Document:

<PAGE>   1
                                                                   EXHIBIT 4.1.2

                          SEQUOIA MORTGAGE TRUST 200__,

                                     Issuer

                                       and

                       _________________________________,

                                     Trustee

                                    INDENTURE

                       Dated as of _____________ __, 200__

                                   Relating to

                          SEQUOIA MORTGAGE TRUST 200_-_

                          COLLATERALIZED MORTGAGE BONDS

<PAGE>   2
Cross-reference sheet showing the location in the indenture of the provisions
inserted pursuant to Sections 310 through 318(a) inclusive of the Trust
Indenture Act of 1939.

<TABLE>
                                                                                             PAGE
                                                                                             ----
<S>                                                                                       <C>
TIA...................................................................................Indenture Section

Section 310
         (a)  (1)............................................................................6.08
         (a)  (2)............................................................................6.09
         (a)  (3)............................................................................6.14(2)
         (a)  (4)........................................................................Not Applicable
         (a)  (5)............................................................................6.08
         (b)  ...............................................................................6.08
              ...............................................................................6.10
              ...............................................................................11.05
         (c)  ...........................................................................Not Applicable

Section 311
         (a)  ...............................................................................6.13
         (b)  ...............................................................................6.13

Section 312
         (a)  ...............................................................................7.01(a)
              ...............................................................................7.02(a)
         (b)  ...............................................................................7.02(b)
         (c)  ...............................................................................7.02(c)

Section 313
         (a)  ...............................................................................7.03(a)
         (b)  ...............................................................................7.03(a)
         (c)  ...............................................................................7.03(a)
              ...............................................................................11.05
         (d)  ...............................................................................7.03(b)

Section 314
         (a)  ...............................................................................7.04
              ...............................................................................11.05
              ...............................................................................3.10
         (b)  (1)............................................................................2.12(c)(viii)
         (b)  (2)............................................................................3.06
         (c)  (1)............................................................................2.12(d)
              ...............................................................................4.01
              ...............................................................................11.01
</TABLE>

                                       -i-
<PAGE>   3

<TABLE>
<CAPTION>
                                                                                             PAGE
                                                                                             ----
<S>                                                                                       <C>
         (c)  (2)............................................................................2.12(c)(ii)
              ...............................................................................4.01
              ...............................................................................11.01
         (c)  (3)............................................................................1.01
              ...............................................................................2.12(f)
         (d)  (1)............................................................................1.01
              ...............................................................................8.12
         (d)  (2)............................................................................1.01
                                                                                         Not Applicable
         (d)  (3)............................................................................1.01
              ...............................................................................2.12(f)
         (e)  ...............................................................................11.01

Section 315
         (a)  ...............................................................................6.01(b)
              ...............................................................................6.01(c)(1)
         (b)  ...............................................................................6.02
              ...............................................................................11.05
         (c)  ...............................................................................6.01(a)
         (d)  ...............................................................................6.01(c)
         (d)  (1)............................................................................6.01(b)
         (d)  (2)............................................................................6.01(c)(2)
         (d)  (3)............................................................................6.01(c)(3)
         (e)  ...............................................................................5.16

Section 316
         (a)  (1)      (A)...................................................................5.14
                       ......................................................................8.01
         (a)  (1)      (B)...................................................................5.02
                       ......................................................................5.15
         (a)  (2)      ..................................................................Not Applicable
         (b)  ...............................................................................5.10
         (c)  ...........................................................................Not Applicable

Section 317
         (a)  (1)............................................................................5.03
         (a)  (2)............................................................................5.06
         (b)  ...............................................................................3.03

Section 318
         (a)  ...............................................................................11.07
</TABLE>

                                      -ii-
<PAGE>   4
                                TABLE OF CONTENTS

                                     PARTIES

                              PRELIMINARY STATEMENT

                                 GRANTING CLAUSE

<TABLE>
<CAPTION>
                                    ARTICLE I

                                   DEFINITIONS

                                                                                                               PAGE
                                                                                                               ----
<S>                                                                                                           <C>
SECTION 1.01. General Definitions..........................................................................     I-1
"Accountant"...............................................................................................     I-1
"Accrual Date".............................................................................................     I-1
"Act"......................................................................................................     I-1
"Adjusted Net Mortgage Rate"...............................................................................     I-2
"Adjustment Date"..........................................................................................     I-2
"Advance"..................................................................................................     I-2
"Affiliate"................................................................................................     I-2
"Agent"....................................................................................................     I-2
"Appraised Value"..........................................................................................     I-2
"Assignments"..............................................................................................     I-2
"Authenticating Agent".....................................................................................     I-3
"Authorized Officer".......................................................................................     I-3
"Available Funds"..........................................................................................     I-4
"Bank".....................................................................................................     I-4
"Bankruptcy Code"..........................................................................................     I-4
"Beneficial Owner".........................................................................................     I-4
"Bond Account".............................................................................................     I-4
"Bond Distribution Amount".................................................................................     I-4
"Bond Payment Amount"......................................................................................     I-4
"Bondholder" or "Holder"...................................................................................     I-4
"Bond Insurance Policy"....................................................................................     I-4
"Bond Insurer".............................................................................................     I-5
"Bond Interest Rate".......................................................................................     I-5
"Bond Register" and "Bond Registrar".......................................................................     I-5
"Bonds"....................................................................................................     I-5
"Book Entry Bonds".........................................................................................     I-5
"Business Day".............................................................................................     I-5
"Certificate Interest Rate"................................................................................     I-5
"Class"....................................................................................................     I-5
"Class B-1 Interest Carryover Shortfall"...................................................................     I-5
"Class B-1 Interest Payment Amount"........................................................................     I-6
"Class B-1 Percentage".....................................................................................     I-6
"Class B-1 Principal Amount"...............................................................................     I-6
"Class B-1 Principal Carryover Shortfall"..................................................................     I-6
"Class B-1 Principal Payment Amount".......................................................................     I-6
"Class B-2 Bond Interest Rate".............................................................................     I-7
"Class B-2 Interest Carryover Shortfall"...................................................................     I-7
"Class B-2 Interest Payment Amount"........................................................................     I-7
"Class B-2 Percentage".....................................................................................     I-7
"Class B-2 Principal Amount"...............................................................................     I-8
</TABLE>

                                      -iii-
<PAGE>   5

<TABLE>
<S>                                                                                                           <C>
"Class B-2 Principal Carryover Shortfall"..................................................................     I-8
"Class B-2 Principal Payment Amount".......................................................................     I-8
"Class Interest Shortfall".................................................................................     I-8
"Class Principal Amount"...................................................................................     I-9
"Closing Date".............................................................................................     I-9
"Code".....................................................................................................     I-9
"Combined Prepayment Percentage"...........................................................................     I-9
"Commission"...............................................................................................     I-9
"Controlling Class"........................................................................................     I-9
"Cooperative Loan".........................................................................................     I-9
"Cooperative Shares".......................................................................................     I-9
"Corporate Trust Office"...................................................................................     I-9
"Cut-Off Date".............................................................................................     I-9
"Debt Service Reduction"...................................................................................     I-9
"Default"..................................................................................................    I-10
"Defaulted Pledged Mortgage"...............................................................................    I-10
"Deficient Valuation"......................................................................................    I-10
"Definitive Bonds".........................................................................................    I-10
"Deleted Pledged Mortgage".................................................................................    I-10
"Denomination".............................................................................................    I-10
"Depositor"................................................................................................    I-10
"Depository"...............................................................................................    I-10
"Depository Participants"..................................................................................    I-10
"Deposit Trust Agreement"..................................................................................    I-10
"Determination Date".......................................................................................    I-11
"Distribution Account".....................................................................................    I-11
"Distribution Account Deposit Date"........................................................................    I-11
"Due Date".................................................................................................    I-11
"Eligible Account".........................................................................................    I-11
"Escrow Account"...........................................................................................    I-12
"Event of Default".........................................................................................    I-12
"Expense Rate".............................................................................................    I-12
"FDIC".....................................................................................................    I-12
"FHLMC"....................................................................................................    I-12
"FIRREA"...................................................................................................    I-12
"Fitch"....................................................................................................    I-12
"FNMA".....................................................................................................    I-13
"Grant"....................................................................................................    I-13
"Highest Lawful Rate"......................................................................................    I-13
"Holder"...................................................................................................    I-13
"Indenture" or "this Indenture"............................................................................    I-13
"Independent"..............................................................................................    I-14
"Index"....................................................................................................    I-14
</TABLE>

                                      -iv-
<PAGE>   6

<TABLE>
<S>                                                                                                           <C>
"Indirect Participant".....................................................................................    I-14
"Individual Bond"..........................................................................................    I-14
"Insurance Policy".........................................................................................    I-14
"Insurance Proceeds".......................................................................................    I-15
"Insured Expenses".........................................................................................    I-15
"Interest Accrual Period"..................................................................................    I-15
"Interest Conversion Date".................................................................................    I-15
"Interest Payment Amount"..................................................................................    I-15
"Invested Amount"..........................................................................................    I-15
"Investor Certificate".....................................................................................    I-15
"Investor Percentage"......................................................................................    I-15
"Investor Prepayment Percentage"...........................................................................    I-15
"Issuer"...................................................................................................    I-15
"Issuer Order" and "Issuer Request"........................................................................    I-16
"Letter Agreement".........................................................................................    I-16
"Liquidated Pledged Mortgage"..............................................................................    I-16
"Liquidation Proceeds".....................................................................................    I-16
"Loan-to-Value Ratio"......................................................................................    I-16
"Margin"...................................................................................................    I-16
"Master Servicer"..........................................................................................    I-16
"Master Servicing Agreement"...............................................................................    I-17
"Master Servicing Fee".....................................................................................    I-17
"Master Servicing Fee Rate"................................................................................    I-17
"Maturity".................................................................................................    I-17
"Maximum Rate".............................................................................................    I-17
"Moody's"..................................................................................................    I-17
"Mortgage".................................................................................................    I-17
"Mortgage Documents".......................................................................................    I-18
"Mortgage Note"............................................................................................    I-18
"Mortgage Rate"............................................................................................    I-18
"Mortgaged Property".......................................................................................    I-18
"Mortgagor"................................................................................................    I-18
"Net Mortgage Rate"........................................................................................    I-18
"Net Interest Shortfalls"..................................................................................    I-18
"Nonrecoverable Advance"...................................................................................    I-18
"Officers' Certificate"....................................................................................    I-19
"Officer's Certificate of the Master Servicer".............................................................    I-19
"Operative Agreements".....................................................................................    I-19
"Opinion of Counsel".......................................................................................    I-19
"Optional Redemption Date".................................................................................    I-19
"Optional Redemption Record Date"..........................................................................    I-19
"Original Class B-1 Principal Amount"......................................................................    I-19
"Original Class B-2 Principal Amount"......................................................................    I-19
"Original Invested Amount".................................................................................    I-19
</TABLE>

                                       -v-
<PAGE>   7

<TABLE>
<S>                                                                                                           <C>
"Original Pledged Mortgages"...............................................................................    I-19
"Original Senior Class Principal Amount"...................................................................    I-19
"Original Subordination Amount"............................................................................    I-19
"OTS"......................................................................................................    I-20
"Outstanding"..............................................................................................    I-20
"Outstanding Pledged Mortgage".............................................................................    I-21
"Owner"....................................................................................................    I-21
"Owner Trustee"............................................................................................    I-21
"Paying Agent".............................................................................................    I-21
"Payment Date".............................................................................................    I-21
"Payment Date Statement"...................................................................................    I-21
"Periodic Rate Cap"........................................................................................    I-21
"Permitted Encumbrance"....................................................................................    I-21
"Permitted Investments"....................................................................................    I-22
"Person"...................................................................................................    I-25
"Pledged Accounts".........................................................................................    I-25
"Pledged Mortgage Schedule"................................................................................    I-25
"Pledged Mortgages"........................................................................................    I-25
"Pool Stated Principal Balance"............................................................................    I-25
"Predecessor Bonds"........................................................................................    I-25
"Prepayment Interest Shortfall"............................................................................    I-25
"Prepayment Period"........................................................................................    I-26
"Primary Mortgage Insurance Policy"........................................................................    I-26
"Principal Prepayment".....................................................................................    I-26
"Principal Prepayment in Full".............................................................................    I-26
"Proceeding"...............................................................................................    I-26
"Proprietary Lease"........................................................................................    I-26
"Prospectus Supplement"....................................................................................    I-26
"Purchase Price"...........................................................................................    I-26
"Rating Agency"............................................................................................    I-26
"Realized Loss"............................................................................................    I-27
"Record Date"..............................................................................................    I-27
"Redemption Date"..........................................................................................    I-27
"Redemption Price".........................................................................................    I-28
"Refinancing Pledged Mortgage".............................................................................    I-28
"Relief Act"...............................................................................................    I-28
"Relief Act Reductions"....................................................................................    I-28
"REO Property".............................................................................................    I-28
"Replacement Pledged Mortgage".............................................................................    I-28
"Request for Release"......................................................................................    I-29
"Responsible Officer"......................................................................................    I-29
"S&P"......................................................................................................    I-29
"SAIF".....................................................................................................    I-29
"Sale".....................................................................................................    I-29
</TABLE>

                                      -vi-
<PAGE>   8

<TABLE>
<S>                                                                                                           <C>
"Scheduled Payment"........................................................................................    I-29
"Securities Act"...........................................................................................    I-30
"Seller/Servicer Guide"....................................................................................    I-30
"Senior Bond Interest Rate"................................................................................    I-30
"Senior Bonds".............................................................................................    I-30
"Senior Class Principal Amount"............................................................................    I-30
"Senior Interest Payment Amount"...........................................................................    I-30
"Senior Interest Shortfall"................................................................................    I-30
"Senior Percentage"........................................................................................    I-30
"Senior Principal Payment Amount"..........................................................................    I-30
"Servicer".................................................................................................    I-31
"Servicer Advance".........................................................................................    I-31
"Servicing Advances".......................................................................................    I-31
"Servicing Agreement"......................................................................................    I-31
"Servicing Default"........................................................................................    I-31
"Servicing Fee"............................................................................................    I-32
"Servicing Fee Rate".......................................................................................    I-32
"Servicing Officer"........................................................................................    I-32
"Stated Maturity"..........................................................................................    I-32
"Stated Principal Balance".................................................................................    I-32
"Subordinated Bond Interest Rate"..........................................................................    I-32
"Subordinated Bonds".......................................................................................    I-32
"Substitution Adjustment Amount"...........................................................................    I-32
"Successor Master Servicer"................................................................................    I-33
"Trust Estate".............................................................................................    I-33
"Trust Indenture Act" or "TIA".............................................................................    I-33
"Trustee"..................................................................................................    I-33
"Trustee Fee"..............................................................................................    I-33
"Trustee Fee Rate".........................................................................................    I-33
"Trustee Mortgage File"....................................................................................    I-33
"Withdrawal Date"..........................................................................................    I-33
</TABLE>

<TABLE>
<S>             <C>                                                                 <C>
                                        ARTICLE II

                                         THE BONDS

SECTION 2.01.   Forms Generally.................................................    II-1
SECTION 2.02.   Forms of Bonds and Certificate of Authentication................    II-1
SECTION 2.03.   Bonds Issuable in Classes; Provisions with Respect
                to Principal and Interest Payments..............................    II-2
SECTION 2.04.   Denominations...................................................    II-5
SECTION 2.05.   Execution, Authentication, Delivery and Dating..................    II-5
SECTION 2.06.   Temporary Bonds.................................................    II-6
SECTION 2.07.   Registration, Registration of Transfer and Exchange.............    II-6
</TABLE>

                                      -vii-
<PAGE>   9

<TABLE>
<S>             <C>                                                                 <C>
SECTION 2.08.   Mutilated, Destroyed, Lost or Stolen Bonds......................    II-7
SECTION 2.09.   Payments of Principal and Interest..............................    II-8
SECTION 2.10.   Persons Deemed Owners...........................................    II-10
SECTION 2.11.   Cancellation....................................................    II-10
SECTION 2.12.   Authentication and Delivery of Bonds............................    II-10
SECTION 2.13.   Matters Relating to Book Entry Bonds............................    II-15
SECTION 2.14.   Termination of Book Entry System................................    II-16
SECTION 2.15.   Additional Bonds................................................    II-17

                                        ARTICLE III

                                         COVENANTS

SECTION 3.01.   Payment of Bonds................................................    III-1
SECTION 3.02.   Maintenance of Office or Agency.................................    III-1
SECTION 3.03.   Money for Bond Payments to Be Held in Trust.....................    III-1
SECTION 3.04.   Corporate Existence of Owner Trustee............................    III-4
SECTION 3.05.   Protection of Trust Estate......................................    III-4
SECTION 3.06.   Opinions as to Trust Estate.....................................    III-6
SECTION 3.07.   Performance of Obligations; Master Servicing Agreement..........    III-6
SECTION 3.08.   Investment Company Act..........................................    III-7
SECTION 3.09.   Negative Covenants..............................................    III-7
SECTION 3.10.   Annual Statement as to Compliance...............................    III-9
SECTION 3.11.   Recording of Assignments........................................    III-9
SECTION 3.12.   Limitation of Liability of......................................    III-9

                                         ARTICLE IV

                                SATISFACTION AND DISCHARGE

SECTION 4.01.   Satisfaction and Discharge of Indenture.........................    IV-1
SECTION 4.02.   Application of Trust Money......................................    IV-2

                                         ARTICLE V

                                   DEFAULTS AND REMEDIES

SECTION 5.01.   Event of Default................................................    V-1
SECTION 5.02.   Acceleration of Maturity; Rescission and Annulment..............    V-3
SECTION 5.03.   Collection of Indebtedness and Suits for Enforcement by
                Trustee.........................................................    V-4
SECTION 5.04.   Remedies........................................................    V-5
SECTION 5.05.   [Reserved]......................................................    V-5
</TABLE>

                                      -viii-
<PAGE>   10

<TABLE>
<S>             <C>                                                                 <C>
SECTION 5.06.   Trustee May File Proofs of Claim................................    V-7
SECTION 5.07.   Trustee May Enforce Claims without Possession of Bonds..........    V-8
SECTION 5.08.   Application of Money Collected..................................    V-8
SECTION 5.09.   Limitation on Suits.............................................    V-8
SECTION 5.10.   Unconditional Rights of Bondholders to Receive Principal and
                Interest........................................................    V-9
SECTION 5.11.   Restoration of Rights and Remedies..............................    V-10
SECTION 5.12.   Rights and Remedies Cumulative..................................    V-10
SECTION 5.13.   Delay or Omission Not Waiver....................................    V-10
SECTION 5.14.   Control by Bondholders..........................................    V-10
SECTION 5.15.   Waiver of Past Defaults.........................................    V-11
SECTION 5.16.   Undertaking for Costs...........................................    V-11
SECTION 5.17.   Waiver of Stay or Extension Laws................................    V-12
SECTION 5.18.   Sale of Trust Estate............................................    V-12
SECTION 5.19.   Action on Bonds.................................................    V-14

                                        ARTICLE VI

                                        THE TRUSTEE

SECTION 6.01.   Duties of Trustee...............................................    VI-1
SECTION 6.02.   Notice of Default...............................................    VI-2
SECTION 6.03.   Rights of Trustee...............................................    VI-3
SECTION 6.04.   Not Responsible for Recitals or Issuance of Bonds...............    VI-5
SECTION 6.05.   May Hold Bonds..................................................    VI-5
SECTION 6.06.   Money Held in Trust.............................................    VI-5
SECTION 6.07.   Compensation and Reimbursement..................................    VI-5
SECTION 6.08.   Eligibility; Disqualification...................................    VI-6
SECTION 6.09.   Trustee's Capital and Surplus...................................    VI-7
SECTION 6.10.   Resignation and Removal; Appointment of Successor...............    VI-7
SECTION 6.11.   Acceptance of Appointment by Successor..........................    VI-8
SECTION 6.12.   Merger, Conversion, Consolidation or Succession
                to Business of Trustee..........................................    VI-9
SECTION 6.13.   Preferential Collection of Claim Against Issuer.................    VI-9
SECTION 6.14.   Co-trustees and Separate Trustees...............................    VI-9
SECTION 6.15.   Authenticating Agents...........................................    VI-11
SECTION 6.16.   Review of Mortgage Documents....................................    VI-12
SECTION 6.17.   Payment of Certain Insurance Premiums...........................    VI-13
SECTION 6.18.   Substitution of Insurance Policies, Etc.; Notification of
                Rating Agencies.................................................    VI-13

                                        ARTICLE VII

                              BONDHOLDERS' LISTS AND REPORTS
</TABLE>

                                      -ix-
<PAGE>   11

<TABLE>
<S>             <C>                                                                 <C>
SECTION 7.01.   Issuer to Furnish Trustee Names and Addresses of Bondholders....    VII-1
SECTION 7.02.   Preservation of Information; Communications to Bondholders......    VII-1
SECTION 7.03.   Reports by Trustee..............................................    VII-1
SECTION 7.04.   Reports by Issuer...............................................    VII-2
SECTION 7.05.   Notice to the Rating Agencies [and to Bond Insurer.]............    VII-2

                                       ARTICLE VIII

                ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES

SECTION 8.01.   Collection of Moneys............................................    VIII-1
SECTION 8.02.   Distribution Account............................................    VIII-1
SECTION 8.03.   General Provisions Regarding Pledged Accounts...................    VIII-2
SECTION 8.04.   Purchases of Defective Pledged Mortgages........................    VIII-3
SECTION 8.05.   Grant of Replacement Pledged Mortgage...........................    VIII-5
SECTION 8.06.   Reports by Trustee to Bondholders...............................    VIII-5
SECTION 8.07.   Reports by Trustee..............................................    VIII-7
SECTION 8.08.   Trust Estate; Release and Delivery of Mortgage Documents........    VIII-8
SECTION 8.09.   Amendments to the Master Servicing Agreement....................    VIII-9
SECTION 8.10.   Servicers and Master Servicer as Agents and Bailees of Trustee..    VIII-9
SECTION 8.11.   Opinion of Counsel..............................................    VIII-10
SECTION 8.12.   Release of Pledged Mortgages....................................    VIII-10

                                        ARTICLE IX

                                  SUPPLEMENTAL INDENTURES

SECTION 9.01.   Supplemental Indentures Without Consent of Bondholders..........    IX-1
SECTION 9.02.   Supplemental Indentures With Consent of Bondholders.............    IX-2
SECTION 9.03.   Execution of Supplemental Indentures............................    IX-4
SECTION 9.04.   Effect of Supplemental Indentures...............................    IX-4
SECTION 9.05.   Conformity with Trust Indenture Act.............................    IX-4
SECTION 9.06.   Reference in Bonds to Supplemental Indentures...................    IX-5
SECTION 9.07.   Amendments to Deposit Trust Agreement or Master
                Servicing Agreement.............................................    IX-5

                                         ARTICLE X

                                    REDEMPTION OF BONDS
</TABLE>

                                       -x-
<PAGE>   12

<TABLE>
<S>             <C>                                                                 <C>
SECTION 10.01.  Special Redemption; Redemption..................................    X-1
SECTION 10.02.  Form of Redemption Notice.......................................    X-1
SECTION 10.03.  Bonds Payable on Optional Redemption Date.......................    X-2

                                        ARTICLE XI

                                       MISCELLANEOUS

SECTION 11.01.  Compliance Certificates and Opinions............................    XI-1
SECTION 11.02.  Form of Documents Delivered to Trustee..........................    XI-1
SECTION 11.03.  Acts of Bondholders.............................................    XI-3
SECTION 11.04.  Notices, etc. to Trustee and Issuer.............................    XI-3
SECTION 11.05.  Notices and Reports to Bondholders; Waiver of Notices...........    XI-4
SECTION 11.06.  Rules by Trustee and Agents.....................................    XI-5
SECTION 11.07.  Conflict with Trust Indenture Act...............................    XI-5
SECTION 11.08.  Effect of Headings and Table of Contents........................    XI-5
SECTION 11.09.  Successors and Assigns..........................................    XI-5
SECTION 11.10.  Separability....................................................    XI-5
SECTION 11.11.  Benefits of Indenture...........................................    XI-6
SECTION 11.12.  Legal Holidays..................................................    XI-6
SECTION 11.13.  Governing Law...................................................    XI-6
SECTION 11.14.  Counterparts....................................................    XI-6
SECTION 11.15.  Recording of Indenture..........................................    XI-6
SECTION 11.16.  Issuer Obligation...............................................    XI-6
SECTION 11.17.  Inspection......................................................    XI-7
SECTION 11.18.  Usury...........................................................    XI-7
SECTION 11.19.  No Petition.....................................................    XI-8

                                        ARTICLE XII

                                     THE BOND INSURER

SECTION 12.01.  Certain Matters Regarding the Bond Insurer and The Bond
                Insurance Policy................................................    XII-1
</TABLE>

                                      -xi-
<PAGE>   13

<TABLE>
<S>                                                                                <C>
TESTIMONIUM.....................................................................   S-1

SIGNATURES AND SEALS............................................................   S-1

ACKNOWLEDGMENTS.................................................................   S-3

SCHEDULE A - Schedule of Pledged Mortgages......................................   A-1
</TABLE>

EXHIBIT I - Letter Agreement with the Depository

EXHIBIT II - Form of Senior Bond

EXHIBIT III - Form of Class B-1 Bond

EXHIBIT IV - Form of Class B-2 Bond

EXHIBIT V - Form of Class R-LT Certificate

EXHIBIT VI - Form of Class R-UT Certificate

EXHIBIT VII - Form of Investment Letter for Holder of Class R-LT and R-UT
Certificate

EXHIBIT VIII - Form of Bond Insurance Policy

EXHIBIT IX - Form of Transfer Affidavit for Class R-LT or Class R-UT Certificate

EXHIBIT X - ERISA Representation Letter

                                     -xii-

<PAGE>   14
                                     PARTIES

            INDENTURE, dated as of ___________ ___, 200__ (as amended or
supplemented from time to time as permitted hereby, the "Indenture"), between
Sequoia Mortgage Trust 200_-_ (herein, together with its permitted successors
and assigns, called the "Issuer"), a statutory business trust created under the
Deposit Trust Agreement (as defined herein), and _____________________________,
a _____________ corporation, as trustee (together with its permitted successors
in the trusts hereunder, the "Trustee").

                              PRELIMINARY STATEMENT

            The Issuer has duly authorized the execution and delivery of this
Indenture to provide for its Collateralized Mortgage Bonds, (the "Bonds"),
issuable as provided in this Indenture. All covenants and agreements made by the
Issuer herein are for the benefit and security of the Holders of the Bonds. The
Issuer is entering into this Indenture, and the Trustee is accepting the trusts
created hereby, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged.

            All things necessary to make this Indenture a valid agreement of the
Issuer in accordance with its terms have been done.

                                 GRANTING CLAUSE

            The Issuer hereby Grants to the Trustee, for the exclusive benefit
of the Holders of the Bonds [and the Bond Insurer], all of the Issuer's right,
title and interest in and to (a) the Pledged Mortgages identified in Schedule A
to this Indenture, including the related Mortgage Documents, which the Issuer
has caused to be delivered to the Trustee herewith, and all interest and
principal received or receivable by the Issuer on or with respect to the Pledged
Mortgages after the Cut-Off Date and all interest and principal payments on the
Pledged Mortgages received prior to the Cut-off Date in respect of installments
of interest and principal due thereafter, but not including payments of interest
and principal due and payable on the Pledged Mortgages on or before the Cut-off
Date, and all other proceeds received in respect of such Pledged Mortgages, (b)
the Issuer's rights under the Master Servicing Agreement, (c) the Insurance
Policies, (d) all cash, instruments or other property held or required to be
deposited in the Bond Account or the Distribution Account (exclusive of any
earnings on investments made with funds deposited in the Distribution Account or
the Bond Account) and (e) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid assets,
including, without limitation, all Insurance Proceeds, Liquidation Proceeds and
condemnation awards. Such Grants are made, however, in trust, to secure the
Bonds equally and ratably without prejudice, priority or distinction between any
Bond and any other Bond by reason of difference in time of issuance or
otherwise, and to secure (i) the payment of all amounts due on the Bonds in
accordance with their terms, (ii) the payment of all other sums payable under
this Indenture with respect to the Bonds and (iii) compliance with the
provisions of this Indenture, all as provided in this

<PAGE>   15
Indenture. All terms used in the foregoing granting clauses that are defined in
Section 1.01 are used with the meanings given in said Section.

            The Trustee acknowledges such Grant, accepts the trusts hereunder in
accordance with the provisions of this Indenture and agrees to perform the
duties herein required to the best of its ability to the end that the interests
of the Holders of the Bonds [and the Bond Insurer] may be adequately and
effectively protected.

            [The Trustee agrees that it will hold any proceeds of any claim made
upon the Bond Insurance Policy, solely for the use and benefit of the
Bondholders in accordance with the terms hereof and of the Bond Insurance
Policy.]

                                    ARTICLE I

                                   DEFINITIONS

SECTION 1.01. GENERAL DEFINITIONS.

            Except as otherwise specified or as the context may otherwise
require, the following terms have the respective meanings set forth below for
all purposes of this Indenture, and the definitions of such terms are applicable
to the singular as well as to the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such terms. Whenever
reference is made herein to an Event of Default or a Default known to the
Trustee or of which the Trustee has notice or knowledge, such reference shall be
construed to refer only to an Event of Default or Default of which the Trustee
is deemed to have notice or knowledge pursuant to Section 6.01(d). All other
terms used herein which are defined in the Trust Indenture Act (as hereinafter
defined), either directly or by reference therein, have the meanings assigned to
them therein.

            "ACCOUNTANT": A Person engaged in the practice of accounting who
(except when this Indenture provides that an Accountant must be Independent) may
be employed by or affiliated with the Issuer or an Affiliate of the Issuer.

            "ACCRUAL DATE": The date upon which interest begins accruing on the
Bonds, such date being ____________ ___, 200__.

            "ACT":  With respect to any Bondholder, as defined in Section 11.03.

            "ADJUSTED NET MORTGAGE RATE": As to each Pledged Mortgage and at any
time, the per annum rate equal to the Mortgage Rate less the sum of the Master
Servicing Fee Rate and the related Servicing Fee Rate.

                                      I-1
<PAGE>   16
            "ADJUSTMENT DATE": As to any Pledged Mortgage, the date on which the
related Mortgage Rate adjusts [annually] after a period of ___ year[s] following
origination, in accordance with the terms of the related Mortgage Note.

            "ADVANCE": The payment required to be made by the Master Servicer
with respect to any Payment Date pursuant to Section 4 of the Master Servicing
Agreement, the amount of any such payment being equal to the aggregate of the
payments of principal and interest (net of the Master Servicing Fee and the
applicable Servicing Fee and net of any net income in the case of any REO
Property) on the Pledged Mortgages that were due on the related Due Date and not
received as of the close of business on the related Determination Date, less the
aggregate amount of any such delinquent payments that the Master Servicer has
determined would constitute a Nonrecoverable Advance if advanced.

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

            "AGENT": Any Bond Registrar, Paying Agent or Authenticating Agent.

            "ALTERNATE BOND RATE: As to any Payment Date, the weighted average
of the Net Mortgage Rates of all Mortgage Loans applicable as of the Due Date of
the month preceding the month of such Payment Date, weighted on the basis of
their outstanding Principal Balances (after giving effect to the Monthly
Payments due on or before such Due Date and Principal Prepayments received prior
to such Due Date) at such time.

            "APPRAISED VALUE": With respect to any Pledged Mortgage, the
Appraised Value of the related Mortgaged Property shall be: (i) with respect to
a Pledged Mortgage other than a Refinancing Pledged Mortgage, the lesser of (a)
the value of the Mortgaged Property based upon the appraisal made at the time of
the origination of such Pledged Mortgage and (b) the sales price of the
Mortgaged Property at the time of the origination of such Pledged Mortgage; (ii)
with respect to a Refinancing Pledged Mortgage, the value of the Mortgaged
Property based upon the appraisal made at the time of the origination of such
Refinancing Pledged Mortgage.

            "ASSIGNMENTS": Collectively (i) the original instrument of
assignment of a Mortgage, including any interim assignments from the originator
or any other holder of any Pledged Mortgage, and (ii) the original instrument of
assignment of such Mortgage, made by the Issuer to the Trustee (which in either
case may, to the extent permitted by the laws of the state in which the related
Mortgaged Property is located, be a blanket instrument of assignment covering
other Mortgages as well and which may also, to the extent permitted by the laws
of the state in

                                      I-2
<PAGE>   17
which the related Mortgaged Property is located, be an instrument of assignment
running directly from the mortgagee of record under the related Mortgage to the
Trustee).

            "AUTHENTICATING AGENT": The Person, if any, appointed as
Authenticating Agent by the Trustee at the request of the Issuer pursuant to
Section 6.15, until any successor Authenticating Agent for the Bonds is named,
and thereafter "Authenticating Agent" shall mean such successor.

            "AUTHORIZED OFFICER": Any officer of the Owner Trustee who is
authorized to act for the Owner Trustee in respect of the Issuer and whose name
appears on a list of such authorized officers furnished by the Owner Trustee to
the Trustee, as such list may be amended or supplemented from time to time, and
any officer of the Issuer who is authorized to act pursuant to the Deposit Trust
Agreement and whose name appears on a list furnished by the Depositor to the
Owner Trustee and the Trustee, as such list may be amended or supplemented from
time to time.

            "AVAILABLE FUNDS": As defined in Section 1 of the Master Servicing
Agreement.

            "BANK": ________________________, a Delaware banking corporation, in
its individual capacity and not as Owner Trustee.

            "BANKRUPTCY CODE": The United States Bankruptcy Reform Act of 1978,
as amended.

            "BENEFICIAL OWNER": With respect to a Book Entry Bond, the Person
who is the beneficial owner of such Book Entry Bond.

            "BOND ACCOUNT": The separate Eligible Account or Accounts created
and maintained by the Master Servicer pursuant to Section 3(h)(v) of the Master
Servicing Agreement with a depository institution in the name of the Master
Servicer for the benefit of the Trustee on behalf of Bondholders and designated
"Sequoia Mortgage Holdings, Inc. in trust for the registered holders of Sequoia
Mortgage Trust 200_-_ Collateralized Mortgage Bonds, Series 200_-_".

            "BOND DISTRIBUTION AMOUNT": As to any Payment Date, an amount equal
to the sum of (i) the Senior Interest Payment Amount, (ii) the Senior Principal
Payment Amount, (iii) the Class B-1 Interest Payment Amount, (iv) the Class B-1
Principal Payment Amount, (v) the Class B-2 Interest Payment Amount and (vi) the
Class B-2 Principal Payment Amount.

            "BOND PAYMENT AMOUNT": As to any Payment Date, an amount equal to
the sum of (i) the Senior Interest Payment Amount, (ii) the Senior Principal
Payment Amount, (iii) the Class B-1 Interest Payment Amount, (iv) the Class B-1
Principal Payment Amount, (v)

                                      I-3
<PAGE>   18
the Class B-2 Interest Payment Amount and (vi) the Class B-2 Principal Payment
Amount, in each case for such Payment Date.

            "BONDHOLDER" OR "HOLDER": The Person in whose name a Bond is
registered in the Bond Register.

            "BOND INSURANCE POLICY": Any financial guaranty insurance policy
covering any Bonds or Class of Bonds of any Series.

            "BOND INSURER":  The issuer of any Bond Insurance Policy.

            "BOND INTEREST RATE": The Senior Bond Interest Rate, the Class B-1
Bond Interest Rate or the Class B-2 Bond Interest Rate, as applicable.

            "BOND REGISTER" AND "BOND REGISTRAR": As defined in Section 2.07.

            "BONDS": Any bonds authorized by, and authenticated and delivered
under, this Indenture.

            "BOOK ENTRY BONDS": The Bonds shall be registered in the name of the
Depository or its nominee, ownership of which is reflected on the books of the
Depository or on the books of a Person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).

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

            "CERTIFICATE INTEREST RATE": As defined in Section 1 of the Master
Servicing Agreement.

            "CLASS": Collectively, all of the Bonds bearing the same class
designation. The Bonds are divided into Classes as provided in Section 2.03.

            "CLASS B-1 INTEREST CARRYOVER SHORTFALL": The amount by which the
sum of (i) the interest at the Class B-1 Bond Interest Rate on the Class B-1
Principal Amount and (ii) the interest at the Class B-1 Bond Interest Rate on
any Class B-1 Principal Carryover Shortfall, on each prior Payment Date,
exceeded the amount actually distributed as interest on such prior Payment Dates
and not subsequently distributed.

            "CLASS B-1 BOND INTEREST RATE": With respect to any Interest Accrual
Period, the annual rate at which interest accrues on the Class B-1 Bonds as
specified in such Bonds and in Section 2.03(c).

                                      I-4
<PAGE>   19
            "CLASS B-1 INTEREST PAYMENT AMOUNT": As to any Payment Date, the sum
of (i) interest at the Class B-1 Bond Interest Rate on the Class B-1 Principal
Amount, (ii) interest at the Class B-1 Bond Interest Rate on any Class B-1
Principal Carryover Shortfall, (iii) the Class B-1 Interest Carryover Shortfall
and (iv) interest at the Class B-1 Bond Interest Rate on any Class B-1 Interest
Carryover Shortfall.

            "CLASS B-1 PERCENTAGE": As to any Payment Date, the percentage
equivalent of a fraction the numerator of which is the Class B-1 Principal
Amount immediately prior to such date and the denominator of which is the sum of
(i) the Senior Class Principal Amount, (ii) the Class B-1 Principal Amount,
(iii) the Class B-2 Principal Amount and (iv) the Invested Amount, in each case
immediately prior to such date.

            "CLASS B-1 PRINCIPAL AMOUNT": As to any Payment Date is the lesser
of (i) the aggregate of the Stated Principal Balances of the Pledged Mortgages,
less the Senior Class Principal Amount immediately prior to such date, and (ii)
the Original Class B-1 Principal Amount reduced by all amounts previously
distributed to holders of the Class B-1 Bonds as payments of principal.

            "CLASS B-1 PRINCIPAL CARRYOVER SHORTFALL": As to any Payment Date,
the excess of (i) the Original Class B-1 Principal Amount reduced by all amounts
previously distributed to holders of the Class B-1 Bonds as payments of
principal or Class B-1 Principal Carryover Shortfall, over (ii) the Class B-1
Principal Amount immediately prior to such date.

            "CLASS B-1 PRINCIPAL PAYMENT AMOUNT": As to any Payment Date, the
sum of (i) the Class B-1 Percentage of the sum of (a) the principal portion of
the Schedules Payment due on each Pledged Mortgage [on the related Due Date],
(b) the principal portion of the purchase price of each Pledged Mortgage that
was purchased by Redwood Trust or another person pursuant to the Mortgage Loan
Purchase Agreement [or by the Master Servicer in connection with any optional
purchase by the Master Servicer of a defaulted Pledged Mortgage] as of such
Payment Date, (c) the Substitution Adjustment Amount in connection with any
Deleted Pledged Mortgage received with respect to such Payment Date, (d) any
Insurance Proceeds or Liquidation Proceeds allocable to recoveries of principal
of Pledged Mortgages that are not yet Liquidated Pledged Mortgages received
during the [calendar month] preceding the month of such Payment Date, (e) with
respect to each Pledged Mortgage that became a Liquidated Pledged Mortgage
during the [calendar month] preceding the month of such Payment Date, the Stated
Principal Balance of such Pledged Mortgage and (f) all partial and full
principal prepayments by borrowers received during the related Prepayment Period
and (ii) any Class B-1 Principal Carryover Shortfall.

            CLASS B-2 BOND INTEREST RATE": With respect to any Interest Accrual
Period, the annual rate at which interest accrues on the Class B-2 Bonds as
specified in such Bonds and in Section 2.03(c).

