Document:

EXHIBIT 4.5

                        PARK PLACE TRUST SERIES ____ - __

                                     Issuer

                                       and

                           [Name of Indenture Trustee]

                                Indenture Trustee

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

                                    INDENTURE

                         Dated as of _________ __, 200_

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

                 Park Place Asset-Backed Notes, Series ____-___

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                                TABLE OF CONTENTS

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Section                                                                                                      Page
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                                                     ARTICLE I

                                                    DEFINITIONS

Section 1.01.  Definitions.....................................................................................1
Section 1.02.  Incorporation by Reference of Trust Indenture Act...............................................2
Section 1.03.  Rules of Construction...........................................................................2

                                                    ARTICLE II

                                            ORIGINAL ISSUANCE OF NOTES

Section 2.01.  Form............................................................................................3
Section 2.02.  Execution, Authentication and Delivery..........................................................3

                                                    ARTICLE III

                                                     COVENANTS

Section 3.01.  Collection of Payments With Respect to the Mortgage Loans.......................................3
Section 3.02.  Maintenance of Office or Agency.................................................................4
Section 3.03.  Money For Payments to be Held In Trust; Paying Agent............................................4
Section 3.04.  Existence.......................................................................................5
Section 3.05.  Payment of Principal and Interest; Defaulted Interest...........................................5
Section 3.06.  Protection of Trust Estate......................................................................7
Section 3.07.  Opinions as to Trust Estate.....................................................................8
Section 3.08.  Performance of Obligations; Servicing Agreement.................................................8
Section 3.09.  Negative Covenants..............................................................................9
Section 3.10.  Annual Statement as to Compliance..............................................................10
Section 3.11.  Recording of Assignments.......................................................................10
Section 3.12.  Representations and Warranties Concerning the Mortgage Loans...................................10
Section 3.13.  Amendments to Servicing Agreement..............................................................10
Section 3.14.  Master Servicer as Agent and Bailee of the Mortgage Loans Holder...............................10
Section 3.15.  Investment Company Act.........................................................................11
Section 3.16.  Issuer May Consolidate, Etc....................................................................11
Section 3.17.  Successor or Transferee........................................................................12
Section 3.18.  No Other Business..............................................................................13
Section 3.19.  No Borrowing...................................................................................13
Section 3.20.  Guarantees, Loans, Advances and Other Liabilities..............................................13
Section 3.21.  Capital Expenditures...........................................................................13
Section 3.22.  [Reserved].....................................................................................13
Section 3.23.  Restricted Payments............................................................................13
Section 3.24.  Notice of Events of Default....................................................................13
Section 3.25.  Further Instruments and Acts...................................................................14
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Section 3.26.  Statements to Noteholders......................................................................14
Section 3.27.  Determination of Note Interest Rate............................................................14
Section 3.28.  Payments Under the Note Insurance Policy.......................................................14
Section 3.29.  Replacement Note Insurance Policy..............................................................14

                                                    ARTICLE IV

                                THE NOTES; SATISFACTION AND DISCHARGE OF INDENTURE

Section 4.01.  The Notes......................................................................................15
Section 4.02.  Registration of and Limitations On Transfer and Exchange of Notes;
               Appointment of Certificate Registrar...........................................................16
Section 4.03.  Mutilated, Destroyed, Lost or Stolen Notes.....................................................17
Section 4.04.  Persons Deemed Owners..........................................................................17
Section 4.05.  Cancellation...................................................................................18
Section 4.06.  Book-Entry Notes...............................................................................18
Section 4.07.  Notices to Depository..........................................................................19
Section 4.08.  Definitive Notes...............................................................................19
Section 4.09.  Tax Treatment..................................................................................19
Section 4.10.  Satisfaction and Discharge of Indenture........................................................19
Section 4.11.  Application of Trust Money.....................................................................20
Section 4.12.  Subrogation and Cooperation....................................................................21
Section 4.13.  Repayment of Monies Held by Paying Agent.......................................................21
Section 4.14.  Temporary Notes................................................................................21

                                                     ARTICLE V

                                               DEFAULT AND REMEDIES

Section 5.01.  Events of Default..............................................................................22
Section 5.02.  Acceleration of Maturity; Rescission and Annulment.............................................22
Section 5.03.  Collection of Indebtedness and Suits for Enforcement by Indenture Trustee......................23
Section 5.04.  Remedies; Priorities...........................................................................25
Section 5.05.  Optional Preservation of the Trust Estate......................................................26
Section 5.06.  Limitation of Suits............................................................................27
Section 5.07.  Unconditional Rights of Noteholders to Receive Principal and Interest..........................27
Section 5.08.  Restoration of Rights and Remedies.............................................................28
Section 5.09.  Rights and Remedies Cumulative.................................................................28
Section 5.10.  Delay or Omission Not a Waiver.................................................................28
Section 5.11.  Control By Noteholders.........................................................................28
Section 5.12.  Waiver of Past Defaults........................................................................29
Section 5.13.  Undertaking for Costs..........................................................................29
Section 5.14.  Waiver of Stay or Extension Laws...............................................................29
Section 5.15.  Sale of Trust Estate...........................................................................29
Section 5.16.  Action on Notes................................................................................31
Section 5.17.  Performance and Enforcement of Certain Obligations.............................................31
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                                                    ARTICLE VI

