Documentation................................................................78

           Section 3.17.     Annual Statement as to Compliance..............................................................78

           Section 3.18.     Annual Independent Public Accountants' Servicing Statement; Financial Statements...............78

           Section 3.19.     Rights of the NIMs Insurer.....................................................................78

           Section 3.20.     Periodic Filings...............................................................................78

           Section 3.21.     Annual Certificate by Trustee..................................................................79

           Section 3.22.     Annual Certificate by Servicer.................................................................80

           Section 3.23.     Prepayment Charge Reporting Requirements.......................................................80

           Section 3.24.     [RESERVED.]....................................................................................81

           Section 3.25.     Indemnification................................................................................81

           Section 3.26.     Nonsolicitation................................................................................81

           Section 3.27.     High Cost Mortgage Loans.......................................................................81

ARTICLE IV DISTRIBUTIONS ...................................................................................................82

           Section 4.01.     Advances.......................................................................................82

           Section 4.02.     Reduction of Servicing Compensation in Connection with Prepayment Interest Shortfalls..........83

           Section 4.03.     Distributions on the REMIC Interests...........................................................83

           Section 4.04.     Distributions..................................................................................83

           Section 4.05.     Monthly Statements to Certificateholders.......................................................90

ARTICLE V THE CERTIFICATES..................................................................................................93

           Section 5.01.     The Certificates...............................................................................93
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           Section 5.02.     Certificate Register; Registration of Transfer and Exchange of Certificates....................94

           Section 5.03.     Mutilated, Destroyed, Lost or Stolen Certificates..............................................98

           Section 5.04.     Persons Deemed Owners..........................................................................98

           Section 5.05.     Access to List of Certificateholders' Names and Addresses......................................98

           Section 5.06.     Book-Entry Certificates........................................................................99

           Section 5.07.     Notices to Depository..........................................................................99

           Section 5.08.     Definitive Certificates.......................................................................100

           Section 5.09.     Maintenance of Office or Agency...............................................................100

           Section 5.10.     [RESERVED]....................................................................................100

ARTICLE VI THE DEPOSITOR AND THE SERVICER..................................................................................100

           Section 6.01.     Respective Liabilities of the Depositor and the Servicer......................................100

           Section 6.02.     Merger or Consolidation of the Depositor or the Servicer......................................100

           Section 6.03.     Limitation on Liability of the Depositor, the Servicer and Others.............................101

           Section 6.04.     Limitation on Resignation of Servicer.........................................................101

           Section 6.05.     Errors and Omissions Insurance; Fidelity Bonds................................................102

           Section 6.06.     [RESERVED]....................................................................................102

           Section 6.07.     [RESERVED]....................................................................................102

ARTICLE VII DEFAULT; TERMINATION OF SERVICER...............................................................................102

           Section 7.01.     Events of Default.............................................................................102

           Section 7.02.     Trustee Act; Appointment of Successor.........................................................104

           Section 7.03.     Notification to Certificateholders............................................................105

ARTICLE VIII CONCERNING The Trustee........................................................................................105

           Section 8.01.     Duties of the Trustee.........................................................................105

           Section 8.02.     Certain Matters Affecting the Trustee.........................................................106

           Section 8.03.     Trustee Not Liable for Certificates or Mortgage Loans.........................................107

           Section 8.04.     Trustee May Own Certificates..................................................................108

           Section 8.05.     Trustee's Fees and Expenses...................................................................108

           Section 8.06.     Indemnification and Expenses of Trustee.......................................................108

           Section 8.07.     Eligibility Requirements for Trustee..........................................................109
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           Section 8.08.     Resignation and Removal of Trustee............................................................109

           Section 8.09.     Successor Trustee.............................................................................110

           Section 8.10.     Merger or Consolidation of Trustee............................................................110

           Section 8.11.     Appointment of Co-Trustee or Separate Trustee.................................................110

           Section 8.12.     Tax Matters...................................................................................112

ARTICLE IX TERMINATION ....................................................................................................114

           Section 9.01.     Termination upon Liquidation or Repurchase of all Mortgage Loans..............................114

           Section 9.02.     Final Distribution on the Certificates........................................................115

           Section 9.03.     Additional Termination Requirements...........................................................116

ARTICLE X MISCELLANEOUS PROVISIONS.........................................................................................117

           Section 10.01.    Amendment.....................................................................................117

           Section 10.02.    Counterparts..................................................................................119

           Section 10.03.    Governing Law.................................................................................119

           Section 10.04.    Intention of Parties..........................................................................119

           Section 10.05.    Notices.......................................................................................119

           Section 10.06.    Severability of Provisions....................................................................120

           Section 10.07.    Assignment....................................................................................120

           Section 10.08.    Limitation on Rights of Certificateholders....................................................121

           Section 10.09.    Inspection and Audit Rights...................................................................122

           Section 10.10.    Certificates Nonassessable and Fully Paid.....................................................122

           Section 10.11.    Third Party Rights............................................................................123

           Section 10.12.    Additional Rights of the NIMs Insurer.........................................................123

ARTICLE XI [RESERVED] .....................................................................................................
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EXHIBIT A     FORMS OF CERTIFICATES
EXHIBIT B-1   MORTGAGE LOAN SCHEDULE -MORTGAGE POOL
EXHIBIT B-2   MORTGAGE LOAN SCHEDULE - GROUP ONE MORTGAGE LOANS
EXHIBIT B-3   MORTGAGE LOAN SCHEDULE - GROUP TWO MORTGAGE LOANS
EXHIBIT C     [RESERVED]
EXHIBIT D     FORM OF CUSTODIAN 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 (ACCREDITED INVESTOR)
EXHIBIT H     FORM OF RULE 144A LETTER (QUALIFIED INSTITUTIONAL BUYER)
EXHIBIT I     FORM OF 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-1   FORM OF DELINQUENCY REPORT
EXHIBIT M-2   FORM OF MONTHLY REMITTANCE ADVICE
EXHIBIT M-3   FORM OF REALIZED LOSS REPORT
EXHIBIT N-1   FORM OF CLASS A-1 CAP CONTRACT
EXHIBIT N-2   FORM OF CLASS A-2 CAP CONTRACT
EXHIBIT N-3   FORM OF SUBORDINATED CERTIFICATE CAP CONTRACT
EXHIBIT O-1   ONE-MONTH LIBOR CAP TABLE - CLASS A-1 CAP CONTRACT
EXHIBIT O-2   ONE-MONTH LIBOR CAP TABLE - CLASS A-2 CAP CONTRACT
EXHIBIT O-3   ONE-MONTH LIBOR CAP TABLE - SUBORDINATED CERTIFICATE CAP CONTRACT
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                  POOLING AND SERVICING AGREEMENT (the "Agreement"), dated as of
May 1, 2005, among MERRILL LYNCH MORTGAGE INVESTORS, INC., a Delaware
corporation, as depositor (the "Depositor"), WILSHIRE CREDIT CORPORATION, a
Nevada corporation, as servicer (the "Servicer") and WELLS FARGO BANK, N.A, a
national banking association, 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) two real estate mortgage
investment conduits, (ii) the right to receive payments distributable to the
Class P Certificates pursuant to Section 4.04(b)(i) hereof, (iii) the Cap
Contracts and the Cap Contract Account and (iv) 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),
(iii) and (iv) above and the Lower 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
Upper Tier REMIC will consist of the Lower Tier REMIC Regular Interests and will
be evidenced by the 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 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 Transferor in the
Transfer Agreement, 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 each Class of Certificates and the
Lower Tier REMIC Interests 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 each Class of
Certificates and the Lower Tier REMIC Interests will be made on the basis of the
actual number of days elapsed in the related Accrual Period and a 360 day year.
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         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 that is 150 days
delinquent or more (whether or not the Mortgage Loan has been converted to an
REO Property), there will be no obligation to make advances and, provided
further, however, that with respect to any Mortgage Loan that has been converted
to an REO Property which is less than 150 days delinquent, the obligation to
make Advances shall be limited to payments of interest.

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

         Advancing Person: The Person to whom the Servicer's rights under this
Agreement to be reimbursed for any Advances or Servicing Advances have been
assigned pursuant to Section 10.07.

         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-1A Certificate Principal Balance, the Class A-1B
Certificate Principal Balance, the Class A-2A Certificate Principal Balance, the
Class A-2B Certificate Principal Balance, the Class A-2C Certificate Principal
Balance, the Class A-2D Certificate Principal Balance, the Class R Certificate
Principal Balance, the Class M-1 Certificate Principal Balance, the Class M-2
Certificate Principal Balance, the Class M-3 Certificate Principal Balance, the
Class M-4 Certificate Principal Balance, the Class M-5 Certificate Principal
Balance, the Class M-6 Certificate Principal Balance, the Class B-1 Certificate
Principal Balance, the Class B-2 Certificate Principal Balance, the Class B-3
Certificate Principal Balance and the Class B-4 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

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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 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.

         Auction: The one-time auction conducted by the Trustee, as described in
Section 9.01(b) hereof.

         Auction Date: The date on which the Auction occurs.

         Available Funds Cap: Any of the Class A-1 Available Funds Cap, the
Class A-2 Available Funds Cap or the Subordinated Certificate Available Funds
Cap.

         Balloon Loan: A Mortgage Loan having an original term to stated
maturity of approximately 10 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 and Class B Certificates constitutes a Class
of Book-Entry Certificates.

         Book-Entry Regulation S Global Securities: As defined in Section 5.01.

         Bring Down Letter: That certain letter agreement, dated as of May 31,
2005 among WMC and the Seller.

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

         Cap Contracts: Any of the Class A-1 Cap Contract, the Class A-2 Cap
Contract or the Subordinated Certificate Cap Contract.

         Cap Contract Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 4.04(k) in the name of the Trustee
for the benefit of the Trust Fund and designated "Wells Fargo Bank, N.A., as
Trustee, in trust for registered holders of Merrill Lynch Mortgage Investors
Trust, Mortgage Loan Asset-Backed Certificates, Series 2005-WMC2." Funds in the
Cap Contract Account shall be held in trust for the Trust Fund for the uses and
purposes set forth in this Agreement.

         Cap Contract Counterparty: The Royal Bank of Scotland plc.

         Cap Contract Notional Balance: Any of the Class A-1 Cap Contact
Notional Balance, the Class A-2 Cap Contract Notional Balance or the
Subordinated Certificate Cap Contract Notional Balance.

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         Cap Contract Termination Date: Any of the Class A-1 Cap Contract
Termination Date, the Class A-2 Cap Contract Termination Date or the
Subordinated Certificate Cap Contract Termination Date.

         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 Exhibit 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 "Wells Fargo Bank,
N.A., as Trustee, in trust for registered holders of Merrill Lynch Mortgage
Investors Trust, Mortgage Loan Asset-Backed Certificates, Series 2005-WMC2."
Funds in the Certificate Account shall be held in trust for the
Certificateholders for the uses and purposes set forth in this Agreement.

         Certificate Group: Either of Certificate Group One or Certificate Group
Two.

         Certificate Group One: The Class A-1A, Class A-1B and Class R
Certificates. For purposes of Section 2.07 hereof, Certificate Group One shall
be related to Group One.

         Certificate Group Two: The Class A-2A, Class A-2B, Class A-2C and Class
A-2D Certificates. For purposes of Section 2.07 hereof, Certificate Group Two
shall be related to Group Two.

         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 all distributions of principal on such
Distribution Date, a portion of the Class C Interest Carry Forward Amount in an
amount equal to the excess of the Overcollateralization Amount on such
Distribution Date over the Overcollateralization Amount as of the preceding
Distribution Date (or, in the case of the first Distribution Date, the initial
Overcollateralization Amount (based on the Stated Principal Balance of the
Mortgage Loans as of the Cut-Off Date)) will be added to the aggregate
Certificate Principal Balance of the Class C Certificates (on a pro rata basis).
Notwithstanding the foregoing on any Distribution Date relating to a Due Period
in which a Subsequent Recovery has been received by the Servicer, the
Certificate Principal Balance of any Class of Certificates then outstanding for
which any Applied Realized Loss Amount has been allocated will be increased, in
order of seniority, by an amount equal to the lesser of (i) the Unpaid Realized
Loss Amount for such Class of Certificates and (ii) the total of any Subsequent
Recovery distributed on such date to the Certificateholders (reduced by the
amount of the increase in the Certificate Principal Balance of any more senior
Class of Certificates pursuant to this sentence on such Distribution Date).

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

         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

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Depositor) owns 100% of the Percentage Interests evidenced by a Class of
Certificates, such Certificates shall be deemed to be Outstanding for purposes
of any provision hereof that requires the consent of the Holders of Certificates
of a particular Class as a condition to the taking of any action hereunder. The
Trustee is entitled to rely conclusively on a certification of the Depositor or
any Affiliate of the Depositor in determining which Certificates are registered
in the name of an Affiliate of the Depositor.

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

         Class A Certificate Principal Balance: For any date of determination,
the sum of the Class A-1A Certificate Principal Balance, the Class A-1B
Certificate Principal Balance, the Class R Certificate Principal Balance, the
Class A-2A Certificate Principal Balance, the Class A-2B Certificate Principal
Balance, the Class A-2C Certificate Principal Balance and the Class A-2D
Certificate Principal Balance.

         Class A Certificates: Any of the Class A-1A Certificates, the Class
A-1B Certificates, the Class A-2A Certificates, the Class A-2B Certificates, the
Class A-2C Certificates, the Class A-2D Certificates and the Class R
Certificates

         Class A Principal Distribution Amount: With respect to any Distribution
Date (1) prior to the Stepdown Date or any Distribution Date on which a Stepdown
Trigger Event exists, 100% of the Principal Distribution Amount for such
Distribution Date and (2) on or after the Stepdown Date where a Stepdown 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)
58.60% of the Stated Principal Balance of the Mortgage Loans as of the end of
the immediately preceding Due Period and (ii) the excess of the Stated Principal
Balance of the Mortgage Loans as of the end of the immediately preceding Due
Period over the Minimum Required Overcollateralization Amount 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 Certificates.

         Class A-1 Available Funds Cap: With respect to a Distribution Date, the
per annum rate equal to the product of (i) 12 and (ii) the quotient obtained by
dividing the amount of interest due on the Group One Mortgage Loans at their Net
Mortgage Rates by the aggregate Stated Principal Balance of the Group One
Mortgage Loans, with such rate being multiplied by a fraction, the numerator of
which is 30 and the denominator of which is the actual number of days in the
related Accrual Period.

         Class A-1 Cap Contract: A confirmation and agreement between the
Trustee on behalf of the Trust Fund and the Cap Contract Counterparty for the
benefit of the Class A-1 and Class R Certificates.

         Class A-1 Cap Contract Notional Balance: As of any Distribution Date,
the Notional Balance of the Class A-1 Cap Contract for such Distribution Date
set forth in the table in Exhibit O-1.

         Class A-1 Cap Contract Termination Date: The Distribution Date
following the Distribution Date in September 2008.

         Class A-1 Certificates: Each of the Class A-1A Certificates and the
Class A-1B Certificates.

         Class A-1 Maximum Rate Cap: With respect to any Distribution Date, the
per annum rate, adjusted to reflect the length of the related Accrual Period,
equal to the weighted average of the maximum lifetime Net Mortgage Rates on the
Group One Adjustable Rate Mortgage Loans and the Net Mortgage Rates on the Group
One Fixed Rate Mortgage Loans.

         Class A-1 Trigger Event: The situation that exists with respect to any
Distribution Date (a) during the period from the Closing Date through the
Distribution Date in May 2008, if the aggregate

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amount of Realized Losses incurred from the Cut-off Date through the last day of
the related Due Period (after giving effect to scheduled payments received or
advanced on or before the related Determination Date and Principal Prepayments
received during the related Prepayment Period) divided by the sum of the
aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off Date
exceeds 3.00%, or (b) on any Distribution Date on or after June 2008, if a
Stepdown Trigger Event is in effect.

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

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

         Class A-1A Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class A-1A Pass-Through Rate on
the Class A-1A Certificate Principal Balance as of such Distribution Date plus
the portion of any previous distributions on such Class in respect of Current
Interest or a Class A-1A Interest Carry Forward Amount 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-1A Certificates.

         Class A-1A Interest Carry Forward Amount: As of any Distribution Date,
the sum of (1) the excess of (A) the Class A-1A Current Interest with respect to
prior Distribution Dates over (B) the amount actually distributed to the Class
A-1A 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-1A Pass-Through Rate for the related Accrual Period.

         Class A-1A Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.290% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.580% per annum.

         Class A-1A Pass-Through Rate: For the first Distribution Date, 3.3800%
per annum. As of any Distribution Date thereafter, the lesser of (1) One-Month
LIBOR plus the Class A-1A Margin and (2) the Class A-1 Available Funds Cap for
such Distribution Date.

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

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

         Class A-1B Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class A-1B Pass-Through Rate on
the Class A-1B Certificate Principal Balance as of such Distribution Date plus
the portion of any previous distributions on such Class in respect of Current
Interest or a Class A-1B Interest Carry Forward Amount 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-1B Certificates.

         Class A-1B Interest Carry Forward Amount: As of any Distribution Date,
the sum of (1) the excess of (A) the Class A-1B Current Interest with respect to
prior Distribution Dates over (B) the amount actually distributed to the Class
A-1B 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-1B Pass-Through Rate for the related Accrual Period.

                                      -6-
<PAGE>
         Class A-1B Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.260% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.520% per annum.

         Class A-1B Pass-Through Rate: For the first Distribution Date, 3.3500%
per annum. As of any Distribution Date thereafter, the lesser of (1) One-Month
LIBOR plus the Class A-1B Margin and (2) the Class A-1 Available Funds Cap for
such Distribution Date.

         Class A-2 Available Funds Cap: With respect to a Distribution Date, the
per annum rate equal to the product of (i) 12 and (ii) the quotient obtained by
dividing the amount of interest due on the Group Two Mortgage Loans at their Net
Mortgage Rates by the aggregate Stated Principal Balance of the Group Two
Mortgage Loans, with such rate being multiplied by a fraction, the numerator of
which is 30 and the denominator of which is the actual number of days in the
related Accrual Period.

         Class A-2 Cap Contract: A confirmation and agreement between the
Trustee on behalf of the Trust Fund and the Cap Contract Counterparty for the
benefit of the Class A-2 Certificates.

         Class A-2 Cap Contract Notional Balance: The Notional Balance of the
Class A-2 Cap Contract set forth in the table in Exhibit O-2.

         Class A-2 Cap Contract Termination Date: The Distribution Date
following the Distribution Date in February 2008.

         Class A-2 Certificates: Each of the Class A-2A Certificates, the Class
A-2B Certificates, the Class A-2C Certificates and the Class A-2D Certificates.

         Class A-2 Maximum Rate Cap: With respect to any Distribution Date, the
per annum rate, adjusted to reflect the length of the related Accrual Period,
equal to the weighted average of the maximum lifetime Net Mortgage Rates on the
Group Two Adjustable Rate Mortgage Loans and the Net Mortgage Rates on the Group
Two Fixed Rate Mortgage Loans.

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

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

         Class A-2A Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class A-2A Pass-Through Rate on
the Class A-2A Certificate Principal Balance as of such Distribution Date plus
the portion of any previous distributions on such Class in respect of Current
Interest or a Class A-2A Interest Carry Forward Amount 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-2A Certificates.

         Class A-2A Interest Carry Forward Amount: As of any Distribution Date,
the sum of (1) the excess of (A) the Class A-2A Current Interest with respect to
prior Distribution Dates over (B) the amount actually distributed to the Class
A-2A 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-2A Pass-Through Rate for the related Accrual Period.

                                      -7-
<PAGE>
         Class A-2A Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.090% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.180% per annum.

         Class A-2A Pass-Through Rate: For the first Distribution Date, 3.1800%
per annum. As of any Distribution Date thereafter, the lesser of (1) One-Month
LIBOR plus the Class A-2A Margin and (2) the Class A-2 Available Funds Cap for
such Distribution Date.

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

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

         Class A-2B Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class A-2B Pass-Through Rate on
the Class A-2B Certificate Principal Balance as of such Distribution Date plus
the portion of any previous distributions on such Class in respect of Current
Interest or a Class A-2B Interest Carry Forward Amount 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-2B Certificates.

         Class A-2B Interest Carry Forward Amount: As of any Distribution Date,
the sum of (1) the excess of (A) the Class A-2B Current Interest with respect to
prior Distribution Dates over (B) the amount actually distributed to the Class
A-2B 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-2B Pass-Through Rate for the related Accrual Period.

         Class A-2B Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.180% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.360% per annum.

         Class A-2B Pass-Through Rate: For the first Distribution Date, 3.2700%
per annum. As of any Distribution Date thereafter, the lesser of (1) One-Month
LIBOR plus the Class A-2B Margin and (2) the Class A-2 Available Funds Cap for
such Distribution Date.

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

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

         Class A-2C Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class A-2C Pass-Through Rate on
the Class A-2C Certificate Principal Balance as of such Distribution Date plus
the portion of any previous distributions on such Class in respect of Current
Interest or a Class A-2C Interest Carry Forward Amount 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-2C Certificates.

         Class A-2C Interest Carry Forward Amount: As of any Distribution Date,
the sum of (1) the excess of (A) the Class A-2C Current Interest with respect to
prior Distribution Dates over (B) the amount actually distributed to the Class
A-2C Certificates with respect to interest on such prior Distribution Dates

                                      -8-
<PAGE>
and (2) interest on such excess (to the extent permitted by applicable law) at
the Class A-2C Pass-Through Rate for the related Accrual Period.

         Class A-2C Margin: As of any Distribution Date up to and including
the Optional Termination Date for the Certificates, 0.250% per annum and, as of
any Distribution Date after the Optional Termination Date, 0.500% per annum.

         Class A-2C Pass-Through Rate: For the first Distribution Date, 3.3400%
per annum. As of any Distribution Date thereafter, the lesser of (1) One-Month
LIBOR plus the Class A-2C Margin and (2) the Class A-2 Available Funds Cap for
such Distribution Date.

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

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

         Class A-2D Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class A-2D Pass-Through Rate on
the Class A-2D Certificate Principal Balance as of such Distribution Date plus
the portion of any previous distributions on such Class in respect of Current
Interest or a Class A-2D Interest Carry Forward Amount 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-2D Certificates.

         Class A-2D Interest Carry Forward Amount: As of any Distribution Date,
the sum of (1) the excess of (A) the Class A-2D Current Interest with respect to
prior Distribution Dates over (B) the amount actually distributed to the Class
A-2D 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-2D Pass-Through Rate for the related Accrual Period.

         Class A-2D Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.360% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.720% per annum.

         Class A-2D Pass-Through Rate: For the first Distribution Date, 3.4500%
per annum. As of any Distribution Date thereafter, the lesser of (1) One-Month
LIBOR plus the Class A-2D Margin and (2) the Class A-2 Available Funds Cap for
such Distribution Date.

         Class B Certificates: Any of the Class B-1, Class B-2, Class B-3 or
Class B-4 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

                                      -9-
<PAGE>
such Distribution Date plus the portion of any previous distributions on such
Class in respect of Current Interest or a Class B-1 Interest Carry Forward
Amount 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.

         Class B-1 Interest Carry Forward 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 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 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 1.200% per annum and, as of any
Distribution Date after the Optional Termination Date, 1.800% per annum.

         Class B-1 Pass-Through Rate: For the first Distribution Date, 4.2900%
per annum. As of any Distribution Date thereafter, the lesser of (1) One-Month
LIBOR plus the Class B-1 Margin and (2) the Subordinated Certificate 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, the Class M-2
Certificate Principal Balance, the Class M-3 Certificate Principal Balance, the
Class M-4 Certificate Principal Balance, the Class M-5 Certificate Principal
Balance and the Class M-6 Certificate Principal Balance have been reduced to
zero and a Stepdown Trigger Event exists, or as long as a Stepdown 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 M-3 Certificate Principal Balance (after taking into account
distributions of the Class M-3 Principal Distribution Amount on such
Distribution Date), (E) the Class M-4 Certificate Principal Balance (after
taking into account distributions of the Class M-4 Principal Distribution Amount
on such Distribution Date), (F) the Class M-5 Certificate Principal Balance
(after taking into account distributions of the Class M-5 Principal Distribution
Amount on such Distribution Date), (G) the Class M-6 Certificate Principal
Balance (after taking into account distributions of the Class M-6 Principal
Distribution Amount on such Distribution Date) and (H) the Class B-1 Certificate
Principal Balance immediately prior to such Distribution Date over (2) the
lesser of (A) 88.30% of the Stated Principal Balance of the Mortgage Loans as of
the end of the immediately preceding Due Period and (B) the excess of the Stated
Principal Balance of the Mortgage Loans as of the end of the immediately
preceding Due Period over the Minimum Required Overcollateralization Amount.
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 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 (x)
all distributions in reduction of the Class B-1 Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the

                                      -10-
<PAGE>
Certificate Principal Balance of such Class B-1 Certificates pursuant to the
last sentence of the definition of "Certificate Principal Balance."

         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 such Distribution Date plus
the portion of any previous distributions on such Class in respect of Current
Interest or a Class B-2 Interest Carry Forward Amount 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.

         Class B-2 Interest Carry Forward 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 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 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 1.300% per annum and, as of any
Distribution Date after the Optional Termination Date, 1.950% per annum.

         Class B-2 Pass-Through Rate: For the first Distribution Date, 4.3900%
per annum. As of any Distribution Date thereafter, the lesser of (1) One-Month
LIBOR plus the Class B-2 Margin and (2) the Subordinated Certificate 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, the Class M-3 Certificate Principal Balance, the
Class M-4 Certificate Principal Balance, the Class M-5 Certificate Principal
Balance, the Class M-6 Certificate Principal Balance and the Class B-1
Certificate Principal Balance have been reduced to zero and a Stepdown Trigger
Event exists, or as long as a Stepdown 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 M-3 Certificate Principal
Balance (after taking into account distributions of the Class M-3 Principal
Distribution Amount on such Distribution Date), (E) the Class M-4 Certificate
Principal Balance (after taking into account distributions of the Class M-4
Principal Distribution Amount on such Distribution Date), (F) the Class M-5
Certificate Principal Balance (after taking into account distributions of the
Class M-5 Principal Distribution Amount on such Distribution Date), (G) the
Class M-6 Certificate Principal Balance (after taking into account distributions
of the Class M-6 Principal Distribution Amount on such Distribution Date), (H)
the Class B-1 Certificate

                                      -11-
<PAGE>
Principal Balance (after taking into account distributions of the Class B-1
Principal Distribution Amount on such Distribution Date) and (I) the Class B-2
Certificate Principal Balance immediately prior to such Distribution Date over
(2) the lesser of (A) 90.80% of the Stated Principal Balance of the Mortgage
Loans as of the end of the immediately preceding Due Period and (B) the excess
of the Stated Principal Balance of the Mortgage Loans as of the end of the
immediately preceding Due Period over the Minimum Required Overcollateralization
Amount. 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, Class M and Class B-1 Certificates has been reduced to zero, the Class B-2
Principal Distribution Amount will equal the lesser of (x) the outstanding
Certificate Principal Balance of the Class B-2 Certificates and (y) 100% of the
Principal Distribution Amount remaining after any distributions on such Class A,
Class M and Class B-1 Certificates and (II) in no event will the Class B-2
Principal Distribution Amount with respect to any Distribution Date exceed the
Class B-2 Certificate Principal Balance.

         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 (x)
all distributions in reduction of the Class B-2 Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the Certificate
Principal Balance of such Class B-2 Certificates pursuant to the last sentence
of the definition of "Certificate Principal Balance."

         Class B-3 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-3 Certificates.

         Class B-3 Certificate: Any Certificate designated as a "Class B-3
Certificate" on the face thereof, in the form of Exhibit A hereto, representing
the right to distributions as set forth herein.

         Class B-3 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class B-3
Certificates.

         Class B-3 Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class B-3 Pass-Through Rate on
the Class B-3 Certificate Principal Balance as of such Distribution Date plus
the portion of any previous distributions on such Class in respect of Current
Interest or a Class B-3 Interest Carry Forward Amount 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-3 Certificates.

         Class B-3 Interest Carry Forward Amount: As of any Distribution Date,
the sum of (1) the excess of (A) the Class B-3 Current Interest with respect to
prior Distribution Dates over (B) the amount actually distributed to the Class
B-3 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-3 Pass-Through Rate for the related Accrual Period.

         Class B-3 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 1.700% per annum and, as of any
Distribution Date after the Optional Termination Date, 2.550% per annum.

         Class B-3 Pass-Through Rate: For the first Distribution Date, 4.7900%
per annum. As of any Distribution Date thereafter, the lesser of (1) One-Month
LIBOR plus the Class B-3 Margin and (2) the Subordinated Certificate Available
Funds Cap for such Distribution Date.

         Class B-3 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

                                      -12-
<PAGE>
Certificate Principal Balance, the Class M-1 Certificate Principal Balance, the
Class M-2 Certificate Principal Balance, the Class M-3 Certificate Principal
Balance, the Class M-4 Certificate Principal Balance, the Class M-5 Certificate
Principal Balance, the Class M-6 Certificate Principal Balance, the Class B-1
Certificate Principal Balance and the Class B-2 Certificate Principal Balance
have been reduced to zero and a Stepdown Trigger Event exists, or as long as a
Stepdown 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 M-3 Certificate Principal Balance (after
taking into account distributions of the Class M-3 Principal Distribution Amount
on such Distribution Date), (E) the Class M-4 Certificate Principal Balance
(after taking into account distributions of the Class M-4 Principal Distribution
Amount on such Distribution Date), (F) the Class M-5 Certificate Principal
Balance (after taking into account distributions of the Class M-5 Principal
Distribution Amount on such Distribution Date), (G) the Class M-6 Certificate
Principal Balance (after taking into account distributions of the Class M-6
Principal Distribution Amount on such Distribution Date) and (H) the Class B-1
Certificate Principal Balance (after taking into account distributions of the
Class B-1 Principal Distribution Amount on such Distribution Date), (G) the
Class B-2 Certificate Principal Balance (after taking into account distributions
of the Class B-2 Principal Distribution Amount on such Distribution Date) and
(H) the Class B-3 Certificate Principal Balance (after taking into account
distributions of the Class B-3 Principal Distribution Amount on such
Distribution Date) over (2) the lesser of (A) 92.80% of the Stated Principal
Balance of the Mortgage Loans as of the end of the immediately preceding Due
Period and (B) the excess of the Stated Principal Balance of the Mortgage Loans
as of the end of the immediately preceding Due Period over the Minimum Required
Overcollateralization Amount. 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, Class M, Class B-1 and Class B-2 Certificates
has been reduced to zero, the Class B-3 Principal Distribution Amount will equal
the lesser of (x) the outstanding Certificate Principal Balance of the Class B-3
Certificates and (y) 100% of the Principal Distribution Amount remaining after
any distributions on such Class A, Class M, Class B-1 and Class B-2 Certificates
and (II) in no event will the Class B-3 Principal Distribution Amount with
respect to any Distribution Date exceed the Class B-3 Certificate Principal
Balance.

         Class B-3 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class B-3 Applied Realized Loss Amount over (2) the sum of (x)
all distributions in reduction of the Class B-3 Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the Certificate
Principal Balance of such Class B-3 Certificates pursuant to the last sentence
of the definition of "Certificate Principal Balance."

         Class B-4 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-4 Certificates.

         Class B-4 Certificate: Any Certificate designated as a "Class B-4
Certificate" on the face thereof, in the form of Exhibit A hereto, representing
the right to distributions as set forth herein.

         Class B-4 Certificate Principal Balance: As of any date of
determination, the aggregate Certificate Principal Balance of the Class B-4
Certificates.

         Class B-4 Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class B-4 Pass-Through Rate on
the Class B-4 Certificate Principal Balance as of such Distribution Date plus
the portion of any previous distributions on such Class in respect of Current

                                      -13-
<PAGE>
Interest or a Class B-4 Interest Carry Forward Amount 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-4 Certificates.

         Class B-4 Interest Carry Forward Amount: As of any Distribution Date,
the sum of (1) the excess of (A) the Class B-4 Current Interest with respect to
prior Distribution Dates over (B) the amount actually distributed to the Class
B-4 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-4 Pass-Through Rate for the related Accrual Period.

         Class B-4 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 3.250% per annum, and, as of any
Distribution Date after the Optional Termination Date, 4.875% per annum.

         Class B-4 Pass-Through Rate: For the first Distribution Date, 6.3400%
per annum. As of any Distribution Date thereafter, the lesser of (1) One-Month
LIBOR plus the Class B-4 Margin and (2) the Subordinated Certificate Available
Funds Cap for such Distribution Date.

         Class B-4 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, the Class M-3 Certificate Principal Balance, the
Class M-4 Certificate Principal Balance, the Class M-5 Certificate Principal,
the Class M-6 Certificate Principal Balance, the Class B-1 Certificate Principal
Balance, the Class B-2 Certificate Principal Balance and the Class B-3
Certificate Principal Balance have been reduced to zero and a Stepdown Trigger
Event exists, or as long as a Stepdown 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 M-3 Certificate Principal
Balance (after taking into account distributions of the Class M-3 Principal
Distribution Amount on such Distribution Date), (E) the Class M-4 Certificate
Principal Balance (after taking into account distributions of the Class M-4
Principal Distribution Amount on such Distribution Date), (F) the Class M-5
Certificate Principal Balance (after taking into account distributions of the
Class M-5 Principal Distribution Amount on such Distribution Date), (G) the
Class M-6 Certificate Principal Balance (after taking into account distributions
of the Class M-6 Principal Distribution Amount on such Distribution Date) and
(H) the Class B-1 Certificate Principal Balance (after taking into account
distributions of the Class B-1 Principal Distribution Amount on such
Distribution Date), (G) the Class B-2 Certificate Principal Balance (after
taking into account distributions of the Class B-2 Principal Distribution Amount
on such Distribution Date), (H) the Class B-3 Certificate Principal Balance
(after taking into account distributions of the Class B-3 Principal Distribution
Amount on such Distribution Date) and (I) the Class B-4 Certificate Principal
Balance (after taking into account distributions of the Class B-4 Principal
Distribution Amount on such Distribution Date)over (2) the lesser of (A) 94.80%
of the Stated Principal Balance of the Mortgage Loans as of the end of the
immediately preceding Due Period and (B) the excess of the Stated Principal
Balance of the Mortgage Loans as of the end of the immediately preceding Due
Period over the Minimum Required Overcollateralization Amount. 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, Class M, Class B-1,
Class B-2 and Class B-3 Certificates has been reduced to zero, the Class B-4
Principal Distribution Amount will equal the lesser of (x) the outstanding
Certificate Principal Balance of the Class B-4 Certificates and (y) 100% of the
Principal Distribution Amount remaining after any distributions on such Class A,
Class M, Class B-1,

                                      -14-
<PAGE>
Class B-2 and Class B-3 Certificates and (II) in no event will the Class B-4
Principal Distribution Amount with respect to any Distribution Date exceed the
Class B-4 Certificate Principal Balance.

         Class B-4 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class B-4 Applied Realized Loss Amount over (2) the sum of (x)
all distributions in reduction of the Class B-4 Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the Certificate
Principal Balance of such Class B-4 Certificates pursuant to the last sentence
of the definition of "Certificate Principal Balance."

         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: 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 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 99.95% of the aggregate principal balance of
the Lower Tier REMIC Regular Interests immediately prior to such Distribution
Date (such amount of interest representing a "specified portion" (within the
meaning of Treasury Regulations Section 1.860G-1(a)(2)(i)(C)) of interest
payments on the Lower Tier REMIC Regular Interests (other than the Class LTII1B
Interest and the Class LTII2B 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 I Marker Interests and the Class LTIX Interest (treating for purposes of
this clause (b) the interest rate on each of the Lower Tier REMIC I Marker
Interests as being subject to a cap and a floor equal to the interest rate of
its Corresponding Certificates and treating the Class LTIX 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 Carry Forward Amount: As of any Distribution Date, 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 or added to the aggregate
Certificate Principal Balance of the Class C Certificates.

         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 (x)
all distributions in reduction of the Class C Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the Certificate
Principal Balance of such Class C Certificates pursuant to the last sentence of
the definition of "Certificate Principal Balance."

         Class LTA-1A Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/4 of the initial
principal balance of its Corresponding Certificates and an interest rate equal
to the Net Rate.

                                      -15-
<PAGE>
         Class LTA-1B Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/4 of the initial
principal balance of its Corresponding Certificate and an interest rate equal to
the Net Rate.

         Class LTA-2A Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/4 of the initial
principal balance of its Corresponding Certificate and an interest rate equal to
the Net Rate.

         Class LTA-2B Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/4 of the initial
principal balance of its Corresponding Certificate and an interest rate equal to
the Net Rate.

         Class LTA-2C Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/4 of the initial
principal balance of its Corresponding Certificate and an interest rate equal to
the Net Rate.

         Class LTA-2D Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/4 of the initial
principal balance of its Corresponding Certificate 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 1/4 of the initial
principal balance of its Corresponding Certificate 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 1/4 of the initial
principal balance of its Corresponding Certificate and an interest rate equal to
the Net Rate.

         Class LTB-3 Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/4 of the initial
principal balance of its Corresponding Certificate and an interest rate equal to
the Net Rate.

         Class LTB-4 Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/4 of the initial
principal balance of its Corresponding Certificate and an interest rate equal to
the Net Rate.

         Class LTIX Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to the excess of (i) 50% of
the aggregate Cut-off Date Principal Balance of the Mortgage Loans over (ii) the
initial principal balance of the Lower Tier REMIC I Marker Interests, and with
an interest rate equal to the Net Rate.

         Class LTIIX Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to the excess of (i) 50% of
the aggregate Cut-off Date Principal Balance of the Mortgage Loans over (ii) the
initial principal balance of the Lower Tier REMIC II Marker Interests, and with
an interest rate equal to the Net Rate.

         Class LTII1A Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 0.05% of the excess of (i)
the aggregate Cut-off Date Principal Balance of the Group One Mortgage Loans
over (ii) the aggregate of the initial Certificate Principal Balances of
Certificate Group One, and with an interest rate equal to the Net Rate.

                                      -16-
<PAGE>
         Class LTII1B Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 0.05% of the aggregate
Cut-off Date Principal Balance of the Group One Mortgage Loans, and with an
interest rate equal to the Class A-1 Available Funds Cap.

         Class LTII2A Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 0.05% of the excess of (i)
the aggregate Cut-off Date Principal Balance of the Group Two Mortgage Loans
over (ii) the aggregate of the initial Certificate Principal Balances of
Certificate Group Two, and with an interest rate equal to the Net Rate.

         Class LTII2B Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 0.05% of the aggregate
Cut-off Date Principal Balance of the Group Two Mortgage Loans, and with an
interest rate equal to the Class A-2 Available Funds Cap.

         Class LTM-1 Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/4 of the initial
principal balance of its Corresponding Certificate and an interest rate equal to
the Net Rate.

         Class LTM-2 Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/4 of the initial
principal balance of its Corresponding Certificate and an interest rate equal to
the Net Rate.

         Class LTM-3 Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/4 of the initial
principal balance of its Corresponding Certificate and an interest rate equal to
the Net Rate.

         Class LTM-4 Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/4 of the initial
principal balance of its Corresponding Certificate and an interest rate equal to
the Net Rate.

         Class LTM-5 Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/4 of the initial
principal balance of its Corresponding Certificate and an interest rate equal to
the Net Rate.

         Class LTM-6 Interest: An uncertificated regular interest in the Lower
Tier REMIC with an initial principal balance equal to 1/4 of the initial
principal balance of its Corresponding Certificate and an interest rate equal to
the Net Rate.

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

         Class M Certificates: Any of the Class M-1, Class M-2, Class M-3, Class
M-4, Class M-5 and Class M-6 Certificates .

         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.

                                      -17-
<PAGE>
         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 such Distribution Date plus
the portion of any previous distributions on such Class in respect of Current
Interest or Class M-1 Interest Carry Forward Amount 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.

         Class M-1 Interest Carry Forward 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 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 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.420% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.630% per annum.

         Class M-1 Pass-Through Rate: For the first Distribution Date, 3.5100%
per annum. As of any Distribution Date thereafter, the lesser of (1) One-Month
LIBOR plus the Class M-1 Margin and (2) the Subordinated Certificate 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 Stepdown Trigger Event exists,
or as long as a Stepdown 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) 65.60% 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 for the Mortgage
Loans as of the end of the immediately preceding Due Period over the Minimum
Required Overcollateralization Amount. 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 (x)
all distributions in reduction of the Class M-1 Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the Certificate
Principal Balance of such Class M-1 Certificates pursuant to the last sentence
of the definition of "Certificate Principal Balance."

         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.

                                      -18-
<PAGE>

      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 such Distribution Date plus
the portion of any previous distributions on such Class in respect of Current
Interest or Class M-2 Interest Carry Forward Amount 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.

      Class M-2 Interest Carry Forward 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 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 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.440% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.660% per annum.

      Class M-2 Pass-Through Rate: For the first Distribution Date, 3.5300% per
annum. As of any Distribution Date thereafter, the lesser of (1) One-Month LIBOR
plus the Class M-2 Margin and (2) the Subordinated Certificate 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 Stepdown
Trigger Event exists, or as long as a Stepdown 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)
71.80% 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 the Minimum Required Overcollateralization Amount. 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 (x)
all distributions in reduction of the Class M-2 Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the Certificate
Principal Balance of such Class M-2 Certificates pursuant to the last sentence
of the definition of "Certificate Principal Balance."

      Class M-3 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-3 Certificates.

                                     - 19 -
<PAGE>
      Class M-3 Certificate: Any Certificate designated as a "Class M-3
Certificate" on the face thereof, in the form of Exhibit A hereto, representing
the right to distributions as set forth herein.

      Class M-3 Certificate Principal Balance: As of any date of determination,
the aggregate Certificate Principal Balance of the Class M-3 Certificates.

      Class M-3 Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-3 Pass-Through Rate on
the Class M-3 Certificate Principal Balance as of such Distribution Date plus
the portion of any previous distributions on such Class in respect of Current
Interest or Class M-3 Interest Carry Forward Amount 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-3 Certificates.

      Class M-3 Interest Carry Forward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class M-3 Current Interest with respect to
prior Distribution Dates over (B) the amount actually distributed to the Class
M-3 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-3 Pass-Through Rate for the related Accrual Period.

      Class M-3 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.470% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.705% per annum.

      Class M-3 Pass-Through Rate: For the first Distribution Date, 3.5600% per
annum. As of any Distribution Date thereafter, the lesser of (1) One-Month LIBOR
plus the Class M-3 Margin and (2) the Subordinated Certificate Available Funds
Cap for such Distribution Date.

      Class M-3 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, Class
M-1 Certificate Principal Balance and Class M-2 Certificate Principal Balance
have been reduced to zero and a Stepdown Trigger Event exists, or as long as a
Stepdown 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 M-3 Certificate Principal Balance
immediately prior to such Distribution Date over (2) the lesser of (A) 75.70% 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 for the Mortgage Loans as of the end of the immediately preceding Due
Period over the Minimum Required Overcollateralization Amount. 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, the
Class M-1 Certificates and the Class M-2 Certificates has been reduced to zero,
the Class M-3 Principal Distribution Amount will equal the lesser of (x) the
outstanding Certificate Principal Balance of the Class M-3 Certificates and (y)
100% of the Principal Distribution Amount remaining after any distributions on
such Class A, Class M-1 and Class M-2 Certificates and (II) in no event will the
Class M-3 Principal Distribution Amount with respect to any Distribution Date
exceed the Class M-3 Certificate Principal Balance.

      Class M-3 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class M-3 Applied Realized Loss Amount over (2) the sum of (x)
all distributions in reduction of the Class M-3 Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the

                                     - 20 -
<PAGE>
Certificate Principal Balance of such Class M-3 Certificates pursuant to the
last sentence of the definition of "Certificate Principal Balance."

      Class M-4 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-4 Certificates.

      Class M-4 Certificate: Any Certificate designated as a "Class M-4
Certificate" on the face thereof, in the form of Exhibit A hereto, representing
the right to distributions as set forth herein.

      Class M-4 Certificate Principal Balance: As of any date of determination,
the aggregate Certificate Principal Balance of the Class M-4 Certificates.

      Class M-4 Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-4 Pass-Through Rate on
the Class M-4 Certificate Principal Balance as of such Distribution Date plus
the portion of any previous distributions on such Class in respect of Current
Interest or Class M-4 Interest Carry Forward Amount 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-4 Certificates.

      Class M-4 Interest Carry Forward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class M-4 Current Interest with respect to
prior Distribution Dates over (B) the amount actually distributed to the Class
M-4 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-4 Pass-Through Rate for the related Accrual Period.

      Class M-4 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.620% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.930% per annum.

      Class M-4 Pass-Through Rate: For the first Distribution Date, 3.7100% per
annum. As of any Distribution Date thereafter, the lesser of (1) One-Month LIBOR
plus the Class M-4 Margin and (2) the Subordinated Certificate Available Funds
Cap for such Distribution Date.

      Class M-4 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, Class
M-1 Certificate Principal Balance and Class M-2 Certificate Principal Balance
and the Class M-3 Certificate Principal Balance have been reduced to zero and a
Stepdown Trigger Event exists, or as long as a Stepdown 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 M-3 Certificate Principal Balance (after taking into account distributions
of the Class M-3 Principal Distribution Amount on such Distribution Date and (E)
the Class M-4 Certificate Principal Balance immediately prior to such
Distribution Date over (2) the lesser of (A) 79.20% 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 for the Mortgage
Loans as of the end of the immediately preceding Due Period over the Minimum
Required Overcollateralization Amount. 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, the Class M-1 Certificates, the
Class M-2 Certificates, and the Class M-3

                                     - 21 -
<PAGE>
Certificates have been reduced to zero, the Class M-4 Principal Distribution
Amount will equal the lesser of (x) the outstanding Certificate Principal
Balance of the Class M-4 Certificates and (y) 100% of the Principal Distribution
Amount remaining after any distributions on such Class A, Class M-1, Class M-2,
and Class M-3 Certificates and (II) in no event will the Class M-4 Principal
Distribution Amount with respect to any Distribution Date exceed the Class M-4
Certificate Principal Balance.

      Class M-4 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class M-4 Applied Realized Loss Amount over (2) the sum of (x)
all distributions in reduction of the Class M-4 Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the Certificate
Principal Balance of such Class M-4 Certificates pursuant to the last sentence
of the definition of "Certificate Principal Balance."

      Class M-5 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-5 Certificates.

      Class M-5 Certificate: Any Certificate designated as a "Class M-5
Certificate" on the face thereof, in the form of Exhibit A hereto, representing
the right to distributions as set forth herein.

      Class M-5 Certificate Principal Balance: As of any date of determination,
the aggregate Certificate Principal Balance of the Class M-5 Certificates.

      Class M-5 Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-5 Pass-Through Rate on
the Class M-5 Certificate Principal Balance as of such Distribution Date plus
the portion of any previous distributions on such Class in respect of Current
Interest or Class M-5 Interest Carry Forward Amount 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-5 Certificates.

      Class M-5 Interest Carry Forward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class M-5 Current Interest with respect to
prior Distribution Dates over (B) the amount actually distributed to the Class
M-5 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-5 Pass-Through Rate for the related Accrual Period.

      Class M-5 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.650% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.975% per annum.

      Class M-5 Pass-Through Rate: For the first Distribution Date, 3.7400% per
annum. As of any Distribution Date thereafter, the lesser of (1) One-Month LIBOR
plus the Class M-5 Margin and (2) the Subordinated Certificate Available Funds
Cap for such Distribution Date.

      Class M-5 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, Class
M-1 Certificate Principal Balance and Class M-2 Certificate Principal Balance,
the Class M-3 Certificate Principal Balance and the Class M-4 Certificate
Principal Balance have been reduced to zero and a Stepdown Trigger Event exists,
or as long as a Stepdown 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

                                     - 22 -
<PAGE>
taking into account distributions of the Class M-2 Principal Distribution Amount
on such Distribution Date), (D) the Class M-3 Certificate Principal Balance
(after taking into account distributions of the Class M-3 Principal Distribution
Amount on such Distribution Date, (E) the Class M-4 Certificate Principal
Balance (after taking into account distributions of the Class M-4 Principal
Distribution Amount on such Distribution Date) and (F) the Class M-5 Certificate
Principal Balance immediately prior to such Distribution Date over (2) the
lesser of (A) 82.50% 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 for the Mortgage Loans as of the end of the
immediately preceding Due Period over the Minimum Required Overcollateralization
Amount. 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, the Class M-1 Certificates, the Class M-2 Certificates, the
Class M-3 Certificates and the Class M-4 Certificates have been reduced to zero,
the Class M-5 Principal Distribution Amount will equal the lesser of (x) the
outstanding Certificate Principal Balance of the Class M-5 Certificates and (y)
100% of the Principal Distribution Amount remaining after any distributions on
such Class A, Class M-1, Class M-2, Class M-3 and Class M-4 Certificates and
(II) in no event will the Class M-5 Principal Distribution Amount with respect
to any Distribution Date exceed the Class M-5 Certificate Principal Balance.