                                      I-5
<PAGE>   20
            "CLASS B-2 INTEREST CARRYOVER SHORTFALL": The amount by which sum of
(i) the interest at the Class B-2 Bond Interest Rate on the Class B-2 Principal
Amount and (ii) the interest at the Class B-2 Bond Interest Rate on any Class
B-2 Principal Carryover Shortfall, on each prior Payment Date, exceeded the
amount actually distributed as interest on such prior Payment Dates and not
subsequently distributed.

            "CLASS B-2 INTEREST PAYMENT AMOUNT": As to any Payment Date, the sum
of (i) interest at the Class B-2 Bond Interest Rate on the Class B-2 Principal
Amount, (ii) interest at the Class B-2 Bond Interest Rate on any Class B-2
Principal Carryover Shortfall, (iii) the Class B-2 Interest Carryover Shortfall
and (iv) interest at the Class B-2 Bond Interest Rate on any Class B-2 Interest
Carryover Shortfall.

            "CLASS B-2 PERCENTAGE": As to any Payment Date, the percentage
equivalent of a fraction the numerator of which is the Class B-2 Principal
Amount immediately prior to such date and the denominator of which is the sum of
(i) the Senior Class Principal Amount, (ii) the Class B-1 Principal Amount,
(iii) the Class B-2 Principal Amount and (iv) the Invested Amount, in each case
immediately prior to such date.

            "CLASS B-2 PRINCIPAL AMOUNT": As to any Payment Date is the lesser
of (i) the aggregate of the Stated Principal Balances of the Pledged Mortgages,
less the sum of the Senior Class Principal Amount and the Class B-1 Principal
Amount, in each case immediately prior to such date, and (ii) the Original Class
B-2 Principal Amount reduced by all amounts previously distributed to holders of
the Class B-2 Bonds as payments of principal.

            "CLASS B-2 PRINCIPAL CARRYOVER SHORTFALL": As to any Payment Date,
the excess of (i) the Original Class B-2 Principal Amount reduced by all amounts
previously distributed to holders of the Class B-2 Bonds as payments of
principal or Class B-2 Principal Carryover Shortfall, over (ii) the Class B-2
Principal Amount immediately prior to such date.

            "CLASS B-2 PRINCIPAL PAYMENT AMOUNT": As to any Payment Date, the
sum of (i) the Class B-2 Percentage of the sum of (a) the principal portion of
the Scheduled Payment due on each Pledged Mortgage [on the related Due Date],
(b) the principal portion of the purchase price of each Pledged Mortgage that
was purchased by Redwood Trust or another person pursuant to the Mortgage Loan
Purchase Agreement [or by the Master Servicer in connection with any optional
purchase by the Master Servicer of a defaulted Pledged Mortgage] as of such
Payment Date, (c) the Substitution Adjustment Amount in connection with any
Deleted Pledged Mortgage received with respect to such Payment Date, (d) any
Insurance Proceeds or Liquidation Proceeds allocable to recoveries of principal
of Pledged Mortgages that are not yet Liquidated Pledged Mortgages received
during the [calendar month] preceding the month of such Payment Date, (e) with
respect to each Pledged Mortgage that became a Liquidated Pledged Mortgage
during the [calendar month] preceding the month of such Payment Date, the Stated
Principal Balance of such Pledged Mortgage and (f) all partial and full
principal

                                      I-6
<PAGE>   21
prepayments by borrowers received during the related Prepayment Period and (ii)
any Class B-2 Principal Carryover Shortfall.

            "CLASS INTEREST SHORTFALL": As to any Payment Date, the Senior
Interest Shortfall, the Class B-1 Interest Carryover Shortfall or the Class B-2
Interest Carryover Shortfall, as applicable.

            "CLASS PRINCIPAL AMOUNT": The Senior Class Principal Amount, the
Class B-1 Principal Amount or the Class B-2 Principal Amount, as applicable.

            "CLASS R CERTIFICATES": Pertaining to either the Class R-LT or the
Class R-UT Certificates, as the case may be.

            "CLASS R-LT CERTIFICATE": Any one of the Certificates executed and
authenticated by the Trustee substantially in the form set forth in Exhibit V.

            "CLASS R-LT DISTRIBUTION AMOUNT": As to any Payment Date, the
aggregate amount distributed to the Class R-LT Holder on such Payment Date
pursuant to Section 2.03

            "CLASS R-UT CERTIFICATE": Any one of the Certificates executed and
authenticated by the Trustee substantially in the form set forth in Exhibit VI.

            "CLASS R-UT DISTRIBUTION AMOUNT": As to any Payment Date, the
aggregate amount distributed to the Class R Holder on such Payment Date pursuant
to Section 2.03.

            "CLOSING DATE":  ____________ ___, 200__.

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

            "COMMISSION": Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or if at
any time such Commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body performing such duties at
such time under the Trust Indenture Act or similar legislation replacing the
Trust Indenture Act.

            "CONTROLLING CLASS": The Class A-1 Bonds or, if the Class A-1 Bonds
are no longer Outstanding, the most senior Class of Subordinated Bonds then
Outstanding.

            "COOPERATIVE LOAN": As defined in Section 1 of the Master Servicing
Agreement.

                                      I-7
<PAGE>   22
            "COOPERATIVE SHARES": As defined in Section 1 of the Master
Servicing Agreement.

            "CORPORATE TRUST OFFICE": The principal corporate trust office of
the Trustee located at ___________________________________________________, or
at such other address as the Trustee may designate from time to time by notice
to the Bondholders and the Issuer, or the principal corporate trust office of
any successor Trustee.

            "CORRESPONDING CLASSES OF BONDS": With respect to each Lower-Tier
Regular Interest, the Class or Classes of Certificates appearing opposite such
Lower-Tier Regular Interest in Section 2.18.

            "CUT-OFF DATE":  _____________ ___, 200__.

            "DEBT SERVICE REDUCTION": With respect to any Pledged Mortgage, a
reduction by a court of competent jurisdiction in a proceeding under the
Bankruptcy Code in the Scheduled Payment for such Pledged Mortgage which became
final and non-appealable, except such a reduction resulting from a Deficient
Valuation or any reduction that results in a permanent forgiveness of principal.

            "DEFAULT": Any occurrence which is, or with notice or the lapse of
time or both would become, an Event of Default.

            "DEFAULTED PLEDGED MORTGAGE": The meaning specified in Section
8.04(e).

            "DEFICIENT VALUATION": With respect to any Pledged Mortgage, a
valuation by a court of competent jurisdiction of the Mortgaged Property in an
amount less than the then outstanding indebtedness under the Pledged Mortgage,
or any reduction in the amount of principal to be paid in connection with any
Scheduled Payment that results in a permanent forgiveness of principal, which
valuation or reduction results from an order of such court which is final and
non-appealable in a proceeding under the Bankruptcy Code.

            "DEFINITIVE BONDS": Bonds other than Book Entry Bonds.

            "DELETED PLEDGED MORTGAGE": As defined in Section 5 of the Master
Servicing Agreement.

            "DENOMINATION": With respect to each Bond, the amount set forth on
the face thereof as the "Initial Principal Amount of this Bond".

            "DEPOSITOR": Sequoia Mortgage Funding Corporation, a Delaware
corporation.

                                      I-8
<PAGE>   23
            "DEPOSITORY": The initial Depository with respect to each Class of
Book Entry Bonds shall be The Depository Trust Company of New York, the nominee
for which is Cede & Co. 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 PARTICIPANTS": 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.

            "DEPOSIT TRUST AGREEMENT": The Amended and Restated Deposit Trust
Agreement, dated as of ____________ _ _, 200__, between the Bank and the
Depositor, creating the Issuer, as such Deposit Trust Agreement may be amended
or supplemented from time to time.

            "DETERMINATION DATE": As to any Payment Date, the ___th day of each
month or if such ___th day is not a Business Day the next succeeding Business
Day; provided, however, that if such next succeeding Business Day is less than
two Business Days prior to the related Payment Date, then the Determination Date
shall be the next Business Day preceding the ___th day of such month.

            "DISTRIBUTION ACCOUNT": The separate Eligible Account created and
maintained by the Trustee pursuant to Section 8.02 in the name of the Trustee
for the benefit of the Bondholders and designated "____________________ in trust
for registered holders of Sequoia Mortgage Trust 200_-_, Collateralized Mortgage
Bonds. Funds in the Distribution Account shall be held in trust for the
Bondholders for the uses and purposes set forth in this Indenture.

            "DISTRIBUTION ACCOUNT DEPOSIT DATE": As to any Payment Date, [12:30
p.m. Pacific time] on the Business Day immediately preceding such Payment Date.

            "DUE DATE": The first day of each month.

            "ELIGIBLE ACCOUNT": Any of (i) an account or accounts maintained
with a federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the debt obligations of such holding company) have the highest
short-term ratings of each Rating Agency at the time any amounts are held on
deposit therein, or (ii) an account or accounts in a depository institution or
trust company in which such accounts are insured by the FDIC or the SAIF (to the
limits established by the FDIC or the SAIF) and the uninsured deposits in which
accounts are otherwise secured such that, as evidenced by an Opinion of Counsel
delivered to the Trustee and to each Rating Agency, the Bondholders have a claim
with respect to the funds in such account or a perfected first priority security
interest against any collateral (which shall be limited to Permitted
Investments) securing such funds that is superior to claims of any other
depositors or creditors of the depository institution or trust

                                      I-9
<PAGE>   24
company in which such account is maintained, or (iii) a trust account or
accounts maintained with the trust department of a federal or state chartered
depository institution or trust company, acting in its fiduciary capacity or
(iv) any other account acceptable to each Rating Agency. Eligible Accounts may
bear interest, and may include, if otherwise qualified under this definition,
accounts maintained with the Trustee.

            "ESCROW ACCOUNT": As defined in Section 1 of the Master Servicing
Agreement.

            "EVENT OF DEFAULT": The meaning specified in Section 5.01.

            "EXPENSE RATE": As to each Pledged Mortgage, the sum of the related
Servicing Fee Rate, the Master Servicing Fee Rate and Trustee Fee Rate.

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

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

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

            ["FITCH": Fitch Investors Service, L.P., or any successor thereto.
For purposes of Section 11.04 the address for notices to Fitch shall be Fitch
Investors Service, L.P., One State Street Plaza, New York, New York 10004,
Attention: Residential Mortgage Surveillance Group, or such other address as
Fitch may hereafter furnish to the Issuer and the Master Servicer.]

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

            "GRANT": To grant, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, mortgage, pledge, create and grant a security
interest in, deposit, set-over and confirm. A Grant of a Pledged Mortgage and
related Mortgage Documents, a Permitted Investment, the Master Servicing
Agreement, an Insurance Policy, or any other instrument shall include all
rights, powers and options (but none of the obligations) of the Granting party
thereunder, including, without limitation, the immediate and continuing right to
claim for, collect, receive and give receipts for principal and interest
payments thereunder, Insurance Proceeds, condemnation awards, purchase prices
and all other moneys payable thereunder and all proceeds thereof, to give and
receive notices and other communications, to make waivers or other agreements,
to exercise all rights and options, to bring Proceedings in the name of the
Granting party or otherwise, and generally to do and receive anything which the
Granting party is or may be entitled to do or receive thereunder or with respect
thereto.

                                      I-10
<PAGE>   25
            "HIGHEST LAWFUL RATE": The meaning specified in Section 11.18.

            "HOLDER": The holder of Bonds or Class R Certificates issued
pursuant to this Indenture.

            "INDENTURE" or "THIS INDENTURE": This instrument as originally
executed and, if from time to time supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof, as so supplemented or amended. All references in this
instrument to designated "Articles", "Sections", "Subsections" and other
subdivisions are to the designated Articles, Sections, Subsections and other
subdivisions of this instrument as originally executed. The words "herein",
"hereof" and "hereunder" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section, Subsection or
other subdivision.

            "INDEPENDENT": When used with respect to any specified Person means
such a Person who (i) is in fact independent of the Issuer and any other obligor
upon the Bonds, (ii) does not have any direct financial interest or any material
indirect financial interest in the Issuer or in any such other obligor or in an
Affiliate of the Issuer or such other obligor and (iii) is not connected with
the Issuer or any such other obligor as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
Whenever it is herein provided that any Independent Person's opinion or
certificate shall be furnished to the Trustee, such Person shall be appointed by
an Issuer Order and with the approval of the Trustee, which approval shall not
be unreasonably withheld, and such opinion or certificate shall state that the
signer has read this definition and that the signer is Independent within the
meaning hereof.

            "INDEX": As to (a) each Pledged Mortgage, the index from time to
time in effect for the adjustment of the Mortgage Rate set forth as such on the
related Mortgage Note and (b) either Bond Interest Rate and any Payment Date,
the weekly average yield on United States Treasury Securities adjusted to a
constant maturity of one year as made available by the Federal Reserve Board and
most recently available as of 45 days prior to the first day of the month
preceding the month in which such Payment Date occurs.

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

            "INDIVIDUAL BOND": A Bond of an original principal amount of $1,000;
a Bond of an original principal amount in excess of $1,000 shall be deemed to be
a number of Individual Bonds equal to the quotient obtained by dividing such
original principal amount by $1,000.

                                      I-11
<PAGE>   26
            "INSURANCE POLICY": With respect to any Pledged Mortgage, any
insurance policy, including all riders and endorsements thereto in effect,
including any replacement policy or policies for any Insurance Policies.

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

            "INSURED EXPENSES": Expenses covered by an Insurance Policy or any
other insurance policy with respect to the Pledged Mortgages.

            "INTEREST ACCRUAL PERIOD": With respect to each Class of Bonds and
any Payment Date, the calendar month prior to the month of such Payment Date.

            "INTEREST CONVERSION DATE": As to the Pledged Mortgages, the date on
which the first Adjustment Date occurs.

            "INTEREST PAYMENT AMOUNT": The Senior Interest Payment Amount, the
Class B-1 Interest Payment Amount, the Class B-2 Interest Payment Amount or the
Certificate Interest Payment Amount, as applicable.

            "INVESTED AMOUNT": As of any Payment Date, the lesser of (i) the
aggregate of the Stated Principal Balances of the Pledged Mortgages, less the
sum of (x) the Senior Class Principal Amount, (y) the Class B-1 Principal Amount
and (z) the Class B-2 Principal Amount, in each case immediately prior to such
date, and (ii) the Original Invested Amount reduced by all amounts previously
distributed to the holder of the Class R Certificate in reduction of the
Invested Amount.

            "INVESTOR PERCENTAGE": As of any Payment Date, the difference
between 100% and the sum of the Senior Percentage, the Class B-1 Percentage and
the Class B-2 Percentage for such date.

            "ISSUER": Sequoia Mortgage Trust 200_-_ formed pursuant to the
Deposit Trust Agreement.

            "ISSUER ORDER" and "ISSUER REQUEST": A written order or request that
is dated and signed in the name of the Issuer by an Authorized Officer and
delivered to the Trustee.

            "LETTER AGREEMENT": With respect to the Book Entry Bonds, the letter
agreement among the Issuer, the Trustee and the Depository governing book entry
transfers of, and certain other matters with respect to, such Book Entry Bonds
and attached as Exhibit I hereto.

                                      I-12
<PAGE>   27
            "LIQUIDATED PLEDGED MORTGAGE": With respect to any Payment Date, a
defaulted Pledged Mortgage (including any REO Property) which was liquidated in
the calendar month preceding the month of such Payment Date and as to which the
Master Servicer has certified (in accordance with the Master Servicing
Agreement) that it has received all amounts it expects to receive in connection
with the liquidation of such Pledged Mortgage including the final disposition of
an REO Property.

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

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

            "LOWER-TIER A PRINCIPAL BALANCE": At any time, an amount equal to
the Class A Principal Balance.

            "LOWER-TIER B PRINCIPAL BALANCE": At any time, an amount equal to
the Class B Principal Balance.

            "LOWER-TIER INTEREST": Any one of the Lower-Tier Regular Interests
or the Lower-Tier Interest R.

            "LOWER-TIER INTEREST A": An uncertificated "regular interest" in the
Lower-Tier REMIC which is held as an asset of the Upper-Tier REMIC.

            "LOWER-TIER INTEREST B": An uncertificated "regular interest" in the
Lower-Tier REMIC which is held as an asset of the Upper-Tier REMIC.

            "LOWER-TIER INTEREST R": The sole class of "residual interest" in
the Lower-Tier REMIC and the beneficial ownership of which is evidenced by the
Class R-LT Certificate.

            "LOWER-TIER PASS-THROUGH RATE": For the Lower-Tier Interest A and
the Lower-Tier Interest B, the per annum rate set forth or calculated in the
manner described in Section [2.08.]

            "LOWER-TIER REGULAR INTERESTS": Lower-Tier Interest A or Lower-Tier
Interest B.

                                      I-13
<PAGE>   28
            "LOWER-TIER REMIC": As described in Section 2.15.

            "MARGIN": As to each Pledged Mortgage, the percentage amount set
forth on the related Mortgage Note added to the Index in calculating the
Mortgage Rate thereon.

            "MASTER SERVICER": _________________________________, a ____________
corporation, as Master Servicer under the Master Servicing Agreement, and its
permitted successors and assigns thereunder.

            "MASTER SERVICING AGREEMENT": The master servicing agreement dated
as of _____________ , 200__, among the Issuer, the Trustee and the Master
Servicer, pursuant to which the Master Servicer will be obligated to manage and
supervise the administration and servicing of the Pledged Mortgages securing the
Bonds and each Servicer of the Pledged Mortgages, or its successors or assigns,
as such agreement may be amended or supplemented from time to time as permitted
thereby.

            "MASTER SERVICING FEE": As to each Pledged Mortgage and any Payment
Date, an amount equal to one month's interest at the related Master Servicing
Fee Rate on the Stated Principal Balance of such Pledged Mortgage or, in the
event of any payment of interest which accompanies a Principal Prepayment in
Full made by the Mortgagor, interest at the Master Servicing Fee Rate on the
Stated Principal Balance of such Pledged Mortgage for the period covered by such
payment of interest, subject to reduction as provided in Section 5(a) of the
Master Servicing Agreement.

            "MASTER SERVICING FEE RATE": With respect to each Mortgage Loan,
_____% per annum.

            "MATURITY": With respect to any Bond, the date on which the entire
unpaid principal amount of such Bond becomes due and payable as therein or
herein provided, whether at the Stated Maturity of the final installment of such
principal or by declaration of acceleration, call for redemption or otherwise.

            "MAXIMUM RATE": As to any Pledged Mortgage, the maximum rate set
forth on the related Mortgage Note at which interest can accrue on such Pledged
Mortgage.

            ["MOODY'S": Moody's Investors Service, Inc., or any successor
thereto. For purposes of Section 11.04 the address for notices to Moody's shall
be Moody's Investors Service, Inc., 99 Church Street, New York, New York 10007,
Attention: ____________ or such other address as Moody's may hereafter furnish
to the Issuer and the Master Servicer.]

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

                                      I-14
<PAGE>   29
            "MORTGAGE DOCUMENTS": The mortgage documents listed in Section
2(a)(i) of the Master Servicing Agreement pertaining to a particular Pledged
Mortgage and any additional documents delivered to the Trustee to be added to
the Mortgage Documents pursuant to the Master Servicing Agreement.

            "MORTGAGE NOTE": The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Pledged
Mortgage.

            "MORTGAGE RATE": The annual rate of interest borne by a Mortgage
Note from time to time.

            "MORTGAGED PROPERTY": The underlying property securing a Pledged
Mortgage, which, with respect to a Cooperative Loan, is the related Cooperative
Shares and Proprietary Lease.

            "MORTGAGOR": The obligor(s) on a Mortgage Note.

            "NET MORTGAGE RATE": As to any Pledged Mortgage and Payment Date,
the related Mortgage Rate as of the Due Date in the month preceding the month of
such Payment Date reduced by the related Expense Rate.

            "NET INTEREST SHORTFALLS": As to any Payment Date, the amount by
which the sum of (i) the amount of interest which would otherwise have been
received with respect to any Pledged Mortgage that was the subject of a Relief
Act Reduction and (ii) any Prepayment Interest Shortfalls, in each case during
the [calendar month] preceding the month of such Payment Date, exceeds the sum
of (i) the Master Servicing Fee for such period and (ii) the Certificate
Interest Payment Amount, the Invested Amount Payment and any other amounts
payable to the holder of the Class R Certificate described in [ ].

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

            "OFFICERS' CERTIFICATE": A certificate signed by two Authorized
Officers.

            "OFFICER'S CERTIFICATE OF THE MASTER SERVICER": A certificate (i)
signed by the Chairman of the Board, the Vice Chairman of the Board, the
President, a Managing Director, a Vice President (however denominated), an
Assistant Vice President, the Treasurer, the Secretary, or one of the Assistant
Treasurers or Assistant Secretaries of the Master Servicer, or (ii) if provided
for herein, signed by a Servicing Officer, as the case may be, and delivered to
the Trustee, as required hereby.

                                      I-15
<PAGE>   30
            "OPERATIVE AGREEMENTS": The meaning ascribed thereto in the Deposit
Trust Agreement.

            "OPINION OF COUNSEL": A written opinion of counsel who may, except
as otherwise expressly provided in this Indenture, be counsel for the Issuer,
and who shall be reasonably satisfactory to the Trustee.

            "OPTIONAL REDEMPTION DATE": With respect to the Bonds which are
subject to optional redemption, the date on which Bonds may be redeemed pursuant
to Section 10.01.

            "OPTIONAL REDEMPTION RECORD DATE": The meaning specified in Section
10.02.

            "ORIGINAL CLASS B-1 PRINCIPAL AMOUNT":  $____________.

            "ORIGINAL CLASS B-2 PRINCIPAL AMOUNT": $____________.

            "ORIGINAL INVESTED AMOUNT":  $____________.

            "ORIGINAL PLEDGED MORTGAGES": The Pledged Mortgages listed on the
Pledged Mortgage Schedule and granted to the Trustee on the Closing Date.

            "ORIGINAL SENIOR CLASS PRINCIPAL AMOUNT": ___________________.

            "ORIGINAL SUBORDINATION AMOUNT": The sum of the Original
Subordinated Class Principal Amount and the Original Invested Amount.

            "OTS": The Office of Thrift Supervision.

            "OUTSTANDING": As of the date of determination, all Bonds
theretofore authenticated and delivered under this Indenture except:

            (i) Bonds theretofore cancelled by the Bond Registrar or delivered
to the Bond Registrar for cancellation;

            (ii) Bonds or portions thereof for whose payment or redemption money
in the necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Issuer) in trust for the Holders of such Bonds;
provided, however, that if such Bonds are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision therefor,
satisfactory to the Trustee, has been made;

            (iii) Bonds in exchange for or in lieu of which other Bonds have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Trustee is

                                      I-16
<PAGE>   31
presented that any such Bonds are held by a bona fide purchaser (as defined by
the Uniform Commercial Code of the applicable jurisdiction); and

            (iv) Bonds alleged to have been destroyed, lost or stolen for which
replacement Bonds have been issued as provided for in Section 2.08;

provided, however, that in determining whether the Holders of the requisite
percentage of the aggregate Class Principal Amount of the Outstanding Bonds have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Bonds owned by the Issuer, any other obligor upon the Bonds or any
Affiliate of the Issuer or such other obligor shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Bonds which the Trustee knows to be so owned
shall be so disregarded. Bonds so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to such Bonds and that
the pledgee is not the Issuer, any other obligor upon the Bonds or any Affiliate
of the Issuer or such other obligor.

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

            "OWNER": The meaning ascribed thereto in the Deposit Trust
Agreement.

            "OWNER TRUSTEE": Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as Owner Trustee under
the Deposit Trust Agreement, until a successor Person shall have become the
Owner Trustee pursuant to the applicable provisions of the Deposit Trust
Agreement, and thereafter "Owner Trustee" shall mean such successor Person.

            "PAYING AGENT": The Trustee or any other depository institution or
trust company that is authorized by the Issuer pursuant to Section 3.03 to pay
the principal of, or interest on, any Bonds on behalf of the Issuer.

            "PAYMENT DATE": The ___th day of each [calendar month] after the
initial issuance of the Bonds or, if such ___th day is not a Business Day, the
next succeeding Business Day, commencing in ____________ 200__.

            "PAYMENT DATE STATEMENT": The meaning specified in Section 8.06.

            ["PERIODIC RATE CAP": As to any Pledged Mortgage and any Adjustment
Date, the maximum percentage increase or decrease to the related Mortgage Note
on any such Adjustment Date, as specified in the related Mortgage Note.]

                                      I-17
<PAGE>   32
            "PERMITTED ENCUMBRANCE": Any lien, charge, security interest,
mortgage or other encumbrance Granted by the Issuer in the Trust Estate,
provided that:

           (i) such lien, charge, security interest, mortgage or encumbrance
extends only to a portion of the Trust Estate which is limited to cash
deliverable or payable to the Issuer pursuant to Section 8.01 or Section
8.02(d);

           (ii) such lien, charge, security interest, mortgage or other
encumbrance secures indebtedness which the Issuer is permitted to incur under
the terms of this Indenture; and

           (iii) the beneficiary of such lien, charge, security interest,
mortgage or other encumbrance has agreed that in connection with the enforcement
thereof it will not bring any Proceeding seeking, or which would result in, the
sale of any portion of the Trust Estate and will not file any petition for the
commencement of insolvency proceedings with respect to the Issuer under the
federal bankruptcy laws, as now or hereafter in effect, or any other present or
future federal or state bankruptcy, insolvency or similar law, or for the
appointment of any receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or of any of its property,
or seeking an order for the winding up or liquidation of the affairs of the
Issuer.

            "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
that such obligations are backed by the full faith and credit of the United
States;

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

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

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

                                      I-18
<PAGE>   33
unsecured debt obligations of such holding company, but only if Moody's
Investor's service, Inc. is not the applicable Rating Agency) are then rated one
of the two highest long-term and the highest short-term ratings of each Rating
Agency for such securities, or such lower ratings as will not result in the
downgrading or withdrawal of the ratings then assigned to the Bonds by the
Rating Agencies, as evidenced by a signed writing delivered by each Rating
Agency;

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

            (vi) guaranteed reinvestment agreements issued by any bank,
insurance company or other corporation acceptable to the Rating Agencies at the
time of the issuance of such agreements, as evidenced by a signed writing
delivered by 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 (iv)
above;

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

            (ix) interests in any money market fund 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 rating by each Rating Agency or
such lower rating as will not result in a change in the rating then assigned to
the Bonds by each Rating Agency;

            (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 which on the date of acquisition has been rated by each
applicable Rating Agency in their respective highest applicable rating category
or such lower rating as will not result in a change in the rating then specified
stated maturity and bearing interest or sold at a discount acceptable to each
Rating Agency as will not result in the downgrading or withdrawal of the ratings
then assigned to the Bonds by the Rating Agencies; and

            (xi) such other investments having a specified stated maturity and
bearing interest or sold at a discount acceptable to the Rating Agencies as will
not result in the downgrading or withdrawal of the ratings then assigned to the
Bonds by the Rating Agencies;

                                      I-19
<PAGE>   34
provided, that no such instrument shall be a Permitted Investment if (i) such
instrument evidences the right to receive interest only payments with respect to
the obligations underlying such instrument or (ii) such instrument would require
the Issuer to register as an investment company under the Investment Company Act
of 1940, as amended.

            "PERSON": Any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

            "PLEDGED ACCOUNTS": The Bond Account and the Distribution Account
(exclusive of any earnings on investments made with funds deposited in the
Distribution Account or the Bond Account).

            "PLEDGED MORTGAGE SCHEDULE": The list of Pledged Mortgages (as from
time to time amended by the Master Servicer to reflect the addition of
Replacement Pledged Mortgages and the deletion of Deleted Pledged Mortgages
pursuant to the provisions of the Master Servicing Agreement) Granted to the
Trustee pursuant to the provisions hereof as part of the Trust Estate and from
time to time subject to this Agreement, attached hereto as Schedule I.

            "PLEDGED MORTGAGES": Such of the mortgage loans Granted to the
Trustee pursuant to the provisions hereof as from time to time are held as a
part of the Trust Estate (including any REO Property), the mortgage loans so
held being identified in the Pledged Mortgage Schedule, notwithstanding
foreclosure or other acquisition of title of the related Mortgaged Property.

            "POOL STATED PRINCIPAL BALANCE": As to any Payment Date, the
aggregate of the Stated Principal Balances of the Pledged Mortgages which were
Outstanding Pledged Mortgages on the Due Date in the month preceding the month
of such Payment Date.

            "PREDECESSOR BONDS": With respect to any particular Bond of a Class,
every previous Bond of that Class evidencing all or a portion of the same debt
as that evidenced by such particular Bond; and, for the purpose of this
definition, any Bond authenticated and delivered under Section 2.08 in lieu of a
lost, destroyed or stolen Bond shall be deemed to evidence the same debt as the
lost, destroyed or stolen Bond.

            "PREPAYMENT INTEREST SHORTFALL": As to any Payment Date, Pledged
Mortgage and Principal Prepayment, the amount, if any, by which one month's
interest at the related Mortgage Rate on such Principal Prepayment exceeds the
amount of interest paid in connection with such Principal Prepayment.

            "PREPAYMENT PERIOD": As to any Payment Date, the [calendar month]
preceding the month of such Payment Date.

                                      I-20
<PAGE>   35
            "PRIMARY MORTGAGE INSURANCE POLICY": Each policy of primary mortgage
guaranty insurance or any replacement policy therefor with respect to any
Pledged Mortgage.

            "PRINCIPAL PREPAYMENT": Any payment of principal by a Mortgagor on a
Pledged Mortgage that is received in advance of its scheduled Due Date and is
not accompanied by an amount representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment.

            "PRINCIPAL PREPAYMENT IN FULL": Any Principal Prepayment made by a
Mortgagor of the entire principal balance of a Pledged Mortgage.

            "PROCEEDING": Any suit in equity, action at law or other judicial or
administrative proceeding.

            "PROPRIETARY LEASE": As defined in Section 1 of the Master Servicing
Agreement.

            "PROSPECTUS SUPPLEMENT": The Prospectus Supplement dated _________
___, 200__ relating to the Bonds.

            "PURCHASE PRICE": With respect to any Pledged Mortgage required to
be purchased by the Master Servicer pursuant to Section 2(a)(ii) or 2(d)(iii) of
the Master Servicing Agreement or purchased at the option of the Master Servicer
pursuant to Section 3(n) of the Master Servicing Agreement, an amount equal to
the sum of (i) 100% of the unpaid principal balance of the Pledged Mortgage on
the date of such purchase, and (ii) accrued interest thereon at the applicable
Adjusted Net Mortgage Rate from the date through which interest was last paid by
the Mortgagor to the Due Date in the month in which the Purchase Price is to be
distributed to Bondholders.

            "RATING AGENCY": Each of [ ] and [ ]. If either such organization or
a successor is no longer in existence, "Rating Agency" shall be such nationally
recognized statistical rating organization, or other comparable Person, as is
designated by the Issuer, notice of which designation shall be given to the
Trustee. References herein to a given rating or rating category of a Rating
Agency shall mean such rating category without giving effect to any modifiers.

            "REALIZED LOSS": With respect to each Liquidated Pledged Mortgage,
an amount (not less than zero or more than the Stated Principal Balance of the
Pledged Mortgage) as of the date of such liquidation, equal to (i) the Stated
Principal Balance of the Liquidated Pledged Mortgage as of the date of such
liquidation, plus (ii) interest at the Net Mortgage Rate from the Due Date as to
which interest was last paid or advanced (and not reimbursed) to Bondholders up
to the Due Date in the month in which Liquidation Proceeds are required to be
distributed on the Stated Principal Balance of such Liquidated Pledged Mortgage
from time to

                                      I-21
<PAGE>   36
time, minus (iii) the Liquidation Proceeds, if any, received during the month in
which such liquidation occurred, to the extent applied as recoveries of interest
at the Adjusted Net Mortgage Rate and to principal of the Liquidated Pledged
Mortgage. With respect to each Pledged Mortgage which has become the subject of
a Deficient Valuation, if the principal amount due under the related Mortgage
Note has been reduced, the difference between the principal balance of the
Pledged Mortgage outstanding immediately prior to such Deficient Valuation and
the principal balance of the Pledged Mortgage as reduced by the Deficient
Valuation. With respect to each Pledged Mortgage which has become the subject of
a Debt Service Reduction and any Payment Date, the amount, if any, by which the
principal portion of the related Scheduled Payment has been reduced.

            "RECORD DATE": With respect to any Payment Date, the date on which
the Persons entitled to receive any payment of principal of, or interest on, any
Bonds (or notice of a payment in full of principal) due and payable on such
Payment Date are determined; such date shall be the last day of the month
preceding the month of such Payment Date.

            "REDEMPTION DATE": Any Optional Redemption Date or any Payment Date
on which Bonds may be redeemed.

            "REDEMPTION PRICE": With respect to any Class of Bonds to be
redeemed, an amount equal to 100% of the related Class Principal Amount of the
Bonds (including, in the case of the Subordinated Bonds, any unpaid Subordinated
Principal Carryover Shortfall) to be so redeemed, together with interest on such
amount at the applicable Bond Interest Rate through the last day of the month
immediately preceding the month in which such Redemption Date occurs, together
with any unpaid Class Interest Shortfalls.

            "REFINANCING PLEDGED MORTGAGE": Any Pledged Mortgage originated in
connection with the refinancing of an existing mortgage loan.

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

            "RELIEF ACT REDUCTIONS": With respect to any Payment Date and any
Pledged Mortgage as to which there has been a reduction in the amount of
interest collectible thereon for the most recently ended calendar month as a
result of the application of the Relief Act, the amount, if any, by which (i)
interest collectible on such Pledged Mortgage for the most recently ended
calendar month is less than (ii) interest accrued thereon for such month
pursuant to the Mortgage Note.

            "REMIC": A "real estate mortgage investment conduit," as such term
is defined in the Code.

            "REMIC PROVISIONS": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of

                                      I-22
<PAGE>   37
Subchapter M of Chapter 1 of the Code, and related provisions, and regulations
promulgated thereunder, as the foregoing may be in effect from time to time.

            "REO PROPERTY": A Mortgaged Property acquired by the Trustee through
foreclosure or deed-in-lieu of foreclosure in connection with a defaulted
Pledged Mortgage.

            "REPLACEMENT PLEDGED MORTGAGE": A Mortgage Loan substituted by the
Master Servicer 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 C to the Master Servicing Agreement, (i) have a Stated Principal
Balance, after deduction of the principal portion of the Scheduled Payment due
in the month of substitution, not in excess of, and not more than 10% less than,
the Stated Principal Balance of the Deleted Mortgage Loan; (ii) be accruing
interest at a rate no lower than and not more than 1% per annum higher than,
that of the Deleted Mortgage Loan; (iii) have a Loan-to-Value Ratio no higher
than that of the Deleted Mortgage Loan; (iv) have a Mortgage Rate based upon the
same Index and a Margin at least equal to and not greater than 50 basis points
higher than that of the Deleted Mortgage Loan; (v) have a Mortgage Rate subject
to a Periodic Rate Cap and Maximum Rate that are no less than those applicable
to the Deleted Mortgage Loan; (vi) have Adjustment Dates that are no more or
less frequent than the Deleted Mortgage Loan; (vii) have a remaining term to
maturity no greater than (and not more than one year less than that of) the
Deleted Mortgage Loan; (viii) not be a Cooperative Loan unless the Deleted
Mortgage Loan was a Cooperative Loan; (ix) comply with each representation and
warranty set forth in Section 2(d)(ii) of the Master Servicing Agreement; and
(x) shall be accompanied by an Opinion of Counsel that such Replacement Pledged
Mortgage would not adversely affect the REMIC status of the Trust Estate or
would not otherwise be prohibited by this Indenture.

            "REQUEST FOR RELEASE": The Request for Release submitted by the
Master Servicer to the Trustee, substantially in the form of Exhibits C and D to
the Master Servicing Agreement, as appropriate.

            "RESPONSIBLE OFFICER": With respect to the Trustee, any officer in
the corporate trust department or similar group of the Trustee and also, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his or her knowledge of and familiarity with the
particular subject.

            "S&P": Standard & Poor's Ratings Group, a division of McGraw-Hill
Inc. For purposes of Section 11.04 the address for notices to S&P shall be
Standard & Poor's Ratings Group, 26 Broadway, 15th Floor, New York, New York
10004, Attention: Mortgage Surveillance Monitoring, or such other address as S&P
may hereafter furnish to the Issuer and the Master Servicer.

            "SAIF": The Savings Association Insurance Fund, or any successor
thereto.

            "SALE": The meaning specified in Section 5.18(a).

                                      I-23
<PAGE>   38
            "SCHEDULED PAYMENT": The scheduled monthly payment on a Pledged
Mortgage due on any Due Date allocable to principal and/or interest on such
Pledged Mortgage which, unless otherwise specified in the Master Servicing
Agreement, shall give effect to any related Debt Service Reduction and any
Deficient Valuation that affects the amount of the monthly payment due on such
Pledged Mortgage.

            "SECURITIES ACT": The Securities Act of 1933, as amended.

            "SENIOR BOND INTEREST RATE": With respect to any Interest Accrual
Period, the annual rate at which interest accrues on the Senior Bonds as
specified in such Bonds and in Section 2.03(c).

            "SENIOR BONDS": The Class A-1 Bonds.

            "SENIOR CLASS PRINCIPAL AMOUNT": As of any Payment Date, the
Original Senior Class Principal Amount reduced by all amounts previously
distributed to Holders of the Senior Bonds as payments of principal.

            "SENIOR INTEREST PAYMENT AMOUNT": As to any Payment Date, the sum of
(i) one month's interest accrued during the related Interest Accrual Period at
the Senior Bond Interest Rate on the Senior Class Principal Amount, subject to
reduction pursuant to Section 2.03(d) and (ii) the sum of the amounts, if any,
by which the amount described in clause (i) above on each prior Payment Date
exceeded the amount actually distributed as interest on such prior Payment Dates
and not subsequently distributed.

            "SENIOR INTEREST SHORTFALL": As to any Payment Date, the amount by
which the amount described in clause (i) of the definition of Senior Interest
Payment Amount exceeds the amount of interest actually paid on the Senior Bonds
on such Payment Date pursuant to such clause (i).

            "SENIOR PERCENTAGE": As to any Payment Date, the percentage
equivalent of a fraction the numerator of which is the Senior Class Principal
Amount immediately prior to such date and the denominator of which is the sum of
(i) the Senior Class Principal Amount, (ii) the Class B-1 Principal Amount,
(iii) the Class B-2 Principal Amount and (iv) the Invested Amount, in each case
immediately prior to such date.

            "SENIOR PRINCIPAL PAYMENT AMOUNT": As to each Payment Date, the
Senior Percentage of the sum of (a) the principal portion of the Scheduled
Payment due on each Pledged Mortgage [on the related Due Date], (b) the
principal portion of the purchase price of each Pledged Mortgage that was
purchased by Redwood Trust or another person pursuant to the Mortgage Loan
Purchase Agreement [or any optional purchase by the Master Servicer of a
defaulted Pledged Mortgage] as of such Payment Date, (c) the Substitution
Adjustment Amount in connection with any Deleted Pledged Mortgage received with
respect to such Payment Date,

                                      I-24
<PAGE>   39
(d) any Insurance Proceeds or Liquidation Proceeds allocable to recoveries of
principal of Pledged Mortgages that are not yet Liquidated Pledged Mortgages
received during the [calendar month] preceding the month of such Payment Date,
(e) with respect to each Pledged Mortgage that became a Liquidated Pledged
Mortgage during the [calendar month] preceding the month of such Payment Date,
the Stated Principal Balance of such Pledged Mortgage, and (f) all partial and
full principal prepayments by borrowers received during the related Prepayment
Period.

            "SERVICER": Any person with which the Master Servicer has entered
into a Servicing Agreement for the servicing of all or a portion of the Pledged
Mortgages pursuant to Section 3(b) of the Master Servicing Agreement.