                                               THE INDENTURE TRUSTEE

Section 6.01.  Duties of Indenture Trustee....................................................................32
Section 6.02.  Rights of Indenture Trustee....................................................................33
Section 6.03.  Individual Rights of Indenture Trustee.........................................................33
Section 6.04.  Indenture Trustee's Disclaimer.................................................................34
Section 6.05.  Notice of Event of Default.....................................................................34
Section 6.06.  Reports by Indenture Trustee to Holders........................................................34
Section 6.07.  Compensation and Indemnity.....................................................................34
Section 6.08.  Replacement of Indenture Trustee...............................................................35
Section 6.09.  Successor Indenture Trustee by Merger..........................................................35
Section 6.10.  Appointment of Co-Indenture Trustee or Separate Indenture Trustee..............................36
Section 6.11.  Eligibility; Disqualification..................................................................37
Section 6.12.  Preferential Collection of Claims Against Issuer...............................................37
Section 6.13.  Representation and Warranty....................................................................37
Section 6.14.  Directions to Indenture Trustee................................................................38
Section 6.15.  No Consent to Certain Acts of Depositor........................................................38
Section 6.16.  Indenture Trustee May Own Securities...........................................................38

                                                    ARTICLE VII

                                          NOTEHOLDERS' LISTS AND REPORTS

Section 7.01.  Issuer to Furnish Indenture Trustee Names and Addresses of Noteholders.........................38
Section 7.02.  Preservation of Information; Communications to Noteholders.....................................39
Section 7.03.  Reports by Issuer..............................................................................39
Section 7.04.  Reports by Indenture Trustee...................................................................39

                                                   ARTICLE VIII

                                       ACCOUNTS, DISBURSEMENTS AND RELEASES

Section 8.01.  Collection of Money............................................................................40
Section 8.02.  Trust Accounts.................................................................................40
Section 8.03.  Officer's Certificate..........................................................................41
Section 8.04.  Termination Upon Distribution to Noteholders...................................................41
Section 8.05.  Release of Trust Estate........................................................................41
Section 8.06.  Surrender of Notes Upon Final Payment..........................................................42

                                                    ARTICLE IX

                                              SUPPLEMENTAL INDENTURES

Section 9.01.  Supplemental Indentures Without Consent of Noteholders.........................................42
Section 9.02.  Supplemental Indentures With Consent of Noteholders............................................43
Section 9.03.  Execution of Supplemental Indentures...........................................................44
Section 9.04.  Effect of Supplemental Indenture...............................................................45
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Section 9.05.  Conformity With Trust Indenture Act............................................................45
Section 9.06.  Reference in Notes to Supplemental Indentures..................................................45

                                                     ARTICLE X

                                                   MISCELLANEOUS

Section 10.01.  Compliance Certificates and Opinions, Etc.....................................................45
Section 10.02.  Form of Documents Delivered to Indenture Trustee..............................................47
Section 10.03.  Acts of Noteholders...........................................................................48
Section 10.04.  Notices, Etc., to Indenture Trustee, Issuer, Note Insurer and Rating Agencies.................48
Section 10.05.  Notices to Noteholders; Waiver................................................................49
Section 10.06.  Alternate Payment and Notice Provisions.......................................................50
Section 10.07.  Conflict With Trust Indenture Act.............................................................50
Section 10.08.  Effect of Headings............................................................................50
Section 10.09.  Successors and Assigns........................................................................50
Section 10.10.  Separability..................................................................................50
Section 10.11.  Benefits of Indenture.........................................................................50
Section 10.12.  Legal Holidays................................................................................50
Section 10.13.  GOVERNING LAW.................................................................................51
Section 10.14.  Counterparts..................................................................................51
Section 10.15.  Recording of Indenture........................................................................51
Section 10.16.  Issuer Obligation.............................................................................51
Section 10.17.  No Petition...................................................................................51
Section 10.18.  Inspection....................................................................................51
Section 10.19.  Authority of the Administrator................................................................52

                                                     EXHIBITS

Exhibit A -     Form of Notes

Appendix A      Definitions
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            This Indenture, dated as of _______________, between

            Park Place Trust Series ____-__, a Delaware business trust, as
Issuer (the "Issuer"), and ____________________________, a
____________________________, as Indenture Trustee (the "Indenture Trustee"),

                                WITNESSETH THAT:

            Each party hereto agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Issuer's Park
Place Asset-Backed Notes, Series ____ - ___ (the "Notes").

                                 GRANTING CLAUSE

            The Issuer hereby Grants to the Indenture Trustee at the Closing
Date, as trustee for the benefit of the Holders of the Notes, all of the
Issuer's right, title and interest in and to whether now existing or hereafter
created by (a) the Mortgage Loans and the proceeds thereof, (b) all funds on
deposit in the Funding Account, including all income from the investment and
reinvestment of funds therein, (c) all funds on deposit from time to time in the
Collection Account allocable to the Mortgage Loans excluding any investment
income from such funds; (d) all funds on deposit from time to time in the
Payment Account and in all proceeds thereof; (e) the Policy and (f) all present
and future claims, demands, causes and chooses in action in respect of any or
all of the foregoing and all payments on or under, and all proceeds of every
kind and nature whatsoever in respect of, any or all of the foregoing and all
payments on or under, and all proceeds of every kind and nature whatsoever in
the conversion thereof, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, checks, deposit accounts, rights to payment of any and every kind,
and other forms of obligations and receivables, instruments and other property
which at any time constitute all or part of or are included in the proceeds of
any of the foregoing (collectively, the "Trust Estate" or the "Collateral").

            The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, equally and ratably without prejudice, priority or distinction, and to
secure compliance with the provisions of this Indenture, all as provided in this
Indenture.

            The Indenture Trustee, as trustee on behalf of the Holders of the
Notes, acknowledges such Grant, accepts the trust under this Indenture in
accordance with the provisions hereof and agrees to perform its duties as
Indenture Trustee as required herein.

                                   ARTICLE I

                                   DEFINITIONS

            Section 1.01. Definitions. For all purposes of this Indenture,
except as otherwise expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Definitions

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attached hereto as Appendix A which is incorporated by reference herein. All
other capitalized terms used herein shall have the meanings specified herein.