      Class M-5 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class M-5 Applied Realized Loss Amount over (2) the sum of (x)
all distributions in reduction of the Class M-5 Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the Certificate
Principal Balance of such Class M-5 Certificates pursuant to the last sentence
of the definition of "Certificate Principal Balance."

      Class M-6 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-6 Certificates.

      Class M-6 Certificate: Any Certificate designated as a "Class M-6
Certificate" on the face thereof, in the form of Exhibit A hereto, representing
the right to distributions as set forth herein.

      Class M-6 Certificate Principal Balance: As of any date of determination,
the aggregate Certificate Principal Balance of the Class M-6 Certificates.

      Class M-6 Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-6 Pass-Through Rate on
the Class M-6 Certificate Principal Balance as of such Distribution Date plus
the portion of any previous distributions on such Class in respect of Current
Interest or Class M-6 Interest Carry Forward Amount 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-6 Certificates.

      Class M-6 Interest Carry Forward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class M-6 Current Interest with respect to
prior Distribution Dates over (B) the amount actually distributed to the Class
M-6 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-6 Pass-Through Rate for the related Accrual Period.

      Class M-6 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.700% per annum and, as of any
Distribution Date after the Optional Termination Date, 1.050% per annum.

                                     - 23 -
<PAGE>
      Class M-6 Pass-Through Rate: For the first Distribution Date, 3.7900% per
annum. As of any Distribution Date thereafter, the lesser of (1) One-Month LIBOR
plus the Class M-6 Margin and (2) the Subordinated Certificate Available Funds
Cap for such Distribution Date.

      Class M-6 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, Class
M-1 Certificate Principal Balance and Class M-2 Certificate Principal Balance,
the Class M-3 Certificate Principal Balance, the Class M-4 Certificate Principal
Balance and the Class M-5 Certificate Principal Balance have been reduced to
zero and a Stepdown Trigger Event exists, or as long as a Stepdown 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 M-3 Certificate Principal Balance (after taking into account
distributions of the Class M-3 Principal Distribution Amount on such
Distribution Date, (E) the Class M-4 Certificate Principal Balance (after taking
into account distributions of the Class M-4 Principal Distribution Amount on
such Distribution Date), (F) the Class M-5 Certificate Principal Balance (after
taking into account distributions of the Class M-5 Principal Distribution Amount
on such Distribution Date) and (G) the Class M-6 Certificate Principal Balance
immediately prior to such Distribution Date over (2) the lesser of (A) 85.70% 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 for the Mortgage Loans as of the end of the immediately preceding Due
Period over the Minimum Required Overcollateralization Amount. 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, the
Class M-1 Certificates, the Class M-2 Certificates, the Class M-3 Certificates,
the Class M-4 Certificates and the Class M-5 Certificates have been reduced to
zero, the Class M-6 Principal Distribution Amount will equal the lesser of (x)
the outstanding Certificate Principal Balance of the Class M-6 Certificates and
(y) 100% of the Principal Distribution Amount remaining after any distributions
on such Class A, Class M-1, Class M-2, Class M-3, Class M-4 and Class M-5
Certificates and (II) in no event will the Class M-6 Principal Distribution
Amount with respect to any Distribution Date exceed the Class M-6 Certificate
Principal Balance.

      Class M-6 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class M-6 Applied Realized Loss Amount over (2) the sum of (x)
all distributions in reduction of the Class M-6 Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the Certificate
Principal Balance of such Class M-6 Certificates pursuant to the last sentence
of the definition of "Certificate Principal Balance."

      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 such Distribution Date plus the
portion of any previous distributions on such Class in respect of Current

                                     - 24 -
<PAGE>
Interest or a Class R Interest Carry Forward Amount 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.

      Class R Interest Carry Forward 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 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 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.290% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.580% per annum.

      Class R Pass-Through Rate: For the first Distribution Date, 3.3800% per
annum. As of any Distribution Date thereafter, the lesser of (1) One-Month LIBOR
plus the Class R Margin and (2) the Class A-1 Available Funds Cap for such
Distribution Date.

      Closing Date: May 31, 2005.

      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(d) in the name of the
Trustee for the benefit of the Certificateholders and designated "Wilshire
Credit Corporation, as servicer for Wells Fargo Bank, N.A., as Trustee, in trust
for registered holders of Merrill Lynch Mortgage Investors Trust, Mortgage Loan
Asset-Backed Certificates, Series 2005-WMC2". 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.

      Condemnation Proceeds: All awards or settlements in respect of a Mortgaged
Property, whether permanent or temporary, partial or entire, by exercise of the
power of eminent domain or condemnation, to the extent not required to be
released either to a Mortgagor in accordance with the terms of the related
mortgage loan documents or to the holder of a senior lien on the Mortgaged
Property.

      Corresponding Certificates: With respect to the Class LTA-1A Interest, the
Class A-1A and Class R Certificates. With respect to the Class LTA-1B Interest,
the Class A-1B Certificates. With respect to the Class LTA-2A Interest, the
Class A-2A Certificates. With respect to the Class LTA-2B Interest, the Class
A-2B Certificates. With respect to the Class LTA-2C Interest, the Class A-2C
Certificates. With respect to the Class LTA-2D Interest, the Class A-2D
Certificates. With respect to the Class LTM-1 Interest, the Class M-1
Certificates. With respect to the Class LTM-2 Interest, the Class M-

                                     - 25 -
<PAGE>
2 Certificates. With respect to the Class LTM-3 Interest, the Class M-3
Certificates. With respect to the Class LTM-4 Interest, the Class M-4
Certificates. With respect to the Class LTM-5 Interest, the Class M-5
Certificates. With respect to the Class LTM-6 Interest, the Class M-6
Certificates. With respect to the Class LTB-1 Interest, the Class B-1
Certificates. With respect to the Class LTB-2 Interest, the Class B-2
Certificates. With respect to the Class LTB-3 Interest, the Class B-3
Certificates. With respect to the Class LTB-4 Interest, the Class B-4
Certificates.

      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, the
Class M-3 Current Interest, the Class M-4 Current Interest, the Class M-5
Current Interest, the Class M-6 Current Interest , the Class B-1 Current
Interest, the Class B-2 Current Interest, the Class B-3 Current Interest and the
Class B-4 Current Interest.

      Cut-off Date: May 1, 2005.

      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. With
respect to any Mortgage Loan due on any day other than the first day of the
month, such Mortgage Loan shall be deemed to be due on the first day of the
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 any 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.

                                     - 26 -
<PAGE>
      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: 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.

      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 June 2005.

      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 and ending on the first day of the month in which such
Distribution Date occurs.

      Eligible Account: An account that is (i) 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 (ii) 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
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 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.

                                     - 27 -
<PAGE>
      ERISA: The Employee Retirement Income Security Act of 1974, including any
successor or amendatory provisions.

      ERISA-Qualifying Underwriting: A best efforts or firm commitment
underwriting or private placement that would satisfy the requirements of
Prohibited Transaction Exemption 90-29, Exemption Application No. D-8012, 55
Fed. Reg. 21459 (1990), as amended, granted to the Underwriter by the United
States Department of Labor (or any other applicable underwriter's exemption
granted by the United States Department of Labor), except, in relevant part, for
the requirement that the certificates have received a rating at the time of
acquisition that is in one of the three (or four, in the case of a "designated
transaction") highest generic rating categories by at least one of the Rating
Agencies.

      ERISA Restricted Certificates: The Class C Certificates, Class P
Certificates, and Class R Certificate and any other Certificate, unless the
acquisition and holding of such other Certificate is covered by and exempt under
any applicable underwriter's exemption granted by the United States Department
of Labor.

      Event of Default: As defined in Section 7.01 hereof.

      Excess Interest: On any Distribution Date, for the Class A, Class M and
Class B 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.

      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) $20,291,278 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 (x) the Aggregate Certificate Principal Balance immediately preceding
such Distribution Date, reduced by the Principal Funds with respect to such
Distribution Date and (y) the greater of (a) the sum of 5.20% of the Pool Stated
Principal Balance of the Mortgage Loans and (b) the Minimum Required
Overcollateralization Amount 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 Stepdown 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 (and will
remain fixed at the applicable percentage of the aggregate Stated Principal
Balance of the Mortgage Loans as of the Due Date immediately prior to the
Stepdown Trigger Event) until the next Distribution Date on which the Stepdown
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.

                                     - 28 -
<PAGE>
      Fitch: Fitch, Inc., or any successor in interest.

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

      Floating Rate Certificate Carryover: With respect to a Distribution Date,
in the event that the Pass-Through Rate for a class of the Class A, Class M or
Class B Certificates is based upon the related Available Funds Cap, the excess
of (1) the amount of interest that such class would have been entitled to
receive on such Distribution Date had the Pass-Through Rate for that class not
been calculated based on the related Available Funds Cap, up to but not
exceeding the greater of (a) the related Maximum Rate Cap or (b) the sum of (i)
the related Available Funds Cap and (ii) the product of (A) a fraction, the
numerator of which is 360 and the denominator of which is the actual number of
days in the related Accrual Period and (B) the quotient obtained by dividing (I)
an amount equal to the proceeds, if any, payable under the related Cap Contract
with respect to such Distribution Date by (II) the aggregate Certificate
Principal Balance of each of the Classes of Certificates to which such Cap
Contract relates for such Distribution Date over (2) the amount of interest such
class was entitled to receive on such Distribution Date based on the related
Available Funds Cap together with (A) the unpaid portion of any such excess from
prior Distribution Dates (and interest accrued thereon at the then applicable
Pass-Through Rate for such class, without giving effect to the related Available
Funds Cap) and (B) any amount previously distributed with respect to Floating
Rate Certificate Carryover for such class that is recovered as a voidable
preference by a trustee in bankruptcy.

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

      Group One: The portion of the Mortgage Pool identified as "Group One" in
the Prospectus Supplement.

      Group One Mortgage Loan: Any Mortgage Loan identified in the Group One
Mortgage Loan Schedule attached hereto as Exhibit B-2.

      Group One Principal Distribution Amount: As of any Distribution Date, the
amount equal to the lesser of (1) the sum of the respective Certificate
Principal Balances of the Class A-1 and Class R Certificates and (2) the product
of (x) the Group One Principal Distribution Percentage and (y) the Class A
Principal Distribution Amount; provided, however, that (A) with respect to the
Distribution Date on which the Certificate Principal Balance of each Class of
the Class A-2 Certificates is initially reduced to zero (so long as the Class
A-1 and Class R Certificates are outstanding), the excess of (i) the Group Two
Principal Distribution Percentage of the Class A Principal Distribution Amount
over (ii) the amount necessary to reduce the Certificate Principal Balance of
each of the Class A-2 Certificates to zero will be added to the Group One
Principal Distribution Amount and (B) with respect to any Distribution Date
thereafter, the Group One Principal Distribution Amount shall equal the Class A
Principal Distribution Amount.

      Group One Principal Distribution Percentage: With respect to any
Distribution Date, a fraction expressed as a percentage, the numerator of which
is the amount of Principal Funds with respect to such

                                     - 29 -
<PAGE>
Distribution Date received with respect to Group One Mortgage Loans, and the
denominator of which is the amount of all Principal Funds with respect to such
Distribution Date received on all the Mortgage Loans.

      Group Two: The portion of the Mortgage Pool identified as "Group Two" in
the Prospectus Supplement.

      Group Two Mortgage Loan: Any Mortgage Loan identified in the Group Two
Mortgage Loan Schedule attached hereto as Exhibit B-3.

      Group Two Principal Distribution Amount: As of any Distribution Date, the
amount equal to the lesser of (1) the sum of the Certificate Principal Balance
of the Class A-2 Certificates and (2) the product of (x) the Group Two Principal
Distribution Percentage and (y) the Class A Principal Distribution Amount;
provided, however, that (A) with respect to the Distribution Date on which the
Certificate Principal Balance of the Class A-1 and Class R Certificates is
initially reduced to zero (so long as any of the Class A-2 Certificates is
outstanding), the excess of (i) the Group One Principal Distribution Percentage
of the Class A Principal Distribution Amount over (ii) the amount necessary to
reduce the Certificate Principal Balances of the Class A-1 Certificates to zero
will be added to the Group Two Principal Distribution Amount and (B) with
respect to any Distribution Date thereafter, the Group Two Principal
Distribution Amount shall equal the Class A Principal Distribution Amount.

      Group Two Principal Distribution Percentage: With respect to any
Distribution Date, a fraction expressed as a percentage, the numerator of which
is the amount of Principal Funds with respect to such Distribution Date received
with respect to Group Two Mortgage Loans, and the denominator of which is the
amount of all Principal Funds with respect to such Distribution Date received on
all the Mortgage Loans.

      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 Class A, Class
M, Class B or Class C or 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.

      Initial 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.

      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

                                     - 30 -
<PAGE>
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 Carry Forward Amount: Any of the Class A-1A Interest Carry
Forward Amount, the Class A-1B Interest Carry Forward Amount, the Class A-2A
Interest Carry Forward Amount, the Class A-2B Interest Carry Forward Amount, the
Class A-2C Interest Carry Forward Amount, the Class A-2D Interest Carry Forward
Amount, the Class R Interest Carry Forward Amount, the Class M-1 Interest Carry
Forward Amount, the Class M-2 Interest Carry Forward Amount, the Class M-3
Interest Carry Forward Amount, the Class M-4 Interest Carry Forward Amount, the
Class M-5 Interest Carry Forward Amount, the Class M-6 Interest Carry Forward
Amount, the Class B-1 Interest Carry Forward Amount, the Class B-2 Interest
Carry Forward Amount, the Class B-3 Interest Carry Forward Amount, the Class B-4
Interest Carry Forward Amount or the Class C Interest Carry Forward Amount, as
the case may be.

      Interest Determination Date: With respect to the Certificates, 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, (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) all proceeds of
any purchase pursuant to Section 2.02 or 2.03 during the related Prepayment
Period or pursuant to Section 9.01 not later than the related Determination Date
(to the extent that such proceeds relate to interest) less the Servicing Fee and
(6) all Prepayment Charges 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.

      Latest Possible Maturity Date: The latest maturity date for any Mortgage
Loan in the Trust Fund plus one year.

      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 either (a) 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
or (b) is not a first lien Mortgage Loan and is delinquent 180 days or longer,
the Servicer has certified in a certificate of an officer of the Servicer
delivered to the Depositor and the Trustee that it does not believe that there
is a reasonable likelihood that any further net proceeds will be received or
recovered with respect to such Mortgage Loan.

      Liquidation Proceeds: Amounts, including Condemnation Proceeds and
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

                                     - 31 -
<PAGE>
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.

      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-1A Interest, the Class
LTA-1B Interest, the Class LTA-2A Interest, the Class LTA-2B Interest, the Class
LTA-2C Interest, the Class LTA-2D Interest, the Class LTM-1 Interest, the Class
LTM-2 Interest, the Class LTM-3 Interest, the Class LTM-4 Interest, the Class
LTM-5 Interest, the Class LTM-6 Interest, the Class LTB-1 Interest, the Class
LTB-2 Interest, the Class LTB-3 Interest, the Class LTB-4 Interest, the Class
LTIX Interest, the Class LTIIX Interest, the Class LTII1A Interest, the Class
LTII1B Interest, the Class LTII2A Interest, the Class LTII2B Interest and the
Class LTR Interest.

      Lower Tier REMIC I Marker Interests: Each of the classes of Lower Tier
REMIC Regular Interests other than the Class LTIX Interest, the Class LTIIX
Interest, the Class LTII1A Interest, the Class LTII1B Interest, the Class LTII2A
Interest, the Class LTII2B Interest.

      Lower Tier REMIC II Marker Interests: Each of the Class LTII1A Interest,
the Class LTII1B Interest, the Class LTII2A Interest and the Class LTII2B
Interest.

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

      Lower Tier REMIC Subordinated Balance Ratio: The ratio of (i) the
principal balance of the Class LTII1A Interest to (ii) the principal balance of
the Class LTII2A Interest that is equal to the ratio of (i) the excess of (A)
the aggregate Stated Principal Balance of the Group One Mortgage Loans over (B)
the current Certificate Principal Balances of the Class A-1 and Class R
Certificates to (ii) the excess of (A) the aggregate Stated Principal Balance of
the Group Two Mortgage Loans over (B) the current Certificate Principal Balance
of the Class A-2 Certificates.

      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.

      Maximum Rate Cap: Any of the Class A-1 Maximum Rate Cap, the Class A-2
Maximum Rate Cap or the Subordinated Certificate Maximum Rate Cap.

      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.

      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.

      Minimum Required Overcollateralization Amount: An amount equal to the
product of (x) 0.50% and (y) the Stated Principal Balance of the Mortgage Loans
as of the Cut-off Date.

                                     - 32 -
<PAGE>
      MIN: The loan number for any MERS Loan.

      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.

      Monthly Excess Interest Amount: With respect to each Distribution Date,
the amount, if any, by which the Interest Funds for such Distribution Date
exceeds the aggregate amount distributed on such Distribution Date pursuant to
Section 4.04(b) (other than the last clause thereof).

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

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

      Mortgage: With respect to a Mortgage Loan, the mortgage, deed of trust or
other instrument creating a second lien or a second 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 Group: Either of Group One or Group Two.

      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 Trustee 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 Exhibits B-1, B-2 and B-3,
setting forth the following information with respect to each Mortgage Loan:

            (i)   the loan number;

            (ii)  borrower name and address;

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

            (iv)  the Initial Mortgage Rate;

            (v)   the original maturity date and the months remaining before
                  maturity date;

            (vi)  the original principal balance;

            (vii) the Cut-off Date Principal Balance;

            (viii) the first payment due date of the Mortgage Loan;

                                     - 33 -
<PAGE>
            (ix)  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;

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

            (xi)  a code indicating the property type;

            (xii) 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;

            (xiii) location of the related Mortgaged Property;

            (xiv) a code indicating whether a Prepayment Charge is applicable
                  and, if so,

                  (A)   the period during which such Prepayment Charge is in
                        effect;

                  (B)   the amount of such Prepayment Charge;

                  (C)   any limitations or other conditions on the
                        enforceability of such Prepayment Charge; and

                  (D)   any other information pertaining to the Prepayment
                        Charge specified in the related Mortgage Note; and

            (xv)  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 set out on Exhibit B-1.

      Mortgaged Property: The underlying property securing a Mortgage Loan.

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

                                     - 34 -
<PAGE>
      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 Servicing Fee Rate.

      Net Rate: With respect to any Distribution Date, the product of (x) the
weighted average Net Mortgage Rate for the Mortgage Loans calculated based on
the respective Net Mortgage Rates and the Stated Principal Balances of such
Mortgage Loans as of the preceding Distribution Date (or, in the case of the
first Distribution Date, as of the Cut-off Date) and (y) a fraction, the
numerator of which is 30 and the denominator of which is the actual number of
days in the related Accrual Period.

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

      NIMs Insurer: Any of the one or more insurers, if any, that is
guaranteeing certain payments under any NIM Notes; provided, that upon the
payment in full of the NIM Notes, all rights of the NIMs Insurer hereunder shall
terminate.

      NIMs Insurer Default: As defined in Section 10.12.

      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 related to the Mortgage Loans.

      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 related to the Mortgage
Loans.

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

      Offered Certificates: The Class A-1A, Class A-1B, Class A-2A, Class A-2B,
Class A-2C, Class A-2D, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5,
Class M-6, Class B-1, Class B-2, Class B-3 and Class R Certificates.

      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 the Trustee (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

                                     - 35 -
<PAGE>
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 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 or 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 clause (a) of Section 9.01 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.

      Optional Termination Price: On any date after the Initial Optional
Termination Date, an amount equal to the sum of (A) the aggregate Stated
Principal Balance of each Mortgage Loan (other than any Mortgage Loan that has
become an REO Property) as of the Distribution Date on which the proceeds of the
Optional Termination are distributed to the Certificateholders, plus accrued
interest thereon at the applicable Mortgage Rate as of the Due Date preceding
the Distribution Date on which the proceeds of the Optional Termination are
distributed to Certificateholders and the fair market value of any REO Property,
plus accrued interest thereon as of the Distribution Date on which the proceeds
of the Optional Termination are distributed to Certificateholders, (B) any
unreimbursed out-of-pocket costs and expenses owed to the Trustee (including any
amounts incurred by the Trustee in connection with conducting the Auction) or
the Servicer and any unpaid or unreimbursed Servicing Fees, Advances and
Servicing Advances and (C) any unreimbursed costs, penalties and/or damages
incurred by the Trust Fund in connection with any violation relating to any of
the Mortgage Loans of any predatory or abusive lending law.

      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.

                                     - 36 -
<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 any Class of Certificates, the
corresponding Pass-Through Rate for such Class of Certificates.

      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 Certificate Principal Balance of such Class
                  divided by the aggregate Certificate 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 the Cap Contracts
                  and 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.

      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;

                                     - 37 -
<PAGE>
            (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 such fund has the highest
                  applicable long term rating by each Rating Agency rating such
                  fund; 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;

                                     - 38 -
<PAGE>
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 shall receive an Opinion of Counsel, 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) each 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
Class R 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 and 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.

      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 or rates of prepayment, as described in the
Prospectus Supplement in the definition of "Modeling Assumptions," relating to
the Offered Certificates.

                                     - 39 -
<PAGE>
      Prepayment Charges: Any prepayment premium or charge payable by a
Mortgagor in connection with any Principal Prepayment on a Mortgage Loan
pursuant to the terms of the related Mortgage Note or Mortgage, as applicable.

      Prepayment Interest Excess: With respect to any Servicer Remittance Date,
for each Mortgage Loan that was the subject of a Principal Prepayment in full
during the portion of the related Prepayment Period occurring between the first
day of the calendar month in which such Servicer Remittance Date occurs and the
last day of the related Prepayment Period, an amount equal to interest (to the
extent received) at the applicable Net Mortgage Rate on the amount of such
Principal Prepayment for the number of days commencing on the first day of the
calendar month in which such Servicer Remittance Date occurs and ending on the
date on which such Principal Prepayment is so applied.

      Prepayment Interest Shortfall: With respect to any Distribution Date, for
each Mortgage Loan that was the subject of 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 and other than a Principal
Prepayment in full on a Mortgage Loan received during the period from and
including the first day to and including the 14th day of the month of such
Distribution Date), 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 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 15th day of the calendar month preceding the month in which such
Distribution Date occurs (or in the case of the first Distribution Date,
beginning with the Cut-off Date) and ending on the 14th day of the month in
which such Distribution Date occurs.

      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 relate to
principal), (6) all Subsequent Recoveries received during the related Due Period
and (7) 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 or recovered 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.

                                     - 40 -
<PAGE>
      Prospectus Supplement: The Prospectus Supplement dated May 26, 2005
relating to the public offering of the Offered Certificates.

      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, (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 and (iii) any unreimbursed costs, penalties and/or damages
incurred by the Trust Fund in connection with any violation relating to such
Mortgage Loan of any predatory or abusive lending law.

      Rating Agency: Either of S&P or Moody's. 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 (or, in the case of the first Distribution
Date, the Closing Date).

      Reference Banks: Barclays Bank PLC, JPMorgan Chase Bank, N.A., Citibank,
N.A., Wells Fargo Bank, 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 M and Class B
Certificates.

      Regulation S: Regulation S promulgated under the Securities Act or any
successor provision thereto, in each case as the same may be amended from time
to time; and all references to any rule, section or subsection of, or definition
or term contained in, Regulation S means such rule, section, subsection,
definition or term, as the case may be, or any successor thereto, in each case
as the same may be amended from time to time.

      Regulation S Global Securities: The Book-Entry Regulation S Global
Securities and the Definitive Regulation S Global Securities.

      Relief Act: The Servicemembers Civil Relief Act or any similar state or
local law.

                                     - 41 -
<PAGE>
      Relief Act Shortfall: With respect to any Distribution Date and any
Mortgage Loan, any reduction in the amount of interest or principal collectible
on such Mortgage Loan for the most recently ended calendar month as a result of
the application of the Relief Act.

      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 and the
Upper Tier REMIC.

      REMIC Pass-Through Rate: The Class A-1 Available Funds Cap (in the case of
a Class included in Certificate Group One), the Class A-2 Available Funds Cap
(in the case of a Class included in Certificate Group Two) or the Subordinated
Certificate Available Funds Cap (in the case of the Subordinated Certificates).

      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.

      REMIC Regular Interests: (i) any of the rights under any 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.

      Remittance Report: As defined in Section 4.04(j) hereof.

      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.

                                     - 42 -
<PAGE>
      Request for Release: The Request for Release of Documents submitted by the
Servicer to the Trustee (or its custodian), 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 Percentage: As of any Distribution 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 Excess Interest Amount: With respect to any Distribution Date,
the excess of (x) 0.05% of the Monthly Excess Interest Amount for such
Distribution Date and all prior Distribution Dates over (y) all payments
previously made to the Class R Certificate in respect of the Residual Excess
Interest Amount.

      Residual Interest: An interest in the Upper Tier REMIC that is entitled to
all distributions of principal and interest on the Class R Certificate other
than distributions in respect of the Class LTR Interest and distributions to the
extent attributable to an interest rate in excess of the Net Rate.

      Responsible Officer: When used with respect to the Trustee or the
Servicer, any officer of the Trustee or the 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
any successor in interest.

      Sale Agreement: The Mortgage Loan Sale and Assignment Agreement dated as
of May 1, 2005 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.

                                     - 43 -
<PAGE>
      Seller: Merrill Lynch Mortgage Capital, Inc., a Delaware corporation, or
its successors in interest.

      Servicer: Wilshire Credit Corporation, a Nevada corporation, or its
successor in interest.

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

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

      Servicer Remittance Date: With respect to any Distribution Date, the later
of (x) the date that is two Business Days after the 15th day of the month in
which the related Distribution Date occurs and (y) the 18th day (or if such day
is not a Business Day, the next preceding Business Day) of the month in which
such Distribution Date occurs.

      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, inspection, 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 (4) executing
and recording instruments of satisfaction, deeds of reconveyance or assignments
of mortgage to the extent not otherwise recovered from the related Mortgages or
payable under this Agreement, (5) correcting errors of prior servicers; tax
tracking; title research; flood certification and lender paid mortgage
insurance, (6) obtaining or correcting any legal documentation required to be
included in the Mortgage Files and reasonably necessary for the Servicer to
perform its obligations under this Agreement and (7) compliance with the
obligations under Sections 3.01 and 3.10.

      Servicing Fee: As to each Mortgage Loan and any Distribution Date, an
amount equal to the product of (x) the Servicing Fee Rate and (y) 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: 0.50% 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 Transfer Costs: In the event that the Servicer does not
reimburse the Trustee under 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 properly
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.

                                      -44-
<PAGE>

      Startup Day: As defined in Section 2.07 hereof.

      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 June
2008 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) 58.60% of the Stated Principal
Balances of the Mortgage Loans as of such Distribution Date.

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

<TABLE>
<CAPTION>
DISTRIBUTION DATE OCCURRING IN           STEPDOWN REQUIRED LOSS PERCENTAGE
------------------------------           ---------------------------------
<S>                                      <C>
June 2008 - May 2009                     3.00% with respect to June 2008, plus
                                         an additional 1/12th  of 1.75% for
                                         each month thereafter

June 2009 - May 2010                     4.75% with respect to June 2009, plus
                                         an additional 1/12th  of 1.50% for
                                         each month thereafter

June 2010 - May 2011                     6.25% with respect to June 2010, plus
                                         an additional 1/12th  of 0.75% for
                                         each month thereafter

June 2011 and thereafter                 7.00%
</TABLE>

      Stepdown Trigger Event: With respect to the Certificates on or after the
Stepdown Date, a Distribution Date on which (1) the quotient of (A) the
aggregate Stated Principal Balance of all Mortgage Loans which are 60 or more
days Delinquent measured on a rolling three month basis (including, for the
purposes of this calculation, Mortgage Loans in foreclosure and REO Properties)
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) 36.25% and
(ii) the 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.

                                      -45-
<PAGE>

      Subordinated Certificates: The Class M and Class B Certificates.

      Subordinated Certificate Available Funds Cap: With respect to a
Distribution Date, the per annum rate equal to the weighted average (weighted in
proportion to the results of subtracting the current Certificate Principal
Balance of the related Class A Certificates from the aggregate Stated Principal
Balance of the Mortgage Loans in each Mortgage Group as of the immediately
preceding Distribution Date (or, in the case of the first Distribution Date, as
of the Cut-off Date)) of the Class A-1 Available Funds Cap and the Class A-2
Available Funds Cap.

      Subordinated Certificate Cap Contract: A confirmation and agreement
between the Trustee on behalf of the Trust Fund and the Cap Contract
Counterparty for the benefit of the Subordinated Certificates.

      Subordinated Certificate Cap Contract Notional Balance: The Notional
Balance of the Subordinated Certificate Cap Contract Act set forth in the table
in Exhibit O-3.

      Subordinated Certificate Cap Contract Termination Date: The Distribution
Date following the Distribution Date in February 2008.

      Subordinated Certificate Maximum Rate Cap: With respect to a Distribution
Date, the per annum rate equal to the weighted average (weighted in proportion
to the results of subtracting from the aggregate Stated Principal Balance of the
Mortgage Loans in each Mortgage Group as of the immediately preceding
Distribution Date (or, in the case of the first Distribution Date, as of the
Cut-off Date) the current Certificate Principal Balance of the related Class A
Certificates) of the Class A-1 Maximum Rate Cap and the Class A-2 Maximum Rate
Cap.

      Subsequent Recovery: Any amount received on a Mortgage Loan (net of
amounts reimbursed to the Servicer related to Liquidated Mortgage Loans)
subsequent to such Mortgage Loan being determined to be a Liquidated Mortgage
Loan.

      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.

      Transfer Agreement: The Master Mortgage Loan Purchase and Interim
Servicing Agreement dated as of January 1, 2004, as amended, between Merrill
Lynch Mortgage Capital Inc., as purchaser and WMC Mortgage Corp., as seller and
interim servicer, as supplemented by the Bring Down Letter.

      Transferor: WMC.

      Trust Fund: The corpus of the trust (the "Merrill Lynch Mortgage Investors
Trust, Series 2005-WMC2") 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

                                      -46-
<PAGE>

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; (v) all proceeds of the conversion, voluntary or involuntary, of any of
the foregoing into cash or other liquid property; and (vi) the Cap Contracts and
Cap Contract Account.

      Trustee: Wells Fargo Bank, N.A., a national banking association, not in
its individual capacity, but solely in its capacity as trustee for the benefit
of the Certificateholders under this Agreement, and any 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, other than the rights to
payments of amounts with respect to the Cap Contracts, 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).

      United States Person: (i) A citizen or resident of the United States, (ii)
a corporation, partnership or other entity treated as a corporation or
partnership for federal income tax purposes organized in or under the laws of
the United States or any state thereof or the District of Columbia (unless, in
the case of a partnership, Treasury regulations provide otherwise), (iii) an
estate the income of which is includible in gross income for United States tax
purposes regardless of its source or (iv) 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. Notwithstanding the preceding sentence, to
the extent provided in Treasury regulations, certain trusts in existence on
August 20, 1996, and treated as United States persons prior to such date, that
elect to continue to be treated as United States persons will also be United
States Persons.

      Unpaid Realized Loss Amount: The Class M-1 Unpaid Realized Loss Amount,
Class M-2 Unpaid Realized Loss Amount, Class M-3 Unpaid Realized Loss Amount,
Class M-4 Unpaid Realized Loss Amount, Class M-5 Unpaid Realized Loss Amount,
Class M-6 Unpaid Realized Loss Amount, Class B-1 Unpaid Realized Loss Amount,
Class B-2 Unpaid Realized Loss Amount, Class B-3 Unpaid Realized Loss Amount,
Class B-4 Unpaid Realized Loss Amount and Class C Unpaid Realized Loss Amount,
collectively.

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

      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 as follows: (1) 98% to the Class A, Class M and Class B
Certificates, with the allocation among such 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 and (2) each Class of the
Class C and Class P will be allocated 1% of the Voting Rights Certificates.
Voting Rights will be allocated among the Certificates of each such Class in
accordance with their respective Percentage Interests.

      WMC: WMC Mortgage Corp., a California corporation, or its successor in
interest.

                                      -47-
<PAGE>

                                   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).

            The parties hereto agree and understand that it is not intended that
any Mortgage Loan be included in the Trust that is, without limitation, a
"High-Cost Home Loan" as defined by the Home Ownership and Equity Protection Act
of 1994 or any other applicable anti-predatory lending laws, including but not
limited to (i) a "High-Cost Home Loan" as defined in the New Jersey Home
Ownership Act effective November 27, 2003; (ii) a "High-Cost Home Loan" as
defined in the New Mexico Home Loan Protection Act effective January 1, 2004;
(iii) a "High-Cost Home Loan" as defined in the Massachusetts Predatory Home
Loan Practices Act effective November 7, 2004 or (iv) a "High-Cost Home Loan" as
defined by the Indiana High Cost Home Loan Law effective January 1, 2005.

            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:

            (A) The Original Mortgage Note endorsed in blank or, "Pay to the
      order of Wells Fargo Bank, N.A., as trustee, 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
      [___________].

            (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 to be true
      copy of the original of the Mortgage that has been delivered for recording
      in the appropriate recording 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, endorsed either in blank or, to
      "Wells Fargo Bank, N.A., as trustee"

            (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).

                                      -48-
<PAGE>

            (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.

            (G) 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.

            (H) 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 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 on behalf of the
Certificateholders. 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 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

                                      -49-
<PAGE>

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 the 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 acknowledges receipt of the Cap Contracts (forms of which are
attached hereto), the Transfer Agreement, the Bring Down Letter and the Sale
Agreement.

            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-1 that have been
conveyed to it. If the Trustee finds any document or documents 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 NIMs Insurer, the Servicer, the Seller and the Depositor. In
addition, the Trustee shall also notify the NIMs Insurer, the Servicer, the
Seller and the Depositor 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 office for recordation and thereafter the Depositor shall deliver or
cause to be delivered such Mortgage with evidence of recording thereon

                                      -50-
<PAGE>

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, 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 Certificate Account or Collection
Account, as appropriate, 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, as shall be requested
by the Seller and 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 NIMs Insurer, the Depositor or the Trustee
pursuant to the Sale Agreement, the Transfer Agreement and the Bring-Down
Letter. 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 Servicer and the Trustee shall keep
confidential the name of each Mortgagor except as required by this Agreement and
the Servicer and the Trustee shall not solicit any such Mortgagor for the
purpose of refinancing the related Mortgage Loan; notwithstanding anything
herein to the contrary, the foregoing shall not be construed to prohibit (i)
disclosure of any and all information that is or becomes publicly known, or
information obtained by the Trustee from sources other than the other parties
hereto, (ii) disclosure of any and all information (A) if required to do so by
any applicable law, rule or regulation, (B) to any government agency or
regulatory body having or claiming authority to regulate or oversee any aspects
of the Trustee's business or that of its affiliates, (C) pursuant to any
subpoena, civil investigation demand or similar demand or request of any court,
regulatory authority, arbitrator or arbitration to which Trustee or any
affiliate or an officer, director, employer or shareholder thereof is a party or
(D) to any affiliate, independent or internal auditor, agent, employee or
attorney of the Trustee having a need to know the same, provided that the
Trustee advises such recipient of the confidential nature of the information
being disclosed, or (iii) any other disclosure authorized by the Depositor.

            Within 70 days of the Closing Date, the Trustee (or its custodian)
shall deliver to the NIMs Insurer, the Depositor and the Servicer 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 NIMs Insurer and the Trustee 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.

                                      -51-
<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) The representations and warranties of the Transferor with
respect to the Mortgage Loans contained in the Transfer Agreement were made as
of the date of the Transfer Agreement and brought forward to the Closing Date
pursuant to the Bring Down Letter. The representations and warranties of the
Transferor with respect to the Mortgage Loans contained in the Bring Down Letter
were made as of the Closing Date. The representations and warranties of the
Seller with respect to the Mortgage Loans contained in the Sale Agreement were
made as of the Closing Date. To the extent that any fact, condition or event
with respect to a Mortgage Loan constitutes a breach of both (i) a
representation or warranty of the Transferor under the Transfer Agreement and
(ii) a representation or warranty of the Seller under the Sale Agreement, the
only right or remedy of the

                                      -52-
<PAGE>

Trustee, the NIMs Insurer or of any Certificateholder shall be the Trustee's
right to enforce the obligations of the Transferor under any applicable
representation or warranty made by it. The Trustee acknowledges that the Seller
shall have no obligation or liability with respect to any breach of a
representation or warranty made by it with respect to the Mortgage Loans if the
fact, condition or event constituting such breach also constitutes a breach of a
representation or warranty made by the Transferor in the Transfer Agreement,
without regard to whether the Transferor fulfills its contractual obligations in
respect of such representation or warranty. The Trustee also acknowledges that
the Seller shall have no obligation or liability with respect to any breach of a
representation or warranty made solely by the Transferor with respect to the
Mortgage Loans, without regard to whether the Transferor fulfills its
contractual obligations in respect of such representation or warranty. The
Trustee further 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.

            In addition to the representations and warranties of the Transferor
in the Transfer Agreement that were brought forward to the Closing Date pursuant
to the Bring Down Letter, with respect to each Mortgage Loan, the Transferor
made certain additional covenants regarding such Mortgage Loan, as set forth in
the Transfer Agreement. With respect to any breach of such additional covenants
that materially and adversely affects the interests of the Certificateholders in
such Mortgage Loan, the Seller shall (1) use reasonable efforts to enforce such
covenant against the Transferor and (2) if the Seller successfully enforces any
obligation of the Transferor to repurchase such Mortgage Loan, the Seller shall
repurchase such Mortgage Loan in accordance with this Section 2.03. If the
Seller does not successfully enforce the obligation, if any, of the Transferor
to repurchase a Mortgage Loan with respect to any breach of any such additional
covenants, the Seller shall have no obligation or right to repurchase or cure
such Mortgage Loan.

            (c) Upon discovery by any of the Depositor, the Servicer, the NIMs
Insurer or the Trustee of a breach of any of such representations and warranties
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 such breach of any representation or
warranty, the Transferor or the Seller, as applicable, 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 Transferor or
the Seller, the Trustee's rights shall be enforced under the Transfer Agreement
or the Sale Agreement for the benefit of Certificateholders and the NIMs
Insurer. If a breach of the representations and warranties set forth in the
Transfer Agreement exists solely due to the unenforceability of a Prepayment
Charge, the Trustee or the other party having notice thereof 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 the Transfer 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). 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 in the Sale
Agreement 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

                                      -53-
<PAGE>

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 Day. 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 day" 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. In
furtherance of the foregoing, if the Seller is not a member of MERS and
repurchases a Mortgage Loan which is registered on the MERS System, the Seller,
at its own expense and without any right of reimbursement, shall cause MERS to
execute and deliver an assignment of the Mortgage in recordable form to transfer
the Mortgage from MERS to the Seller and shall cause such Mortgage to be removed
from registration on the MERS System in accordance with MERS' rules and
regulations.

            With respect to any Mortgage Loan repurchased by the Depositor
pursuant to this Agreement, by the Seller pursuant to the Sale Agreement or by
the Transferor pursuant to the Transfer 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 in the
Certificate Account pursuant to Section 3.05 and the Servicer shall notify the
Trustee of its receipt of the same. The Trustee, upon the Servicer's 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, the Seller or the Transferor, 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 prepared by the Trustee
(or its custodian), and the Trustee shall have no 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 (or its custodian) pursuant to the terms of this Article II in
exchange for a Deleted Mortgage Loan: (i) the Seller must deliver to the Trustee
(or its custodian) 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 Mortgage Loan satisfying all requirements
under the definition of Replacement Mortgage Loan and the delivery of such
Mortgage File and containing the granting language set forth in 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 (or its
custodian) 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

                                      -54-
<PAGE>

aggregate principal balance of all such Replacement Mortgage Loans as of the
date of substitution and the aggregate Prepayment Charges 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 Charges 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")
plus an amount equal to any unreimbursed costs, penalties and/or damages
incurred by the Trust Fund in connection with any violation relating to such
Deleted Mortgage Loan of any predatory or abusive lending law shall be remitted
by the Seller to the Servicer for deposit into the Certificate Account by the
Seller 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
shall have received an Opinion of Counsel (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 Trustee 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.
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.

            (d) It is understood and agreed that the representations, warranties
and indemnification (i) set forth in this Section 2.03, (ii) of the Seller and
the Depositor set forth in the Sale Agreement and assigned to the Trustee by the
Depositor hereunder and (iii) of the Transferor, assigned by the Seller to the
Depositor pursuant to 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.

            (e) The Depositor shall deliver a copy of the Mortgage Loan Schedule
to the Servicer on the Closing Date.

            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 duly organized and is validly
existing as a corporation in good standing under the laws of the State of Nevada
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.

                                      -55-
<PAGE>

                        (ii) The Servicer has the corporate 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 hereunder 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.

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

                        (v) Except as previously disclosed to the Depositor in
the Prospectus Supplement, 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

                                      -56-
<PAGE>

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, upon the written direction of the Depositor, 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 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 so
as to carry out the intention of the parties that each of the Upper 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 Day" 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) amounts distributable to the Class P Certificates pursuant
to Section 4.04(b)(i) hereof, (ii) the interests issued by the Lower Tier REMIC,
(iii) the grantor trusts described in Section 2.07 hereof and (iv) the Cap
Contracts and Cap Contract Account). The Lower Tier REMIC shall issue the Lower
Tier REMIC Regular Interests 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 Upper Tier REMIC shall be the Lower 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 (other than the Uncertificated Class C 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 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.

                                      -57-
<PAGE>

            (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 each Class of the Class A,
Class M and Class B Certificates to receive payments in respect of Excess
Interest shall be treated as a right in interest rate cap contracts written by
the Class C Certificateholders in favor of the holders of each Class of the
Class A, Class M and Class B 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 (other than the Class R Certificate),
Class M and Class B Certificates and the residual interest in the Upper Tier
REMIC held by the holder of the Class R Certificate. For information reporting
requirements, the rights of the Class A, Class M and Class B Certificates to
receive payments in respect of Excess Interest shall be assumed to have zero
value or a de minimis value. 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, Class M and Class B Certificates
receive payments in respect of Excess Interest, such amounts, to the extent not
derived from payments on the Cap Contracts, 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 rate cap agreement.

            (e) The parties intend that the portion of the Trust Fund consisting
of the Uncertificated Class C Interest, the Cap Contracts, the Cap Contract
Account and the obligation of the holders of the Class C Certificates to pay
amounts in respect of Excess Interest to the holders of the Class A, Class M and
Class B 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, Class M, Class B 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 payments distributable to the Class P Certificates
pursuant to Section 4.04(b)(i) hereof 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) [RESERVED]

            (h) All payments of principal and interest at the Net Mortgage Rate
on each of the Mortgage Loans (other than payments distributable to the Class P
Certificates pursuant to Section 4.04(b)(i) hereof) received from the Mortgage
Loans shall be paid to the Lower Tier REMIC Regular

                                      -58-
<PAGE>

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, payments and losses shall be allocated among the Lower Tier REMIC Regular
Interests so that (i) each of the Lower Tier REMIC I Marker Interests shall have
a principal balance equal to 25% of the principal balance of the Corresponding
Certificates, (ii) the Class LTIX Interest has a principal balance equal to the
excess of (x) 50% of the remaining principal balance of the Mortgage Loans over
(y) the aggregate principal balance of the Lower Tier REMIC I Marker Interests
(if necessary to reflect an increase in overcollateralization, accrued and
unpaid interest on the Class LTIX interest may be added to its principal amount
to achieve this result) and (iii) the aggregate principal amount of the Class
LTII1A Interest, Class LTII1B Interest, Class LTII2A Interest, Class LTII2B
Interest and the Class LTIIX Interest shall equal 50% of the remaining principal
balance of the Mortgage Loans. Distributions and losses allocated to the Lower
Tier REMIC Regular Interests described in clause (iii) of the preceding sentence
will be allocated among such Lower Tier REMIC Regular Interests in the following
manner: (x) such distributions shall be deemed made to such Lower Tier REMIC
Regular Interests first, so as to keep the principal balance of the each such
Lower Tier REMIC Regular Interest with "B" at the end of its designation equal
to 0.05% of the aggregate scheduled principal balance of the Mortgage Loans in
the related Mortgage Group; second, to such Lower Tier REMIC Regular Interests
with "A" at the end of its designation so that the uncertificated principal
balance of each such Lower Tier REMIC Regular Interest is equal to 0.05% of the
excess of (I) the aggregate scheduled principal balance of the Mortgage Loans in
the related Mortgage Group over (II) the aggregate principal balance of
Certificate Group One, in the case of the Class LTII1A Interest, or Certificate
Group Two, in the case of the Class LTII2A Interest (except that if 0.05% of any
such excess is greater than the principal amount of the related Lower Tier REMIC
II Marker Interest with "A" at the end of its designation, the least amount of
principal shall be distributed to each Lower Tier REMIC II Marker Interest with
"A" at the end of its designation such that the Lower Tier REMIC Subordinated
Balance Ratio is maintained) and finally, any remaining distributions of
principal to the Class LTIIX Interest and (y) such losses shall be allocated
among the Lower Tier REMIC Regular Interests described in clause (iii) of the
preceding sentence first, so as to keep the principal balance of the each such
Lower Tier REMIC Regular Interest with "B" at the end of its designation equal
to 0.05% of the aggregate scheduled principal balance of the Mortgage Loans in
the related Mortgage Group; second, to such Lower Tier REMIC Regular Interests
with "A" at the end of its designation so that the uncertificated principal
balance of each such Lower Tier REMIC Regular Interest is equal to 0.05% of the
excess of (I) the aggregate scheduled principal balance of the Mortgage Loans in
the related Mortgage Group over (II) the aggregate principal balance of
Certificate Group One, in the case of the Class LTII1A Interest, or Certificate
Group Two, in the case of the Class LTII2A Interest (except that if 0.05% of any
such excess is greater than the principal amount of the related Lower Tier REMIC
II Marker Interest with "A" at the end of its designation, the least amount of
losses shall be allocated to each Lower REMIC II Marker Interest with "A" at the
end of its designation such that the Lower Tier REMIC Subordinated Balance Ratio
is maintained) and finally, any remaining losses to the Class LTIIX Interest.
Notwithstanding the preceding two sentences, however, losses not allocated to
any Class of Certificates will not be allocated to any Lower Tier REMIC Regular
Interests. All computations with respect to the Lower Tier REMIC Regular
Interests shall be taken out to ten decimal places.

            Any available funds remaining in the Lower Tier REMIC on a
Distribution Date after distributions to the Lower Tier REMIC Regular Interests
shall be distributed to the Class R Certificates in respect of the Class LTR
Interest.

            If on any Distribution Date the Certificate Principal Balance of any
Class of Certificates is increased pursuant to the last sentence of the
definition of "Certificate Principal Balance", then there shall be an equivalent
increase in the principal amounts of the Lower Tier REMIC Regular Interests,
with such increase allocated (before the making of distributions and the
allocation of losses on the Lower Tier REMIC Regular Interests on such
Distribution Date) among the Lower Tier REMIC Regular Interests so

                                      -59-
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that to the greatest extent possible, (i) each of the Lower Tier REMIC I Marker
Interests has a principal balance equal to 25% of the principal balance of the
Corresponding Certificates, (ii) the Class LTIX Interest has a principal balance
equal to the excess of (x) 50% of the remaining principal balance of the
Mortgage Loans over (y) the aggregate principal balance of the Lower Tier REMIC
I Marker Interests and (iii) the aggregate principal amount of the Lower Tier
REMIC II Marker Interests and the Class LTIIX Interest shall equal 50% of the
remaining principal balance of the Mortgage Loans. Allocations in connection
with clause (iii) shall be made so that, to the greatest extent possible, (a)
the principal balance of each Lower Tier REMIC II Marker Interest with "B" at
the end of its designation equals 0.05% of the aggregate scheduled principal
balance of the Mortgage Loans in the related Mortgage Group, (b) the principal
balance of each Lower Tier REMIC II Marker Interest with "A" at the end of its
designation equals 0.05% of the excess of (x) the aggregate scheduled principal
balance of the Mortgage Loans in the related Mortgage Group over (y) the
aggregate principal balance of Certificate Group One in the case of the Class
LTII1A Interest, or Certificate Group Two in the case of the Class LTII2A
Interest and (c) any remaining allocations are made to the Class LTIIX Interest.

            For purposes of this Section 2.07, (i) the Class LTII1A Interest and
Class LTII1B Interest shall be related to Group One, and (ii) the Class LTII2A
Interest and Class LTII2B Interest shall be related to Group Two.

            (i) 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 a 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 those arising out of a negligent performance by the
Servicer 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).

            (j) 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 a 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 those 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).