            "SERVICER ADVANCE": The meaning ascribed to such term in Section
3(h)(iv) of the Master Servicing Agreement.

            "SERVICING ADVANCES": All customary, reasonable and necessary "out
of pocket" costs and expenses incurred in the performance by the Master Servicer
of its servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of a Mortgaged Property, (ii) any
expenses reimbursable to the Master Servicer pursuant to Section 3(n) of the
Master Servicing Agreement and any enforcement or judicial proceedings,
including foreclosures, (iii) the management and liquidation of any REO Property
and (iv) compliance with the obligations under Section 3(l) of the Master
Servicing Agreement.

            "SERVICING AGREEMENT": Any agreement between the Master Servicer and
related Servicer relating to servicing and/or administration of certain Pledged
Mortgages as provided in Section 3(b) of the Master Servicing Agreement.

            "SERVICING DEFAULT": As defined in the Master Servicing Agreement.

            "SERVICING FEE": As to each Pledged Mortgage and any Payment Date,
an amount equal to one month's interest at the applicable Servicing Fee Rate on
the Stated Principal Balance of such Pledged Mortgage.

            "SERVICING FEE RATE": With respect to any Pledged Mortgage, the per
annum rate set forth in the Pledged Mortgage Schedule for such Pledged Mortgage.

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

            "STATED MATURITY": With respect to any and all Bonds
_________________.

                                      I-25
<PAGE>   40
            "STATED PRINCIPAL BALANCE": As to any Pledged Mortgage and Due Date,
the unpaid principal balance of such Pledged Mortgage as of such Due Date as
specified in the amortization schedule at the time relating thereto (before any
adjustment to such amortization schedule by reason of any moratorium or similar
waiver or grace period) after giving effect to any previous partial Principal
Prepayments and Liquidation Proceeds allocable to principal (other than with
respect to any Liquidated Pledged Mortgage) and to the payment of principal due
on such Due Date and irrespective of any delinquency in payment by the related
Mortgagor.

            "SUBORDINATED BOND INTEREST RATE": With respect to any Interest
Accrual Period, the annual rate at which interest accrues on the Subordinated
Bonds as specified in such Bonds and in Section 2.03(c).

            "SUBORDINATED BONDS": The Class B-1 and the Class B-2 Bonds.

            "SUBORDINATED CLASS PRINCIPAL AMOUNT": As of any Payment Date, the
Original Class B-1 and Class B-2 Principal Amounts reduced by all amounts
previously distributed to Holders of the Subordinated Bonds as payments of
principal.

            "SUBSTITUTION ADJUSTMENT AMOUNT": The meaning ascribed to such term
pursuant to Section 2(d)(iv) of the Master Servicing Agreement.

            "SUCCESSOR MASTER SERVICER": A Person appointed by the Trustee who
succeeds either the Trustee or the Master Servicer, pursuant to the applicable
provisions of the Master Servicing Agreement.

            "TRUST ESTATE": All money, instruments and other property subject or
intended to be subject to the lien of this Indenture for the benefit of the
Bondholders as of any particular time (including, without limitation, all
property and interests Granted to the Trustee), including all proceeds thereof.

            "TRUST INDENTURE ACT" OR "TIA": The Trust Indenture Act of 1939, as
amended, as in force at the Closing Date, unless otherwise specifically
provided.

            "TRUSTEE": ______________________________, a banking corporation
organized and existing under the laws of _________________________________, and
any Person succeeding as Trustee hereunder pursuant to Section 6.12 or any other
applicable provision hereof.

            "TRUSTEE FEE": As to any Payment Date, an amount equal to
one-twelfth of the Trustee Fee Rate multiplied by the Pool Stated Principal
Balance with respect to such Payment Date.

            "TRUSTEE FEE RATE": With respect to each Pledged Mortgage, the per
annum rate agreed upon in writing on or prior to the Closing Date by the Trustee
and the Issuer.

                                      I-26
<PAGE>   41
            "TRUSTEE MORTGAGE FILE": With respect to each Pledged Mortgage, the
original documents and instruments relating thereto to be retained in the
custody and possession of the Trustee, as set forth and enumerated in Section
2(a) of the Master Servicing Agreement.

            "UPPER-TIER INTEREST R": The sole class of "residual interest" in
the Upper-Tier REMIC and the beneficial ownership of which is evidenced by the
Class R-UT Certificate.

            "UPPER-TIER REMIC": As described in Section 2.15.

            "WITHDRAWAL DATE": The ___th day of each month, or if such day is
not a Business Day, the next preceding Business Day.

                                      I-27
<PAGE>   42
                                   ARTICLE II

                                    THE BONDS

SECTION 2.01. FORMS GENERALLY.

            The Bonds and the Trustee's certificate of authentication shall be
in substantially the form required by this Article II, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange on which the Bonds
may be listed, or as may, consistently herewith, be determined by the officers
executing such Bonds, as evidenced by their execution thereof. Any portion of
the text of any Bond may be set forth on the reverse thereof with an appropriate
reference on the face of the Bond.

            The Definitive Bonds may be produced in any manner determined by the
officers executing such Bonds, as evidenced by their execution thereof;
provided, however, that in the event the Bonds are listed on any securities
exchange, the Bonds shall be produced in accordance with the rules of any
securities exchange on which the Bonds may be listed.

SECTION 2.02. FORMS OF BONDS AND CERTIFICATE OF AUTHENTICATION.

            (a) The form of Bond which is a Senior Bond is attached hereto as
Exhibit II.

            (b) The form of Bond which is a Class B-1 Bond is attached hereto as
Exhibit III.

            (c) The form of Bond which is a Class B-2 Bond is attached hereto as
Exhibit IV.

            (d) The form of Class R Certificate which is a Class R-LT
Certificate is attached hereto as Exhibit V.

            (e) The form of Class R Certificate which is a Class R-UT
Certificate is attached hereto as Exhibit VI.

            (f) The form of the Trustee's certificate of authentication is as
follows:

            "This is one of the Bonds referred to in the within mentioned
            Indenture. as Trustee

                                      II-1
<PAGE>   43
            By:

            Authorized Signatory"

            (g) The form of assignment is as follows:

            "FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _________________________________________________________________
________________________________________________________________________________
    (Please insert Social Security or other Identifying Number of Assignee)

________________________________________________________________________________

________________________________________________________________________________
         (Please print or type name and address of Assignee)

________________________________________________________________________________

the within Bond of Sequoia Mortgage Trust 200_-_, and does hereby irrevocably
constitute and appoint __________ Attorney to transfer such Bond on the books of
the within named trust, with full power of substitution in the premises.

Dated: _________________________________________________________________________

            Notice: The signature to this assignment must correspond with the
            name as written upon the face of this Bond in every particular
            without alteration or enlargement or any change whatever. The
            signature must be guaranteed by a member of a signature guaranty
            medallion program. Notarized or witnessed signatures are not
            acceptable."

            [(h) The Bonds shall have a Statement of Insurance printed thereon
or attached thereto which essentially sets forth the terms of the Bond Insurance
Policy.]

SECTION 2.03. BONDS ISSUABLE IN CLASSES; PROVISIONS WITH RESPECT TO PRINCIPAL
AND INTEREST PAYMENTS.

            (a) General.

                                      II-2
<PAGE>   44
            The Bonds shall be designated generally as the Sequoia Mortgage
Trust _________, "Collateralized Mortgage Bonds" of the Issuer. Each Bond shall
bear upon the face thereof the designation so selected for the Class to which it
belongs.

            Bonds of each Class shall constitute Book Entry Bonds as defined in
Section 2.13 hereof. The aggregate principal amount of Bonds that may be
authenticated and delivered under the Indenture is unlimited.

            All of the Bonds shall be issued in the appropriate forms attached
as Exhibits hereto with such additions and completions as are appropriate for
each such Class.

            The Class A-1 Bonds shall constitute the sole Class of Senior Bonds
and the Class B-1 Bonds and the Class B-2 Bonds shall constitute the sole
Classes of Subordinated Bonds.

            The final installments of principal of the Classes of Bonds shall
have the Stated Maturity specified above. The principal of each Bond shall be
payable in installments ending no later than the Stated Maturity of the final
installment of the principal thereof unless the unpaid principal of such Bond
becomes due and payable at an earlier date by declaration of acceleration or
call for redemption or otherwise. All payments made with respect to any Bond
shall be applied first to the interest then due and payable on such Bond and
then to the principal thereof.

            (b) Payments of Principal of and Interest on the Bonds.

            On each Payment Date, the Trustee shall withdraw the Bond Payment
Amount from the Distribution Account and apply such funds to payments on the
Bonds in the following order of priority and, in each case, to the extent of
funds remaining:

            (i) to the Senior Bonds, an amount allocable to interest equal to
the Senior Interest Payment Amount for such Payment Date;

            (ii) to the Senior Bonds, an amount allocable to principal equal to
the Senior Principal Payment Amount for such Payment Date;

            (iii) to the Class B-1 Bonds, an amount allocable to interest equal
to the Class B-1 Interest Payment Amount for such Payment Date;

            (iv) to the Class B-1 Bonds, an amount allocable to principal equal
to the Class B-1 Principal Payment Amount for such Payment Date;

            (v) to the Class B-2 Bonds, an amount allocable to interest equal to
the Class B-2 Interest Payment Amount for such Payment Date; and

                                      II-3
<PAGE>   45
            (vi) to the Class B-2 Bonds, an amount allocable to principal to the
Class B-2 Principal Payment Amount for such Payment Date.

            (vii) to the Class R Holders, pro rata, any remaining balance;
provided, however, that any balance remaining for distribution after the
exercise by the Class R-LT Holder of its option to terminate the Trust Estate
under Section 10.01 shall be distributed to the Class R-LT Holder; and provided
further that the aggregate amounts distributed on account of principal to the
Senior and Subordinated Bondholders (whether out of the Bond Distribution Amount
or the Bond Insurance Policy) shall not exceed the Original Senior Class, Class
B-1 and Class B-2 Amount, respectively.

            (c) Calculation of the Bond Interest Rate.

            (i) The Bond Interest Rate for the Senior Bonds (the "Senior Bond
Interest Rate") and any Interest Accrual Period will equal ______________;

            (ii) The Bond Interest Rate for the Class B-1 Bonds (the "Class B-1
Bond Interest Rate") and any Interest Accrual Period will equal
___________________;

            (iii) The Bond Interest Rate for the Class B-2 Bonds (the "Class B-2
Bond Interest Rate") and any Interest Accrual Period will equal _______________;
and

            (iv) The Senior Interest Payment Amount, the Class B-1 Interest
Payment Amount and the Class B-2 Interest Payment Amount shall each be
calculated on the basis of a 360-day year of twelve 30-day months.

            (d) Reduction of Interest Payment Amounts.

            With respect to each Payment Date, the amounts referred to in clause
(i) of the definition of Senior Interest Payment Amount and clauses (i) and (ii)
of the definitions of Class B-1 Interest Payment Amount and Class B-2 Interest
Payment Amount, as applicable, for such Payment Date shall be reduced by the
applicable Class' pro rata share (based on the Interest Payment Amount for such
Class before reduction pursuant to this Section 2.03(d)) of Net Interest
Shortfalls.

            (e) Pro Rata Payments.

            All payments on the Bonds of any Class shall be made pro rata among
all Bonds of such Class.

            (f) Payments to the Senior Bondholders provided for in (b) of this
Section 2.03 shall be paid, on each Payment Date after the Subordinated Class
Principal Amount and the Invested Amount have been reduced to zero and where the
Senior Interest Payment Amount and the Senior Principal Payment Amount exceed
the Available Funds, by the Bond Insurer.

                                      II-4
<PAGE>   46
SECTION 2.04. DENOMINATIONS.

            Each Class of Book Entry Bonds shall be evidenced initially by a
single Bond representing the entire aggregate Class Principal Amount of such
Class of Bonds as of the Closing Date, beneficial ownership of which may be held
in denominations of $25,000 and increments of $1,000 in excess thereof for all
Bonds. All of the Book Entry Bonds shall be initially registered on the Bond
Register in the name of Cede & Co., the nominee of the Depository, and no
Beneficial Owner will receive a Definitive Bond representing such Beneficial
Owner's interest in the Book Entry Bonds, except in the event of Book Entry
Termination. The minimum beneficial ownership which may be held for a Class R-LT
or Class R-UT Certificate shall be 100% of the amount specified on the face
thereof.

SECTION 2.05. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.

            The Bonds shall be executed by an Authorized Officer of the Issuer.
The signature of such officer on the Bonds may be manual or facsimile.

            Bonds bearing the manual or facsimile signature of an individual who
was at any time an Authorized Officer shall bind the Issuer, notwithstanding
that such individual has ceased to hold such office prior to the authentication
and delivery of such Bonds or did not hold such office at the date of such
Bonds.

            At any time and from time to time after the execution and delivery
of this Indenture, the Issuer may deliver Bonds executed on behalf of the Issuer
to the Trustee for authentication; and the Trustee shall authenticate and
deliver such Bonds as in this Indenture provided and not otherwise.

            Each Bond authenticated on the Closing Date shall be dated the
Closing Date. All other Bonds which are authenticated after the Closing Date for
any other purpose hereunder shall be dated the date of their authentication.

            No Bond shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Bond a
certificate of authentication substantially in the form provided for herein
executed by the Trustee or by any Authenticating Agent by the manual signature
of one of its authorized officers or employees, and such certificate upon any
Bond shall be conclusive evidence, and the only evidence, that such Bond has
been duly authenticated and delivered hereunder.

SECTION 2.06. TEMPORARY BONDS.

            So long as the Book Entry Bonds are held by the Depository for the
Participants in book-entry form, they may be typewritten or in any other form
acceptable to the Issuer, the Trustee and the Depository. At any time during
which the Book Entry Bonds are not held by the

                                      II-5
<PAGE>   47
Depository for the Participants in book-entry form, the Definitive Bonds shall
be lithographed or printed with steel engraved borders.

            Pending the preparation of Definitive Bonds, the Issuer may execute,
and upon Issuer Order the Trustee shall authenticate and deliver, temporary
Bonds which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Bonds in lieu of which they may be so issued and with such variations
as the officers executing such Bonds may determine, as evidenced by their
execution of such Bonds.

            If temporary Bonds are issued, the Issuer will cause definitive
Bonds to be prepared without unreasonable delay. After the preparation of
definitive Bonds, the temporary Bonds shall be exchangeable for definitive Bonds
upon surrender of the temporary Bonds at the office or agency of the Issuer to
be maintained as provided in Section 3.02, without charge to the Holder. Upon
surrender or cancellation of any one or more temporary Bonds, the Issuer shall
execute and the Trustee shall authenticate and deliver and exchange therefor a
like principal amount of definitive Bonds of the same Class and of authorized
denominations. Until so exchanged, the temporary Bonds shall in all respects be
entitled to the same benefits under this Indenture as Definitive Bonds of the
same Class.

SECTION 2.07. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.

            (a) The Issuer shall cause to be kept a register (the "Bond
Register") in which, subject to such reasonable regulations as it may prescribe,
the Issuer shall provide for the registration of Bonds and the registration of
transfers of Bonds. The Trustee is hereby initially appointed "Bond Registrar"
for the purpose of registering Bonds and transfers of Bonds as herein provided.
Upon any resignation of any Bond Registrar appointed by the Issuer, the Issuer
shall promptly appoint a successor or, in the absence of such appointment, shall
assume the duties of Bond Registrar.

            (b) At any time the Trustee is not also the Bond Registrar, the
Trustee shall be a co-Bond Registrar. The Issuer shall cause each co-Bond
Registrar to furnish the Bond Registrar, promptly after each authentication of a
Bond by it, appropriate information with respect thereto for entry by the Bond
Registrar into the Bond Register. If the Trustee shall at any time not be
authorized to keep and maintain the Bond Register, the Trustee shall have the
right to inspect such Bond Register at all reasonable times and to rely
conclusively upon a certificate of the Person in charge of the Bond Register as
to the names and addresses of the Holders of the Bonds and the principal amounts
and numbers of such Bonds so held.

            (c) Upon surrender for registration of transfer of any Bond at the
office or agency of the Issuer to be maintained as provided in Section 3.02, the
Issuer shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees,

                                      II-6
<PAGE>   48
one or more new Bonds of any authorized denominations and of a like aggregate
principal amount and Class.

            (d) At the option of the Holder, Bonds may be exchanged for other
Bonds of any authorized denominations, and of a like aggregate initial principal
amount and Class, upon surrender of the Bonds to be exchanged at such office or
agency. Whenever any Bonds are so surrendered for exchange, the Issuer shall
execute, and the Trustee shall authenticate and deliver, the Bonds which the
Bondholder making the exchange is entitled to receive.

            (e) All Bonds issued upon any registration of transfer or exchange
of Bonds shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Bonds surrendered
upon such registration of transfer or exchange.

            (f) Every Bond presented or surrendered for registration of transfer
or exchange shall be duly endorsed, or 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.

            (g) No service charge shall be made for any registration of transfer
or exchange of Bonds, but the Issuer may require payment of a sum sufficient to
cover any tax or other governmental charge as may be imposed in connection with
any registration of transfer or exchange of Bonds, other than exchanges pursuant
to Section 2.08 not involving any transfer.

            (h) No transfer of a Class B Bond or a Class R-LT or Class R-UT
Certificate shall be made unless such transfer is made pursuant to an effective
registration statement or in accordance with an exemption from the requirements
under the Securities Act of 1933, as amended (the "Act"). If such a transfer is
to be made in reliance upon an exemption from the Act, (i) the Trustee shall, if
not otherwise directed by the Depositor, require a written Opinion of Counsel
acceptable to and in form and substance satisfactory to the Trustee that such
transfer may be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from the Act or is being made pursuant to the
Act, which Opinion of Counsel shall not be an expense of the Trustee, the
Depositor or the Master Servicer, and (ii) the Trustee shall require the
transferee to execute a certification, substantially in the form of Exhibit IX
hereto, acceptable to and in form and substance satisfactory to the Trustee
setting forth the facts surrounding such transfer; provided that such Opinion of
Counsel shall not be required in the case of transfers by or to the Depositor,
Redwood Trust, Inc., RWT Holdings or any of their wholly-owned subsidiaries.
Such Opinion of Counsel and certification shall not be an expense of the
Trustee, the Depositor or the Master Servicer. The Trustee, the Master Servicer
and the Depositor may, without the consent of any Bondholder, add provisions
(which shall include a form of certificate to be attached hereto as an exhibit
that must be delivered by the proposed transferee) to this Section 2.07(h) to
permit transfers pursuant to Rule 144A of the Securities and Exchange
Commission, in which case transfers pursuant to such provisions shall not
require an Opinion of Counsel.

                                      II-7
<PAGE>   49
            (i) No transfer (exclusive of any transfer to a Depository or a
securitization trustee) of a Class B Bond or a Class R-LT or Class R-UT
Certificate shall be made unless the Trustee shall have received either (i) a
representation letter (substantially in the form attached hereto as Exhibit X)
from the transferee of such Class R Certificate, acceptable to and in form and
substance satisfactory to the Trustee, to the effect that such transferee is not
an employee benefit plan or other retirement plan or arrangement subject to
Section 406 of ERISA or Section 4975 of the Code, nor a Person acting on behalf
of any such plan or arrangement or acquiring such Class R Certificate with funds
of such a plan or arrangement (including without limitation any insurance
company using funds that may constitute "plan assets"), which representation
letter shall not be an expense of the Trustee, the Depositor or the Master
Servicer, or (ii) in the case of any such Class R Certificate presented for
registration in the name of an employee benefit plan or other retirement plan or
arrangement subject to ERISA or Section 4975 of the Code (or comparable
provisions of any subsequent enactments), or a trustee of any such plan or
arrangement, an Opinion of Counsel satisfactory to the Trustee to the effect
that the purchase or holding of such Class R Certificate is permissible under
applicable law, will not constitute or result in a non-exempt prohibited
transaction under ERISA or Section 4975 of the Code and will not subject the
Trustee, the Depositor or the Master Servicer to any obligation in addition to
those undertaken in this Indenture, which Opinion of Counsel shall not be an
expense of the Trustee, the Depositor or the Master Servicer.

            (j) Notwithstanding anything to the contrary contained herein,
unless and until the Trustee shall have received an Opinion of Counsel that is
Independent, satisfactory in form and substance to the Trustee, to the effect
that the absence of the transfer restrictions contained in this Section 2.07(j)
would not result in the imposition of federal income tax upon the Trust Estate
or cause the Trust Estate to fail to qualify as two REMICs, no transfer, sale or
other disposition of the Class R-LT or Class R-UT Certificate (including a
beneficial interest therein) may be made without the express written consent of
the Trustee.

            (k) As a condition to the granting of the consent referred to in
Section 2.07(j), prior to the transfer, sale or other disposition of the Class
R-LT or Class R-UT Certificate, the Trustee shall require that the proposed
transferee deliver to the Trustee an affidavit stating that as of the date of
such transfer (i) such transferee is not and has no intention of becoming either
(A) 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 (other than an instrumentality that is a corporation all of
whose activities are subject to tax under the Code and, except in the case of
the FHLMC, a majority of the board of directors of which corporation is not
selected by the United States, any state or political subdivision thereof), (B)
any organization that is exempt from any tax imposed by Chapter 1 of Subtitle A
of the Code, other than (x) a tax-exempt farmers' cooperative within the meaning
of section 521 of the Code or (y) an organization that is subject to the tax
imposed by section 511 of the Code on "unrelated business income" or (C) a
corporation operating on a cooperative basis that is engaged in furnishing
electric energy or providing telephone service to persons in rural areas (within
the meaning of section 1381(a)(2)(C) of the Code) (any Person described in (A),
(B), or (C) being

                                      II-8
<PAGE>   50
referred to herein as a "Disqualified Organization"), (ii) such transferee is
not acquiring such Class R Certificates as an agent, broker, nominee, or
middleman for a Disqualified Organization and (iii) such transferee is not a
Non-U.S. Person. A Responsible Officer of the Trustee shall not grant the
consent referred to in Section 2.07(j) if it has actual knowledge that any
statement made in the affidavit issued pursuant to the preceding sentence is not
true. Notwithstanding any transfer, sale or other disposition of such Class R
Certificates to a Disqualified Organization or Non-U.S. Person, such transfer,
sale or other disposition shall be deemed to be of no legal force or effect
whatsoever and such Disqualified Organization or Non-U.S. Person shall not be
deemed to be a Holder of such Class R Certificates for any purpose hereunder,
including, but not limited to, the receipt of distributions on such Class R
Certificates. If any purported transfer shall be in violation of the provisions
of Section 2.07(j), then the prior Holder of such Class R Certificates shall,
upon discovery that the transfer of such Class R Certificates was not in fact
permitted in Section 2.07(j), be restored to all rights as a Holder thereof
retroactive to the date of the purported transfer of such Class R Certificates.
The Trustee, the Depositor and the Master Servicer shall be under no liability
to any Person for any registration or transfer of a Class R Certificate that is
not permitted by Section 2.07(j) or for the Payment Agent making payments due on
any such Class R Certificate to the purported Holder thereof or taking any other
action with respect to such purported Holder under the provisions of this
Indenture so long as the transfer was registered under the written certification
of the Trustee as described in Section 2.07(j). The prior Holder shall be
entitled to recover from any purported Holder of any such Class R Certificate
that was in fact not a permitted transferee under Section 2.07(j) at the time it
became a Holder all payments made on such Class R Certificate; provided that
neither the Depositor, the Master Servicer nor the Trustee shall be responsible
for such recovery if they otherwise made a good faith effort to comply with this
Section 2.07(k). Each such Class R Holder, by the acceptance of a Class R-LT or
Class R-UT Certificate, shall be deemed for all purposes to have consented to
the provisions of Section 2.07(j) and to any amendment of this Indenture deemed
necessary by counsel of the Trustee, as evidenced by an Opinion of Counsel, to
ensure that either such Class R Certificate is not transferred to a Disqualified
Organization or Non-U.S. Person and that any transfer of such Class R
Certificate will not cause the imposition of a tax upon the Trust Estate or
cause the Trust Estate to fail to qualify as two REMICs. The restrictions on
transfer of either such Class R Certificate will cease to apply and be void upon
receipt by the Trustee of the Opinion of Counsel as described in Section 2.07(j)
or shall be modified as indicated in such Opinion of Counsel. If any Person that
is not permitted to acquire any beneficial interest in a Class R-LT or Class
R-UT Certificate under this Section 2.07(k) acquires any beneficial interest in
a Class R-LT or Class R-UT Certificate in violation of the restrictions in this
Section 2.07(k), then the Trustee, based on information provided to it by the
Master Servicer and/or the Depositor, will provide to the Internal Revenue
Service, and to the persons specified in Section 860E(e)(3) and (6) of the Code,
information needed to compute the tax imposed under Section 860E(e)(5) of the
Code on transfers of residual interests to disqualified organizations. The
Trustee shall be entitled to be reimbursed by such Person for the cost of
providing such information.

SECTION 2.08. MUTILATED, DESTROYED, LOST OR STOLEN BONDS.

                                      II-9
<PAGE>   51
            If (1) any mutilated Bond is surrendered to the Trustee or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Bond and (2) there is delivered to the Trustee such security or indemnity
as may be required by the Trustee to save the Issuer and the Trustee harmless,
then, in the absence of notice to the Issuer or the Trustee that such Bond has
been acquired by a bona fide purchaser, the Issuer shall execute and upon its
request the Trustee shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Bond, a new Bond or Bonds of
the same tenor, aggregate initial principal amount and Class bearing a number
not contemporaneously outstanding. If, after the delivery of such new Bond, a
bona fide purchaser of the original Bond in lieu of which such new Bond was
issued presents for payment such original Bond, the Issuer and the Trustee shall
be entitled to recover such new Bond from the person to whom it was delivered or
any person taking therefrom, except a bona fide purchaser, and shall be entitled
to recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expenses incurred by the Issuer or the Trustee in
connection therewith. If any such mutilated, destroyed, lost or stolen Bond
shall have become or shall be about to become due and payable, or shall have
become subject to redemption in full, instead of issuing a new Bond, the Issuer
may pay such Bond without surrender thereof, except that any mutilated Bond
shall be surrendered.

            Upon the issuance of any new Bond under this Section, the Issuer 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 reasonable expenses
(including the fees and expenses of the Trustee) connected therewith.

            Every new Bond issued pursuant to this Section in lieu of any
destroyed, lost or stolen Bond shall constitute an original additional
contractual obligation of the Issuer, whether or not the destroyed, lost or
stolen Bond shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Bonds duly issued hereunder.

            The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Bonds.

SECTION 2.09. PAYMENTS OF PRINCIPAL AND INTEREST.

            (a) Each payment of principal of and interest on a Book Entry Bond
shall be paid to the Depository, which shall credit the amount of such payments
to the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing such
payments to the Beneficial Owners of the Book Entry Bonds that it represents and
to each indirect participating brokerage firm (a "brokerage firm" or "indirect
participating firm") for which it acts as agent. Each brokerage firm shall be
responsible for disbursing funds to the Beneficial Owners of the Book Entry
Bonds that it represents. All such credits and disbursements are to be made by
the Depository and the Depository Participants

                                     II-10
<PAGE>   52
in accordance with the provisions of the Bonds. Neither the Trustee, the Bond
Registrar nor the Issuer shall have any responsibility for such credits and
disbursements.

            Each payment of principal of and interest on a Definitive Bond shall
be paid to the Person in whose name such Bond (or one or more Predecessor Bonds)
is registered at the close of business on the Record Date or Optional Redemption
Record Date, for such Payment Date or Optional Redemption Date, by check mailed
to such Person's address as it appears in the Bond Register on such Record Date
or the Optional Redemption Record Date, except for the final installment of
principal payable with respect to such Bond, which shall be payable as provided
in Section 2.09(b).

            All payments of principal of and interest on the Bonds shall be made
only from the Trust Estate and any other assets of the Issuer, and each Holder
of the Bonds, by its acceptance of the Bonds, agrees that it will have recourse
solely against such Trust Estate and such other assets of the Issuer and that
neither the Owner Trustee in its individual capacity, the Owner nor any of their
respective partners, beneficiaries, agents, officers, directors, employees or
successors or assigns shall be personally liable for any amounts payable, or
performance due, under the Bonds or this Indenture.

            (b) All reductions in the principal amount of a Bond (or one or more
Predecessor Bonds) effected by payments of installments of principal made on any
Payment Date or Optional Redemption Date shall be binding upon all Holders of
such Bond and any Bond issued upon transfer thereof or in exchange therefor or
in lieu thereof. The final installment of principal of each Bond (including the
Redemption Price of any Bond called for optional redemption, if such optional
redemption will result in payment of the entire unpaid principal amount of any
such Bond) shall be payable only upon presentation and surrender thereof on or
after the Payment Date or Optional Redemption Date therefor at the office or
agency of the Issuer maintained by it for such purpose in the Borough of
Manhattan, the City of New York, State of New York, pursuant to Section 3.02.
Whenever the Trustee expects that the entire remaining unpaid principal amount
of any Bond will become due and payable on the next Payment Date, it shall, no
later than five days prior to such Payment Date, mail or cause to be mailed to
the Holder of each Bond as of the close of the business on such otherwise
applicable Record Date a notice to the effect that:

            (i) the Trustee expects that funds sufficient to pay such final
installment will be available in the Distribution Account on such Payment Date;
and

            (ii) if such funds are available, such final installment will be
payable on such Payment Date, but only upon presentation and surrender of such
Bond at the office or agency of the Issuer maintained for such purpose pursuant
to Section 3.02 (the address of which shall be set forth in such notice).

            Notices in connection with optional redemptions of Bonds shall be
mailed to Holders in accordance with Section 10.02.

                                     II-11
<PAGE>   53
SECTION 2.10. PERSONS DEEMED OWNERS.

            Prior to due presentment for registration of transfer of any Bond,
the Issuer, [the Bond Insurer], the Trustee, any Agent and any other agent of
the Issuer, [the Bond Insurer], or the Trustee shall treat the Person in whose
name any Bond is registered as the owner of such Bond (a) on the applicable
Record Date or Optional Redemption Record Date for the purpose of receiving
payments of the principal of, and interest on, such Bond and (b) on any other
date for all other purposes whatsoever, whether or not such Bond is overdue, and
neither the Issuer, [the Bond Insurer], the Trustee, any Agent nor any other
agent of the Issuer or the Trustee shall be affected by notice to the contrary.

SECTION 2.11. CANCELLATION.

            All Bonds surrendered for payment, registration of transfer,
exchange or redemption shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The
Issuer may at any time deliver to the Trustee for cancellation any Bond
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Bonds so delivered shall be promptly
cancelled by the Trustee. No Bonds shall be authenticated in lieu of or in
exchange for any Bonds cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Bonds held by the Trustee
shall be held by the Trustee in accordance with its standard retention policy,
unless the Issuer shall direct by an Issuer Order that they be destroyed or
returned to it.

SECTION 2.12. AUTHENTICATION AND DELIVERY OF BONDS.

            The Bonds may be executed by the Issuer and delivered to the Trustee
for authentication, and thereupon the same shall be authenticated and delivered
by the Trustee, upon Issuer Request and upon receipt by the Trustee of the
following:

            (a) an Issuer Order authorizing the execution, authentication and
delivery of the Bonds and specifying the Classes, the Stated Maturity of the
final installment of principal, the principal amount and the Bond Interest Rate,
of each Class of such Bonds to be authenticated and delivered;

            (b) an Issuer Order authorizing the execution and delivery of this
Indenture;

            (c) One or more Opinions of Counsel addressed to the Trustee,
complying with the requirements of Section 11.01, reasonably satisfactory in
form and substance to the Trustee, and to the effect that:

                  (i) all instruments furnished to the Trustee by the Issuer
pursuant to this Section 2.12 in connection with the Bonds conform in all
material respects to the requirements of

                                     II-12
<PAGE>   54
this Indenture and constitute all the documents required to be delivered under
this Section 2.12 for the Trustee to authenticate and deliver the Bonds (counsel
rendering such opinion or opinions need not express any opinion as to whether
the Pledged Mortgages Granted to the Trustee as security conform to the
requirements of this Indenture);

                  (ii) all conditions precedent provided for in this Indenture
relating to the authentication and delivery of the Bonds have been complied with
in all material respects (counsel rendering such opinion or opinions need not
express any opinion as to the matters set forth in the parenthetical clause at
the end of paragraph (i) above or as to whether the amount of cash or other
collateral, if any, delivered to the Trustee pursuant to any subsection of this
Section 2.12 is the requisite amount);

                  (iii) the Bank has corporate power to execute and deliver the
Deposit Trust Agreement, the Deposit Trust Agreement authorizes the Issuer to
execute and deliver the Bonds and this Indenture, and to issue the Bonds, and
the Owner Trustee has duly taken all necessary action under the Deposit Trust
Agreement for those purposes;

                  (iv) the Issuer is a statutory business trust created under
the laws of the State of Delaware and duly authorized by the Deposit Trust
Agreement;

                  (v) assuming due authorization, execution and delivery thereof
by the Trustee, this Indenture will be the legally valid and binding obligation
of the Issuer, enforceable against the Issuer in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws and equitable principles relating to or limiting creditors'
rights generally and such counsel need express no opinion as to the availability
of equitable remedies;

                  (vi) the Bonds, when issued, delivered, authenticated and paid
for, will be the legally valid and binding obligations of the Issuer, entitled
to the benefits of this Indenture, and enforceable against the Issuer in
accordance with their terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws and equitable principles relating to
or limiting creditors' rights generally and such counsel need express no opinion
as to the availability of equitable remedies;

                  (vii) assuming due execution and delivery thereof by the
Trustee and by the Master Servicer, the Master Servicing Agreement constitutes
the legally valid and binding obligation of the Master Servicer and of the
Issuer, respectively, enforceable against the Master Servicer and the Issuer in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws and equitable principles relating to
or limiting creditors' rights generally and such counsel need express no opinion
as to the availability of equitable remedies;

                  (viii) the Mortgage Notes included in the Original Pledged
Mortgages have been duly and validly assigned, delivered and pledged to the
Trustee to the extent

                                     II-13
<PAGE>   55
contemplated by this Indenture, and this Indenture together with such
assignment, delivery and pledge to the Trustee, creates as security for the
Bonds a valid and perfected security interest of first priority in such Mortgage
Notes, except to the extent limited in the event (A) the Trustee relinquishes
possession of any such Mortgage Note, (B) the Depositor, the Issuer, the Master
Servicer or any Servicer transfers any such Mortgage Note or the related
Mortgage to a bona fide purchaser for value without notice prior to notification
to the Mortgagor of the assignment to the Trustee of such Mortgage Note or due
recordation of the Assignment to the Trustee of the related Mortgage or (C) the
Depositor, the Issuer, the Master Servicer or any Servicer discharges any such
Mortgage Note or the related Mortgage prior to such notification or recordation;
the Mortgages delivered to the Trustee with the Original Mortgage Notes will
continue to secure the Mortgage Notes included in the Original Pledged
Mortgages, as though, and to the same extent as if, such Mortgage Notes had not
been assigned, delivered and pledged; and it is not necessary to record or file
this Indenture or to take any other action, except as set forth above, in order
to make effective the lien and security interest created by this Indenture in
the Mortgage Notes included in the Original Pledged Mortgages;

                  (ix) this Indenture has been duly qualified under the TIA; and

                  (x) the Issuer's registration statement with respect to the
Bonds has become effective under the Securities Act of 1933, as amended, and, to
the best of such counsel's knowledge, no stop order suspending the effectiveness
of such registration statement has been issued and is in effect under such act
and no proceedings for that purpose have been instituted or are pending under
such act.

            In rendering the opinions set forth above, such counsel may rely
upon officers' certificates of the Depositor, the Owner Trustee, the Issuer, any
Servicer, the Master Servicer and the Trustee, without independent confirmation
or verification, as to the following matters and as to such other matters as
shall be reasonably acceptable to the Trustee: (A) the accuracy of the
descriptions of the Mortgage Notes included in the Original Pledged Mortgages
and the conformity thereof to the descriptions in this Indenture, (B) the
ownership by Sequoia Mortgage Funding Corporation, the Depositor and the Issuer
of such Mortgage Notes free and clear of any lien, claim, charge or interest of
any kind of any third party, (C) the physical delivery of such Mortgage Notes to
the Trustee, (D) the absence of any evidence appearing on any such Mortgage Note
of any right or interest inconsistent with the opinions expressed, and (E) the
form of endorsement approved by such counsel having been made on each such
Mortgage Note. In rendering the opinions set forth above, such counsel need
express no opinion as to (A) the perfection of the security interest in any
collateral not governed by Article 9 of the Uniform Commercial Code of the State
of California, (B) the existence of, or the priority of the security interest
created by the Indenture against, any liens or other interests which arise by
operation of law and which do not require any filing or similar action in order
to take priority over a perfected security interest or (C) the priority of the
security interest created by this Indenture with respect to any claim or lien in
favor of the United States or any agency or instrumentality thereof (including
federal tax liens and liens arising under Title IV of the Employee Retirement
Income Security Act of 1974, as amended).

                                     II-14
<PAGE>   56
            (d) an Officers' Certificate complying with the requirements of
Section 11.01 and stating that:

                  (i) the Issuer is not in Default under this Indenture and the
issuance of the Bonds will not result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, the Deposit Trust
Agreement or any indenture, mortgage, deed of trust or other agreement or
instrument to which the Issuer is a party or by which it is bound, or any order
of any court or administrative agency entered in any proceeding to which the
Issuer is a party or by which it may be bound or to which it may be subject, and
that all conditions precedent provided in this Indenture relating to the
authentication and delivery of the Bonds have been complied with;

                  (ii) the Issuer is the owner of each Original Pledged
Mortgage, free and clear of any lien, security interest or charge, has not
assigned any interest or participation in any such Pledged Mortgage (or, if any
such interest or participation has been assigned, it has been released) and has
the right to Grant each such Original Pledged Mortgage to the Trustee;

                  (iii) the information set forth in the Pledged Mortgage
Schedule attached as Schedule A to this Indenture is true and correct in all
material respects as of the Closing Date;

                  (iv) the Issuer has Granted to the Trustee all of its right,
title and interest in each Pledged Mortgage;

                  (v) as of the Closing Date, no lien in favor of the United
States described in Section 6321 of the Code, or lien in favor of the Pension
Benefit Guaranty Corporation described in Section 4068(a) of the Employee
Retirement Income Security Act of 1974, as amended, has been filed as described
in subsections 6323(f) and 6323(g) of the Code upon any property belonging to
the Issuer; and (vi) attached thereto is a true and correct copy of letters
signed by the Rating Agencies confirming that the Senior Bonds have been rated
AAA by [ ] and [ ] and that the Class B-1 Bonds have been rated [ ] by [ ].

            (e) An executed counterpart of the Master Servicing Agreement.

            (f) A certificate of one or more Independent Persons, whose regular
business activity includes valuing securities and mortgage loans similar to the
Original Pledged Mortgages, of the fair value of the Original Pledged Mortgages,
which fair value, as so certified, will be equal to or in excess of the sum of
the Original Senior Class Principal Amount and the Original Subordinated Class
Principal Amount, and which determination of fair value shall be as of a date
not earlier than three Business Days prior to the Closing Date.

SECTION 2.13. MATTERS RELATING TO BOOK ENTRY BONDS.

                                     II-15
<PAGE>   57
            (a) If the Bonds are listed on any stock exchange at any time after
the Closing Date, the Issuer shall, if required as a condition to such listing,
prepare and deliver to the Trustee Bonds in substantially the same form as the
Bonds issued on the Closing Date, but with such other additional features and
such modifications, if any, as shall be necessary or appropriate in order to
comply with the requirements of such stock exchange for the listing of the Bonds
on such exchange. Bonds in the form issued on the Closing Date shall thereafter
be exchangeable for Bonds in such revised form to the same extent as temporary
Bonds are exchangeable for Definitive Bonds pursuant to Section 2.06.