Section 1.02. Incorporation by Reference of Trust Indenture Act. Whenever this
Indenture refers to a provision of the Trust Indenture Act (the "TIA"), the
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:

            "Commission" means the Securities and Exchange Commission.

            "indenture securities" means the Notes.

            "indenture security holder" means a Noteholder.

            "indenture to be qualified" means this Indenture.

            "indenture trustee" or "institutional trustee" means the Indenture
      Trustee.

            "obligor" on the indenture securities means the Issuer and any other
      obligor on the indenture securities.

      All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.

Section 1.03.     Rules of Construction.  Unless the context otherwise requires:

            (i) a term has the meaning assigned to it;

            (ii) an accounting term not otherwise defined has the meaning
      assigned to it in accordance with generally accepted accounting principles
      as in effect from time to time;

            (iii) "or" is not exclusive;

            (iv) "including" means including without limitation;

            (v) words in the singular include the plural and words in the plural
      include the singular; and

            (vi) any agreement, instrument or statute defined or referred to
      herein or in any instrument or certificate delivered in connection
      herewith means such agreement, instrument or statute as from time to time
      amended, modified or supplemented and includes (in the case of agreements
      or instruments) references to all attachments thereto and instruments
      incorporated therein; references to a Person are also to its permitted
      successors and assigns.

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                                   ARTICLE II

                           ORIGINAL ISSUANCE OF NOTES

      Section 2.01. Form. The Notes, together with the Indenture Trustee's
certificate of authentication, shall be in substantially the form set forth in
Exhibit A, 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, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.

      The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the Authorized Officers executing such Notes, as
evidenced by their execution of such Notes.

      The terms of the Notes set forth in Exhibit A are part of the terms of
this Indenture.

      Section 2.02. Execution, Authentication and Delivery. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.

      Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.

      The Indenture Trustee shall upon Issuer Request authenticate and deliver
Notes for original issue in an aggregate initial principal amount of
$___________.

      Each Note shall be dated the date of its authentication. The Notes shall
be issuable as registered Notes and the Notes shall be issuable in the minimum
initial Security Balances of $_______ and in integral multiples of $_____ in
excess thereof.

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

                                  ARTICLE III

                                   COVENANTS

      Section 3.01. Collection of Payments With Respect to the Mortgage Loans.
The Indenture Trustee shall establish and maintain with itself a trust account
(the "Payment Account") in which the Indenture Trustee shall, subject to the
terms of this paragraph, deposit,

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on the same day as it is received from the Master Servicer, each remittance
received by the Indenture Trustee with respect to the Mortgage Loans. The
Indenture Trustee shall make all payments of principal of and interest on the
Notes, subject to Section 3.03 as provided in Section 3.05 herein from monies on
deposit in the Payment Account.

      Section 3.02. Maintenance of Office or Agency. The Issuer will maintain in
the [County of ______, The City of ______,] an office or agency where, subject
to satisfaction of conditions set forth herein, Notes may be surrendered for
registration of transfer or exchange, and where notices and demands to or upon
the Issuer in respect of the Notes and this Indenture may be served. The Issuer
hereby initially appoints the Indenture Trustee to serve as its agent for the
foregoing purposes. If at any time the Issuer shall fail to maintain any such
office or agency or shall fail to furnish the Indenture Trustee with the address
thereof, such surrenders, notices and demands may be made or served at the
Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee as
its agent to receive all such surrenders, notices and demands.

      Section 3.03. Money For Payments to be Held In Trust; Paying Agent. (a) As
provided in Section 3.01, all payments of amounts due and payable with respect
to any Notes that are to be made from amounts withdrawn from the Payment Account
pursuant to Section 3.01 shall be made on behalf of the Issuer by the Indenture
Trustee or by the Paying Agent, and no amounts so withdrawn from the Payment
Account for payments of Notes shall be paid over to the Issuer except as
provided in this Section 3.03.

      The Issuer will cause each Paying Agent other than the Indenture Trustee
to execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent it hereby so agrees), subject to the provisions of
this Section 3.03, that such Paying Agent will:

            (i) hold all sums held by it for the payment of amounts due with
      respect to the Notes 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;

            (ii) give the Indenture Trustee notice of any default by the Issuer
      of which it has actual knowledge in the making of any payment required to
      be made with respect to the Notes;

            (iii) at any time during the continuance of any such default, upon
      the written request of the Indenture Trustee, forthwith pay to the
      Indenture Trustee all sums so held in trust by such Paying Agent;

            (iv) immediately resign as Paying Agent and forthwith pay to the
      Indenture Trustee all sums held by it in trust for the payment of Notes if
      at any time it ceases to meet the standards required to be met by a Paying
      Agent at the time of its appointment; and

            (v) comply with all requirements of the Code with respect to the
      withholding from any payments made by it on any Notes of any applicable
      withholding taxes imposed

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      thereon and with respect to any applicable reporting requirements in
      connection therewith.

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

      Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for one year
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer on Issuer Request; and the Holder of such Note 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 Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and direction of the Issuer cause to be published once, in
an Authorized Newspaper published in the English language, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The Indenture
Trustee may also adopt and employ, at the expense and direction of the Issuer,
any other reasonable means of notification of such repayment (including, but not
limited to, mailing notice of such repayment to Holders whose Notes have been
called but have not been surrendered for redemption or whose right to or
interest in monies due and payable but not claimed is determinable from the
records of the Indenture Trustee or of any Paying Agent, at the last address of
record for each such Holder).

      Section 3.04. Existence. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Mortgage Loans and each other
instrument or agreement included in the Trust Estate.