                                      -60-
<PAGE>

            Section 2.08. [RESERVED]

            Section 2.09. 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 NIMs
Insurer or the Trustee, any affiliate of the Depositor, the NIMs Insurer or the
Trustee 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 2.10. [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, the Cap Contracts, 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 or SFAS 140.

                                   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

                                      -61-
<PAGE>

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. Notwithstanding
anything in this Agreement to the contrary, the Servicer shall not make or
permit any modification, waiver or amendment of any term of any Mortgage Loan
that 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. 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, 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, subordinations 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, to the extent that the Servicer is not permitted
to execute and deliver such documents pursuant to the preceding sentence. Upon
receipt of such documents, the Depositor and/or the Trustee shall execute such
documents and deliver them to the Servicer. For purposes of this Section 3.01,
the Trustee hereby grants to the Servicer a limited power of attorney to execute
and file any and all documents necessary to fulfill the obligations of the
Servicer under this Section 3.01.

            The Servicer shall not be required to make any Servicing Advance
with respect to a Mortgage Loan that is 150 days or more delinquent.

            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.

            The Servicer further is authorized and empowered by the Trustee, on
behalf of the Certificateholders and the Trustee, in its own name or in the name
of the Sub-Servicer, when the Servicer or the Sub-Servicer, as the case may be,
believes it is appropriate in its best judgment to register any Mortgage Loan on
the MERS System, or cause the removal from the registration of any Mortgage Loan
on the MERS System, to execute and deliver, on behalf of the Trustee and the
Certificateholders or any of them, any and all instruments of assignment and
other comparable instruments with respect to such assignment or re-recording of
a Mortgage in the name of MERS, solely as nominee for the Trustee and its
successors and assigns. Any reasonable expenses incurred in connection with the
actions described in the preceding sentence or as a result of MERS discontinuing
or becoming unable to continue operations in connection with the MERS System,
shall be subject to withdrawal by the Servicer from the Collection Account.

            With respect to any second lien Mortgage Loan, the Servicer may
consent to the refinancing of the prior senior lien relating to such Mortgage
Loan, provided that the following requirements are met:

                                      -62-
<PAGE>

            (a) the resulting Combined Loan-to-Value Ratio of such Mortgage Loan
is no higher than the Combined Loan-to-Value Ratio prior to such refinancing;
and

            (b) the interest rate for the loan evidencing the refinanced senior
lien is no more than 2.0% higher than the interest rate on the loan evidencing
the existing senior lien immediately prior to the date of such refinancing; and

            (c) the loan evidencing the refinanced senior lien is not subject to
negative amortization.

            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")
including, at the Servicer's option, if requested to do so by the Holder of the
Class C Certificate; 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. The
Trustee shall have no obligations, duties or liabilities with respect to a
subservicer, including without limitation, any obligation, duty or liability to
monitor such subservicer or to pay a subservicer's fees and expenses.

            (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.

                                      -63-
<PAGE>

            Section 3.04. Trustee to Act as Servicer.

            Subject to Sections 6.04 and 7.02, 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
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 or resignation 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 succeed to the rights and obligations
of the Servicer thereunder; and the Servicer shall not thereby be relieved of
any liability or obligations under the subservicing agreement arising prior to
the date of such succession. 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 thereof, such
amounts shall be payable out of the Certificate Account; provided that if the
Servicer has been terminated by reason of an Event of Default, 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, the Trustee
shall seek to appoint a successor servicer that is eligible in accordance with
the criteria specified this Agreement.

            The Servicer shall, upon request of the Trustee, but at the expense
of the Servicer if the Servicer has been terminated by reason of an Event of
Default, 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.

            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 default
interest charge, or (ii) subject to Section 3.01, 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
computation hereunder, except as provided below; provided, further, that the
NIMs Insurer's prior written consent shall be required for any modification,

                                      -64-
<PAGE>

waiver or amendment after 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 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 Charge or portion
thereof unless, (i) the enforceability thereof shall have been limited by
bankruptcy, insolvency, moratorium, receivership or 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 Servicer has not
been provided with information sufficient to enable it to collect the Prepayment
Charge, 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 and (y) such waiver would maximize recovery of total proceeds taking
into account the value of such Prepayment Charge and related Mortgage Loan, or
(v) the collection of such Prepayment Charge or portion thereof, or of a similar
type of Prepayment Charge, would be considered "predatory" or "illegal" pursuant
to written guidance published by any applicable federal, state or local
regulatory authority having jurisdiction over such matters or has been
challenged by any such authority, or (vi) there is a certificated class action
in which a similar type of prepayment charge is being challenged. Except as
provided in the preceding sentence, in no event will the Servicer waive a
Prepayment Charge in connection with a refinancing of a Mortgage Loan that is
not related to a default or a reasonably foreseeable default. If the Servicer
waives or does not collect all or a portion of a Prepayment Charge 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 Charge (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.

            (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:

                                      -65-
<PAGE>

                  (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 (x)
interest due on the Mortgage Loans on or prior to the Cut-off Date and (y)
Prepayment Interest Excess;

                  (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 Subsequent Recoveries;

                  (v) all Compensating Interest;

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

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

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

                  (ix) all Prepayment Charges; 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 Charges)) if collected, and any Prepayment Interest Excess need not
be remitted by the Servicer. Rather, such fees and charges may be retained by
the Servicer as additional servicing compensation. 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, 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 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.

                                      -66-
<PAGE>

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

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

                  (iv) the Optional Termination Amount paid by the winning
bidder at the Auction or by the Servicer pursuant to Section 9.01.

            Any amounts received by the Trustee prior to 1:00 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 Trustee into the Certificate
Account shall be exclusive. If the Servicer fails to remit any funds due by the
time designated herein, the Servicer shall pay to the Trustee, for its own
account, interest accrued on such funds at the then current prime rate (as
published by Wells Fargo Bank, N.A.) from and including the applicable due date,
to but excluding the day such funds are paid to the Trustee. 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 cause the Trustee to 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.

            (f) 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
Trustee, 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

                                      -67-
<PAGE>

incurred in the Certificate Account in respect of any such investments shall be
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.

            The Servicer may from time to time provide the Depositor, and any
Person designated by the Depositor, with certain reports and reasonable access
to information and documentation regarding the Mortgage Loans.

            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 (or to
reimburse the Advance Financing Person 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

                                      -68-
<PAGE>

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 any Non-Recoverable Servicing Advances previously
made to the extent that, in the case of Non-Recoverable Servicing Advances,
reimbursement therefor constitutes "unanticipated expenses" within the meaning
of Treasury Regulation Section 1.860G-1(b)(3)(ii);

                  (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) reserved;

                  (vii) to pay to the Servicer any unpaid Servicing Fees and to
reimburse it for any unreimbursed Servicing Advances (to the extent that
reimbursement for Servicing Advances would constitute an "unanticipated expense"
within the meaning of Treasury Regulation Section 1.860-1(b)(3)(ii)), 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;

                  (viii) to pay to the Servicer any unpaid Servicing Fees for
any Mortgage Loan upon such Mortgage Loan being charged off and upon termination
of the obligations of the Servicer.

                  (ix) 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;

                  (x) to reimburse the Servicer or the Depositor for expenses
incurred by either of them in connection with the Mortgage Loans or Certificates
and reimbursable pursuant to Section 3.04, Section 3.25 or Section 6.03 hereof
provided that reimbursement therefor would constitute "unanticipated" expenses
within the meaning of Treasury Regulation Section 1.860G-1(b)(3)(ii);

                  (xi) to reimburse the Trustee for enforcement expenses
reasonably incurred in respect of a breach or 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 (xi) 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;

                  (xii) [RESERVED]

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

                                      -69-
<PAGE>

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

            In addition, no later than 2:00 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 2:00 p.m. Eastern Time, such Interest Funds and Principal Funds shall be
deposited in the Certificate Account on the next Business Day. In the event such
funds are not deposited by 2:00 p.m. Eastern Time on the Servicer Remittance
Date, the Servicer shall pay, out of its own funds, interest on such amount at a
rate equal to the then current "prime rate" (as published by Wells Fargo Bank,
N.A.) for each date or part thereof until such amount is paid in full.

            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 on or
prior to the next succeeding Servicer Remittance Date upon making any
withdrawals from the Collection Account pursuant to subclauses (iii) and (vii)
above.

            Unless otherwise specified, any amounts reimbursable to the Servicer
or the Trustee from amounts on deposit in the Collection Account or the
Certificate Accounts shall be deemed to come from first, Interest Funds, and
thereafter, Principal Funds for the related Distribution Date.

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

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

                  (ii) to clear and terminate the Certificate Account upon
termination of the Agreement pursuant to Section 9.01 hereof (after paying all
amounts necessary to the Trustee or the Servicer in connection with any such
termination);

                  (iii) to reimburse the Trustee for any fees, expenses and
indemnification reimbursable pursuant to this Agreement, including without
limitation Sections 3.04, 6.03, 8.05 and 8.06 hereof; and

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

            Section 3.09. [RESERVED]

            Section 3.10. Maintenance of Hazard Insurance.

            The Servicer shall cause to be maintained, for each Mortgage Loan
secured by a first lien, fire and hazard insurance with extended coverage in an
amount, to the extent permitted by applicable law, that is at least equal to the
lesser of (i) the replacement value of the improvements that are part of such

                                      -70-
<PAGE>

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 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 as a Servicing Advance to the extent provided in Section 3.08(a)(vii)
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 with respect to a Mortgage Loan
secured by a first lien is located at the time of origination of the Mortgage
Loan in a federally designated special flood hazard area and such area is
participating in the national flood insurance program, the 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.

            When a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall, except as set forth below, to the extent it has
knowledge of such conveyance or prospective conveyance, exercise its rights to
accelerate the maturity of the related Mortgage Loan under any "due-on-sale"
clause contained in the related Mortgage or Mortgage Note; provided, however,
that the Servicer shall not exercise any such right if the "due-on-sale" clause,
in the reasonable belief of the Servicer, is not enforceable under applicable
law; provided, further, that the Servicer shall not take any action in relation
to the enforcement of any "due-on-sale" clause which would adversely affect or
jeopardize coverage under any Required Insurance Policy. An Opinion of Counsel
at the expense of the Servicer (which the expense shall constitute a Servicing
Advance) delivered to the Trustee and the Depositor shall conclusively establish
the reasonableness of the Servicer's belief that any "due-on-sale" clause is not
enforceable under applicable law, but which shall not be required. In such
event, the Servicer shall make reasonable efforts to enter into an assumption
and modification agreement with the Person to whom such

                                      -71-
<PAGE>

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 law
or the Mortgage, the Mortgagor remains liable thereon. If the foregoing is not
permitted under applicable law, the Servicer is authorized to enter into a
substitution of liability agreement with such Person, pursuant to which the
original Mortgagor is released from liability and such Person is substituted as
Mortgagor and becomes liable under the Note. In addition to the foregoing, the
Servicer shall not be required to enforce any "due-on-sale" clause if in the
reasonable judgment of the Servicer, entering into an assumption and
modification agreement with a Person to whom such property shall be conveyed and
releasing the original Mortgagor from liability would be in the best interests
of the Certificateholders. The Mortgage Loan, as assumed, shall conform in all
respects to the requirements, representations and warranties of this Agreement.
The Servicer shall notify the Trustee and the NIMs Insurer that any such
assumption or substitution agreement has been completed by forwarding to the
Trustee (with a copy to the NIMs Insurer) the original copy of such assumption
or substitution agreement (indicating the Mortgage File to which it relates)
which copy shall be added by the Trustee to the related Mortgage File and which
shall, for all purposes, be considered a part of such Mortgage File to the same
extent as all other documents and instruments constituting a part thereof. The
Servicer shall be responsible for recording any such assumption or substitution
agreements. In connection with any such assumption or substitution agreement,
the Monthly Payment on the related Mortgage Loan shall not be changed but shall
remain as in effect immediately prior to the assumption or substitution, the
stated maturity or outstanding principal amount of such Mortgage Loan shall not
be changed nor shall any required monthly payments of principal or interest be
deferred or forgiven. Any fee collected by the Servicer for consenting to any
such conveyance or entering into an assumption or substitution agreement shall
be retained by or paid to the Servicer as additional servicing compensation.

            Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.

            Section 3.12. Realization Upon Defaulted Mortgage Loans;
      Determination of Excess Proceeds; Special Loss Mitigation.

            (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
will increase the proceeds of liquidation of the Mortgage Loan after
reimbursement to itself of such expenses and (ii) that such expenses will be
recoverable to it through Liquidation Proceeds (respecting which it shall have
priority for purposes of withdrawals from the 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. Any
Mortgage Loan that is charged off may be sold to the majority Certificateholder
of the Class C Certificates, at its option, at its fair market value after the
time period specified in (e) below. 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

                                      -72-
<PAGE>

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 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, obtain, in accordance with
applicable procedures for obtaining an automatic extension of the grace period,
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, in which case
such property must be disposed of prior to the end of such extension, unless the
Trustee and the NIMs Insurer shall have been supplied with an Opinion of Counsel
(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 or extension 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 held, 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 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

                                      -73-
<PAGE>

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 will be applied as
between the parties in the following order of priority: first, to reimburse the
Servicer for any related Servicing Advances and unpaid Servicing Fees, pursuant
to Section 3.08(a)(vi) or this Section 3.12; second, to reimburse the Servicer
for any unreimbursed Advances, pursuant to Section 3.08(a)(ii) or this Section
3.12; third, to accrued and unpaid interest (to the extent no Advance has been
made for such amount) on the Mortgage Loan, at the Net Mortgage Rate to the Due
Date occurring in the month in which such amounts are required to be
distributed; fourth, as a recovery of principal of the Mortgage Loan; and fifth,
to any Prepayment Charges.

            The proceeds of any net income from an REO Property, will be applied
as between the parties 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 unreimbursed Advances, pursuant to Section 3.08(a)(ii) or this
Section 3.12; third, as a recovery of principal; and fourth, to accrued and
unpaid interest (to the extent no Advance has been made for such amount) on the
related REO Property, at the applicable Net Mortgage Rate to the Due Date
occurring in the month in which such amounts are required to be distributed.

            (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 to the
Certificate Account and the Trustee (or its custodian), upon receipt of such
confirmation of deposit and a Request for Release from the Servicer 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, 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 Certificateholders with respect thereto.

            (d) With respect to such of the Mortgage Loans as come into and
continue in default, the Servicer will decide, in its reasonable business
judgment, whether to (i) foreclose upon the Mortgaged Properties securing those
Mortgage Loans pursuant to Section 3.12(a), (ii) write off the unpaid principal
balance of the Mortgage Loans as bad debt (provided that the Servicer has
determined that no net recovery is possible through foreclosure proceedings or
other liquidation of the related Mortgaged

                                      -74-
<PAGE>

Property), (iii) take a deed in lieu of foreclosure, (iv) accept a short sale or
short refinance; (v) arrange for a repayment plan, or (vi) agree to a
modification of such Mortgage Loan. As to any Mortgage Loan that becomes 120
days delinquent, the Servicer will be required to obtain a broker's price
opinion, the cost of which will be reimbursable as a Servicing Advance. After
obtaining the broker's price opinion, the Servicer will determine, in its
reasonable business judgment, whether a net recovery is possible through
foreclosure proceedings or other liquidation of the related Mortgage Property.
If the Servicer determines that no such recovery is possible, it must charge off
the related Mortgage Loan at the time it becomes 180 days delinquent. Once a
Mortgage Loan has been charged off, the Servicer will discontinue making
Advances, the Servicer will not be entitled to Servicing Fees (except as
provided below) with respect to such Mortgage Loan, and the Mortgage Loan will
be treated as a Liquidated Mortgage Loan. If the Servicer determines that such
net recovery is possible through foreclosure proceedings or other liquidation of
the related Mortgaged Property on a Mortgage Loan that becomes 180 days
delinquent, the Servicer may continue making Advances, and the Servicer will be
required to notify the Trustee of such decision.

            (e) Any Mortgage Loan that is charged off, pursuant to (d) above,
may continue to be serviced by the Servicer for the Certificateholders using
specialized collection procedures (including foreclosure, if appropriate). The
Servicer will be entitled to Servicing Fees and reimbursement of expenses in
connection with such Mortgage Loans after the date of charge off, only to the
extent of funds available from any recoveries on any such Mortgage Loans. Any
such Mortgage Loans serviced in accordance with the specialized collection
procedures shall be serviced for approximately six months. Any net recoveries
received on such Mortgage Loans during such six month period will be treated as
Subsequent Recoveries. On the date which is six months after the date on which
the Servicer begins servicing such Mortgage Loans using the specialized
collection procedures, unless specific net recoveries are anticipated by the
Servicer on a particular Mortgage Loan, such charged off loan will be released
to the majority holder of the Class C Certificates and thereafter, (i) the
majority holder of the Class C Certificates will be entitled to any amounts
subsequently received in respect of any such released loans, (ii) the majority
holder of the Class C Certificates may designate any servicer to service any
such released loan and (iii) the majority holder of the Class C Certificates may
sell any such released loan to a third party.

                                      -75-

<PAGE>
               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 a copy of such request, the Trustee or its designee
shall promptly release the related Mortgage File to the Servicer, and the
Servicer is authorized to cause the removal from the registration on the MERS
System of any such Mortgage if applicable, and the Servicer, on behalf of the
Trustee shall execute and deliver the request for reconveyance, deed of
reconveyance or release or satisfaction of mortgage or such instrument releasing
the lien of the Mortgage together with the Mortgage Note with written evidence
of cancellation thereon. Expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to the Mortgagor to the
extent permitted by law, and otherwise to the Trust Fund to the extent such
expenses constitute "unanticipated expenses" within the meaning of Treasury
Regulations Section 1.860G-(1)(b)(3)(ii). 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.

          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 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 respectively caused by
it.

          On each day that the Servicer remits to the Trustee or its designee
Requests for Releases pursuant to clauses (ii) or (iii) above, the Servicer
shall also submit to the Trustee or its designee a summary of the total number
of such Requests for Releases requested on such day by the same method as
described in such clauses (ii) and (iii).

          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 may deliver or cause to be delivered to the Trustee or its designee,
for signature, as appropriate or on behalf of the Trustee, execute 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

                                      -76-
<PAGE>
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 Trust Fund, 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, the 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 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, Prepayment Interest Excess, 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 and shall not be entitled to
reimbursement therefor except as specifically provided in this Agreement. In no
event shall the Trustee be liable for any Servicing Fee or for any differential
between the Servicing Fee and the amount necessary to induce a successor
servicer to act as successor servicer under this Agreement.

                                      -77-
<PAGE>
               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 and the Trustee on or before March 15 of each year beginning in 2006,
(or such other date as to which the Depositor gives the Servicer at least 30
days prior notice) 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 or a similar 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 2006 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 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.

               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 NIM Notes issued pursuant to the Indenture remain
outstanding or the NIMs Insurer is owed amounts in respect of its guarantee of
payment on such NIM Notes.

               Section 3.20. Periodic Filings.

          (a) 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

                                      -78-
<PAGE>
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 Depositor shall prepare and file the initial report on Form
8-K. 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
2006 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 as soon as it is able to do so. 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) The obligations set forth in paragraphs (a) and (b) 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) and (b) 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 related back to the prior fiscal year).

               Section 3.21. Annual Certificate by Trustee.

          (a) On or before March 15 of each year (commencing in 2006), 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 the 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

                                      -79-
<PAGE>
relative fault of the Trustee on the one hand and of 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) Within 15 days prior to the date on which a Form 10-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 and Depositor for the
benefit of the Trustee and Depositor and their respective officers, directors
and affiliates.

          (b) The Servicer shall indemnify and hold harmless the Trustee and 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 a breach by the Servicer or any of its officers, directors, agents or
affiliates of its obligations under Section 3.17, Section 3.18 and this Section
3.22, any material misstatement or omission in the Officer's Certificate
required under this Section or 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 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 Charge Reporting Requirements.

          Promptly after each Distribution Date, the Servicer shall provide to
the Depositor and the Trustee 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 Charge amount due; and

          (vi)  Prepayment Charge amount collected.

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<PAGE>
               Section 3.24. Information to the Trustee.

     Two Business Days after the 15th day of each month, but not later than the
18th day of each month, the Servicer shall furnish to the Trustee a delinquency
report in the form set forth in Exhibit M-1, a monthly remittance advice in the
form set forth in Exhibit M-2 and a realized loss report in the form set forth
in Exhibit M-3 (or such other form or forms as the Trustee and the Servicer may
from time to time agree) for the period ending on the last Business Day of the
preceding month; provided, however, that in the event the 18th day is not a
Business Day, the aforementioned reports shall be furnished by the Servicer to
the Trustee on the next Business Day; and provided, further, that in the event
there are three non-Business Days preceding the 18th day, the Servicer will (a)
furnish to the Trustee, on or before the 18th day of the month, the
aforementioned reports, which will not include information arising from the
related Prepayment Period, and (b) furnish to the Trustee, by 3:00 P.M., EST on
the next succeeding Business Day after the 18th day, a cumulative version of the
aforementioned reports which includes such information arising from the related
Prepayment Period.

               Section 3.25. Indemnification.

          The Servicer shall indemnify the Seller, the Trust Fund, the Trustee,
the Depositor, the NIMs Insurer and their officers, directors, employees and
agents and hold each of them harmless against any and all claims, losses,
damages, penalties, fines, forfeitures, reasonable and necessary legal fees and
related costs, judgments, and any other costs, fees and expenses that any of
such parties may sustain in any way related to the negligence, willful
misfeasance or bad faith of the Servicer in the performance of its duties or by
reason of reckless disregard of its obligations and duties hereunder. The
Servicer promptly shall notify the Seller, the Trustee, the NIMs Insurer and the
Depositor or any other relevant party if a claim is made by a third party with
respect to such party and this Agreement or the Mortgage Loans and, if subject
to this indemnification obligation, 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
judgment or decree which may be entered against it or any of such parties in
respect of such claim. The Servicer shall provide the Depositor, the Trustee 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 shall promptly
reimburse itself from the assets of the Trust Fund in the Collection Account for
all amounts advanced by it pursuant to the preceding sentence except when and to
the extent a determination has been made that the claim in any way relates to
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. High Cost Mortgage Loans.

          In the event that the Servicer reasonably determines that a Mortgage
Loan may be a "high cost mortgage loan", "high cost home", "covered", "high
cost", "high risk home", "predatory" or similarly classified loan under any
applicable state, federal or local law, the Servicer may notify the

                                      -81-
<PAGE>
Depositor and Trustee thereof; the Servicer may terminate its servicing thereof;
and such determination shall be deemed to materially and adversely affect the
interests of the Certificateholders in such Mortgage Loan and the Seller will
repurchase the Mortgage Loan within a 30 day period from the date of the notice
in the manner described in Section 2.05.

                                   ARTICLE IV

                                  DISTRIBUTIONS

               Section 4.01. Advances.

          (a) 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 4:00 p.m. Eastern 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 the earlier of (i) such Mortgage Loan is paid in full, (ii) 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, (iii) the Servicer determines in its good faith
judgment that such amounts would constitute a Non-Recoverable Advance as
provided in the preceding paragraph or (iv) the date on which such Mortgage Loan
becomes 150 days delinquent as set forth below.

          (b) Notwithstanding anything in this Agreement to the contrary
(including, but not limited to, Sections 3.01 and 4.01(a) hereof), no Advance or
Servicing Advance shall be required to be made hereunder by the Servicer if such
Advance or Servicing Advance would, if made, constitute a Non-

                                      -82-
<PAGE>
Recoverable Advance or a Non-Recoverable Servicing Advance. The determination by
the Servicer that it has made a Non-Recoverable Advance or a Non-Recoverable
Servicing Advance or that any proposed Advance or Servicing Advance, if made,
would constitute a Non-Recoverable Advance or a Non-Recoverable Servicing
Advance, respectively, shall be evidenced by an Officer's Certificate of the
Servicer delivered to the Depositor and the Trustee. In addition, the Servicer
shall not be required to advance any Relief Act Shortfalls.

          (c) Notwithstanding the foregoing, the Servicer shall not be required
to make any Advances for any Mortgage Loan after such Mortgage Loan becomes 150
days delinquent. The Servicer shall identify such delinquent Mortgage Loans in
the Servicer Statement referenced in Section 3.24. In addition, the Servicer
shall provide the Trustee with an Officer's Certificate listing such delinquent
Mortgage Loans and certifying that such loans are 150 days or more delinquent.

               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 0.25% per annum 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. Notwithstanding the
foregoing, there shall be no reduction of the Servicing Fee in connection with
Prepayment Interest Shortfalls related to the Relief Act and the Servicer shall
not be obligated to pay Compensating Interest with respect to Prepayment
Interest Shortfalls related to the Relief Act.

               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 the Lower 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 Charges collected on the Mortgage Loans during the related Prepayment
Period and all amounts paid by the Servicer or the Seller in respect of
Prepayment Charges pursuant to this Agreement or the Sale Agreement, as
applicable, and all amounts received in respect of any indemnification paid as a
result of a

                                      -83-
<PAGE>
Prepayment Charge being unenforceable in breach of the representations and
warranties set forth in the Sale Agreement for the related Prepayment Period;

                 (ii) to each class of the Class A Certificates, the Current
Interest and any Interest Carry Forward 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 Carry Forward Amount with respect to
the Class A Certificates, such amount will be distributed pro rata among each
Class of the Class A Certificates based on the ratio of (x) the Current Interest
and Interest Carry Forward Amount for each class of the Class A Certificates to
(y) the total amount of Current Interest and any Interest Carry Forward Amount
for the Class A Certificates;

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

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

                 (v) to the Class M-3 Certificates, the Class M-3 Current
Interest and any Class M-3 Interest Carry Forward Amount;

                 (vi) to the Class M-4 Certificates, the Class M-4 Current
Interest and any Class M-4 Interest Carry Forward Amount;

                 (vii) to the Class M-5 Certificates, the Class M-5 Current
Interest and any Class M-5 Interest Carry Forward Amount;

                 (viii) to the Class M-6 Certificates, the Class M-6 Current
Interest and any Class M-6 Interest Carry Forward Amount;

                 (ix) to the Class B-1 Certificates, the Class B-1 Current
Interest and any Class B-1 Interest Carry Forward Amount;

                 (x) to the Class B-2 Certificates, the Class B-2 Current
Interest and any Class B-2 Interest Carry Forward Amount;

                 (xi) to the Class B-3 Certificates, the Class B-3 Current
Interest and any Class B-3 Interest Carry Forward Amount;

                 (xii) to the Class B-4 Certificates, the Class B-4 Current
Interest and any Class B-4 Interest Carry Forward Amount; and

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

          On each Distribution Date, subject to the proviso in (ii) above,
Interest Funds received on the Group One Mortgage Loans will be deemed to be
distributed to the Class R, Class A-1A and Class A-1B Certificates and Interest
Funds received on the Group Two Mortgage Loans will be deemed to be distributed
to the Class A-2A, Class A-2B, Class A-2C and Class A-2D Certificates, in each
case, until the related Current Interest and Interest Carry Forward Amount of
each such class of Certificates for such Distribution Date has been paid in
full. Thereafter, Interest Funds not required for such distributions are
available to be applied if necessary, to the class or classes of Certificates
that are not related to such group of Mortgage Loans

                                      -84-
<PAGE>
          (c) [RESERVED]

          (d) On each Distribution Date, the Trustee shall, to the extent of
funds then available, make the following distributions from the Certificate
Account of an amount equal to the Principal Distribution Amount in the following
order of 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) to the Class A Certificates, the Class A Principal
Distribution Amount will be distributed as follows:

                 (A) the Group One Principal Distribution Amount will be
           distributed as follows: (1) if no Class A-1 Trigger Event has
           occurred, the Group One Principal Distribution Amount will be
           distributed as follows: first, to the Class R Certificate until its
           Certificate Principal Balance has been reduced to zero, and second,
           pro rata to the Class A-1A and Class A-1B Certificates, based on
           their relative Certificate Principal Balances, until the Certificate
           Principal Balance of each such class has been reduced to zero and
           (2) if a Class A-1 Trigger Event has occurred, the Group One
           Principal Distribution Amount will be distributed sequentially to
           the Class R, Class A-1A and Class A-1B Certificates, until the
           Certificate Principal Balance of each such class has been reduced to
           zero; and

                 (B) the Group Two Principal Distribution Amount will be
           distributed sequentially to the Class A-2A, Class A-2B, Class A-2C
           and Class A-2D Certificates until the Certificate Principal Balance
           of each such class has been reduced to zero; provided, however, that
           on and after the Distribution Date on which the aggregate
           Certificate Principal Balance of the Class M, Class B and Class C
           Certificates have been reduced to zero, any principal distributions
           allocated to the Class A-2A, Class A-2B, Class A-2C and Class A-2D
           Certificates are required to be allocated pro rata among such
           classes of Certificates, based on their respective Certificate
           Principal Balances, until their Certificate Principal Balances 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 M-3 Certificates, the Class M-3 Principal
Distribution Amount;

                 (v) to the Class M-4 Certificates, the Class M-4 Principal
Distribution Amount;

                 (vi) to the Class M-5 Certificates, the Class M-5 Principal
Distribution Amount;

                 (vii) to the Class M-6 Certificates, the Class M-6 Principal
Distribution Amount;

                                      -85-
<PAGE>
                 (viii) to the Class B-1 Certificates, the Class B-1 Principal
Distribution Amount;

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

                 (x) to the Class B-3 Certificates, the Class B-3 Principal
Distribution Amount;

                 (xi) to the Class B-4 Certificates, the Class B-4 Principal
Distribution Amount; and

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

          (e) [RESERVED]

          (f) On each Distribution Date, the Trustee shall, to the extent of
funds then available, make the following distributions up to the following
amounts from the Certificate Account of the remainders pursuant to Section
4.04(b)(xiii) and (d)(xii) hereof 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 M-3 Certificates, the Class M-3 Unpaid
Realized Loss Amount;

                 (v) to the Class M-4 Certificates, the Class M-4 Unpaid
Realized Loss Amount

                 (vi) to the Class M-5 Certificates, the Class M-5 Unpaid
Realized Loss Amount;

                 (vii) to the Class M-6 Certificates, the Class M-6 Unpaid
Realized Loss Amount;

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

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

                 (x) to the Class B-3 Certificates, the Class B-3 Unpaid
Realized Loss Amount;

                                      -86-
<PAGE>
                 (xi) to the Class B-4 Certificates, the Class B-4 Unpaid
Realized Loss Amount;

                 (xii) to the Class R Certificate, the Residual Excess Interest
Amount;

                 (xiii) to the Class A, Class M and Class B Certificates, on a
pro rata basis, based upon outstanding Floating Rate Certificate Carryover for
each such Class, the Floating Rate Certificate Carryover for each Class; and

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

          (g) on each Distribution Date, the Trustee shall allocate the
remainders pursuant to Section 4.04(f)(xiv) 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 Carry
Forward 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 and (ii) 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 Certificates and the 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-4 Certificates until the Class B-4
Certificate Principal Balance is reduced to zero;

                 (iii) to the Class B-3 Certificates until the Class B-3
Certificate Principal Balance is reduced to zero;

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

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

                 (vi) to the Class M-6 Certificates until the Class M-6
Principal Balance is reduced to zero;

                                      -87-
<PAGE>
                 (vii) to the Class M-5 Certificates until the Class M-5
Principal Balance is reduced to zero;

                 (viii) to the Class M-4 Certificates until the Class M-4
Certificate Principal Balance is reduced to zero;

                 (ix) to the Class M-3 Certificates until the Class M-3
Certificate Principal Balance is reduced to zero;

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

                 (xi) 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.

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

          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.

                                      -88-
<PAGE>
          (k) The Trustee is hereby directed by the Depositor to execute the Cap
Contracts on behalf of the Trust Fund in the form presented to it by the
Depositor and shall have no responsibility for the contents, adequacy or
sufficiency of such Cap Contracts, including, without limitation, the
representations and warranties contained therein. Any funds payable by the
Trustee under the Cap Contracts at closing shall be paid by the Depositor.
Notwithstanding anything to the contrary contained herein or in the Cap
Contracts, the Trustee shall not be required to make any payments to the
counterparty under the Cap Contracts. Any payments received under the terms of
the Cap Contracts will be available to pay the holders of the Offered
Certificates up to the amount of any Floating Rate Certificate Carryover
remaining after the application of Section 4.04(f)(xii) on such Distribution
Date; provided, however, that payments received on the Cap Contracts will not be
used to pay any Floating Rate Certificate Carryover that results from a failure
to allocate Applied Realized Loss Amounts to the Class A Certificates. Any
amounts in the Cap Contract Account on any Distribution Date in excess of
amounts required, subject to the restrictions set forth in the preceding
sentence, to pay outstanding Floating Rate Certificate Carryovers on such
Distribution Date will be distributed to the holders of the Class C
Certificates. Payments from the Cap Contract Account in respect of the Floating
Rate Certificate Carryovers shall, subject to the limitations set forth in the
second preceding sentence of this Section 4.04(k), be paid to the Class A, Class
M and Class B Certificates in accordance with the provisions of Section
4.04(f)(xii) hereof.

          For any Distribution Date on which there is a payment under the Cap
Contracts based on a notional balance in excess of the aggregate Certificate
Principal Balance of the Offered Certificates, the amount representing such
excess payment, to the extent not otherwise used to pay Floating Rate
Certificate Carryovers, shall not be an asset of the Trust Fund and, instead,
shall be paid into and distributed out of a separate trust created by this
Agreement for the benefit of the Class C Certificates and shall be distributed
to the Class C Certificates.

                 (i) On or prior to the Cap Contract Termination Date, amounts,
if any, received by the Trustee for the benefit of the Trust Fund in respect of
the Cap Contracts shall be deposited by the Trustee into the Cap Contract
Account. With respect to any Distribution Date on or prior to the Cap Contract
Termination Date, the amount, if any, payable by the Cap Contract Counterparty
under the Cap Contracts will equal the product of (i) the excess of (x)
One-Month LIBOR (as determined by the Cap Contract Counterparty and subject to a
cap equal to the rate with respect to such Distribution Date as shown under the
heading "Upper Collar" in the Cap Tables), over (y) the rate with respect to
such Distribution Date as shown under the heading "Lower Collar" in the Cap
Tables, (ii) an amount equal to the Cap Contract Notional Balance and (iii) the
number of days in such Accrual Period, divided by 360.

                 (ii) Amounts on deposit in the Cap Contract Account will remain
uninvested pending distribution to Certificateholders.

                 (iii) Each Cap Contract is scheduled to remain in effect until
the applicable Cap Contract Termination Date and will be subject to early
termination only in limited circumstances. Such circumstances include certain
insolvency or bankruptcy events in relation to the Cap Contract Counterparty
(after a grace period of three Local Business Days, as defined in the Cap
Contracts, after notice of such failure is received by the Cap Contract
Counterparty) to make a payment due under the Cap Contracts, the failure by the
Cap Contract Counterparty or the Trustee (after a cure period of 20 days after
notice of such failure is received) to perform any other agreement made by it
under the Cap Contracts, the termination of the Trust Fund and the Cap Contracts
becoming illegal or subject to certain kinds of taxation.

                                      -89-
<PAGE>
               Section 4.05. Monthly Statements to Certificateholders.

          (a) Not later than each Distribution Date based solely on information
provided by the Servicer, the Trustee shall prepare and make available on its
website located at www.ctslink.com 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 Charges, 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 amount of the Servicing Fee paid to or retained by the
Servicer, and any amounts constituting reimbursement or indemnification of the
Servicer;

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

                 (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, in the aggregate and with respect to
Group One Mortgage Loans and Group Two Mortgage Loans;

                 (x) the amount of (A) Realized Losses and (B) Applied Realized
Loss Amounts with respect to such Distribution Date, in the aggregate and with
respect to Group One Mortgage Loans and Group Two Mortgage Loans;

                 (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, in the aggregate and with respect to Group One Mortgage
Loans and Group Two Mortgage Loans;

                 (xii) 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, in the aggregate and with respect to Group One
Mortgage Loans and Group Two Mortgage Loans;

                                      -90-
<PAGE>
                 (xiii) the aggregate Stated Principal Balance of all Liquidated
Loans as of the preceding Distribution Date, in the aggregate and with respect
to Group One Mortgage Loans and Group Two Mortgage Loans;

                 (xiv) whether a Stepdown Trigger Event or Class A-1 Trigger
Event has occurred and is in effect;

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

                 (xvi) with respect to each Class of Certificates, any Floating
Rate Certificate Carryover with respect to such Distribution Date for each such
Class, any Floating Rate Certificate Carryover paid for each such Class and any
remaining Floating Rate Certificate Carryover for each such Class;

                 (xvii) 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;

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

                 (xix) as of each Distribution Date, the amount, if any, to be
deposited in the Certificate Account pursuant to the Cap Contracts as described
in Section 4.04(k) and the amount thereof to be paid to the Class A, Class M and
Class B Certificates described in Section 4.04(k) hereof;

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

                 (xxi) the amount of any payments to each Class of Certificates
that are treated as payments received in respect of a REMIC Regular Interest or
REMIC "residual interest" and the amount of any payments to each Class of
Certificates that are not treated as payments received in respect of a REMIC
Regular Interest or REMIC "residual interest".

          (b) The Trustee will make the Monthly Statement (and, at its option,
any additional files containing the same information in an alternative format)
available each month to Certificateholders, other parties to this Agreement and
any other interested parties via the Trustee's Internet website. The Trustee's
Internet website shall initially be located at "www.ctslink.com". Assistance in
using the website can be obtained by calling the Trustee's customer service desk
at (301) 815-6600. Parties that are unable to use the website are entitled to
have a paper copy mailed to them via first class mail by calling the customer
service desk and indicating such. The Trustee shall have the right to change the
way the monthly statements to Certificateholders are distributed in order to
make such distribution more convenient and/or more accessible to the above
parties and the Trustee shall provide timely and adequate notification to all
above parties regarding any such changes.

          The Trustee shall also be entitled to rely on but shall not be
responsible for the content or accuracy of any information provided by third
parties for purposes of preparing the monthly statement

                                      -91-
<PAGE>
and may affix thereto any disclaimer it deems appropriate in its reasonable
discretion (without suggesting liability on the part of any other party hereto).

          As a condition to access the Trustee's internet website, the Trustee
may require registration and the acceptance of a disclaimer. The Trustee will
not be liable for the dissemination of information in accordance with this
Agreement.

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

          (d) If so requested in writing within a reasonable period of time
after the end of each calendar year, the Trustee shall make available on its
website or cause to be furnished to each Person who at any time during the
calendar year was a Certificateholder of record, a statement containing the
information set forth in clauses (a)(i) and (a)(ii) of this Section 4.05
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 are from time to time in effect.

          (e) 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: 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;

                 (i) 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;

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

                 (iii) 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;

                 (iv) 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;

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

                 (vi) 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.

                                      -92-
<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>
             Minimum        Integral Multiples in      Original Certificate
 Class     Denomination        Excess of Minimum        Principal Balance
 -----     ------------        -----------------        -----------------
<S>        <C>              <C>                        <C>
  A-1A      $25,000.00               $1.00                  $283,447,000
  A-1B      $25,000.00               $1.00                   $31,494,000
  A-2A      $25,000.00               $1.00                  $155,438,000
  A-2B      $25,000.00               $1.00                   $52,540,000
  A-2C      $25,000.00               $1.00                   $69,435,000
  A-2D      $25,000.00               $1.00                   $26,529,000
  M-1       $25,000.00               $1.00                   $27,315,000
  M-2       $25,000.00               $1.00                   $24,193,000
  M-3       $25,000.00               $1.00                   $15,218,000
  M-4       $25,000.00               $1.00                   $13,657,000
  M-5       $25,000.00               $1.00                   $12,877,000
  M-6       $25,000.00               $1.00                   $12,486,000
  B-1       $25,000.00               $1.00                   $10,145,000
  B-2       $25,000.00               $1.00                   $ 9,755,000
  B-3       $25,000.00               $1.00                   $ 7,804,000
  B-4       $25,000.00               $1.00                   $ 7,804,000
  C            (1)                   (1)                            100%
  R          $100.00                 N/A                            $100
  P            (2)                   (2)                             (2)
</TABLE>

------------
(1)  The Class C Certificates shall not have minimum dollar denominations or
     certificate notional amounts and shall be issued in a minimum percentage
     interest of 25%. The initial Overcollateralization Amount is
     $20,296,678.54.

(2)  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

                                      -93-
<PAGE>
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.

          The Class B-4 Certificates sold in offshore transactions in reliance
on Regulation S shall be issued initially in the form of one or more permanent
global certificates in definitive, fully registered form without interest
coupons with the applicable legends set forth in Exhibit A hereto added to the
form of each such Certificate (each, a "Book-Entry Regulation S Global
Security"), which shall be deposited on behalf of the Holders of such
Certificates represented thereby with the Trustee, as custodian for DTC and
registered in the name of a nominee of DTC, duly executed and authenticated by
the Trustee as hereinafter provided. The aggregate principal amounts of the
Book-Entry Regulation S Global Securities may from time to time be increased or
decreased by adjustments made on the records of the Trustee or DTC or its
nominee, as the case may be, as hereinafter provided.

               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 the Trustee. Whenever
any Certificates are so surrendered for exchange, the Trustee shall execute,
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 the Trustee duly executed by the
holder thereof or his attorney duly authorized in writing.

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

          No Transfer of a Class B-4, 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 B-4, Class C or
Class P Certificate by Merrill Lynch & Co. or, in connection with any transfers
of a Class C or Class P Certificate to the indenture trustee under an Indenture
pursuant to which NIM Notes are issued, whether or not such notes are guaranteed
by the NIMs Insurer) each certify to the Trustee in writing the facts
surrounding the Transfer in substantially the form 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

                                      -94-
<PAGE>
Letter") or (ii) there shall be delivered to the Trustee an Opinion of Counsel
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 B-4, 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 B-4,
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.

          By acceptance of a Regulation S Global Security, whether upon original
issuance or subsequent transfer, each Holder of such a Certificate acknowledges
the restrictions on the transfer of such Certificate set forth thereon and
agrees that it will only transfer such a Certificate as provided herein. In
addition, each Holder of a Regulation S Global Security shall be deemed to have
represented and warranted to the Depositor, the Trustee and any of their
respective successors that: (i) such Person is not a "U.S. person" within the
meaning of Regulation S and was, at the time the buy order was originated,
outside the United States and (ii) such Person understands that such
Certificates have not been registered under the Securities Act and that (x)
until the expiration of the 40-day distribution compliance period (within the
meaning of Regulation S), no offer, sale, pledge or other transfer of such
Certificates or any interest therein shall be made in the United States or to or
for the account or benefit of a U.S. person (each as defined in Regulation S),
(y) if in the future it decides to offer, resell, pledge or otherwise transfer
such Certificates, such Certificates may be offered, resold, pledged or
otherwise transferred only (A) to a person which the seller reasonably believes
is a "qualified institutional buyer" (a "QIB") as defined in Rule 144A under the
Securities Act, that is purchasing such Certificates for its own account or for
the account of a qualified institutional buyer to which notice is given that the
transfer is being made in reliance on Rule 144A or (B) in an offshore
transaction (as defined in Regulation S) in compliance with the provisions of
Regulation S, in each case in compliance with the requirements of this
Agreement; and it will notify such transferee of the transfer restrictions
specified in this Section.

          No transfer of an ERISA Restricted Certificate that is a Class R
Certificate may be made to any Person unless the Trustee has received a
representation that such Person is not an employee benefit plan subject to Title
I of ERISA, a plan subject to Section 4975 of the Code or a plan subject to any
state, local, federal, non-U.S. or other law substantively similar to the
foregoing provisions of ERISA or the Code ("Similar Law"), or any Person
directly or indirectly acquiring such Certificate for, on behalf of, or with any
assets of any such plan (collectively, "Plan"). Each Person to whom a Class R
Certificate is to be transferred shall be required or deemed to represent that
it is not a Plan.

          No transfer of an ERISA-Restricted Certificate (other than the Class R
Certificate) shall be made to any Person unless the Trustee has received (A) a
representation that such transferee is not a Plan, or (B) if the Certificate has
been the subject of an ERISA-Qualifying Underwriting, a representation that such
transferee is an insurance company that is acquiring the Certificate with assets
of an "insurance company general account," as defined in Section V(e) of
Prohibited Transaction Class Exemption ("PTCE") 95-60, and the acquisition and
holding of the Certificate are covered and exempt under Sections I and III of
PTCE 95-60, or (C) solely in the case of any such Certificate that is a
Definitive Certificate, an Opinion of Counsel satisfactory to the Trustee, and
upon which the Trustee and the NIMs Insurer shall be entitled to rely, to the
effect that the acquisition and holding of such Certificate will not

                                      -95-
<PAGE>
constitute or result in a nonexempt prohibited transaction under Title I of
ERISA or Section 4975 of the Code, or a violation of Similar Law, and will not
subject the Trustee, the Servicer, the NIMs Insurer or the Depositor to any
obligation in addition to those expressly undertaken in this Agreement, which
Opinion of Counsel shall not be an expense of the Trustee, the Servicer, the
NIMs Insurer or the Depositor.

          For purposes of the two immediately preceding paragraphs of this
Subsection 5.02(a), other than clause (C) in the immediately preceding
paragraph, the representations as set forth therein 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). Notwithstanding any other
provision herein to the contrary, any purported transfer of an ERISA Restricted
Certificate to or on behalf of a Plan without the delivery to the Trustee of a
representation or an Opinion of Counsel satisfactory to the Trustee as described
above shall be void and of no effect. The Trustee shall not be under any
liability to any Person for any registration or transfer of any ERISA Restricted
Certificate that is in fact not permitted by this Section 5.02(a), nor shall the
Trustee be under any liability 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 a Plan and that held such Certificate in violation
of this Section 5.02(a) all payments made on such ERISA Restricted Certificate
at and after the time it commenced such holding. Any such payments so recovered
shall be paid and delivered to the last preceding Holder of such Certificate
that is not a Plan.

          (b) 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
(a) 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(b)(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

                                      -96-
<PAGE>
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(b) 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(b), 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(a) and 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 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 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 and the residual interest in the Upper Tier REMIC may be
severed and represented by separate certificates (with the separate certificate
that represents the Residual Interest also representing all rights of the Class
R Certificate to distributions attributable to a Pass-Through Rate on the Class
R Certificate in excess of the Net Rate); provided, however, that such separate
certification may not occur until the Trustee and the NIMs Insurer receive an
Opinion of Counsel 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(a) and (b) 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 and the
Residual Interest in the Upper Tier REMIC shall be severed and represented by
separate certificates (with the separate certificate that represents the
Residual Interest also representing all rights of the Class R Certificate to
distributions attributable to a Pass-Through Rate on the Class R Certificate in
excess of the Net Rate).

          The restrictions on Transfers of a Class R Certificate set forth in
this Section 5.02(b) 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, which Opinion of Counsel shall not be an expense of the Trustee, the
NIMs Insurer 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 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

                                      -97-
<PAGE>
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.

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

          (d) 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 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 and its counsel) 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.

               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 or 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.

                                      -98-
<PAGE>
               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 Class C, Class P and Class R Certificates shall be Definitive
Certificates (as defined below). 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 NIMs Insurer and the Trustee 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;

          (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, the Trustee shall give all such
notices and communications to the Depository.

                                      -99-
<PAGE>
               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 Trustee or the Depositor is unable to locate a qualified
successor, (b) the Depositor notifies the Trustee and the Depository of its
intent to terminate the book entry system through the Depository and, upon
receipt of notice of such intent from the Depository, the Certificate Owners of
the Book-Entry Certificates agree to initiate such termination 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
offices at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479,
Attention: Client Services Manager - Merrill Lynch Mortgage Investors Trust,
Series 2005-WMC2 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.

               Section 5.10. [RESERVED].

                                   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 and 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

                                     -100-
<PAGE>
the United States or under the laws of one of the States thereof and will each
obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, or any of the
Mortgage Loans and to perform its respective duties under this Agreement.

          Any Person into which the Depositor or the Servicer may be merged or
consolidated, or any Person resulting from any merger or consolidation to which
the Depositor or the Servicer shall be a party, or any Person succeeding to the
business of the Depositor or the Servicer, shall be the successor of the
Depositor or the Servicer, as the case may be, hereunder, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding (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
the 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 or 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 (i) 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 or (ii) which does not constitute
an "unanticipated expense" within the meaning of Treasury Regulation Section
1.860G-1(b)(3)(ii). Neither 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 either the
Depositor or the Servicer in its discretion may 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 the interests of the Trustee and the
Certificateholders hereunder. In such event, the legal expenses and costs of
such action and any liability resulting therefrom shall be expenses, costs and
liabilities of the Trust Fund, and the Depositor 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 NIMs Insurer and the Trustee is

                                     -101-
<PAGE>
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.

               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
commercial 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.

               Section 6.06. [RESERVED].