            (b) Each Class of Book Entry Bonds will be issued in the form of a
single typewritten bond certificate (each, a "DTC Certificate") to be delivered
to the Depository by the Issuer substantially in the respective forms for each
such Class attached as Exhibits hereto. The DTC Certificate for each such Class
of Book Entry Bonds shall be initially registered on the Bond Register in the
name of the nominee of such Depository and no Beneficial Owner will receive a
certificate representing its interests in any Class of Book Entry Bonds except
in the event that the Trustee issues Definitive Bonds, as provided in Section
2.14. Pursuant to the Letter Agreement, while each Class of the Book Entry Bonds
remains outstanding and such Depository remains the Holder, it will agree to
make book-entry transfers among the Depository Participants and receive and
transmit payments of principal and interest on the Book Entry Bonds until and
unless the Trustee authenticates and delivers Definitive Bonds to the Beneficial
Owners of the Book Entry Bonds or their nominees, as described in Section 2.14.

            (c) Prior to Book Entry Termination, each Class of Book Entry Bonds
will remain registered in the name of the Depository or its nominee and at all
times: (i) registration of the Book Entry Bonds may not be transferred by the
Trustee or the Bond Registrar except to another Depository; (ii) the Depository
shall maintain book-entry records with respect to the Beneficial Owners and with
respect to ownership and transfers of such Book Entry Bonds; (iii) ownership and
transfers of registration of the Book Entry Bonds on the books of the Depository
shall be governed by applicable rules established by the Depository; (iv) the
Depository may collect its usual and customary fees, charges and expenses from
its Depository Participants; (v) the Trustee shall deal with the Depository,
Depository Participants and interest participating firms as representatives of
the Beneficial Owners of the Book Entry Bonds for purposes of exercising the
rights of holders under the Indenture, and requests and directions for and votes
of such representatives shall not be deemed to be inconsistent if they are made
with respect to different Beneficial Owners; and (vi) the Trustee may rely and
shall be fully protected in relying upon information furnished by the Depository
with respect to its Depository Participants and furnished by the Depository
Participants with respect to indirect participating firms and Persons shown on
the books of such indirect participating firms as direct or indirect Beneficial
Owners.

            All transfers by Beneficial Owners of Book Entry Bonds shall be made
in accordance with the procedures established by the Depository Participant or
brokerage firm representing such Beneficial Owner. Each Depository Participant
shall only transfer Book Entry Bonds of Beneficial Owners it represents or of
brokerage firms for which it acts as agent in accordance with the Depository's
normal procedures.

                                     II-16
<PAGE>   58
SECTION 2.14. TERMINATION OF BOOK ENTRY SYSTEM.

            (a) The book entry system through the Depository with respect to any
Class of Book Entry Bonds may be terminated upon the happening of any of the
following:

            (i) The Depository or the Issuer advises the Trustee in writing that
the Depository is no longer willing or able to properly discharge its
responsibilities as Depository and the Issuer is unable to locate a qualified
successor clearing agency satisfactory to the Trustee and the Issuer;

            (ii) The Issuer at its option advises the Trustee in writing that it
elects to terminate the book entry system through the Depository; or

            (iii) After the occurrence of an Event of Default (at which time the
Trustee shall use all reasonable efforts to promptly notify each Beneficial
Owner through the Depository of such Event of Default when such notice shall be
given pursuant to Section 6.02), the Beneficial Owners of a majority in
aggregate Class Principal Amount of the Book Entry Bonds together advise the
Trustee and the Depository through the Depository Participants in writing that
the continuation of a book entry system through the Depository is no longer in
the best interests of the Beneficial Owners.

            (b) Upon the occurrence of any event described in subsection (a)
above, the Trustee shall notify all Beneficial Owners, through the Depository,
of the occurrence of any such event and of the availability of Definitive Bond
certificates to Beneficial Owners requesting the same, in an aggregate Class
Principal Amount representing the interest of each, making such adjustments and
allowances as it may find necessary or appropriate as to accrued interest, if
any, and previous calls for redemption. Definitive Bond certificates shall be
issued only upon surrender to the Trustee of the Book Entry Bond by the
Depository, accompanied by registration instructions for the Definitive Bond
certificates. Neither the Issuer nor the Trustee shall be liable for any delay
in delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon issuance of the Definitive Bond
certificates, all references herein to obligations imposed upon or to be
performed by the Depository shall cease to be applicable and the provisions
relating to Definitive Bonds shall be applicable.

SECTION 2.15. REMIC ELECTIONS

            The Depositor hereby directs the Trustee to sign two initial tax
returns which shall cause the Trust Estate to elect for federal income tax
purposes to consist of two REMICs. This Indenture shall be construed so as to
carry out the intention of this Indenture that the Lower-Tier REMIC shall
consist of all of the assets constituting the Trust Estate and shall be
evidenced by the Lower-Tier Regular Interests (which will be uncertificated and
will represent the "regular interests" in the Lower-Tier REMIC for purposes of
the REMIC Provisions) and the Lower-Tier Interest R (which will represent the
single "residual interest" in the Lower-Tier REMIC for

                                     II-17
<PAGE>   59
purposes of the REMIC Provisions). In addition, the Upper-Tier REMIC at all
times prior to the date on which final payment is made (or made available on
demand) to the Holders of any [Class A and Class B] Bonds shall consist of the
Lower-Tier Regular Interests and shall be evidenced by the [Class A and Class B]
Bonds (which will represent the "regular interests" in the Upper-Tier REMIC for
purposes of the REMIC Provisions) and the Upper-Tier Interest R (which will
represent the single "residual interest" in the Upper-Tier REMIC for purposes of
the REMIC Provisions). The Class R-LT Certificate shall represent beneficial
ownership of the Lower-Tier Interest R and the Class R-UT Certificate shall
represent beneficial ownership of the Upper-Tier Interest R. The Closing Date is
hereby designated as the "startup day" of such REMIC within the meaning of
Section 860G(a)(9) of the Code. The Trustee will apply for an Employee
Identification Number for the Upper-Tier REMIC and for the Lower-Tier REMIC from
the Internal Revenue Service on Form SS-4 or any other acceptable method for all
tax entities.

SECTION 2.16. REMIC TAX ACCOUNTING MATTERS

            The tax year of the Upper-Tier REMIC and the Lower-Tier REMIC shall
be the calendar year, and the Trust Estate shall use the accrual method of
reporting income and loss.

SECTION 2.17. REMIC CERTIFICATE MATURITY DATE

            All regular interests in the Lower-Tier and Upper-Tier REMICs
created hereby will be retired on or before the Payment Date in [______ 20__.]

SECTION 2.18. LOWER-TIER REMIC

            Principal of and interest on the Lower-Tier Regular Interests and
the Lower-Tier Interest R shall be allocated to the Corresponding Class of Bonds
in the manner set forth in the following table:

                                     II-18
<PAGE>   60
                                   ARTICLE III

                                    COVENANTS

SECTION 3.01. PAYMENT OF BONDS.

            The Issuer will pay or cause to be duly and punctually paid the
principal of, and interest on, the Bonds in accordance with the terms of the
Bonds and this Indenture.

SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY.

            The Issuer will maintain in the Borough of Manhattan, the City of
New York, the State of New York an office or agency where Bonds may be presented
or surrendered for payment or may be surrendered for registration of transfer or
exchange, and where notices and demands to or upon the Issuer in respect of the
Bonds and this Indenture may be served. The Issuer will give prompt written
notice to the Trustee of the location and any change in the location, of such
office or agency. Until written notice of any change in the location of such
office or agency is delivered to the Trustee or if at any time the Issuer shall
fail to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, Bonds may be so presented and surrendered, and
such notices and demands may be made or served, at the office of
___________________________________________ at ________________________________.

            The Issuer may also from time to time designate one or more other
offices or agencies (in or outside the City of New York) where the Bonds may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that (i) no such designation or
rescission shall in any manner relieve the Issuer of its obligation to maintain
an office or agency in the Borough of Manhattan, the City of New York, the State
of New York, for the purposes set forth in the preceding paragraph, (ii)
presentations or surrenders of Bonds for payment may be made only in the City of
New York, the State of New York or at the Corporate Trust Office of the Trustee
and (iii) any designation of an office or agency for payment of Bonds shall be
subject to Section 3.03. The Issuer will give prompt written notice to the
Trustee of any such designation or rescission and of any change in the location
of any such other office or agency.

SECTION 3.03. MONEY FOR BOND PAYMENTS TO BE HELD IN TRUST.

            All payments of amounts due and payable with respect to any Bonds
which are to be made from amounts withdrawn from the Distribution Account
pursuant to Section 8.02(c) or Section 5.08 shall be made on behalf of the
Issuer by the Trustee or by a Paying Agent, and no amounts so withdrawn from the
Distribution Account for payments of Bonds shall be paid over to the Issuer
under any circumstances except as provided in this Section 3.03 or in Section
5.08.

            If the Issuer shall have a Paying Agent that is not also the Bond
Registrar, it shall furnish, or cause the Bond Registrar to furnish, no later
than

            (a) the fifth calendar day after each Record Date, and

            (b) the first Business Day after the Optional Redemption Record Date
applicable to the Optional Redemption Date,

a list, in such form as such Paying Agent may reasonably require, of the names
and addresses of the Holders of Bonds and of the number of Individual Bonds of
each Class held by each such Holder.

            Whenever the Issuer shall have a Paying Agent other than the
Trustee, it will, on or before the Business Day next preceding each Payment Date
and Optional Redemption Date, direct the Trustee to deposit with such Paying
Agent an aggregate sum sufficient to pay the amounts then becoming due (to the
extent funds are then available for such purpose in the Distribution Account),
such sum to be held in trust for the benefit of the Persons entitled thereto.

                                     III-1
<PAGE>   61
Any moneys deposited with a Paying Agent in excess of an amount sufficient to
pay the amounts then becoming due on the Bonds with respect to which such
deposit was made shall, upon Issuer Order, be paid over by such Paying Agent to
the Trustee for application in accordance with Article VIII.

            Any Paying Agent shall be appointed by Issuer Order. The Issuer
shall not appoint any Paying Agent which is not, at the time of such
appointment, a depository institution or trust company whose obligations would
be Permitted Investments pursuant to clause (iv) of the definition of the term
"Permitted Investments". The Issuer will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee (and if the Trustee acts as Paying Agent, it
hereby so agrees), subject to the provisions of this Section, that such Paying
Agent will:

            (1) allocate all sums received for payment to the Holders of Bonds
on each Payment Date and Optional Redemption Date among such Holders in the
proportion specified in the applicable Payment Date Statement, as the case may
be, in each case to the extent permitted by applicable law;

            (2) hold all sums held by it for the payment of amounts due with
respect to the Bonds in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and pay such sums to such Persons as herein provided;

            (3) if such Paying Agent is not the Trustee, immediately resign as a
Paying Agent and forthwith pay to the Trustee all sums held by it in trust for
the payment of the Bonds if at any time it ceases to meet the standards set
forth above required to be met by a Paying Agent at the time of its appointment;

            (4) if such Paying Agent is not the Trustee, give the Trustee notice
of any Default by the Issuer (or any other obligor upon the Bonds) in the making
of any payment required to be made with respect to any Bonds for which it is
acting as Paying Agent;

            (5) if such Paying Agent is not the Trustee, at any time during the
continuance of any such Default, upon the written request of the Trustee,
forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and

            (6) comply with all requirements of the Code, and all regulations
thereunder, with respect to the withholding from any payments made by it on any
Bonds of any applicable withholding taxes imposed thereon and with respect to
any applicable reporting requirements in connection therewith; provided,
however, that with respect to withholding and reporting requirements applicable
to original issue discount (if any) on any Class of Bonds, the Issuer has
provided the calculations pertaining thereto to the Trustee.

                                     III-2
<PAGE>   62
            The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or any other purpose, by Issuer
Order direct any Paying Agent, if other than the Trustee, to pay to the Trustee
all sums held in trust by such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by such Paying
Agent; and upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.

            Subject to applicable escheat laws, any money held by the Trustee or
any Paying Agent in trust for the payment of any amount due with respect to any
Bond and remaining unclaimed for six years after such amount has become due and
payable to the Holder of such Bond shall be discharged from such trust and, upon
its written request, paid to the Issuer; and the Holder of such Bond shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Trustee or such Paying Agent with respect to such trust
money shall thereupon cease. The Trustee may, but shall not be required to,
adopt and employ, at the expense of the Issuer, any reasonable means of
notification of such repayment (including, but not limited to, mailing notice of
such repayment to Holders whose Bonds have been called but have not been
surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Trustee or any
Agent, at the last address of record for each such Holder).

SECTION 3.04. CORPORATE EXISTENCE OF OWNER TRUSTEE.

            (a) Subject to subsections (b) and (c) below, the Owner Trustee will
keep in full effect its existence, rights and franchises as a bank and trust
company under the laws of the state of its incorporation.

            (b) Any corporation into which the Owner Trustee may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Owner Trustee shall be a party, shall be the
successor Owner Trustee under this Indenture without the execution or filing of
any paper, instrument or further act to be done on the part of the parties
hereto, anything herein, or in any agreement relating to such merger or
consolidation, by which any such Owner Trustee may seek to retain certain
powers, rights and privileges therefore obtaining for any period of time
following such merger or consolidation, to the contrary notwithstanding.

            (c) Any successor to the Owner Trustee appointed pursuant to Section
10.01 of the Deposit Trust Agreement shall be the successor Owner Trustee under
this Indenture without the execution or filing of any paper, instrument or
further act to be done on the part of the parties hereto.

            (d) Upon any consolidation or merger of or other succession to the
Owner Trustee in accordance with this Section 3.04, the Person formed by or
surviving such consolidation or merger (if other than the Issuer) or the Person
succeeding to the Owner Trustee

                                     III-3
<PAGE>   63
under the Deposit Trust Agreement may exercise every right and power of the
Owner Trustee, on behalf of the Issuer, under this Indenture with the same
effect as if such Person had been named as the Owner Trustee herein.

SECTION 3.05. PROTECTION OF TRUST ESTATE.

            (a) The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
and will take such other action as may be necessary or advisable to:

            (i) Grant more effectively all or any portion of the Trust Estate;

            (ii) maintain or preserve the lien of this Indenture or carry out
more effectively the purposes hereof;

            (iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;

            (iv) enforce any of the Mortgage Documents; or

            (v) preserve and defend title to the Trust Estate and the rights of
the Trustee, and of the Bondholders, in the Pledged Mortgages and the other
property held as part of the Trust Estate against the claims of all Persons and
parties.

            The Issuer hereby designates the Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required pursuant to this Section 3.05; provided, however, that
such designation shall not be deemed to create a duty in the Trustee to monitor
the compliance of the Issuer with the foregoing covenants; and provided further,
however, that the duty of the Trustee to execute any instrument required
pursuant to this Section 3.05 shall arise only if the Trustee has knowledge
pursuant to Section 6.01(d) of the occurrence of a failure of the Issuer to
comply with provisions of this Section 3.05.

            (b) Except as permitted by Section 8.08, the Trustee shall not
remove any portion of the Trust Estate that consists of money or is evidenced by
an instrument, certificate or other writing from the jurisdiction in which it
was held at the date of the most recent Opinion of Counsel delivered pursuant to
Section 3.06 (or from the jurisdiction in which it was held, or to which it is
intended to be removed, as described in the Opinion of Counsel delivered at the
Closing Date pursuant to Section 2.12(c), if no Opinion of Counsel has yet been
delivered pursuant to Section 3.06) or cause or permit ownership or the pledge
of any portion of the Trust Estate that consists of book-entry securities to be
recorded on the books of a Person located in a different jurisdiction from the
jurisdiction in which such ownership or pledge was recorded at such time unless
the Trustee shall have first received an Opinion of Counsel to the effect that
the

                                     III-4
<PAGE>   64
lien and security interest created by this Indenture with respect to such
property will continue to be maintained after giving effect to such action or
actions.

SECTION 3.06.     OPINIONS AS TO TRUST ESTATE.

            On or before February 15 in each calendar year, beginning with [the
first calendar year commencing more than three months after the Closing Date,
the Issuer shall furnish to the Trustee an Opinion of Counsel reasonably
satisfactory in form and substance to the Trustee either stating that, in the
opinion of such counsel, such action has been taken as is necessary to maintain
the lien and security interest created by this Indenture and reciting the
details of such action or stating that in the opinion of such counsel no such
action is necessary to maintain such lien and security interest. Such Opinion of
Counsel shall also describe all such actions, if any, that will, in the opinion
of such counsel, be required to be taken to maintain the lien and security
interest of this Indenture with respect to the Trust Estate until May 15 in the
following calendar year.

SECTION 3.07.     PERFORMANCE OF OBLIGATIONS; MASTER SERVICING AGREEMENT.

            (a) The Issuer shall punctually perform and observe all of its
obligations and agreements contained in the Deposit Trust Agreement. The Issuer
and the Trustee shall punctually perform and observe all of their respective
obligations and agreements contained in the Master Servicing Agreement.

            (b) The Issuer shall not take any action and will use its reasonable
good faith efforts not to permit any action to be taken by others that would
release any Person from any of such Person's covenants or obligations under any
of the Mortgage Documents or under any instrument included in the Trust Estate,
or that would result in the amendment, hypothecation, subordination, termination
or discharge of, or impair the validity or effectiveness of, any of the Mortgage
Documents, except as expressly provided or permitted in this Indenture and the
Master Servicing Agreement or such Mortgage Document or other instrument or
unless such action will not adversely affect the interests of the Holders of the
Bonds.

            (c) The Issuer shall monitor the performance of the Master Servicer
under the Master Servicing Agreement, and shall use its reasonable good faith
efforts to cause the Master Servicer duly and punctually to perform all of its
duties and obligations thereunder. Upon the occurrence of a Servicing Default of
which an Authorized Officer of the Issuer has actual knowledge under the Master
Servicing Agreement, the Issuer shall promptly notify the Trustee thereof, and
shall specify in such notice the action, if any, the Issuer is taking in respect
of such Servicing Default. So long as any such Servicing Default shall be
continuing, the Trustee may (i) terminate all of the rights and powers of the
Master Servicer pursuant to the applicable provisions of the Master Servicing
Agreement; (ii) exercise any rights it may have to enforce the Master Servicing
Agreement against the Master Servicer; and/or (iii) waive any such Servicing

                                     III-5
<PAGE>   65
Default under the Master Servicing Agreement or take any other action with
respect to such Servicing Default as is permitted thereunder.

            (d) Upon any termination by the Trustee of the Master Servicer's
rights and powers pursuant to the Master Servicing Agreement, the rights and
powers of the Master Servicer with respect to the Pledged Mortgages shall vest
in the Trustee and the Trustee shall be the successor in all respects to the
Master Servicer in its capacity as Master Servicer with respect to such Pledged
Mortgages under the Master Servicing Agreement, until the Trustee shall have
appointed, with the consent of the Issuer, such consent not to be unreasonably
withheld, and the Rating Agencies, and in accordance with the applicable
provisions of the Master Servicing Agreement a new FNMA- or FHLMC-approved
Person to serve as successor to the Master Servicer. With such consent, the
Trustee may elect to continue to serve as successor Master Servicer under the
Master Servicing Agreement. Upon appointment of a successor Master Servicer, the
Trustee and such successor Master Servicer shall enter into a master servicing
agreement in a form substantially similar to the Master Servicing Agreement. In
connection with any such appointment, the Trustee may make such arrangements for
the compensation of such successor as it and such successor shall agree, but in
no event shall such compensation of any successor Master Servicer (including the
Trustee) be in excess of that payable to the Master Servicer under the Master
Servicing Agreement.

            (e) Upon any termination of the Master Servicer's rights and powers
pursuant to the Master Servicing Agreement, the Trustee shall promptly notify
the Issuer and the Rating Agencies, specifying in such notice that the Trustee
or any successor Master Servicer, as the case may be, has succeeded the Master
Servicer under the Master Servicing Agreement, which notice shall also specify
the name and address of any such successor Master Servicer.

SECTION 3.08. INVESTMENT COMPANY ACT.

            The Issuer shall at all times conduct its operations so as not to be
subject to the Investment Company Act of 1940, as amended (or any successor
statute), and the rules and regulations thereunder.

SECTION 3.09. NEGATIVE COVENANTS.

            The Issuer shall not:

            (a) sell, transfer, exchange or otherwise dispose of any portion of
the Trust Estate except as expressly permitted by this Indenture or the Master
Servicing Agreement;

            (b) claim any credit on, or make any deduction from, the principal
of, or interest on, any of the Bonds by reason of the payment of any taxes
levied or assessed upon any portion of the Trust Estate;

                                     III-6
<PAGE>   66
            (c) engage in any business or activity other than in connection
with, or relating to, the issuance of the Bonds and the Class R Certificates
pursuant to this Indenture and the Deposit Trust Agreement, respectively, or
amend Section 2.03 or Section 11.01 of the Deposit Trust Agreement as in effect
on the Closing Date without, in each case, the consent of the Holders of 66 2/3%
of the aggregate Class Principal Amount of the Bonds then Outstanding;

            (d) incur any indebtedness or assume or guaranty any indebtedness of
any Person, except for such indebtedness as may be incurred by the Issuer in
connection with the issuance of the Bonds pursuant to this Indenture;

            (e) dissolve or liquidate in whole or in part; or

            (f) (i) permit the validity or effectiveness of this Indenture or
any Grant to be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations under this Indenture, except as may
be expressly permitted hereby, (ii) permit any lien, charge, security interest,
mortgage or other encumbrance (other than the lien of this Indenture, the lien
created by Section 8.04 of the Deposit Trust Agreement, as in effect on the
Closing Date, or any Permitted Encumbrance) to be created on or extended to or
otherwise arise upon or burden the Trust Estate or any part thereof or any
interest therein or the proceeds thereof or (iii) permit the lien of this
Indenture not to constitute a valid perfected first priority security interest
in the Trust Estate.

SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE.

            On or before 120 days after the end of the first fiscal year of the
Issuer which ends more than three months after the Closing Date, and each fiscal
year thereafter, the Issuer shall deliver to the Trustee a written statement,
signed by an Authorized Officer, stating that:

            (1) a review of the fulfillment by the Issuer during such year of
its obligations under this Indenture has been made under such officer's
supervision; and

            (2) to the best of such officer's knowledge, based on such review,
the Issuer has fulfilled all of its obligations under this Indenture throughout
such year, or, if there has been a Default in the fulfillment of any such
obligation, specifying each such Default known to such officer and the nature
and status thereof.

SECTION 3.11. RECORDING OF ASSIGNMENTS.

            The Issuer shall cause the Assignments of the Pledged Mortgages
securing the Bonds to be duly recorded in the manner specified in Section
2(a)(i) of the Master Servicing Agreement. If the Issuer fails to cause the
Assignment to be recorded within the time limit provided thereunder, the Issuer
shall cause the Master Servicer to purchase such corresponding

                                     III-7
<PAGE>   67
Pledged Mortgage pursuant to Section 8.04 and the applicable provisions of the
Master Servicing Agreement.

SECTION 3.12. LIMITATION OF LIABILITY OF              .

            It is expressly understood and agreed by the parties hereto that (a)
this Indenture is executed and delivered by _________________________, not
individually or personally but solely as owner trustee of Sequoia Mortgage Trust
200_-_ under the Deposit Trust Agreement, in the exercise of the powers and
authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and
intended not as personal representations, undertakings and agreements by
________________________, but is made and intended for the purpose for binding
only the Issuer, (c) nothing herein contained shall be construed as creating any
liability on ___ _____________________, other than any liability arising out of
its gross negligence, bad faith or wilful misconduct, and (d) under no
circumstances shall ________________________ be personally liable for the
payment of any indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Issuer under this Indenture or the other Operative
Agreements.

SECTION 3.13. REMIC-RELATED COVENANTS.

      For as long as the Trust Estate shall exist, the parties to this Indenture
shall act in accordance herewith to assure continued treatment of the Trust
Estate as two REMICs. In particular:

            (a) The Master Servicer will not create, or permit the creation of,
any "interests" in the Trust Estate within the meaning of Section 860G of the
Code other than the interests referred to in Section 2.15;

            (b) As of all times as may be required by the Code, the Master
Servicer (with respect to the Mortgage Loans) and the Trustee (with respect to
investments) will ensure that substantially all of the assets of the Trust
Estate will consist of "qualified mortgages" as defined in Section 860G(a)(3) of
the Code and "permitted investments" as defined in Section 860G(a)(5) of the
Code. The Master Servicer will maintain records that are sufficient to indicate
the Trust Estate's compliance with applicable requirements of the Code (or
applicable Treasury Regulations) relating to the assets held by the Trust
Estate. Further, the Trustee shall not accept the transfer or substitution of
any Mortgage Loan two (2) years or more after the Closing Date unless the Master
Servicer and the Trustee shall have received an Opinion of Counsel, which shall
be an expense of the Depositor, that such transfer or substitution would not
adversely affect the REMIC status of the Trust Estate or would not otherwise be
prohibited by this Indenture;

            (c) The Depositor, the Trustee and the Master Servicer, each to the
extent of their respective activities and/or obligations hereunder, shall ensure
that the Trust Estate does not receive a fee or other compensation for services
and that the Trust Estate does not receive any income from assets other than
"qualified mortgages" within the meaning of Section 860G(a)(3)

                                     III-8
<PAGE>   68
of the Code or "permitted investments" within the meaning of Section 860G(a)(5)
of the Code, and shall take whatever action it deems necessary to avoid any
material tax imposed by the Code on the Trust Estate;

            (d) The Trustee shall not sell or permit the sale of all or any
portion of the Mortgage Loans or of any Eligible Account unless such sale is as
a result of a repurchase of the Mortgage Loans by the Class R-LT Holder, [RWT
Holdings], or the Depositor pursuant to the Indenture or the Trustee has
received an Opinion of Counsel to the effect that such sale (i) is in accordance
with a qualified liquidation as defined in Section 860F(a)(4) of the Code and as
described in [Section 10.01 or 10.04] hereof, or (ii) would not be treated as a
prohibited transaction within the meaning of Section 860F(a)(2) of the Code,
which prohibited transaction results in the realization of a material amount of
gain or loss for federal income tax purposes; and

            (e) Notwithstanding anything to the contrary in this Indenture, the
Master Servicer and the Trustee, at the direction and expense of the Master
Servicer (with respect to individual Mortgage Loans) or the Depositor (with
respect to the entire Mortgage Pool or all of the Bonds), will take any other
action or omit to take any action otherwise required where the Master Servicer
or the Depositor deems such action or inaction reasonably necessary to preserve
or ensure the REMIC status of the Trust Estate.

SECTION 3.14. PROHIBITED TRANSACTIONS AND OTHER TAXES.

      In the event that any tax is imposed on the Trust Estate (including
"prohibited transactions" of the Trust Estate as defined in Section 860F of the
Code), such tax shall be charged first against amounts distributable to the
Class R-LT and Class R-UT Holders and then sequentially against amounts
otherwise distributable to the [Class B] Bondholders on a pro rata basis within
each Class. The Trustee is hereby authorized to direct the Paying Agent to
retain and, upon such direction, the Paying Agent is hereby authorized to retain
from amounts otherwise distributable to the Class R Holder and the [Class B]
Bondholders, as appropriate, sufficient funds to pay or provide for the payments
of, and to actually pay, such tax as is legally owed by the Trust Estate (but
such authorization shall not prevent the Trustee or the Depositor from
contesting any such tax in appropriate proceedings, if it elects to so contest
such tax or proceeding, and withholding payment of such tax, if permitted by
law, pending the outcome of such proceedings).

SECTION 3.15. FEDERAL INFORMATION RETURNS AND REPORTS TO BONDHOLDERS.

            (a) The books of the Trust Estate shall reflect all payments made
with respect to the Mortgage Loans, and amounts attributable to the [Class A]
Bondholders, the [Class B] Bondholders, the Class R-LT Holder and the Class R-UT
Holder. The Trust Estate intends to allocate all excess inclusion income to the
Upper-Tier REMIC, and specifically to the Class R-UT Holder. At all times, the
Trustee shall take all actions consistent with this intention. In addition, with
respect to the Lower-Tier REMIC, the Trustee shall account for distributions
made from the Lower-Tier REMIC as made on the first day of each calendar month.
Further, the

                                     III-9
<PAGE>   69
Trustee shall account for income of the Lower-Tier REMIC under the all-OID
method at the Alternate Bond Rate and shall use the aggregation method as
provided in Treasury Regulation Section 1.1275-2(c).

      (b) The Trustee shall prepare and file or cause to be filed with the
Internal Revenue Service at the times and in the manner required by the Code or
applicable Treasury Regulations all Federal tax or information returns with
respect to the Upper-Tier REMIC and the Lower-Tier REMIC and the Bonds, which
tax or information returns contain such information as may be required by the
Code or applicable Treasury Regulations. The Class R-LT Holder may, upon
reasonable notice to the Trustee, review such tax or information returns prior
to filing with the Internal Revenue Service. The Trustee also shall furnish to
Holders of Bonds such statements or information at the times and in the manner
as the Code or applicable Treasury Regulations may require such holders to be
furnished, regardless of by whom. For this purpose, the Trustee may, but need
not, rely on any proposed regulations of the United States Department of the
Treasury. The Trustee shall indicate the election to treat the Trust Estate as
two REMICs in such manner as the Code or applicable Treasury regulations may
prescribe. The Trustee shall sign all required tax or information returns;
provided, however, that the Trustee shall have no obligation to prepare, file or
otherwise deal with partnership tax information or returns. In the event that
partnership tax information or returns is required by the Internal Revenue
Service, the Depositor will prepare and file all necessary returns. The initial
Class R-LT Holder is hereby designated as the initial "tax matters person"
(within the meaning of Temp. Treas. Reg. Section 1.860F-4T(d)). In the event
that the Code or applicable Treasury Regulations prohibit the Trustee from
signing tax or information returns or other statements, or the Class R-LT Holder
from acting as tax matters person (as an agent or otherwise), the Trustee shall
take whatever action that in its sole good faith judgment is necessary for the
proper filing of such information returns or for the provision of a tax matters
person, including designation of the Class R-LT Holder to sign such returns. The
Class R-LT Holder and the Class R-UT Holder shall each be bound by this Section
3.15.

                                     III-10
<PAGE>   70
                                   ARTICLE IV

                           SATISFACTION AND DISCHARGE

SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE.

            Whenever the following conditions shall have been satisfied:

            (1) either

            (A) all Bonds theretofore authenticated and delivered (other than
(i) Bonds which have been destroyed, lost or stolen and which have been replaced
or paid as provided in Section 2.08, and (ii) Bonds for whose payment money has
theretofore been deposited in trust and thereafter repaid to the Issuer, as
provided in Section 3.03) have been delivered to the Trustee for cancellation;
or

            (B) all Bonds not theretofore delivered to the Trustee for
cancellation

            (i) have become due and payable, or

            (ii) will become due and payable at the Stated Maturity of the final
installment of the principal thereof within one year, or

            (iii) are to be called for redemption within one year under
irrevocable arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Issuer,

      and the Issuer, in the case of clauses (B)(i), (B)(ii) or (B)(iii) above,
has deposited or caused to be deposited with the Trustee, in trust for such
purpose, an amount sufficient to pay and discharge the entire indebtedness on
such Bonds not theretofore delivered to the Trustee for cancellation, for
principal and interest to the Stated Maturity of their entire unpaid principal
amount or to the applicable Redemption Date, as the case may be, and in the case
of Bonds which were not paid at the Stated Maturity of their entire unpaid
principal amount, for all overdue principal and all interest payable on such
Bonds to the next succeeding Payment Date therefor;

            (2) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and

            (3) the Issuer has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel reasonably satisfactory in form and substance to the
Trustee each stating that all conditions precedent herein providing for the
satisfaction and discharge of this Indenture have been complied with;

then, upon Issuer Request, this Indenture and the lien, rights and interests
created hereby shall cease to be of further effect, and the Trustee and each
co-trustee and separate trustee, if any, then acting as such hereunder shall, at
the expense of the Issuer, execute and deliver all such instruments as may be
necessary to acknowledge the satisfaction and discharge of this Indenture and
shall pay, or assign or transfer and deliver, to the Issuer or upon Issuer Order
all Pledged Mortgages, cash, securities and other property held by it as part of
the Trust Estate remaining after satisfaction of the conditions set forth in
clauses (1) and (2) above.

            Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Issuer to the Trustee under Section 6.07, the obligations
of the Trustee to the Issuer and the Holders of Bonds under Section 3.03, the
obligations of the Trustee to the Holders of Bonds under Section 4.02 and the
provisions of Article II with respect to lost, stolen, destroyed or mutilated
Bonds, registration of transfers of Bonds and rights to receive payments of
principal of, and interest on, the Bonds shall survive.

SECTION 4.02. APPLICATION OF TRUST MONEY.

            All money deposited with the Trustee pursuant to Sections 3.03 and
4.01 shall be held in trust and applied by it, in accordance with the provisions
of the Bonds and this Indenture, to the payment, either directly or through any
Paying Agent, as the Trustee may determine, to the Persons entitled thereto, of
the principal and interest for whose payment such money has been deposited with
the Trustee.

                                      IV-1
<PAGE>   71
                                    ARTICLE V

                              DEFAULTS AND REMEDIES

SECTION 5.01. EVENT OF DEFAULT.

            "Event of Default", wherever used herein, means, with respect to
Bonds issued hereunder, any one of the following events (whatever the reason for
such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):

            (1) if the Issuer shall

            (A) default in the payment when and as due of any installment of
principal of or interest on any Bond, or

            (B) default in the payment of the Redemption Price of any Bond which
has been called for optional redemption pursuant to Article X;

            (2) if the Issuer shall breach, or default in the due observance, of
any one or more of the covenants set forth in clauses (a) through (e) of Section
3.09;

            (3) if the Issuer shall breach, or default in the due observance or
performance of, any other of its covenants in this Indenture, and such Default
shall continue for a period of 30 days after there shall have been given, by
registered or certified mail, to the Issuer by the Trustee, or to the Issuer and
the Trustee [by the Bond Insurer, or, during the existence of a Bond Insurer
Default] by the Holders of Bonds representing more than 50% of the aggregate
Class Principal Amount of the Controlling Class, a written notice specifying
such Default and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder;

            (4) if any representation or warranty of the Issuer made in this
Indenture or any certificate or other writing delivered pursuant hereto or in
connection herewith shall prove to be incorrect in any material respect as of
the time when the same shall have been made and, within 30 days after there
shall have been given, by registered or certified mail, written notice thereof
to the Issuer by the Trustee, or to the Issuer and the Trustee by the Holders of
Bonds representing

                                      V-1
<PAGE>   72
more than 50% of the aggregate Class Principal Amount of the Controlling Class,
the circumstance or condition in respect of which such representation or
warranty was incorrect shall not have been eliminated or otherwise cured;

            (5) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Issuer in an involuntary case under the federal
bankruptcy laws, as now or hereafter in effect, or any other present or future
federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or of any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Issuer and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days; or

            (6) the commencement by the Issuer of a voluntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other present or
future federal or state bankruptcy, insolvency or similar law, or the consent by
the Issuer to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or of any substantial part of its property or the making by the Issuer of
an assignment for the benefit of creditors or the failure by the Issuer
generally to pay its debts as such debts become due or the taking of corporate
action by the Issuer in furtherance of any of the foregoing.

            (a) Notwithstanding the foregoing, prior to the payment in full of
the Senior Bonds, the failure of the Issuer to pay when and as due any
installment of principal of or interest (regardless of the lapse of any grace
period) on any Subordinated Bond shall not constitute an Event of Default
hereunder. In addition, notwithstanding any applicable provision of this
Indenture, upon payment in full of the Senior Bonds, the prior occurrence of any
such shortfalls attributable to the Subordinated Bonds, which shortfalls have
previously been paid in full, will not constitute an Event of Default hereunder
in respect of the Subordinated Bonds. Subject to the foregoing, Section 5.01 of
the Indenture shall otherwise apply in all respects to the Subordinated Bonds.

            (b) Notwithstanding the foregoing, the failure of the Issuer to pay
when and as due any installment of principal of (regardless of the lapse of any
grace period) any Senior Bond shall not constitute an Event of Default hereunder
unless the Senior Class Principal Amount exceeds the aggregate Stated Principal
Balances of the Pledged Mortgages after application of all available amounts on
deposit in the Distribution Account on a Payment Date. Subject to the foregoing,
Section 5.01 of the Indenture shall otherwise apply in all respects to the
Senior Bonds.

SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.

            If an Event of Default occurs and is continuing with respect to the
Bonds, then and in every such case the Trustee or the Holders of Bonds
representing more than 50% of the aggregate Class Principal Amount of the
Controlling Class may declare all the Bonds to be

                                      V-2
<PAGE>   73
immediately due and payable, by a notice in writing to the Issuer (and to the
Trustee if given by Bondholders), and upon any such declaration such Bonds shall
become immediately due and payable in an amount equal to:

            (i) the aggregate Class Principal Amount of all Classes of Bonds,

            (ii) accrued and unpaid interest at the respective Bond Interest
Rates on the aggregate Class Principal Amount through the date of acceleration,
and

            (iii) in the case of the Senior Bonds, interest (but only to the
extent payment thereof shall be legally enforceable) on any overdue installments
of interest on the Senior Bonds from the Stated Maturity of any such
installments to the date of the acceleration at the Bond Interest Rate at which
such interest accrued or such lower rate at which payment of such interest shall
be legally enforceable.

            At any time after such a declaration of acceleration of maturity of
the Bonds has been made and before a judgment or decree for payment of the money
due has been obtained by the Trustee as hereinafter in this Article provided,
the Holders of Bonds representing more than 50% of the aggregate Class Principal
Amount of the Controlling Class, by written notice to the Issuer and the
Trustee, may rescind and annul such declaration and its consequences if:

            (1) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay:

            (A) all payments of principal of, and interest on, all Bonds and all
other amounts which would then be due hereunder or upon such Bonds if the Event
of Default giving rise to such acceleration had not occurred; and

            (B) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel; and

            (2) all Events of Default, other than the nonpayment of the
principal of Bonds which have become due solely by such acceleration, have been
cured or waived as provided in Section 5.15.

            No such rescission shall affect any subsequent Default or impair any
right consequent thereon.

SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.

            Subject to Section 5.05, the Issuer covenants that if an Event of
Default shall occur and be continuing in respect to the Bonds and the Bonds have
been declared due and payable and such declaration and its consequences have not
been rescinded and annulled, the Issuer will, upon demand of the Trustee, pay to
the Trustee, for the benefit of the Holders of the Bonds:

                                      V-3
<PAGE>   74
            (i) the amounts specified in the first paragraph of Section 5.02,
and

            (ii) in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.

            If the Issuer fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
Proceeding for the collection of the sums so due and unpaid, and may prosecute
such Proceeding to judgment or final decree, and may enforce the same against
the Issuer or any other obligor upon the Bonds and collect, out of the Trust
Estate (as defined in the Deposit Trust Agreement), wherever situated, of the
Issuer, the moneys adjudged or decreed to be payable in the manner provided by
law; provided, however, that neither the Bank nor any of its agents, officers,
directors, employees, successors or assigns shall be personally liable for any
amounts due under the Bonds or this Indenture.

            If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Bondholders by any Proceedings the Trustee deems appropriate to protect and
enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or enforce any other proper remedy, including, without limitation,
instituting a Proceeding prior to any declaration of acceleration of the
Maturity of the Bonds for the collection of all amounts then due and unpaid on
such Bonds, prosecuting such Proceeding to final judgment or decree, enforcing
the same against the Issuer and collecting out of the property, wherever
situated, of the Issuer the moneys adjudged or decreed to be payable in the
manner provided by law.

SECTION 5.04. REMEDIES.