      Section 3.05. Payment of Principal and Interest; Defaulted Interest. (a)
On each Payment Date from amounts on deposit in the Payment Account after making
(x) any deposit to the Funding Account pursuant to Section 8.02(b) and (y) any
deposits to the Payment Account pursuant to Section 8.02(c)(ii) and Section
8.02(c)(i)(2), the Indenture Trustee shall pay to the Noteholders, the
Certificate Paying Agent, on behalf of the Certificateholders, and to other
Persons the amounts to which they are entitled as set forth below:

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            (i) To the Noteholders the sum of (a) one month's interest at the
      Note Interest Rate on the Security Balances of Notes immediately prior to
      such Payment Date and (b) any previously accrued and unpaid interest for
      prior Payment Dates;

            (ii) if such Payment Date is after the Funding Period, to the
      Noteholders, as principal on the Notes, the applicable Security Percentage
      of the Principal Collection Distribution Amount and if such Payment Date
      is the first Payment Date following the end of the Funding Period (if
      ending due to an Amortization Event) or the Payment Date on which the
      Funding Period ends, to the Noteholders as principal on the Notes the
      applicable Security Percentage of the amount deposited from the Funding
      Account in respect of Security Principal Collections;

            (iii) to the Noteholders, as principal on the Notes, from the amount
      remaining on deposit in the Payment Account, up to the applicable Security
      Percentage of Liquidation Loss Amounts for the related Collection Period;

            (iv) to the Noteholders, as principal on the Notes, from the amount
      remaining on deposit in the Payment Account, up to the applicable Security
      Percentage of Carryover Loss Amounts;

            (v) to the Note Insurer, in the amount of the premium for the Note
      Insurance Policy and for any Additional Note Insurance Policy;

            (vi) to the Note Insurer, to reimburse it for prior draws made on
      the Note Insurance Policy and on any Additional Note Insurance Policy
      (with interest thereon as provided in the Insurance Agreement);

            (vii) to the Noteholders, as principal on the Notes based on the
      Security Balances from Security Interest Collections, up to the Special
      Capital Distribution Amount for such Payment Date;

            (viii) to the Note Insurer, any other amounts owed to the Note
      Insurer pursuant to the Insurance Agreement;

            (ix) [Reserved];

            (x) to reimburse the Administrator for expenditures made on behalf
      of the Issuer with respect to the performance of its duties under the
      Indenture; and

            (xi) any remaining amount, to the Certificate Paying Agent, on
      behalf of the Certificates.

provided, however, in the event that on a Payment Date a Note Insurer Default
shall have occurred and be continuing then the priorities of distributions
described above will be adjusted such that payments of the Certificate
Distribution Amount and all other amounts to be paid to the Certificate Paying
Agent will not be paid until the full amount of interest and principal in
accordance with clauses (i), (x) and (ii) through (iv) above that are due on the
Notes on such Payment Date have been paid and provided, further, that on the
Final Scheduled Payment Date

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or other final Payment Date, the amount to be paid pursuant to clause (ii) above
shall be equal to the Security Balances of the Securities immediately prior to
such Payment Date.

      On each Payment Date, the Certificate Paying Agent shall deposit in the
Certificate Distribution Account all amounts it received pursuant to this
Section 3.05 for the purpose of distributing such funds to the
Certificateholders.

      The amounts paid to Noteholders shall be paid to each Class in accordance
with the Class Percentage as set forth in paragraph (b) below. Interest will
accrue on the Notes during an Interest Period on the basis of the actual number
of days in such Interest Period and a year assumed to consist of 360 days.

      [Any installment of interest or principal, if any, payable on any Note or
Certificate that is punctually paid or duly provided for by the Issuer on the
applicable Payment Date shall, if such Holder holds Notes or Certificates of an
aggregate initial Principal Balance of at least $_________, be paid to each
Holder of record on the preceding Record Date, by wire transfer to an account
specified in writing by such Holder reasonably satisfactory to the Indenture
Trustee as of the preceding Record Date or in all other cases or if no such
instructions have been delivered to the Indenture Trustee, by check to such
Noteholder mailed to such Holder's address as it appears in the Note Register
the amount required to be distributed to such Holder on such Payment Date
pursuant to such Holder's Securities; provided, however, that the Indenture
Trustee shall not pay to such Holders any amount required to be withheld from a
payment to such Holder by the Code.]

      (b) The principal of each Note shall be due and payable in full on the
Final Scheduled Payment Date for such Note as provided in the form of Note set
forth in Exhibit A. All principal payments on each Class of Notes shall be made
to the Noteholders of such Class entitled thereto in accordance with the
Percentage Interests represented by such Notes. Upon notice to the Indenture
Trustee by the Issuer, the Indenture Trustee shall notify the Person in whose
name a Note is register ed at the close of business on the Record Date preceding
the Final Scheduled Payment Date or other final Payment Date. Such notice shall
be mailed no later than five Business Days prior to such Final Scheduled Payment
Date or other final Payment Date and shall specify that payment of the principal
amount and any interest due with respect to such Note at the Final Scheduled
Payment Date or other final Payment Date will be payable only upon presentation
and surrender of such Note and shall specify the place where such Note may be
presented and surrendered for such final payment.

      Section 3.06. 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 necessary or advisable
to:

            (i) maintain or preserve the lien and security interest (and the
      priority thereof) of this Indenture or carry out more effectively the
      purposes hereof;

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

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            (iii) cause the Issuer to enforce any of the Mortgage Loans; or

            (iv) preserve and defend title to the Trust Estate and the rights of
      the Indenture Trustee and the Noteholders in such Trust Estate against the
      claims of all persons and parties.