               Section 6.07. [RESERVED].

                                  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 Business Days and, with respect to a payment
required to be made under Section 4.01 hereof, for one Business 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 and the Depositor 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

                                     -102-
<PAGE>
                 (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; or

                 (vi) any failure by the Servicer to duly perform, within the
required time period, its obligations under Sections 3.17, 3.18 and 3.22 of this
Agreement, which failure continues unremedied for a period of ten (10) days
after the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by any party to this Agreement.

          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, the Trustee may, 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 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 Section 3.08(a), 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.

                                     -103-
<PAGE>
               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 fees, 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 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 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.

                                     -104-
<PAGE>
                 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 Depositor 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 the 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 written 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
Certificateholders and the NIMs Insurer and take such further action as directed
by the Certificateholders and the NIMs Insurer.

          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:

                   (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

                                     -105-
<PAGE>
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, individually or as Trustee, be
liable 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; and

                   (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 in accordance with this Agreement relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee under this Agreement.

               Section 8.02. Certain Matters Affecting the Trustee.

          (a) Except as otherwise provided in Section 8.01:

                 (i) the Trustee may request and conclusively rely upon and
shall be fully 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 Opinion of Counsel;

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

                 (iv) 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, custodians, accountants, attorneys or independent contractors and the
Trustee will not be responsible for any misconduct or negligence on the part of
any agent, custodian, accountant, attorney or independent contractor appointed
with due care by it hereunder;

                 (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;

                                     -106-
<PAGE>
                 (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 security or indemnity satisfactory to it
against the costs, expenses and liabilities that may be incurred therein or
thereby;

                 (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; and

                 (xi) the Trustee may rely on the sole judgment of the Depositor
in determining whether "Eligible Collateral" (as defined in the Cap Contracts)
has been delivered in an amount equal to the "Exposure" (as defined in the Cap
Contracts) as contemplated by Section 4(10) of each Cap Contract. The Trustee
shall not be liable, individually or as Trustee, for any action relating to the
determination of whether collateral delivered pursuant to the sentence above
constitutes "Eligible Collateral."

          (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. The Trustee shall have no duty (A) to record, file or deposit
this Agreement or any agreement referred to herein or any financing statement or
continuation statement evidencing a security interest, or to undertake any
rerecording, refiling or redepositing, as applicable, thereof, (B) to establish
or maintain any insurance or (C) to see to the payment or discharge of any tax,
assessment, or other governmental charge or any lien or encumbrance of any kind
owing with respect to, assessed or levied against, any part of the Trust Fund.

               Section 8.03. Trustee Not Liable for Certificates or 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 representation as to
the validity or sufficiency of this Agreement, of any Mortgage Loan, or of any
related document other than with respect to the execution and authentication of
the Certificates, if the Trustee executed or authorized 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
the Certificate Account by the Depositor or the Servicer.

                                     -107-
<PAGE>
               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 was
not the Trustee.

               Section 8.05. Trustee's Fees and Expenses.

          The Trustee shall be entitled to compensation (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust) for all services rendered by it in the execution of the trusts
hereby created and in the exercise and performance of any of the powers and
duties hereunder of the Trustee.

               Section 8.06. Indemnification and Expenses of Trustee.

          (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 (i) any audit, controversy or
judicial proceeding relating to a governmental authority or any legal proceeding
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 and (ii) the performance of their respective 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 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 reasonably cooperate and consult 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 or delayed; and

                 (iv) indemnification therefor would constitute "unanticipated
expenses" within the meaning of Treasury Regulation 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 advances 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
advances that either (i) arise from its negligence, bad faith or willful
misconduct or (ii) do not constitute "unanticipated expenses" within the meaning
of Treasury Regulations Section 1.860G-1(b)(3)(ii).

                                     -108-
<PAGE>
          (c) The Trustee's right to indemnification and reimbursement shall be
subject to a cap of $300,000 in the aggregate in any calendar year, excluding
(i) any Servicing Transfer Costs and (ii) any costs, damages or expenses
incurred by the Trustee in connection with any "high cost" home loans or any
predatory or abusive lending laws, which amounts shall in no case be subject to
any such limitation; provided, however, that such cap shall apply only if NIM
Notes have been issued 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; provided further,
however, that amounts incurred by the Trustee in excess of such annual limit in
any calendar year shall be payable to the Trustee in succeeding calendar years,
subject to such annual limit for each applicable calendar year. Any amounts
reimbursable hereunder 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 its
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 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 or (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, then the Depositor may remove the Trustee and shall promptly
appoint a successor trustee by written instrument, in triplicate, one copy of
which instrument shall be delivered to the Trustee, one copy

                                     -109-
<PAGE>
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
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

                                     -110-
<PAGE>
the Trustee and the NIMs Insurer to act as co-trustee or co-trustees jointly
with the Trustee, or separate trustee or separate trustees, of all or any part
of the Trust Fund, and to vest in such Person or Persons, in such capacity and
for the benefit of the Certificateholders, such title to the Trust Fund 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 compensated by the Trust Fund and
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 with due
care; provided that the appointment of a co-trustee shall not relieve the
Trustee of its obligations hereunder. 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 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
NIMs Insurer, the Servicer and the Depositor.

          Any separate trustee or co-trustee may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.

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               Section 8.12. Tax Matters.

          (a) It is intended that each of the REMICs provided for herein REMIC
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. 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 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, 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
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; (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) 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); (i) sign or
cause to be signed federal, state or local income tax or information returns;
(j) 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, 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 (k) as and when necessary and appropriate,
represent each of the REMICs 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

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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 the 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 (other than amounts
derived by the Trust Fund from a payment on the Cap Contracts) 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-4 Certificates (pro rata), third
to the Class B-3 Certificates (pro rata), fourth to the Class B-2 Certificates
(pro rata), fifth, to the Class B-1 Certificates (pro rata), sixth, to the Class
M-6 Certificates (pro rata), seventh to the Class M-5 Certificates (pro rata),
eighth to the Class M-4 Certificates (pro rata), ninth to the Class M-3
Certificates (pro rata), tenth to the Class M-2 Certificates (pro rata),
eleventh to the Class M-1 Certificates (pro rata), and twelfth to the Class A
Certificates (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.

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                                   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 earlier of (a) an Optional Termination and
(b) the later of (i) the maturity or other liquidation (or any Advance with
respect thereto) of the last Mortgage Loan remaining in the Trust Fund and the
disposition of all REO Property and (ii) the distribution to Certificateholders
of all amounts required to be distributed to them pursuant to this Agreement, 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) On or before the Determination Date following the Initial Optional
Termination Date, the Trustee shall attempt to terminate the Trust Fund by
conducting an auction of all of the Mortgage Loans and REO Properties via a
solicitation of bids from at least three (3) bidders, each of which shall be a
nationally recognized participant in mortgage finance (the "Auction"). In
addition, the Trustee will also solicit a bid from each Holder of a Class C
Certificate. The Depositor and the Trustee agree to work in good faith to
develop bid procedures in advance of the Initial Optional Termination Date to
govern the operation of the Auction. The Trustee shall be entitled to retain an
investment banking firm and/or other agents in connection with the Auction, the
cost of which shall be included in the Optional Termination Price (unless an
Optional Termination does not occur in which case such costs shall be an expense
of the Trust Fund). The Trustee shall accept the highest bid received at the
Auction; provided that the amount of such bid equals or exceeds the Optional
Termination Price. The Trustee shall determine the Optional Termination Price
based upon information provided by (i) the Servicer with respect to the amounts
described in clauses (A) and (B) of the definition of "Optional Termination
Price" (other than Trustee expenses), (ii) the Depositor with respect to the
information described in clause (C) of the definition of "Optional Termination
Price." The Trustee may conclusively rely upon the information provided to it in
accordance with the immediately preceding sentence and shall not have any
liability for the failure of any party to provide such information.

          If an Optional Termination does not occur as a result of the Auction's
failure to achieve the Optional Termination Price, the NIMs Insurer (or the
Servicer, if there is not a NIMs Insurer at such time) may, on any Distribution
Date following such Auction, at its option, terminate the Trust Fund by
purchasing all of the Mortgage Loans and REO Properties at a price equal to the
Optional Termination Price. In the event that there is a NIMs Insurer at the
time of the Auction, the Auction fails to achieve the Optional Termination Price
and the NIMs Insurer does not exercise its option to terminate the Trust Fund on
the first Distribution Date on which it is able to exercise such option, the
Servicer may, at such time, at its option, terminate the Trust Fund by
purchasing all of the Mortgage Loans and REO Properties at a price equal to the
Optional Termination Price. In connection with such termination, the Optional
Termination Price shall be delivered to the Trustee no later than the Business
Day immediately preceding the related Distribution Date. Notwithstanding
anything to the contrary herein, the Optional Termination Amount paid to the
Trustee by the winning bidder at the Auction or by the NIMs Insurer or the
Servicer shall be deposited by the Trustee directly into the Certificate Account
immediately upon receipt. Upon any termination as a result of an Auction, the
Trustee shall, out of the Optional Termination Amount deposited into the
Certificate Account, (x) reimburse the Trustee for its costs and expenses
necessary to conduct the Auction and any other unreimbursed amounts owing to it
and (y) pay to the Servicer, the

                                     -114-
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aggregate amount of any unreimbursed out-of-pocket costs and expenses owed to
the Servicer and any unpaid or unreimbursed Servicing Fees, Advances and
Servicing Advances.

          (c) Notwithstanding anything to the contrary in clause (b) above, in
the event that the Trustee receives the written opinion of a nationally
recognized participant in mortgage finance acceptable to the Seller that the
Mortgage Loans and REO Properties to be included in the Auction will not be
saleable at a price sufficient to achieve the Optional Termination Price, the
Trustee need not conduct the Auction. In such event, the NIMs Insurer, if any,
and the Servicer in the event the NIMs Insurer declines to exercise its option,
shall have the option to purchase the Mortgage Loans and REO Properties at the
Optional Termination Price as of the Initial Optional Termination Date.

               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.

          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 no later than the last
calendar day of the month immediately preceding the month of such final
distribution (or with respect to an Auction, mailed no later than one Business
Day following completion of such Auction). 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, certification to the Trustee that such required
amount has been deposited in the Trust Fund and the receipt by the Trustee of a
Request for Release therefor, the Trustee (or its custodian) shall promptly
release 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.

          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

                                     -115-
<PAGE>
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, the NIMs Insurer or the Servicer
completes an Optional Termination as provided in Section 9.01, the Trust Fund
shall be terminated in accordance with the following additional requirements,
unless the Trustee has been supplied with an Opinion of Counsel, at the expense
of the Trustee, the NIMs Insurer or the Servicer, 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, and the Trustee 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 Servicer;

                 (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), 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, upon the
written request of the Depositor, to adopt and sign such a plan of complete
liquidation prepared and delivered to it by Depositor and the receipt of the
Opinion of Counsel referred to in Section 9.03(a) and to take such other action
in connection therewith as may be reasonably requested by the Depositor.

          (d) Notwithstanding any other terms of this Agreement, prior to any
termination of the Trust Fund, the Servicer may prepare a reconciliation of all
Advances and Servicing Advances made by it for which it has not been reimbursed
and a reasonable estimate of all additional Servicing Advances and other costs
for which it would be entitled to be reimbursed if the Trust Fund were not being
terminated, including without limitation, any Servicing Advances and other costs
arising under Section

                                     -116-
<PAGE>
6.03 (Limitation on Liability of the Depositor, the Servicer and Others), and
the Servicer may recover these Advances, Servicing Advances and estimated
Servicing Advances and other costs from the Collection Account (to the extent
that such recovery of Servicing Advances, estimated Servicing Advances and other
costs constitutes "unanticipated expenses" within the meaning of Treasury
Regulation Section 1.860G-1(b)(3)(ii)).

          (e) Notwithstanding any other terms of this Agreement, unless the
Servicer previously has notified the Trustee that it has entered into a
servicing agreement for the servicing after the termination date of the Trust
Fund assets, at least 20 days prior to any termination of the Trust Fund, the
Trustee or the Depositor shall notify the Servicer in writing to transfer the
assets of the Trust Fund as of the termination date to the person specified in
the notice, or if such person is not then known, to continue servicing the
assets until the date that is 20 days after the termination date and on the
termination date, the Trustee or the Depositor shall notify the Servicer of the
person to whom the assets should be transferred on that date. In the latter
event the Servicer shall be entitled to recover its servicing fee and any
advances made for the interim servicing period from the collections on the
assets which have been purchased from the Trust and the new owner of the assets,
and the agreements for the new owner to obtain ownership of the assets of the
Trust Fund shall so provide.

                                   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 to such effect, adversely affect 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 but with the consent of the NIMs Insurer, 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

                                     -117-
<PAGE>
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 shall have been
provided an Opinion of Counsel, which opinion shall be an expense of the party
requesting such amendment but in any case shall not be an expense of the Trustee
or the NIMs Insurer, 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.

          Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel, which opinion shall 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 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.

          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 and
each Rating Agency. A copy of such Opinion of Counsel shall be provided to the
NIMs Insurer.

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

          Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel, satisfactory to the Trustee
that (i) such amendment is permitted and is not prohibited by this Agreement and
that all requirements for amending this Agreement have been complied with; and
(ii) either (A) the amendment does not adversely affect in any material respect
the interests of any Certificateholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 10.01.

          The Trustee may, but shall not be obligated to, enter into any
supplement, modification or waiver which affects its rights, duties or
obligations hereunder.

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<PAGE>
               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 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 it 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;

                                     -119-
<PAGE>
                 (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.

          (b) 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.

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 Rating Agencies, (i) Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc., 55 Water Street, New
York, New York 10041; and (ii) Moody's Investors Service, Inc., 99 Church
Street, 4th Floor, New York, New York 10007; (c) in the case of the Servicer,
Wilshire Credit Corporation, 14523 S.W. Millikan Way, Suite 200, Beaverton,
Oregon 97005; (d) in the case of the Trustee, Wells Fargo Bank, N.A., 9062 Old
Annapolis Road, Columbia, Maryland 21045, Attention: Client Services Manager -
Merrill Lynch Mortgage Investors Trust, Series 2005-WMC2; 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 Trustee and the Depositor;
provided, however, the Servicer is hereby authorized to enter into an Advance
Facility under which (l) the Servicer sells, assigns or pledges to an Advancing
Person the Servicer's rights under this Agreement to be reimbursed for any
Advances or Servicing Advances and/or (2) an Advancing Person agrees to fund
some or all Advances or Servicing Advances required to be made by the Servicer
pursuant to this Agreement. No consent of the Trustee, Certificateholders, NIMs
Insurer or any other party is required before the Servicer may enter into an
Advance Facility. Notwithstanding the existence of any Advance Facility under
which an Advancing Person agrees to fund Advances and/or Servicing Advances on
the Servicer's behalf, the Servicer shall remain obligated pursuant to this
Agreement to

                                     -120-
<PAGE>
make Advances and Servicing Advances pursuant to and as required by this
Agreement, and shall not be relieved of such obligations by virtue of such
Advance Facility.

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

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

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

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

          Any amendment to this Section 10.07 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 10.07, including amendments to
add provisions relating to a successor Servicer, may be entered into by the
Trustee and the Servicer, without the consent of any Certificateholder
notwithstanding anything to the contrary in this Agreement, upon receipt by the
Trustee of an Opinion of Counsel that such amendment has no material adverse
effect on the Certificateholders or written confirmation from the Rating
Agencies that such amendment will not adversely affect the ratings on the
Certificates. Prior to entering into an Advance Facility, the applicable
Servicer shall notify the lender under such facility in writing that: (a) the
Advances financed by and/or pledged to the lender are obligations owed to the
Servicer on a non recourse basis payable only from the cash flows and proceeds
received under this Agreement for reimbursement of Advances only to the extent
provided herein, and the Trustee and the Trust Fund are not otherwise obligated
or liable to repay any Advances financed by the lender; (b) the Servicer will be
responsible for remitting to the lender the applicable amounts collected by it
as reimbursement for Advances funded by the lender, subject to the restrictions
and priorities created in this Agreement; and (c) the Trustee shall not have any
responsibility to track or monitor the administration of the financing
arrangement between the Servicer and the lender.

             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

                                     -121-
<PAGE>
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 indemnity satisfactory to
it 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 enforcement of the provisions of
this Section 10.08, each and every Certificateholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.

             Section 10.09. Inspection and Audit Rights.

          The Servicer agrees that, on reasonable prior notice, it will permit
any representative of the Depositor 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 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 Depositor or the Trustee of any right under this
Section 10.09 shall be borne by the party requesting such inspection (except in
the case of the Trustee in which case such expenses shall be borne by the
requesting Certificateholder(s)); 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.

                                     -122-
<PAGE>
             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. With respect to
the Trustee, such obligation shall be satisfied with the provision of access to
the NIMs Insurer to the Trustee's website.

          (b) Wherever in this Agreement there shall be a requirement that there
be no downgrade, reduction, withdrawal or qualification of or other adverse
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
adverse 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.

                                   ARTICLE XI

                                   [RESERVED]

                                     -123-
<PAGE>
          IN WITNESS WHEREOF, the Depositor, the Trustee and the Servicer have
caused their names to be signed hereto by their respective officers thereunto
duly authorized as of the day and year first above written.

                                         MERRILL LYNCH MORTGAGE INVESTORS, INC.,
                                                as Depositor

                                         By:____________________________________
                                         Name: Matthew Whalen
                                         Title: President

                                         WELLS FARGO BANK, N.A.,
                                                as Trustee

                                         By:____________________________________
                                         Name: Sandra Whalen
                                         Title: Vice President

                                         WILSHIRE CREDIT CORPORATION,
                                                as Servicer

                                         By:____________________________________
                                         Name: Heidi Peterson
                                         Title: Vice President

<PAGE>
                                    EXHIBIT A

                              FORMS OF CERTIFICATES

                             [INTENTIONALLY OMITTED]

                                       A-1
<PAGE>
                                   EXHIBIT B-1

                     MORTGAGE LOAN SCHEDULE - MORTGAGE POOL

                             [INTENTIONALLY OMITTED]

                                      B-1-1
<PAGE>
                                   EXHIBIT B-2

                MORTGAGE LOAN SCHEDULE - GROUP ONE MORTGAGE LOANS

                             [INTENTIONALLY OMITTED]

                                      B-2-1
<PAGE>
                                   EXHIBIT B-3

                MORTGAGE LOAN SCHEDULE - GROUP TWO MORTGAGE LOANS

                             [INTENTIONALLY OMITTED]

                                      B-3-1
<PAGE>
                                    EXHIBIT C

                                   [RESERVED]

                                       C-1
<PAGE>
                                    EXHIBIT D

                         FORM OF CUSTODIAN CERTIFICATION

                                     [DATE]

Merrill Lynch Mortgage Investors, Inc.
250 Vesey Street
4 World Financial Center, 10th Floor
New York, New York 10080

Wilshire Credit Corporation
14523 S.W. Millikan Way,
Suite 200
Beaverton, Oregon 97005

Wells Fargo Bank, N.A.
9062 Old Annapolis Road
Columbia, Maryland  21045

Re:   Merrill Lynch Mortgage Investors Trust, Mortgage Loan Asset-Backed
      Certificates, Series 2005-WMC2

Ladies and Gentlemen:

            In accordance with Section 2.02 of the Pooling and Servicing
Agreement dated as of May 1, 2005 among Merrill Lynch Mortgage Investors, Inc.,
as depositor, Wells Fargo Bank, N.A., as trustee and Wilshire Credit
Corporation, as servicer (the "Pooling and Servicing Agreement"), the
undersigned, as custodian, 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 or Assignment thereof 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 appear regular on
their face and relate to such Mortgage Loan.

            The custodian has made no independent examination of any documents
contained in each Mortgage File beyond confirming (i) that the Mortgage Loan
number, the name of the Mortgagor, the street address (excluding zip code), the
mortgage interest rate at origination, the gross margin (if applicable), the
lifetime rate cap (if applicable), the periodic rate cap (if applicable), the
original principal balance, the first payment due date and the original maturity
date 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 (i)(A) through
(G), inclusive, of

                                      D-1
<PAGE>
Section 2.01 in the Agreement. The custodian makes no representations or
warranties as to the validity, legality, recordability, sufficiency,
enforceability or genuineness of any of the documents contained in each Mortgage
Loan or the collectability, 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-referenced Pooling and Servicing
Agreement.

                                          WELLS FARGO BANK, N.A.,
                                                    as Custodian

                                          By: __________________________________
                                          Name: ________________________________
                                          Title: _______________________________

                                      D-2
<PAGE>
                                   EXHIBIT E-1

                    FORM OF TRANSFEREE'S LETTER AND AFFIDAVIT

                                     [DATE]

Wells Fargo Bank, N.A.
9062 Old Annapolis Road
Columbia, Maryland 21045
Attention: Corporate Trust Services - Merrill Lynch Mortgage Investors Trust,
Series 2005-WMC2

Ladies and Gentlemen:

            We propose to purchase Merrill Lynch Mortgage Investors Trust,
Mortgage Loan Asset-Backed Certificates, Series 2005-WMC2, Class R, described in
the Prospectus Supplement, dated May 26, 2005, and Prospectus, dated January 19,
2005.

            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)

                  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.

____________________

(1) Check appropriate box and if necessary fill in the name of the Transferee's
nominee.

                                     E-1-1
<PAGE>
            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"), a plan subject to Section 4975 of the Code or a plan subject to
federal, state, local, non-U.S. or other law substantively similar to the
foregoing provisions of ERISA or the Code (each, a "Plan"), and are not directly
or indirectly acquiring the Class R Certificate on behalf of or with any assets
of a 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 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 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 a letter in the form of this letter (including the affidavit
appended hereto) and, we will provide the Trustee a written statement
substantially in the form of Exhibit E-2 to the Pooling and Servicing Agreement.

            7. We hereby designate _______________________ as our fiduciary to
act as the tax matters person for each of the REMICs provided for in the Pooling
and Servicing Agreement.

                                   Very truly yours,

                                   [PURCHASER]

                                   By:__________________________________________
                                      Name:
                                      Title:

Accepted as of __________ __, 200__

MERRILL LYNCH MORTGAGE INVESTORS, INC.

By:__________________________________________________
   Name:
   Title:

                                     E-1-2
<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 2005-WMC2,
                  Class R Certificate on behalf of a disqualified organization
                  or any other entity,

            4.    unless Merrill Lynch Mortgage Investors, Inc.("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-1-3
<PAGE>
            12.   the present value of any consideration given to the Transferee
                  to acquire such residual interest;

            13.   the present value of the expected future distributions on such
                  residual interest; and

            14.   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.

                                     E-1-4
<PAGE>
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 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-1-5
<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-1-6
<PAGE>
                                  EXHIBIT E - 2

                         FORM OF TRANSFEROR'S AFFIDAVIT

                                     [DATE]

Wells Fargo Bank, N.A.
9062 Old Annapolis Road
Columbia, Maryland 21045
Attention: Corporate Trust Services - Merrill Lynch Mortgage Investors Trust,
Series 2005-WMC2

Re:   Merrill Lynch Mortgage Investors Trust, Mortgage Loan Asset-Backed
      Certificates, Series 2005-WMC2

            _______________________ (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-2-1
<PAGE>
                                    EXHIBIT F

                         FORM OF TRANSFEROR CERTIFICATE

                                     [DATE]

Wells Fargo Bank, N.A.
9062 Old Annapolis Road
Columbia, Maryland 21045
Attention:  Corporate Trust Services - Merrill Lynch Mortgage Investors Trust,
Series 2005-WMC2

RE:   Merrill Lynch Mortgage Investors Trust, Mortgage Loan Asset-Backed
      Certificates, Series 2005-WMC2

Ladies and Gentlemen:

            In connection with our disposition of the Class [____] 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 and (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. 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 May 1, 2005,
among Merrill Lynch Mortgage Investors, Inc., as depositor, Wells Fargo Bank,
N.A., as trustee and Wilshire Credit Corporation, as servicer.

                                        Very truly yours,

                                        _________________________________
                                        Name of Transferor

                                        By:______________________________
                                           Name:
                                           Title

                                       F-1
<PAGE>
                                    EXHIBIT G

                            FORM OF INVESTMENT LETTER

                              (ACCREDITED INVESTOR)

                                     [DATE]

Wells Fargo Bank, N.A.
9062 Old Annapolis Road
Columbia, Maryland 21045
Attention:  Corporate Trust Services - Merrill Lynch Mortgage Investors Trust,
Series 2005-WMC2

Re:   Merrill Lynch Mortgage Investors Trust, Mortgage Loan Asset-Backed
      Certificates, Series 2005-WMC2

Ladies and Gentlemen:

            ______________ (the "Purchaser") intends to purchase from
________________ (the "Transferor") $_______ by original principal balance (the
"Transferred Certificates") of Merrill Lynch Mortgage Investors Trust, Mortgage
Loan Asset-Backed Certificates, Series 2005-WMC2, Class [____] (the
"Certificates"), issued pursuant to a Pooling and Servicing Agreement, dated as
of May 1, 2005 (the "Pooling and Servicing Agreement"), among Merrill Lynch
Mortgage Investors, Inc., as depositor (the "Depositor"), Wells Fargo Bank, N.A.
as trustee (the "Trustee") and Wilshire Credit Corporation, as servicer (the
"Servicer"). [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
            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

                                       G-1
<PAGE>
            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 TRUSTEE (A) AN INVESTMENT LETTER FROM THE
            PROSPECTIVE INVESTOR; AND (B) REPRESENTATIONS FROM THE TRANSFEROR
            REGARDING THE OFFERING AND SALE OF THE CERTIFICATES.

            3. The ERISA Restricted Certificates (other than the Class R
Certificates) will bear a legend to the following effect:

            NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE TRUSTEE HAS
            RECEIVED (A) A REPRESENTATION THAT SUCH TRANSFEREE IS NOT AN
            EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT
            INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), A PLAN SUBJECT TO
            SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
            "CODE") OR A PLAN SUBJECT TO STATE, LOCAL, FEDERAL, NON-U.S. OR
            OTHER LAW SUBSTANTIVELY SIMILAR TO THE FOREGOING PROVISIONS OF ERISA
            OR THE CODE ("SIMILAR LAW"), AND IS NOT DIRECTLY OR INDIRECTLY
            ACQUIRING THIS CERTIFICATE BY, ON BEHALF OF, OR WITH ANY ASSETS OF
            ANY SUCH PLAN, (B) IF THE CERTIFICATE HAS BEEN THE SUBJECT OF AN
            ERISA-QUALIFYING UNDERWRITING, A REPRESENTATION THAT SUCH TRANSFEREE
            IS AN INSURANCE COMPANY THAT IS ACQUIRING THE CERTIFICATE WITH
            ASSETS OF AN "INSURANCE COMPANY GENERAL ACCOUNT" AS DEFINED IN
            SECTION V(E) OF PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE")
            95-60 AND THE ACQUISITION AND HOLDING OF THE CERTIFICATE ARE COVERED
            AND EXEMPT UNDER SECTIONS I AND III OF PTCE 95-60, OR (C) SOLELY IN
            THE CASE OF A DEFINITIVE CERTIFICATE, AN OPINION OF COUNSEL
            SATISFACTORY TO THE TRUSTEE, AND UPON WHICH THE TRUSTEE SHALL BE
            ENTITLED TO RELY, TO THE EFFECT THAT THE ACQUISITION AND HOLDING OF
            SUCH CERTIFICATE BY THE PROSPECTIVE TRANSFEREE WILL NOT CONSTITUTE
            OR RESULT IN A NONEXEMPT PROHIBITED TRANSACTION UNDER TITLE I OF
            ERISA OR SECTION 4975 OF THE CODE OR A VIOLATION OF SIMILAR LAW AND
            WILL NOT SUBJECT THE TRUSTEE, THE NIMS INSURER, THE SERVICER OR THE
            DEPOSITOR TO ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN BY SUCH
            ENTITIES IN THE POOLING AND SERVICING AGREEMENT, WHICH OPINION OF
            COUNSEL SHALL NOT BE AN EXPENSE OF, THE NIMS INSURER, THE TRUSTEE,
            THE SERVICER OR THE DEPOSITOR. IF THE CERTIFICATE IS NOT A
            DEFINITIVE CERTIFICATE, THE TRANSFEREE IS DEEMED TO HAVE MADE THE
            REPRESENTATION IN (A) OR (B) ABOVE.

                                       G-2
<PAGE>
            4. The Class R Certificate will bear a legend to the following
effect:

            NO TRANSFER OF THIS CERTIFICATE SHALL BE REGISTERED UNLESS THE
            PROSPECTIVE TRANSFEREE PROVIDES THE TRUSTEE WITH A REPRESENTATION
            THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO
            TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
            AMENDED ("ERISA"), A PLAN SUBJECT TO SECTION 4975 OF THE CODE OR A
            PLAN SUBJECT TO STATE, LOCAL, FEDERAL, NON-U.S. OR OTHER LAW
            SUBSTANTIVELY SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE
            CODE ("SIMILAR LAW"), AND IS NOT DIRECTLY OR INDIRECTLY ACQUIRING
            THIS CERTIFICATE BY, ON BEHALF OF, OR WITH ANY ASSETS OF ANY SUCH
            PLAN.

            5. 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.

            6. 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.

            7. 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.

            8. The Purchaser of an ERISA Restricted Certificate (other than the
Class R Certificate) (A) is not an employee benefit plan subject to Title I of
ERISA, a plan subject to Section 4975 of the Code, a plan subject to any state,
local, federal, non-U.S. or other law substantively similar to the foregoing
provisions of ERISA or the Code ("Similar Law") and is not directly or
indirectly acquiring such Certificates by, on behalf of, or with any assets of
any such plan, or (B) if the Certificate has been

_____________________

* Not required of a broker/dealer purchaser.

                                       G-3
<PAGE>
the subject of an ERISA-Qualifying Underwriting, is an insurance company that is
acquiring the Certificate with assets of an "insurance company general account,"
as defined in Section V(e) of Prohibited Transaction Class Exemption ("PTCE")
95-60, and the acquisition and holding of the Certificate are covered and exempt
under Sections I and III of PTCE 95-60, or (C) solely in the event the
Certificate is a Definitive Certificate, herewith delivers an Opinion of Counsel
satisfactory to the Trustee, and upon which the Trustee shall be entitled to
rely, to the effect that the acquisition and holding of the Certificate will not
constitute or result in a nonexempt prohibited transaction under Title I of
ERISA or Section 4975 of the Code, or a violation of Similar Law, and will not
subject the NIMs Insurer, the Trustee, the Servicer or the Depositor 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, the Trustee, the Servicer or the Depositor.

            9. The Purchaser of a Class R Certificate is not an employee benefit
plan subject to Title I of ERISA, a plan subject to Section 4975 of the Code, a
plan subject to any state, local, federal, non-U.S. or other law substantively
similar to the foregoing provisions of ERISA or the Code ("Similar Law"), or a
Person directly or indirectly acquiring such Certificate by, on behalf of, or
with any assets of any such plan.

            10 ..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.

            11 ..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]

Wells Fargo Bank, N.A.
9062 Old Annapolis Road
Columbia, Maryland 21045
Attention:  Corporate Trust Services - Merrill Lynch Mortgage Investors Trust,
Series 2005-WMC2

Re:   Merrill Lynch Mortgage Investors Trust, Mortgage Loan Asset-Backed
      Certificates, Series 2005-WMC2

Ladies and Gentlemen:

            ______________ (the "Purchaser") intends to purchase from
________________ (the "Transferor") $_______ by original principal balance (the
"Transferred Certificates") of Merrill Lynch Mortgage Investors Trust, Mortgage
Loan Asset-Backed Certificates, Series 2005-WMC2, Class [____] (the
"Certificates"), issued pursuant to a Pooling and Servicing Agreement, dated as
of May 1, 2005 (the "Pooling and Servicing Agreement"), among Merrill Lynch
Mortgage Investors, Inc., as depositor (the "Depositor"), Wells Fargo Bank, N.A.
as trustee (the "Trustee"), Wilshire Credit Corporation, as servicer (the
"Servicer"). [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)(A) solely with respect to ERISA Restricted Certificates, we are not an
employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), a plan subject to Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code"), a plan subject to
any state, local, federal, non-U.S. or other law substantively similar to the
foregoing provisions of ERISA or the Code ("Similar Law"), or Persons directly
or indirectly acting on behalf of or using any assets of any such plan, or (B)
solely with respect to ERISA Restricted Certificates (other than the Class R
Certificates), if the Certificate has been the subject of an ERISA-Qualifying
Underwriting, we are an insurance company that is acquiring the Certificate with
assets of an "insurance company general account," as defined in Section V(e) of
Prohibited Transaction Class Exemption ("PTCE") 95-60, and the acquisition and
holding of the Certificate are covered and exempt under Sections I and III of
PTCE 95-60, or (C) solely in the event the Certificate is an ERISA Restricted
Certificate (other than a Class R

                                       H-1
<PAGE>
Certificate) and also a Definitive Certificate, we will herewith deliver an
Opinion of Counsel satisfactory to the Trustee, and upon which the Trustee shall
be entitled to rely, to the effect that the acquisition and holding of the
Certificate will not constitute or result in a nonexempt prohibited transaction
under Title I of ERISA or Section 4975 of the Code, or a violation of Similar
Law, and will not subject the NIMs Insurer, the Trustee, the Servicer or the
Depositor 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, the Trustee, the Servicer or the Depositor, (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.

            _____ 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.

_______________________

* 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.

                                       H-3
<PAGE>
            _____ Insurance Company. The Buyer is an insurance company whose
                  primary and predominant business activity is the writing of
                  insurance or the reinsuring of risks underwritten by insurance
                  companies and which is subject to supervision by the insurance
                  commissioner or a similar official or agency of 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.

                                       H-4
<PAGE>
            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 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

                                       H-6
<PAGE>
rely on the statements made herein because one or more sales to the Buyer will
be in reliance on Rule 144A. In addition, the Buyer will only purchase for the
Buyer's own account.

            6. Until the date of purchase of the Certificates, the undersigned
will notify the parties listed in the Rule 144A Transferee Certificate to which
this certification relates of any changes in the information and conclusions
herein. Until such notice is given, the Buyer's purchase of the Certificates
will constitute a reaffirmation of this certification by the undersigned as of
the date of such purchase.

                                       By:______________________________________
                                          Name:
                                          Title:

                                       IF AN ADVISER:

                                       _________________________________________
                                       Print Name of Buyer

                                       Date:____________________________________

                                       H-7
<PAGE>
                                    EXHIBIT I

                           FORM OF REQUEST FOR RELEASE

                                     [DATE]

To:   Wells Fargo Bank, N.A.
      1015 10TH Avenue Southeast
      Minneapolis, Minnesota 55414

Re:   Merrill Lynch Mortgage Investors Trust, Mortgage Loan Asset-Backed
      Certificates, Series 2005-WMC2

            In connection with the administration of the Mortgage Loans held by
you, as Trustee, pursuant to the Pooling and Servicing Agreement dated as of May
1, 2005 among Merrill Lynch Mortgage Investors, Inc., as depositor, Wells Fargo
Bank, N.A., as trustee and Wilshire Credit Corporation, as servicer (the
"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
_____

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.

Please acknowledge the execution of the above request by your signature and date
below:

WELLS FARGO BANK, N.A.,
as Custodian

By:___________________________________     _____________________________________
     Signature                               Date

Documents returned to Custodian:

By:___________________________________     _____________________________________
     Signature                               Date

                                      I-2
<PAGE>

                                    EXHIBIT J

                                   [RESERVED]

                                       J-1
<PAGE>
                                    EXHIBIT K

                    FORM OF OFFICER'S CERTIFICATE OF TRUSTEE

                                     [DATE]

Merrill Lynch Mortgage Investors, Inc.
250 Vesey Street
4 World Financial Center, 10th Floor
New York, New York 10080

Re:   Merrill Lynch Mortgage Investors Trust,  Mortgage Loan Asset-Backed
      Certificates, Series 2005-WMC2

      I, [identify the certifying individual], a [title] of Wells Fargo Bank,
N.A., as Trustee under the Pooling and Servicing Agreement dated as of May 1,
2005 among Merrill Lynch Mortgage Investors, Inc., as depositor, Wells Fargo
Bank, N.A., as trustee and Wilshire Credit Corporation, as servicer (the
"Agreement"), hereby certify to the Depositor, and its officers, directors and
affiliates, and with the knowledge and intent that they will rely upon this
certification, that:

1.    I have reviewed the Monthly Statements delivered pursuant to the Agreement
      since the last Officer's Certificate executed pursuant to Section 3.21 of
      the Agreement [or in the case of the first certification, since the
      Cut-off Date] (the "Trustee Information").

2.    Based on my 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 necessary to make the statements made, in light
      of the circumstances under which such statements were made, not misleading
      as of the date hereof;

3.    Based on my knowledge, the Monthly Statements required to be prepared by
      the Trustee under the Agreement has been prepared and provided in
      accordance with the Agreement; and

4.    I am responsible for reviewing the activities performed by the Trustee
      under the Agreement and the Trustee has, as of the date hereof fulfilled
      its obligations under the Agreement and there are no significant
      deficiencies relating to the Trustee's compliance with the Agreement.

Date:

                                        Wells Fargo Bank, N.A.,
                                        as Trustee
                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                       K-1
<PAGE>
                                    EXHIBIT L

                    FORM OF OFFICER'S CERTIFICATE OF SERVICER

                                     [DATE]

Merrill Lynch Mortgage Investors, Inc.
250 Vesey Street
4 World Financial Center, 10th Floor
New York, New York 10080

Wells Fargo Bank, N.A.
9062 Old Annapolis Road
Columbia, Maryland 21045
Attention:  Corporate Trust Services - Merrill Lynch Mortgage Investors Trust,
            Series 2005-WMC2

Re:   Merrill Lynch Mortgage Investors Trust, Mortgage Loan Asset-Backed
      Certificates, Series 2005-WMC2

            I, [identify the certifying individual], an authorized
representative of Wilshire Credit Corporation, as servicer under the Pooling and
Servicing Agreement dated as of May 1, 2005 among Merrill Lynch Mortgage
Investors, Inc., as depositor, Wells Fargo Bank, N.A., as trustee and Wilshire
Credit Corporation, as servicer (the "Agreement"), hereby certify to the Trustee
and the Depositor, and each of their respective officers, directors and
affiliates, and with the knowledge and intent that they will rely upon this
certification, that:

            1. Based on my knowledge, the information in the annual statement of
compliance identified in Section 3.17 of the Agreement, the annual independent
public accountants' report identified in Section 3.18 of the Agreement and all
servicing reports, officer's certificates and other information relating to the
servicing of the Mortgage Loans submitted to the Trustee 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 date of this
certification;

            2. The servicing information required to be provided to the Trustee
by the Servicer under the Agreement has been provided to the Trustee;

            3. I am responsible for reviewing the activities performed by the
Servicer under the Agreement and based upon the review required hereunder, and
except as disclosed in the annual statement of compliance identified in Section
3.17 of the Agreement, the annual independent public accountants' report
identified in Section 3.18 of the Agreement and all servicing reports, officer's
certificates and other information relating to the servicing of the Mortgage
Loans submitted to the Trustee, the Servicer has, as of the date of this
certification, fulfilled its obligations under this Agreement; and

                                       L-1
<PAGE>
            4. I have disclosed to the Trustee all significant deficiencies
relating to the Servicer's compliance with the minimum servicing standards in
accordance with a review conducted in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or similar standard as set forth under
the Agreement.

Date:

                                        Wilshire Credit Corporation, as Servicer
                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                      L-2
<PAGE>
                                   EXHIBIT M-1

                           FORM OF DELINQUENCY REPORT

STANDARD FILE LAYOUT - DELINQUENCY REPORTING

<TABLE>
<CAPTION>
                                                                                                        FORMAT
COLUMN/HEADER NAME                                   DESCRIPTION                            DECIMAL     COMMENT
<S>                          <C>                                                            <C>        <C>
SERVICER_LOAN_NBR            A unique number assigned to a loan by the Servicer.  This
                             may be different than the LOAN_NBR

LOAN_NBR                     A unique identifier assigned to each loan by the originator.

CLIENT_NBR                   Servicer Client Number

SERV_INVESTOR_NBR            Contains a unique number as assigned by an external
                             servicer to identify a group of loans in their system.

BORROWER_FIRST_NAME          First Name of the Borrower.

BORROWER_LAST_NAME           Last name of the borrower.

PROP_ADDRESS                 Street Name and Number of Property

PROP_STATE                   The state where the  property located.

PROP_ZIP                     Zip code where the property is located.

BORR_NEXT_PAY_DUE_DATE       The date that the borrower's next payment is due to the                   MM/DD/YYYY
                             servicer at the end of processing cycle, as reported by
                             Servicer.

LOAN_TYPE                    Loan Type (i.e. FHA, VA, Conv)

BANKRUPTCY_FILED_DATE        The date a particular bankruptcy claim was filed.                         MM/DD/YYYY

BANKRUPTCY_CHAPTER_CODE      The chapter under which the bankruptcy was filed.

BANKRUPTCY_CASE_NBR          The case number assigned by the court to the bankruptcy
                             filing.

POST_PETITION_DUE_DATE       The payment due date once the bankruptcy has been approved                MM/DD/YYYY
                             by the courts

BANKRUPTCY_DCHRG_DISM_DATE   The Date The Loan Is Removed From Bankruptcy. Either by                   MM/DD/YYYY
                             Dismissal, Discharged and/or a Motion For Relief Was
                             Granted.

LOSS_MIT_APPR_DATE           The Date The Loss Mitigation Was Approved By The Servicer                 MM/DD/YYYY

LOSS_MIT_TYPE                The Type Of Loss Mitigation Approved For A Loan Such As;

LOSS_MIT_EST_COMP_DATE       The Date The Loss Mitigation /Plan Is Scheduled To End/Close              MM/DD/YYYY

LOSS_MIT_ACT_COMP_DATE       The Date The Loss Mitigation Is Actually Completed                        MM/DD/YYYY

FRCLSR_APPROVED_DATE         The date DA Admin sends a letter to the servicer with                     MM/DD/YYYY
                             instructions to begin foreclosure proceedings.

ATTORNEY_REFERRAL_DATE       Date File Was Referred To Attorney to Pursue Foreclosure                  MM/DD/YYYY

FIRST_LEGAL_DATE             Notice of 1st legal filed by an Attorney in a Foreclosure                 MM/DD/YYYY
                             Action

FRCLSR_SALE_EXPECTED_DATE    The date by which a foreclosure sale is expected to occur.                MM/DD/YYYY

FRCLSR_SALE_DATE             The actual date of the foreclosure sale.                                  MM/DD/YYYY
</TABLE>

                                      M-1-1
<PAGE>
<TABLE>
<S>                          <C>                                                            <C>        <C>
FRCLSR_SALE_AMT              The amount a property sold for at the foreclosure sale.           2       No commas(,) or
                                                                                                       dollar signs ($)

EVICTION_START_DATE          The date the servicer initiates eviction of the borrower.                 MM/DD/YYYY

EVICTION_COMPLETED_DATE      The date the court revokes legal possession of the property               MM/DD/YYYY
                             from the borrower.

LIST_PRICE                   The price at which an REO property is marketed.                   2       No commas(,) or
                                                                                                       dollar signs ($)

LIST_DATE                    The date an REO property is listed at a particular price.                 MM/DD/YYYY

OFFER_AMT                    The dollar value of an offer for an REO property.                 2       No commas(,) or
                                                                                                       dollar signs ($)

OFFER_DATE_TIME              The date an offer is received by DA Admin or by the                       MM/DD/YYYY
                             Servicer.

REO_CLOSING_DATE             The date the REO sale of the property is scheduled to close.              MM/DD/YYYY

REO_ACTUAL_CLOSING_DATE      Actual Date Of REO Sale                                                   MM/DD/YYYY

OCCUPANT_CODE                Classification of how the property is occupied.

PROP_CONDITION_CODE          A code that indicates the condition of the property.

PROP_INSPECTION_DATE         The date a  property inspection is performed.                             MM/DD/YYYY

APPRAISAL_DATE               The date the appraisal was done.                                          MM/DD/YYYY

CURR_PROP_VAL                The current "as is" value of the property based on brokers        2
                             price opinion or appraisal.

REPAIRED_PROP_VAL            The amount the property would be worth if repairs are             2
                             completed pursuant to a broker's price opinion or appraisal.

IF APPLICABLE:

DELINQ_STATUS_CODE           FNMA Code Describing Status of Loan

DELINQ_REASON_CODE           The circumstances which caused a borrower to stop paying on
                             a loan. Code indicates the reason why the loan is in default
                             for this cycle.

MI_CLAIM_FILED_DATE          Date Mortgage Insurance Claim Was Filed With Mortgage                     MM/DD/YYYY
                             Insurance Company.

MI_CLAIM_AMT                 Amount of Mortgage Insurance Claim Filed                                  No commas(,) or
                                                                                                       dollar signs ($)

MI_CLAIM_PAID_DATE           Date Mortgage Insurance Company Disbursed Claim Payment                   MM/DD/YYYY

MI_CLAIM_AMT_PAID            Amount Mortgage Insurance Company Paid On Claim                   2       No commas(,) or
                                                                                                       dollar signs ($)

POOL_CLAIM_FILED_DATE        Date Claim Was Filed With Pool Insurance Company                          MM/DD/YYYY
</TABLE>

                                      M-1-2
<PAGE>
<TABLE>
<S>                          <C>                                                            <C>        <C>
POOL_CLAIM_AMT               Amount of Claim Filed With Pool Insurance Company                 2       No commas(,) or
                                                                                                       dollar signs ($)

POOL_CLAIM_PAID_DATE         Date Claim Was Settled and The Check Was Issued By The Pool               MM/DD/YYYY
                             Insurer

POOL_CLAIM_AMT_PAID          Amount Paid On Claim By Pool Insurance Company                    2       No commas(,) or
                                                                                                       dollar signs ($)

FHA_PART_A_CLAIM_FILED_DATE  Date FHA Part A Claim Was Filed With HUD                                  MM/DD/YYYY

FHA_PART_A_CLAIM_AMT         Amount of FHA Part A Claim Filed                                  2       No commas(,) or
                                                                                                       dollar signs ($)

FHA_PART_A_CLAIM_PAID_DATE   Date HUD Disbursed Part A Claim Payment                                   MM/DD/YYYY

FHA_PART_A_CLAIM_PAID_AMT    Amount HUD Paid on Part A Claim                                   2       No commas(,) or
                                                                                                       dollar signs ($)

FHA_PART_B_CLAIM_FILED_DATE  Date FHA Part B Claim Was Filed With HUD                                  MM/DD/YYYY

FHA_PART_B_CLAIM_AMT         Amount of FHA Part B Claim Filed                                  2       No commas(,) or
                                                                                                       dollar signs ($)

FHA_PART_B_CLAIM_PAID_DATE   Date HUD Disbursed Part B Claim Payment                                   MM/DD/YYYY

FHA_PART_B_CLAIM_PAID_AMT    Amount HUD Paid on Part B Claim                                   2       No commas(,) or
                                                                                                       dollar signs ($)

VA_CLAIM_FILED_DATE          Date VA Claim Was Filed With the Veterans Admin                           MM/DD/YYYY

VA_CLAIM_PAID_DATE           Date Veterans Admin. Disbursed VA Claim Payment                           MM/DD/YYYY

VA_CLAIM_PAID_AMT            Amount Veterans Admin. Paid on VA Claim                           2       No commas(,) or
                                                                                                       dollar signs ($)
</TABLE>

                                     M-1-3
<PAGE>
STANDARD FILE CODES - DELINQUENCY REPORTING

The LOSS MIT TYPE field should show the approved Loss Mitigation Code as
follows:

      -     ASUM-       Approved Assumption

      -     BAP-        Borrower Assistance Program

      -     CO-         Charge Off

      -     DIL-        Deed-in-Lieu

      -     FFA-        Formal Forbearance Agreement

      -     MOD-        Loan Modification

      -     PRE-        Pre-Sale

      -     SS-         Short Sale

      -     MISC-       Anything else approved by the PMI or Pool Insurer

NOTE: Wells Fargo Bank will accept alternative Loss Mitigation Types to those
above, provided that they are consistent with industry standards. If Loss
Mitigation Types other than those above are used, the Servicer must supply Wells
Fargo Bank with a description of each of the Loss Mitigation Types prior to
sending the file.