            If an Event of Default shall have occurred and be continuing and the
Bonds have been declared due and payable and such declaration and its
consequences have not been rescinded and annulled, the Trustee (subject to
Section 5.18, to the extent applicable) may do one or more of the following:

            (a) institute Proceedings for the collection of all amounts then
payable on the Bonds, or under this Indenture, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Issuer moneys
adjudged due;

            (b) in accordance with Section 5.18, sell the Trust Estate or any
portion thereof or rights or interest therein, at one or more public or private
Sales called and conducted in any manner permitted by law;

            (c) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate; and

                                      V-4
<PAGE>   75
            (d) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and enforce the
rights and remedies of the Trustee or the Holders of the Bonds hereunder.

SECTION 5.05. [RESERVED].

SECTION 5.06. TRUSTEE MAY FILE PROOFS OF CLAIM.

            In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, composition or other
judicial Proceeding relative to the Issuer or any other obligor upon any of the
Bonds or the property of the Issuer or of such other obligor or their creditors,
the Trustee (irrespective of whether the Bonds shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Issuer for the payment of any overdue
principal or interest) shall be entitled and empowered, by intervention in such
Proceeding or otherwise to:

            (i) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Bonds and file such other papers or
documents and take such other actions as it deems necessary or advisable in
order to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and of the Bondholders allowed in such Proceeding; and

            (ii) collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any receiver,
assignee, trustee, liquidator or sequestrator (or other similar official) in any
such Proceeding is hereby authorized by each Bondholder to make such payments to
the Trustee and, in the event that the Trustee shall consent to the making of
such payments directly to the Bondholders, to pay to the Trustee any amount due
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 6.07.

            Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Bondholder any plan
of reorganization, arrangement, adjustment or composition affecting any of the
Bonds or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Bondholder in any such Proceeding.

SECTION 5.07. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF BONDS.

            All rights of action and claims under this Indenture or any of the
Bonds may be prosecuted and enforced by the Trustee without the possession of
any of the Bonds or the production thereof in any Proceeding relating thereto,
and any such Proceeding instituted by the

                                      V-5
<PAGE>   76
Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall be for the ratable benefit of the Holders of the
Bonds in respect of which such judgment has been recovered. Any surplus shall be
available, in accordance with Section 5.08, for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.

SECTION 5.08. APPLICATION OF MONEY COLLECTED.

            If the Bonds have been declared due and payable following an Event
of Default and such declaration and its consequences have not been rescinded and
annulled, any money collected by the Trustee with respect to the Bonds pursuant
to this Article or otherwise and any monies that may then be held or thereafter
received by the Trustee with respect to the Bonds shall be applied, after
payment to the Trustee of such amounts as may be payable to it under Section
6.07, in the order, at the date or dates fixed by the Trustee and, in case of
the distribution of the entire amount due on account of principal of, and
interest on, such Bonds, upon presentation and surrender thereof:

            First: To the payment of amounts then due and unpaid to any Servicer
or the Master Servicer in respect of Nonrecoverable Advances made by such
Servicer or the Master Servicer pursuant to the related Servicing Agreement or
the Master Servicing Agreement;

            Second: To the payment of amounts of interest and principal then due
and unpaid upon the Outstanding Bonds in accordance with the priorities set
forth in Section 2.03(b); and

            Third: To the payment of the remainder, if any, to the Issuer or any
other Person legally entitled thereto.

SECTION 5.09. LIMITATION ON SUITS.

            No Holder of a Bond shall have any right to institute any
Proceedings, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:

            (1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;

            (2) the Holders of Bonds representing more than 50% of the aggregate
Class Principal Amount of the Controlling Class shall have made written request
to the Trustee to institute Proceedings in respect of such Event of Default in
its own name as Trustee hereunder;

            (3) such Holder or Holders have offered to the Trustee indemnity in
full against the costs, expenses and liabilities to be incurred in compliance
with such request;

                                      V-6
<PAGE>   77
            (4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such Proceeding; and

            (5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of Bonds
representing more than 50% of the aggregate Class Principal Amount of the
Controlling Class;

it being understood and intended that no one or more Holders of Bonds shall have
any right in any manner whatever by virtue of, or by availing themselves of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Bonds or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all the
Holders of Bonds.

SECTION 5.10. UNCONDITIONAL RIGHTS OF BONDHOLDERS TO RECEIVE PRINCIPAL AND
INTEREST.

            Notwithstanding any other provision in this Indenture, other than
the provisions hereof limiting the right to recover amounts due on a Bond to
recovery from the property of the Issuer, the Holder of any Bond shall have the
right, to the extent permitted by applicable law, which right is absolute and
unconditional, to receive payment of each installment of interest on such Bond
on the respective Stated Maturities of such installments of interest, to receive
payment of each installment of principal of such Bond when due (or, in the case
of any Bond called for redemption, on the date fixed for such redemption) and to
institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Holder.

SECTION 5.11. RESTORATION OF RIGHTS AND REMEDIES.

            If the Trustee or any Bondholder has instituted any Proceeding to
enforce any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Bondholder, then and in every such case the Issuer, the
Trustee and the Bondholders shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the
Bondholders shall continue as though no such Proceeding had been instituted.

SECTION 5.12. RIGHTS AND REMEDIES CUMULATIVE.

            No right or remedy herein conferred upon or reserved to the Trustee
or to the Bondholders is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The

                                      V-7
<PAGE>   78
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.

SECTION 5.13. DELAY OR OMISSION NOT WAIVER.

            No delay or omission of the Trustee or of any Holder of any Bond to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Bondholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Bondholders, as the
case may be.

SECTION 5.14. CONTROL BY BONDHOLDERS.

            The Holders of Bonds representing more than 50% of the aggregate
Class Principal Amount of the Controlling Class shall have the right to direct
the time, method and place of conducting any Proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee;
provided, however, that:

            (1) such direction shall not be in conflict with any rule of law or
with this Indenture;

            (2) any direction to the Trustee to undertake a Sale of the Trust
Estate shall be by the Holders of Bonds representing the percentage of the
aggregate Class Principal Amount of the Controlling Class specified in Section
5.18(b)(1), unless Section 5.18(b)(2) is applicable; and

            (3) [Reserved];

            (4) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction; provided, however, that,
subject to Section 6.01, the Trustee need not take any action which it
determines might involve it in liability or be unjustly prejudicial to the
Bondholders not consenting.

SECTION 5.15. WAIVER OF PAST DEFAULTS.

            The Holders of Bonds representing more than 50% of the aggregate
Class Principal Amount of the Controlling Class may on behalf of the Holders of
all the Bonds of such Class waive any past Default hereunder and its
consequences, except a Default:

            (1) in the payment of any installment of principal of, or interest
on, any Bond; or

                                      V-8
<PAGE>   79
            (2) in respect of a covenant or provision hereof which under Section
9.02 cannot be modified or amended without the consent of the Holder of each
Outstanding Bond affected.

            Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.

SECTION 5.16. UNDERTAKING FOR COSTS.

            All parties to this Indenture agree, and each Holder of any Bond by
his or her acceptance thereof shall be deemed to have agreed, that any court may
in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Bondholder, or group of Bondholders,
holding in the aggregate Bonds representing more than 10% of the aggregate Class
Principal Amount of the Controlling Class, or to any suit instituted by any
Bondholder for the enforcement of the payment of any installment of interest on
any Bond on or after the Stated Maturity thereof expressed in such Bond or for
the enforcement of the payment of any installment of principal of any Bond when
due (or, in the case of any Bond called for redemption, on or after the
applicable redemption date).

SECTION 5.17. WAIVER OF STAY OR EXTENSION LAWS.

            The Issuer covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension of law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
in, or the performance of, this Indenture; and the Issuer (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

SECTION 5.18. SALE OF TRUST ESTATE.

            (a) The power to effect any sale (a "Sale") of any portion of the
Trust Estate pursuant to Section 5.04 shall not be exhausted by any one or more
Sales as to any portion of the Trust Estate remaining unsold, but shall continue
unimpaired until the entire Trust Estate shall have been sold or all amounts
payable on the Bonds and under this Indenture with respect thereto

                                      V-9
<PAGE>   80
shall have been paid. The Trustee may from time to time postpone any public Sale
by public announcement made at the time and place of such Sale. The Trustee
hereby expressly waives its right to any amount fixed by law as compensation for
any Sale.

            (b) To the extent permitted by law, the Trustee shall not in any
private Sale sell or otherwise dispose of the Trust Estate, or any portion
thereof, unless:

            (1) the Holders of all Controlling Class consent to, or direct the
Trustee to make, such Sale; or

            (2) the proceeds of such Sale would be not less than the entire
amount which would be distributable to the Holders of the Bonds, in full payment
thereof in accordance with Section 5.08, on the Payment Date next succeeding the
date of such Sale.

            (3) [Reserved]

            The purchase by the Trustee of all or any portion of the Trust
Estate at a private Sale shall not be deemed a Sale or disposition thereof for
purposes of this Section 5.18(b).

            (c) Unless the Holders of all Controlling Class have otherwise
consented or directed the Trustee, at any public Sale of all or any portion of
the Trust Estate at which a minimum bid equal to or greater than the amount
described in paragraph (2) of subsection (b) of this Section 5.18 has not been
established by the Trustee and no Person bids an amount equal to or greater than
such amount, the Trustee shall bid an amount at least $1.00 more than the
highest other bid.

            (d) In connection with a Sale of all or any portion of the Trust
Estate:

            (1) any Holder or Holders of Bonds may bid for and purchase the
property offered for Sale, and upon compliance with the terms of sale may hold,
retain and possess and dispose of such property, without further accountability,
and may, in paying the purchase money therefor, deliver any Controlling Class or
claims for interest thereon in lieu of cash up to the amount which shall, upon
distribution of the net proceeds of such Sale, be payable thereon, and such
Bonds, in case the amount so payable thereon shall be less than the amount due
thereon, shall be returned to the Holders thereof after being appropriately
stamped to show such partial payment;

            (2) the Trustee may bid for and acquire the property offered for
Sale in connection with any public Sale thereof, and, in lieu of paying cash
therefor, may make settlement for the purchase price by crediting the gross Sale
price against the sum of (A) the amount which would be distributable to the
Holders of the Bonds as a result of such Sale in accordance with Section 5.08 on
the Payment Date next succeeding the date of such Sale and (B) the expenses of
the Sale and of any Proceedings in connection therewith which are reimbursable
to it, without being required to produce the Bonds in order to complete any such
Sale or in order

                                      V-10
<PAGE>   81
for the net Sale price to be credited against such Bonds, and any property so
acquired by the Trustee shall be held and dealt with by it in accordance with
the provisions of this Indenture;

            (3) the Trustee shall execute and deliver an appropriate instrument
of conveyance transferring its interest in any portion of the Trust Estate in
connection with a Sale thereof;

            (4) the Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Issuer to transfer and convey its interest in any
portion of the Trust Estate in connection with a Sale thereof, and to take all
action necessary to effect such Sale; and

            (5) no purchaser or transferee at such a Sale shall be bound to
ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.

            (e) Notwithstanding anything in this Indenture to the contrary, if
an Event of Default specified in Section 5.01(1) is the Event of Default, or one
of the Events of Default, on the basis of which the Bonds have been declared due
and payable, then the Trustee may, in its sole discretion, sell the Trust Estate
without compliance with this Section 5.18.

SECTION 5.19. ACTION ON BONDS.

            The Trustee's right to seek and recover judgment under this
Indenture shall not be affected by the seeking, obtaining or application of any
other relief under or with respect to this Indenture. Neither the lien of this
Indenture nor any rights or remedies of the Trustee or the Holders of Bonds
shall be impaired by the recovery of any judgment by the Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion of
the Trust Estate.

                                      V-11
<PAGE>   82
                                   ARTICLE VI

                                   THE TRUSTEE

SECTION 6.01. DUTIES OF TRUSTEE.

            (a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, 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
his or her own affairs.

            (b) Except during the continuance of an Event of Default:

            (1) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others and no implied covenants or
obligations shall be read into this Indenture; and

            (2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. The Trustee shall,
however, examine such certificates and opinions to determine whether they
conform to the requirements of this Indenture.

            (c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:

            (1) This paragraph does not limit the effect of subsection (b) of
this Section;

            (2) The Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and

            (3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received by
it pursuant to Section 5.14 or Section 5.18.

            (d) Except with respect to duties of the Trustee prescribed by the
TIA, as to which this Section 6.01(d) shall not apply, for all purposes under
this Indenture, the Trustee shall not be deemed to have notice or knowledge of
any Event of Default described in Section 5.01(2), 5.01(5) or 5.01(6) or any
Default described in Section 5.01(3) or 5.01(4) or any Servicing Default or
default under the Master Servicing Agreement unless a Responsible Officer
assigned to and working in the Trustee's corporate trust department has actual
knowledge thereof or unless written notice of any event which is in fact such an
Event of Default, Servicing Default or default is received by the Trustee at the
Corporate Trust Office, and such notice references the Bonds generally, the
Issuer, the Trust Estate or this Indenture.

            (e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it. In determining that such repayment or indemnity is
not reasonably assured to it, the Trustee must consider not only the likelihood
of repayment or indemnity by or on behalf of the Issuer but also the likelihood
of repayment or indemnity from amounts payable to it from the Trust Estate
pursuant to Sections 6.07 and 8.02(d); provided, however, that, except as
provided in the first sentence of this Section 6.01(e), the Trustee shall not
refuse or fail to perform any of its duties hereunder solely as a result of
nonpayment of its reasonable fees and expenses; and provided further, however,
that nothing in this Section 6.01(e) shall be construed to limit the exercise by
the Trustee of any right or remedy permitted under this Indenture or otherwise
in the event of the Issuer's failure to pay the amounts due the Trustee pursuant
to Section 6.07.

                                      VI-1
<PAGE>   83
            (f) Every provision of this Indenture that in any way relates to the
Trustee is subject to the provisions of this Section.

            (g) Notwithstanding any extinguishment of all right, title and
interest of the Issuer in and to the Trust Estate following an Event of Default
and a consequent declaration of acceleration of the Maturity of the Bonds,
whether such extinguishment occurs through a Sale of the Trust Estate to another
Person, the acquisition of the Trust Estate by the Trustee or otherwise, the
rights, powers and duties of the Trustee with respect to the Trust Estate (or
the proceeds thereof) and the Bondholders and the rights of Bondholders shall
continue to be governed by the terms of this Indenture.

SECTION 6.02. NOTICE OF DEFAULT.

            Within 90 days after the occurrence of any Default known to the
Trustee, the Trustee shall transmit by mail to all Holders of Bonds notice of
each such Default, unless such Default shall have been cured or waived;
provided, however, that except in the case of a Default of the type described in
Section 5.01(1), the Trustee shall be protected in withholding such notice if
and so long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interests of the Holders
of the Bonds; and provided, further, that in the case of any Default of the
character specified in Section 5.01(3) or 5.01(4) no such notice to Holders of
the Bonds shall be given until at least 30 days after the occurrence thereof.
Concurrently with the mailing of any such notice to the Holders of the Bonds,
the Trustee shall transmit by mail a copy of such notice to the Rating Agencies.

SECTION 6.03. RIGHTS OF TRUSTEE.

            Except as otherwise provided in Section 6.01 hereof:

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

            (b) any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by an Issuer Request or Issuer Order, and any resolution
of the board of directors may be sufficiently evidenced by a written resolution;

            (c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate or the Officer's Certificate of the Master
Servicer;

                                      VI-2
<PAGE>   84
            (d) the Trustee may consult with counsel, and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;

            (e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Bondholders pursuant to this Indenture, unless such Bondholders shall
have offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction;

            (f) 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, direction, consent, order, bond,
note or other paper or document, but the Trustee, in its discretion may make
such further inquiry or investigation into such facts or matters as it may see
fit, and if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled, on reasonable prior notice to the Issuer,
to examine the books, records and premises of the Issuer, personally or by agent
or attorney, during the Issuer's normal business hours; provided that the
Trustee shall and shall cause its agents to hold in confidence all such
information except to the extent disclosure may be required by law and except to
the extent that the Trustee, in its sole judgment, may determine that such
disclosure is consistent with its obligations hereunder;

            (g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed and supervised with
due care by it hereunder;

            (h) the Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers;

            (i) prior to the time that one of its Responsible Officers obtains
actual knowledge of a Servicing Default as defined in the Master Servicing
Agreement or a failure by the Master Servicer thereunder which with notice and
the passage of time will become a Servicing Default, the Trustee shall not be
responsible for taking action with respect thereto;

            (j) the Trustee shall not be responsible for supervising, monitoring
or reviewing the Master Servicer's performance of its duties under the Master
Servicing Agreement except to the extent of determining (i) that the periodic
reports, certificates and opinions required to be delivered by the Master
Servicer to it thereunder are delivered in timely fashion and conform to the
requirements of the Master Servicing Agreement, (ii) that the amounts received
by it from the Master Servicer for deposit in the Distribution Account during
any month are as shown in the Master Servicer's report for such month, (iii) and
that any Trustee Mortgage File or

                                      VI-3
<PAGE>   85
document therein that has been released by the Trustee to the Master Servicer is
returned as provided in the Master Servicing Agreement; and

            (k) the provisions of this Section, other than clauses (e), (i) and
(j), and of Sections 6.01(b) and (c) shall apply to the Trustee as it may be
Successor Master Servicer under the Master Servicing Agreement.

SECTION 6.04. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF BONDS.

            The recitals contained herein and in the Bonds, except the
certificates of authentication on the Bonds, shall be taken as the statements of
the Issuer, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations with respect to the Trust Estate or as to the
validity or sufficiency of this Indenture or of the Bonds. The Trustee shall not
be accountable for the use or application by the Issuer of the Bonds or the
proceeds thereof or any money paid to the Issuer or upon Issuer Order pursuant
to the provisions hereof.

SECTION 6.05. MAY HOLD BONDS.

            The Trustee, any Agent, or any other agent of the Issuer, in its
individual or any other capacity, may become the owner or pledgee of Bonds and,
subject to Sections 6.08 and 6.13, may otherwise deal with the Issuer or any
Affiliate of the Issuer with the same rights it would have if it were not the
Trustee, Agent or such other agent.

SECTION 6.06. MONEY HELD IN TRUST.

            Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by this Indenture or by law. The
Trustee shall be under no liability for interest on any money received by it
hereunder except as otherwise agreed with the Issuer and except to the extent of
income or other gain on investments which are obligations of the Trustee, in its
commercial capacity, and income or other gain actually received by the Trustee
on investments, which are obligations of others.

SECTION 6.07. COMPENSATION AND REIMBURSEMENT.

            The Issuer agrees:

            (1) subject to any separate written agreement with the Trustee, to
pay the Trustee from time to time reasonable compensation for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);

            (2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by

                                      VI-4
<PAGE>   86
the Trustee in connection with the performance of its duties hereunder
(including the reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and

            (3) to indemnify the Trustee and its agents for, and to hold them
harmless against, any loss, liability or expense incurred without negligence or
bad faith on their part, arising out of, or in connection with, the acceptance
or administration of this trust, including 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
Issuer written notice thereof promptly after the Trustee shall have knowledge
thereof;

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

            (iii) notwithstanding anything to the contrary in this Section
6.07(3), the Issuer shall not be liable for settlement of any such claim by the
Trustee entered into without the prior consent of the Issuer.

            As security for the performance of the obligations of the Issuer
under this Section, the Trustee shall have a lien ranking junior to the lien of
the Bonds with respect to which any claim of the Trustee under this Section
arose (but senior to all other liens, if any) upon all property and funds held
or collected as part of the Trust Estate by the Trustee in its capacity as such.
The Trustee shall not institute any Proceeding seeking the enforcement of such
lien against the Trust Estate unless such Proceeding is in connection with a
Proceeding in accordance with Article V for enforcement of the lien of this
Indenture after the occurrence of an Event of Default (other than an Event of
Default arising solely from the Issuer's failure to pay amounts due the Trustee
under this Section 6.07) and a resulting declaration of acceleration of Maturity
of the Bonds which has not been rescinded and annulled.

SECTION 6.08. ELIGIBILITY; DISQUALIFICATION.

            Irrespective of whether this Indenture is qualified under the TIA,
this Indenture shall always have a Trustee who satisfies the requirements of TIA
Sections 310(a)(1) and 310(a)(5). The Trustee shall always have a combined
capital and surplus as stated in Section 6.09. The Trustee shall be subject to
TIA Section 310(b).

SECTION 6.09. TRUSTEE'S CAPITAL AND SURPLUS.

            The Trustee shall at all times have a combined capital and surplus
of at least $50,000,000 or shall be a member of a bank holding company system,
the aggregate combined capital and surplus of which is at least $50,000,000;
provided, however, that the Trustee's separate capital and surplus shall at all
times be at least the amount required by TIA Section

                                      VI-5
<PAGE>   87
310(a)(2) if this Indenture is qualified under the TIA. If the Trustee publishes
annual reports of condition of the type described in TIA Section 310(a)(2), its
combined capital and surplus for purposes of this Section 6.09 shall be as set
forth in the latest such report.

SECTION 6.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.

            (a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.

            (b) The Trustee may resign at any time by giving written notice
thereof to the Issuer. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.

            (c) The Trustee may be removed at any time by Act of the Holders
representing more than 50% of the aggregate Class Principal Amount of the
Controlling Class, delivered to the Trustee and to the Issuer.

            (d) If at any time:

            (1) the Trustee shall have a conflicting interest prohibited by
Section 6.08 and shall fail to resign or eliminate such conflicting interest in
accordance with Section 6.08 after written request therefor by the Issuer or by
any Bondholder; provided, however, that this Section 6.10(d)(1) shall not be
operative as part of this Indenture unless and until this Indenture is qualified
under the TIA, and until such qualification this Indenture shall be construed as
if this Section 6.10(d)(1) were not contained herein; or

            (2) the Trustee shall cease to be eligible under Section 6.09 or
shall become incapable of acting or shall be adjudged a 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, in any such case, (i) the Issuer by an Issuer Order may remove the Trustee
or (ii) subject to Section 5.16, any Bondholder who has been a bona fide Holder
of a Bond for at least six months may, on behalf of itself and all others
similarly situated, petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee, unless this Indenture
is qualified under the TIA and the Trustee's duty to resign is stayed as
provided in Section 310(b) of the TIA.

            (e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any cause,
the Issuer, by an Issuer Order shall promptly appoint a successor Trustee. If
within one year after such resignation, removal or

                                      VI-6
<PAGE>   88
incapability or the occurrence of such vacancy a successor Trustee shall be
appointed by Act of the Holders of Bonds representing more than 50% of the
aggregate Class Principal Amount of the Controlling Class delivered to the
Issuer and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Issuer. If no successor
Trustee shall have been so appointed by the Issuer or Bondholders and shall have
accepted appointment in the manner hereinafter provided, any Bondholder who has
been a bona fide Holder of a Bond for at least six months may, on behalf of
itself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.

            (f) The Issuer shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Bonds. Each notice shall include the name of the successor Trustee
and the address of its Corporate Trust Office.

SECTION 6.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.

            Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Issuer and the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee. Notwithstanding the
foregoing, on request of the Issuer or the successor Trustee, such retiring
Trustee shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee, and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder subject
nevertheless to its lien, if any, provided for in Section 6.07. Upon request of
any such successor Trustee, the Issuer shall execute and deliver any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.

            No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.

SECTION 6.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS 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 such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Bonds have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee

                                      VI-7
<PAGE>   89
may adopt such authentication and deliver the Bonds so authenticated with the
same effect as if such successor Trustee had authenticated such Bonds.

SECTION 6.13. PREFERENTIAL COLLECTION OF CLAIM AGAINST ISSUER.

            If this Indenture is qualified under the TIA, the Trustee shall be
subject to TIA Section 311(a), excluding any creditor relationship listed in TIA
Section 311(b), and a Trustee who has resigned or been removed shall be subject
to TIA Section 311(a) to the extent indicated.

SECTION 6.14. CO-TRUSTEES AND SEPARATE TRUSTEES.

            At any time or times, for the purpose of meeting the legal
requirements of the TIA or of any jurisdiction in which any of the Trust Estate
may at the time be located, the Issuer and the Trustee shall have power to
appoint, and, upon the written request of the Trustee or of the Holders of Bonds
representing more than 50% of the aggregate Class Principal Amount of the
Controlling Class with respect to which a co-trustee or separate trustee is
being appointed, the Issuer shall for such purpose join with the Trustee in the
execution, delivery and performance of all instruments and agreements necessary
or proper to appoint, one or more Persons approved by the Trustee either to act
as co-trustee, jointly with the Trustee, of all or any part of the Trust Estate,
or to act as separate trustee of any such property, in either case with such
powers as may be provided in the instrument of appointment, and to vest in such
Person or Persons in the capacity aforesaid, any property, title, right or power
deemed necessary or desirable, subject to the other provisions of this Section.
If the Issuer does not join in such appointment within 15 days after the receipt
by it of a request to do so, or in case an Event of Default has occurred and is
continuing, the Trustee alone shall have power to make such appointment.

            Should any written instrument from the Issuer be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Issuer. Each notice shall include the name and address of any such
co-trustee or successor trustee.

            Every co-trustee or separate trustee shall, to the extent permitted
by law, but to such extent only, be appointed subject to the following terms:

            (1) The Bonds shall be authenticated and delivered and all rights,
powers, duties and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustee hereunder, shall be exercised solely by
the Trustee.

            (2) The rights, powers, duties and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by such appointment
shall be conferred or imposed upon and exercised or performed by the Trustee or
by the Trustee and such co-trustee or separate trustee jointly, as shall be
provided in the instrument appointing such co-trustee or

                                      VI-8
<PAGE>   90
separate trustee, except to the extent that under any law of any jurisdiction in
which any particular act is to be performed, the Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers, duties and
obligations shall be exercised and performed by such co-trustee or separate
trustee.

            (3) The Trustee at any time, by an instrument in writing executed by
it, with the concurrence of the Issuer evidenced by an Issuer Order, may accept
the resignation of or remove any co-trustee or separate trustee appointed under
this Section, and, in case of an Event of Default has occurred and is
continuing, the Trustee shall have power to accept the resignation of, or
remove, any such co-trustee or separate trustee without the concurrence of the
Issuer. Upon the written request of the Trustee, the Issuer shall join with the
Trustee in the execution, delivery and performance of all instruments and
agreements necessary or proper to effectuate such resignation or removal. A
successor to any co-trustee or separate trustee which has resigned or has been
removed may be appointed in the manner provided in this Section.

            (4) No co-trustee or separate trustee shall be required to satisfy
the eligibility requirements under Sections 6.08 and 6.09. No co-trustee or
separate trustee hereunder shall be personally liable by reason of any act or
omission of the Trustee, or any other such trustee hereunder.

            (5) Any Act of Bondholders delivered to the Trustee shall be deemed
to have been delivered to each such co-trustee and separate trustee.

SECTION 6.15. AUTHENTICATING AGENTS.

            Upon the request of the Issuer, the Trustee shall appoint an
Authenticating Agent with power to act on its behalf and subject to its
direction in the authentication and delivery of the Bonds designated for such
authentication by the Issuer and containing provisions therein for such
authentication (or with respect to which the Issuer has made other arrangements,
satisfactory to the Trustee and such Authenticating Agent, for notation on the
Bonds of the authority of an Authenticating Agent appointed after the initial
authentication and delivery of such Bonds) in connection with transfers and
exchanges under Sections 2.06 and 2.07, if any, as fully to all intents and
purposes as though the Authenticating Agent had been expressly authorized by
those Sections to authenticate and deliver Bonds. For all purposes of this
Indenture (other than in connection with the authentication and delivery of
Bonds pursuant to Sections 2.05 and 2.12 in connection with their initial
issuance and for purposes of Section 2.08), the authentication and delivery of
Bonds by the Authenticating Agent pursuant to this Section shall be deemed to be
the authentication and delivery of Bonds "by the Trustee". Such Authenticating
Agent shall at all times be a Person that both meets the requirements of Section
6.09 for the Trustee hereunder and has its principal office in the Borough of
Manhattan, City and State of New York.

            Any Authenticating Agent shall also serve as Bond Registrar or
co-Bond Registrar, as provided in Section 2.07. Any Authenticating Agent
appointed by the Trustee pursuant to the

                                      VI-9
<PAGE>   91
terms of this Section 6.15 or pursuant to the terms of any supplemental
indenture shall deliver to the Trustee as a condition precedent to the
effectiveness of such appointment an instrument accepting the trusts, duties and
responsibilities of Authenticating Agent and of Bond Registrar or co-Bond
Registrar and indemnifying the Trustee for and holding the Trustee harmless
against, any loss, liability or expense (including reasonable attorneys' fees)
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance, administration of the trust or exercise of
authority by such Authenticating Agent, Bond Registrar or co-Bond Registrar.

            Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall be the successor of the Authenticating Agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any further act on the part of the
parties hereto or the Authenticating Agent or such successor corporation.

            Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and the Issuer. The Trustee may at any time
terminate the agency of any Authenticating Agent by giving written notice of
termination to such Authenticating Agent and the Issuer. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible under this Section, the Trustee
shall promptly appoint a successor Authenticating Agent, shall give written
notice of such appointment to the Issuer and shall mail notice of such
appointment to all Holders of Bonds.

            The Trustee agrees, subject to Section 6.01(e), to pay to any
Authenticating Agent from time to time reasonable compensation for its services
and the Trustee shall be entitled to be reimbursed for such payments, subject to
Section 6.07. The provisions of Sections 2.10, 6.04 and 6.05 shall be applicable
to any Authenticating Agent.

SECTION 6.16. REVIEW OF MORTGAGE DOCUMENTS.

            The Trustee agrees, for the benefit of the Holders of the Bonds, to
review, within 90 days after the Closing Date, the Mortgage Documents delivered
to it in connection with the Grant of the Original Pledged Mortgages as security
for the Bonds. The Trustee's review shall be limited to a determination that all
documents referred to in the definition of the term Mortgage Documents have been
delivered with respect to each such Pledged Mortgage (other than the documents
related to any Pledged Mortgage so listed which has been subject to a Principal
Prepayment in Full and the proceeds of which have been delivered to the Trustee
in lieu of the applicable Mortgage Documents), that all such documents have been
executed, and that all such documents relate to the Original Pledged Mortgages,
provided that the Trustee shall not be responsible for determining whether any
assignment is in recordable form or for verifying the information with respect
to said loans contained on the Pledged Mortgage Schedule. In performing such
review the Trustee may rely upon the purported genuineness and due execution

                                     VI-10
<PAGE>   92
of any such document and on the purported genuineness of any signature thereon.
If the Trustee discovers any defect or omission in the Mortgage Documents or
that any document required to be delivered to it has not been delivered or that
any document so delivered does not relate to any of the Original Pledged
Mortgages, it shall promptly notify the Issuer and the Master Servicer of such
Pledged Mortgage in accordance with the provisions of the Master Servicing
Agreement.

SECTION 6.17. PAYMENT OF CERTAIN INSURANCE PREMIUMS.

            Notwithstanding anything to the contrary contained in this
Indenture, the Trustee agrees, for the benefit of the Holders of the Bonds,
that, should it fail to receive notice from the Master Servicer or the
applicable Insurer, within the time period required pursuant to the Master
Servicing Agreement, to the effect that any premiums due with respect to any
Insurance Policies the premiums for which are required to be paid by the
Servicer or the Master Servicer from amounts on deposit in the related Escrow
Account, or required to be advanced by the Master Servicer or the related
Servicer, have been paid in full at the times set forth in the Master Servicing
Agreement, the Trustee shall proceed with diligence to make inquiries of the
Master Servicer, the Issuer and the applicable Insurers as to whether such
premiums have been paid at the times set forth in the Master Servicing
Agreement. In the event such premiums have not been paid and the coverage
provided under the related Insurance Policy may be interrupted or adversely
affected, the Trustee agrees promptly to pay such premiums from amounts on
deposit in the Distribution Account, pursuant to Section 8.02(d) and in
accordance with its obligations under the applicable provisions of the Master
Servicing Agreement.

SECTION 6.18. SUBSTITUTION OF INSURANCE POLICIES, ETC.; NOTIFICATION OF RATING
AGENCIES.

            (a) Provided that the conditions set forth in paragraph (b) hereof
have been satisfied, the Issuer may substitute a replacement policy or
instrument for any Bond Insurance Policy.

            (b) The Issuer shall notify each Rating Agency rating the Bonds in
the event that any replacement policy or instrument is obtained for any Bond
Insurance Policy and Insurer or other Person other than the Person who issued
such policy or instrument; provided, however, that the Trustee shall not be
required to accept any such replacement policy or instrument unless the Trustee
has received from each Rating Agency rating the Bonds a written instrument to
the effect that such acceptance by the Trustee will not result in the lowering
of the then applicable rating of any Bonds issued pursuant to this Indenture by
such Rating Agency.

                                     VI-11
<PAGE>   93
                                   ARTICLE VII

                         BONDHOLDERS' LISTS AND REPORTS

SECTION 7.01. ISSUER TO FURNISH TRUSTEE NAMES AND ADDRESSES OF BONDHOLDERS.

            (a) The Issuer shall furnish or cause to be furnished to the Trustee
(i) semi-annually, not less than 45 days nor more than 60 days after the
Interest Payment Date occurring closest to six months after the Closing Date and
each Interest Payment Date occurring at six-month intervals thereafter, a list,
in such form as the Trustee may reasonably require, of the names and addresses
of the Holders of Bonds and (ii) at such other times, as the Trustee may request
in writing, within 30 days after receipt by the Issuer of any such request, a
list of similar form and content as of a date not more than 10 days prior to the
time such list is furnished; provided, however, that so long as the Trustee is
the Bond Registrar, no such list shall be required to be furnished.

            (b) In addition to furnishing to the Trustee the Bondholder lists,
if any, required under subsection (a), the Issuer shall also furnish all
Bondholder lists, if any, required under Section 3.03 at the times required by
Section 3.03.

SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO BONDHOLDERS.

            (a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Bonds
contained in the most recent list, if any, furnished to the Trustee as provided
in Section 7.01 and the names and addresses of the Holders of Bonds received by
the Trustee in its capacity as Bond Registrar. The Trustee may destroy any list
furnished to it as provided in Section 7.01 upon receipt of a new list so
furnished.

            (b) If this Indenture is qualified under the TIA, Bondholders may
communicate pursuant to TIA Section 312(b) with other Bondholders with respect
to their rights under this Indenture or under the Bonds.

            (c) If this Indenture is qualified under the TIA, the Issuer, the
Trustee and the Bond Registrar shall have the protection of TIA Section 312(c).

SECTION 7.03. REPORTS BY TRUSTEE.

            (a) If this Indenture is qualified under the TIA, then within 30
days after May 15 of each year (the "reporting date"), commencing with the year
after the issuance of the Bonds, (i) in the circumstance required by TIA Section
313(a), the Trustee shall mail to all Holders a brief report dated as of such
reporting date that complies with TIA Section 313(a), (ii) the Trustee shall
also mail to Holders of Bonds with respect to which it has made advances any
reports with respect to such advances that are required by TIA Section 313(b)(2)
and (iii) the Trustee shall also mail to Holders of Bonds any reports required
by TIA Section 313(b)(1). For purposes of the information required to be
included in any such reports pursuant to TIA Sections 313(a)(3), 313(b)(1) (if
applicable) or 313(b)(2), the principal amount of indenture securities
outstanding on the date as of which such information is provided shall be the
aggregate Class

                                     VII-1
<PAGE>   94
Principal Amount of the then Controlling Class covered by the report. The
Trustee shall comply with TIA Section 313(c) with respect to any reports
required by this Section 7.03(a).

            (b) If this Indenture is qualified under the TIA, a copy of each
report required under this Section 7.03 shall, at the time of such transmission
to Holders of Bonds be filed by the Trustee with the Commission and with each
securities exchange upon which the Bonds are listed. The Issuer will notify the
Trustee when the Bonds are listed on any securities exchange.

SECTION 7.04. REPORTS BY ISSUER.

            If this Indenture is qualified under the TIA, the Issuer (a) shall
file with the Trustee, within 15 days after it files them with the Commission,
copies of the annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may by
rules and regulations prescribe) which the Issuer is required to file with the
Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 and (b) shall also comply with the other provisions of TIA Section 314(a).

SECTION 7.05. NOTICE TO THE RATING AGENCIES [AND TO BOND INSURER.]

            The Issuer shall use its best efforts promptly to provide notice to
the Rating Agencies [and the Bond Insurer] of any of the following events of
which it has actual knowledge:

            (a) any material change to or amendment of this Indenture;

            (b) the occurrence of any Default or Event of Default that has not
been cured;

            (c) the resignation or termination of the Trustee;

            (d) the substitution of Pledged Mortgages;

            (e) the final payment of Bondholders; and

            [(f) any payment or claim made under the Bond Insurance Policy.]

                                     VII-2
<PAGE>   95
                                  ARTICLE VIII

           ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES

SECTION 8.01. COLLECTION OF MONEYS.

            Except as otherwise expressly provided herein, the Trustee may
demand payment or delivery of, and shall receive and collect, directly and
without intervention or assistance of any fiscal agent or other intermediary,
all money and other property payable to or receivable by the Trustee pursuant to
this Indenture. The Trustee shall hold all such money and property received by
it as part of the Trust Estate and shall apply it as provided in this Indenture.
Except as otherwise expressly provided herein, if any default occurred in the
making of any payment or performance under any agreement or instrument that is
part of the Trust Estate, the Trustee may take such action as may be appropriate
to enforce such payment or performance, including the institution and
prosecution of appropriate Proceedings. Any such action shall be without
prejudice to any right to claim a Default or Event of Default hereunder and any
right to proceed thereafter as provided in Article V.

SECTION 8.02. DISTRIBUTION ACCOUNT.

            (a) On or prior to the Closing Date, the Issuer shall cause the
Master Servicer to establish and maintain, in the name of the Trustee, for the
benefit of the Bondholders and the Holders of the Class R Certificates, the
Pledged Accounts as provided in Section 3(h) of the Master Servicing Agreement.

            (b) Except as otherwise provided in the Master Servicing Agreement,
within one Business Day of receipt thereof by the Master Servicer, the Master
Servicer will deposit in the Bond Account all amounts required to be deposited
therein pursuant to Section 3(h) of the Master Servicing Agreement.

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

            (i) the aggregate amount remitted by the Master Servicer to the
Trustee pursuant to Section 3(h)(vii) of the Master Servicing Agreement; and

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

            In the event that the Master Servicer shall remit any amount not
required to be remitted, it may at any time direct the Trustee to withdraw such
amount from the Distribution Account, any provision herein to the contrary
notwithstanding. Such direction may be accomplished by delivering an Officer's
Certificate to the Trustee which describes the amounts deposited in error in the
Distribution Account. All funds deposited in the Distribution Account shall be
held by the Trustee in trust for the Bondholders until disbursed in accordance
with this Indenture or withdrawn in accordance with Section 2.03(b). In no event
shall the Trustee incur liability for withdrawals from the Distribution Account
at the direction of the Master Servicer.

            (d) Subject to Sections 5.02 and 5.08, on each Payment Date and
Redemption Date, the Trustee shall distribute all amounts on deposit in the
Distribution Account to

                                     VIII-1
<PAGE>   96
Bondholders in respect of the Bonds to the extent of amounts due and unpaid on
the Bonds for principal and interest in the amounts and in the order of priority
set forth in Section 2.03(b).

SECTION 8.03. GENERAL PROVISIONS REGARDING PLEDGED ACCOUNTS.