      (b) Except as otherwise provided in this Indenture, the Indenture 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 3.07 (or from the jurisdiction in which it was held as
described in the Opinion of Counsel delivered at the Closing Date pursuant to
Section 3.07(a), if no Opinion of Counsel has yet been delivered pursuant to
Section 3.07(b) unless the Trustee shall have first received an Opinion of
Counsel to the effect that the 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.

      The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.06.

      Section 3.07. Opinions as to Trust Estate. (a) On the Closing Date, the
Issuer shall furnish to the Indenture Trustee and the Owner Trustee an Opinion
of Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to the recording and filing of this Indenture, any
indentures supplemental hereto, and any other requisite documents, and with
respect to the execution and filing of any financing statements and continuation
statements, as are necessary to perfect and make effective the lien and security
interest in the Mortgage Loans and reciting the details of such action, or
stating that, in the opinion of such counsel, no such action is necessary to
make such lien and security interest effective.

      (b) On or before ___________ in each calendar year, beginning in ____, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel at the
expense of the Issuer either stating that, in the opinion of such counsel, such
action has been taken with respect to the recording, filing, rerecording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and with respect to the execution and filing of any
financing statements and continuation statements as is necessary to maintain the
lien and security interest in the Mortgage Loans 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 the recording, filing, re-recording and refiling of this
Indenture, any indentures supplemental hereto and any other requisite documents
and the execution and filing of any financing statements and continuation
statements that will, in the opinion of such counsel, be required to maintain
the lien and security interest in the Mortgage Loans until December 31 in the
following calendar year.

      Section 3.08. Performance of Obligations; Servicing Agreement. (a) The
Issuer will punctually perform and observe all of its obligations and agreements
contained in this Indenture, the Basic Documents and in the instruments and
agreements included in the Trust Estate.

                                       8
<PAGE>

      (b) The Issuer may contract with other Persons to assist it in performing
its duties under this Indenture, and any performance of such duties by a Person
identified to the Indenture Trustee in an Officer's Certificate of the Issuer
shall be deemed to be action taken by the Issuer. Initially, the Issuer has
contracted with the Administrator to assist the Issuer in performing its duties
under this Indenture.

      (c) The Issuer will not take any action or permit any action to be taken
by others which would release any Person from any of such Person's covenants or
obligations under any of the documents relating to the Mortgage Loans or under
any instrument included in the Trust Estate, or which would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any of the documents relating to the Mortgage
Loans or any such instrument, except such actions as the Master Servicer is
expressly permitted to take in the Servicing Agreement. The Indenture Trustee,
as pledgee of the Mortgage Loans, shall be able to exercise the rights Issuer
and the Mortgage Loans holder, to direct the actions of the Master Servicer.

      (d) The Issuer shall at all times retain an Administrator (approved by the
Note Insurer under the Administration Agreement) and may enter into contracts
with other Persons for the performance of the Issuer's obligations hereunder,
and performance of such obligations by such Persons shall be deemed to be
performance of such obligations by the Issuer.

      Section 3.09. Negative Covenants. So long as any Notes are Outstanding,
the Issuer shall not:

            (i) except as expressly permitted by this Indenture, sell, transfer,
      exchange or otherwise dispose of the Trust Estate, unless directed to do
      so by the Indenture Trustee;

            (ii) claim any credit on, or make any deduction from the principal
      or interest payable in respect of, the Notes (other than amounts properly
      withheld from such payments under the Code) or assert any claim against
      any present or former Noteholder by reason of the payment of the taxes
      levied or assessed upon any part of the Trust Estate;

            (iii) (A) permit the validity or effectiveness of this Indenture 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 with respect to the Notes
      under this Indenture except as may be expressly permitted hereby, (B)
      permit any lien, charge, excise, claim, security interest, mortgage or
      other encumbrance (other than the lien of this Indenture) to be created on
      or extend to or otherwise arise upon or burden the Trust Estate or any
      part thereof or any interest therein or the proceeds thereof or (C) permit
      the lien of this Indenture not to constitute a valid first priority
      security interest in the Trust Estate; or

            (iv) waive or impair, or fail to assert rights under, the Mortgage
      Loans, or impair or cause to be impaired the Company's or the Issuer's
      interest in the Mortgage Loans, the Mortgage Loan Purchase Agreement or in
      any Basic Document, if any such action would materially and adversely
      affect the interests of the Noteholders.

                                       9
<PAGE>

      Section 3.10. Annual Statement as to Compliance. The Issuer will deliver
to the Indenture Trustee, within 120 days after the end of each fiscal year of
the Issuer (commencing with the fiscal year ____), an Officer's Certificate
stating, as to the Authorized Officer signing such Officer's Certificate, that:

            (i) a review of the activities of the Issuer during such year and of
      its performance under this Indenture has been made under such Authorized
      Officer's supervision; and

            (ii) to the best of such Authorized Officer's knowledge, based on
      such review, the Issuer has complied with all conditions and covenants
      under this Indenture throughout such year, or, if there has been a default
      in its compliance with any such condition or covenant, specifying each
      such default known to such Authorized Officer and the nature and status
      thereof.

      Section 3.11. Recording of Assignments. The Company shall cause the to
exercise its right under the Mortgage Loan Purchase Agreement with respect to
the obligation of the Seller to submit or cause to be submitted for recording
all Assignments of Mortgages on or prior to ______________ with respect to the
Initial Loans and within 60 days following the related Deposit Date with respect
to any Additional Loans.

      Section 3.12. Representations and Warranties Concerning the Mortgage
Loans. The Indenture Trustee, as pledgee of the Mortgage Loans, has the benefit
of the representations and warranties made by the Seller in Section [____] and
Section [____] of the Mortgage Loan Purchase Agreement concerning the Mortgage
Loans and the right to enforce the remedies against the Seller provided in such
Section [____] or Section [____] to the same extent as though such
representations and warranties were made directly to the Indenture Trustee.