The OCCUPANT CODE field should show the current status of the property code as
follows:

      -     Mortgagor

      -     Tenant

      -     Unknown

      -     Vacant

The PROPERTY CONDITION field should show the last reported condition of the
property as follows:

      -     Damaged

      -     Excellent

      -     Fair

      -     Gone

      -     Good

      -     Poor

      -     Special Hazard

      -     Unknown

                                     M-1-4
<PAGE>
                                   EXHIBIT M-2

                        FORM OF MONTHLY REMITTANCE ADVICE

STANDARD FILE LAYOUT - SCHEDULED/SCHEDULED

<TABLE>
<CAPTION>
COLUMN NAME                                DESCRIPTION                      DECIMAL    FORMAT COMMENT
<S>                     <C>                                                <C>        <C>
LOAN_NBR                Loan Number assigned by investor                               Text up to 10 digits

SERVICER LOAN_NBR       Servicer Loan Number                                           Text up to 10 digits

SCHED_PMT_AMT           P&I constant                                           2       No commas(,) or dollar signs ($)

NOTE_INT_RATE           Gross Interest Rate                                    4       Max length of 6

NET_RATE                Gross Interest Rate less the Service Fee Rate          4       Max length of 6

SERV_FEE_RATE           Service Fee Rate                                       4       Max length of 6

ARM_INDEX_RATE          ARM loan's index Rate used                             4       Max length of 6

ACTL_BEG_BAL            Beginning Actual Balance                               2       No commas(,) or dollar signs ($)

ACTL_END_BAL            Ending Actual Balance                                  2       No commas(,) or dollar signs ($)

NEXT_DUE_DATE           Borrower's next due date                                       MM/DD/YYYY

CURT_AMT_1              Curtailment Amount                                     2       No commas(,) or dollar signs ($)

CURT_DATE_1             Due date Curtailment was applied to                            MM/DD/YYYY

CURT_ADJ_ AMT_1         Curtailment Interest if applicable                     2       No commas(,) or dollar signs ($)

CURT_AMT_2              Curtailment Amount 2                                   2       No commas(,) or dollar signs ($)

CURT_DATE_2             Due date Curtailment was applied to                            MM/DD/YYYY

CURT_ADJ_ AMT2          Curtailment Interest if applicable                     2       No commas(,) or dollar signs ($)

CURT_AMT_3              Curtailment Amount 3                                   2       No commas(,) or dollar signs ($)

CURT_DATE_3             Due date Curtailment was applied to                            MM/DD/YYYY

CURT_ADJ_AMT3           Curtailment Interest, if applicable                    2       No commas(,) or dollar signs ($)

SCHED_BEG_BAL           Beginning Scheduled Balance                            2       No commas(,) or dollar signs ($)

SCHED_END_BAL           Ending Scheduled Balance                               2       No commas(,) or dollar signs ($)

SCHED_PRIN_AMT          Scheduled Principal portion of P&I                     2       No commas(,) or dollar signs ($)

                        Scheduled Net Interest (less Service Fee)
SCHED_NET_INT           portion of P&I                                         2       No commas(,) or dollar signs ($)

                        Liquidation Principal Amt to bring balance to
LIQ_AMT                 zero                                                   2       No commas(,) or dollar signs ($)

PIF_DATE                Liquidation Date                                               MM/DD/YYYY

ACTION_CODE             Either 60 for liquidation or 65 for Repurchase                 Max length of 2
</TABLE>

                                     M-2-1
<PAGE>
<TABLE>
<S>                     <C>                                                <C>        <C>
PRIN_ADJ_AMT            Principal Adjustments made to loan, if applicable      2       No commas(,) or dollar signs ($)

INT_ADJ_AMT             Interest Adjustment made to loan, if applicable        2       No commas(,) or dollar signs ($)

PREPAYMENT PENALTY AMT  Prepayment penalty amount, if applicable               2       No commas(,) or dollar signs ($)

                        Soldier and Sailor Adjustment amount, if
SOILDER_SAILOR ADJ AMT  applicable                                             2       No commas(,) or dollar signs ($)

NON ADV LOAN AMT        Non Recoverable Loan Amount, if applicable             2       No commas(,) or dollar signs ($)
</TABLE>

                                     M-2-2
<PAGE>
                                   EXHIBIT M-3

                          FORM OF REALIZED LOSS REPORT

       WELLS FARGO BANK, N.A. - CALCULATION OF REALIZED LOSS/GAIN FORM 332

Prepared by:  __________________                     Date:  _______________
Phone:  ______________________   Email Address:_____________________

Servicer Loan No.            Servicer Name                Servicer Address

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

WELLS FARGO BANK, N.A. LOAN NO._____________________________

Borrower's Name: _________________________________________________________
Property Address: _________________________________________________________

LIQUIDATION TYPE:  REO SALE     3RD PARTY SALE       SHORT SALE       CHARGE OFF

WAS THIS LOAN GRANTED A BANKRUPTCY DEFICIENCY OR CRAMDOWN     YES         NO

If "Yes", provide deficiency or cramdown amount ________________________________

LIQUIDATION AND ACQUISITION EXPENSES:

<TABLE>
<S>                                                        <C>
(1)  Actual Unpaid Principal Balance of Mortgage Loan      $ ______________ (1)
(2)  Interest accrued at Net Rate                            ______________ (2)
(3)  Accrued Servicing Fees                                  ______________ (3)
(4)  Attorney's Fees                                         ______________ (4)
(5)  Taxes (see page 2)                                      ______________ (5)
(6)  Property Maintenance                                    ______________ (6)
(7)  MI/Hazard Insurance Premiums (see page 2)               ______________ (7)
(8)  Utility Expenses                                        ______________ (8)
(9)  Appraisal/BPO                                           ______________ (9)
(10) Property Inspections                                    ______________ (10)
(11) FC Costs/Other Legal Expenses                           ______________ (11)
(12) Other (itemize)                                         ______________ (12)
     Cash for Keys________________________                   ______________ (12)
     HOA/Condo Fees_______________________                   ______________ (12)
     _____________________________________                   ______________ (12)

     TOTAL EXPENSES                                        $ ______________ (13)

     CREDITS:
(14) Escrow Balance                                        $ ______________ (14)
(15) HIP Refund                                              ______________ (15)
</TABLE>

                                     M-3-1
<PAGE>
<TABLE>
<S>                                                       <C>
(16) Rental Receipts                                        ______________ (16)
(17) Hazard Loss Proceeds                                   ______________ (17)
(18) Primary Mortgage Insurance / Gov't Insurance           ______________ (18a)

HUD Part A                                                  ______________ (18b)

HUD Part B

(19) Pool Insurance Proceeds                                ______________ (19)
(20) Proceeds from Sale of Acquired Property                ______________ (20)
(21) Other (itemize)                                        ______________ (21)
     _________________________________________              ______________ (21)

     TOTAL CREDITS                                        $ ______________ (22)

TOTAL REALIZED LOSS (OR AMOUNT OF GAIN)                   $ ______________ (23)
</TABLE>

                                     M-3-2
<PAGE>
ESCROW DISBURSEMENT DETAIL

<TABLE>
<CAPTION>
   TYPE         DATE PAID      PERIOD OF     TOTAL PAID       BASE       PENALTIES        INTEREST
(TAX /INS.)                    COVERAGE                      AMOUNT
<S>             <C>            <C>           <C>             <C>         <C>              <C>

</TABLE>

                                     M-3-3
<PAGE>
                             WELLS FARGO BANK, N.A.
         CALCULATION OF REALIZED LOSS/GAIN FORM 332 - INSTRUCTION SHEET

      NOTE: DO NOT NET OR COMBINE ITEMS. SHOW ALL EXPENSES INDIVIDUALLY AND ALL
      CREDITS AS SEPARATE LINE ITEMS. CLAIM PACKAGES ARE DUE ON THE REMITTANCE
      REPORT DATE. LATE SUBMISSIONS MAY RESULT IN CLAIMS NOT BEING PASSED UNTIL
      THE FOLLOWING MONTH.

1. The numbers on the 332 form correspond with the numbers listed below.

      LIQUIDATION AND ACQUISITION EXPENSES:

      1.    The Actual Unpaid Principal Balance of the Mortgage Loan. For
            documentation, an Amortization Schedule from date of default through
            liquidation breaking out the net interest and servicing fees
            advanced is required.

      2.    The Total Interest Due less the aggregate amount of servicing fee
            that would have been earned if all delinquent payments had been made
            as agreed. For documentation, an Amortization Schedule from date of
            default through liquidation breaking out the net interest and
            servicing fees advanced is required.

      3.    Accrued Servicing Fees based upon the Scheduled Principal Balance of
            the Mortgage Loan as calculated on a monthly basis. For
            documentation, an Amortization Schedule from date of default through
            liquidation breaking out the net interest and servicing fees
            advanced is required.

      4-12. Complete as applicable. Required documentation:

            * For interest advances - an amortization schedule (evidencing
            calculation of interest advances)

            * For taxes and insurance advances - see page 2 of 332 form -
            breakdown required showing period

                  of coverage, base tax, interest, penalty. Advances prior to
                  default require evidence of servicer efforts to recover
                  advances.

            * For escrow advances - complete payment history

                  (to calculate advances from last positive escrow balance
                  forward)

            * Other expenses - copies of corporate advance history showing all
            payments

            * REO repairs > $1500 require explanation

            * REO repairs >$3000 require evidence of at least 2 bids.

            * Short Sale or Charge Off require P&L supporting the decision

            * Unusual or extraordinary items may require further documentation.

      13.   The total of lines 1 through 12.

                                      M-3-4
<PAGE>
                        2. CREDITS:

      14-21. Complete as applicable. Required documentation:

            * Copy of the HUD 1 from the REO sale. If a 3rd Party Sale, copy of
            attorney letter of Foreclosure proceeds.

            * Copy of EOB for any MI or gov't guarantee

            * All other credits need to be clearly defined on the 332 form

      22.   The total of lines 14 through 21.

      Please Note: For HUD/VA loans, use line (18a) for Part A/Initial proceeds
                   and line (18b) for Part B/Supplemental proceeds.

      TOTAL REALIZED LOSS (OR AMOUNT OF ANY GAIN)

      23.   The total derived from subtracting line 22 from 13. If the amount
            represents a realized gain, show the amount in parenthesis ( ).

                                     M-3-5
<PAGE>
                                  EXHIBIT N -1

                         FORM OF CLASS A-1 CAP CONTRACT

                             [INTENTIONALLY OMITTED]

                                      N-1
<PAGE>
                                  EXHIBIT N -2

                         FORM OF CLASS A-2 CAP CONTRACT

                             [INTENTIONALLY OMITTED]

                                      N-2
<PAGE>

                                  EXHIBIT N -3

                  FORM OF SUBORDINATED CERTIFICATE CAP CONTRACT

                             [INTENTIONALLY OMITTED]

                                      N-3
<PAGE>
                                 EXHIBIT O - 1

                      CLASS A-1 ONE-MONTH LIBOR CAP TABLE

<TABLE>
<CAPTION>
     PERIOD       BEGINNING ACCRUAL   ENDING ACCRUAL    NOTIONAL BALANCE($)   LOWER COLLAR (%) (1)    UPPER COLLAR (%)
     ------       -----------------   --------------    -------------------   --------------------    ----------------
<S>               <C>                 <C>               <C>                   <C>                     <C>
       1              05/31/05           06/25/05         314,941,000.00              7.554                 9.710
       2              06/25/05           07/25/05         312,030,677.11              6.247                 9.710
       3              07/25/05           08/25/05         308,258,674.46              6.036                 9.710
       4              08/25/05           09/25/05         303,630,057.09              6.037                 9.710
       5              09/25/05           10/25/05         298,149,763.84              6.248                 9.710
       6              10/25/05           11/25/05         291,831,084.60              6.038                 9.710
       7              11/25/05           12/25/05         284,690,068.82              6.250                 9.710
       8              12/25/05           01/25/06         276,751,729.63              6.040                 9.710
       9              01/25/06           02/25/06         268,106,246.16              6.041                 9.710
       10             02/25/06           03/25/06         258,846,483.36              6.721                 9.710
       11             03/25/06           04/25/06         249,229,599.67              6.045                 9.710
       12             04/25/06           05/25/06         239,887,703.95              6.258                 9.710
       13             05/25/06           06/25/06         230,812,850.89              6.049                 9.710
       14             06/25/06           07/25/06         221,997,326.32              6.263                 9.710
       15             07/25/06           08/25/06         213,433,640.48              6.054                 9.710
       16             08/25/06           09/25/06         205,114,521.50              6.057                 9.710
       17             09/25/06           10/25/06         197,032,908.95              6.271                 9.710
       18             10/25/06           11/25/06         189,181,947.74              6.062                 9.710
       19             11/25/06           12/25/06         181,554,982.09              6.276                 9.710
       20             12/25/06           01/25/07         174,145,549.70              6.066                 9.710
       21             01/25/07           02/25/07         165,467,348.23              6.069                 9.710
       22             02/25/07           03/25/07         153,119,973.86              7.282                 9.710
       23             03/25/07           04/25/07         141,454,822.96              7.984                 9.710
       24             04/25/07           05/25/07         130,450,607.44              8.254                 9.710
       25             05/25/07           06/25/07         120,036,247.64              7.973                 9.710
       26             06/25/07           07/25/07         111,037,992.70              8.244                 9.710
       27             07/25/07           08/25/07         104,811,497.73              7.967                 9.710
       28             08/25/07           09/25/07          98,793,503.10              8.146                 9.710
       29             09/25/07           10/25/07          92,980,330.05              8.959                 9.710
       30             10/25/07           11/25/07          87,368,859.58              8.656                 9.710
       31             11/25/07           12/25/07          81,944,435.35              8.949                 9.710
       32             12/25/07           01/25/08          76,700,657.70              8.646                 9.710
       33             01/25/08           02/25/08          71,631,349.31              8.641                 9.710
       34             02/25/08           03/25/08          66,730,547.37              9.476                 9.710
       35             03/25/08           04/25/08          61,995,681.65              9.410                 9.710
       36             04/25/08           05/25/08          57,424,429.34              9.710                 9.710
       37             05/25/08           06/25/08          53,004,366.62              9.393                 9.710
       38             06/25/08           07/25/08          53,004,366.62              9.707                 9.710
       39             07/25/08           08/25/08          53,004,366.62              9.376                 9.710
       40             08/25/08           09/25/08          53,004,366.62              9.551                 9.710
</TABLE>

(1)      With respect to any Distribution Date, if One-Month LIBOR (as
         determined by the Cap Contract Counterparty and subject to a cap equal
         to 9.710%) exceeds the Lower Collar, the Trust Fund will receive
         payments pursuant to the Class A-1 Cap Contract.

                                      O-1
<PAGE>
                                  EXHIBIT O - 2

                       CLASS A-2 ONE-MONTH LIBOR CAP TABLE

<TABLE>
<CAPTION>
     PERIOD       BEGINNING ACCRUAL   ENDING ACCRUAL    NOTIONAL BALANCE($)   LOWER COLLAR (%) (1)    UPPER COLLAR (%)
     ------       -----------------   --------------    -------------------   --------------------    ----------------
<S>               <C>                 <C>               <C>                   <C>                     <C>
       1              05/31/05           06/25/05         303,942,000.00              7.625                 9.280
       2              06/25/05           07/25/05         300,934,739.90              6.318                 9.280
       3              07/25/05           08/25/05         297,098,148.74              6.109                 9.280
       4              08/25/05           09/25/05         292,435,593.87              6.110                 9.280
       5              09/25/05           10/25/05         286,956,265.81              6.326                 9.280
       6              10/25/05           11/25/05         280,671,368.23              6.116                 9.280
       7              11/25/05           12/25/05         273,601,099.68              6.330                 9.280
       8              12/25/05           01/25/06         265,767,896.39              6.122                 9.280
       9              01/25/06           02/25/06         257,223,477.82              6.125                 9.280
       10             02/25/06           03/25/06         248,116,242.98              6.809                 9.280
       11             03/25/06           04/25/06         239,097,425.37              6.136                 9.280
       12             04/25/06           05/25/06         230,332,069.76              6.353                 9.280
       13             05/25/06           06/25/06         221,812,843.39              6.146                 9.280
       14             06/25/06           07/25/06         213,532,729.41              6.363                 9.280
       15             07/25/06           08/25/06         205,484,913.18              6.155                 9.280
       16             08/25/06           09/25/06         197,662,776.31              6.160                 9.280
       17             09/25/06           10/25/06         190,059,891.02              6.380                 9.280
       18             10/25/06           11/25/06         182,670,087.96              6.172                 9.280
       19             11/25/06           12/25/06         175,487,226.74              6.390                 9.280
       20             12/25/06           01/25/07         168,505,419.01              6.182                 9.280
       21             01/25/07           02/25/07         157,631,989.06              6.198                 9.280
       22             02/25/07           03/25/07         146,214,917.49              8.648                 9.280
       23             03/25/07           04/25/07         135,427,265.05              8.111                 9.280
       24             04/25/07           05/25/07         125,211,209.07              8.390                 9.280
       25             05/25/07           06/25/07         115,534,309.28              8.115                 9.280
       26             06/25/07           07/25/07         108,742,766.34              8.396                 9.280
       27             07/25/07           08/25/07         102,846,416.27              8.119                 9.280
       28             08/25/07           09/25/07          97,143,937.04              8.672                 9.280
       29             09/25/07           10/25/07          91,634,061.12              9.075                 9.280
       30             10/25/07           11/25/07          86,304,986.26              8.773                 9.280
       31             11/25/07           12/25/07          81,150,371.95              9.071                 9.280
       32             12/25/07           01/25/08          76,164,316.43              8.769                 9.280
       33             01/25/08           02/25/08           71341121.53               8.767                 9.280
</TABLE>

(1)      With respect to any Distribution Date, if One-Month LIBOR (as
         determined by the Cap Contract Counterparty and subject to a cap equal
         to 9.280%) exceeds the Lower Collar, the Trust Fund will receive
         payments pursuant to the Class A-2 Cap Contract.

                                      O-2
<PAGE>
                                  EXHIBIT O - 3

               SUBORDINATED CERTIFICATE ONE-MONTH LIBOR CAP TABLE

<TABLE>
<CAPTION>
     PERIOD       BEGINNING ACCRUAL   ENDING ACCRUAL    NOTIONAL BALANCE($)   LOWER COLLAR (%) (1)    UPPER COLLAR (%)
     ------       -----------------   --------------    -------------------   --------------------    ----------------
<S>               <C>                 <C>               <C>                   <C>                     <C>
       1              05/31/05           06/25/05         141,254,000.00              7.024                 8.680
       2              06/25/05           07/25/05         141,254,000.00              5.718                 8.680
       3              07/25/05           08/25/05         141,254,000.00              5.507                 8.680
       4              08/25/05           09/25/05         141,254,000.00              5.508                 8.680
       5              09/25/05           10/25/05         141,254,000.00              5.722                 8.680
       6              10/25/05           11/25/05         141,254,000.00              5.512                 8.680
       7              11/25/05           12/25/05         141,254,000.00              5.725                 8.680
       8              12/25/05           01/25/06         141,254,000.00              5.515                 8.680
       9              01/25/06           02/25/06         141,254,000.00              5.518                 8.680
       10             02/25/06           03/25/06         141,254,000.00              6.200                 8.680
       11             03/25/06           04/25/06         141,254,000.00              5.525                 8.680
       12             04/25/06           05/25/06         141,254,000.00              5.740                 8.680
       13             05/25/06           06/25/06         141,254,000.00              5.532                 8.680
       14             06/25/06           07/25/06         141,254,000.00              5.748                 8.680
       15             07/25/06           08/25/06         141,254,000.00              5.539                 8.680
       16             08/25/06           09/25/06         141,254,000.00              5.543                 8.680
       17             09/25/06           10/25/06         141,254,000.00              5.760                 8.680
       18             10/25/06           11/25/06         141,254,000.00              5.552                 8.680
       19             11/25/06           12/25/06         141,254,000.00              5.768                 8.680
       20             12/25/06           01/25/07         141,254,000.00              5.559                 8.680
       21             01/25/07           02/25/07         141,254,000.00              5.568                 8.680
       22             02/25/07           03/25/07         141,254,000.00              7.388                 8.680
       23             03/25/07           04/25/07         141,254,000.00              7.482                 8.680
       24             04/25/07           05/25/07         141,254,000.00              7.757                 8.680
       25             05/25/07           06/25/07         141,254,000.00              7.478                 8.680
       26             06/25/07           07/25/07         141,254,000.00              7.754                 8.680
       27             07/25/07           08/25/07         141,254,000.00              7.477                 8.680
       28             08/25/07           09/25/07         141,254,000.00              7.840                 8.680
       29             09/25/07           10/25/07         141,254,000.00              8.452                 8.680
       30             10/25/07           11/25/07         141,254,000.00              8.149                 8.680
       31             11/25/07           12/25/07         141,254,000.00              8.445                 8.680
       32             12/25/07           01/25/08         141,254,000.00              8.142                 8.680
       33             01/25/08           02/25/08         141,254,000.00              8.139                 8.680
</TABLE>

(1)      With respect to any Distribution Date, if One-Month LIBOR (as
         determined by the Cap Contract Counterparty and subject to a cap equal
         to 8.680%) exceeds the Lower Collar, the Trust Fund will receive
         payments pursuant to the Subordinated Certificate Cap Contract.

                                      O-3<PAGE>

                                                                   Exhibit 10.20

                           LOAN AND SECURITY AGREEMENT

                        HSBC BUSINESS CREDIT (USA) INC.,
                                    As Lender

                                       and

                                  ATARI, INC.,
                                   As Borrower

                                  May 13, 2005

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<S>   <C>                                                                                          <C>
I.    DEFINITIONS..........................................................................         1

      1.1.        Accounting Terms.........................................................         1
      1.2.        General Terms............................................................         1
      1.3.        UCC Terms................................................................        14
      1.4.        Certain Matters of Construction..........................................        14

II.   ADVANCES, PAYMENTS...................................................................        15

      2.1.        Revolving Advances.......................................................        15
      2.2.        Procedure for Borrowing..................................................        15
      2.3.        Disbursement of Advance Proceeds.........................................        17
      2.4.        Maximum Revolving Advances...............................................        18
      2.5.        Repayment of Advances....................................................        18
      2.6.        Repayment of Excess Advances.............................................        18
      2.7.        Statement of Account.....................................................        19
      2.8.        Letters of Credit........................................................        19
      2.9.        Issuance of Letters of Credit............................................        19
      2.10.       Requirements For Issuance of Letters of Credit...........................        20
      2.11.       Additional Payments......................................................        20
      2.12.       Prepayments..............................................................        20
      2.13.       Use of Proceeds..........................................................        21

III.  INTEREST AND FEES....................................................................        21

      3.1.        Interest.................................................................        21
      3.2.        Letter of Credit Fees; Cash Collateral...................................        22
      3.3.        Loan Fees................................................................        23
      3.4.        Collateral Fees..........................................................        23
      3.5.        Computation of Interest and Fees.........................................        23
      3.6.        Maximum Charges..........................................................        23
      3.7.        Increased Costs..........................................................        24
      3.8.        Basis For Determining Interest Rate Inadequate or Unfair.................        24
      3.9.        Capital Adequacy.........................................................        25

IV.   COLLATERAL: GENERAL TERMS............................................................        26

      4.1.        Security Interest in the Collateral......................................        26
      4.2.        Perfection of Security Interest..........................................        26
      4.3.        Disposition of Collateral................................................        27
      4.4.        Preservation of Collateral...............................................        27
      4.5.        Ownership of Collateral..................................................        28
      4.6.        Defense of Lender's Interests............................................        28
      4.7.        Books and Records........................................................        29
      4.8.        Financial Disclosure.....................................................        29
      4.9.        Compliance with Laws.....................................................        29
</TABLE>

<PAGE>

<TABLE>
<S>   <C>                                                                                          <C>
      4.10.       Inspection of Premises...................................................        30
      4.11.       Insurance................................................................        30
      4.12.       Failure to Pay Insurance.................................................        31
      4.13.       Payment of Taxes.........................................................        32
      4.14.       Payment of Leasehold Obligations.........................................        32
      4.15.       Receivables..............................................................        32
      4.16.       Inventory................................................................        35
      4.17.       Maintenance of Equipment.................................................        35
      4.18.       Exculpation of Liability.................................................        35
      4.19.       Environmental Matters....................................................        35
      4.20.       Financing Statements.....................................................        35

V.    REPRESENTATIONS AND WARRANTIES.......................................................        35

      5.1.        Authority................................................................        36
      5.2.        Incorporation and Qualification..........................................        36
      5.3.        Survival of Representations and Warranties...............................        36
      5.4.        Tax Returns..............................................................        36
      5.5.        Financial Statements.....................................................        37
      5.6.        Corporate Name...........................................................        37
      5.7.        O.S.H.A. and Environmental Compliance....................................        37
      5.8.        Solvency; Litigation, Violation, Indebtedness or Default.................        38
      5.9.        Patents, Trademarks, Copyrights and Licenses.............................        39
      5.10.       Licenses and Permits.....................................................        39
      5.11.       Default of Indebtedness..................................................        39
      5.12.       No Default...............................................................        39
      5.13.       No Burdensome Restrictions...............................................        40
      5.14.       No Labor Disputes........................................................        40
      5.15.       Margin Regulations.......................................................        40
      5.16.       Investment Company Act...................................................        40
      5.17.       Disclosure...............................................................        40
      5.18.       Swaps....................................................................        40
      5.19.       Conflicting Agreements...................................................        40
      5.20.       Application of Certain Laws and Regulations..............................        41
      5.21.       Business and Property of Borrower........................................        41
      5.22.       Material Contracts.......................................................        41
      5.23.       Bank Accounts............................................................        41
      5.24.       Affiliate Debt...........................................................        41

VI.   AFFIRMATIVE COVENANTS................................................................        42

      6.1.        Payment of Fees..........................................................        42
      6.2.        Conduct of Business and Maintenance of Existence and Assets..............        42
      6.3.        Violations...............................................................        42
      6.4.        Execution of Supplemental Instruments....................................        42
      6.5.        Payment of Indebtedness..................................................        43
      6.6.        Standards of Financial Statements........................................        43
      6.7.        Bank Accounts............................................................        43
</TABLE>

                                      -ii-
<PAGE>

<TABLE>
<S>   <C>                                                                                          <C>
      6.8.        Financial Covenants......................................................        43

VII.  NEGATIVE COVENANTS...................................................................        44

      7.1.        Merger, Consolidation, Acquisition and Sale of Assets....................        44
      7.2.        Creation of Liens........................................................        44
      7.3.        Guarantees...............................................................        44
      7.4.        Investments..............................................................        45
      7.5.        Loans....................................................................        45
      7.6.        Capital Expenditures.....................................................        45
      7.7.        Dividends and Distributions..............................................        45
      7.8.        Indebtedness.............................................................        45
      7.9.        Nature of Business.......................................................        46
      7.10.       Transactions with Affiliates.............................................        46
      7.11.       Subsidiaries.............................................................        46
      7.12.       Fiscal Year and Accounting Changes.......................................        46
      7.13.       Additional Bank Accounts.................................................        46
      7.14.       Use of Proceeds..........................................................        46
      7.15.       Amendment of Organizational Documents....................................        46
      7.16.       Compliance with ERISA....................................................        47
      7.17.       Prepayment of Indebtedness...............................................        47
      7.18.       State of Organization....................................................        47

VIII. CONDITIONS PRECEDENT.................................................................        47

      8.1.        Conditions to Initial Advances...........................................        47
      8.2.        Conditions to Each Advance...............................................        50

IX.   INFORMATION AS TO BORROWER...........................................................        51

      9.1.        Disclosure of Material Matters...........................................        51
      9.2.        Borrowing Base; Schedules................................................        52
      9.3.        Litigation...............................................................        52
      9.4.        Material Occurrences.....................................................        52
      9.5.        Annual Financial Statements..............................................        53
      9.6.        Quarterly Financial Statements...........................................        53
      9.7.        Monthly Financial Statements.............................................        54
      9.8.        SEC Reports; Press Releases..............................................        54
      9.9.        Additional Information...................................................        54
      9.10.       Notice of Suits, Adverse Events..........................................        54
      9.11.       ERISA Notices and Requests...............................................        54
      9.12.       Additional Documents.....................................................        55

X.    EVENTS OF DEFAULT....................................................................        55

XI.   LENDER'S RIGHTS AND REMEDIES AFTER DEFAULT...........................................        57

      11.1.       Rights and Remedies......................................................        57
      11.2.       Application of Proceeds..................................................        58
</TABLE>

                                      -iii-
<PAGE>

<TABLE>
<S>   <C>                                                                                          <C>
      11.3.       Lender's Discretion......................................................        59
      11.4.       Setoff...................................................................        59
      11.5.       Rights and Remedies Not Exclusive........................................        59

XII.  WAIVERS AND JUDICIAL PROCEEDINGS.....................................................        59

      12.1.       Waiver of Notice.........................................................        59
      12.2.       Delay....................................................................        59
      12.3.       Jury Waiver..............................................................        59
      12.4.       Lender's Right to Arbitrate..............................................        60

XIII. EFFECTIVE DATE AND TERMINATION.......................................................        61

      13.1.       Term.....................................................................        61
      13.2.       Termination..............................................................        62

XIV.  MISCELLANEOUS........................................................................        62

      14.1.       Governing Law............................................................        62
      14.2.       Entire Understanding; Amendments.........................................        63
      14.3.       Successors and Assigns; Participations; New Lenders......................        63
      14.4.       Application of Payments..................................................        64
      14.5.       Indemnity................................................................        64
      14.6.       Notice...................................................................        64
      14.7.       Survival.................................................................        65
      14.8.       Severability.............................................................        65
      14.9.       Expenses.................................................................        65
      14.10.      Injunctive Relief........................................................        66
      14.11.      Consequential Damages....................................................        66
      14.12.      Captions.................................................................        66
      14.13.      Counterparts; Telecopied Signatures......................................        66
      14.14.      Construction.............................................................        66
      14.15.      Confidentiality..........................................................        67
      14.16.      Publicity................................................................        67
</TABLE>

                                      -iv-
<PAGE>

                         List of Exhibits and Schedules

Exhibits

Exhibit A         Borrowing Base Certificate

Exhibit 2.1(a)    Revolving Credit Note

Schedules

Schedule 4.5      Equipment and Inventory Locations

Schedule 4.15(c)  Location of Executive Offices

Schedule 4.19     Real Property

Schedule 5.2(a)   States of Qualification and Good Standing

Schedule 5.2(b)   Subsidiaries

Schedule 5.4      Federal Tax Identification Number

Schedule 5.6      Prior Names

Schedule 5.7      Environmental

Schedule 5.8(b)   Litigation; Commercial Tort Claims

Schedule 5.8(c)   Governmental Orders

Schedule 5.8(d)   Plans

Schedule 5.9      Intellectual Property

Schedule 5.10     Licenses and Permits

Schedule 5.14     Labor Disputes

Schedule 5.19     Conflicting Agreements

Schedule 5.21     Ownership of Property

Schedule 5.22     Material Contracts

Schedule 5.23     Bank Accounts

Schedule 5.24     Affiliate Debt

Schedule 7.2      Existing Liens

Schedule 7.3      Guarantees

Schedule 7.8      Existing Indebtedness

Schedule 7.10     Affiliate Transactions

                                       -v-
<PAGE>

                           LOAN AND SECURITY AGREEMENT

      Loan and Security Agreement, dated as of May 13, 2005 among ATARI, INC., a
Delaware corporation ("Borrower"), and HSBC BUSINESS CREDIT (USA) INC., a
Delaware corporation ("Lender").

      IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrower and Lender hereby agree as follows:

I.    DEFINITIONS.

      1.1.  Accounting Terms.

            As used in this Agreement, the Revolving Credit Note, any Other
Document, or any certificate, report or other document made or delivered
pursuant to this Agreement, accounting terms not defined in Section 1.2 or
elsewhere in this Agreement and accounting terms partly defined in Section 1.2
to the extent not defined, shall have the respective meanings given to them
under GAAP; provided, however, whenever such accounting terms are used for the
purposes of determining compliance with financial covenants in this Agreement,
such accounting terms shall be defined in accordance with GAAP as applied in
preparation of the audited financial statements of Borrower for the fiscal year
ended March 31, 2005.

      1.2.  General Terms.

            For purposes of this Agreement the following terms shall have the
following meanings:

            "Adjusted LIBO Rate" shall mean, with respect to any Eurodollar Loan
for any Interest Period a rate of interest equal to:

                  (a) the London Interbank Offered Rate shown on the display
      designated as "RMEY" to subscribers of the Reuters Monitor Money Rates
      Service, or any successor page thereto, as at 11:00 AM (London time)
      rounded upward to the nearest 1/16 of 1%, two Business Days prior to the
      first day of such Interest Period for a term comparable to such Interest
      Period, for deposits of Dollars in an amount equal to the amount of the
      relevant EuroDollar Rate Loan. If for any reason such rate is not
      available, the term "Adjusted LIBO Rate" shall mean, for any Eurodollar
      Loan for any Interest Period therefor, the rate per annum (rounded
      upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
      Screen LIBO Page as the London interbank offered rate for deposits in
      Dollars at approximately 11:00 a.m. (London time) two Business Days prior
      to the first day of such Interest Period for a term comparable to such
      Interest Period; provided, however, if more than one rate is specified on
      Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean
      of all such rates (rounded upwards, if necessary, to the nearest 1/100 of
      1%); divided by

<PAGE>

                  (b) a number equal to 1.0 minus the aggregate (but without
      duplication) of the rates (expressed as a decimal fraction) of reserve
      requirements in effect on the day which is two (2) Business Days prior to
      the beginning of such Interest Period (including, without limitation,
      basic, supplemental, marginal and emergency reserves under any regulations
      of the Board of Governors of the Federal Reserve System or other
      governmental authority having jurisdiction with respect thereto, as now
      and from time to time in effect) for Eurocurrency funding (currently
      referred to as "Eurocurrency Liabilities" in Regulation D of such Board)
      which are required to be maintained by a member bank of the Federal
      Reserve System; such rate (if greater than zero) to be rounded upward to
      the next whole multiple of one-sixteenth of one percent (.0625%).

            "Advances" shall mean and include the Revolving Advances and Letters
of Credit.

            "Advance Rates" shall have the meaning set forth in Section 2.1(a).

            "Affiliate" of any Person shall mean (a) any Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with such Person, or (b) any Person who is a director or officer (i) of such
Person, (ii) of any Subsidiary of such Person or (iii) of any Person described
in clause (a) above. For purposes of this definition, control of a Person shall
mean the power, direct or indirect, (x) to vote 10% or more of the securities
having ordinary voting power for the election of directors of such Person, or
(y) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.

            "Agreement" shall mean this Loan and Security Agreement, as amended,
restated, modified and supplemented from time to time.

            "Applicable Margin" shall mean, with respect to Eurodollar Rate
Loans, 1.75%.

            "Base Rate" shall mean a variable rate of interest per annum equal
to the rate of interest from time to time announced by HSBC Bank (or any
successor institution) as its "prime rate" (with the understanding that such
rate may merely be a reference rate and may not necessarily represent the lowest
or best rate actually charged to any customer by such bank).

            "Blocked Accounts" shall have the meaning set forth in Section
4.15(h).

            "Borrower" shall have the meaning set forth in the preamble to this
Agreement and shall extend to all permitted successors and assigns of such
Person.

            "Borrower's Account" shall have the meaning set forth in Section
2.7.

            "Borrowing Base Certificate" shall mean a certificate duly executed
by an officer of Borrower appropriately completed and in substantially the form
of EXHIBIT A.

            "Business Day" shall mean with respect to Eurodollar Rate Loans, any
day on which commercial banks are open for domestic and international business,
including dealings in Dollar deposit, in London, England and New York, New York,
and with respect to all other

                                      -2-
<PAGE>

matters, any day other than a day on which commercial banks in New York, New
York are authorized or required by law to close.

            "Capital Expenditures" means, without duplication, all expenditures
(including deposits) for any fixed assets or improvements, or for replacements,
substitutions or additions thereto, which would be required to be capitalized
and shown on the balance sheet of Borrower in accordance with GAAP.

            "Capital Lease" means any lease of any property (whether real,
personal or mixed) that, in conformity with GAAP, should be accounted for as a
capital lease.

            "Cash Equivalents" shall mean: (a) marketable direct obligations
issued or unconditionally guaranteed by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within six (6) months from the date of acquisition
thereof; (b) commercial paper maturing no more than six (6) months from the date
acquired and, at the time of acquisition, having a rating of at least A-1 from
Standard & Poor's Corporation or at least P-1 from Moody's Investors Service,
Inc.; (c) certificates of deposit or bankers' acceptances maturing within six
(6) months from the date of issuance thereof issued by, or overnight reverse
repurchase agreements from, any commercial bank organized under the laws of the
United States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $500,000,000 and whose debt
obligations, or those of a holding company of which it is a Subsidiary, are
rated not less than A (or the equivalent rating) by a nationally recognized
investment rating agency and not subject to setoff rights in favor of such bank;
and (d) all other cash equivalents acceptable to Lender in its sole discretion.

            "Cash Flow Projections" shall mean the cash flow projections of
Borrower dated April 28, 2005 which have been delivered to and approved of by
Lender.

            "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601 et
seq.

            "Change of Control" shall mean the occurrence of any event that
results in (a) the acquisition, directly or indirectly, by any person or group
(within the meaning of Section 13(d)(3) of the Exchange Act), other than Parent,
of beneficial ownership of more than 50% of the aggregate outstanding voting
power of the capital stock of Borrower; or (b) during any period of up to 12
consecutive months, individuals who at the beginning of such 12-month period
were directors of Borrower ceasing for any reasons to constitute a majority of
the Board of Directors of Borrower.

            "Charges" shall mean all taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation and property
taxes, custom duties, fees, assessments, liens, claims and charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts, imposed by any taxing or other authority, domestic or
foreign (including, without limitation, the PBGC or any environmental agency or
superfund), upon the Collateral.

                                      -3-
<PAGE>

            "Closing Date" shall mean May 13, 2005 or such other date as may be
agreed to by the parties hereto.

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

            "Collateral" shall mean and include:

                  (a) all Receivables;

                  (b) all Equipment;

                  (c) all General Intangibles;

                  (d) all Inventory;

                  (e) all Investment Property;

                  (f) the Leasehold Interests;

                  (g) all of the right, title and interest of Borrower, in and
      to (i) its goods and other property including, but not limited to, all
      merchandise returned or rejected by Customers, relating to or securing any
      of the Receivables; (ii) all of Borrower's rights as a consignor, a
      consignee, an unpaid vendor, mechanic, artisan, or other lienor, including
      stoppage in transit, setoff, detinue, replevin, reclamation and
      repurchase; (iii) all supporting obligations and all additional amounts
      due to Borrower from any Customer relating to the Receivables; (iv) other
      property, including warranty claims, relating to any goods securing this
      Agreement; (v) all of Borrower's contract rights, rights of payment which
      have been earned under a contract right, letter of credit rights (whether
      or not the letter of credit is evidenced by a writing), instruments
      (including promissory notes), documents, chattel paper (whether tangible
      or electronic), warehouse receipts, deposit accounts, money and
      securities; (vi) if and when obtained by Borrower, all real and personal
      property of third parties in which Borrower has been granted a lien or
      security interest as security for the payment or enforcement of
      Receivables; and (vii) any other goods, personal property or real property
      now owned or hereafter acquired in which Borrower may in the future grant
      a security interest to Lender hereunder, or in any amendment or supplement
      hereto or thereto, or under any other agreement between Lender and
      Borrower;

                  (h) all of Borrower's ledger sheets, ledger cards, files,
      correspondence, records, books of account, business papers, computers,
      computer software (owned by Borrower or in which it has an interest),
      computer programs, tapes, disks and documents relating to clauses (a),
      (b), (c), (d), (e), (f) or (g) of this definition; and

                  (i) all proceeds and products of clauses (a), (b), (c), (d),
      (e), (f), (g) and (h) of this definition in whatever form, including, but
      not limited to: cash, deposit accounts (whether or not comprised solely of
      proceeds), certificates of deposit, insurance proceeds (including hazard,
      flood and credit insurance), negotiable instruments and other

                                      -4-
<PAGE>

      instruments for the payment of money, chattel paper, security agreements,
      documents, eminent domain proceeds, condemnation proceeds and tort claim
      proceeds;

      provided, however, that, in no event shall the Collateral include the
      Excluded Assets.

            "Commission" means the Securities and Exchange Commission, or any
successor.

            "Consents" shall mean all filings and all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and other third parties, domestic or foreign, necessary to carry on
Borrower's business, including, without limitation, any Consents required under
all applicable federal, state or other applicable law.

            "Consolidated EBITDA" shall mean, for Borrower and its consolidated
Subsidiaries, on a consolidated basis, for any period (without duplication), the
Consolidated Net Income (Net Loss) of Borrower and its consolidated Subsidiaries
for such period, plus the sum, without duplication, of (a) Consolidated Interest
Expense, (b) depreciation and amortization expenses or charges, (c) income taxes
to any government or governmental instrumentality expensed on Borrower's or any
of its consolidated Subsidiaries' books (whether paid or accrued), (d) non-cash,
non-recurring charges or losses, if any, and (e) restructuring charges shown as
such on the financial statements delivered pursuant to Sections 9.5, 9.6 and
9.7, if any, minus the sum of (i) non-cash, non-recurring gains, and (ii)
interest income.

            "Consolidated Interest Expense" shall mean, for Borrower and its
Subsidiaries, on a consolidated basis, for any period (without duplication), the
sum of all interest expense on Indebtedness of the Company and its consolidated
Subsidiaries determined in accordance with GAAP.

            "Consolidated Net Income (Net Loss)" shall mean, for any period, the
net income (or net loss) of the Borrower and its consolidated Subsidiaries on a
consolidated basis for such period determined in accordance with GAAP applied on
a consistent basis.

            "Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Borrower, are treated as a single employer
under Section 414 of the Code.

            "Customer" shall mean and include the account debtor with respect to
any Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with Borrower, pursuant
to which Borrower is to deliver any personal property or perform any services.

            "Customs" shall mean the United States of America Customs
Department.

            "Default" shall mean an event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.

            "Default Rate" shall have the meaning set forth in Section 3.1.

                                      -5-
<PAGE>

            "Documents" shall have the meaning set forth in Section 8.1(c).

            "Dollar" and the sign "$" shall mean lawful money of the United
States of America.

            "Domestic Rate Loan" shall mean any Advance that bears interest
based upon the Base Rate.

            "Eligible Inventory" shall mean and include Inventory of Borrower,
excluding work in process, packaging materials and supplies, foreign inventory,
inventory subject to license or distribution agreements under which Lender does
not have the right to foreclose on and sell such inventory (because of the terms
of such agreements, including, without limitation, the failure of Borrower or
any Affiliate of Borrower to have paid applicable royalty or license fees,
and/or the lack of necessary consents or waivers, in form and substance
reasonably satisfactory to Lender, with respect to such license agreements), in
each case (A) which is clearly identifiable and has been identified to Lender in
detail satisfactory to Lender in its reasonable discretion, and (B) (x) owned by
and in the possession of Borrower and located at premises of Borrower listed on
SCHEDULE 4.5 or any other location with respect to which Lender has (i) been
provided with not less than ten (10) days prior written notice, (ii) given its
consent to Eligible Inventory being located at such location (which consent
shall not be unreasonably withheld or delayed), and (iii) received such landlord
or other waivers as it deems necessary, or (y) with respect to which Lender is
the holder of the documents of title with respect to such Inventory or has
issued a Letter of Credit with respect to such Inventory that is negotiable only
upon presentment of such documents of title to Lender, in each case valued at
the lower of cost or market value, determined on a standard cost basis, which is
not, in Lender's reasonable opinion, obsolete, slow moving or unmerchantable and
which Lender, in its sole discretion, shall not deem ineligible Inventory, based
on such considerations as Lender may from time to time deem appropriate
including, without limitation, whether the Inventory is subject to a perfected,
first priority security interest in favor of Lender and no other Lien (other
than Permitted Encumbrances).

            "Eligible Receivables" shall mean and include with respect to
Borrower, each Receivable of Borrower arising in the ordinary course of
Borrower's business and which Lender, in its sole credit judgment, shall deem to
be an Eligible Receivable, based on such considerations as Lender may from time
to time deem appropriate. A Receivable shall not be deemed eligible unless such
Receivable is subject to Lender's first priority perfected security interest and
no other Lien (other than Permitted Encumbrances), and is evidenced by an
invoice or other documentary evidence satisfactory to Lender. In addition, no
Receivable shall be an Eligible Receivable if:

                  (a) it arises out of a sale made by Borrower to (i) an
      Affiliate of Borrower or (ii) a Person controlled by an Affiliate of
      Borrower;

                  (b) it is due or unpaid more than ninety (90) days after the
      due date (other than any portion thereof with respect to which Borrower
      produces reasonable evidence of collectibility within a specified period
      of time, satisfactory to Lender in its sole discretion);

                                      -6-
<PAGE>

                  (c) fifty percent (50%) or more of the Receivables from such
      Customer are not deemed Eligible Receivables hereunder. Such percentage
      may, in Lender's sole discretion, be increased or decreased from time to
      time;

                  (d) any covenant, representation or warranty contained in this
      Agreement with respect to such Receivable has been breached;

                  (e) the Customer shall (i) apply for, suffer, or consent to
      the appointment of, or the taking of possession by, a receiver, custodian,
      trustee or liquidator of itself or of all or a substantial part of its
      property or call a meeting of its creditors, (ii) admit in writing its
      inability, or be generally unable, to pay its debts as they become due or
      cease operations of its present business, (iii) make a general assignment
      for the benefit of creditors, (iv) commence a voluntary case under any
      state or federal bankruptcy laws (as now or hereafter in effect), (v) be
      adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take
      advantage of any other law providing for the relief of debtors, (vii)
      acquiesce to, or fail to have dismissed, any petition which is filed
      against it in any involuntary case under such bankruptcy laws, or (viii)
      take any action for the purpose of effecting any of the foregoing;

                  (f) the sale is to a Customer outside the United States of
      America or Canada, unless the sale is on letter of credit, guaranty or
      acceptance terms, in each case acceptable to Lender in its sole
      discretion;

                  (g) the sale to the Customer is on a bill-and-hold, guaranteed
      sale, sale-and-return, sale on approval, consignment or any other
      repurchase or return basis or is evidenced by chattel paper;

                  (h) Lender believes, in its sole judgment, that collection of
      such Receivable is insecure or that such Receivable may not be paid by
      reason of the Customer's financial inability to pay;

                  (i) the Customer is the United States of America, any state or
      any department, agency or instrumentality of any of them, unless Borrower
      assigns its right to payment of such Receivable to Lender pursuant to the
      Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727
      et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied
      with other applicable statutes or ordinances;

                  (j) the goods giving rise to such Receivable have not been
      shipped to and accepted by the Customer or the services giving rise to
      such Receivable have not been performed by Borrower and accepted by the
      Customer or the Receivable otherwise does not represent a final sale;

                  (k) the Receivables of the Customer exceed a credit limit
      determined by Lender, in its sole discretion, to the extent such
      Receivable exceeds such limit;

                  (l) the Receivable is subject to any offset, deduction,
      defense, dispute, or counterclaim or the Customer is also a creditor or
      supplier of Borrower, except, in the case of any of the foregoing, to the
      extent the Customer has waived the right of setoff in a

                                      -7-
<PAGE>

      manner satisfactory to Lender, and in each such case only to the extent of
      such offset, deduction, defense, dispute, or counterclaim; or the
      Receivable is contingent in any respect or for any reason;

                  (m) Borrower has made any agreement with any Customer for any
      deduction therefrom (but only to the extent of such deduction), except for
      discounts or allowances made in the ordinary course of business for prompt
      payment, all of which discounts or allowances are reflected in the
      calculation of the face value of each respective invoice related thereto;

                  (n) any return, rejection or repossession of the merchandise
      covered by such Receivable has occurred, to the extent of the invoiced
      value of such returned, rejected or repossessed merchandise;

                  (o) such Receivable is not payable to Borrower; or

                  (p) such Receivable is not otherwise satisfactory to Lender as
      determined in good faith by Lender in the exercise of its discretion in a
      reasonable manner.

            "Environmental Laws" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.

            "Equipment" shall mean and include all of Borrower's goods (other
than Inventory) whether now owned or hereafter acquired and wherever located
including, without limitation, all equipment, machinery, apparatus, motor
vehicles, fittings, furniture, furnishings, fixtures, parts, accessories and all
replacements and substitutions therefor or accessions thereto.

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

            "Eurodollar Rate" shall mean for any Eurodollar Rate Loan for the
then current Interest Period relating thereto the rate per annum (such
Eurodollar Rate to be rounded upward, if necessary, to the next higher 1/100 of
one percent (1%)) equal to the Adjusted LIBO Rate.

            "Eurodollar Rate Loan" shall mean an Advance at any time that bears
interest based on the Adjusted LIBO Rate.

            "Event of Default" shall mean the occurrence of any of the events
set forth in Article X.