            (a) Each Pledged Account shall relate solely to the Bonds, the Class
R Certificates and to the Pledged Mortgages, Permitted Investments and other
property securing the Bonds. Funds and other property in each Pledged Account
shall not be commingled with any other moneys or property of the Issuer or any
Affiliate thereof. Notwithstanding the foregoing, the Trustee may hold any funds
or other property received or held by it as part of a Pledged Account, other
than the Distribution Account, in collective accounts maintained by it in the
normal course of its business and containing funds or property held by it for
other Persons (which may include the Issuer or an Affiliate), provided that such
accounts are under the sole control of the Trustee and the Trustee maintains
adequate records indicating the ownership of all such funds or property and the
portions thereof held for credit to each Pledged Account.

            (b) So long as no Default or Event of Default shall have occurred
and be continuing, all or a portion of the funds in the Pledged Accounts shall
be invested in Permitted Investments and reinvested by the Trustee upon written
direction of the Master Servicer, subject to the provisions of Section 3(h) of
the Master Servicing Agreement. Any such Permitted Investment shall mature not
later than the applicable date specified in Section 3(h)(ix) of the Master
Servicing Agreement. All income and gain (net of any losses) realized from any
such investment of funds on deposit in the Pledged Accounts shall be for the
benefit of the Master Servicer as servicing compensation and shall be remitted
to it monthly as provided in the Master Servicing Agreement. The amount of any
realized losses in the Pledged Accounts incurred in respect of any such
investments shall promptly be deposited by the Master Servicer in the applicable
Pledged Account or Pledged Accounts. The Master Servicer will not direct the
Trustee to make any investment of any funds or to sell any investment held in
any of the Pledged Accounts unless the security interest Granted and perfected
in such account will continue to be perfected in such investment or the proceeds
of such sale, in either case without any further action by any Person, and, in
connection with any direction to the Trustee to make any such investment or
sale, if requested by the Trustee, the Master Servicer shall deliver to the
Trustee an Opinion of Counsel, acceptable to the Trustee, to such effect.

            (c) Subject to Section 6.01(c), the Trustee shall not in any way be
held liable by reason of any insufficiency in any of the Pledged Accounts
resulting from any loss on any Permitted Investment included therein except for
losses attributable to the Trustee's failure to make payments on such Permitted
Investments issued by the Trustee, in its commercial capacity as principal
obligor and not as trustee, in accordance with their terms.

            (d) If (i) the Master Servicer shall have failed to give investment
directions for any funds on deposit in the Pledged Accounts to the Trustee by
11:00 a.m. Eastern Time (or such other time as may be agreed by the Master
Servicer and Trustee) on any Business Day or (ii) a Default or Event of Default
shall have occurred and be continuing with respect to the Bonds but

                                     VIII-2
<PAGE>   97
the Bonds shall not have been declared due and payable pursuant to Section 5.02
or (iii) if such Bonds shall have been declared due and payable following an
Event of Default, amounts collected or receivable from the Trust Estate are
being applied in accordance with Section 5.05 as if there had not been such a
declaration, then the Trustee shall, to the fullest extent practicable, invest
and reinvest funds in the Pledged Accounts in one or more Permitted Investments.

            (e) The Trustee shall, at all times while any Bonds are outstanding,
maintain in its possession, or in the possession of an agent whose actions with
respect to such items are under the sole control of the Trustee, all
certificates or other instruments, if any, evidencing any investment of funds in
a Pledged Account. The Trustee shall relinquish possession of such items, or
direct its agent to do so, only for purposes of collecting the final payment
receivable on such investment or certificate or, in connection with the sale of
any investment held in a Pledged Account, against delivery of the amount
receivable in connection with any sale.

SECTION 8.04. PURCHASES OF DEFECTIVE PLEDGED MORTGAGES.

            (a) If at any time the Issuer or the Trustee discovers or is
notified by the Master Servicer (i) that there has been a breach of any of the
Master Servicer's representations and warranties with respect to Pledged
Mortgages contained in the Master Servicing Agreement that materially and
adversely affects the interests of the Bondholders in any Pledged Mortgage, (ii)
that any of the Mortgage Documents for a Pledged Mortgage has not been properly
executed by the Mortgagor or contains a material defect or (iii) that any
Mortgage Documents for a Pledged Mortgage shall not have been received by the
Trustee within the applicable time periods and in the forms set forth in Section
3.11 or Section 6.16, as the case may be, and the Master Servicing Agreement,
then the party discovering such defect or omission or receiving notice thereof
shall promptly notify the other party and the Master Servicer (other than in
cases where the Master Servicer has given notice thereof).

            (b) If any defect, misrepresentation or omission described in
subsection (a) of this Section 8.04 materially and adversely affects the
interests of the Bondholders, then the Issuer shall, pursuant to the applicable
provisions of the Master Servicing Agreement, cause the Master Servicer to
either (i) cure any such defect, misrepresentation or omission, (ii) remove such
Pledged Mortgage and substitute in its place a Replacement Pledged Mortgage or
(iii) purchase the affected Pledged Mortgage, in each case at the times and in
the manner set forth in the Master Servicing Agreement. Notwithstanding anything
in this Indenture to the contrary, the Depositor shall not substitute a
Replacement Pledged Mortgage at any time after two (2) years after the Closing
Date.

            (c) Upon any such purchase or substitution, the Issuer shall be
entitled to request a release of the defective Pledged Mortgage from the lien of
this Indenture pursuant to Section 8.08(c) and Section 8.12.

            (d) If the Master Servicer shall either (i) purchase any Pledged
Mortgage it is required to purchase pursuant to the Master Servicing Agreement
and deposit the Purchase Price

                                     VIII-3
<PAGE>   98
therefor in the Bond Account or (ii) (a) remove such Pledged Mortgage from the
Trust Estate and substitute in its place a Replacement Pledged Mortgage and (b)
deposit in the Bond Account any related Substitution Adjustment Amount, in each
case in the manner set forth in the Master Servicing Agreement, then the Master
Servicer shall be deemed to have complied with all requirements imposed upon it
by this Section 8.04 with respect to such Pledged Mortgage.

            (e) The Master Servicer shall, in its sole discretion, have the
right to purchase for its own account from the Trust Estate any Pledged Mortgage
which is 91 days or more delinquent at a price and in the manner specified in
Section 3(n) of the Master Servicing Agreement. Upon purchase of such Pledged
Mortgage by the Master Servicer, the Master Servicer shall have the right to
treat such Pledged Mortgage (a "Defaulted Pledged Mortgage") as having been the
subject of a Principal Prepayment in Full and request the release thereof from
the lien of this Indenture pursuant to Section 8.12.

SECTION 8.05. GRANT OF REPLACEMENT PLEDGED MORTGAGE.

            The Master Servicer shall be permitted to substitute any Pledged
Mortgage for any Original Pledged Mortgage initially Granted to the Trustee on
the Closing Date pursuant to this Indenture as set forth in Sections 2(a)(ii)
and 2(d)(iv) of the Master Servicing Agreement.

SECTION 8.06. REPORTS BY TRUSTEE TO BONDHOLDERS.

            On each Payment Date or Optional Redemption Date the Trustee shall
deliver a written report to each Holder of Bonds, setting forth the following:

            (a) On or before [noon California time] on the Determination Date,
the Master Servicer shall provide by modem to the Trustee with respect to the
Pledged Mortgages, an electronic data file (accompanied by a hardcopy report) in
a format which is mutually agreed upon by the Master Servicer and the Trustee.
The Trustee shall be under no duty to recalculate, verify or recompute the
information provided to it by the Master Servicer under this Section 8.06(a).
Not later than each Payment Date, the Trustee shall prepare and cause to be
forwarded by first class mail to each Bondholder, the Master Servicer and the
Issuer a statement (each, a "Payment Date Statement") setting forth with respect
to the related distribution:

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

            (ii) the amount thereof allocable to interest, and (x) any of (a)
the amount by which the aggregate Senior Interest Shortfalls on prior Payment
Dates exceeds the amount paid on the Senior Bonds on prior Payment Dates
pursuant to clause (ii) of the definition of Senior Interest Payment Date, (b)
the amount by which the aggregate Class B-1 Interest Shortfalls on prior Payment
Dates exceeds the amount paid on the Class B-1 Bonds on prior Payment Dates
pursuant to clause (iii) of the definition of Class B-1 Interest Payment Amount
and (c) the amount by which the aggregate Class B-2 Interest Shortfalls on prior
Payment Dates exceeds the

                                     VIII-4
<PAGE>   99
amount paid on the Class B-2 Bonds on prior Payment Dates pursuant to clause
(iii) of the definition of Class B-2 Interest Payment Amount included in such
distribution and (y) any of the amounts in clauses (a), (b) or (c) above
remaining after giving effect to such distribution.

            (iii) if the distribution to the Holders of such Class of Bonds is
less than the full amount that would be distributable to such Holders pursuant
to Section 2.03(b) on such Payment Date if there were sufficient funds available
therefor, the amount of the shortfall and the allocation thereof as between
principal and interest and specifying, in the case of the Subordinated Bonds,
the Class B-2 Principal Carryover Shortfall and/or Class B-1 Principal Carryover
Shortfall;

            (iv) the Class Principal Amount of each Class of Bonds and the
Invested Amount after giving effect to the distribution of principal on such
Payment Date;

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

            (vi) the Senior Percentage, the Class B-1 Percentage, the Class B-2
Percentage and the Investor Percentage for the following Payment Date;

            (vii) the amount of the Master Servicing Fees and Servicing Fees
paid to or retained by the Master Servicer and the Servicers (with respect to
the Servicers, in the aggregate) with respect to such Payment Date;

            (viii) the Bond Interest Rate for each such Class of Bonds and the
Certificate Interest Rate with respect to such Payment Date;

            (ix) the amount of Advances included in the distribution on such
Payment Date and the aggregate amount of Advances outstanding as of the close of
business on such Payment Date;

            (x) the number and aggregate principal amounts of Pledged Mortgages
(A) delinquent (exclusive of Pledged Mortgages in foreclosure) (1) 1 to 29 days
(2) 30 to 59 days (3) 60 to 89 days and (4) 90 or more days and (B) in
foreclosure and delinquent (1) 1 to 29 days (2) 30 to 59 days (3) 60 to 89 days
and (4) 90 or more days, as of the close of business on the last day of the
calendar month preceding such Payment Date;

            (xi) for each of the preceding 12 calendar months, or all calendar
months since the Cut-off Date, whichever is less, the aggregate dollar amount of
the Scheduled Payments (A) due on all Outstanding Pledged Mortgages on each of
the Due Dates in each such month and (B) delinquent 60 days or more on each of
the Due Dates in each such month;

            (xii) with respect to any Pledged Mortgage that became an REO
Property during the preceding calendar month, the loan number and Stated
Principal Balance of such Pledged

                                     VIII-5
<PAGE>   100
Mortgage as of the close of business on the Determination Date preceding such
Payment Date and the date of acquisition thereof;

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

            (xiv) the Senior Percentage, the Class B-1 Percentage, the Class B-2
Percentage and the Investor Prepayment Percentage for the following Payment
Date;

            (xv) the aggregate amount of Realized Losses incurred during the
preceding calendar month and aggregate Realized Losses through such Payment
Date;

            (xvi) the amount payable to the holder of the Investor Certificate
pursuant to Section 5.01 of the Deposit Trust Agreement; and

            [(xvii) any amount payable under the Bond Insurance Policy.]

            (b) The Trustee's responsibility for disbursing the above
information to the Bondholders is limited to the availability, timeliness and
accuracy of the information derived from the Master Servicer. The Trustee will
send a copy of each statement provided pursuant to this Section 8.06 to each
Rating Agency.

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

SECTION 8.07. REPORTS BY TRUSTEE.

            In addition to any statements required to be delivered or prepared
by the Trustee pursuant to Section 2.09, 8.02, 8.06 or 10.01, the Trustee shall
deliver to the Issuer, within two Business Days after the request of the Issuer,
a written report setting forth the amount of each Pledged Account established
hereunder and the identity of the investments included therein. Without limiting
the generality of the foregoing, the Trustee shall, upon the request of the
Issuer, promptly transmit to the Issuer copies of all accountings of, and
information with respect to, collections furnished to it by the Master Servicer
and shall promptly notify the Issuer if on the second Business Day after any
Distribution Account Deposit Date, the related Bond Distribution Amount or any
portion thereof has not been received by the Trustee.

                                     VIII-6
<PAGE>   101
SECTION 8.08. TRUST ESTATE; RELEASE AND DELIVERY OF MORTGAGE DOCUMENTS.

            (a) The Trustee may, and when required by the provisions of this
Indenture shall, execute instruments in form supplied to it to release property
from the lien of this Indenture, or convey the Trustee's interest in the same,
in a manner and under circumstances which are not inconsistent with the
provisions of this Indenture and the TIA. No party relying upon an instrument
executed by the Trustee as provided in this Article VIII shall be bound to
ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.

            (b) In order to facilitate the servicing of the Pledged Mortgages by
the Servicers, the Master Servicer is authorized under the Master Servicing
Agreement for the benefit of the Trustee, the Bondholders and the Issuer, to
supervise, administer, monitor and oversee the servicing of the Pledged
Mortgages by the Servicers and the observance and performance by the Servicers
of all services, duties, responsibilities and obligations which are to be
observed or performed by each Servicer pursuant to the Seller/Servicer Guide.

            (c) Upon request by the Master Servicer accompanied by a Request for
Release in the form of Exhibit D to the Master Servicing Agreement to the effect
that a Pledged Mortgage has been the subject of a Prepayment in Full or has
otherwise been paid in full, together with any other items required under
Section 8.12, the Trustee shall promptly release the related Mortgage Documents
and execute such other documents as the Master Servicer may request to evidence
satisfaction and discharge of such Pledged Mortgage.

            (d) In addition, if from time to time and as appropriate for the
servicing or foreclosure of any Pledged Mortgage, or the other purposes set
forth in the Master Servicing Agreement, the Master Servicer requests the
Trustee to release any related Mortgage Documents or other documents contained
in the Trustee Mortgage File relating to such Pledged Mortgage and delivers to
the Trustee a Request for Release in the form of Exhibit C to the Master
Servicing Agreement to the Trustee and signed by a Servicing Officer, the
Trustee shall release the related Mortgage Documents to the Master Servicer if
the applicable requirements of the Master Servicing Agreement have been
satisfied. If such Pledged Mortgage shall be liquidated and the Trustee receives
an Issuer Request accompanied by a Request for Release as provided in subsection
(c) above, together with any other items required under Section 8.12, then the
Trustee shall release any documents with respect to such Pledged Mortgage still
in its possession to or upon the order of the Issuer and shall execute such
other documents as the Master Servicer may request to evidence satisfaction and
discharge of such Pledged Mortgage, as set forth in subsection (c) above.

            (e) The Trustee shall, at such time as there are no Bonds
Outstanding, release all of the Trust Estate to the Issuer (other than any cash
held for the payment of the Bonds pursuant to Section 3.03 or Section 4.02),
subject, however, to Section 4.01 and the rights of the Trustee under Section
6.07.

                                     VIII-7
<PAGE>   102
SECTION 8.09. AMENDMENTS TO THE MASTER SERVICING AGREEMENT.

            The Trustee may enter into or consent to any amendment or supplement
to the Master Servicing Agreement or waive any Servicing Default only in
accordance with the applicable provisions of the Master Servicing Agreement. The
Trustee may, in its discretion, decline to enter into or consent to any such
supplement or amendment or make any such waiver (i) unless the Trustee receives
an Opinion of Counsel that the interests of the Holders would not be materially
adversely affected or (ii) if its own rights, duties or immunities would be
adversely affected.

SECTION 8.10. SERVICERS AND MASTER SERVICER AS AGENTS AND BAILEES OF TRUSTEE.

            In order to facilitate the servicing of the Pledged Mortgages by the
each Servicer or by the Master Servicer, each Servicer shall deposit in the
Servicing Account proceeds of the Pledged Mortgages in accordance with the
provisions of the Servicing Agreements, the Master Servicing Agreement and this
Indenture, prior to the time they are deposited into the Bond Account. In
addition, on each Withdrawal Date, the Master Servicer shall cause each Servicer
to remit to the Master Servicer for deposit in the Bond Account all funds held
in the Servicing Account that are required to be remitted to the Master Servicer
in accordance with the terms of the Servicing Agreement and the Master Servicing
Agreement. Solely for purposes of perfection under Section 9-305 of the Uniform
Commercial Code or similar provision of law in the state in which such property
is held by the Servicers or the Master Servicer, the Trustee hereby designates
the Master Servicer and each Servicer as its agents and bailees to hold such
funds with respect to the Pledged Mortgages until they are deposited into the
Distribution Account as well as its agents and bailees in holding any Mortgage
Documents or other documents contained in a Trustee Mortgage File released to it
by the Trustee pursuant to Section 8.08(d), and any other items constituting a
part of the Trust Estate which from time to time come into possession of any
Servicer or the Master Servicer. It is intended that, by the Servicers' and
Master Servicer's acceptance of such agency pursuant to the Servicing Agreements
and the Master Servicing Agreement, the Trustee, as secured party, will be
deemed to have possession of such Mortgage Documents, such moneys and such other
items for purposes of Section 9-305 of the Uniform Commercial Code or similar
provision of law of the states in which such property is held by such Servicer
or the Master Servicer.

SECTION 8.11. OPINION OF COUNSEL.

            The Trustee shall be entitled to receive at least five Business
Days' notice of any action to be taken pursuant to Section 8.08(a) (other than
in connection with releases of Pledged Mortgages which were the subject of a
Principal Prepayment in Full) accompanied by copies of any instruments involved,
and the Trustee shall be entitled to request an Opinion of Counsel, in form and
substance reasonably satisfactory to the Trustee, stating the legal effect of
any such action, outlining the steps required to complete the same, and
concluding that all conditions

                                     VIII-8
<PAGE>   103
precedent to the taking of such action have been complied with. Counsel
rendering any such opinion may rely, without independent investigation, on the
accuracy and validity of any certificate or other instrument delivered to the
Trustee in connection with any such action.

SECTION 8.12. RELEASE OF PLEDGED MORTGAGES.

            (a) The Issuer shall be entitled to request a release from the lien
of this Indenture of any Pledged Mortgage at any time after such Pledged
Mortgage has been the subject of a Principal Prepayment in Full or in accordance
with the requirements of Section 8.04 if:

            (i) the Master Servicer has complied with all requirements imposed
on it by Section 8.04 in connection with such Pledged Mortgage (or is deemed to
have complied with such requirements by reason of the provisions of Section
8.04(e));

            (ii) at the time such release is requested, no Default or Event of
Default has occurred and is continuing; provided, however, that if a Pledged
Mortgage has been the subject of a Principal Prepayment in Full, then the
Trustee shall release such Pledged Mortgage from the lien of this Indenture upon
compliance with all other conditions of this subsection (a), notwithstanding the
existence of a Default or Event of Default;

            (iii) the Master Servicer delivers to the Trustee an Officers'
Certificate (A) identifying the Pledged Mortgage to be released, (B) requesting
the release thereof, (C) setting forth the amount deposited in the Bond Account
with respect thereto, if any, and (D) certifying that the conditions set forth
in clauses (i) and (ii) above have been satisfied; and

            (iv) the Issuer delivers to the Trustee a certificate of fair value
if required by Section 314(d)(1) or Section 314(d)(3) of the TIA.

            (b) Upon satisfaction of the conditions specified in subsection (a)
of this Section 8.12, the Trustee shall release from the lien of this Indenture
and deliver to or upon the order of the Master Servicer the Pledged Mortgage to
be released (including all related Mortgage Documents) described in the Master
Servicer's Request for Release.

                                     VIII-9
<PAGE>   104
                                   ARTICLE IX

                            SUPPLEMENTAL INDENTURES

SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF BONDHOLDERS.

            Without the consent of the Holders of any Bonds, the Issuer and the
Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Trustee, for any of
the following purposes:

            (1) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Trustee any property subject or required to be subjected to the
lien of this Indenture, or to subject to the lien of this Indenture additional
property;

            (2) to add to the conditions, limitations and restrictions on the
authorized amount, terms and purposes of the issuance, authentication and
delivery of any Bonds, as herein set forth, additional conditions, limitations
and restrictions thereafter to be observed;

            (3) to evidence the succession of another Person to the Issuer, and
the assumption by any such successor of the covenants of the Issuer herein and
in the Bonds contained;

            (4) to add to the covenants of the Issuer, for the benefit of the
Holders of all Bonds or to surrender any right or power herein conferred upon
the Issuer;

            (5) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions with respect to matters or questions arising
under this Indenture, which shall not be inconsistent with the provisions of
this Indenture, provided that such action shall not adversely affect the
interests of the Holders of the Bonds (any such action shall be deemed not to
adversely affect the interests of the Bondholders if the Issuer delivers to the
Trustee letters from each Rating Agency to the effect that such action will not
result in a downgrading of the Bonds); or

            (6) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the TIA or under any similar federal statute hereafter enacted,
and to add to this Indenture such other provisions as may be expressly required
by the TIA.

            The Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into any such supplemental indenture that affects the
Trustee's own rights, duties, liabilities or immunities under this Indenture or
otherwise except to the extent required by law.

            The Trustee may in its discretion determine whether or not the
rights of the Holder of Bonds would be adversely affected by any supplemental
indenture, and any such determination shall be conclusive upon the Holders of
all Bonds, whether theretofore or thereafter authenticated and delivered
hereunder. In making such determination, a supplemental indenture shall be
conclusively deemed by the Trustee not to adversely affect the Bonds if (i) the
Trustee receives a letter or other writing from each Rating Agency rating the
Bonds to the effect that execution of the supplemental indenture will not result
in any change in the current rating assigned by that Rating Agency to the Bonds
and (ii) the supplemental indenture effects no change in principal priority
schedules, interest rates, Redemption Prices, substitution of

                                      IX-1
<PAGE>   105
Mortgage Collateral, Payment Dates, Record Dates, Accounting Dates, terms or
optional Redemption, the application of surplus to the payment of the Bonds or
other payment terms. The Trustee shall not be liable for any such determination
made in good faith.

            [The Trustee shall provide the Bond Insurer, if any, with a copy of
any supplemental indenture executed pursuant to this Section, by first class
mail mailed to the Bond Insurer within five Business Days after the execution of
such supplemental indenture. Notwithstanding the foregoing, no supplemental
indenture that changes in any way any of the payment terms of the Bonds may be
entered into without the prior written consent of such Bonder Insurer.]

SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF BONDHOLDERS.

            With the consent of the Holders of Bonds representing not less than
two-thirds of the aggregate Class Principal Amount of the Controlling Class by
Act of said Holders delivered to the Issuer and the Trustee [and the Bond
Insurer], the Issuer and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Bonds under this
Indenture; provided, however, that no such supplemental indenture shall, without
the consent of the Holder of each Outstanding Bond affected thereby:

            (1) change the Stated Maturity of the final installment of the
principal of, or any installment of interest on, any Bond or reduce the
principal amount thereof, the Bond Interest Rate thereon or the Redemption Price
with respect thereto, change the earliest date on which any Bond may be redeemed
at the option of the Issuer, change any place of payment where, or the coin or
currency in which, any Bond or any interest thereon is payable, or impair the
right to institute suit for the enforcement of the payment of any installment of
interest due on any Bond on or after the Stated Maturity thereof or for the
enforcement of the payment of the entire remaining unpaid principal amount of
any Bond on or after the Stated Maturity of the final installment of the
principal thereof (or, in the case of redemption, on or after the applicable
Optional Redemption Date);

            (2) reduce the percentage of the aggregate Class Principal Amount of
the Controlling Class, the consent of the Holders of which is required for any
such supplemental indenture, or the consent of the Holders of which is required
for any waiver of compliance with provisions of this Indenture or Defaults
hereunder and their consequences provided for in this Indenture;

            (3) modify any of the provisions of this Section, Section 5.14 or
Section 5.18(b) except to increase any percentage specified therein or to
provide that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Bond affected
thereby;

                                      IX-2
<PAGE>   106
            (4) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";

            (5) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Trust Estate
(except for Permitted Encumbrances) or terminate the lien of this Indenture on
any property at any time subject hereto or deprive the Holder of any Bond of the
security afforded by the lien of this Indenture; or

            (6) modify any of the provisions of this Indenture in such manner as
to materially and adversely affect rights of the Holders of the Controlling
Class to the benefits of any provisions for the mandatory redemption of Bonds
contained herein.

            The Trustee may in its discretion determine whether or not the
rights of the Holder of any Controlling Class would be materially and adversely
affected by any supplemental indenture and any such determination shall be
conclusive upon the Holders of all Bonds authenticated and delivered hereunder.
The Trustee shall not be liable for any such determination made in good faith.

            It shall not be necessary for any Act of Bondholders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.

            Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section, the Trustee shall mail to the
Holders of the Bonds to which such supplemental indenture relates [and to the
Bond Insurer] a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.

SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES.

            In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.01) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.

SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURES.

            Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form

                                      IX-3
<PAGE>   107
a part of this Indenture for all purposes; and every Holder of Bonds to which
such supplemental indenture relates which have theretofore been or thereafter
are authenticated and delivered hereunder shall be bound thereby.

SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT.

            Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the TIA as then in effect so long as this
Indenture shall then be qualified under the TIA.

SECTION 9.06. REFERENCE IN BONDS TO SUPPLEMENTAL INDENTURES.

            Bonds authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and if required by the
Trustee shall, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Issuer shall so determine,
new Bonds so modified as to conform, in the opinion of the Trustee and the
Issuer, to any such supplemental indenture may be prepared and executed by the
Issuer and authenticated and delivered by the Trustee in exchange for
Controlling Class.

SECTION 9.07. AMENDMENTS TO DEPOSIT TRUST AGREEMENT OR MASTER SERVICING
AGREEMENT.

            The Trustee shall, upon Issuer Request, consent to any proposed
amendment to the Deposit Trust Agreement or Master Servicing Agreement, or an
amendment to or waiver of any provision of any other document relating to the
Deposit Trust Agreement or Master Servicing Agreement, such consent to be given
without the necessity of obtaining the consent of the Holders of any Bonds upon
receipt by the Trustee of:

            (i) an Opinion of Counsel to the effect that such amendment or
waiver will not materially and adversely affect the interests of the Holders of
the Bonds and that all conditions precedent to such consent specified in this
Section 9.07 have been satisfied; provided, however, that no such Opinion of
Counsel shall be required if the Person requesting the amendment obtains a
letter from each Rating Agency stating that the amendment would not result in
the downgrading or withdrawal of the respective ratings then assigned to the
Bonds; 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;

            (ii) an Officers' Certificate, to which such proposed amendment or
waiver shall be attached, stating that such attached copy is the true copy of
the proposed amendment or waiver and that all conditions precedent to such
consent specified in this Section 9.07 have been satisfied;

                                      IX-4
<PAGE>   108
            (iii) written confirmation from the Rating Agencies that the
implementation of the proposed amendment or waiver will not adversely affect
their rating of the Bonds; and

            (iv) any other document required pursuant to Section 11.01.

            Notwithstanding the foregoing, the Trustee may decline to consent to
a proposed waiver or amendment that adversely affects its own rights, duties or
immunities under this Indenture or otherwise.

            Nothing in this Section 9.07 shall be construed to require that any
Person obtain the consent of the Trustee to any amendment or waiver or any
provision of any document where the making of such amendment or the giving of
such waiver without obtaining the consent of the Trustee is not prohibited by
this Indenture or by the terms of the document that is the subject of the
proposed amendment or waiver.

                                      IX-5
<PAGE>   109
                                    ARTICLE X

                               REDEMPTION OF BONDS

SECTION 10.01. SPECIAL REDEMPTION; REDEMPTION.

            (a) The Bonds shall not be subject to special redemption.

            (b) The Bonds shall be subject to redemption by the Class R-LT
Holder, in whole but not in part, at the option of the Class R-LT Holder, on any
Payment Date on or after the Payment Date on which the sum of (i) the Invested
Amount, (ii) the Senior Class Principal Amount, (iii) the Class B-1 Principal
Amount and (iv) the Class B-2 Principal Amount, after giving effect to payments
expected to be made on such Payment Date, is __% or less than the aggregate of
the Stated Principal Balances of the Pledged Mortgages as of the Cut-Off Date,
on the terms and conditions specified in this subsection (b) at the Redemption
Price. If the Class R-LT Holder elects to so redeem the Bonds, it shall, no
later than 30 days prior to the Optional Redemption Date selected for such
redemption, deliver notice of such election to the Trustee, together with the
Redemption Price therefor to be deposited in the Distribution Account, an Issuer
Order directing the Trustee to effect such redemption, any certification and
opinion required pursuant to Section 11.01 and a form of redemption notice. All
Bonds so redeemed shall be due and payable on such Optional Redemption Date upon
the giving of the notice thereof required by Section 10.02. At all times during
the life of the Trust Estate, the Issuer shall hold the Class R-LT Certificates
or the legal right to the redemption rights accorded to the Class R-LT Holder in
this Section 10.01(b).

SECTION 10.02. FORM OF REDEMPTION NOTICE.

                                      X-1
<PAGE>   110
            Notice of redemption shall be given by the Trustee in the name of
and at the expense of the Issuer by first class mail, postage prepaid, mailed
not less than five days prior to the applicable Optional Redemption Date (but in
no event prior to the date on which the Redemption Price with respect to the
Bonds to be redeemed pursuant to subsection (b) of Section 10.01 has been
deposited in the Distribution Account) to each Holder of Bonds to be redeemed,
such Holders being determined as of the last day of the month preceding the
month in which such Optional Redemption Date occurs (the "Optional Redemption
Record Date").

            All notices of redemption shall state:

            (1) the Optional Redemption Date; and

            (2) the fact of such payment in full, the place where such Bonds are
to be surrendered for payment of the Redemption Price (which shall be the office
or agency of the Issuer to be maintained as provided in Section 3.02) and that
no interest shall accrue on such Bond for any period after the last day of the
month preceding the month in which the date fixed for redemption occurs. Failure
to give notice of redemption, or any defect therein, to any Holder of any Bond
selected for redemption shall not impair or affect the validity of the
redemption of any other Bond.

SECTION 10.03. BONDS PAYABLE ON OPTIONAL REDEMPTION DATE.

            Notice of redemption having been given as provided in Section 10.02,
the Bonds or portions thereof so to be redeemed shall, on the applicable
Optional Redemption Date, become due and payable at the Redemption Price and
(unless the Issuer shall default in the payment of the Redemption Price) no
interest shall accrue on such Redemption Price for any period after the last day
of the month preceding the month in which such Optional Redemption Date occurs.

SECTION 10.04. ADDITIONAL TERMINATION REQUIREMENTS

       (a) In the event the Class R-LT Holder elects to redeem the Bonds as
provided in Section 10.01, the Trust Estate shall be terminated in accordance
with the following additional requirements, unless the Trustee has received an
Opinion of Independent Counsel, at the expense of the Class R-LT Holder, to the
effect that the failure of the Trust Estate to comply with the requirements of
this Section 10.04 will not (i) result in the imposition of taxes on "prohibited
transactions" of the Trust Estate as defined in Section 860F of the Code, or
(ii) cause the Trust Estate to fail to qualify as two REMICs at any time that
any Bonds or Class R Certificates are outstanding:

            (i) Depositor shall establish a 90-day liquidation period and notify
      the Trustee thereof, which shall in turn specify the first day of such
      period in a statement attached to the final tax returns of the Trust
      Estate pursuant to Treasury Regulation Section 1.860F-1. The Depositor
      shall satisfy all requirements of a qualified liquidation under Section
      860F of

                                      X-2
<PAGE>   111
      the Code and any regulations thereunder, as evidenced by an Independent
      Opinion of Counsel obtained at the expense of the Depositor;

               (ii) During such 90-day liquidation period, and at or prior to
      the Payment Date for the final distribution, the Depositor as agent of the
      Trustee shall sell all of the assets of the Trust Estate for cash; and

               (iii) At the time of the final payment on the Bonds and Class R
      Certificates, the Trustee shall distribute or credit, or cause to be
      distributed or credited, to the Class R-LT Holder all cash on hand (other
      than cash retained to meet claims), and the Trust Estate shall terminate
      at that time.

      (b) By their acceptance of the Class R-LT and Class R-UT Certificates, the
Holders thereof hereby authorize the Depositor to specify the 90-day liquidation
period for the Trust Estate, which authorization shall be binding upon all
successor Holders of the Class R-LT and Class R-UT Certificates.

                                      X-3
<PAGE>   112
                                   ARTICLE XI

                                  MISCELLANEOUS

SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS.

            Upon any application or request by the Issuer to the Trustee to take
any action under any provision of this Indenture, the Issuer shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.

            Every certificate, opinion or letter with respect to compliance with
a condition or covenant provided for in this Indenture (including one furnished
pursuant to specific requirements of this Indenture relating to a particular
application or request) shall include:

            (1) a statement that each individual signing such certificate,
opinion or letter has read such covenant or condition and the definitions herein
relating thereto;

            (2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate, opinion or letter are based;

            (3) a statement that, in the opinion of each such individual, he or
she has made such examination or investigation as is necessary to enable such
individual to express an informed opinion as to whether or not such covenant or
condition has been complied with; and

            (4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.

SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.

            In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents

            Any certificate or opinion of an officer of the Issuer may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate ar opinion or representations
with respect to the matters upon which his other certificate or opinion is based
are erroneous. Any such Issuer certificate or Opinion of Counsel may be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an Authorized Officer or Officers of the Owner Trustee or a
certificate of the officers of the Depositor or the manager of the Issuer,
stating that the information with respect to such factual matters is in the
possession of the Owner Trustee, or the Depositor or the manager of the Issuer,
unless such officer or counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous. Any Opinion of Counsel may be based on the written
opinion of other counsel, in which event such Opinion of Counsel shall be
accompanied by a copy of such other counsel's opinion and shall include a
statement to the effect that such counsel believes that such counsel and the
Trustee may reasonably rely upon the opinion of such other counsel.

            Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

            Wherever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not,

                                      XI-1
<PAGE>   113
however, be construed to affect the Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Section 6.01(b)(2).

            Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default is a condition
precedent to the taking of any action by the Trustee at the request or direction
of the Issuer, then, notwithstanding that the satisfaction of such condition is
a condition precedent to the Issuer's right to make such request or direction,
the Trustee shall be protected in acting in accordance with such request or
direction if it does not have knowledge of the occurrence and continuation of
such Default or Event of Default as provided in Section 6.01(d).

SECTION 11.03. ACTS OF BONDHOLDERS.

            (a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Bondholders may be embodied in any evidence by one or more instruments of
substantially similar tenor signed by such Bondholders in person or by an agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Bondholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.01) conclusive in
favor of the Trustee and the Issuer, if made in the manner provided in this
Section.

            (b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgements of deeds, certifying that the individual signing
such instrument or writing acknowledged to him or her the execution thereof.
Whenever such execution is by an officer of a corporation or a member of a
partnership on behalf of such corporation or partnership, such certificate or
affidavit shall also constitute sufficient proof of his or her authority.

            (c) The ownership of Bonds shall be proved by the Bond Register.

            (d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Bonds shall bind the Holder of every
Bond issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, in respect of anything done, omitted or suffered to be done by
the Trustee or the Issuer in reliance thereon, whether or not any notation of
such action is made upon such Bonds.

SECTION 11.04. NOTICES, ETC. TO TRUSTEE AND ISSUER.

                                      XI-2
<PAGE>   114
            Any request, demand, authorization, direction, notice, consent,
waiver or Act of Bondholders or other documents provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with:

            (1) the Trustee by any Bondholder or by the Issuer shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with and received by the Trustee at its Corporate Trust Office;

            (2) the Issuer by the Trustee or by any Bondholder shall be
sufficient for every purpose hereunder (except as provided in Sections 5.01(3)
and (4)) if in writing and mailed, first-class, postage prepaid, to the Issuer
addressed to it c/o __________________________________________________________
____________________________, Attention: Corporate Trust Administration, or at
any other address previously furnished in writing to the Trustee by the Issuer;

            (3) any Rating Agency by the Trustee, the Issuer or the Master
Servicer shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by such Rating Agency at
the address specified therefor in the definition corresponding to the name of
such Rating Agency; or

            [(4) the Bond Insurer by the Trustee, the Issuer or any Bondholder
shall be sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid to the Bond Insurer at ___________________
____________________.]

SECTION 11.05. NOTICES AND REPORTS TO BONDHOLDERS; WAIVER OF NOTICES.

            Where this Indenture provides for notice to Bondholders of any event
or the mailing of any report to Bondholders, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class, postage prepaid, to each Bondholder affected by such event or to
whom such report is required to be mailed, at the address of such Bondholder as
it appears on the Bond Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice or the mailing
of such report. In any case where a notice or report to Bondholders is mailed in
the manner provided above, neither the failure to mail such notice or report,
nor any defect in any notice or report so mailed, to any particular Bondholder
shall affect the sufficiency of such notice or report with respect to other
Bondholders, and any notice or report which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given or provided.

            Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waiver of notice by any Bondholder shall

                                      XI-3
<PAGE>   115
be filed with the Trustee, but such filing shall not be a condition precedent to
the validity of any action taken in reliance upon such waiver.

            In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Bondholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.

            Where this Indenture provides for notice to Bondholders of any
event, such notice shall also be sent to ______________________________________
_____________________________, so long as [ ] is a Rating Agency.

SECTION 11.06. RULES BY TRUSTEE AND AGENTS.

            The Trustee may make reasonable rules for any meeting of
Bondholders. Any Agent may make reasonable rules and set reasonable requirements
for its functions.

SECTION 11.07. CONFLICT WITH TRUST INDENTURE ACT.

            If this Indenture is qualified under the TIA and any provision
hereof limits, qualifies or conflicts with another provision hereof which is
required to be included in this Indenture by any of the provisions of the TIA,
such required provision shall control.

SECTION 11.08. EFFECT OF HEADINGS AND TABLE OF CONTENTS.

            The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.

SECTION 11.09. SUCCESSORS AND ASSIGNS.

            All covenants and agreements in this Indenture by the Issuer shall
bind its successors and assigns, whether so expressed or not.

SECTION 11.10. SEPARABILITY.

            In case any provision in this Indenture or in the Bonds shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 11.11. BENEFITS OF INDENTURE.

            Nothing in this Indenture or in the Bonds, expressed or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, any separate trustee or co-

                                      XI-4
<PAGE>   116
trustee appointed under Section 6.14 and the Bondholders, any benefit or any
legal or equitable right, remedy or claim under this Indenture.

SECTION 11.12. LEGAL HOLIDAYS.

            In any case where the date of any Payment Date, Redemption Date or
any other date on which principal of, or interest on, any Bond is proposed to be
paid shall not be a Business Day, then (notwithstanding any other provision of
the Bonds or this Indenture) payment need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made on the nominal date of any such Payment Date, Optional Redemption Date or
other date for the payment of principal of, or interest on, any Bond, as the
case may be, and no interest shall accrue for the period from and after any such
nominal date, provided such payment is made in full on such next succeeding
Business Day.

SECTION 11.13. GOVERNING LAW.

            This Indenture and each Bond 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 Bondholders shall
be determined in accordance with such laws.

SECTION 11.14. COUNTERPARTS.

            This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument.

SECTION 11.15. RECORDING OF INDENTURE.

            This Indenture is subject to recording in any appropriate public
recording office, such recording to be effected by the Issuer and at its expense
in compliance with any Opinion of Counsel delivered pursuant to Section 2.12(c)
or Section 3.06.

SECTION 11.16. ISSUER OBLIGATION.

            No recourse may be taken, directly or indirectly, against (i) the
Bank, (ii) any incorporator, subscriber to the capital stock, stockholder,
officer or director of the Bank or of any predecessor or successor of the Bank,
(iii) any holder of a beneficial interest in the Issuer (solely in its capacity
as such), (iv) any incorporator, subscriber to the capital stock, stockholder,
partner, beneficiary, agent, officer, director, employee, or successor or assign
of a holder of a beneficial interest in the Issuer, (v) the Depositor or any
Affiliate thereof (other than the Issuer) or (vi) any incorporator, subscriber
to the capital stock, stockholder, officer, director or employee of the Trustee
or any predecessor or successor of the Trustee with respect to the Issuer's

                                      XI-5
<PAGE>   117
obligation with respect to the Bonds or the obligation of the Issuer or the
Trustee under this Indenture or any certificate or other writing delivered in
connection herewith or therewith.