      Section 3.13. Amendments to Servicing Agreement. The Issuer covenants with
the Indenture Trustee that it will not enter into any amendment or supplement to
the Servicing Agreement in accordance with Section 8.01 of the Servicing
Agreement without the prior written consent of the Indenture Trustee. The
Indenture Trustee, as pledgee of the Mortgage Loans, may, in its discretion,
decline to enter into or consent to any such supplement or amendment if its own
rights, duties or immunities shall be adversely affected.

      Section 3.14. Master Servicer as Agent and Bailee of the Mortgage Loans
Holder. Solely for purposes of perfection under Section 9-305 of the Uniform
Commercial Code or other similar applicable law, rule or regulation of the state
in which such property is held by the Master Servicer, the Indenture Trustee
hereby acknowledges that the Master Servicer is acting as agent and bailee of
the Mortgage Loans holder in holding amounts on deposit in the Collection
Account pursuant to Section 3.02 of the Servicing Agreement, as well as its
agent and bailee in holding any Related Documents released to the Master
Servicer pursuant to Section 3.06(c) of the Servicing Agreement, and any other
items constituting a part of the Trust Estate which from time to time come into
the possession of the Master Servicer. It is intended that, by the Master
Servicer's acceptance of such agency pursuant to Section 3.02 of the Servicing
Agreement, the Trustee, as a secured party of the Mortgage Loans, will be deemed
to have possession of such

                                       10
<PAGE>

Related Documents, such monies and such other items for purposes of Section
9-305 of the Uniform Commercial Code of the state in which such property is held
by the Master Servicer.

      Section 3.15. Investment Company Act. The Issuer shall not become an
"investment company" or under the "control" of an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended (or any
successor or amendatory statute), and the rules and regulations thereunder
(taking into account not only the general definition of the term "investment
company" but also any available exceptions to such general definition);
provided, however, that the Issuer shall be in compliance with this Section 3.15
if it shall have obtained an order exempting it from regulation as an
"investment company" so long as it is in compliance with the conditions imposed
in such order.

      Section 3.16. Issuer May Consolidate, Etc. (a) The Issuer shall not
consolidate or merge with or into any other Person, unless:

            (i) the Person (if other than the Issuer) formed by or surviving
      such consolidation or merger shall be a Person organized and existing
      under the laws of the United States of America or any state or the
      District of Columbia and shall expressly assume, by an indenture
      supplemental hereto, executed and delivered to the Indenture Trustee, in
      form reasonably satisfactory to the Indenture Trustee, the due and
      punctual payment of the principal of and interest on all Notes and to the
      Certificate Paying Agent, on behalf of the Certificateholders and the
      performance or observance of every agreement and covenant of this
      Indenture on the part of the Issuer to be performed or observed, all as
      provided herein; (ii) immediately after giving effect to such transaction,
      no Event of Default shall have occurred and be continuing;

            (iii) the Rating Agencies shall have notified the Issuer that such
      transaction shall not cause the rating of the Notes [or the Certificates]
      to be reduced, suspended or withdrawn or to be considered by either Rating
      Agency to be below investment grade without taking into account the Note
      Insurance Policy;

            (iv) the Issuer shall have received an Opinion of Counsel (and shall
      have delivered copies thereof to the Indenture Trustee) to the effect that
      such transaction will not have any material adverse tax consequence to the
      Issuer, any Noteholder or any Certificateholder;

            (v) any action that is necessary to maintain the lien and security
      interest created by this Indenture shall have been taken; and

            (vi) the Issuer shall have delivered to the Indenture Trustee an
      Officer's Certificate and an Opinion of Counsel each stating that such
      consolidation or merger and such supplemental indenture comply with this
      Article III and that all conditions precedent herein provided for relating
      to such transaction have been complied with (including any filing required
      by the Exchange Act).

                                       11
<PAGE>

      (b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:

            (i) the Person that acquires by conveyance or transfer the
      properties and assets of the Issuer the conveyance or transfer of which is
      hereby restricted shall (A) be a United States citizen or a Person
      organized and existing under the laws of the United States of America or
      any state, (B) expressly assumes, by an indenture supplemental hereto,
      executed and delivered to the Indenture Trustee, in form satisfactory to
      the Indenture Trustee, the due and punctual payment of the principal of
      and interest on all Notes and the performance or observance of every
      agreement and covenant of this Indenture on the part of the Issuer to be
      performed or observed, all as provided herein, (C) expressly agrees by
      means of such supplemental indenture that all right, title and interest so
      conveyed or transferred shall be subject and subordinate to the rights of
      Holders of the Notes, (D) unless otherwise provided in such supplemental
      indenture, expressly agrees to indemnify, defend and hold harmless the
      Issuer against and from any loss, liability or expense arising under or
      related to this Indenture and the Notes and (E) expressly agrees by means
      of such supplemental indenture that such Person (or if a group of Persons,
      then one specified Person) shall make all filings with the Commission (and
      any other appropriate Person) required by the Exchange Act in connection
      with the Notes;

            (ii) immediately after giving effect to such transaction, no Default
      or Event of Default shall have occurred and be continuing;

            (iii) the Rating Agencies shall have notified the Issuer that such
      transaction shall not cause the rating of the Notes or the Certificates to
      be reduced, suspended or withdrawn;

            (iv) the Issuer shall have received an Opinion of Counsel (and shall
      have delivered copies thereof to the Indenture Trustee) to the effect that
      such transaction will not have any material adverse tax consequence to the
      Issuer or any Noteholder;

            (v) any action that is necessary to maintain the lien and security
      interest created by this Indenture shall have been taken; and

            (vi) the Issuer shall have delivered to the Indenture Trustee an
      Officer's Certificate and an Opinion of Counsel each stating that such
      conveyance or transfer and such supplemental indenture comply with this
      Article III and that all conditions precedent herein provided for relating
      to such transaction have been complied with (including any filing required
      by the Exchange Act).