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

                                      -8-
<PAGE>

            "Excluded Assets" shall mean all Equipment located outside the
United States; all Inventory located outside the United States and Canada; all
patents, copyrights and trademarks to the extent registered or applied for in
countries outside of the United States; all equity interests in all foreign
Subsidiaries of Borrower; all proceeds and products of all of the foregoing to
the extent located outside of the United States and not constituting
Receivables; and all General Intangibles and Inventory with respect to which
Debtor is prohibited from granting liens to Secured Party pursuant to the terms
of licensing and distribution agreements to which Debtor is a party unless,
pursuant to Section 9-406 or 9-408 of the UCC, such prohibitions are
ineffective.

            "Existing Loan Agreement" means the Credit Agreement, dated as of
November 12, 2002, among Borrower, the lenders party thereto, GECC as agent for
such lenders, and certain other parties, as amended.

            "Formula Amount" shall have the meaning set forth in Section 2.1(a).

            "GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.

            "GECC" means General Electric Capital Corporation.

            "General Intangibles" shall mean and include all of Borrower's
general intangibles, whether now owned or hereafter acquired including, without
limitation, all payment intangibles, choses in action, commercial tort claims,
including the commercial tort claims listed on SCHEDULE 5.8(b), causes of
action, corporate or other business records, inventions, designs, patents,
patent applications, equipment formulations, manufacturing procedures, quality
control procedures, trademarks, service marks, trade secrets, goodwill,
copyrights, design rights, registrations, licenses, franchises, customer lists,
tax refunds, tax refund claims, computer programs and computer software, all
claims under guaranties, security interests or other security held by or granted
to Borrower to secure payment of any of the Receivables by a Customer, all
rights of indemnification and all other intangible property of every kind and
nature (other than Receivables).

            "Governmental Body" shall mean any nation or government, any state
or other political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.

            "Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New York State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.

            "Hazardous Wastes" shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.

                                      -9-
<PAGE>

            "HSBC Bank" shall mean Lender's Affiliate, HSBC Bank USA, National
Association.

            "Indebtedness" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities and in any event, without limitation by
reason of enumeration, shall include (without duplication) (a) all indebtedness,
debt and similar monetary obligations of such Person whether direct or
guaranteed; (b) indebtedness for borrowed money; (c) that portion of obligations
with respect to Capital Leases that is properly classified as a liability on a
balance sheet in conformity with GAAP; (d) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money; (e) any obligation owed for all or any part of the deferred
purchase price of property or services if the purchase price is due more than
six (6) months from the date the obligation is incurred or is evidenced by a
note or similar written instrument; (f) all indebtedness secured by any Lien on
any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person; and (g) guarantees of any of the
foregoing types of liabilities.

            "Interest Period" shall mean the period provided for any Eurodollar
Rate Loan pursuant to Section 2.2(b).

            "Inventory" shall mean and include all of Borrower's now owned or
hereafter acquired goods, merchandise and other personal property, wherever
located, to be furnished under any contract of service or held for sale or
lease, all raw materials, work in process, finished goods and materials and
supplies of any kind, nature or description which are or might be used or
consumed in Borrower's business or used in selling or furnishing such goods,
merchandise and other personal property, all other inventory of Borrower, and
all documents of title or other documents representing them.

            "Inventory Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(ii).

            "Investment Property" shall mean and include all of Borrower's now
owned or hereafter acquired securities (whether certificated or uncertificated),
securities entitlements, securities accounts, commodities contracts, commodities
accounts, stocks, mutual fund shares, money market shares and U.S. Government
securities.

            "Issuer" shall mean any Person who issues a Letter of Credit and/or
accepts a draft pursuant to the terms thereof, it being agreed that so long as
Lender is HSBC Business Credit (USA) Inc., that the Issuer shall be HSBC Bank.

            "Leasehold Interests" shall mean all of the right, title and
interest of Borrower in and to all Real Property.

            "Lender" shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of Lender in accordance with the requirements of
this Agreement.

                                      -10-
<PAGE>

            "Letter of Credit Fees" shall have the meaning set forth in Section
3.2.

            "Letters of Credit" shall have the meaning set forth in Section 2.8.

            "Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the UCC or comparable
law of any jurisdiction.

            "Material Adverse Effect" shall mean a material adverse effect on
(a) the condition, operations, assets, business or prospects of Borrower, (b)
the Borrower's ability to pay the Obligations in accordance with the terms
thereof, (c) the value of the Collateral, or Lender's Liens on the Collateral or
the priority of any such Lien or (d) the practical realization of the benefits
of Lender's rights and remedies under this Agreement and the Other Documents.

            "Maximum Revolving Advance Amount" shall mean $50,000,000.

            "Multiemployer Plan" shall mean a Plan which is a "multiemployer
plan" as defined in Sections 3(37) and 4001(a)(3) of ERISA as to which Borrower
or any member of the Controlled Group is required to contribute on behalf of any
of its employees.

            "Obligations" shall mean and include any and all of Borrower's
Indebtedness and/or liabilities to Lender, HSBC Bank, or any Issuer of every
kind, nature and description, direct or indirect, secured or unsecured, joint,
several, joint and several, absolute or contingent, due or to become due, now
existing or hereafter arising, contractual or tortious, liquidated or
unliquidated, regardless of how such Indebtedness or liabilities arise or by
what agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument (including all interest and other liabilities accruing
after the commencement of any bankruptcy or similar proceeding whether or not
enforceable in such proceeding), but arising under this Agreement and the Other
Documents; and all obligations of Borrower to Lender or any Issuer to perform
acts or refrain from taking any action.

            "Other Documents" shall mean the Revolving Credit Note, and any and
all other agreements, instruments and documents, including, without limitation,
intellectual property security agreements, pledges, control agreements, powers
of attorney, consents, and all other writings heretofore, now or hereafter
executed by Borrower and/or delivered to Lender in respect of the transactions
contemplated by this Agreement.

            "Parent" shall mean Infogrames Entertainment S.A., a French
corporation.

            "Payment Office" shall mean, initially, 452 Fifth Avenue, New York,
New York 10018; thereafter, such other office of Lender within the United
States, if any, which it may designate by notice to Borrower to be the Payment
Office.

            "PBGC" shall mean the Pension Benefit Guaranty Corporation.

                                      -11-
<PAGE>

            "Permitted Encumbrances" shall mean (a) Liens in favor of Lender
which secure Obligations; (b) Liens for taxes, assessments or other governmental
charges not delinquent or being contested in good faith and by appropriate
proceedings and with respect to which proper reserves in accordance with GAAP
have been taken by Borrower; provided, that, the Lien shall have no effect on
the priority of the Liens in favor of Lender or the value of the assets in which
Lender has such a Lien and a stay of enforcement of any such Lien shall be in
effect; (c) deposits or pledges to secure obligations under worker's
compensation, social security or similar laws, or under unemployment insurance;
(d) deposits or pledges to secure bids, tenders, contracts (other than contracts
for the payment of money), leases, statutory obligations, surety and appeal
bonds and other obligations of like nature arising in the ordinary course of
Borrower's business; (e) judgment Liens that have been stayed or bonded and
mechanics', carriers', workers', warehousemen's, supplier's materialmen's or
other like Liens arising in the ordinary course of Borrower's business with
respect to obligations which are not due or which are being contested in good
faith by Borrower; (f) Liens securing Purchase Money Indebtedness to the extent
permitted under Section 7.6; and (g) Liens disclosed on SCHEDULE 7.2.

            "Person" shall mean any individual, sole proprietorship,
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited liability company,
institution, public benefit corporation, joint venture, entity or government
(whether Federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).

            "Plan" shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA and subject to ERISA, maintained for employees of Borrower
or any member of the Controlled Group or any such Plan to which Borrower or any
member of the Controlled Group is required to contribute on behalf of any of its
employees.

            "Public Filing" means any filing made by Borrower with the
Commission on Form 10-K, Form 10-Q or any other form prescribed by the
Commission.

            "Purchase Money Indebtedness" means (i) any Indebtedness incurred
for the payment of all or any part of the purchase price of any fixed asset,
(ii) any Indebtedness incurred for the sole purpose of financing or refinancing
all or any part of the purchase price of any fixed asset, and (iii) any
renewals, extensions or refinancings thereof (but not any increases in the
principal amounts thereof outstanding at that time).

            "Purchase Money Lien" means any Lien upon any fixed assets that
secures the Purchase Money Indebtedness related thereto but only if such Lien
shall at all times be confined solely to the asset the purchase price of which
was financed or refinanced through the incurrence of the Purchase Money
Indebtedness secured by such Lien and only if such Lien secures only such
Purchase Money Indebtedness.

            "RCRA" shall mean the Resource Conservation and Recovery Act, 42
U.S.C. Sections 6901 et seq., as same may be amended from time to time.

            "Real Property" shall mean all of Borrower's right, title and
interest in and to all owned and leased premises, as set forth on SCHEDULE 4.19.

                                      -12-
<PAGE>

            "Receivables" shall mean and include all of Borrower's accounts,
contract rights, instruments (including promissory notes and other instruments
evidencing Indebtedness owed to Borrower by Affiliates), documents, chattel
paper (whether tangible or electronic), general intangibles relating to
accounts, drafts and acceptances, and all other forms of obligations owing to
Borrower arising out of or in connection with the sale, lease or other
disposition of Inventory or the rendition of services, all guarantees and other
security therefor, whether secured or unsecured, now existing or hereafter
created, and whether or not specifically sold or assigned to Lender hereunder.

            "Receivables Advance Rate" shall have the meaning set forth in
Section 2.1(a)(y)(i).

            "Reflections" means Reflections Interactive Limited, a company
organized under the laws of the United Kingdom that is a wholly-owned Subsidiary
of Borrower."

            "Reportable Event" shall mean a reportable event described in
Section 4043(b) of ERISA or the regulations promulgated thereunder, the
reporting of which has not been waived under the applicable ERISA regulations.

            "Reserves" shall mean such reserves as Lender may reasonably deem
proper and necessary from time to time, including, without limitation, reserves
for unpaid license fees and royalty obligations owed by the Borrower.

            "Revolving Advances" shall mean Advances made other than Letters of
Credit.

            "Revolving Credit Note" shall mean the promissory note referred to
in Section 2.1(a).

            "Revolving Interest Rate" shall mean an interest rate per annum
equal to (a) the Base Rate with respect to Domestic Rate Loans, and (b) sum of
the Eurodollar Rate plus the Applicable Margin with respect to Eurodollar Rate
Loans.

            "Subsidiary" shall mean a corporation or other entity of whose
shares of stock or other ownership interests having ordinary voting power (other
than stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.

            "Tangible Net Worth" shall mean, at a particular date, (i) the
aggregate amount of all assets of Borrower as may be properly classified as such
in accordance with GAAP, minus (ii) such assets as are properly classified as
intangible assets under GAAP, minus (iii) the aggregate amount of all
liabilities of Borrower.

            "Term" shall mean the period commencing on the Closing Date and
ending on the Termination Date.

            "Termination Date" shall have the meaning set forth in Section 13.1.

                                      -13-
<PAGE>

            "Termination Event" shall mean (i) a Reportable Event with respect
to any Plan or Multiemployer Plan; (ii) the withdrawal of Borrower or any member
of the Controlled Group from a Plan or Multiemployer Plan during a plan year in
which such entity was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; (iii) the providing of notice of intent to terminate a Plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the institution
by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any
event or condition (a) which could reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan or Multiemployer Plan, or (b) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi)
the partial or complete withdrawal within the meaning of Sections 4203 and 4205
of ERISA, of Borrower or any member of the Controlled Group from a Multiemployer
Plan.

            "Toxic Substance" shall mean and include any material present on the
Real Property or the Leasehold Interests which has been shown to have
significant adverse effect on human health or which is subject to regulation
under the Toxic Substances Control Act (TSCA), 15 U.S.C. Sections 2601 et seq.,
applicable state law, or any other applicable Federal or state laws now in force
or hereafter enacted relating to toxic substances. "Toxic Substance" includes
but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based
paints.

            "Transferee" shall have the meaning set forth in Section 14.3(b).

            "UCC" shall mean the Uniform Commercial Code as in effect in the
State of New York from time to time.

            "Working Capital" shall mean, with respect to Borrower at any time,
the aggregate amount of all cash and cash equivalents, inventory, net of
reserves and receivables, net of reserves, that would be reflected on its
balance sheet as assets in accordance with GAAP, minus the aggregate amount of
all liabilities of Borrower as may be properly classified as current liabilities
in accordance with GAAP.

      1.3.  UCC Terms.

            All terms used herein and defined in the UCC shall have the meaning
given therein unless otherwise defined herein.

      1.4.  Certain Matters of Construction.

            The terms "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision. Each reference to a Section, an EXHIBIT or a
SCHEDULE shall be deemed to refer to a Section, an Exhibit or a Schedule, as
applicable, of this Agreement unless otherwise specified. Any pronoun used shall
be deemed to cover all genders. Wherever appropriate in the context, terms used
herein in the singular also include the plural and vice versa. All references to
statutes (including the UCC) and related regulations shall include any
amendments of same and any successor statutes and regulations. Unless otherwise
provided, all references to any instruments or agreements to which Lender is a
party, including, without limitation, references to any of the

                                      -14-
<PAGE>

Other Documents, shall include any and all modifications or amendments thereto
and any and all extensions or renewals thereof.

II.   ADVANCES, PAYMENTS.

      2.1.  Revolving Advances.

            (a) Revolving Advances. Subject to the terms and conditions set
forth in this Agreement (including, without limitation, Section 2.1(b)), Lender
will make Revolving Advances to Borrower in aggregate amounts outstanding at any
time equal to the lesser of (x) an amount equal to (i) the Maximum Revolving
Advance Amount minus (ii) the aggregate amount of outstanding Letters of Credit
and (y) an amount equal to:

                  (i) up to 60% of Eligible Receivables (the "Receivables
      Advance Rate"), plus

                  (ii) during the period from August 1, 2005 to and including
      November 15, 2005 up to the lesser of (A) 60%, subject to the provisions
      of Section 2.1(b), of the aggregate cost, calculated on a standard cost
      basis, of Eligible Inventory at such time (the "Inventory Advance Rate"
      and together with the Receivables Advance Rate, the "Advance Rates"), and
      (B) $20,000,000, minus

                  (iii) the aggregate amount of outstanding Letters of Credit,
      minus

                  (iv) Reserves.

      The amount derived from the sum of Sections 2.1(a)(y)(i), and (ii), minus
      Section 2.1(a)(y)(vi) at any time and from time to time shall be referred
      to as the "Formula Amount".

The Revolving Advances shall be evidenced by a secured promissory note
("Revolving Credit Note") substantially in the form attached hereto as EXHIBIT
2.1(A).

            (b) Discretionary Rights. The Advance Rates may be (i) decreased by
Lender at any time and from time to time, and (ii) increased by Lender at any
time and from time to time after the Advance Rate have been decreased, but in no
event to levels higher than the initial Advance Rates, in each case in the
exercise of Lender's sole discretion. Borrower consents to any such decreases
and acknowledges that decreasing the Advance Rates or increasing the Reserves
may limit or restrict Advances requested by Borrower. Lender shall give Borrower
five (5) days prior written notice of its intention to decrease the Advance
Rates.

      2.2.  Procedure for Borrowing.

            (a) Borrower may notify Lender prior to 1:00 p.m. (New York time) on
a Business Day of Borrower's request to incur, on that day, a Revolving Advance
hereunder. Any amount required to be paid as interest hereunder, or as fees or
other charges under this Agreement or any other agreement with Lender, or any
Issuer, or with respect to any other

                                      -15-
<PAGE>

Obligation, which shall become due, shall be deemed a request for an Advance as
of the date such payment is due, in the amount required to pay in full such
interest, fee, charge or Obligation under this Agreement or any other agreement
with Lender and/or any Issuer and such request shall be irrevocable.

            (b) Notwithstanding the provisions of (a) above, in the event
Borrower desires to obtain a Eurodollar Rate Loan, Borrower shall give Lender at
least three (3) Business Days' prior written notice, specifying (i) the date of
the proposed borrowing (which shall be a Business Day), (ii) the type of
borrowing and the amount on the date of such Advance to be borrowed, which
amount shall be in a minimum amount of $2,000,000 and in integral multiples of
$500,000 in excess thereof, and (iii) the duration of the first Interest Period
therefor. Interest Periods for Eurodollar Rate Loans shall be for one, two or
three months. No Eurodollar Rate Loan shall be made available to Borrower during
the continuance of a Default or an Event of Default. At no time shall there be
more than THREE Eurodollar Rate Loans outstanding, in the aggregate.

            (c) Each Interest Period of a Eurodollar Rate Loan shall commence on
the date such Eurodollar Rate Loan is made and shall end on such date as
Borrower may elect as set forth in (b)(iii) above provided that the exact length
of each Interest Period shall be determined in accordance with the practice of
the interbank market for offshore Dollar deposits and no Interest Period shall
end after the Termination Date.

            (d) Borrower shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Lender pursuant to
Section 2.2(b) or by its notice of conversion given to Lender pursuant to
Section 2.2(e), as the case may be. Borrower shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to Lender of
such duration not less than three (3) Business Days prior to the last day of the
then current Interest Period applicable to such Eurodollar Rate Loan. If Lender
does not receive timely notice of the Interest Period elected by Borrower,
Borrower shall be deemed to have elected to convert such Eurodollar Rate Loan to
a Domestic Rate Loan subject to Section 2.2(e).

            (e) Provided that no Event of Default shall have occurred and be
continuing, Borrower may, on the last Business Day of the then current Interest
Period applicable to any outstanding Eurodollar Rate Loan, or on any Business
Day with respect to Domestic Rate Loans, convert any such loan into a loan of
another type in the same aggregate principal amount provided that any conversion
of a Eurodollar Rate Loan shall be made only on the last Business Day of the
then current Interest Period applicable to such Eurodollar Rate Loan. If
Borrower desires to convert a loan, Borrower shall give Lender not less than
three (3) Business Days' prior written notice to convert from a Domestic Rate
Loan to a Eurodollar Rate Loan or one (1) Business Day's prior written notice to
convert from a Eurodollar Rate Loan to a Domestic Rate Loan, specifying the date
of such conversion, the loans to be converted and if the conversion is from a
Domestic Rate Loan to any other type of loan, the duration of the first Interest
Period therefor. After giving effect to each such conversion, there shall not be
more than three (3) Eurodollar Rate Loans outstanding, in the aggregate.

            (f) At its option and upon three (3) Business Days' prior written
notice, Borrower may prepay the Eurodollar Rate Loans in whole at any time or in
part from time to

                                      -16-
<PAGE>

time, without premium or penalty, but with accrued interest on the principal
being prepaid to the date of such repayment. Borrower shall specify the date of
prepayment of Advances which are Eurodollar Rate Loans and the amount of such
prepayment. In the event that any prepayment of a Eurodollar Rate Loan is
required or permitted on a date other than the last Business Day of the then
current Interest Period with respect thereto, Borrower shall indemnify Lender
therefor in accordance with Section 2.2(g).

            (g) Borrower shall indemnify Lender and hold Lender harmless from
and against any and all losses or expenses that Lender may sustain or incur as a
consequence of any payment or prepayment with respect to any Eurodollar Rate
Loan on any date other than the last day of an applicable Interest Period,
conversion of or any default by Borrower in the payment of the principal of or
interest on any Eurodollar Rate Loan or failure by Borrower to complete a
borrowing of, a prepayment of or conversion of or to a Eurodollar Rate Loan
after notice thereof has been given, including, but not limited to, any interest
payable by Lender to lenders of funds obtained by it in order to make or
maintain its Eurodollar Rate Loans hereunder. A certificate as to any additional
amounts payable pursuant to the foregoing sentence submitted by Lender to
Borrower shall be conclusive absent manifest error.

            (h) Notwithstanding any other provision hereof, if any applicable
law, treaty, regulation or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender
(for purposes of this Section 2.2(h), the term "Lender" shall include any Lender
and the office or branch where Lender or any corporation or bank controlling
such Lender makes or maintains any Eurodollar Rate Loans) to make or maintain
its Eurodollar Rate Loans, the obligation of Lender to make Eurodollar Rate
Loans hereunder shall forthwith be cancelled and Borrower shall, if any affected
Eurodollar Rate Loans are then outstanding, promptly upon request from Lender,
either pay all such affected Eurodollar Rate Loans or convert such affected
Eurodollar Rate Loans into loans of another type. If any such payment or
conversion of any Eurodollar Rate Loan is made on a day that is not the last day
of the Interest Period applicable to such Eurodollar Rate Loan, Borrower shall
pay Lender, upon Lender's request, such amount or amounts as may be necessary to
compensate Lender for any loss or expense sustained or incurred by Lender in
respect of such Eurodollar Rate Loan as a result of such payment or conversion,
including (but not limited to) any interest or other amounts payable by Lender
to lenders of funds obtained by Lender in order to make or maintain such
Eurodollar Rate Loan. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Lender to Borrower shall be
conclusive absent manifest error.

      2.3.  Disbursement of Advance Proceeds.

            All Advances shall be disbursed from whichever office or other place
Lender may designate from time to time and, together with any and all other
Obligations of Borrower to Lender, shall be charged to Borrower's Account on
Lender's books. During the Term, Borrower may use the Advances by borrowing,
prepaying and reborrowing, all in accordance with the terms and conditions
hereof. The proceeds of each Advance requested by Borrower or deemed to have
been requested by Borrower under Section 2.2(a) shall, with respect to requested
Advances to the extent Lender makes such Advances, be made available to Borrower
on the day so requested by way of credit to Borrower's operating account at HSBC
Bank (or until such account has been opened, which shall in no event be more
than 10 Business Days following the

                                      -17-
<PAGE>

Closing Date, to such account of Borrower as shall be designated by Borrower to
Lender) following notification to Lender, in immediately available federal funds
or other immediately available funds or, with respect to Advances deemed to have
been requested by Borrower, be disbursed to Lender to be applied to the
outstanding Obligations giving rise to such deemed request.

      2.4.  Maximum Revolving Advances.

            The aggregate balance of Revolving Advances plus the aggregate
amount of Letters of Credit outstanding at any time shall not exceed the lesser
of (a) the Maximum Revolving Advance Amount or (b) the Formula Amount.

      2.5.  Repayment of Advances.

            (a) The Revolving Advances shall be due and payable in full on the
Termination Date subject to earlier prepayment as herein provided.

            (b) Borrower recognizes that the amounts evidenced by checks, notes,
drafts or any other items of payment relating to and/or proceeds of Collateral
may not be collectible by Lender on the date received. In consideration of
Lender's agreement to conditionally credit Borrower's Account as of the Business
Day on which Lender receives those items of payment, Borrower agrees that, in
computing the charges under this Agreement, all items of payment shall be deemed
applied by Lender on account of the Obligations one (1) Business Day after
confirmation to Lender by the Blocked Account bank, as provided for in Section
4.15(h), that such items of payment have been collected in good funds and
finally credited to Lender's account. Lender is not, however, required to credit
Borrower's Account for the amount of any item of payment which is unsatisfactory
to Lender and Lender may charge Borrower's Account for the amount of any item of
payment which is returned to Lender unpaid.

            (c) All payments of principal, interest and other amounts payable
hereunder, or under any of the related agreements shall be made to Lender at the
Payment Office not later than 1:00 p.m. (New York time) on the due date therefor
in lawful money of the United States of America in federal funds or other funds
immediately available to Lender. Lender shall have the right to effectuate
payment on any and all Obligations due and owing hereunder by charging
Borrower's Account or by making Revolving Advances as provided in Section 2.2.

            (d) Borrower shall pay principal, interest, and all other amounts
payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.

      2.6.  Repayment of Excess Advances.

            The aggregate balance of Advances outstanding at any time in excess
of the maximum amount of Advances permitted hereunder shall be immediately due
and payable without the necessity of any demand, at the Payment Office, whether
or not a Default or Event of Default has occurred.

                                      -18-
<PAGE>

      2.7.  Statement of Account.

            Lender shall maintain, in accordance with its customary procedures,
a loan account (the "Borrower's Account") in the name of Borrower in which shall
be recorded the date and amount of each Advance made by Lender and the date and
amount of each payment in respect thereof; provided, however, the failure by
Lender to record the date and amount of any Advance shall not adversely affect
Lender. Borrower will be credited with all amounts received by Lender from the
Blocked Account banks for Borrower's account, and all other amounts received by
Lender in payment of Receivables, and such amounts will be applied to the
payment of the Obligations as set forth in this Agreement. Each month, Lender
shall send to Borrower a statement showing the accounting for the Advances made,
payments made or credited in respect thereof, and other transactions between
Lender and Borrower, during such month. The monthly statements shall be deemed
correct and binding upon Borrower in the absence of manifest error and shall
constitute an account stated between Lender and Borrower unless Lender receives
a written statement of Borrower's specific exceptions thereto within thirty (30)
days after such statement is received by Borrower. The records of Lender with
respect to the loan account shall be conclusive evidence absent manifest error
of the amounts of Advances and other charges thereto and of payments applicable
thereto.

      2.8.  Letters of Credit.

            Subject to the terms and conditions hereof, Lender shall cause the
issuance of commercial and standby letters of credit (collectively, "Letters of
Credit") by the Issuer on behalf of Borrower; provided, however, that Lender
will not be required to cause to be issued any Letter of Credit to the extent
that, if issued, the face amount of such Letter of Credit would then cause the
sum of (i) the outstanding Revolving Advances plus (ii) outstanding Letters of
Credit to exceed the lesser of (x) the Maximum Revolving Advance Amount or (y)
the Formula Amount. The maximum amount available under outstanding Letters of
Credit shall not exceed $15,000,000 in the aggregate at any time. All
disbursements or payments related to Letters of Credit shall be deemed to be
Domestic Rate Loans and shall bear interest at the Revolving Interest Rate for
Domestic Rate Loans, subject to Section 2.2(e). Letters of Credit that have not
been drawn upon shall not bear interest.

      2.9.  Issuance of Letters of Credit.

            (a) Borrower may request Lender to cause the issuance of a Letter of
Credit by delivering to Lender at the Payment Office, Issuer's standard form of
Letter of Credit application, completed to the satisfaction of Lender, and such
other certificates, documents and other papers and information as Lender or
Issuer may reasonably request.

            (b) Each Letter of Credit shall, among other things, (i) provide for
the payment of sight drafts or acceptances of issuance drafts when presented for
honor thereunder in accordance with the terms thereof and when accompanied by
the documents described therein and (ii) have an expiry date not later than
twelve (12) months after such Letter of Credit's date of issuance, and in no
event have an expiry date later than the Termination Date unless Borrower
provides cash collateral equal to not less than one hundred five percent (105%)
of the face amount thereof to be held by Lender pursuant to a cash collateral
agreement in form and

                                      -19-
<PAGE>

substance satisfactory to Lender. All Letters of Credit shall be subject to the
laws or rules designated in such Letter of Credit, or if no laws or rules are
designated, the Uniform Customs and Practice for Documentary Credits (UCP 500),
and, as to matters not governed thereby, the laws of the State of New York.

      2.10. Requirements For Issuance of Letters of Credit.

            (a) In connection with the issuance of any Letter of Credit Borrower
shall indemnify, save and hold Lender and each Issuer harmless from any loss,
cost, expense or liability, including, without limitation, payments made by
Lender or any Issuer and expenses and reasonable attorneys' fees incurred by
Lender or any Issuer arising out of, or in connection with, any Letter of Credit
to be issued or created for Borrower. Borrower shall be bound by Issuer's
regulations and good faith interpretations of any Letter of Credit issued or
created for Borrower's Account, although this interpretation may be different
from its own; and, neither Lender nor any Issuer nor any of their correspondents
shall be liable for any error, negligence, or mistakes, whether of omission or
commission, in following Borrower's instructions or those contained in any
Letter of Credit or of any modifications, amendments or supplements thereto or
in issuing or paying any Letter of Credit except for Lender's, any Issuer's or
such correspondents' gross negligence or willful misconduct.

            (b) Borrower shall authorize and direct the Issuer to name the
Borrower as the "Applicant" or "Account Party" therein, to deliver to Lender all
related payment/acceptance advices, to deliver to Lender all instruments,
documents, and other writings and property received by the Issuer pursuant to
the Letter of Credit and to accept and rely upon Lender's instructions and
agreements with respect to all matters arising in connection with the Letter of
Credit or the application therefor.

      2.11. Additional Payments.

            Any sums expended by Lender due to Borrower's failure to perform or
comply with its obligations under this Agreement or any Other Document
including, without limitation, Borrower's obligations under Sections 4.2, 4.4,
4.12, 4.13, 4.14 and 6.1, may be charged to Borrower's Account as a Revolving
Advance and added to the Obligations.

      2.12. Prepayments.

            (a) When Borrower sells or otherwise disposes of any Collateral
other than Inventory in the ordinary course of business, Borrower shall repay
the Advances in an amount equal to the net proceeds of such sale (i.e., gross
proceeds less the reasonable costs of such sales or other dispositions and all
taxes related to such sales), such repayments to be made promptly but in no
event more than three (3) Business Days following receipt of such net proceeds,
and until the date of payment, such proceeds shall be held in trust for Lender.
The foregoing shall not be deemed to be implied consent to any such sale
otherwise prohibited by the terms and conditions hereof. Such repayments shall
be applied to the outstanding Revolving Advances in such order as Lender may
determine, subject to Borrower's ability to reborrow Revolving Advances in
accordance with the terms hereof; provided, however, that, that so long as no
Event of Default has occurred and is continuing, such repayments shall be first
applied to Domestic

                                      -20-
<PAGE>

Rate Loans before being applied to Eurodollar Rate Loans. Notwithstanding the
foregoing, unless and until an Event of Default has occurred and is continuing,
Borrower may sell or otherwise dispose of Collateral not to exceed $500,000 in
any single transaction and $2,500,000 in the aggregate in any fiscal year and
retain such net proceeds solely to acquire replacement Collateral without making
a mandatory prepayment hereunder so long as (a) the fair market value of the
acquired Collateral is equal to or greater than the fair market value of the
Collateral which was sold, (b) the acquired Collateral is purchased by Borrower
within thirty (30) days of the sale of the Collateral, (c) the acquired
Collateral shall be deemed to be acceptable Collateral by Lender in its
reasonable discretion, (d) the acquired Collateral shall be subject to Lender's
first priority security interest created hereunder and (e) until such time as
the proceeds are used to acquire such replacement Collateral, at Lender's
option, either (i) such proceeds shall be held by Lender as cash collateral for
the Obligations pursuant to terms acceptable to Lender in its sole discretion or
(ii) such proceeds shall be applied as a repayment of Revolving Advances and a
reserve against loan availability under Section 2.1(a) in the amount of such
repayment shall be established. Such cash collateral or loan availability
reserve, as the case may be, shall be released by Lender only in connection with
the making of a Revolving Advance to be used by Borrower solely for the purposes
of funding the acquisition of replacement Collateral pursuant to the terms of
this Section 2.12; provided, however, that nothing contained herein shall waive
or modify any conditions to the making of Revolving Advances or any other
provisions of this Agreement. If Borrower fails to meet the conditions set forth
above Lender may apply the proceeds held by Lender as a prepayment of the
Advances in the manner set forth above.

            (b) Subject to the provisions of Section 4.11, Lender shall apply
the proceeds of any insurance settlements from casualty losses which are
received by Lender to the outstanding Advances in such order as Lender may
determine, subject to Borrower's ability to reborrow Revolving Advances in
accordance with the terms hereof.

            (c) Borrower shall have the right, upon not less than three Business
Day's notice to Lender, to terminate this Agreement without premium or penalty
and prepay the Obligations in whole (but not in part). The effective date of
termination specified in such notice shall be the Termination Date.

      2.13. Use of Proceeds.

            Borrower shall apply the proceeds of (i) Revolving Advances made on
the Closing Date to (x) repay existing Indebtedness owed under the Existing Loan
Agreement , and (y) pay fees and expenses relating to this Agreement, and (ii)
Revolving Advances made on and after the Closing Date to provide for Borrower's
working capital needs.

III.  INTEREST AND FEES.

      3.1.  Interest.

            Interest on Advances shall be payable to Lender in arrears on the
first day of each month with respect to Domestic Rate Loans and, with respect to
Eurodollar Rate Loans, at the end of each Interest Period. Interest charges
shall be computed on the actual principal amount of Revolving Advances
outstanding during the month at a rate per annum equal to the applicable

                                      -21-
<PAGE>

Revolving Interest Rate. Whenever, subsequent to the date of this Agreement, the
Base Rate is increased or decreased, the Revolving Interest Rate for Domestic
Rate Loans shall be similarly changed without notice or demand of any kind by an
amount equal to the amount of such change in the Base Rate during the time such
change or changes remain in effect. Upon and after the occurrence of an Event of
Default, and during the continuation thereof, (i) the Obligations other than
Eurodollar Rate Loans shall bear interest at the Revolving Interest Rate for
Domestic Loans plus two percent (2.0%) per annum and (ii) Eurodollar Rate Loans
shall bear interest at the Revolving Interest Rate for Eurodollar Rate Loans
plus two percent (2.0%) per annum (as applicable, the "Default Rate").

      3.2.  Letter of Credit Fees; Cash Collateral.

            (a) Borrower shall pay (i) to Lender fees for each Letter of Credit
that is a standby Letter of Credit for the period from and excluding the date of
issuance of same to and including the date of expiration or termination, equal
to the average daily face amount of each outstanding such standby Letter of
Credit multiplied by two (2.0%) per annum, such fees to be calculated on the
basis of a 360-day year for the actual number of days elapsed and to be payable
quarterly in arrears on the first day of each of August, November, February and
May, and on the last day of the Term and (ii) to the Issuer, any and all fees
and expenses as agreed upon by the Issuer and the Borrower in connection with
any Letter of Credit, including, without limitation, in connection with the
opening, amendment, maintenance or renewal of any such Letter of Credit (it
being acknowledged and understood by Borrower that the current fee of HSBC Bank
for the payment and negotiation of a Letter of Credit is the greater of (x) .25%
of the amount of such payment and (y) $95.00) and shall reimburse Lender for any
and all fees and expenses, if any, paid by Lender to any Issuer (all of the
foregoing fees, the "Letter of Credit Fees"). All Letter of Credit Fees shall be
deemed earned in full on the date when the same are due and payable hereunder
and shall not be subject to rebate or proration upon the termination of this
Agreement for any reason. Any such charge in effect at the time of a particular
transaction shall be the charge for that transaction, notwithstanding any
subsequent change in the Issuer's prevailing charges for that type of
transaction. Upon and after the occurrence of an Event of Default, and during
the continuation thereof, Lender may increase the Letter of Credit Fees under
clause (i) of this Section 3.2 by two percent (2.0%) per annum. All Letter of
Credit Fees payable hereunder shall be deemed earned in full on the date when
the same are due and payable hereunder and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason.

            (b) At any time that an Event of Default set forth in Section 10.1
has occurred and is continuing, Borrower will cause cash to be deposited and
maintained in an account with Lender, as cash collateral, in an amount equal to
one hundred and five percent (105%) of the outstanding Letters of Credit, and
Borrower hereby irrevocably authorizes Lender, in its discretion, on Borrower's
behalf and in Borrower's name, to open such an account and to make and maintain
deposits therein, or in an account opened by Borrower, in the amounts required
to be made by Borrower, out of the proceeds of Receivables or other Collateral
or out of any other funds of Borrower coming into Lender's possession at any
time. Lender will invest such cash collateral (less applicable reserves) in such
short-term money-market items as to which Lender and Borrower mutually agree and
the net return on such investments shall be credited to such account and
constitute additional cash collateral. Borrower may not withdraw amounts
credited

                                      -22-
<PAGE>

to any such account except upon payment and performance in full of all
Obligations and termination of this Agreement.

      3.3.  Loan Fees.

            (a) Closing Fee. Upon the execution of this Agreement, Borrower
shall pay to Lender a closing fee of $50,000.

            (b) Facility Fee. If, for any period during the Term, the average
daily unpaid balance of the Advances for each day of such period is less than
the Maximum Revolving Advance Amount, then Borrower shall pay to Lender a fee at
a rate equal to one-quarter of one percent (0.25%) per annum on the amount by
which the Maximum Revolving Advance Amount exceeds such average daily unpaid
balance during such period. Such fee shall be payable to Lender in arrears on
the first day of January, April, July and October of year, and on the
Termination Date.

      3.4.  Collateral Fees.

            (a) Collateral Monitoring Fee. Borrower shall pay Lender, for its
own account, an annual collateral monitoring fee equal to $30,000 per year,
which fee shall be deemed earned in full and payable on the Closing Date and not
subject to rebate or proration upon termination of this Agreement for any
reason.

            (b) Collateral Evaluation Fee. Borrower shall pay to Lender on the
first day of each month following any month in which Lender performs any
collateral evaluation, namely any field audit, collateral analysis or other
business analysis, the need for which is to be determined by Lender and which
evaluation is undertaken by Lender or for Lender's benefit, a collateral
evaluation fee in an amount equal to $5,000 per evaluation so long as no Event
of Default has occurred or is then continuing, plus all reasonable costs and
disbursements incurred by Lender in connection therewith; provided however, that
so long as no Event of Default has occurred and is continuing, Borrower shall
not be required to pay for more than three (3) field audits per year. Lender may
perform field audits of the Collateral from time to time during normal business
hours on reasonable notice as it determines to be necessary, subject to the
proviso set forth in the previous sentence.

      3.5.  Computation of Interest and Fees.

            Interest and fees hereunder shall be computed on the basis of a year
of 360 days and for the actual number of days elapsed. If any payment to be made
hereunder becomes due and payable on a day other than a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and interest
thereon shall be payable at the Revolving Interest Rate for Domestic Rate Loans
during such extension.

      3.6.  Maximum Charges.

            In no event whatsoever shall interest and other charges charged
hereunder exceed the highest rate permissible under law. In the event interest
and other charges as computed hereunder would otherwise exceed the highest rate
permitted under law, such excess amount

                                      -23-
<PAGE>

shall be first applied to any unpaid principal balance owed by Borrower, and if
the then remaining excess amount is greater than the previously unpaid principal
balance, Lender shall promptly refund such excess amount to Borrower and the
provisions hereof shall be deemed amended to provide for such permissible rate.

      3.7.  Increased Costs.

            In the event that any applicable law, treaty or governmental
regulation, or any change therein or in the interpretation or application
thereof, or compliance by any Lender (for purposes of this Section 3.7, the term
"Lender" shall include Lender and any corporation or bank controlling Lender)
and the office or branch where Lender (as so defined) makes or maintains any
Eurodollar Rate Loans with any request or directive (whether or not having the
force of law) from any central bank or other financial, monetary or other
authority, in each case that becomes effective after the Closing Date, shall:

                  (a) subject Lender to any tax of any kind whatsoever with
      respect to this Agreement or any Other Document or change the basis of
      taxation of payments to Lender of principal, fees, interest or any other
      amount payable hereunder or under any Other Documents (except for changes
      in the rate of tax on the overall net income of Lender by the jurisdiction
      in which it maintains its principal office);

                  (b) impose, modify or hold applicable any reserve, special
      deposit, assessment or similar requirement against assets held by, or
      deposits in or for the account of, advances or loans by, or other credit
      extended by, any office of Lender, including (without limitation) pursuant
      to Regulation D of the Board of Governors of the Federal Reserve System;
      or

                  (c) impose on Lender or the London interbank Eurodollar market
      any other condition with respect to this Agreement or any Other Document;

      and the result of any of the foregoing is to increase the cost to Lender
      of making, renewing or maintaining its Advances hereunder by an amount
      that Lender deems to be material or to reduce the amount of any payment
      (whether of principal, interest or otherwise) in respect of any of the
      Advances by an amount that Lender deems to be material, then, in any case
      Borrower shall promptly pay Lender, upon its demand, such additional
      amount as will compensate Lender for such additional cost or such
      reduction, as the case may be, provided that the foregoing shall not apply
      to increased costs which are reflected in the Adjusted LIBO Rate. Lender
      will designate a different lending office if such designation will avoid
      the need for, or reduce the amount of such compensation pursuant to this
      Section and will not, in the reasonable judgment of Lender, be otherwise
      disadvantageous to Lender. Lender shall certify the amount of such
      additional cost or reduced amount to Borrower, and such certification
      shall be conclusive absent manifest error.

      3.8.  Basis For Determining Interest Rate Inadequate or Unfair.

            In the event that Lender shall have determined that:

                                      -24-
<PAGE>

                  (a) reasonable means do not exist for ascertaining the
      Adjusted LIBO Rate for any Interest Period; or

                  (b) Dollar deposits in the relevant amount and for the
      relevant maturity are not available in the London interbank Eurodollar
      market, with respect to an outstanding Eurodollar Rate Loan, a proposed
      Eurodollar Rate Loan, or a proposed conversion of a Domestic Rate Loan
      into a Eurodollar Rate Loan,

then Lender shall give Borrower prompt written, telephonic or telegraphic notice
of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrower
shall notify Lender no later than 10:00 a.m. (New York time) two (2) Business
Days prior to the date of such proposed borrowing, that its request for such
borrowing shall be cancelled or made as an unaffected type of Eurodollar Rate
Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have been
converted to an affected type of Eurodollar Rate Loan shall be continued as or
converted into a Domestic Rate Loan, or, if Borrower shall notify Lender, no
later than 10:00 a.m. (New York time) two (2) Business Days prior to the
proposed conversion, shall be maintained as an unaffected type of Eurodollar
Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans shall be
converted into a Domestic Rate Loan, or, if Borrower shall notify Lender, no
later than 10:00 a.m. (New York time) two (2) Business Days prior to the last
Business Day of the then current Interest Period applicable to such affected
Eurodollar Rate Loan, shall be converted into an unaffected type of Eurodollar
Rate Loan, on the last Business Day of the then current Interest Period for such
affected Eurodollar Rate Loans. Until such notice has been withdrawn, Lender
shall have no obligation to make an affected type of Eurodollar Rate Loan or
maintain outstanding affected Eurodollar Rate Loans and no Borrower shall have
the right to convert a Domestic Rate Loan or an unaffected type of Eurodollar
Rate Loan into an affected type of Eurodollar Rate Loan.

      3.9.  Capital Adequacy.

            (a) In the event that Lender shall have determined that any
applicable law, rule, regulation or guideline regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Lender (for purposes
of this Section 3.9, the term "Lender" shall include Lender and any corporation
or bank controlling Lender) and the office or branch where Lender (as so
defined) makes or maintains any Eurodollar Rate Loans with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, in each case that becomes
effective after the Closing Date, has or would have the effect of reducing the
rate of return on Lender's capital as a consequence of its obligations hereunder
to a level below that which Lender could have achieved but for such adoption,
change or compliance (taking into consideration Lender's and each Lender's
policies with respect to capital adequacy) by an amount deemed by Lender to be
material, then, from time to time, Borrower shall pay upon demand to Lender such
additional amount or amounts as will compensate Lender for such reduction. In
determining such amount or amounts, Lender may use any reasonable averaging or
attribution methods. The protection of this Section 3.9 shall be

                                      -25-
<PAGE>

available to Lender regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or condition.

            (b) A certificate of Lender setting forth such amount or amounts as
shall be necessary to compensate Lender with respect to Section 3.9(a) when
delivered to Borrower shall be conclusive absent manifest error.

IV.   COLLATERAL: GENERAL TERMS.

      4.1.  Security Interest in the Collateral.

            To secure the prompt payment and performance to Lender and Issuer of
the Obligations, Borrower hereby assigns, pledges and grants to Lender and each
Issuer, a continuing security interest in and to all of its right, title and
interest in and to the Collateral, whether now owned or existing or hereafter
acquired or arising and wheresoever located. Borrower shall mark its books and
records as may be necessary or appropriate to evidence, protect and perfect
Lender's security interest and shall cause its financial statements to reflect
such security interest.

      4.2.  Perfection of Security Interest.

            (a) Borrower shall take all action that may be necessary or
desirable, or that Lender may reasonably request, so as at all times to maintain
the validity, perfection, enforceability and priority of Lender's security
interest in the Collateral or to enable Lender to protect, exercise or enforce
its rights hereunder and in the Collateral, including, but not limited to, (i)
immediately discharging all Liens other than Permitted Encumbrances, (ii)
obtaining landlords' or mortgagees' lien waivers, (iii) delivering to Lender,
endorsed or accompanied by such instruments of assignment as Lender may specify,
and stamping or marking, in such manner as Lender may specify, any and all
chattel paper, instruments, letters of credits and advices thereof and documents
evidencing or forming a part of the Collateral, (iv) entering into warehousing,
lockbox, bailee and other custodial arrangements reasonably satisfactory to
Lender, and (v) executing and delivering financing statements, instruments of
pledge, mortgages, notices and assignments, in each case in form and substance
satisfactory to Lender, relating to the creation, validity, perfection,
maintenance or continuation of Lender's security interest under the UCC or other
applicable law; provided, however, that Borrower shall not be required to
deliver waivers from its licensors.

            (b) Lender may at any time and from time to time file, without the
signature of Borrower in accordance with Section 9-509 of the UCC, financing
statements, continuation statements and amendments thereto that describe the
Collateral as "all assets other than the Excluded Assets" of Borrower and which
contain any other information required by the UCC for the sufficiency or filing
office acceptance of any financing statements, continuation statements or
amendments. Borrower agrees to furnish any such information to Lender promptly
upon request.

            (c) Borrower shall, at any time and from time to time, take such
steps as Lender may reasonably request (i) to obtain an acknowledgment, in form
and substance reasonably satisfactory to Lender, of any bailee having possession
of any of the Collateral,

                                      -26-
<PAGE>

stating that the bailee holds such Collateral for Lender, (ii) to obtain
"control" of any letter-of-credit rights, deposit accounts or electronic chattel
paper (as such terms are defined in the UCC with corresponding provisions
thereof defining what constitutes "control" for such items of Collateral), with
any agreements establishing control to be in form and substance reasonably
satisfactory to Lender, and (iii) otherwise to insure the continued perfection
and priority of Lender's security interest in any of the Collateral and of its
rights therein. If Borrower shall at any time, acquire a "commercial tort claim"
(as such term is defined in the UCC) in excess of $100,000 individually or in
the aggregate, Borrower shall promptly notify Lender thereof in writing, therein
providing a reasonable description and summary thereof, and upon delivery
thereof to Lender, Borrower shall be deemed to thereby grant to Lender (and
Borrower hereby grants to Lender) a security interest and lien in and to such
commercial tort claim and all proceeds thereof, all upon the terms of and
governed by this Agreement.

            (d) All reasonable charges, expenses and fees Lender may incur in
doing any of the foregoing, and any local taxes relating thereto, shall be
charged to Borrower's Account as a Revolving Advance and added to the
Obligations, or, at Lender's option, shall be paid to Lender immediately upon
demand.

      4.3.  Disposition of Collateral.

            Borrower will safeguard and protect all Collateral for Lender's
general account and make no disposition thereof whether by sale, lease or
otherwise except (a) the sale of Inventory in the ordinary course of business,
(b) the disposition or transfer of obsolete and worn-out Equipment in the
ordinary course of business during any fiscal year having an aggregate fair
market value of not more than $500,000 in any single transaction and $2,500,000
in the aggregate in any fiscal year, and only to the extent that (i) the
proceeds of any such disposition are used to acquire replacement Equipment which
is subject to Lender's first priority security interest or (ii) the proceeds of
such disposition are remitted to Lender as a prepayment on Revolving Advances,
as required by Section 2.12; (c) the licensing in the ordinary course of its
business of intellectual property, other than where the grant of such license
would prohibit Borrower from continuing to retain full rights in such
intellectual property; and (d) the disposition of assets and operations
identified to Lender in writing on or prior to the Closing Date, and only to the
extent that the proceeds of any such disposition are immediately remitted to
Lender as a prepayment on Revolving Advances. Lender shall deliver to Borrower,
promptly upon demand, such Lien releases and other documents as Borrower shall
reasonably request to enable Borrower to dispose of free of Lender's Lien the
Collateral permitted hereby to be disposed of by Borrower.

      4.4.  Preservation of Collateral.

            Following the occurrence and during the continuance of a Default or
Event of Default, in addition to the rights and remedies set forth in Section
11.1, Lender: (a) may at any time take such steps as Lender deems necessary to
protect Lender's interest in and to preserve the Collateral, including the
hiring of such security guards or the placing of other security protection
measures as Lender may deem appropriate; (b) may employ and maintain at
Borrower's premises a custodian who shall have full authority to do all acts
necessary to protect Lender's interests in the Collateral; (c) may lease
warehouse facilities to which Lender may

                                      -27-
<PAGE>

move all or part of the Collateral; (d) may use Borrower's owned or leased
lifts, hoists, trucks and other facilities or equipment for handling or removing
the Collateral; and (e) shall have, and is hereby granted, a right of ingress
and egress to the places where the Collateral is located, and may proceed over
and through Borrower's owned or leased property. Borrower shall cooperate fully
with all of Lender's efforts to preserve the Collateral and will take such
actions to preserve the Collateral as Lender may direct. All of Lender's
reasonable expenses of preserving the Collateral, including any expenses
relating to the bonding of a custodian, shall be charged to Borrower's Account
as a Revolving Advance and added to the Obligations.