SECTION 11.17. INSPECTION.

            The Issuer agrees that, on reasonable prior notice, it will permit
any representative of the Trustee, during the Issuer's normal business hours, to
examine all books of account, records, reports and other papers of the Issuer,
to make copies and extracts therefrom, to cause such books to be audited by
Independent Accountants selected by the Trustee, and to discuss its affairs,
finances and accounts with its officers, employees and Independent Accountants
(and by this provision the Issuer hereby authorizes its Accountants to discuss
with such representatives such affairs, finances and accounts), all at such
reasonable times and as often as may be reasonably requested. Any expense
incident to the exercise by the Trustee of any rights under this Section 11.17
shall be borne by the Issuer.

SECTION 11.18. USURY.

            The amount of interest payable or paid on any Bond under the terms
of this Indenture shall be limited to an amount which shall not exceed the
maximum nonusurious rate of interest allowed by the applicable laws of the
United States or the State of New York (whichever shall permit the higher rate),
which could lawfully be contracted for, charged or received (the "Highest Lawful
Rate"). In the event any payment of interest on any Bond exceeds the Highest
Lawful Rate, the Issuer stipulates that such excess amount will be deemed to
have been paid as a result of an error on the part of both the Trustee, acting
on behalf of the Holder of such Bond, and the Issuer, and the Holder receiving
such excess payment shall promptly, upon discovery of such error or upon notice
thereof from the Issuer or the Trustee, refund the amount of such excess or, at
the option of the Trustee, apply the excess to the payment of principal of such
Bond, if any, remaining unpaid.

SECTION 11.19. NO PETITION.

            The Trustee, by entering into this Indenture, and each Bondholder,
by accepting a Bond, hereby covenant and agree that they will not at any time
institute against the Depositor or the Issuer, or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States federal or state bankruptcy or similar law in connection with
any obligations relating to the Bonds, this Indenture or any of the Operative
Agreements.

SECTION 11.20. AMENDMENT

            This Indenture may be amended from time to time by the Depositor,
the Master Servicer and the Trustee, with the consent of the Bond Insurer so
long as such consent is not unreasonably withheld and without the consent of any
of the Bondholders, (i) to cure or correct any ambiguity, mistake or error, (ii)
to correct or supplement any provisions herein which may be inconsistent

                                      XI-6
<PAGE>   118
with any other provisions herein or with the Prospectus Supplement or Prospectus
pursuant to which the Class A Bonds were offered, (iii) to obtain a rating by a
nationally recognized rating agency or to maintain or improve the rating of the
Class A Bonds then given by a rating agency (it being understood that, after
obtaining the rating of the Class A Bonds at the Closing Date, none of the
Trustee, the Depositor or the Master Servicer is obligated to obtain, maintain
or improve any rating of any Class of Bonds), or (iv) to make any other
provisions with respect to matters or questions arising under this Indenture
which shall not be materially inconsistent with the provisions of this
Indenture, including without limitation provisions relating to the issuance of
Definitive Bonds to Beneficial Owners if book-entry registration of the Class A
Bonds is no longer permitted; provided that, in the case of clause (iv), such
action shall not, as evidenced by an Opinion of Independent Counsel, adversely
affect in any material respect the interests of any Bondholder or Class R
Holder.

            This Indenture may also be amended from time to time by the
Depositor, the Master Servicer and the Trustee, with the consent of the Holders
of Bonds of each Class affected thereby, evidencing, as to each such Class,
beneficial interests aggregating not less than 66% and the consent of the Bond
Insurer, for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Indenture or of modifying in any
manner the rights of the Holders of Bonds of such Class; provided, however, that
no such amendment shall (i) reduce in any manner the amount of, or delay the
timing of, payments received on Mortgage Loans which are required to be
distributed on any Bond without the consent of the Holder of such Bond or (ii)
reduce the aforesaid percentage of Bonds of any class the Holders of which are
required to consent to any such amendment, without the consent of the Holders of
all Bonds of such Class then outstanding.

            The Depositor, the Master Servicer and the Trustee, may from time to
time amend this Indenture without the consent of any of the Bondholders or the
Bond Insurer to modify, eliminate or add to any of the provisions hereof to the
extent necessary to maintain the qualification of the Trust Estate as two REMICs
or to avoid the imposition of any material tax liability thereon at all times
that any Bond is outstanding.

            Promptly after the execution of any such amendment the Trustee shall
furnish written notification of such amendment to each Bondholder, the Bond
Insurer and the Rating Agencies (with a copy of the amendment itself to Standard
& Poor's).

            It shall not be necessary for the consent of Bondholders under this
Section 11.20 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 Bondholders shall be subject to such reasonable regulations
as the Trustee may prescribe.

            Notwithstanding any provisions of this Indenture, the Trustee shall
not consent to any amendment to this Indenture unless it shall first receive an
Opinion of Counsel to the effect that such amendment will not result in the
imposition of a tax on the Trust Estate or cause the Trust Estate to fail to
qualify as two REMICs at any time that any Bonds are outstanding. In no event
shall any Opinion of Counsel provided pursuant to this Section 11.20 be an
expense of the Trustee.

                                      XI-7
<PAGE>   119
                                   ARTICLE XII

                                THE BOND INSURER

SECTION 12.01. CERTAIN MATTERS REGARDING THE BOND INSURER AND THE BOND INSURANCE
POLICY.

            [as set forth in the applicable policy]

                                     XII-1
<PAGE>   120
            IN WITNESS WHEREOF, each party has caused this Indenture to be
executed by its duly authorized officer or officers as of the day and year first
above written.

            SEQUOIA MORTGAGE TRUST 200_-_,
            as Issuer

            By: ________________________________,

            not in its individual capacity but
            solely as Owner Trustee

            By: ________________________________

            Name: ______________________________

            Title: _____________________________

            as Trustee

            By: ________________________________

            Authorized Officer

            By: ________________________________

            Name: ______________________________

            Title: _____________________________

                                       S-1
<PAGE>   121
STATE OF DELAWARE     )
                      )  ss.:
COUNTY OF NEW CASTLE  )

            On the ____ day of _____________ in the year one thousand nine
hundred and ninety-_____ before me personally came __________________________,
to me known, who being by me duly sworn did depose and say that she/he resides
in _______________, that she/he is the ______________________ of
__________________________, the corporation described in and which executed the
above instrument and that she/he signed her/his name thereto by authority of the
Board of Directors of said corporation.

[NOTARIAL SEAL]

---------------------------------------
            Notary Public

                                       S-2
<PAGE>   122

STATE OF _________________   )
                             )  ss.:
COUNTY OF ________________   )

            On the ____ day of __________, 200__, before me, a notary public in
and for said State, personally appeared ___________________________, known to me
(or proved to me on the basis of satisfactory evidence) to be a ______
______________ of ____________________________________, the ___________________
corporation that executed the within instrument, and also known to me (or proved
to me on the basis of satisfactory evidence) to be the persons who executed it
on behalf of said _____________________ corporation, and acknowledged to me that
such ___________________ corporation executed the within instrument.

            IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

[NOTARIAL SEAL]

---------------------------------------
            Notary Public

                                       S-3
<PAGE>   123
                                    EXHIBIT I

                      LETTER AGREEMENT WITH THE DEPOSITORY

                                       I-1
<PAGE>   124
                                   EXHIBIT II

                               FORM OF SENIOR BOND

      The form of Senior Bond is as follows:

            SOLELY FOR US FEDERAL INCOME TAX PURPOSES, THIS BOND IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.

            PRINCIPAL OF THIS BOND IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE CLASS PRINCIPAL AMOUNT OF THIS BOND AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THE CLASS PRINCIPAL AMOUNT OF
THIS BOND MAY BE ASCERTAINED ONLY BY OBTAINING A CONFIRMATION THEREOF FROM THE
TRUSTEE UNDER THE INDENTURE REFERRED TO BELOW.

            UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND SO ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR USE HEREOF, FOR VALUE OR OTHERWISE, BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

<PAGE>   125
                         SEQUOIA MORTGAGE TRUST 200_-_,
                       a Delaware Statutory Business Trust

                          Collateralized Mortgage Bonds
                                    CLASS A-1

                           DUE: __________ ___, _____
                       ACCRUAL DATE: __________ ___, _____
                        ISSUE DATE: __________ ___, _____
                             [      ] INTEREST RATE

Initial Class Principal
Amount of this Bond:

$____________________________                                       CUSIP NO.___
            CERTIFICATE NUMBER 1

            Sequoia Mortgage Trust 200 _-_ (the "Issuer"), a statutory business
trust formed under the Deposit Trust Agreement dated as of _____________ ___,
200__ and having _________________________, a Delaware bank and trust company,
as Owner Trustee, for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of [AMOUNT IN WORDS] ($_______) in monthly
installments on the ____________ day of each month, commencing on ________ _
___, _____ (each, a "Payment Date"), and ending on or before __________ ___,
_____, (the "Stated Maturity" of such final installment of principal), and to
pay interest (computed on the basis of a 360-day year of twelve 30-day months)
on the Class Principal Amount (as defined in the Indenture hereinafter referred
to) of this Bond from time to time from _ ________ ___, _____ (the "Accrual
Date"), or such later date to which interest has been paid, through the last day
of the month preceding the month in which the principal amount of this Bond is
paid in full, at a [variable/fixed] rate determined as described below, such
interest being payable monthly on each Payment Date. If any Payment Date shall
not be a "Business Day" (as defined in the Indenture), payment of the amount due
will be made on the next succeeding Business Day.

            Installments of principal of this Bond are due and payable as
described in the Indenture.

            Interest payable on this Bond on a Payment Date will be equal to the
amount of interest that has accrued on the Class Principal Amount of this Bond
during the one-month period ending on the last day of the month preceding the
month in which each such Payment Date occurs (each, an "Interest Accrual
Period").

                                       1
<PAGE>   126
            The principal of, and interest on, this Bond are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Bond shall be applied as set forth in the Indenture.
Any installment of principal or interest which is not paid when and as due shall
bear interest as described in the Indenture.

            Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Bond shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.

            IN WITNESS WHEREOF, Sequoia Mortgage Trust 200_-_ has caused this
instrument to be duly executed by its duly authorized officer.

Dated:_______________                              SEQUOIA MORTGAGE TRUST 200_-_

            By: ____________________________

            not in its individual capacity
            but solely as Owner Trustee

            By: ____________________________

            Title: _________________________

                          CERTIFICATE OF AUTHENTICATION

This is one of the Bonds referred to in the within-mentioned Indenture.

_______________________________,

as Trustee

By: ___________________________,
    Authorized Signatory

                                       2
<PAGE>   127
            This Bond is one of a duly authorized issue of Bonds of the Issuer,
designated as its Collateralized Mortgage Bonds, Series 200-_ (herein called the
"Bonds"). The Bonds are issuable in one or more classes; the Bonds of particular
Classes being herein called the Class A-1, Class B-1, and Class B-2 Bonds, and
the Class R-LT and Class R-UT Certificates, all issued and to be issued under
the Issuer's Indenture dated as of ____________ ___, 200__ between the Issuer
and _______________________________ (the "Trustee", which term includes any
successor Trustee under the Indenture), which authorized the Bonds, and
reference is hereby made thereto for a statement of the respective rights
thereunder of the Issuer, the Trustee and the Holders of the Bonds of each
particular Class thereof and the terms upon which the Bonds of each Class are,
and are to be, authenticated and delivered.

            The Class A-1 Bonds constitute "Senior Bonds" and the Class B-1
Bonds and the Class B-2 Bonds constitute "Subordinated Bonds".

            The Class R-LT and R-UT Certificates represent the residual interest
in the Lower-Tier REMIC and Upper-Tier REMIC, respectively.

            All terms used in this Bond which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.

            The Bond Interest Rate for the Senior Bonds (the "Senior Bond
Interest Rate") and any Interest Accrual Period will equal _______________.

            As provided in the Indenture, the Bonds are issuable in Classes
which may vary as is provided or permitted in the Indenture. Bonds of each Class
are equally and ratably secured by the collateral pledged as security therefor
to the extent provided by the Indenture.

            For each Principal Payment Date, the aggregate amount of each
installment of principal due and payable on the Senior Bonds will be equal to
the Senior Principal Payment Amount for such Payment Date. The Senior Principal
Payment Amount for any Payment Date is equal to the Senior Percentage of the sum
of (a) the principal portion of the Scheduled Payment due on each Pledged
Mortgage [on the related Due Date], (b) the principal portion of the purchase
price of each Pledged Mortgage that was purchased by Redwood Trust or another
person pursuant to the Mortgage Loan Purchase Agreement [or any optional
purchase by the Master Servicer of a defaulted Pledged Mortgage] as of such
Payment Date, (c) the Substitution Adjustment Amount in connection with any
Deleted Pledged Mortgage received with respect to such Payment Date, (d) any
Insurance Proceeds or Liquidation Proceeds allocable to recoveries of principal
of Pledged Mortgages that are not yet Liquidated Pledged Mortgages received
during the [calendar month] preceding the month of such Payment Date, (e) with
respect to each Pledged Mortgage that became a Liquidated Pledged Mortgage
during the [calendar month] preceding the month of such Payment Date, the Stated
Principal Balance of such Pledged Mortgage, and (f) all partial and full
principal prepayments by borrowers received during the related Prepayment
Period.

                                       3
<PAGE>   128
            Payments of principal or interest, if any, on the Bonds will be made
on each Payment Date, commencing on ____________ ___, 200__, in the manner and
in accordance with the priorities for the Bonds provided in the Indenture.

            The entire unpaid principal amount of each Class of Bonds shall be
due and payable, if not then previously paid, on the Stated Maturity of the
final installment of principal of such Class.

            All payments of principal of, and interest on, the Bonds shall be
made only from the Trust Estate Granted as security for the Bonds and any other
assets of the Issuer that have not been Granted as security for any other bonds
or obligations of the Issuer, and each Holder hereof, by its acceptance of this
Bond, agrees that it will have recourse solely against such Trust Estate and
such other assets of the Issuer and that neither _____________________ ___ in
its individual capacity, any holder of a beneficial interest in the Issuer nor
any of their respective shareholders, partners, beneficiaries, agents, officers,
directors, employees, successors or assigns shall be personally liable for any
amounts payable, or performance due, under this Bond or the Indenture.

            Payment of the then remaining unpaid principal amount of this Bond
on the Stated Maturity of its final installment of principal or on such earlier
date as the Issuer shall be required to pay the then remaining unpaid principal
amount of this Bond or payment of the Redemption Price payable on any date as of
which this Bond has been called for redemption in full, shall be made upon
presentation of this Bond to the office or agency of the Issuer maintained for
such purpose. Payments of interest on this Bond due and payable on each Payment
Date or on any Optional Redemption Date, to the extent this Bond is not being
paid in full, together with any installment of principal of this Bond due and
payable on each Payment Date or the Optional Redemption Date, to the extent not
in full payment of this Bond, shall be made by check mailed to the Person whose
name appears as the registered Holder of this Bond (or one or more Predecessor
Bonds) on the Bond Register as of the last day of the month preceding the month
in which such Payment Date occurs (each a "Record Date").

            Checks for amounts which include installments of principal due on
this Bond shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Bond Register as of the applicable Record Date
without requiring that this Bond be submitted for notation of payment and checks
returned undelivered will be held for payment to the Person entitled thereto,
subject to the terms of the Indenture, at the office or agency in the United
States of America designated by the Issuer for such purpose pursuant to the
Indenture. Any reduction in the principal amount of this Bond (or any one or
more Predecessor Bonds) effected by any payments made on any Payment Date shall
be binding upon all Holders of this Bond and of any Bond issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not noted hereon.

            If funds are expected to be available, as provided in the Indenture,
for payment in full of the then remaining unpaid principal amount of this Bond
on a Payment Date or Optional

                                       4
<PAGE>   129
Redemption Date which is prior to the Stated Maturity of the final installment
of principal hereof, then the Trustee, on behalf of the Issuer, will notify the
Person who was the registered Holder hereof on the last day of the month prior
to the month in which such Payment Date or Optional Redemption Date occurs, and
the amount then due and payable shall, if sufficient funds therefor are
available, be payable only upon presentation of this Bond to the office or
agency of the Issuer maintained for such purpose.

            The failure of the Issuer to pay when and as due any installment of
principal of (regardless of the lapse of any grace period) any Senior Bond shall
not constitute an Event of Default under the Indenture unless the Senior Class
Principal Amount exceeds the aggregate Stated Principal Balances of the Pledged
Mortgages after application of all available amounts on deposit in the
Distribution Account on a Payment Date.

            If an Event of Default as defined in the Indenture shall occur and
be continuing with respect to the Bonds, the Bonds may become or be declared due
and payable in the manner and with the effect provided in the Indenture. If any
such acceleration of maturity occurs prior to the Stated Maturity of the final
installment of principal of this Bond, the amount payable to the Holder of this
Bond will be equal to the Class Principal Amount of this Bond on the date this
Bond becomes so due and payable, together with accrued interest. Following the
acceleration of the maturity of the Bonds, all amounts collected as proceeds of
the collateral securing the Bonds or otherwise shall be applied as described in
the Indenture. Following such acceleration, interest on any overdue installments
of interest on all Bonds shall be payable at the rate set forth in the
Indenture.

            The Bonds are not prepayable or redeemable at the option or
direction of the Issuer except that the Bonds are subject to redemption in
whole, but not in part, at the option of the Issuer on any Payment Date on or
after the Payment Date on which the sum of (i) the Invested Amount, (ii) the
Senior Class Principal Amount, (iii) the Class B- 1 Principal Amount and (iv)
the Class B-2 Principal Amount, after giving effect to payments expected to be
made on such Payment Date, is __% or less of the aggregate of the Stated
Principal Balances of the Pledged Mortgages as of the Cut- Off Date. Any such
redemption at the option of the Issuer shall be at a price equal to 100% of the
unpaid principal amount of the Bonds (including, in the case of the Subordinated
Bonds, any unpaid Class B-1 Principal Carryover Shortfall and/or Class B-2
Principal Carryover Shortfall) so redeemed plus accrued interest through the
last day of the month preceding the month in which such optional redemption
occurs.

            As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Bond may be registered on the Bond
Register of the Issuer, upon surrender of this Bond for registration of transfer
at the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Bonds of the same
Class, of authorized denominations and in the same aggregate initial principal
amount, will be issued to the designated transferee or transferees.

                                       5
<PAGE>   130
            Prior to the due presentment for registration of transfer of this
Bond, the Issuer, the Trustee, and any agent of the Issuer shall treat the
Person in whose name this Bond is registered (i) on any Record Date, for
purposes of making payments, and (ii) on any other date for any other purposes,
as the owner hereof, whether or not this Bond be overdue, and neither the
Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.

            The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of Bonds representing
two-thirds of the aggregate Class Principal Amount of the Controlling Class. The
Indenture also contains provisions permitting the Holders of Bonds representing
specified percentages of the aggregate Class Principal Amount of the Controlling
Class on behalf of the Holders of all the Bonds of such Class, to waive
compliance by the Issuer with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder, at the time of the giving thereof, of this Bond (or any
one or more Predecessor Bonds) shall be conclusive and binding upon such Holder
and upon all future holders of this Bond and of any Bond issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent or waiver is made upon this Bond. The Indenture
also permits the Trustee to amend or waive certain terms and conditions set
forth in the Indenture without the consent of the Holders of the Bonds of any
Series issued thereunder.

            The Senior Bonds are "Book Entry Bonds" which will be available to
investors only through the book entry facilities of The Depository Trust
Company, and bond certificates for all Classes of Bonds will be available only
under certain limited circumstances as described in the Indenture.

            AS PROVIDED IN THE INDENTURE, THIS BOND AND THE INDENTURE SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.

            No reference herein to the Indenture and no provision of this Bond
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional to the extent permitted by applicable law, to pay the
principal of, and interest on, this Bond at the times, place and rate, and in
the coin or currency herein prescribed.

                                       6
<PAGE>   131
                                   EXHIBIT III

                             FORM OF CLASS B-1 BOND

            The form of a Class B-1 Bond is as follows:

            SOLELY FOR US FEDERAL INCOME TAX PURPOSES, THIS BOND IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.

            PRINCIPAL OF THIS BOND IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE CLASS PRINCIPAL AMOUNT OF THIS BOND AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THE CLASS PRINCIPAL AMOUNT OF
THIS BOND MAY BE ASCERTAINED ONLY BY OBTAINING A CONFIRMATION THEREOF FROM THE
TRUSTEE UNDER THE INDENTURE REFERRED TO BELOW.

            UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

            THIS BOND IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR BONDS AS
DESCRIBED IN THE INDENTURE REFERRED TO HEREIN.

       THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSE OF APPLYING
THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS BOND.
THE ISSUE DATE OF THIS BOND IS __________ ___, 200__. THE PER ANNUM RATE OF
INTEREST ON THIS BOND IS ___% ASSUMING THAT PRINCIPAL PAYMENTS ARE MADE ON THE
MORTGAGE COLLATERAL UNDERLYING THE BONDS AT _______% OF THE STANDARD PREPAYMENT
ASSUMPTION (AS DEFINED IN THE PROSPECTUS SUPPLEMENT) THIS BOND HAS BEEN ISSUED
WITH $ OF OID PER $1,000 OF INITIAL PRINCIPAL AMOUNT, THE YIELD TO MATURITY IS
___% AND THE AMOUNT OF OID ATTRIBUTABLE TO THE INITIAL SHORT ACCRUAL PERIOD IS
$_______

<PAGE>   132
OF OID PER $1,000 OF INITIAL PRINCIPAL AMOUNT, CALCULATED ASSUMING THE YIELD IS
ACCRUED DAILY DURING INITIAL SHORT PERIOD. NO REPRESENTATION IS MADE AS TO THE
RATE AT WHICH PRINCIPAL PAYMENTS WILL BE MADE ON THE MORTGAGE COLLATERAL.

                         SEQUOIA MORTGAGE TRUST 200_-_,
                       a Delaware Statutory Business Trust

                          Collateralized Mortgage Bonds
                                    CLASS B-1

                          DUE: _____________ ___, _____
                     ACCRUAL DATE: _____________ ___, _____
                      ISSUE DATE: _____________ ___, _____
                            ___________ INTEREST RATE

Initial Class Principal                                         CUSIP NO. ______
Amount of this Bond:

$____________________                                       CERTIFICATE NUMBER 1

            Sequoia Mortgage Trust 200_-_ (the "Issuer"), a statutory business
trust formed under the Deposit Trust Agreement dated as of __________ ___,
_____, and having ________________________, a Delaware bank and trust company,
as Owner Trustee for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of [AMOUNT IN WORDS] ($___________) in
monthly installments on the ______________ day of each month, commencing on
_________ ___, _____ (each, a "Payment Date"), and ending on or before
__________ ___, _____ (the "Stated Maturity" of such final installment of
principal), and to pay interest (computed on the basis of a 360-day year of
twelve 30-day months) on the Class Principal Amount (as defined in the
Indenture) of this Bond from time to time from __________ ___, _____ (the
"Accrual Date"), or such later date to which interest has been paid, through the
last day of the month preceding the month in which the principal amount of this
Bond is paid in full, at a [variable/fixed] rate determined as described below,
such interest being payable monthly on each Payment Date. If any Payment Date
shall not be a "Business Day" (as defined in the Indenture), payment of the
amount due will be made on the next succeeding Business Day.

            Installments of principal of this Bond are due and payable as
described in the Indenture.

            Interest payable on this Bond on a Payment Date will be equal to the
amount of interest that has accrued on the Class Principal Balance of this Bond
during the one-month

                                       2
<PAGE>   133
period ending on the last day of the month preceding the month in which each
such Payment Date occurs (each, an "Interest Accrual Period").

            The principal of, and interest on, this Bond are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Bond shall be applied as set forth in the Indenture.
Any installment of principal or interest which is not paid when and as due shall
bear interest as described in the Indenture.

            Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Bond shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.

            IN WITNESS WHEREOF, Sequoia Mortgage Trust 200_-_ has caused this
instrument to be duly executed by its duly authorized officer.

Dated:_______________     SEQUOIA MORTGAGE TRUST 200_-_

            By: ____________________________

            not in its individual capacity
            but solely as Owner Trustee

            By: ____________________________

            Title: _________________________

                          CERTIFICATE OF AUTHENTICATION

This is one of the Bonds referred to in the within-mentioned Indenture.

______________________________,

as Trustee

By: ___________________________
    Authorized Signatory

                                       3
<PAGE>   134
            This Bond is one of a duly authorized issue of Bonds of the Issuer,
designated as its Collateralized Mortgage Bonds, Series 200_-_ (herein called
the "Bonds"). The Bonds are issuable in one or more classes; the Bonds of
particular Classes being herein called the Class A-1, Class B-1 and Class B-2
Bonds, and Class R-LT and Class R-UT Certificates, all issued and to be issued
under the Issuer's Indenture dated as of ____________ ___, 200__ between the
Issuer and ________________________________ (the "Trustee", which term includes
any successor Trustee under the Indenture), which authorized the Bonds, and
reference is hereby made thereto for a statement of the respective rights
thereunder of the Issuer, the Trustee and the Holders of the Bonds of each
particular Class thereof and the terms upon which the Bonds of each Class are,
and are to be, authenticated and delivered.

            The Class A-1 Bonds constitute "Senior Bonds" and the Class B-1
Bonds and Class B-2 Bonds constitute "Subordinated Bonds".

            The Class R-LT and R-UT Certificates represent the residual interest
in the Lower-Tier REMIC and Upper-Tier REMIC, respectively.

            All terms used in this Bond which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.

            The Bond Interest Rate for the Class B-1 Bonds (the "Class B-1 Bond
Interest Rate") and any Interest Accrual Period will equal ________________.

            As provided in the Indenture, the Bonds are issuable in Classes
which may vary as provided or permitted in the Indenture. Bonds of each Class
are equally and ratably secured by the collateral pledged as security therefor
to the extent provided by the Indenture.

            For each Payment Date, the aggregate amount of each installment of
principal due and payable on the Class B-1 Bonds will be equal to the Class B-1
Principal Payment Amount for such Payment Date. The Class B-1 Principal Payment
Amount for any Payment Date is equal to the sum of (i) the Class B-1 Percentage
of the sum of (a) the principal portion of the Scheduled Payment due on each
Pledged Mortgage [on the related Due Date], (b) the principal portion of the
purchase price of each Pledged Mortgage that was purchased by Redwood Trust or
another person pursuant to the Mortgage Loan Purchase Agreement [or by the
Master Servicer in connection with any optional purchase by the Master Servicer
of a defaulted Pledged Mortgage] as of such Payment Date, (c) the Substitution
Adjustment Amount in connection with any Deleted Pledged Mortgage received with
respect to such Payment Date, (d) any Insurance Proceeds or Liquidation Proceeds
allocable to recoveries of principal of Pledged Mortgages that are not yet
Liquidated Pledged Mortgages received during the [calendar month] preceding the
month of such Payment Date, (e) with respect to each Pledged Mortgage that
became a Liquidated Pledged Mortgage during the [calendar month] preceding the
month of such Payment Date, the Stated Principal Balance of such Pledged
Mortgage and (f) all partial and full principal prepayments by borrowers
received during the related Prepayment Period and (ii) any Class B-1 Principal
Carryover Shortfall.

                                       4
<PAGE>   135
            Payments of principal or interest, if any, on the Bonds will be made
on each Payment Date, commencing on __________ ___, 200__, in the manner and in
accordance with the priorities for the Bonds provided in the Indenture.

            The entire unpaid principal amount of each Class of Bonds shall be
due and payable, if not then previously paid, on the Stated Maturity of the
final installment of principal of such Class.

            All payments of principal of, and interest on, the Bonds shall be
made only from the Trust Estate Granted as security for the Bonds and any other
assets of the Issuer that have not been Granted as security for any other bonds
or obligations of the Issuer, and each Holder hereof, by its acceptance of this
Bond, agrees that it will have recourse solely against such Trust Estate and
such other assets of the Issuer and that neither Wilmington Trust Company in its
individual capacity, any holder of a beneficial interest in the Issuer nor any
of their respective shareholders, partners, beneficiaries, agents, officers,
directors, employees, successors or assigns shall be personally liable for any
amounts payable, or performance due, under this Bond or the Indenture.

            Payment of the then remaining unpaid principal amount of this Bond
on the Stated Maturity of its final installment of principal or on such earlier
date as the Issuer shall be required to pay the then remaining unpaid principal
amount of this Bond or payment of the Redemption Price payable on any date as of
which this Bond has been called for redemption in full, shall be made upon
presentation of this Bond to the office or agency of the Issuer maintained for
such purpose. Payments of interest on this Bond due and payable on each Payment
Date or on any Optional Redemption Date, to the extent this Bond is not being
paid in full, together with any installment of principal of this Bond due and
payable on each Payment Date or the Optional Redemption Date, to the extent not
in full payment of this Bond, shall be made by check mailed to the Person whose
name appears as the registered Holder of this Bond (or one or more Predecessor
Bonds) on the Bond Register as of the last day of the month preceding the month
in which such Payment Date occurs (each a "Record Date").

            Checks for amounts which include installments of principal due on
this Bond shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Bond Register as of the applicable Record Date
without requiring that this Bond be submitted for notation of payment and checks
returned undelivered will be held for payment to the Person entitled thereto,
subject to the terms of the Indenture, at the office or agency in the United
States of America designated by the Issuer for such purpose pursuant to the
Indenture. Any reduction in the principal amount of this Bond (or any one or
more Predecessor Bonds) effected by any payments made on any Payment Date shall
be binding upon all Holders of this Bond and of any Bond issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not noted hereon.

            If funds are expected to be available, as provided in the Indenture,
for payment in full of the then remaining unpaid principal amount of this Bond
on a Payment Date or Optional

                                       5
<PAGE>   136
Redemption Date which is prior to the Stated Maturity of the final installment
of principal hereof, then the Trustee, on behalf of the Issuer, will notify the
Person who was the registered Holder hereof on the last day of the month prior
to the month in which such Payment Date or optional Redemption Date occurs, and
the amount then due and payable shall, if sufficient funds therefor are
available, be payable only upon presentation of this Bond to the office or
agency of the Issuer maintained for such purpose.

            Prior to the payment in full of the Senior Bonds, the failure of the
Issuer to pay when and as due any installment of principal of or interest
(regardless of the lapse of any grace period) on any Subordinated Bond shall not
constitute an Event of Default under the Indenture. In addition, notwithstanding
any applicable provision of the Indenture, upon payment in full of the Senior
Bonds, the prior occurrence of any such shortfalls attributable to the
Subordinated Bonds, which shortfalls have previously been paid in full, will not
constitute an Event of Default under the Indenture in respect of the
Subordinated Bonds.

            If an Event of Default as defined in the Indenture shall occur and
be continuing with respect to the Bonds, the Bonds may become or be declared due
and payable in the manner and with the effect provided in the Indenture. If any
such acceleration of maturity occurs prior to the Stated Maturity of the final
installment of principal of this Bond, the amount payable to the Holder of this
Bond will be equal to the Class Principal Amount of this Bond on the date this
Bond becomes so due and payable, together with accrued interest. Following the
acceleration of the maturity of the Bonds, all amounts collected as proceeds of
the collateral securing the Bonds or otherwise shall be applied as described in
the Indenture. Following such acceleration, interest on any overdue installments
of interest on all Bonds shall be payable at the rate set forth in the
Indenture.

            The Bonds are not prepayable or redeemable at the option or
direction of the Issuer except that the Bonds are subject to redemption in
whole, but not in part, at the option of the Issuer on any Payment Date on or
after the Payment Date on which the sum of (i) the Invested Amount, (ii) the
Senior Class Principal Amount, (iii) the Class B- 1 Principal Amount and (iv)
the Class B-2 Principal Amount, after giving effect to payments expected to be
made on such Payment Date, is __% or less of the aggregate of the Stated
Principal Balances of the Pledged Mortgages as of the Cut- Off Date. Any such
redemption at the option of the Issuer shall be at a price equal to 100% of the
unpaid principal amount of the Bonds (including, in the case of the Subordinated
Bonds, any unpaid Class B-1 Principal Carryover Shortfall and/or Class B-2
Principal Carryover Shortfall) so redeemed plus accrued interest through the
last day of the month preceding the month in which such optional redemption
occurs.

            As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Bond may be registered on the Bond
Register of the Issuer, upon surrender of this Bond for registration of transfer
at the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Bonds of the same
Class, of authorized denominations

                                       6
<PAGE>   137
and in the same aggregate initial principal amount, will be issued to the
designated transferee or transferees.

            Prior to the due presentment for registration of transfer of this
Bond, the Issuer, the Trustee, and any agent of the Issuer shall treat the
Person in whose name this Bond is registered (i) on any Record Date, for
purposes of making payments, and (ii) on any other date for any other purposes,
as the owner hereof, whether or not this Bond be overdue, and neither the
Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.

            The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of Bonds representing
two-thirds of the aggregate Class Principal Amount of the Controlling Class. The
Indenture also contains provisions permitting the Holders of Bonds representing
specified percentages of the aggregate Class Principal Amount of the Controlling
Class on behalf of the Holders of all the Bonds of such Class, to waive
compliance by the Issuer with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder, at the time of the giving thereof, of this Bond (or any
one or more Predecessor Bonds) shall be conclusive and binding upon such Holder
and upon all future holders of this Bond and of any Bond issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent or waiver is made upon this Bond. The Indenture
also permits the Trustee to amend or waive certain terms and conditions set
forth in the Indenture without the consent of the Holders of the Bonds of any
Series issued thereunder.

            The Class B-1 Bonds are "Book Entry Bonds" which will be available
to investors only through the book entry facilities of The Depository Trust
Company, and bond certificates for all Classes of Bonds will be available only
under certain limited circumstances as described in the Indenture.

            AS PROVIDED IN THE INDENTURE, THIS BOND AND THE INDENTURE SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.

            No reference herein to the Indenture and no provision of this Bond
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional to the extent permitted by applicable law, to pay the
principal of, and interest on, this Bond at the times, place and rate, and in
the coin or currency herein prescribed.

                                       7
<PAGE>   138
                                   EXHIBIT IV

                             FORM OF CLASS B-2 BOND

            The form of a Class B-2 Bond is as follows:

            SOLELY FOR US FEDERAL INCOME TAX PURPOSES, THIS BOND IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.

            PRINCIPAL OF THIS BOND IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE CLASS PRINCIPAL AMOUNT OF THIS BOND AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THE CLASS PRINCIPAL AMOUNT OF
THIS BOND MAY BE ASCERTAINED ONLY BY OBTAINING A CONFIRMATION THEREOF FROM THE
TRUSTEE UNDER THE INDENTURE REFERRED TO BELOW.

            [UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

            THIS BOND IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS B-1 BONDS
AND THE SENIOR BONDS AS DESCRIBED IN THE INDENTURE REFERRED TO HEREIN.

       THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSE OF APPLYING
THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS BOND.
THE ISSUE DATE OF THIS BOND IS _____________, 200__. THE PER ANNUM RATE OF
INTEREST ON THIS BOND IS ___% ASSUMING THAT PRINCIPAL PAYMENTS ARE MADE ON THE
MORTGAGE COLLATERAL UNDERLYING THE BONDS AT _______% OF THE STANDARD PREPAYMENT
ASSUMPTION (AS DEFINED IN THE PROSPECTUS SUPPLEMENT) THIS BOND HAS BEEN ISSUED
WITH $ OF OID PER $1,000 OF INITIAL PRINCIPAL AMOUNT, THE YIELD TO MATURITY IS
___% AND THE AMOUNT

<PAGE>   139
OF OID ATTRIBUTABLE TO THE INITIAL SHORT ACCRUAL PERIOD IS $_______ OF OID PER
$1,000 OF INITIAL PRINCIPAL AMOUNT, CALCULATED ASSUMING THE YIELD IS ACCRUED
DAILY DURING INITIAL SHORT PERIOD. NO REPRESENTATION IS MADE AS TO THE RATE AT
WHICH PRINCIPAL PAYMENTS WILL BE MADE ON THE MORTGAGE COLLATERAL.

                         SEQUOIA MORTGAGE TRUST 200_-_,
                       a Delaware Statutory Business Trust

                          Collateralized Mortgage Bonds
                                    CLASS B-2

                           DUE: __________ ___, _____
                       ACCRUAL DATE: __________ ___, _____
                        ISSUE DATE: __________ ___, _____
                               INTEREST RATE _____

Initial Class Principal                                         CUSIP NO. ______
Amount of this Bond:

$____________________                                       CERTIFICATE NUMBER 1

            Sequoia Mortgage Trust 200_-_ (the "Issuer"), a statutory business
trust formed under the Deposit Trust Agreement dated as of __________ ___,
200__, and having ________________________, a Delaware bank and trust company,
as Owner Trustee for value received, hereby promises to pay to CEDE & CO. or
registered assigns, the principal sum of [AMOUNT IN WORDS] ($___________) in
monthly installments on the ____________ day of each month, commencing on
__________ ___, _____ (each, a "Payment Date"), and ending on or before
__________ ___, _____ (the "Stated Maturity" of such final installment of
principal), and to pay interest (computed on the basis of a 360-day year of
twelve 30-day months) on the Class Principal Amount (as defined in the
Indenture) of this Bond from time to time from __________ ___, _____ (the
"Accrual Date"), or such later date to which interest has been paid, through the
last day of the month preceding the month in which the principal amount of this
Bond is paid in full, at a variable rate determined as described below, such
interest being payable monthly on each Payment Date. If any Payment Date shall
not be a "Business Day" (as defined in the Indenture), payment of the amount due
will be made on the next succeeding Business Day.

            Installments of principal of this Bond are due and payable as
described in the Indenture.

            Interest payable on this Bond on a Payment Date will be equal to the
amount of interest that has accrued on the Class Principal Balance of this Bond
during the one-month

                                       2
<PAGE>   140
period ending on the last day of the month preceding the month in which each
such Payment Date occurs (each, an "Interest Accrual Period").

            The principal of, and interest on, this Bond are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Issuer with respect to this Bond shall be applied as set forth in the Indenture.
Any installment of principal or interest which is not paid when and as due shall
bear interest as described in the Indenture.

            Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Bond shall not be entitled to any benefit
under the Indenture, or be valid or obligatory for any purpose.

            IN WITNESS WHEREOF, Sequoia Mortgage Trust 200_-_ has caused this
instrument to be duly executed by its duly authorized officer.

Dated:_______________     SEQUOIA MORTGAGE TRUST 200_-_

            By: ____________________________

            not in its individual capacity
            but solely as Owner Trustee

            By: ____________________________

            Title: _________________________

                          CERTIFICATE OF AUTHENTICATION

This is one of the Bonds referred to in the within-mentioned Indenture.

______________________________,

as Trustee

By: ___________________________
    Authorized Signatory

                                       3
<PAGE>   141
            This Bond is one of a duly authorized issue of Bonds of the Issuer,
designated as its Collateralized Mortgage Bonds, Series 200__-__ (herein called
the "Bonds"). The Bonds are issuable in one or more classes; the Bonds of
particular Classes being herein called the Class A-1, Class B-1 and Class B-2
Bonds, and Class R-LT and Class R-UT Certificates, all issued and to be issued
under the Issuer's Indenture dated as of ____________ ___, _____, between the
Issuer and ____________ _____________________ (the "Trustee", which term
includes any successor Trustee under the Indenture), which authorized the Bonds,
and reference is hereby made thereto for a statement of the respective rights
thereunder of the Issuer, the Trustee and the Holders of the Bonds of each
particular Class thereof and the terms upon which the Bonds of each Class are,
and are to be, authenticated and delivered.