      Section 3.17. Successor or Transferee. (a) Upon any consolidation or
merger of the Issuer in accordance with Section 3.16(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.

                                       12
<PAGE>

      (b) Upon a conveyance or transfer of all the assets and properties of the
Issuer pursuant to Section 3.16(b), the Issuer will be released from every
covenant and agreement of this Indenture to be observed or performed on the part
of the Issuer with respect to the Notes immediately upon the delivery of written
notice to the Indenture Trustee of such conveyance or transfer.

      Section 3.18. No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning and selling and managing the
Mortgage Loans and the issuance of the Notes and Certificates in the manner
contemplated by this Indenture and the Basic Documents and all activities
incidental thereto.

      Section 3.19. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.

      Section 3.20. Guarantees, Loans, Advances and Other Liabilities. Except as
contemplated by this Indenture or the Basic Documents, the Issuer shall not make
any loan or advance or credit to, or guarantee (directly or indirectly or by an
instrument having the effect of assuring another's payment or performance on any
obligation or capability of so doing or otherwise), endorse or otherwise become
contingently liable, directly or indirectly, in connection with the obligations,
stocks or dividends of, or own, purchase, repurchase or acquire (or agree
contingently to do so) any stock, obligations, assets or securities of, or any
other interest in, or make any capital contribution to, any other Person.

      Section 3.21. Capital Expenditures. The Issuer shall not make any
expenditure (by long- term or operating lease or otherwise) for capital assets
(either realty or personalty).

      Section 3.22. [Reserved].

      Section 3.23. Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer, (ii) redeem, purchase, retire or otherwise acquire for
value any such ownership or equity interest or security or (iii) set aside or
otherwise segregate any amounts for any such purpose; provided, however, that
the Issuer may make, or cause to be made, (x) distributions to the Owner Trustee
and the Certificateholders as contemplated by, and to the extent funds are
available for such purpose under the Trust Agreement, (y) payments to the Master
Servicer pursuant to the terms of the Servicing Agreement and (z) payments to
the Indenture Trustee pursuant to Section 1(a)(ii) of the Administration
Agreement. The Issuer will not, directly or indirectly, make payments to or
distributions from the Collection Account except in accordance with this
Indenture and the Basic Documents.

      Section 3.24. Notice of Events of Default. The Issuer shall give the
Indenture Trustee the Note Insurer and the Rating Agencies prompt written notice
of each Event of Default hereunder and under the Trust Agreement.

                                       13
<PAGE>

      Section 3.25. Further Instruments and Acts. Upon request of the Indenture
Trustee, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.

      Section 3.26. Statements to Noteholders. The Indenture Trustee and the
Certificate Registrar shall forward by mail to each Noteholder and
Certificateholder, respectively, the Statement delivered to it pursuant to
Section 4.01 of the Servicing Agreement.

      Section 3.27. Determination of Note Interest Rate. On the second LIBOR
Business Day immediately preceding (i) the Closing Date in the case of the first
Interest Period and (ii) the first day of each succeeding Interest Period, the
Indenture Trustee shall determine LIBOR and the Note Interest Rate for such
Interest Period and shall inform the Issuer, the Master Servicer and the
Depositor at their respective facsimile numbers given to the Indenture Trustee
in writing thereof.

      Section 3.28. Payments Under the Note Insurance Policy. (a) On any Payment
Date, other than a Dissolution Payment Date, the Indenture Trustee on behalf of
the Noteholders, and in its capacity as Certificate Paying Agent on behalf of
the Certificateholders shall make a draw on the Note Insurance Policy in an
amount if any equal to the sum of (x) the amount by which the interest accrued
at the Note Interest Rate on the Security Balance of the Notes exceeds the
amount on deposit in the Payment Account available to be distributed therefor on
such Payment Date and (y) the Guaranteed Principal Payment Amount (the "Credit
Enhancement Draw Amount").

      (b) The Indenture Trustee shall submit, if a Credit Enhancement Draw
Amount is specified in any Statement to Holders prepared by the Master Servicer
pursuant to Section 4.01 of the Servicing Agreement, the Notice for Payment (as
defined in the Note Insurance Policy) in the amount of the Credit Enhancement
Draw Amount to the Note Insurer no later than _____________ time, on the second
Business Day prior to the applicable Payment Date. Upon receipt of such Credit
Enhancement Draw Amount in accordance with the terms of the Note Insurance
Policy, the Indenture Trustee shall deposit such Credit Enhancement Draw Amount
in the Payment Account for distribution to Holders (and the Certificate Paying
Agent on behalf of the Certificates) pursuant to Section 3.05.

      In addition, a draw may be made under the Note Insurance Policy in respect
of any Avoided Payment (as defined in and pursuant to the terms and conditions
of the Note Insurance Policy) and the Indenture Trustee shall submit a Notice
for Payment with respect thereto together with the other documents required to
be delivered to the Note Insurer pursuant to the Note Insurance Policy in
connection with a draw in respect of any Avoided Payment.

      (c) In the event that any Additional Note Insurance Policys are issued
pursuant to Section 4.01 and Section 2.02(B) of the Insurance Agreement, the
Indenture Trustee shall be authorized to make draws thereon subject to the terms
and conditions therein.