      4.5.  Ownership of Collateral.

            With respect to the Collateral, at the time the Collateral becomes
subject to Lender's security interest: (a) Borrower shall be the sole owner of
and fully authorized and able to sell, transfer, pledge and/or grant a first
priority security interest (subject to Permitted Encumbrances) in each and every
item of its respective Collateral to Lender; and, except for Permitted
Encumbrances the Collateral shall be free and clear of all Liens and
encumbrances whatsoever; (b) each document and agreement executed by Borrower or
delivered to Lender in connection with this Agreement shall be true and correct
in all respects; (c) all signatures and endorsements of Borrower that appear on
such documents and agreements shall be genuine and Borrower shall have full
capacity to execute same; and (d) Borrower's Equipment and Inventory shall be
located as set forth on SCHEDULE 4.5 or any other location with respect to which
Lender has (i) been provided with not less than ten (10) days prior written
notice, (ii) given its consent to Collateral being located at such location,
such consent not to be unreasonably withheld, and (iii) received such landlord
or other waivers as it deems necessary, and in each case shall not be removed
from such location(s) without the prior written consent of Lender, except with
respect to the sale of Inventory in the ordinary course of business and
Equipment to the extent permitted in Section 4.3 or this Section 4.5.

      4.6.  Defense of Lender's Interests.

            Until (a) payment and performance in full of all of the Obligations
and (b) termination of this Agreement, Lender's interests in the Collateral
shall continue in full force and effect. During such period Borrower shall not,
without Lender's prior written consent, pledge, sell (except Inventory in the
ordinary course of business and Equipment to the extent permitted in Section
4.3), assign, transfer, create or suffer to exist a Lien upon or encumber or
allow or suffer to be encumbered in any way except for Permitted Encumbrances,
any part of the Collateral. Borrower shall defend Lender's interests in the
Collateral against any and all Persons whatsoever (subject to Permitted
Encumbrances). At any time following the occurrence and during the continuance
of an Event of Default, Lender shall have the right to take possession of the
indicia of the Collateral and the Collateral in whatever physical form
contained, including without limitation: labels, stationery, documents,
instruments and advertising materials. If Lender exercises this right to take
possession of the Collateral, Borrower shall, upon demand, assemble it in the
best manner possible and make it available to Lender at a place reasonably
convenient to Lender. In addition, with respect to all Collateral, Lender shall
be entitled to all of the rights and remedies set forth herein and further
provided by the UCC or other applicable law. At any time following the
occurrence and during the continuance of an Event of Default, Borrower shall,
upon notification from Lender, and Lender may, at its option, instruct all

                                      -28-
<PAGE>

suppliers, carriers, forwarders, warehouses or others receiving or holding cash,
checks, Inventory, documents or instruments in which Lender holds a security
interest to deliver same to Lender and/or subject to Lender's order and if they
shall come into Borrower's possession, they, and each of them, shall be held by
Borrower in trust as Lender's trustee, and Borrower will immediately deliver
them to Lender in their original form together with any necessary endorsement.

      4.7.  Books and Records.

            Borrower shall (a) keep proper books of record and account in which
full, true and correct entries will be made of all dealings or transactions of
or in relation to its business and affairs; (b) set up on its books accruals
with respect to all taxes, assessments, charges, levies and claims; and (c) on a
reasonably current basis set up on its books, from its earnings, allowances
against doubtful Receivables, advances and investments and all other proper
accruals (including without limitation by reason of enumeration, accruals for
premiums, if any, due on required payments and accruals for depreciation,
obsolescence, or amortization of properties), which should be set aside from
such earnings in connection with its business. All determinations pursuant to
this subsection shall be made in accordance with, or as required by, GAAP
consistently applied in the opinion of such independent public accountant as
shall then be regularly engaged by Borrower.

      4.8.  Financial Disclosure.

            Borrower hereby irrevocably authorizes and directs all accountants
and auditors employed or retained by Borrower at any time during the Term to
exhibit and deliver to Lender copies of any of Borrower's financial statements,
trial balances or other accounting records of any sort in the accountant's or
auditor's possession, and to disclose to Lender any information such accountants
may have concerning Borrower's financial status and business operations,
provided, however, that (i) Borrower shall be given notice of any request made
under this Section to accountants and auditors not employed by it at the same
time such request is communicated to such accountants and auditors, (ii)
Borrower shall be permitted to participate in any discussions between Lender and
such accountants and auditors, (iii) and Borrower shall not have any obligations
to Lender as a result of the refusal of such accountants or auditors to comply
with any request of Lender hereunder notwithstanding the direction and
authorization of Borrower pursuant to this Section. Borrower hereby authorizes
all federal, state and municipal authorities to furnish to Lender copies of
reports or examinations relating to Borrower, whether made by Borrower or
otherwise; however, Lender will attempt to obtain such information or materials
directly from Borrower prior to obtaining such information or materials from
such accountants or such authorities.

      4.9.  Compliance with Laws.

            Borrower shall comply in all material respects with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official applicable to the Collateral or any part thereof or to the operation of
Borrower's business the non-compliance with which could reasonably be expected
to have a Material Adverse Effect. The assets of Borrower shall at all times be
maintained in accordance with the requirements of all insurance carriers which
provide

                                      -29-
<PAGE>

insurance with respect to the assets of Borrower so that such insurance shall
remain in full force and effect.

      4.10. Inspection of Premises.

            At all reasonable times upon reasonable notice Lender shall have
full access to and the right to audit, check, inspect and make abstracts and
copies from Borrower's books, records, audits, correspondence and all other
papers relating to the Collateral and the operation of Borrower's business.
Lender and its agents may enter upon any of Borrower's premises at any time
during normal business hours upon reasonable notice, for the purpose of
inspecting the Collateral (including, without limitation, for the purpose of
appraising the Inventory) and any and all records pertaining thereto and the
operation of Borrower's business. Without limiting the foregoing, Borrower
acknowledges that Lender intends to undertake three (3) field audits each fiscal
year, as provided in Section 3.4(b), and may perform interim appraisals of the
Inventory, all at Borrower's expense. Notwithstanding the foregoing, Lender may
cause additional field audits during normal business hours on reasonable notice
to be undertaken, as Lender it in its reasonable discretion deems necessary or
appropriate, which additional audits shall be at Lender's expense unless a
Default or Event of Default has occurred and is then continuing.

      4.11. Insurance.

            Borrower shall bear the full risk of any loss of any nature
whatsoever with respect to the Collateral. At Borrower's own cost and expense in
amounts and with carriers acceptable to Lender, Borrower shall (a) keep all its
insurable properties and properties in which Borrower has an interest insured
against the hazards of fire, flood, sprinkler leakage, those hazards covered by
extended coverage insurance and such other hazards, and for such amounts, as is
customary in the case of companies engaged in businesses similar to Borrower's
including, without limitation, business interruption insurance; (b) maintain a
bond in such amounts as is customary in the case of companies engaged in
businesses similar to Borrower insuring against larceny, embezzlement or other
criminal misappropriation of insured's officers and employees who may either
singly or jointly with others at any time have access to the assets or funds of
Borrower either directly or through authority to draw upon such funds or to
direct generally the disposition of such assets; (c) maintain public and product
liability insurance against claims for personal injury, death or property damage
suffered by others; (d) maintain all such worker's compensation or similar
insurance as may be required under the laws of any state or jurisdiction in
which Borrower is engaged in business; and (e); and furnish Lender with (i)
copies of all policies and evidence of the maintenance of such policies by the
renewal thereof at least thirty (30) days before any expiration date, and (ii)
appropriate loss payable endorsements in form and substance reasonably
satisfactory to Lender, naming Lender as a co-insured and loss payee as its
interests may appear with respect to all insurance coverage referred to in
clauses (a) (with respect to the Collateral), and (c) above, and providing (A)
that all proceeds thereunder shall be payable to Lender, (B) no such insurance
shall be affected by any act or neglect of the insured or owner of the property
described in such policy, and (C) that such policy and loss payable clauses may
not be cancelled, amended or terminated unless at least thirty (30) days' prior
written notice is given to Lender. In the event of any loss thereunder, the
carriers named therein hereby are directed by Lender and Borrower to make
payment for such loss to Lender and not to Borrower and Lender jointly. If any
insurance losses are paid by check, draft or other instrument payable to
Borrower and Lender

                                      -30-
<PAGE>

jointly, Lender may endorse Borrower's name thereon and do such other things as
Lender may deem advisable to reduce the same to cash. Lender is hereby
authorized to adjust and compromise claims under insurance coverage referred to
in clauses (a) (with respect to the Collateral), and (c) above. All loss
recoveries received by Lender upon any such insurance may be applied to the
Obligations, in such order as Lender in its sole discretion shall determine;
provided that so long as no Event of Default has occurred and is continuing,
such repayments shall be first applied to Domestic Rate Loans before being
applied to Eurodollar Rate Loans . Any surplus shall be paid by Lender to
Borrower or applied as may be otherwise required by law. Anything hereinabove to
the contrary notwithstanding, and subject to the fulfillment of the conditions
set forth below, Lender shall remit to Borrower insurance proceeds received by
Lender during any calendar year under insurance policies procured and maintained
by Borrower which insure Borrower's Equipment to the extent such insurance
proceeds do not exceed $50,000 in the aggregate during such calendar year or
$25,000 per occurrence. In the event the amount of insurance proceeds received
by Lender for any occurrence exceeds $25,000, then Lender shall not be obligated
to remit such insurance proceeds to Borrower unless Borrower shall provide
Lender with evidence reasonably satisfactory to Lender that the insurance
proceeds will be used by Borrower within thirty (30) days of Borrower's receipt
of such insurance proceeds to repair, replace or restore the insured Equipment
which was the subject of the insurable loss. In the event Borrower has
previously received (or, after giving effect to any proposed remittance by
Lender to Borrower would receive) insurance proceeds which equal or exceed
$50,000 in the aggregate during any calendar year, then Lender may, in its sole
discretion, either remit the insurance proceeds to Borrower upon Borrower
providing Lender with evidence reasonably satisfactory to Lender that the
insurance proceeds will be used by Borrower within thirty (30) days of
Borrower's receipt of such insurance proceeds to repair, replace or restore the
insured Equipment which was the subject of the insurable loss, or apply the
proceeds to the Obligations, as aforesaid. The agreement of Lender to remit
insurance proceeds in the manner above provided shall be subject in each
instance to satisfaction of each of the following conditions: (x) no Event of
Default or Default shall then have occurred and be continuing, (y) Borrower
shall use such insurance proceeds to repair, replace or restore the insured
Equipment which was the subject of the insurable loss and for no other purpose
and (z) until such time as Borrower shall use such insurance proceeds for such
repair, replacement or restoration, at Borrower's option, either (a) such
proceeds shall be held by Lender as cash collateral for the Obligations pursuant
to terms acceptable to Lender in its sole discretion or (b) such proceeds shall
be applied as a repayment of Revolving Advances. Such cash collateral shall be
released by Lender only if used by Borrower solely for the purposes of such
repair, replacement or restoration; provided, however, that nothing contained
herein shall waive or modify any conditions to the making of Revolving Advances
or any other provisions of this Agreement.

      4.12. Failure to Pay Insurance.

            If Borrower fails to obtain insurance as hereinabove provided, or to
keep the same in force, Lender, if Lender so elects, may obtain such insurance
and pay the premium therefor for Borrower's Account, and charge Borrower's
Account therefor and such expenses so paid shall be part of the Obligations.

                                      -31-
<PAGE>

      4.13. Payment of Taxes.

            Borrower will pay, when due, all income and other material taxes,
assessments and other Charges lawfully levied or assessed upon Borrower or any
of the Collateral including, without limitation, real and personal property
taxes, assessments and charges and all franchise, income, employment, social
security benefits, withholding, and sales taxes, except, in each case to the
extent such taxes, assessments and charges are being contested in good faith and
so long as any Lien arising therefrom is a Permitted Encumbrance. If any tax by
any governmental authority is or may be imposed on or as a result of any
transaction between Borrower and Lender which Lender may be required to withhold
or pay or if any taxes, assessments, or other Charges remain unpaid after the
date fixed for their payment, or if any claim shall be made which, in Lender's
opinion, creates a valid Lien (other than a Permitted Encumbrance) on the
Collateral, Lender may, after providing not less than ten (10) days notice to
Borrower, pay the taxes, assessments or other Charges and Borrower hereby
indemnifies and holds Lender harmless in respect thereof. The amount of any
payment by Lender under this Section 4.13 shall be charged to Borrower's Account
as a Revolving Advance and added to the Obligations and, until Borrower shall
furnish Lender with an indemnity therefor (or supply Lender with evidence
satisfactory to Lender that due provision for the payment thereof has been
made), Lender may hold without interest any balance standing to Borrower's
credit and Lender shall retain its security interest in any and all Collateral
held by Lender.

      4.14. Payment of Leasehold Obligations.

            Borrower shall at all times pay, when and as due (after giving
effect to any applicable grace period), its rental obligations under all leases
under which it is a tenant of Real Property where Collateral is located, and
shall otherwise comply, in all material respects, with all other terms of such
leases and keep them in full force and effect and, at Lender's request will
provide evidence of having done so.

      4.15. Receivables.

            (a) Nature of Receivables. Each of the Receivables shall be a bona
fide and valid account representing a bona fide indebtedness incurred by the
Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of Borrower, or work, labor or services theretofore
rendered by Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with Borrower's standard terms of sale without
dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by Borrower to Lender.

            (b) Solvency of Customers. Each Customer, to the best of Borrower's
knowledge, as of the date each Receivable is created, will be able to pay all
Receivables on which the Customer is obligated in full when due or with respect
to such Customers of Borrower who are not solvent Borrower has set up on its
books and in its financial records bad debt reserves in accordance with GAAP to
cover such Receivables.

                                      -32-
<PAGE>

            (c) Locations of Borrower. Borrower's chief executive office is
located at the address set forth on SCHEDULE 4.15(C). Until written notice is
given to Lender by Borrower of any other office at which Borrower keeps its
records pertaining to Receivables, all such records shall be kept at such
executive office and such other locations as are set forth on SCHEDULE 4.15(C).

            (d) Collection of Receivables. Until Borrower's authority to do so
is terminated by Lender (which notice Lender may give at any time following the
occurrence and during the continuance of an Event of Default or a Default or
when Lender in its sole discretion deems it to be in Lender's best interest to
do so), Borrower will, at Borrower's sole cost and expense, but on Lender's
behalf and for Lender's account, collect as Lender's property and in trust for
Lender all amounts received on Receivables, and shall not commingle such
collections with Borrower's funds or use the same except to pay Obligations.
Borrower shall, upon request, deliver to Lender, or deposit in the Blocked
Account, in original form and on the date of receipt thereof, all checks,
drafts, notes, money orders, acceptances, cash and other items received by
Borrower in respect of Receivables.

            (e) Notification of Assignment of Receivables. At any time following
the occurrence and during the continuance of an Event of Default, Lender shall
have the right to send notice of the assignment of, and Lender's security
interest in, the Receivables to any and all Customers or any third party holding
or otherwise concerned with any of the Collateral. Thereafter, Lender shall have
the sole right to collect the Receivables, take possession of the Collateral, or
both. Lender's reasonable collection expenses, including, but not limited to,
stationery and postage, telephone and telecopy, secretarial and clerical
expenses and the salaries of any collection personnel used for collection, may
be charged to Borrower's Account and added to the Obligations.

            (f) Power of Lender to Act on Borrower's Behalf. Lender shall have
the right to receive, endorse, assign and/or deliver in the name of Lender or
Borrower any and all checks, drafts and other instruments for the payment of
money relating to the Receivables, and Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Borrower
hereby constitutes Lender or Lender's designee as Borrower's attorney with power
(x) at all times (i) to endorse Borrower's name upon any notes, acceptances,
checks, drafts, money orders or other evidences of payment or Collateral; (ii)
to sign Borrower's name on any invoice or bill of lading relating to any of the
Receivables, drafts against Customers, assignments and verifications of
Receivables; (iii) to send verifications of Receivables to any Customer; and
(iv) to sign Borrower's name on all documents or instruments deemed necessary or
appropriate by Lender to preserve, protect, or perfect Lender's interest in the
Collateral and to file same; (y) after the occurrence and during the continuance
of an Event of Default (i) to demand payment of the Receivables; (ii) to enforce
payment of the Receivables by legal proceedings or otherwise; (iii) to exercise
all of Borrower's rights and remedies with respect to the collection of the
Receivables and any other Collateral; (iv) to settle, adjust, compromise, extend
or renew the Receivables; (v) to settle, adjust or compromise any legal
proceedings brought to collect Receivables; (vi) to prepare, file and sign
Borrower's name on a proof of claim in bankruptcy or similar document against
any Customer; and (vii) to prepare, file and sign Borrower's name on any notice
of Lien, assignment or satisfaction of Lien or similar document in connection
with the Receivables; and (z) at all times to do all other acts and things
necessary to carry out this

                                      -33-
<PAGE>

Agreement. All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designee shall not be liable for any acts of
omission or commission nor for any error of judgment or mistake of fact or of
law, unless done with willful misconduct or gross (not mere) negligence; this
power being coupled with an interest is irrevocable while any of the Obligations
remain unpaid. Lender shall have the right at any time following the occurrence
and during the continuance of an Event of Default to change the address for
delivery of mail addressed to any Borrower to such address as Lender may
designate and to receive, open and dispose of all mail addressed to Borrower.

            (g) No Liability. Lender shall not, under any circumstances or in
any event whatsoever, have any liability for any error or omission or delay of
any kind occurring in the settlement, collection or payment of any of the
Receivables or any instrument received in payment thereof, or for any damage
resulting therefrom other than results from Lender's gross negligence or willful
misconduct. Following the occurrence and during the continuance of an Event of
Default or Default, Lender may, without notice or consent from Borrower, sue
upon or otherwise collect, extend the time of payment of, compromise or settle
for cash, credit or upon any terms any of the Receivables or any other
securities, instruments or insurance applicable thereto and/or release any
obligor thereof. Lender is authorized and empowered to accept, following the
occurrence and during the continuance of an Event of Default, the return of the
goods represented by any of the Receivables, without notice to or consent by
Borrower, all without discharging or in any way affecting Borrower's liability
hereunder.

            (h) Establishment of Lockbox Accounts. Borrower shall establish and
maintain, at its expense, lockboxes and related blocked accounts (in either
case, "Blocked Accounts"), as Lender may specify in its sole discretion, with
such banks as are acceptable to Lender into which Borrower shall promptly
deposit, and shall direct its account debtors to directly remit, all cash and
other payments received by Borrower (or, in the case of account debtors, payable
to Borrower), including, without limitation, all payments in respect of
Receivables, all payments constituting proceeds of Inventory or other
Collateral, all tax, duty and other cash refunds, and all other cash payments,
in each case in the identical form in which such payments are made, whether by
cash, check or other manner. The banks at which the Blocked Accounts are
established shall enter into agreements, in form and substance reasonably
satisfactory to Lender, providing that all items received or deposited in the
Blocked Accounts are the property of Lender held for the benefit of Lender, that
the depository bank has no lien upon, or right to setoff against, the Blocked
Accounts, the items received for deposit therein, or the funds from time to time
on deposit therein, (other than for charges related to the Blocked Account,
checks or other items returned due to insufficient funds or any other reason,
and daylight overdrafts) and that the depository bank will wire, or otherwise
transfer, in immediately available funds, on a daily basis, all funds received
or deposited into the Blocked Accounts to such bank account of Lender as Lender
may from time to time designate for such purpose. Borrower agrees that all
payments made to such Blocked Accounts or other funds received and collected by
Lender, whether on the Receivables, as proceeds of Inventory or other
Collateral, or otherwise shall be the property of Lender held for the benefit of
Lender.

            (i) Adjustments. Borrower will not, without Lender's consent,
compromise or adjust any Receivables (or extend the time for payment thereof) or
accept any returns of merchandise or grant any additional discounts, allowances
or credits thereon except for those

                                      -34-
<PAGE>

compromises, adjustments, returns, discounts, credits and allowances as have
been heretofore customary in the business of Borrower.

      4.16. Inventory.

            To the extent Inventory held for sale or lease has been produced by
Borrower, it has been and will be produced by Borrower in compliance in all
material respects with the Federal Fair Labor Standards Act of 1938, as amended,
and all rules, regulations and orders thereunder.

      4.17. Maintenance of Equipment.

            The Equipment shall be maintained in good operating condition and
repair (reasonable wear and tear excepted) and all necessary replacements of and
repairs thereto shall be made so that the value and operating efficiency of the
Equipment shall be maintained and preserved. Borrower shall not use or operate
the Equipment in violation of any law, statute, ordinance, code, rule or
regulation, except such violations which could not reasonably be expected to
have a Material Adverse Effect. Borrower shall have the right to sell Equipment
to the extent set forth in Section 4.3.

      4.18. Exculpation of Liability.

            Nothing herein contained shall be construed to constitute Lender as
Borrower's agent for any purpose whatsoever, nor shall Lender be responsible or
liable for any shortage, discrepancy, damage, loss or destruction of any part of
the Collateral wherever the same may be located and regardless of the cause
thereof. Lender shall not, whether by anything herein or in any assignment or
otherwise, assume any of Borrower's obligations under any contract or agreement
assigned to Lender, and Lender shall not be responsible in any way for the
performance by Borrower of any of the terms and conditions thereof.

      4.19. Environmental Matters.

            Borrower shall comply with all Environmental Laws applicable to it
and shall not place or permit to be placed any Hazardous Substances on any Real
Property except such noncompliance or placement as is not reasonably likely to
have a Material Adverse Effect.

      4.20. Financing Statements.

            Except for the (i) financing statements described on SCHEDULE 7.2
and (ii) financing statements in favor of GECC, as agent under the Existing Loan
Agreement, all of which are being terminated on the Closing Date, no financing
statement covering any of the Collateral or any proceeds thereof is on file in
any public office.

V.    REPRESENTATIONS AND WARRANTIES.

      Borrower represents and warrants as follows:

                                      -35-
<PAGE>

      5.1.  Authority.

            Borrower has full power, authority and legal right to enter into
this Agreement and the Other Documents and to perform all its respective
Obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement and of the Other Documents (a) are within Borrower's corporate
powers, have been duly authorized, are not in contravention of law or the terms
of Borrower's certificate of incorporation and by-laws or other applicable
documents relating to the conduct of Borrower's business or of any material
agreement or undertaking to which Borrower is a party or by which Borrower is
bound, and (b) will not conflict with nor result in any breach in any of the
provisions of or constitute a default under or result in the creation of any
Lien except Permitted Encumbrances upon any asset of Borrower under the
provisions of any agreement, charter document, instrument, by-law, or other
instrument to which Borrower or its property is a party or by which it may be
bound.

      5.2.  Incorporation and Qualification.

            (a)   Borrower is duly incorporated and in good standing under the
laws of the state of Delaware and is qualified to do business and is in good
standing in the states listed on SCHEDULE 5.2(a) which constitute all states in
which qualification and good standing are necessary for Borrower to conduct its
business and own its property and where the failure to so qualify could
reasonably be expected to have a Material Adverse Effect. The exact State
organizational number of Borrower is set forth on SCHEDULE 5.2(a). Borrower has
delivered to Lender true and complete copies of its certificate of incorporation
and by-laws and will promptly notify Lender of any amendment or changes thereto.

            (b)   The only Subsidiaries of Borrower are listed on SCHEDULE
5.2(b). All Subsidiaries listed on SCHEDULE 5.2(b) have been organized outside
the United States, and except as indicated on such Schedule, are inactive and
have no operations.

      5.3.  Survival of Representations and Warranties.

            All representations and warranties of Borrower contained in this
Agreement and the Other Documents shall be true at the time of Borrower's
execution of this Agreement and the Other Documents, and shall survive the
execution, delivery and acceptance thereof by the parties thereto and the
closing of the transactions described therein or related thereto.

      5.4.  Tax Returns.

            Borrower's federal tax identification number is set forth on
SCHEDULE 5.4. Except as set forth on SCHEDULE 5.4, Borrower has filed all
federal, state and local income, franchise and other material tax returns and
other reports it is required by law to file and has paid all income, franchise
and other material taxes, assessments, fees and other governmental charges that
are due and payable as shown on such returns. Federal, state and local income
tax returns of Borrower have been examined and reported upon by the appropriate
taxing authority or closed by applicable statute and satisfied for all tax years
prior to and including the tax year ending September 30, 2000. The provision for
taxes on the books of Borrower is adequate in accordance with GAAP for all years
not closed by applicable statutes, and for its current fiscal

                                      -36-
<PAGE>

year, and Borrower has no knowledge of any deficiency or additional assessment
in connection therewith not provided for on its books.

      5.5.  Financial Statements.

            Borrower has heretofore furnished to Lender (i) the audited
consolidated balance sheet of Borrower and its Subsidiaries and the related
consolidated statements of earnings, shareholders' equity and cash flows,
audited by Deloitte & Touche LLP, independent certified public accountants, as
of and for the fiscal year ended March 31, 2004; (ii) the unaudited consolidated
balance sheet of Borrower and its Subsidiaries as of December 31, 2004 and the
related consolidated statements of earnings of Borrower and its Subsidiaries for
the three and nine month periods ended December 31, 2004 and cash flows for the
nine month period ended December 31, 2004; and (iii) the unaudited consolidated
balance sheet of Borrower and its Subsidiaries and the related consolidated
statements of earnings, shareholders' equity and cash flows as of and for the
fiscal year ended March 31, 2005. Such financial statements were prepared in
conformity with GAAP, applied on a consistent basis, and fairly present the
consolidated financial condition and consolidated results of operations of the
Company and its Subsidiaries as of the date of such financial statements and for
the periods to which they relate (subject, in the case of interim financial
statements, to normal year-end audit adjustments). Since December 31, 2004, no
Material Adverse Effect has occurred. Since December 31, 2004, there were no
material obligations or liabilities, contingent or otherwise, of Borrower or any
of its Subsidiaries which are not reflected or disclosed on such financial
statements.

      5.6.  Corporate Name.

            The exact name of Borrower is set forth in the first paragraph to
this Agreement (or, if Borrower is not listed in such first paragraph, such
exact name is set forth on SCHEDULE 5.6). Borrower has not been known by any
other corporate name in the past five years, and Borrower does not sell
Inventory under any other name except as set forth in the Public Filings made
prior to the Closing Date or on SCHEDULE 5.6, nor has Borrower been the
surviving corporation of a merger or consolidation or acquired all or
substantially all of the assets of any Person during the preceding five (5)
years except as set forth on SCHEDULE 5.6 or the Public Filings.

      5.7.  O.S.H.A. and Environmental Compliance.

            Borrower has complied in all material respects with, and its
facilities, business, assets, property, leaseholds and Equipment are in
compliance in all material respects with, the provisions of the Federal
Occupational Safety and Health Act, the Environmental Protection Act, RCRA and
all other Environmental Laws applicable to it except such noncompliance that
could not reasonably be expected to have a Material Adverse Effect; there have
been no outstanding citations, notices or orders of non-compliance issued to
Borrower or relating to its business, assets, property, leaseholds or Equipment
under any such laws, rules or regulations, in each case except as set forth on
SCHEDULE 5.7.

                                      -37-
<PAGE>

      5.8.  Solvency; Litigation, Violation, Indebtedness or Default.

            (a)   (i) After giving effect to the initial Loans hereunder,
Borrower is solvent, able to pay its debts as they mature and has capital
sufficient to carry on its business and all businesses in which it is about to
engage, (ii) as of the Closing Date, the fair present saleable value of
Borrower's assets, calculated on a going concern basis, is in excess of the
amount of its liabilities, and (iii) after giving effect to each Advance
hereunder subsequent to the Closing Date, the fair saleable value of Borrower's
assets (calculated on a going concern basis) is in excess of the amount of its
liabilities.

            (b)   Except as disclosed in SCHEDULE 5.8(b), Borrower has no (i)
pending or, to its knowledge, threatened, litigation, arbitration, actions or
proceedings which could reasonably be expected to have a Material Adverse
Effect, and (ii) any Indebtedness for borrowed money or outstanding letters of
credit. All commercial tort claims of Borrower are set forth on SCHEDULE 5.8(b).

            (c)   Except as set forth on SCHEDULE 5.8(c), Borrower is not in
violation of any applicable statute, regulation or ordinance in any respect
which could reasonably be expected to have a Material Adverse Effect, nor is
Borrower in violation of any order of any court, governmental authority or
arbitration board or tribunal which could reasonably be expected to have a
Material Adverse Effect.

            (d)   Borrower is not a member of a Controlled Group that maintains
or contributes to any Plan that is an employee pension benefit plan within the
meaning of Section 3(2) of ERISA other than those listed on SCHEDULE 5.8(d).
Except as set forth in SCHEDULE 5.8(d), (i) neither the Borrower nor any member
of its Controlled Group maintains or contributes to, and have maintained or
contributed to during the last five (5) years, a Plan subject to Title IV of
ERISA (including a Multiemployer Plan), Section 412 of the Code or Section
302(a)(2) of ERISA, (ii) each Plan which is intended to be a qualified plan
under Section 401(a) of the Code as currently in effect has been determined by
the Internal Revenue Service to be qualified under Section 401(a) of the Code
and the trust related thereto is exempt from federal income tax under Section
501(a) of the Code, (iii) neither Borrower nor any member of the Controlled
Group has materially breached any of the responsibilities, obligations or duties
imposed on it by ERISA, the Code or any other applicable law with respect to any
Plan, (iv) neither Borrower nor any member of a Controlled Group has incurred
any liability for any excise tax arising under Section 4972 or 4980B of the
Code, and no fact exists which could give rise to any such liability, (v)
neither Borrower nor any member of the Controlled Group nor any fiduciary of,
nor any trustee to, any Plan, has engaged in a non-exempt "prohibited
transaction" described in Section 406 of ERISA or Section 4975 of the Code, (vi)
Borrower and each member of the Controlled Group has made all contributions due
and payable with respect to each Plan, (vii) neither Borrower nor any member of
the Controlled Group has any fiduciary responsibility for investments with
respect to any plan existing for the benefit of persons other than employees or
former employees of Borrower and any member of the Controlled Group, (vii)
neither the Borrower nor any member of its Controlled Group maintains or
contributes to a Plan that is a welfare benefit plan within the meaning of
Section 3(1) of ERISA which provides or is intended to provide benefits to
current or future retirees of the Borrower or a member of its Controlled Group
other than as required to comply with the health care continuation coverage
requirements of Section 4980B of the Code

                                      -38-
<PAGE>

and Part 5 of Subtitle B of Title I of ERISA, and (viii) the Borrower does not,
and does not reasonably expect to, have any liability with respect to any
pension or welfare plan maintained by any Person outside the United States,
except where such event or condition described in the foregoing clauses (ii)
through (viii) is not reasonably likely to have a Material Adverse Effect.

      5.9.  Patents, Trademarks, Copyrights and Licenses.

            All United States patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, registered
copyrights, copyright applications, tradenames, assumed names and licenses that
are owned or utilized by Borrower and are necessary for the operation of its
business are set forth on SCHEDULE 5.9, are valid and have been duly registered
or filed with all appropriate governmental authorities and constitute all of the
intellectual property rights which are necessary for the operation of its
business; there is no objection to or pending challenge to the validity of any
such material patent, trademark, copyright, design right, tradename, trade
secret or license which, if determined adversely to Borrower, could reasonably
be expected to have a Material Adverse Effect, and Borrower is not aware of any
grounds for any challenge, except as set forth in SCHEDULE 5.9. Each patent,
patent application, patent license, trademark, trademark application, trademark
license, service mark, service mark application, service mark license,
copyright, copyright application and copyright license owned or held by Borrower
and all trade secrets used by Borrower consist of original material or property
developed by Borrower or was lawfully acquired by Borrower from the proper and
lawful owner thereof. Each of such items has been maintained so as to preserve
the value thereof from the date of creation or acquisition thereof.

      5.10. Licenses and Permits.

            Except as set forth in SCHEDULE 5.10, Borrower (a) is in material
compliance with and (b) has procured and is now in possession of, all material
licenses or permits required by any applicable federal, state or local law or
regulation for the operation of its business in each jurisdiction wherein it is
now conducting or proposes to conduct business and where the failure to procure
such licenses or permits could have a Material Adverse Effect.

      5.11. Default of Indebtedness.

            Borrower is not in default in the payment of the principal of or
interest on any Indebtedness for borrowed money in an individual principal
amount exceeding $100,000 or in the aggregate principal amount exceeding
$250,000, or under any instrument or agreement under or subject to which any
Indebtedness for borrowed money (other than the Loans) in an individual
principal amount exceeding $100,000 or in the aggregate principal amount
exceeding $250,000 has been issued and no event has occurred under the
provisions of any such instrument or agreement which with or without the lapse
of time or the giving of notice, or both, constitutes or would constitute an
event of default thereunder.

      5.12. No Default.

            Borrower is not in default in the payment or performance of any of
its material contractual obligations, except such defaults (a) which could not
reasonably be expected to have

                                      -39-
<PAGE>

a Material Adverse Effect and (b) as are being contested in good faith; and no
Default has occurred and is continuing.

      5.13. No Burdensome Restrictions.

            Borrower is not a party to any contract or agreement the performance
of which could reasonably be expected to have a Material Adverse Effect.
Borrower has not agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien which is not a Permitted
Encumbrance.

      5.14. No Labor Disputes.

            Borrower is not involved in any labor dispute, there are no strikes
or walkouts or union organization of Borrower's employees threatened or in
existence and no labor contract is scheduled to expire during the Term other
than as set forth on SCHEDULE 5.14.

      5.15. Margin Regulations.

            Borrower is not engaged, nor will it engage, 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 the
quoted term under Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect. No part of the proceeds
of any Advance will be used for "purchasing" or "carrying" "margin stock" as
defined in Regulation U of such Board of Governors.

      5.16. Investment Company Act.

            Borrower is not an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, nor is it
controlled by such a company.

      5.17. Disclosure.

            No representation or warranty made by Borrower in this Agreement,
any financial statement, report, certificate or any other document furnished in
connection herewith or therewith, contains any untrue statement of a material
fact or omits to state any material fact necessary to make the statements herein
or therein not misleading.

      5.18. Swaps.

            Borrower is not a party to, nor will it be a party to, any swap
agreement whereby Borrower has agreed or will agree to swap currencies or
interest rates.

      5.19. Conflicting Agreements.

            Other than as set forth on SCHEDULE 5.19, no provision of any
mortgage, indenture, contract, agreement, judgment, decree or order binding on
Borrower or affecting the Collateral conflicts with, or requires any Consent
which has not already been obtained to, which

                                      -40-
<PAGE>

conflict or the absence of which Consent could reasonably be expected to have a
Material Adverse Effect, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.

      5.20. Application of Certain Laws and Regulations.

            Borrower is not subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including without limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone, telegraph or other public utility
services.

      5.21. Business and Property of Borrower.

            Upon and after the Closing Date, Borrower does not propose to engage
in any business other than its business currently conducted as described in its
filings with the Commission. Except as set forth on SCHEDULE 5.21, on the
Closing Date, Borrower will own all the property and possess all of the rights
and material Consents necessary for the conduct of the business of Borrower.

      5.22. Material Contracts.

            Except as set forth on SCHEDULE 5.22, a true, correct and complete
list of all contracts which are material to the operation of Borrower's business
is set forth or referred to in Borrower's Form 10-K filed with the Commission on
June 14, 2004, the amendments thereto, Borrower's subsequent Forms 10-Q filed
with the Commission on August 9, 2004, November 9, 2004 and February 9, 2005,
and Borrowers Forms 8-K filed with the Commission subsequent to June 14, 2004.
Except as set forth on SCHEDULE 5.22 or disclosed to Lender in writing, each
such contract is in full force and effect and no material defaults enforceable
against Borrower exist thereunder. Except as set forth on Schedule 5.22,
Borrower has not received notice from any party to such contract stating that it
intends to terminate or amend such contract.

      5.23. Bank Accounts.

            SCHEDULE 5.23 contains a true, correct and complete list of all
deposit accounts, investment accounts and other accounts in the name of or used
by Borrower, identifying the account number for each such account and the bank
or other financial institution where each such account is maintained.

      5.24. Affiliate Debt.

            SCHEDULE 5.24 contains a true, correct and complete schedule of all
monetary obligations of Borrower to Parent, Atari Interactive, Inc. and each
other Affiliate of Borrower, including, without limitation, under any license,
distribution or other commercial agreement, as of the Closing Date.

                                      -41-
<PAGE>

VI.   AFFIRMATIVE COVENANTS.

      Borrower shall, until payment in full of the Obligations and termination
of this Agreement:

      6.1.  Payment of Fees.

            Pay to Lender on demand all usual and customary fees and expenses
which Lender incurs in connection with (a) the forwarding of proceeds of
Advances and (b) the establishment and maintenance of any Blocked Accounts as
provided for in Section 4.15(h). Lender may, without making demand, charge
Borrower's Account for all such fees and expenses.

      6.2.  Conduct of Business and Maintenance of Existence and Assets.

            (i) Conduct continuously and operate actively its business according
to good business practices and, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect, maintain all of its
properties useful or necessary in its business in good working order and
condition (reasonable wear and tear excepted and except as may be disposed of in
accordance with the terms of this Agreement), including, without limitation, all
licenses, patents, copyrights, design rights, tradenames, trade secrets and
trademarks and, except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect, take all actions necessary to
enforce and protect the validity of any intellectual property right or other
right included in the Collateral, including, without limitation, by promptly
paying when due or causing to be paid when due, all licensing and royalty fees
due with respect to such intellectual property, unless provided otherwise
pursuant to this Agreement or any Other Document; (ii) keep in full force and
effect its existence and comply in all material respects with the laws and
regulations governing the conduct of its business where the failure to do so
could reasonably be expected to have a Material Adverse Effect; and (iii) make
all such reports and pay all such franchise and other taxes and license fees and
do all such other acts and things as may be lawfully required to maintain its
rights, licenses, leases, powers and franchises under the laws of the United
States or any political subdivision thereof where the failure to do so could
reasonably be expected to have a Material Adverse Effect.

      6.3.  Violations.

            Promptly notify Lender in writing of any violation of any law,
statute, regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to Borrower which could reasonably be expected to have a
Material Adverse Effect.

      6.4.  Execution of Supplemental Instruments.

            Execute and deliver to Lender from time to time, upon demand, such
supplemental agreements, statements, assignments and transfers, or instructions
or documents relating to the Collateral, and such other instruments as Lender
may request, in order that the full intent of this Agreement may be carried into
effect.

                                      -42-
<PAGE>

      6.5.  Payment of Indebtedness.

            Subject at all times to any applicable subordination arrangement in
favor of Lender, pay, discharge or otherwise satisfy at or before maturity
(subject, where applicable, to specified grace periods and, in the case of the
trade payables, to normal payment practices) all its obligations and liabilities
of whatever nature, except when the failure to do so could not reasonably be
expected to have a Material Adverse Effect or when the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and Borrower shall have provided for such reserves as are required by GAAP.

      6.6.  Standards of Financial Statements.

            Cause all financial statements referred to in Sections 9.5, 9.6 and
9.7 as to which GAAP is applicable to be complete and correct in all material
respects (subject, in the case of interim financial statements, to normal
year-end audit adjustments) and to be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein (except as concurred in by such reporting accountants or officer, as the
case may be, and disclosed therein).

      6.7.  Bank Accounts.

            No later than 180 days following the Closing Date, cause all of
Borrower's banking and depository accounts (including the Blocked Accounts) to
be maintained with HSBC Bank, except for those two certificates of deposits
maintained by Borrower with JPMorgan Chase Bank, in the approximate amounts of
$253,481 and $111,360.00, respectively, which serve as cash collateral for
letters of credit T-618888 and T-213485 issued by JPMorgan Chase Bank, and cause
all of its Customers to make all payments in respect of Receivables directly
into Blocked Accounts maintained by Borrower with HSBC Bank.

      6.8.  Financial Covenants.

            (a)   EBITDA. Maintain Consolidated EBITDA for the twelve-month
periods ending on the dates set forth below of not less than the amounts set
forth below opposite such dates:

<TABLE>
<CAPTION>
 Twelve-Month
Period Ending On                      Minimum EBITDA
----------------                      --------------
<S>                                   <C>
 6/30/05                              $ (15,500,000)
 9/30/05                              $  (2,100,000)
12/31/05                              $   7,000,000
 3/31/06                              $  11,200,000
</TABLE>

            (b)   Tangible Net Worth. Maintain Tangible Net Worth at all times
during each period set forth below of not less than the amounts set forth below
opposite such periods:

                                      -43-
<PAGE>

<TABLE>
<CAPTION>
Fiscal Quarter                                                   Minimum
  Ending On                                                 Tangible Net Worth
--------------                                              ------------------
<S>                                                         <C>
   6/30/05                                                  $ 19,700,000
   9/30/05                                                  $ 14,300,000
  12/31/05                                                  $ 37,600,000
   3/31/06                                                  $ 38,000,000
</TABLE>

            (c)   Working Capital. Maintain Working Capital at all times during
each period set forth below of not less than the amounts set forth below
opposite such periods:

<TABLE>
<CAPTION>
Fiscal Quarter                                              Minimum
  Ending On                                             Working Capital
--------------                                          ---------------
<S>                                                     <C>
 6/30/05                                                $ (10,500,000)
 9/30/05                                                $ (19,000,000)
12/31/05                                                $   7,000,000
 3/31/06                                                $  18,500,000
</TABLE>

            (d)   Cleanup Period. For a period of 90 consecutive days beginning
no later than January 31, 2006, Borrower shall make such prepayments and refrain
from requesting Revolving Advances so that during such period no Revolving
Advances shall be outstanding.

VII.  NEGATIVE COVENANTS.

      Borrower shall not, until satisfaction in full of the Obligations and
termination of this Agreement:

      7.1.  Merger, Consolidation, Acquisition and Sale of Assets.

            (a)   Enter into any merger, consolidation or other reorganization
with or into any other Person or acquire all or a substantial portion of the
assets or stock of any Person or permit any other Person to consolidate with or
merge with it.

            (b)   Sell, lease, transfer or otherwise dispose of any of its
properties or assets, except in the ordinary course of its business and except
as provided in Section 4.3.

      7.2.  Creation of Liens.

            Create or suffer to exist any Lien upon or against any of its
property or assets now owned or hereafter acquired, except Permitted
Encumbrances.

      7.3.  Guarantees.

            Become liable upon the obligations of any Person by assumption,
endorsement or guaranty thereof or otherwise (other than to Lender) except (a)
as disclosed on SCHEDULE 7.3, and (b) the endorsement of checks in the ordinary
course of business.

                                      -44-
<PAGE>

      7.4.  Investments.

            Purchase or acquire obligations or stock of, or any other interest
in, any Person, except (i) notes payable issued by any Person who may become
obligated to Borrower, under, with respect to, or on account of, an account,
chattel paper or General Intangibles (including a payment intangible) to
Borrower pursuant to negotiated agreements with respect to settlement of such
Person's accounts in the ordinary course of business, so long as the aggregate
amount of such accounts so settled by Borrower does not exceed $1,000,000 and
any such note, in the event the principal amount thereof exceeds $50,000, is
delivered to Lender as Collateral securing the Obligations, (ii) loans and
advances to employees and Reflections permitted pursuant to Section 7.5, (iii)
Cash Equivalents and (iv) other investments not exceeding $50,000 in the
aggregate at any time outstanding.

      7.5.  Loans.

            Make advances, loans or extensions of credit to any Person,
including without limitation, to Parent or any Subsidiary or Affiliate, except
(i) the extension of commercial trade credit in connection with the sale of
Inventory in the ordinary course of its business, (ii) loans and advances to
Borrower's employees on an arm's-length basis in the ordinary course of business
consistent with past practices for travel and entertainment expenses, relocation
costs and similar purposes up to a maximum of $200,000 to any employee and up to
a maximum of $50,000 in the aggregate at any one time outstanding, (iii) advance
payments of production costs and developer's fees to developers of games
marketed by Borrower in the ordinary course of business consistent with past
practice to Persons that are not Affiliates of Borrower, and (iv) loans and
advances to Reflections in the ordinary course of business substantially
consistent with past practice and the Cash Flow Projections in the aggregate.

      7.6.  Capital Expenditures; Purchase Money Indebtedness.

            Contract for, purchase or make Capital Expenditures or incur
Purchase Money Indebtedness in excess of $7,000,000 in the aggregate during the
Term.

      7.7.  Dividends and Distributions.

            Declare, pay or make any dividend or distribution on any shares of
the common stock, preferred stock or other equity interests of Borrower (other
than dividends or distributions payable in its stock or other equity interests
or split-ups or reclassifications of its stock or other equity interests) or
apply any of its funds, property or assets to the purchase, redemption or other
retirement of any common or preferred stock, or of any options to purchase or
acquire any such shares of common or preferred stock or other equity interests
of Borrower.

      7.8.  Indebtedness.

            Create, incur, assume or suffer to exist any Indebtedness (exclusive
of trade debt), including, without limitation, any intercompany indebtedness,
except in respect of (i) Indebtedness to Lender pursuant to this Agreement;
(iii) Indebtedness permitted to be incurred under Section 7.6, and (iii)
Indebtedness existing on the Closing Date as set forth on SCHEDULE 7.8.

                                      -45-
<PAGE>

      7.9.  Nature of Business.

            Substantially change the nature of the business in which it is
presently engaged, nor except as specifically permitted hereby purchase or
invest, directly or indirectly, in any assets or property other than in the
ordinary course of business for assets or property which are useful in,
necessary for and are to be used in its business as presently conducted.

      7.10. Transactions with Affiliates.

            Directly or indirectly, purchase, acquire or lease any property
from, or sell, transfer or lease any property to, or otherwise deal with, any
Affiliate, except (i) pursuant to agreements and arrangements existing on the
Closing Date as set forth in the Public Filings made prior to the Closing Date
or on SCHEDULE 7.10, which shall not be amended in any material respect adverse
to Borrower without the prior written consent of Lender; provided, however, that
the management fees payable to Parent as disclosed in the Public Filings, in no
event shall be in excess of $250,000 in any month, (ii) transactions in the
ordinary course of business, such as the provision of development and/or other
commercial services, and (iii) loans and advances to employees and Reflections
permitted pursuant to Section 7.5.

      7.11. Subsidiaries.

            Form any Subsidiary, permit any existing Subsidiary designated as an
inactive subsidiary on SCHEDULE 5.2(b) to conduct any business or operations, or
enter into any partnership, joint venture or similar arrangement.

      7.12. Fiscal Year and Accounting Changes.

            Change its fiscal year from March 31 or make any significant change
(i) in accounting treatment and reporting practices except as required by GAAP
or (ii) in tax reporting treatment except as required by law.

      7.13. Additional Bank Accounts.

            Borrower shall not, directly or indirectly, open, establish or
maintain any deposit account, investment account or any other account with any
bank or other financial institution, other than the Blocked Accounts maintained
with HSBC Bank and, subject Section 6.7, the accounts set forth in SCHEDULE 5.23
hereto.

      7.14. Use of Proceeds.

            Now or hereafter use any portion of any Advance in or for any
business other than Borrower's business as conducted on the date of, or
permitted by, this Agreement.

      7.15. Amendment of Organizational Documents.

            Amend, modify or waive any term or provision of its Certificate of
Incorporation or By-Laws in a manner that could reasonably be expected to
adversely affect Lender or

                                      -46-
<PAGE>

Borrower's ability to repay the Obligations unless required by law, provided,
however, that Borrower may change its name upon not less than thirty (30) days
prior written notice to Lender.

      7.16. Compliance with ERISA.

            (i) Engage, or permit any member of the Controlled Group to engage,
in any non-exempt "prohibited transaction", as that term is defined in section
406 of ERISA and Section 4975 of the Code, (ii) incur, or permit any member of
the Controlled Group to incur, any "accumulated funding deficiency", as that
term is defined in Section 302 of ERISA or Section 412 of the Code, (iii)
terminate, or permit any member of the Controlled Group to terminate, any Plan
where such event could result in any material liability of Borrower or any
member of the Controlled Group or the imposition of a lien on the property of
Borrower or any member of the Controlled Group pursuant to Section 4068 of
ERISA, (iv) assume, or permit any member of the Controlled Group to assume, any
obligation to contribute to any Multiemployer Plan, (v) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vi) fail promptly to notify Lender of the occurrence of any
Termination Event, (vii) fail to comply, or permit a member of the Controlled
Group to fail to materially comply, with the requirements of ERISA, the Code or
other applicable laws in respect of any Plan, (viii) fail to meet, or permit any
member of the Controlled Group to fail to meet, all minimum funding requirements
under ERISA or the Code or postpone or delay or allow any member of the
Controlled Group to postpone or delay any funding requirement with respect of
any Plan, except where such event or condition described in the foregoing
clauses (i) through (viii) is not reasonably likely to have, at the time of the
event or condition or in the future, a Material Adverse Effect.