            The Class A-1 Bonds constitute "Senior Bonds" and the Class B-1 and
Class B-2 Bonds constitute "Subordinated Bonds".

            The Class R-LT and Class R-UT Certificates represent the residual
interest in the Lower-Tier REMIC and Upper-Tier REMIC, respectively.

            All terms used in this Bond which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.

            The Bond Interest Rate for the Class B-2 Bonds (the "Class B-2 Bond
Interest Rate") and any Interest Accrual Period will equal _______________.

            As provided in the Indenture, the Bonds are issuable in Classes
which may vary as provided or permitted in the Indenture. Bonds of each Class
are equally and ratably secured by the collateral pledged as security therefor
to the extent provided by the Indenture.

            For each Payment Date, the aggregate amount of each installment of
principal due and payable on the Class B-2 Bonds will be equal to the Class B-2
Principal Payment Amount for such Payment Date. The Class B-2 Principal Payment
Amount for any Payment Date is equal to the sum of (i) the Class B-2 Percentage
of the sum of (a) the principal portion of the Scheduled Payment due on each
Pledged Mortgage [on the related Due Date], (b) the principal portion of the
purchase price of each Pledged Mortgage that was purchased by Redwood Trust or
another person pursuant to the Mortgage Loan Purchase Agreement [or by the
Master Servicer in connection with any optional purchase by the Master Servicer
of a defaulted Pledged Mortgage] as of such Payment Date, (c) the Substitution
Adjustment Amount in connection with any Deleted Pledged Mortgage received with
respect to such Payment Date, (d) any Insurance Proceeds or Liquidation Proceeds
allocable to recoveries of principal of Pledged Mortgages that are not yet
Liquidated Pledged Mortgages received during the [calendar month] preceding the
month of such Payment Date, (e) with respect to each Pledged Mortgage that
became a Liquidated Pledged Mortgage during the [calendar month] preceding the
month of such Payment Date, the Stated Principal Balance of such Pledged
Mortgage and (f) all partial and full principal prepayments by borrowers
received during the related Prepayment Period and (ii) any Class B-2 Principal
Carryover Shortfall.

                                       4
<PAGE>   142
            Payments of principal or interest, if any, on the Bonds will be made
on each Payment Date, commencing on _____________ __, 200_, in the manner and in
accordance with the priorities for the Bonds provided in the Indenture.

            The entire unpaid principal amount of each Class of Bonds shall be
due and payable, if not then previously paid, on the Stated Maturity of the
final installment of principal of such Class.

            All payments of principal of, and interest on, the Bonds shall be
made only from the Trust Estate Granted as security for the Bonds and any other
assets of the Issuer that have not been Granted as security for any other bonds
or obligations of the Issuer, and each Holder hereof, by its acceptance of this
Bond, agrees that it will have recourse solely against such Trust Estate and
such other assets of the Issuer and that neither Wilmington Trust Company in its
individual capacity, any holder of a beneficial interest in the Issuer nor any
of their respective shareholders, partners, beneficiaries, agents, officers,
directors, employees, successors or assigns shall be personally liable for any
amounts payable, or performance due, under this Bond or the Indenture.

            Payment of the then remaining unpaid principal amount of this Bond
on the Stated Maturity of its final installment of principal or on such earlier
date as the Issuer shall be required to pay the then remaining unpaid principal
amount of this Bond or payment of the Redemption Price payable on any date as of
which this Bond has been called for redemption in full, shall be made upon
presentation of this Bond to the office or agency of the Issuer maintained for
such purpose. Payments of interest on this Bond due and payable on each Payment
Date or on any Optional Redemption Date, to the extent this Bond is not being
paid in full, together with any installment of principal of this Bond due and
payable on each Payment Date or the Optional Redemption Date, to the extent not
in full payment of this Bond, shall be made by check mailed to the Person whose
name appears as the registered Holder of this Bond (or one or more Predecessor
Bonds) on the Bond Register as of the last day of the month preceding the month
in which such Payment Date occurs (each a "Record Date").

            Checks for amounts which include installments of principal due on
this Bond shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Bond Register as of the applicable Record Date
without requiring that this Bond be submitted for notation of payment and checks
returned undelivered will be held for payment to the Person entitled thereto,
subject to the terms of the Indenture, at the office or agency in the United
States of America designated by the Issuer for such purpose pursuant to the
Indenture. Any reduction in the principal amount of this Bond (or any one or
more Predecessor Bonds) effected by any payments made on any Payment Date shall
be binding upon all Holders of this Bond and of any Bond issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not noted hereon.

            If funds are expected to be available, as provided in the Indenture,
for payment in full of the then remaining unpaid principal amount of this Bond
on a Payment Date or Optional

                                       5
<PAGE>   143
Redemption Date which is prior to the Stated Maturity of the final installment
of principal hereof, then the Trustee, on behalf of the Issuer, will notify the
Person who was the registered Holder hereof on the last day of the month prior
to the month in which such Payment Date or optional Redemption Date occurs, and
the amount then due and payable shall, if sufficient funds therefor are
available, be payable only upon presentation of this Bond to the office or
agency of the Issuer maintained for such purpose.

            Prior to the payment in full of the Senior Bonds, the failure of the
Issuer to pay when and as due any installment of principal of or interest
(regardless of the lapse of any grace period) on any Subordinated Bond shall not
constitute an Event of Default under the Indenture. In addition, notwithstanding
any applicable provision of the Indenture, upon payment in full of the Senior
Bonds, the prior occurrence of any such shortfalls attributable to the
Subordinated Bonds, which shortfalls have previously been paid in full, will not
constitute an Event of Default under the Indenture in respect of the
Subordinated Bonds.

            If an Event of Default as defined in the Indenture shall occur and
be continuing with respect to the Bonds, the Bonds may become or be declared due
and payable in the manner and with the effect provided in the Indenture. If any
such acceleration of maturity occurs prior to the Stated Maturity of the final
installment of principal of this Bond, the amount payable to the Holder of this
Bond will be equal to the Class Principal Amount of this Bond on the date this
Bond becomes so due and payable, together with accrued interest. Following the
acceleration of the maturity of the Bonds, all amounts collected as proceeds of
the collateral securing the Bonds or otherwise shall be applied as described in
the Indenture. Following such acceleration, interest on any overdue installments
of interest on all Bonds shall be payable at the rate set forth in the
Indenture.

            The Bonds are not prepayable or redeemable at the option or
direction of the Issuer except that the Bonds are subject to redemption in
whole, but not in part, at the option of the Issuer on any Payment Date on or
after the Payment Date on which the sum of (i) the Invested Amount, (ii) the
Senior Class Principal Amount and (iii) the Subordinated Class Principal Amount,
after giving effect to payments expected to be made on such Payment Date, is __%
or less of the aggregate of the Stated Principal Balances of the Pledged
Mortgages as of the Cut-Off Date. Any such redemption at the option of the
Issuer shall be at a price equal to 100% of the unpaid principal amount of the
Bonds (including, in the case of the Subordinated Bonds, any unpaid Class B-1
Principal Carryover Shortfall and/or Class B-2 Principal Carryover Shortfall) so
redeemed plus accrued interest through the last day of the month preceding the
month in which such optional redemption occurs.

            As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Bond may be registered on the Bond
Register of the Issuer, upon surrender of this Bond for registration of transfer
at the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Bonds of the same
Class, of authorized denominations

                                       6
<PAGE>   144
and in the same aggregate initial principal amount, will be issued to the
designated transferee or transferees.

            Prior to the due presentment for registration of transfer of this
Bond, the Issuer, the Trustee, and any agent of the Issuer shall treat the
Person in whose name this Bond is registered (i) on any Record Date, for
purposes of making payments, and (ii) on any other date for any other purposes,
as the owner hereof, whether or not this Bond be overdue, and neither the
Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.

            The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Bonds under the Indenture at any
time by the Issuer with the consent of the Holders of Bonds representing
two-thirds of the aggregate Class Principal Amount of the Controlling Class. The
Indenture also contains provisions permitting the Holders of Bonds representing
specified percentages of the aggregate Class Principal Amount of the Controlling
Class on behalf of the Holders of all the Bonds such Class, to waive compliance
by the Issuer with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder, at the time of the giving thereof, of this Bond (or any one or more
Predecessor Bonds) shall be conclusive and binding upon such Holder and upon all
future holders of this Bond and of any Bond issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent or waiver is made upon this Bond. The Indenture also permits the
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of the Holders of the Bonds of any Series issued
thereunder.

            [The Subordinated Bonds are "Book Entry Bonds" which will be
available to investors only through the book entry facilities of The Depository
Trust Company, and bond certificates for all Classes of Bonds will be available
only under certain limited circumstances as described in the Indenture.]

            AS PROVIDED IN THE INDENTURE, THIS BOND AND THE INDENTURE SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.

            No reference herein to the Indenture and no provision of this Bond
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional to the extent permitted by applicable law, to pay the
principal of, and interest on, this Bond at the times, place and rate, and in
the coin or currency herein prescribed.

                                       7
<PAGE>   145
                                    EXHIBIT V

                         FORM OF CLASS R-LT CERTIFICATE

      THIS CLASS R-LT CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
      BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT OR
      LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
      REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE LAW AND IS
      TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 2.07 OF THE
      INDENTURE REFERRED TO HEREIN.

      THIS CLASS R-LT CERTIFICATE IS SUBORDINATE IN RIGHT OF PAYMENT TO THE
      CLASS A AND CLASS B BONDS AS DESCRIBED IN THE INDENTURE REFERRED TO
      HEREIN.

      SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
      "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS
      THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
      INTERNAL REVENUE CODE.

      NEITHER THIS CERTIFICATE NOR ANY BENEFICIAL INTEREST HEREIN MAY BE,
      DIRECTLY OR INDIRECTLY, TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR
      OTHERWISE ASSIGNED WITHOUT THE DELIVERY TO THE TRUSTEE OF AN EXECUTED
      TRANSFER AFFIDAVIT, AND ANY TRANSFER IN VIOLATION OF THIS RESTRICTION
      SHALL BE ABSOLUTELY NULL AND VOID AND SHALL VEST NO RIGHTS IN ANY
      PURPORTED TRANSFEREE, AND SHALL SUBJECT THE HOLDER HEREOF TO LIABILITY FOR
      ANY TAX IMPOSED (AND RELATED EXPENSES, IF ANY) WITH RESPECT TO SUCH
      ATTEMPTED TRANSFER.

CLASS R-LT                                   PERCENTAGE
RESIDUAL INTEREST                            INTEREST:  100%

NUMBER: __________

DATE OF INDENTURE:
[_________, 20__]

<PAGE>   146
CUT-OFF DATE:
[________, 20__]

FIRST DISTRIBUTION DATE:
[________, 20__]

                          SEQUOIA MORTGAGE TRUST [20__]
                          COLLATERALIZED MORTGAGE BONDS

      evidencing a percentage interest in any distribution allocable to the
      Class R-LT Certificates with respect to a pool of adjustable rate
      conventional one- to four-family mortgage loans formed and sold by

                         SEQUOIA MORTGAGE FUNDING, INC.

THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN SEQUOIA
MORTGAGE FUNDING, INC., THE MASTER SERVICER OR THE TRUSTEE REFERRED TO BELOW OR
ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE
LOANS ARE GUARANTEED OR INSURED BY SEQUOIA MORTGAGE FUNDING, INC. OR BY ANY OF
ITS AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.

This certifies that ___________________ is the registered owner of a beneficial
interest in certain distributions with respect to a pool (the "Mortgage Pool")
conventional one- to four-family mortgage loans (the "Mortgage Pool") formed and
sold by Sequoia Mortgage Funding, Inc. (hereinafter called the "Depositor",
which term includes any successor entity under the Indenture referred to below),
and certain other property held in trust for the benefit of Bondholders
(collectively, the "Trust Estate"). The Mortgage Loans are serviced by
__________________ (the "Master Servicer"). The Trust Estate was created
pursuant to an Indenture dated as specified above (the "Indenture") among
Sequoia Mortgage Trust [20__] (the "Issuer"), and _____________ (the "Trustee"),
a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings signed in the Indenture.

This Certificate is one of a duly authorized issue of Certificates, designated
as Sequoia Mortgage Trust [20__] Collateralized Mortgage Bonds, Class R-LT (the
"Class R-LT Certificate") and is issued under and is subject to the terms,
provisions and conditions of the Indenture, to which Indenture the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound. Also issued under the Indenture are Bonds designated as Sequoia
Mortgage Trust [20__] Collateralized Mortgage Bonds, Class B (the "Class B
Bonds"), and one residual interest Certificate designated collectively as
Sequoia Mortgage Trust [20__] Collateralized Mortgage Bonds, Class R-UT (the
"Class R-UT Certificate" and together with the Class R-LT Certificate, the
"Class R Certificates"). The Class A Bonds are senior to the Class B

                                       2
<PAGE>   147

Bonds and Class R Certificates in right of payment to the extent described in
the Indenture. The Class A Bonds and the Class B Bonds are collectively referred
to as the "Bonds". Any payments made under this Certificate will be made in
accordance with the terms of the Indenture.

The Indenture may be amended from time to time by the Depositor, the Master
Servicer and the Trustee, with the consent of the Bond Insurer and without the
consent of any of the Bondholders, (i) to cure or correct any ambiguity, mistake
or error, (ii) to correct or supplement any provisions therein which may be
inconsistent with any other provisions therein or with the Prospectus Supplement
or Prospectus pursuant to which the Class A Bonds were offered, (iii) to ensure
continuing treatment of the Trust Estate as two REMICs or to avoid the
imposition of certain tax liabilities, (iv) to obtain a rating by a nationally
recognized rating agency or to maintain or improve the ratings of the Class A
Bonds then given by a rating agency (it being understood that, after obtaining
the ratings of the Class A Bonds at the Closing Date, none of the Trustee, the
Depositor or the Master Servicer is obligated to obtain, maintain or improve any
rating of any Class of Bonds), and (v) to make any other provisions with respect
to matters or questions arising under the Indenture which are not materially
inconsistent with the provisions of the Indenture, including without limitation
provisions relating to the issuance of Definitive Bonds to Beneficial Owners if
book-entry registration of the Class A Bonds is no longer permitted; provided
that, in the case of clause (v), such action does not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interest of any
Bondholder.

The Indenture may also be amended from time to time by the Depositor, the Master
Servicer and the Trustee, with the consent of the Holders of Bonds of each Class
affected thereby evidencing, as to each such Class, beneficial interests
aggregating not less than 66% and the consent of the Bond Insurer, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Indenture or of modifying in any manner the rights of
the Holders of Bonds of such Class; provided, however, that no such amendment
may (i) reduce in any manner the amount of, or delay the timing of, payments
received on Mortgage Loans which are required to be distributed on any Bond
without the consent of the Holder of such Bond or (ii) reduce the aforesaid
percentage of Bonds of any Class the Holders of which are required to consent to
any such amendment, without the consent of the Holders of all Bonds of such
Class then outstanding.

The Depositor intends to cause an election to be made to treat the Trust as two
real estate mortgage investment conduits (the "Lower-Tier REMIC" and the
"Upper-Tier REMIC"). The Class A Bonds and the Class B Bonds will constitute
"regular interests" in the Upper-Tier REMIC. The Class R-UT Certificate will
constitute the "residual interest" in the Upper-Tier REMIC and the Class R-LT
Certificate will constitute the "residual interest" in the Lower-Tier REMIC.

No transfer of a Class R Certificate will be made unless such transfer is exempt
from the registration requirements of the Securities Act of 1933, as amended,
and any applicable state securities laws or is made pursuant to an effective
registration statement under said Act or laws. The Depositor may direct the
Trustee to require an opinion of counsel acceptable to and in form and substance
satisfactory to the Depositor that such transfer is exempt (describing the
applicable

                                       3
<PAGE>   148
exemption and the basis therefor) from the registration requirements of the
Securities Act of 1933, as amended, and from any applicable securities statute
of any state, and the transferee shall execute an investment letter in the form
described by the Indenture. Unless the Opinion of Counsel required by Section
2.07(h) has been delivered to the Trustee in connection with this Certificate,
the holder of this Certificate represents, by virtue of its acceptance hereof,
that it is not an employee benefit plan or other retirement plan or arrangement
subject to Section 406 of ERISA or Section 4975 of the Code or a person acting
on behalf of such a plan or arrangement or using the funds of such a plan or
arrangement to acquire this Certificate.

The respective obligations and responsibilities of the Depositor, the Master
Servicer and the Trustee under the Indenture will terminate upon: (i) the later
of the final payment or other liquidation (or any advance with respect thereto)
of the last Mortgage Loan or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the
remittance of all funds due thereunder; or (ii) at the option of the Class R-LT
Holder on any Payment Date which occurs in the month following a Due Date on
which the aggregate unpaid Principal Balance of all outstanding Mortgage Loans
is less than [__]% of the Cut-off Date Pool Balance in accordance with the
provisions set forth in the Indenture; or (iii) at the option of the Bond
Insurer on any Payment Date which occurs in the month following a Due Date on
which the aggregate unpaid Principal Balance of all outstanding Mortgage Loans
is less than [__%] of the Cut-off Date Pool Balance in accordance with the
provisions set forth in the Indenture; provided, however, that in no event shall
the trust created hereby continue beyond 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.

Most of the Mortgage Loans are convertible to fixed rates or new Indices in
accordance with their terms.

Unless the certificate of authentication hereon has been executed by the
Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Indenture or be valid for any purpose.

                                       4
<PAGE>   149

IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed.
Dated:  [_______ __, 20__]

                                          --------------------------------------
                                          as Trustee

                                          By:
                                             -----------------------------------
                                             Authorized Signatory

FORM OF CERTIFICATE OF AUTHENTICATION

THIS IS THE CLASS R
CERTIFICATE REFERRED TO
IN THE WITHIN-MENTIONED INDENTURE

-------------------------------,
as Trustee

By:
    ------------------------------------
    Authorized Signatory

                                       5
<PAGE>   150
                               FORM OF ASSIGNMENT

            FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto

(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE)

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

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

--------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address of Assignee)

--------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint

--------------------------------------------------------------------------------
Attorney to transfer the within Certificate on the books kept for the
registration thereof, with full power of substitution in the premises.

Dated:

(Signature guaranty)
                                    --------------------------------------------
                                    NOTICE:  The signature to this
                                    assignment must correspond with
                                    the name as it appears upon the
                                    face of the within Certificate
                                    in every particular, without
                                    alteration or enlargement or
                                    any change whatever.

(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)

                                       6
<PAGE>   151
                                   EXHIBIT VI

                         FORM OF CLASS R-UT CERTIFICATE

      THIS CLASS R-UT CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
      BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT OR
      LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
      REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE LAW AND IS
      TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 2.07 OF THE
      INDENTURE REFERRED TO HEREIN.

      THIS CLASS R-UT CERTIFICATE IS SUBORDINATE IN RIGHT OF PAYMENT TO THE
      CLASS A AND CLASS B BONDS AS DESCRIBED IN THE INDENTURE REFERRED TO
      HEREIN.

      SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
      "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS
      THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
      INTERNAL REVENUE CODE.

      NEITHER THIS CERTIFICATE NOR ANY BENEFICIAL INTEREST HEREIN MAY BE,
      DIRECTLY OR INDIRECTLY, TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR
      OTHERWISE ASSIGNED WITHOUT THE DELIVERY TO THE TRUSTEE OF AN EXECUTED
      TRANSFER AFFIDAVIT, AND ANY TRANSFER IN VIOLATION OF THIS RESTRICTION
      SHALL BE ABSOLUTELY NULL AND VOID AND SHALL VEST NO RIGHTS IN ANY
      PURPORTED TRANSFEREE, AND SHALL SUBJECT THE HOLDER HEREOF TO LIABILITY FOR
      ANY TAX IMPOSED (AND RELATED EXPENSES, IF ANY) WITH RESPECT TO SUCH
      ATTEMPTED TRANSFER.

CLASS R-UT                                   PERCENTAGE
RESIDUAL INTEREST                            INTEREST:  100%

NUMBER:___________

DATE OF INDENTURE:
[________, 20__]
<PAGE>   152
CUT-OFF DATE:
[_______, 20__]

FIRST DISTRIBUTION DATE:
[________, 20__]

                           SEQUOIA MORTGAGE TRUST 20__
                          COLLATERALIZED MORTGAGE BONDS

      evidencing a percentage interest in any distribution allocable to the
      Class R-UT Certificate with respect to a pool of adjustable rate
      conventional one- to four-family mortgage loans formed and sold by

                         SEQUOIA MORTGAGE FUNDING, INC.

THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN SEQUOIA
MORTGAGE FUNDING, INC., THE MASTER SERVICER OR THE TRUSTEE REFERRED TO BELOW OR
ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE NOR THE UNDERLYING MORTGAGE
LOANS ARE GUARANTEED OR INSURED BY SEQUOIA MORTGAGE FUNDING, INC. OR BY ANY OF
ITS AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY.

This certifies that ___________________ is the registered owner of a beneficial
interest in certain distributions with respect to a pool (the "Mortgage Pool")
conventional one- to four-family mortgage loans (the "Mortgage Pool") formed and
sold by Sequoia Mortgage Funding, Inc. (hereinafter called the "Depositor",
which term includes any successor entity under the Indenture referred to below),
and certain other property held in trust for the benefit of Bondholders
(collectively, the "Trust Estate"). The Mortgage Loans are serviced by
____________ (the "Master Servicer"). The Trust Estate was created pursuant to
an Indenture dated as specified above (the "Indenture") among Sequoia Mortgage
Funding 20__ (the "Issuer") and _____________ (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth hereafter. To the
extent not defined herein, the capitalized terms used herein have the meanings
signed in the Indenture.

This Certificate is one of a duly authorized issue of Bonds and Class R
Certificates, designated as Sequoia Mortgage Trust 20__ Collateralized Mortgage
Bonds, Class R (the "Class R Certificate") and is issued under and is subject to
the terms, provisions and conditions of the Indenture, to which Indenture the
Holder of this Certificate by virtue of the acceptance hereof assents and by
which such Holder is bound. Also issued under the Indenture are Bonds designated
as Sequoia Mortgage Trust 20__ Collateralized Mortgage Bonds, Class B (the
"Class B Bonds"), and one residual interest Certificate designated collectively
as Sequoia Mortgage Trust 20__ Collateralized Mortgage Bonds, Class R-LT (the
"Class R-LT Certificate" and together with the Class R-UT Certificate, the
"Class R Certificates"). The Class A Bonds are senior to the Class B Bonds and
Class R Certificates in right of payment to the extent described in the
Indenture. The Class A Bonds, the Class B Bonds are collectively referred to as
the

                                       2
<PAGE>   153
"Bonds". Any payments made under this Certificate will be made in accordance
with the terms of the Indenture.

The Indenture may be amended from time to time by the Depositor, the Master
Servicer and the Trustee, with the consent of the Bond Insurer and without the
consent of any of the Bondholders, (i) to cure or correct any ambiguity, mistake
or error, (ii) to correct or supplement any provisions therein which may be
inconsistent with any other provisions therein or with the Prospectus Supplement
or Prospectus pursuant to which the Class A Bonds were offered, (iii) to ensure
continuing treatment of the Trust Estate as two REMICs or to avoid the
imposition of certain tax liabilities, (iv) to obtain a rating by a nationally
recognized rating agency or to maintain or improve the ratings of the Class A
Bonds then given by a rating agency (it being understood that, after obtaining
the ratings of the Class A Bonds at the Closing Date, none of the Trustee, the
Depositor or the Master Servicer is obligated to obtain, maintain or improve any
rating of any Class of Bonds), and (v) to make any other provisions with respect
to matters or questions arising under the Indenture which are not materially
inconsistent with the provisions of the Indenture, including without limitation
provisions relating to the issuance of Definitive Bonds to Beneficial Owners if
book-entry registration of the Class A Bonds is no longer permitted; provided
that, in the case of clause (v), such action does not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interest of any
Bondholder.

The Indenture may also be amended from time to time by the Depositor, the Master
Servicer and the Trustee, with the consent of the Holders of Bonds of each Class
affected thereby evidencing, as to each such Class, beneficial interests
aggregating not less than 66% and the consent of the Bond Insurer, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Indenture or of modifying in any manner the rights of
the Holders of Bonds of such Class; provided, however, that no such amendment
may (i) reduce in any manner the amount of, or delay the timing of, payments
received on Mortgage Loans which are required to be distributed on any Bond
without the consent of the Holder of such Bond or (ii) reduce the aforesaid
percentage of Bonds of any Class the Holders of which are required to consent to
any such amendment, without the consent of the Holders of all Bonds of such
Class then outstanding.

The Depositor intends to cause an election to be made to treat the Trust Estate
as two real estate mortgage investment conduits (the "Lower-Tier REMIC" and the
"Upper-Tier REMIC"). The Class A Bonds and the Class B Bonds will constitute
"regular interests" in the Upper-Tier REMIC. The Class R-UT Certificate will
constitute the "residual interest" in the Upper-Tier REMIC and the Class R-LT
Certificate will constitute the "residual interest" in the Lower-Tier REMIC.

No transfer of a Class R Certificate will be made unless such transfer is exempt
from the registration requirements of the Securities Act of 1933, as amended,
and any applicable state securities laws or is made pursuant to an effective
registration statement under said Act or laws. The Depositor may direct the
Trustee to require an opinion of counsel acceptable to and in form and substance
satisfactory to the Depositor that such transfer is exempt (describing the
applicable

                                       3
<PAGE>   154
exemption and the basis therefor) from the registration requirements of the
Securities Act of 1933, as amended, and from any applicable securities statute
of any state, and the transferee shall execute an investment letter in the form
described by the Indenture. Unless the Opinion of Counsel required by Section
2.07 has been delivered to the Trustee in connection with this Certificate, the
holder of this Certificate represents, by virtue of its acceptance hereof, that
it is not an employee benefit plan or other retirement plan or arrangement
subject to Section 406 of ERISA or Section 4975 of the Code or a person acting
on behalf of such a plan or arrangement or using the funds of such a plan or
arrangement to acquire this Certificate.

The respective obligations and responsibilities of the Depositor, the Master
Servicer and the Trustee under the Indenture will terminate upon: (i) the later
of the final payment or other liquidation (or any advance with respect thereto)
of the last Mortgage Loan or the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the
remittance of all funds due thereunder; or (ii) at the option of the Class R-LT
Holder on any Payment Date which occurs in the month following a Due Date on
which the aggregate unpaid Principal Balance of all outstanding Mortgage Loans
is less than [__%] of the Cut-off Date Pool Balance in accordance with the
provisions set forth in the Indenture; or (iii) at the option of the Bond
Insurer on any Payment Date which occurs in the month following a Due Date on
which the aggregate unpaid Principal Balance of all outstanding Mortgage Loans
is less than [__%] of the Cut-off Date Pool Balance in accordance with the
provisions set forth in the Indenture; provided, however, that in no event shall
the trust created hereby continue beyond 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.

Most of the Mortgage Loans are convertible to fixed rates or new Indices in
accordance with their terms.

Unless the certificate of authentication hereon has been executed by the
Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Indenture or be valid for any purpose.

                                       4
<PAGE>   155
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed.
Dated:  [___________, 20__]

                                          --------------------------------------
                                          as Trustee

                                          By:
                                             -----------------------------------
                                             Authorized Signatory

FORM OF CERTIFICATE OF AUTHENTICATION

THIS IS THE CLASS R-UT
CERTIFICATE REFERRED TO
IN THE WITHIN-MENTIONED INDENTURE

---------------------------------
as Trustee

By:
   ------------------------------
   Authorized Signatory

                                       5
<PAGE>   156
                               FORM OF ASSIGNMENT

            FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto

(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE)

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

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

--------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address of Assignee)

--------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint

--------------------------------------------------------------------------------
Attorney to transfer the within Certificate on the books kept for the
registration thereof, with full power of substitution in the premises.

Dated:

(Signature guaranty)
                                    --------------------------------------------
                                    NOTICE:  The signature to this
                                    assignment must correspond with
                                    the name as it appears upon the
                                    face of the within Certificate
                                    in every particular, without
                                    alteration or enlargement or
                                    any change whatever.

(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)

                                       6
<PAGE>   157
                                   EXHIBIT VII

                          FORM OF BOND INSURANCE POLICY

<PAGE>   158
                                  EXHIBIT VIII

                  FORM OF INVESTMENT LETTER FOR HOLDER OF THE
              CLASS B BOND, CLASS R-LT AND CLASS R-UT CERTIFICATES

1. The Purchaser is acquiring the Class B Bond (the "Bond"), Class R-LT or Class
R-UT Certificate (the "Certificate") as principal for its own account for the
purpose of investment [neither the Depositor nor any of its Affiliates need
represent that it is acquiring for purposes of investment] and not with a view
to or for sale in connection with any distribution thereof, subject nevertheless
to any requirement of law that the disposition of the Purchaser's property shall
at all times be and remain within its control.

2. The Purchaser has knowledge and experience in financial and business matters
and is capable of evaluating the merits and risks of its investment in the
residual interest and is able to bear the economic risk of such investment. The
Purchaser is an "accredited investor" within the meaning of Rule 501(a) under
the rules and regulations of the Securities and Exchange Commission under the
Securities Act of 1933, as amended [Affiliates of the Depositor need not make
this representation]. The Purchaser has been given such information concerning
the Bond and/or Certificate, the underlying Mortgage Loans and the Master
Servicer as it has requested.

3. The Purchaser will comply with all applicable federal and state securities
laws in connection with any subsequent resale by the Purchaser of the Bond
and/or Certificate.

4. The Purchaser understands that the Bond and/or Certificate has not been and
will not be registered under the Securities Act of 1933, as amended, or any
state securities laws and may be resold (which resale is not currently
contemplated) only if an exemption from registration is available, that neither
the Depositor, the Master Servicer nor the Trustee is required to register the
Bond or the Certificate and that any transfer must comply with Section 2.07 of
the Indenture. In connection with any resale of the Bond and/or Certificate, the
Purchaser shall not make any general solicitation or advertisement.

5. The Purchaser agrees that it will obtain from any purchaser of the Bond
and/or Certificate from it the same representations, warranties and agreements
contained in the foregoing paragraphs 1 through 4 and in this paragraph 5.

<PAGE>   159
6. The Purchaser hereby directs the Trustee to register the Bond and/or
Certificate acquired by the Purchaser in the name of its nominee as follows:
____________.

                                       Very truly yours,

                                       -----------------------------------------
                                       NAME OF PURCHASER

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

                                       7
<PAGE>   160
                                   EXHIBIT IX

       FORM OF TRANSFER AFFIDAVIT FOR CLASS R-LT OR CLASS R-UT CERTIFICATE

STATE OF            )
                    : ss.:
COUNTY OF           )

The undersigned, being first duly sworn, deposes and says as follows:

1. The undersigned is an officer of _____________________ (the "Transferee"), a
corporation duly organized and existing under the laws of the State of Delaware
and on behalf of which the undersigned makes this affidavit.

2. The Transferee is acquiring a beneficial ownership interest in Sequoia
Mortgage Trust 200__, Collateralized Mortgage Bonds, Class [R-LT] [R-UT] (the
"Class [R-LT] [R-UT] Certificates"), issued pursuant to the Indenture, dated as
of ____________ 1, 200_ (the "Indenture"), by and among Sequoia Mortgage Trust
20__, as Issuer (the "Issuer") and ______________, as Trustee (the "Trustee").
Capitalized terms used, but not defined herein, shall have the meanings ascribed
to such terms in the Indenture. The Transferee has authorized the undersigned to
make this affidavit on behalf of the Transferee.

3. The Transferee is not, as of the date hereof, and will not be, as of the date
of the Transfer, a Disqualified Organization. The Transferee is acquiring the
Class [R-LT] [R-UT] Certificate either (i) for its own account or (ii) as
nominee, trustee or agent for another Person and has attached hereto an
affidavit from such Person in substantially the form as this affidavit attached
hereto. The Transferee has no knowledge that any such affidavit is false.

4. The Transferee has been advised of, and understands that: (i) a tax shall be
imposed on any Transfer to Persons that are Disqualified Organizations; (ii)
such tax is imposed on the transferor, or, if such Transfer is through an agent
(which includes a broker, nominee or middleman) for Persons that are
Disqualified Organizations, on the agent; and (iii) the Person otherwise liable
for the tax shall be relieved of liability for the tax if the subsequent
transferee furnished to such Person an affidavit that such subsequent transferee
is not a Disqualified Organization and, at the time of the Transfer, such Person
does not have actual knowledge that the affidavit is false.

<PAGE>   161
5. The Transferee has been advised and understands that a tax shall be imposed
on a "pass-through entity" holding Class [R-LT] [R-UT] Certificates if at any
time during the taxable year of the pass-through entity a Person that is a
Disqualified Organization is the record holder of an interest in such entity.
The Transferee understands that no tax will be imposed for any period for which
the record holder furnishes to the pass-through entity an affidavit stating that
the record holder is not a Disqualified Organization and the pass-through entity
does not have actual knowledge that such affidavit is false. (For this purpose,
a "pass-through entity" includes a regulated investment company, a real estate
investment trust or common trust fund, a partnership, trust or estate, and
certain cooperatives and, except as may be provided in Treasury Regulations,
persons holding interests in pass-through entities as nominees for other
Persons.)

6. The Transferee has reviewed the provisions of Section 2.07 of the Indenture,
which is incorporated herein by reference, and understands the legal
consequences of the acquisition of the Class [R-LT] [R-UT] Certificates
including, without limitations, the restrictions on subsequent Transfers and the
provisions regarding voiding the Transfer and mandatory sales. The Transferee
expressly agrees to be bound by and to abide by the provisions of Section 2.07
of the Indenture. The Transferee understands and agrees that any breach of any
of the representations included herein shall render the Transfer to the
Transferee contemplated hereby null and void.

7. The Transferee does not have the intention to impede the assessment or
collection of any income tax legally required to be paid with respect to the
Class [R-LT] [R-UT] Certificates and the Transferee hereby acknowledges that the
Class [R-LT] [R-UT] Certificates may generate tax liabilities in excess of the
cash flow associated with the Class [R-LT] [R-UT] Certificates and intends to
pay such taxes associated with the Class [R-LT] [R-UT] Certificates when they
become due.

8. The Transferee hereby represents to and for the benefit of the transferor
that the Transferee intends and reasonably expects to have the ability to pay
any taxes associated with the holding of the Class [R-LT] [R-UT] Certificates as
they become due, fully realizing that it may incur tax liabilities in excess of
any cash flows generated by the Class [R-LT] [R-UT] Certificates. The Transferee
has provided financial statements or other financial information requested by
the transferor in connection with the transfer of the Class [R-LT] [R-UT]
Certificates to permit the transferor to assess the financial capability of the
Transferee to pay any such taxes.

9. The Transferee agrees to require a Transfer Affidavit from any Person to whom
the Transferee attempts to make a Transfer and in connection with any Transfer
by a Person for whom the Transferee is acting as nominee, trustee or agent, and
the Transferee will not make a Transfer or cause any Transfer to any Person that
the Transferee knows is a Disqualified Organization.

10. That the Purchaser (i) is not a Non-U.S. Person or (ii) is a Non-U.S. Person
that holds the Class [R-LT] [R-UT] Certificate in connection with the conduct of
a trade or business in the United States and has furnished the transferor and
the Trustee with an effective Internal Revenue Service Form 4224 or successor
form at the time and in the manner required by the Code or (iii)

                                       2
<PAGE>   162
is a Non-U.S. Person that has delivered to both the transferor and the Trustee
an opinion of a nationally recognized tax counsel to the effect that the
transfer of the Class [R-LT] [R-UT] Certificates to it is in accordance with the
requirements of the Code and the regulation promulgated thereunder and that such
transfer of the Class [R-LT] [R-UT] Certificates will not be disregarded for
federal income tax purposes.

11.  The following information as to the Transferee is true and correct:

      Address: ______________________________________________________
      _______________________________________________________________
      _______________________________________________________________

      Contact for Tax Matters: ______________________________________

      Phone Number: _________________________________________________

      Form of Organization of Transferee: ___________________________

      Transferee's Federal Tax Identification Number: _______________

      Percentage of Residual Interest Acquired: __%

      Price Paid for Residual Interest: _____________________________

      Date of Acquisition: __________________________________________

            If security is being registered in the name of a nominee, please
state such name:

      ________________________________________________________________

                                       3
<PAGE>   163
IN WITNESS WHEREOF, the Transferee has caused this instrument to be executed on
its behalf, pursuant to authority of its _________________, by its duly
authorized officer this _____ day of _____________.

                                    [NAME OF TRANSFEREE]

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

                                       4
<PAGE>   164
STATE OF          )
                  ) ss.:
COUNTY OF         )

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
_______________________________, and acknowledged that he executed the same as
his free act and deed and the free act and deed of the Transferee.
Subscribed and sworn before me this _______ of ___________.

                                          --------------------------------------
                                          NOTARY PUBLIC

                                          My commission expires the ___ day of
                                          ________________, 200__.

<PAGE>   165
                                    EXHIBIT X

                           ERISA REPRESENTATION LETTER
     (FOR TRANSFERS OF CLASS B BOND, CLASS R-LT AND CLASS R-UT CERTIFICATES)

The Purchaser is not an employee benefit plan or other retirement plan or
arrangement (a "Plan") subject to Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code") or a person acting on behalf of
such a Plan or arrangement or using the assets of such a Plan or arrangement to
acquire a Class B Bond or Class [R-LT] [R-UT] Certificate.<PAGE>   1
                                 Exhibit 10(BB)

                                Second Amendment
                                     to the
                                  June 1, 1999
                                Credit Agreement
                                      dated
                                December 1, 1999
                                     between
                        State Auto Financial Corporation
                                       and
                    State Automobile Mutual Insurance Company
<PAGE>   2
                                SECOND AMENDMENT
                                     TO THE
                                CREDIT AGREEMENT

         This Second Amendment to the Credit Agreement dated effective as of
December 1, 1999 (the "Second Amendment") is attached to and hereby expressly
made a part of the Credit Agreement dated as of June 1, 1999 (the "Credit
Agreement") by and between State Auto Financial Corporation (the "Company") and
State Automobile Mutual Insurance Company (the "Lender").

         In consideration of the mutual covenants set forth herein and INTENDING
TO BE LEGALLY BOUND HEREBY, the Company and the Lender hereby agree to amend the
Credit Agreement in the following particulars as set forth in this Second
Amendment.

         Section 1. Definitions and Accounting Matters: The definition of
Commitment is deleted and replaced by the following:

         Commitment shall mean, as to the Lender, the obligation of the Lender
         to make Loans in an aggregate principal amount up to but not exceeding
         $45,500,000.

         Section 2. Commitment, Loans, Notes and Prepayments:

         Section 2.01 Loans is deleted and replaced by the following:

         2.01. Loans: The Lender agrees, on the terms and conditions of this
         Agreement, to make one or more term loans to the Company in dollars on
         or before the Commitment Termination Date in an aggregate principal
         amount up to but not exceeding $45,500,000. Loans paid or prepaid may
         not be re-borrowed.

         In addition, the Company hereby restates and brings forward each
representation and warranty set forth in Section 6 of the Credit Agreement as
though each were made as of the date of this Second Amendment.

         The Company also specifically agrees that the covenants set forth in
Section 7 of the Credit Agreement shall continue to be applicable to the Credit
Agreement as amended by this Second Amendment.

         By their signatures hereon, the parties expressly agree to the changes
to the Credit Agreement as set forth in this Second Amendment and each does
further hereby reaffirm each and every other provision of the Credit Agreement.

For the Company

By:       /s/ Steven J. Johnston
    ---------------------------------
Title:     Senior Vice President
       ------------------------------
<PAGE>   3
For the Lender

Commitment
$45,500,000

State Automobile Mutual Insurance Company

By:     /s/ John R. Lowther
    ---------------------------------
Title:    Vice President
       ------------------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00009-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00009-of-00352.parquet"}]]