      7.17. Prepayment of Indebtedness.

            At any time, directly or indirectly, prepay any Indebtedness for
borrowed money (other than to Lender), or repurchase, redeem, retire or
otherwise acquire any Indebtedness for borrowed money of Borrower, except (i)
Indebtedness secured by a Permitted Encumbrance if the asset securing such
Indebtedness has been sold or otherwise disposed of and (ii) Indebtedness
permitted by Section 7.8 upon any refinancing thereof.

      7.18. State of Organization.

            Change the State in which it is incorporated or otherwise organized,
unless it has given Lender not less than thirty (30) days prior written notice
thereof.

VIII. CONDITIONS PRECEDENT.

      8.1.  Conditions to Initial Advances.

            The agreement of Lender to make the initial Advances requested to be
made on the Closing Date is subject to the satisfaction, or waiver by Lender,
immediately prior to or concurrently with the making of such Advances, of the
following conditions precedent:

                                      -47-
<PAGE>

                  (a)   Note. Lender shall have received the Revolving Credit
      Note duly executed and delivered by an authorized officer of Borrower;

                  (b)   Filings, Registrations, Recordings and Searches. Each
      document (including, without limitation, any UCC financing statement)
      required by this Agreement, any related agreement or under law or
      reasonably requested by Lender to be filed, registered or recorded in
      order to create, in favor of Lender, a perfected security interest in or
      lien upon the Collateral shall, at the sole discretion of Lender, either
      (i) have been properly filed, registered or recorded in each jurisdiction
      in which the filing, registration or recordation thereof is so required or
      requested, and Lender shall have received an acknowledgment copy, or other
      evidence satisfactory to it, of each such filing, registration or
      recordation and satisfactory evidence of the payment of any necessary fee,
      tax or expense relating thereto, or (ii) have been delivered to Lender in
      a form ready to be so filed, registered or recorded. The Lender shall also
      have received UCC, tax and judgment lien searches with respect to Borrower
      in such jurisdictions as Lender shall require, and the results of such
      searches shall be satisfactory to Lender;

                  (c)   Corporate Proceedings of Borrower. Lender shall have
      received a copy of the resolutions in form and substance reasonably
      satisfactory to Lender, of the Board of Directors (or equivalent
      authority) of Borrower authorizing (i) the execution, delivery and
      performance of this Agreement and the Other Documents (collectively the
      "Documents") and (ii) the granting by Borrower of the security interests
      in and liens upon the Collateral in each case certified by the Secretary
      or an Assistant Secretary of Borrower as of the Closing Date; and, such
      certificate shall state that the resolutions thereby certified have not
      been amended, modified, revoked or rescinded as of the date of such
      certificate;

                  (d)   Certificate of Chief Financial Officer. Lender shall
      have received a certificate of the Chief Financial Officer of Borrower,
      dated the Closing Date, stating that (i) all representations and
      warranties set forth in this Agreement and the Other Documents are true
      and correct on and as of such date, (ii) Borrower is on such date in
      compliance with all the terms and provisions set forth in this Agreement
      and the Other Documents, (iii) on such date no Default or Event of Default
      has occurred or is continuing, and (iv) the unaudited financial statements
      of Borrower for the fiscal year ended March 31, 2005, and other financial
      information provided to Lender, fairly present in all material respects
      the financial condition, results of operations and cash flows of Borrower
      for the periods presented therein, subject to final audit review, and that
      there has been no material adverse change in Borrower's financial
      condition since December 31, 2004.

                  (e)   Incumbency Certificates of Borrower. Lender shall have
      received a certificate of the Secretary or an Assistant Secretary of
      Borrower, dated the Closing Date, as to the incumbency and signature of
      the officers of Borrower executing this Agreement, any certificate or
      other documents to be delivered by it pursuant hereto, together with
      evidence of the incumbency of such Secretary or Assistant Secretary;

                                      -48-
<PAGE>

                  (f)   Certificates. Lender shall have received a copy of the
      Certificate of Incorporation of Borrower, and all amendments thereto,
      certified by the Secretary of State or other appropriate official of its
      jurisdiction of incorporation together with copies of the By-Laws of
      Borrower certified as accurate and complete by the Secretary of Borrower;

                  (g)   Payoff Letter. Lender shall have received a payoff
      letter from GECC including an undertaking or authorization regarding the
      release and discharge of all collateral security and filing of UCC
      termination statements with respect to the credit facilities extended to
      Borrower by GECC, in form and substance satisfactory to Lender.

                  (h)   Good Standing Certificates. Lender shall have received
      good standing certificates for Borrower dated not more than thirty (30)
      days prior to the Closing Date, issued by the Secretary of State or other
      appropriate official of Borrower's jurisdiction of incorporation and each
      other jurisdiction set forth on SCHEDULE 5.2(a);

                  (i)   Legal Opinion. Lender shall have received the executed
      legal opinion of Clifford Chance US LLP in form and substance satisfactory
      to Lender which shall cover such matters incident to the transactions
      contemplated by this Agreement and the Other Documents as Lender may
      reasonably require and Borrower hereby authorizes and directs such counsel
      to deliver such opinions to Lender;

                  (j)   No Litigation. (i) No litigation, investigation or
      proceeding before or by any arbitrator or Governmental Body shall be
      continuing or threatened against Borrower or against the officers or
      directors of Borrower (A) in connection with this Agreement and/or the
      Other Documents or any of the transactions contemplated thereby and which,
      in the reasonable opinion of Lender, is deemed material or (B) which
      could, in the reasonable opinion of Lender, have a Material Adverse
      Effect; and (ii) no injunction, writ, restraining order or other order of
      any nature materially adverse to Borrower or the conduct of its business
      or inconsistent with the due consummation of the transactions contemplated
      hereunder shall have been issued by any Governmental Body;

                  (k)   Collateral Examination. Lender shall have completed
      Collateral examinations and received appraisals, the results of which
      shall be satisfactory in form and substance to Lender, of the Receivables
      and Inventory of Borrower and all books and records in connection
      therewith;

                  (l)   Fees. Lender shall have received all fees payable to
      Lender on or prior to the Closing Date pursuant to Article III and all
      costs and expenses payable to Lender under Section 14.9;

                  (m)   Other Documents. Lender shall have received each of the
      Other Documents, in form and substance satisfactory to Lender and duly
      executed by the parties thereto;

                  (n)   Insurance. Lender shall have received evidence of
      insurance and loss payee endorsements required hereunder in form and
      substance satisfactory to Lender,

                                      -49-
<PAGE>

      and certificates of insurance policies and/or endorsements naming Lender
      as lender loss payee or additional insured, as applicable;

                  (o)   Payment Instructions. Lender shall have received written
      instructions from Borrower directing the application of proceeds of the
      initial Advances made pursuant to this Agreement;

                  (p)   Blocked Accounts. Lender shall have received duly
      executed agreements establishing the Blocked Accounts with financial
      institutions acceptable to Lender for the collection of the Receivables
      and proceeds of the Collateral (which agreements may be in the form of
      amendments to prior agreement among Borrower, GECC and such financial
      institutions);

                  (q)   Cash Flow Projections. Lender shall have received a copy
      of the initial Cash Flow Projections, which shall be satisfactory in all
      respects to Lender;

                  (r)   Consents and Waivers. Lender shall have received, in
      form and substance satisfactory to Lender, all consents, waivers,
      acknowledgments and other agreements from which Lender may deem necessary
      or desirable in order to permit, protect and perfect its security
      interests in and liens upon the Collateral or to effectuate the provisions
      or purposes of this Agreement, including acknowledgments by lessors,
      mortgagees, warehousemen of Lender's security interests in the Collateral,
      waivers by such persons of any security interests, liens or other claims
      by such persons to the Collateral, and agreements permitting Lender access
      to, and the right to remain on, the premises to exercise its rights and
      remedies and otherwise deal with the Collateral; provided, however, that,
      that Borrower shall not be required to deliver waivers from its licensors;

                  (s)   Contract Review. Lender shall have reviewed all material
      contracts of Borrower including, without limitation, leases, license
      agreements and distributor agreements and such contracts and agreements
      shall be satisfactory in all respects to Lender;

                  (t)   Borrowing Base. Lender shall have received a duly
      executed Borrowing Base Certificate which shall indicate that the
      aggregate amount of Eligible Receivables is sufficient in value and amount
      to support Advances in the amount requested by Borrower on the Closing
      Date;

                  (u)   Other. All corporate and other proceedings, and all
      documents, instruments and other legal matters in connection with the
      transactions contemplated hereunder shall be satisfactory in form and
      substance to Lender and its counsel.

      8.2.  Conditions to Each Advance.

            The agreement of Lender to make any Advance requested to be made on
any date (including, without limitation, the initial Advance), is subject to the
satisfaction of the following conditions precedent as of the date such Advance
is made:

                                      -50-
<PAGE>

                  (a)   Representations and Warranties. Each of the
      representations and warranties made by Borrower in or pursuant to this
      Agreement and any related agreements to which it is a party, and each of
      the representations and warranties contained in any certificate, document
      or financial or other statement furnished at any time under or in
      connection with this Agreement or any related agreement shall be true and
      correct in all material respects on and as of such date as if made on and
      as of such date, except to the extent that such representation or warranty
      was made with respect to a specific date;

                  (b)   No Default. No Event of Default or Default shall have
      occurred and be continuing on such date, or would exist after giving
      effect to the Advances requested to be made, on such date; provided,
      however that Lender, in its sole discretion, may continue to make Advances
      notwithstanding the existence of an Event of Default or Default and that
      any Advances so made shall not be deemed a waiver of any such Event of
      Default or Default;

                  (c)   Maximum Revolving Advances. In the case of any Revolving
      Advances requested to be made, after giving effect thereto, the aggregate
      Revolving Advances shall not exceed the maximum amount of Revolving
      Advances permitted under Section 2.1; and

                  (d)   Maximum Letters of Credit. In the case of any Letters of
      Credit requested to be made, after giving effect thereto, the aggregate
      face amount and reimbursement obligations outstanding in respect of
      Letters of Credit shall not exceed the maximum amount permitted under
      Section 2.8.

Each request for an Advance by Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.

IX.   INFORMATION AS TO BORROWER.

      Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:

      9.1.  Disclosure of Material Matters.

            Promptly upon learning thereof, report to Lender all matters that
could reasonably be expected to have a material adverse affect on the value,
enforceability or collectibility of any material portion of the Collateral
including, without limitation, Borrower's reclamation or repossession of, or the
return to Borrower of, a material amount of goods or claims or disputes asserted
by any Customer or other obligor.

                                      -51-
<PAGE>

      9.2.  Borrowing Base; Schedules.

            (a)   Deliver to Lender on a weekly basis, daily sales journals,
credit memo journals and cash receipt journals, in each case, with supporting
documentation in such detail as Lender shall require.

            (b)   Deliver to Lender, on the third Business Day of each week (or
more frequently if required by Lender), a Borrowing Base Certificate (which
shall be calculated as of the last day of the immediately preceding week and
which shall not be binding upon Lender or restrictive of Lender's rights under
this Agreement).

            (c)   Deliver to Lender on or before the twentieth (20th) day of
each month as and for the prior month (i) an accounts receivable aging, (ii) an
accounts payable aging, (iii) an Inventory report, which shall include, when
applicable, a schedule of all Inventory that constitutes Eligible Inventory,
(iv) a schedule showing all Receivables that constitute Eligible Receivables,
(v) a report setting forth all royalty and license payments made during such
preceding month, and if applicable, listing the license agreements and
distribution agreements under which Borrower is then in default in the payment
of any license or royalty fee due thereunder. In addition, Borrower shall
deliver to Lender, upon Lender's request, at such intervals as Lender may
require: (i) confirmatory assignment schedules, (ii) copies of Customer's
invoices, (iii) evidence of shipment or delivery, and (iv) such further
schedules, documents and/or information regarding the Collateral as Lender may
require including, without limitation, trial balances and test verifications.
Lender shall have the right to confirm and verify all Receivables and Inventory
by any manner and through any medium it considers advisable and do whatever it
may deem reasonably necessary to protect its interests hereunder.

            (d)   The items to be provided under Sections 9.2(a) and 9.2(c) are
to be in form satisfactory to Lender and executed by Borrower and delivered to
Lender from time to time solely for Lender's convenience in maintaining records
of the Collateral, and Borrower's failure to deliver any of such items to Lender
shall not affect, terminate, modify or otherwise limit Lender's Lien with
respect to the Collateral.

      9.3.  Litigation.

            Promptly notify Lender in writing of any litigation, suit or
administrative proceeding affecting Borrower, whether or not the claim is
covered by insurance, and of any suit or administrative proceeding, which in any
such case could reasonably be expected to have a Material Adverse Effect.

      9.4.  Material Occurrences.

            Promptly notify Lender in writing upon the occurrence of (a) any
Event of Default or Default; (b) any event, development or circumstance whereby
any financial statements or other reports furnished to Lender fail in any
material respect to present fairly, and, if such financial statements or reports
were required to be in accordance with GAAP, in accordance with GAAP
consistently applied, the financial condition or operating results of Borrower
as of the date of such statements; (c) each and every default by Borrower which
could reasonably be expected to result in the acceleration of the maturity of
any Indebtedness, in an

                                      -52-
<PAGE>

individual principal amount exceeding $100,000 or in the aggregate principal
amount exceeding $250,000, including the names and addresses of the holders of
such Indebtedness with respect to which there is a default existing or with
respect to which the maturity has been or could be accelerated, and the amount
of such Indebtedness; and (d) any other development in the business or affairs
of Borrower which could reasonably be expected to have a Material Adverse
Effect; in each case describing the nature thereof and the action Borrower
propose to take with respect thereto.

      9.5.  Annual Financial Statements.

            Furnish Lender within ninety (90) days after the end of each fiscal
year of Borrower, financial statements of Borrower on a consolidated basis
including, but not limited to, statements of income and stockholders' equity and
cash flow from the beginning of the current fiscal year to the end of such
fiscal year and the balance sheet as at the end of such fiscal year, all
prepared in accordance with GAAP applied on a basis consistent with prior
practices, and in reasonable detail and reported upon without qualification by
an independent certified public accounting firm selected by Borrower and
satisfactory to Lender (the "Accountants"). In addition, the reports shall be
accompanied by a certificate of Borrower's Chief Financial Officer which shall
state that, based on an examination sufficient to permit him to make an informed
statement, no Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default, its nature, when it occurred,
whether it is continuing and the steps being taken by Borrower with respect to
such event, and such certificate shall have appended thereto calculations which
set forth Borrower's compliance with the requirements or restrictions imposed by
Sections 6.8, and 7.6.

      9.6.  Quarterly Financial Statements.

            Furnish Lender, within forty-five (45) days after the end of each
fiscal quarter, an unaudited balance sheet and unaudited statements of income
and stockholders' equity and cash flow of Borrower on a consolidated basis
reflecting results of operations from the beginning of the fiscal year to the
end of such quarter and for such quarter prepared on a basis consistent with
prior practices and complete and correct in all material respects, subject to
normal and recurring year end adjustments that individually and in the aggregate
are not material to the business of Borrower. Each such balance sheet, statement
of income and stockholders' equity and statement of cash flow shall set forth a
comparison of the figures for (x) the current fiscal period and the current
year-to-date with the figures for (y) the same fiscal period and year-to-date
period of the immediately preceding fiscal year. The financial statements shall
be accompanied by a certificate signed by the Chief Financial Officer of
Borrower, which shall state that, based on an examination sufficient to permit
him to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by Borrower
with respect to such default and, such certificate shall have appended thereto
calculations which set forth Borrower's compliance with the requirements or
restrictions imposed by Sections 6.8 and 7.6.

                                      -53-
<PAGE>

      9.7.  Monthly Financial Statements.

            Furnish Lender, within thirty (30) days after the end of each month,
an unaudited balance sheet and unaudited statements of income and stockholders'
equity and cash flow of Borrower on a consolidated basis reflecting results of
operations from the beginning of the fiscal year to the end of such month and
for such month, prepared on a basis consistent with prior practices and complete
and correct in all material respects, subject to normal and recurring year end
adjustments that individually and in the aggregate are not material to the
business of Borrower. Each such balance sheet, statement of income and
stockholders' equity and statement of cash flow shall set forth a comparison of
the figures for (x) the current fiscal period and the current year-to-date with
the figures for (y) the same fiscal period and year-to-date period of the
immediately preceding fiscal year. The financial statements shall be accompanied
by a certificate of Borrower's Chief Financial Officer, which shall state that,
based on an examination sufficient to permit him to make an informed statement,
no Default or Event of Default exists, or, if such is not the case, specifying
such Default or Event of Default, its nature, when it occurred, whether it is
continuing and the steps being taken by Borrower with respect to such event.

      9.8.  SEC Reports; Press Releases.

            Furnish Lender, promptly after the sending, filing or issuing
thereof, copies of (i) all statements, reports and other information Borrower
sends to any holders of its securities or files with the Commission, and (ii)
press releases made available to the public.

      9.9.  Additional Information.

            Furnish Lender with such additional information as Lender shall
reasonably request in order to enable Lender to determine whether the terms,
covenants, provisions and conditions of this Agreement and the Other Documents
have been complied with by Borrower including, without limitation and without
the necessity of any request by Lender, (a) at least thirty (30) days prior
thereto, notice of Borrower's opening of any new office or place of business or
Borrower's closing of any existing office or place of business, and (b) promptly
upon Borrower's learning thereof, notice of any labor dispute to which Borrower
may become a party.

      9.10. Notice of Suits, Adverse Events.

            Furnish Lender with prompt notice of (i) any lapse or other
termination of any Consent issued to Borrower by any Governmental Body or any
other Person that is material to the operation of Borrower's business, (ii) any
refusal by any Governmental Body or any other Person to renew or extend any such
Consent; and (iii) copies of any periodic or special reports filed by Borrower
with any Governmental Body or Person, if such reports indicate any material
change in the business, operations, affairs or condition of Borrower, or if
copies thereof are requested by Lender, and (iv) copies of any material notices
and other communications from any Governmental Body or Person which specifically
relate to Borrower.

      9.11. ERISA Notices and Requests.

            Furnish Lender with immediate written notice in the event that (i)
Borrower or any member of the Controlled Group knows or has reason to know that
a Termination Event has

                                      -54-
<PAGE>

occurred, together with a written statement describing such Termination Event
and the action, if any, which Borrower or member of the Controlled Group has
taken, is taking, or proposes to take with respect thereto and, when known, any
action taken or threatened by the Internal Revenue Service, Department of Labor
or PBGC with respect thereto, (ii) Borrower or any member of the Controlled
Group knows or has reason to know that a non-exempt prohibited transaction (as
defined in Sections 406 of ERISA and 4975 of the Code) that is reasonably likely
to have a Material Adverse Effect has occurred together with a written statement
describing such transaction and the action which Borrower or any member of the
Controlled Group has taken, is taking or proposes to take with respect thereto,
(iii) a funding waiver request has been filed with respect to any Plan together
with all communications received by Borrower or any member of the Controlled
Group with respect to such request, (iv) any substantial increase in the
benefits of any existing Plan or the establishment of any new Plan providing
substantial benefits or the commencement of substantial contributions to any
Plan to which Borrower or any member of the Controlled Group was not previously
contributing shall occur, (v) Borrower or any member of the Controlled Group
shall receive from the PBGC a notice of intention to terminate a Plan or to have
a trustee appointed to administer a Plan, together with copies of each such
notice, (vi) Borrower or any member of the Controlled Group shall receive any
unfavorable determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Code, together with copies
of each such letter; (vii) Borrower or any member of the Controlled Group shall
receive a notice regarding the imposition of withdrawal liability, together with
copies of each such notice; (viii) Borrower or any member of the Controlled
Group shall fail to make a required installment or any other required payment
under Section 412 of the Code on or before the due date for such installment or
payment or (ix) Borrower knows or has reason to know it may become liable for
any liability with respect to any pension or welfare plan maintained by any
Person outside the United States that is reasonably likely to have a Material
Adverse Effect.

      9.12. Additional Documents.

            Execute and deliver to Lender, upon request, such documents and
agreements as Lender may, from time to time, reasonably request to carry out the
purposes, terms or conditions of this Agreement.

X.    EVENTS OF DEFAULT.

      The occurrence of any one or more of the following events shall constitute
an "Event of Default":

            10.1. Failure by Borrower to pay any principal or interest on the
      Obligations when due, whether at maturity or by reason of acceleration
      pursuant to the terms of this Agreement or by notice of intention to
      prepay, or by required prepayment or failure to pay any other liabilities
      or make any other payment, fee or charge provided for herein when due or
      in any Other Document;

            10.2. (i) Failure by Borrower to perform, keep or observe any
      provision of Sections 4.2, 4.3, 4.5, 4.6, 4.10, 4.11, 4.15(h), 6.8,
      Article VII or (ii) any representation or

                                      -55-
<PAGE>

      warranty made or deemed made by Borrower in this Agreement or any related
      agreement or in any certificate, document or financial or other statement
      furnished at any time in connection herewith or therewith shall prove to
      have been misleading in any material respect on the date when made or
      deemed to have been made;

            10.3. Failure by Borrower to (i) furnish financial information when
      due or requested, or (ii) permit the inspection of its books or records as
      set forth in Section 4.10;

            10.4. Issuance of a notice of Lien (other than a Permitted
      Encumbrance), levy, assessment, injunction or attachment against a
      material portion of Borrower's property which is not stayed or lifted
      within thirty (30) days;

            10.5. Failure or neglect of Borrower to perform, keep or observe any
      term, provision, condition, covenant herein contained (other than those
      described in Section 10.1, 10.2 or 10.3), or contained in any Other
      Document, now or hereafter entered into between Borrower and Lender (to
      the extent such breach is not otherwise embodied in any other provision of
      this Article X for which a different grace or cure period is specified or
      which constitute an immediate Event of Default under this Agreement or the
      Other Documents), which is not cured within twenty (20) Business Days
      after the notice thereof from Lender;

            10.6. Any judgment or judgments are rendered or judgment liens filed
      against Borrower for an aggregate amount in excess of $250,000 which
      within thirty (30) days of such rendering or filing is not either
      satisfied, stayed or discharged of record;

            10.7. Borrower shall (i) apply for, consent to or suffer the
      appointment of, or the taking of possession by, a receiver, custodian,
      trustee, liquidator or similar fiduciary of itself or of all or a
      substantial part of its property, (ii) make a general assignment for the
      benefit of creditors, (iii) commence a voluntary case under any state or
      federal bankruptcy laws (as now or hereafter in effect), (iv) be
      adjudicated a bankrupt or insolvent, (v) file a petition seeking to take
      advantage of any other law providing for the relief of debtors, (vi)
      acquiesce to, or fail to have dismissed, within thirty (30) days, any
      petition filed against it in any involuntary case under such bankruptcy
      laws, or (vii) take any action for the purpose of effecting any of the
      foregoing;

            10.8. Borrower shall admit in writing its inability, or be generally
      unable, to pay its debts as they become due or cease operations of its
      present business;

            10.9. Any change in Borrower's condition or affairs (financial or
      otherwise) which in Lender's opinion has a Material Adverse Effect;

            10.10. Any Lien created hereunder or provided for hereby or under
      any Other Document in any Eligible Inventory, Eligible Receivable (to the
      extent supporting Revolving Advances under Section 2.1(a)(y)) or material
      portion of the Collateral for any reason ceases to be or is not a valid
      and perfected Lien having a first priority interest (subject to Permitted
      Encumbrances);

                                      -56-
<PAGE>

            10.11. A default of the obligations of Borrower under any other
      agreement to which it is a party, shall occur which materially and
      adversely affects the condition, affairs or prospects (financial or
      otherwise) of Borrower, which default is not cured within any applicable
      grace period;

            10.12. Any Change of Control shall occur;

            10.13. Any material provision of this Agreement shall, for any
      reason, cease to be valid and binding on Borrower or Borrower shall so
      claim in writing to Lender;

            10.14. (i) Any Governmental Body shall (A) revoke, terminate,
      suspend or adversely modify any license, permit, patent trademark or
      tradename of Borrower, the continuation of which is material to the
      continuation of the business of Borrower, or (B) commence proceedings to
      suspend, revoke, terminate or adversely modify any such license, permit,
      trademark, tradename or patent and such proceedings shall not be dismissed
      or discharged within sixty (60) days, or (c) schedule or conduct a hearing
      on the renewal of any license, permit, trademark, tradename or patent
      necessary for the continuation of Borrower's business and the staff of
      such Governmental Body issues a report recommending the termination,
      revocation, suspension or material, adverse modification of such license,
      permit, trademark, tradename or patent; (ii) any agreement which is
      necessary or material to the operation of the business of Borrower shall
      be revoked or terminated and not replaced by a substitute acceptable to
      Lender within thirty (30) days after the date of such revocation or
      termination, and such revocation or termination and non-replacement would
      reasonably be expected to have a Material Adverse Effect;

            10.15. Any Eligible Inventory, Eligible Receivable (to the extent
      supporting Revolving Advances under Section 2.1(a)(y)) or material portion
      of the Collateral of the Collateral shall be seized or taken by a
      Governmental Body, or Borrower or the title and rights of Borrower in any
      material portion of the Collateral shall have become the subject matter of
      litigation which might, in the opinion of Lender, upon final
      determination, result in impairment or loss of the security provided by
      this Agreement or the Other Documents;

            10.16. An event or condition specified in Section 7.16 or Section
      9.11 shall occur or exist with respect to any Plan and, as a result of
      such event or condition, together with all other such events or
      conditions, Borrower or any member of the Controlled Group shall incur, or
      in the opinion of Lender be reasonably likely to incur, a liability to a
      Plan or the PBGC (or both) which, in the reasonable judgment of Lender,
      would have a Material Adverse Effect.

XI.   LENDER'S RIGHTS AND REMEDIES AFTER DEFAULT.

      11.1. Rights and Remedies.

            Upon the occurrence of (i) an Event of Default pursuant to Section
X.10.7, all Obligations shall be immediately due and payable and this Agreement
and the obligation of

                                      -57-
<PAGE>

Lender to make Advances shall be deemed terminated; and, (ii) any of the other
Events of Default and at any time thereafter (such default not having previously
been cured), at the option of Lender all Obligations shall be immediately due
and payable and Lender shall have the right to terminate this Agreement and to
terminate the obligation of Lender to make Advances and (iii) a filing of a
petition against Borrower in any involuntary case under any state or federal
bankruptcy laws, the obligation of Lender to make Advances hereunder shall be
terminated other than as may be required by an appropriate order of the
bankruptcy court having jurisdiction over Borrower. Upon the occurrence of any
Event of Default, Lender shall have the right to exercise any and all other
rights and remedies provided for herein, under the UCC and at law or equity
generally, including, without limitation, the right to foreclose the security
interests granted herein and to realize upon any Collateral by any available
judicial procedure and/or to take possession of and sell any or all of the
Collateral with or without judicial process. Lender may enter Borrower's
premises or other premises without legal process and without incurring liability
to Borrower therefor, and Lender may thereupon, or at any time thereafter, in
its discretion without notice or demand, take the Collateral and remove the same
to such place as Lender may deem advisable and Lender may require Borrower to
make the Collateral available to Lender at a convenient place. With or without
having the Collateral at the time or place of sale, Lender may sell the
Collateral, or any part thereof, at public or private sale, at any time or
place, in one or more sales, at such price or prices, and upon such terms,
either for cash, credit or future delivery, as Lender may elect. Except as to
that part of the Collateral which is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Lender shall
give Borrower reasonable notification of such sale or sales, it being agreed
that in all events written notice mailed to Borrower at least ten (10) days
prior to such sale or sales is reasonable notification. At any public sale
Lender may bid for and become the purchaser, and Lender or any other purchaser
at any such sale thereafter shall hold the Collateral sold absolutely free from
any claim or right of whatsoever kind, including any equity of redemption and
such right and equity are hereby expressly waived and released by Borrower, to
the extent permitted by law. Lender may specifically disclaim any warranties of
title or the like at any sale of Collateral. In connection with the exercise of
the foregoing remedies, Lender is granted permission to use all of Borrower's
trademarks, trade styles, trade names, patents, patent applications, licenses,
franchises and other proprietary rights which are used in connection with (a)
Inventory for the purpose of disposing of such Inventory and (b) Equipment for
the purpose of completing the manufacture of unfinished goods.

      11.2. Application of Proceeds.

            The proceeds realized from the sale of any Collateral shall be
applied as follows: first, to the reasonable costs, expenses and attorneys' fees
and expenses incurred by Lender for collection and for acquisition, completion,
protection, removal, storage, sale and delivery of the Collateral; second, to
interest due upon any of the Obligations; third, to fees payable in connection
with this Agreement; fourth, to furnish to Lender cash collateral in an amount
not less than 105% of the aggregate undrawn amount of all Letters of Credit,
such cash collateral arrangements to be in form and substance satisfactory to
Lender; and, fifth, to the principal of the Obligations. If any deficiency shall
arise, Borrower shall remain liable to Lender therefor. If it is determined by
an authority of competent jurisdiction that a disposition by Lender did not
occur in a commercially reasonably manner, Lender may obtain a deficiency
judgment for the difference between the amount of the Obligation and the amount
that a commercially reasonable

                                      -58-
<PAGE>

sale would have yielded. Lender will not be considered to have offered to retain
the Collateral in satisfaction of the Obligations unless Lender has entered into
a written agreement with Borrower to that effect.

      11.3. Lender's Discretion.

            Lender shall have the right in its sole discretion to determine
which rights, Liens, security interests or remedies Lender may at any time
pursue, relinquish, subordinate, or modify or to take any other action with
respect thereto and such determination will not in any way modify or affect any
of Lender's rights hereunder.

      11.4. Setoff.

            In addition to any other rights which Lender or any Issuer may have
under applicable law, upon the occurrence of an Event of Default hereunder,
Lender and such Issuer shall have a right to apply Borrower's property held by
Lender or such Issuer to reduce the Obligations.

      11.5. Rights and Remedies Not Exclusive.

            The enumeration of the foregoing rights and remedies is not intended
to be exhaustive and the exercise of any right or remedy shall not preclude the
exercise of any other right or remedies provided for herein or otherwise
provided by law, all of which shall be cumulative and not alternative.

XII.  WAIVERS AND JUDICIAL PROCEEDINGS.

      12.1. Waiver of Notice.

            Borrower hereby waives notice of non-payment of any of the
Receivables, demand, presentment, protest and notice thereof with respect to any
and all instruments, notice of acceptance hereof, notice of loans or advances
made, credit extended, Collateral received or delivered, or any other action
taken in reliance hereon, and all other demands and notices of any description,
except such as are expressly provided for herein.

      12.2. Delay.

            No delay or omission on Lender's part in exercising any right,
remedy or option shall operate as a waiver of such or any other right, remedy or
option or of any default.

      12.3. Jury Waiver.

            EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER
THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL

                                      -59-
<PAGE>

TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND
THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

      12.4. Lender's Right to Arbitrate.

            (a)   BORROWER AGREES THAT ANY ACTION, DISPUTE, PROCEEDING, CLAIM OR
CONTROVERSY BETWEEN OR AMONG THE PARTIES WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE ("DISPUTE" OR "DISPUTES") SHALL, AT LENDER'S ELECTION, WHICH ELECTION
MAY BE MADE AT ANY TIME PRIOR TO THE COMMENCEMENT OF A JUDICIAL PROCEEDING BY
LENDER, OR IN THE EVENT OF A JUDICIAL PROCEEDING INSTITUTED BY BORROWER AT ANY
TIME PRIOR TO THE LAST DAY TO ANSWER AND/OR RESPOND TO A SUMMONS AND/OR
COMPLAINT MADE BY BORROWER, BE RESOLVED BY ARBITRATION IN NEW YORK, NEW YORK IN
ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 12.4 AND SHALL, AT THE ELECTION
OF LENDER, INCLUDE ALL DISPUTES ARISING OUT OF OR IN CONNECTION WITH (I) THIS
AGREEMENT, THE NOTE, ANY OTHER DOCUMENT OR ANY RELATED AGREEMENTS OR
INSTRUMENTS, (II) ALL PAST, PRESENT AND FUTURE AGREEMENTS INVOLVING THE PARTIES,
(III) ANY TRANSACTION CONTEMPLATED HEREBY AND ALL PAST, PRESENT AND FUTURE
TRANSACTIONS INVOLVING THE PARTIES, AND (IV) ANY ASPECT OF THE PAST, PRESENT OR
FUTURE RELATIONSHIP OF THE PARTIES. LENDER MAY ELECT TO REQUIRE ARBITRATION OF
ANY DISPUTE WITH BORROWER WITHOUT THEREBY BEING REQUIRED TO ARBITRATE ALL
DISPUTES BETWEEN LENDER AND BORROWER. ANY SUCH DISPUTE SHALL BE RESOLVED BY
BINDING ARBITRATION IN ACCORDANCE WITH ARTICLE 75 OF THE NEW YORK CIVIL PRACTICE
LAW AND RULES AND THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION
ASSOCIATION ("AAA"). In the event of any inconsistency between such Rules and
these arbitration provisions, these provisions shall supersede such Rules. All
statutes of limitations which would otherwise be applicable shall apply to any
arbitration proceeding under this Section 12.4(a). In any arbitration proceeding
subject to these provisions, the arbitration panel (the "arbitrator") is
specifically empowered to decide (by documents only, or with a hearing, at the
arbitrator's sole discretion) pre-hearing motions which are substantially
similar to pre-hearing motions to dismiss and motions for summary adjudication.
In any such arbitration proceeding, the arbitrator shall not have the power or
authority to award punitive damages to any party. Judgment upon the award
rendered may be entered in any court having jurisdiction. Whenever an
arbitration is required, the parties shall select an arbitrator in the manner
provided in Section 12.4(d).

                                      -60-
<PAGE>

            (b)   No provision of, nor the exercise of any rights under, Section
12.4(a) shall limit the right of any party (i) to foreclose against any real or
personal property collateral through judicial foreclosure, by the exercise of a
power of sale under a deed of trust, mortgage or other security agreement or
instrument, pursuant to applicable provisions of the UCC, or otherwise pursuant
to applicable law, (ii) to exercise self help remedies including but not limited
to setoff and repossession, or (iii) to request and obtain from a court having
jurisdiction before, during or after the pendency of any arbitration,
provisional or ancillary remedies and relief including but not limited to
injunctive or mandatory relief or the appointment of a receiver. The institution
and maintenance of an action or judicial proceeding for, or pursuit of,
provisional or ancillary remedies or exercise of self help remedies shall not
constitute a waiver of the right of Lender, even if Lender is the plaintiff, to
submit the Dispute to arbitration if Lender would otherwise have such right.

            (c)   Lender may require arbitration of any Dispute concerning the
lawfulness, unconscionableness, propriety, or reasonableness of any exercise by
Lender of its right to take or dispose of any collateral or its exercise of any
other right in connection with collateral including, without limitation,
judicial foreclosure, exercising a power of sale under a deed of trust or
mortgage, obtaining or executing a writ of attachment, taking or disposing of
property with or without judicial process pursuant to Article 9 of the UCC or
otherwise as permitted by applicable law, notwithstanding any such exercise by
Lender.

            (d)   Whenever an arbitration is required under Section 12.4(a), the
arbitrator shall be selected, except as otherwise herein provided, in accordance
with the Commercial Arbitration Rules of the AAA. A single arbitrator shall
decide any claim of $100,000 or less and he or she shall be an attorney with at
least five years' experience. Where the claim of any party exceeds $100,000, the
Dispute shall be decided by a majority vote of three arbitrators, at least two
of whom shall be attorneys (at least one of whom shall have not less than five
years' experience representing commercial banks). The arbitrator shall have the
power to award recovery of all costs and fees (including attorneys' fees,
administrative fees, arbitrator's fees, and court costs) to the prevailing
party.

            (e)   In the event of any Dispute governed by this Section 12.4,
each of the parties shall, subject to the award of the arbitrator, pay an equal
share of the arbitrator's fees.

XIII. EFFECTIVE DATE AND TERMINATION.

      13.1. Term.

            This Agreement, which shall inure to the benefit of and shall be
binding upon the respective successors and permitted assigns of Borrower and
Lender, shall become effective on the date hereof and shall continue in full
force and effect until the earliest of (w) May 31, 2006, (x) the acceleration of
all Obligations pursuant to the terms of this Agreement, (y) the date specified
in a notice provided to Lender under Section 2.12(c), or (z) the date on which
this Agreement shall be terminated in accordance with the provisions hereof (the
"Termination Date").

                                      -61-
<PAGE>

      13.2. Termination.

            The termination of the Agreement shall not affect Lender's rights,
or any of the Obligations having their inception prior to the effective date of
such termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into, rights or interests created or Obligations
have been fully disposed of, concluded or liquidated. The security interests,
Liens and rights granted to Lender hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrower's Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of Borrower have been paid or performed in full after the
termination of this Agreement or Borrower has furnished Lender with an
indemnification satisfactory to Lender with respect thereto. Accordingly,
Borrower waives any rights which it may have under Section 9-513 of the UCC to
demand the filing of termination statements with respect to the Collateral, and
Lender shall not be required to send such termination statements to Borrower, or
to file them with any filing office, unless and until this Agreement shall have
been terminated in accordance with its terms and all Obligations paid in full in
immediately available funds. All representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof until all
Obligations are paid or performed in full.

XIV.  MISCELLANEOUS.

      14.1. Governing Law.

            This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applied to contracts to be performed wholly
within the State of New York. Subject to Lender's rights under Section 12.4, any
judicial proceeding brought by or against Borrower with respect to any of the
Obligations, this Agreement or any related agreement may be brought in any court
of competent jurisdiction in the State of New York, United States of America,
and, by execution and delivery of this Agreement, Borrower accepts for itself
and in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement.
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by registered mail (return
receipt requested) directed to Borrower at its address set forth in Section 14.6
and service so made shall be deemed completed five (5) days after the same shall
have been so deposited in the mails of the United States of America, or, at
Lender's option, by service upon Borrower which Borrower irrevocably appoints as
Borrower's Lender for the purpose of accepting service within the State of New
York. Nothing herein shall affect the right to serve process in any manner
permitted by law or shall limit the right of Lender to bring proceedings against
Borrower in the courts of any other jurisdiction. Borrower waives any objection
to jurisdiction and venue of any action instituted hereunder and shall not
assert any defense based on lack of jurisdiction or venue or based upon forum
non conveniens. Subject to Lender's rights under Section 12.4, any judicial
proceeding by Borrower against Lender involving, directly or indirectly, any
matter or claim in any way arising out of, related to or connected with this
Agreement or any related

                                      -62-
<PAGE>

agreement, shall be brought only in a federal or state court located in the City
of New York, State of New York.

      14.2. Entire Understanding; Amendments.

            This Agreement and the documents executed concurrently herewith
contain the entire understanding between Borrower and Lender and supersedes all
prior agreements and understandings, if any, relating to the subject matter
hereof. Any promises, representations, warranties or guarantees not herein
contained and hereinafter made shall have no force and effect unless in writing,
signed by Borrower's, Lender's and each Lender's respective officers. Neither
this Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or by
any course of dealing, or in any manner other than by an agreement in writing,
signed by the party to be charged. Borrower acknowledges that it has been
advised by counsel in connection with the execution of this Agreement and Other
Documents and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.

      14.3. Successors and Assigns; Participations; New Lenders.

            (a)   This Agreement shall be binding upon and inure to the benefit
of Borrower, Lender, all future holders of the Obligations and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations under this Agreement without the prior written consent
of Lender.

            (b)   Borrower acknowledges that in the regular course of commercial
finance business Lender may at any time and from time to time sell participating
interests in the Advances to other financial institutions (each such transferee
or purchaser of a participating interest, a "Transferee"). Any agreement or
instrument pursuant to which Lender sells such a participation shall provide
that Lender shall retain the sole right to enforce this Agreement and the Other
Documents and to approve any amendment, modification or waiver of any provision
of the Loan Documents.

            (c)   Lender may sell, assign or transfer all or any part of its
rights under this Agreement and the Other Documents to one or more additional
banks or financial institutions and one or more additional banks or financial
institutions may commit to make Advances hereunder (each a "Purchasing Lender"),
in minimum amounts of not less than $1,000,000, provided that so long as no
Default or Event of Default has occurred, such sale, assignment or transfer
shall not be made without the prior consent of Borrower, such consent not to be
unreasonably withheld or delayed.

            (d)   Borrower authorizes Lender to disclose to any Transferee or
Purchasing Lender and any prospective Transferee or Purchasing Lender any and
all financial information in Lender's possession concerning Borrower which has
been delivered to Lender by or on behalf of Borrower pursuant to this Agreement
or in connection with Lender's credit evaluation of Borrower, provided such
Transferee or Purchasing Lender and any prospective Transferee or Purchasing
Lender agrees in writing to be bound by the confidentiality provisions of this
Agreement.

                                      -63-
<PAGE>

      14.4. Application of Payments.

            Lender shall have the continuing and exclusive right to apply or
reverse and re-apply any payment and any and all proceeds of Collateral to any
portion of the Obligations; provided that so long as no Event of Default has
occurred and is continuing, such payments shall be first applied to Domestic
Rate Loans before being applied to Eurodollar Rate Loans. To the extent that
Borrower makes a payment or Lender receives any payment or proceeds of the
Collateral for Borrower's benefit, which are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver, custodian or any other party under any
bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Lender.

      14.5. Indemnity.

            Borrower shall indemnify Lender, each Issuer, and each of their
respective officers, directors, Affiliates, employees and agents from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, fees and disbursements of
counsel) which may be imposed on, incurred by, or asserted against Lender in any
litigation, proceeding or investigation instituted or conducted by any
governmental agency or instrumentality or any other Person with respect to any
aspect of, or any transaction contemplated by, or referred to in, or any matter
related to, this Agreement or the Other Documents, whether or not Lender is a
party thereto, except to the extent that any of the foregoing arises out of the
gross negligence or willful misconduct of the party being indemnified.

      14.6. Notice.

            Any notice or request hereunder may be given to Borrower or to
Lender at their respective addresses set forth below or at such other address as
may hereafter be specified in a notice designated as a notice of change of
address under this Section 14.6. Any notice or request hereunder shall be given
by (a) hand delivery, (b) overnight courier, (c) registered or certified mail,
return receipt requested, or (d) telecopy to the number set out below (or such
other number as may hereafter be specified in a notice designated as a notice of
change of address) with electronic confirmation of its receipt. Any notice or
other communication required or permitted pursuant to this Agreement shall be
deemed given (a) when personally delivered to any officer of the party to whom
it is addressed, (b) on the earlier of actual receipt thereof or three (3) days
following posting thereof by certified or registered mail, postage prepaid, or
(c) upon actual receipt thereof when sent by a recognized overnight delivery
service or (d) upon actual receipt thereof when sent by telecopier to the number
set forth below with electronic confirmation of its receipt, in each case
addressed to each party at its address set forth below or at such other address
as has been furnished in writing by a party to the other by like notice:

      (A)   If to Lender:            HSBC Business Credit (USA) Inc.
                                     452 Fifth Avenue
                                     New York, New York 10018
                                     Attention: Adam Moskowitz

                                      -64-
<PAGE>

                                     Telephone: (212) 525-2517
                                     Telecopier: (212) 525-2520

            with a copy to:          Kronish Lieb Weiner & Hellman LLP
                                     1114 Avenue of the Americas
                                     New York, New York 10036
                                     Attention: Steven K. Weinberg
                                     Telephone:  (212) 479-6240
                                     Telecopier: (212) 479-6275

      (B)   If to Borrower:          Atari, Inc.
                                     417 Fifth Avenue
                                     New York, New York 10016
                                     Attention: Diane Price Baker
                                     Telephone:  (212) 726-6500
                                     Telecopier: (212) 726-4239

            with a copy to:          Clifford Chance US LLP
                                     31 West 52nd Street
                                     New York, NY 10019-6131
                                     Attention: Alan M. Christenfeld
                                     Telephone:  (212) 878-8011
                                     Telecopier: (212) 878-8375

      14.7. Survival.

            The obligations of Borrower under Sections 2.2(g), 3.7, 3.9, and
14.5 shall survive termination of this Agreement and the Other Documents and
payment in full of the Obligations.

      14.8. Severability.

            If any part of this Agreement is contrary to, prohibited by, or
deemed invalid under applicable laws or regulations, such provision shall be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.

      14.9. Expenses.

            All costs and expenses including, without limitation:

                  (a)   reasonable attorneys' fees and disbursements incurred by
      Lender (i) in all efforts made to enforce payment of any Obligation or
      effect collection of any Collateral, or (ii) in connection with the
      negotiation, preparation and entering into, modification, amendment,
      administration and enforcement of this Agreement or any consents or
      waivers hereunder and all related agreements, documents and instruments,
      or (iii) in instituting, maintaining, preserving, enforcing and
      foreclosing on Lender's security interest in or Lien on any of the
      Collateral, whether through judicial proceedings

                                      -65-
<PAGE>

      or otherwise, (iv) in defending or prosecuting any actions or proceedings
      arising out of or relating to Lender's transactions with Borrower, (v) in
      connection with determining which Inventory constitutes Eligible Inventory
      and obtaining appropriate waivers from licensors and other Persons in
      connection therewith, or (vi) in connection with any advice given to
      Lender with respect to its rights and obligations under this Agreement and
      all related agreements; and

                  (b)   fees and disbursements incurred by Lender in connection
      with determining which Inventory constitutes Eligible Inventory, and
      appraisals of Inventory or other Collateral, field examinations,
      collateral analysis or monitoring or other business analysis conducted by
      outside Persons in connection with this Agreement and all related
      agreements;

may be charged to Borrower's Account and shall be part of the Obligations.

      14.10. Injunctive Relief.

            Borrower recognizes that, in the event Borrower fails to perform,
observe or discharge any of its obligations or liabilities under this Agreement,
any remedy at law may prove to be inadequate relief to Lender; therefore,
Lender, if Lender so requests, shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving that actual
damages are not an adequate remedy.

      14.11. Consequential Damages.

            None of Lender, Issuer, nor any agent or attorney for any of them,
shall be liable to Borrower for consequential damages arising from any breach of
contract, tort or other wrong relating to the establishment, administration or
collection of the Obligations.

      14.12. Captions.

            The captions at various places in this Agreement are intended for
convenience only and do not constitute and shall not be interpreted as part of
this Agreement.

      14.13. Counterparts; Telecopied Signatures.

            This Agreement may be executed in any number of and by different
parties hereto on separate counterparts, all of which, when so executed, shall
be deemed an original, but all such counterparts shall constitute one and the
same agreement. Any signature delivered by a party by facsimile transmission
shall be deemed to be an original signature hereto.

      14.14. Construction.

            The parties acknowledge that each party and its counsel have
reviewed this Agreement and that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any amendments, schedules or
exhibits thereto.

                                      -66-
<PAGE>

      14.15. Confidentiality.

            Lender shall hold all non-public information obtained by Lender
pursuant to the requirements of this Agreement in accordance with Lender's
customary procedures for handling confidential information of this nature;
provided, however, Lender may disclose such confidential information (i) to its
examiners, Affiliates, outside auditors, counsel and other professional
advisors, (ii) subject to an agreement in writing containing provisions
substantially the same as those of this Section, to any prospective Transferees
and Purchasing Lenders, and (iii) as required or requested by any Governmental
Body or representative thereof or pursuant to legal process; provided, further
that (x) unless specifically prohibited by applicable law or court order, Lender
shall use reasonable efforts prior to disclosure thereof, to notify Borrower of
the applicable request for disclosure of such non-public information (A) by a
Governmental Body or representative thereof (other than any such request in
connection with an examination of the financial condition of Lender by such
Governmental Body) or (B) pursuant to legal process and (y) in no event shall
Lender be obligated to return any materials furnished by Borrower other than
those documents and instruments in possession of Lender in order to perfect its
Lien on the Collateral once the Obligations have been paid in full and this
Agreement has been terminated.

      14.16. Publicity.

            Borrower hereby authorizes Lender to make appropriate announcements
of the financial arrangement entered into among Borrower and Lender including,
without limitation, announcements which are commonly known as tombstones, in
such publications and in such form as is approved in writing advance by
Borrower, such approval not to be unreasonably withheld or delayed.

                            [SIGNATURE PAGE FOLLOWS]

                                      -67-
<PAGE>

      Each of the parties has signed this Loan and Security Agreement as of the
day and year first above written.

                                                ATARI, INC.

                                                By: /s/ Diane P. Baker
                                                -------------------------------
                                                Name: Diane P. Baker
                                                Title: EVP & CFO

                                                HSBC BUSINESS CREDIT (USA) INC.

                                                By: /s/ Adam Moskowitz
                                                -------------------------------
                                                Name: Adam Moskowitz
                                                Title: First Vice President

                                      -68-

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