      Section 3.29. Replacement Note Insurance Policy. In the event of a Note
Insurer Default or if the claims paying ability rating of the Note Insurer is
downgraded and such downgrade results in a downgrading of the then current
rating of the Securities (in each case, a

                                       14
<PAGE>

"Replacement Event"), the Issuer, at its expense, in accordance with and upon
satisfaction of the conditions set forth in the Note Insurance Policy,
including, without limitation, payment in full of all amounts owed to the Note
Insurer, may, but shall not be required to, substitute a new surety bond or
surety bonds for the existing Note Insurance Policy or may arrange for any other
form of credit enhancement; provided, however, that in each case the Notes shall
be rated no lower than the rating assigned by each Rating Agency to the Notes
immediately prior to such Replacement Event and the timing and mechanism for
drawing on such new credit enhancement shall be reasonably acceptable to the
Indenture Trustee and provided further that the premiums under the proposed
credit enhancement shall not exceed such premiums under the existing Note
Insurance Policy. It shall be a condition to substitution of any new credit
enhancement that there be delivered to the Indenture Trustee (i) an Opinion of
Counsel, acceptable in form to the Indenture Trustee, from counsel to the
provider of such new credit enhancement with respect to the enforceability
thereof and such other matters as the Indenture Trustee may require and (ii) an
Opinion of Counsel to the effect that such substitution would not (a) adversely
affect in any material respect the tax status of the Notes or (b) cause the
Issuer to be subject to a tax at the entity level. Upon receipt of the items
referred to above and payment of all amounts owing to the Note Insurer and the
taking of physical possession of the new credit enhancement, the Indenture
Trustee shall, within _____ Business Days following receipt of such items and
such taking of physical possession, deliver the replaced Note Insurance Policy
to the Note Insurer. In the event of any such replacement the Issuer shall give
written notice thereof to the Rating Agencies.

                                   ARTICLE IV

               THE NOTES; SATISFACTION AND DISCHARGE OF INDENTURE

      Section 4.01. The Notes. The Notes shall be registered in the name of a
nominee designated by the Depository. Beneficial Owners will hold interests in
the Notes through the book-entry facilities of the Depository in minimum initial
Principal Balances of $______ and integral multiples of $_______ in excess
thereof.

      The Indenture Trustee may for all purposes (including the making of
payments due on the Notes) deal with the Depository as the authorized
representative of the Beneficial Owners with respect to the Notes for the
purposes of exercising the rights of Holders of Notes hereunder. Except as
provided in the next succeeding paragraph of this Section 4.01, the rights of
Beneficial Owners with respect to the Notes shall be limited to those
established by law and agreements between such Beneficial Owners and the
Depository and Depository Participants. Except as provided in Section 4.08,
Beneficial Owners shall not be entitled to definitive certificates for the Notes
as to which they are the Beneficial Owners. Requests and directions from, and
votes of, the Depository as Holder of the Notes shall not be deemed inconsistent
if they are made with respect to different Beneficial Owners. The Indenture
Trustee may establish a reasonable record date in connection with solicitations
of consents from or voting by Noteholders and give notice to the Depository of
such record date. Without the consent of the Issuer and the Indenture Trustee,
no Note may be transferred by the Depository except to a successor Depository
that agrees to hold such Note for the account of the Beneficial Owners.

      In the event the Depository Trust Company resigns or is removed as
Depository, the Indenture Trustee with the approval of the Issuer may appoint a
successor Depository. If no

                                       15
<PAGE>

successor Depository has been appointed within 30 days of the effective date of
the Depository's resignation or removal, each Beneficial Owner shall be entitled
to certificates representing the Notes it beneficially owns in the manner
prescribed in Section 4.08.

      The Notes shall, on original issue, be executed on behalf of the Issuer by
the Owner Trustee, not in its individual capacity but solely as Owner Trustee,
authenticated by the Note Registrar and delivered by the Indenture Trustee to or
upon the order of the Issuer.

      Section 4.02. Registration of and Limitations On Transfer and Exchange of
Notes; Appointment of Certificate Registrar. The Issuer shall cause to be kept
at its Corporate Trust Office a Note Register in which, subject to such
reasonable regulations as it may prescribe, the Note Registrar shall provide for
the registration of Notes and of transfers and exchanges of Notes as herein
provided.

      Subject to the restrictions and limitations set forth below, upon
surrender for registration of transfer of any Note at the Corporate Trust
Office, the Indenture Trustee shall execute and the Note Registrar shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes in authorized initial Security Balances
evidencing the same aggregate Percentage Interests.

      Subject to the foregoing, at the option of the Noteholders, Notes may be
exchanged for other Notes of like tenor or, in each case in authorized initial
Principal Balances evidencing the same aggregate Percentage Interests upon
surrender of the Notes to be exchanged at the Corporate Trust Office of the Note
Registrar. Whenever any Notes are so surrendered for exchange, the Indenture
Trustee shall execute and the Note Registrar shall authenticate and deliver the
Notes which the Note holder making the exchange is entitled to receive. Each
Note presented or surrendered for registration of transfer or exchange shall (if
so required by the Note Registrar) be duly endorsed by, or be accompanied by a
written instrument of transfer in form reasonably satisfactory to the Note
Registrar duly executed by, the Holder thereof or his attorney duly authorized
in writing with such signature guaranteed by a commercial bank or trust company
located or having a correspondent located in the city of New York. Notes
delivered upon any such transfer or exchange will evidence the same obligations,
and will be entitled to the same rights and privileges, as the Notes
surrendered.

      No service charge shall be made for any registration of transfer or
exchange of Notes, but the Note Registrar shall require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes.

      All Notes surrendered for registration of transfer and exchange shall be
canceled by the Note Registrar and delivered to the Indenture Trustee for
subsequent destruction without liability on the part of either.

      The Issuer hereby appoints __________________________________ as
Certificate Registrar to keep at its Corporate Trust Office a Certificate
Register pursuant to Section 3.09 of the Trust Agreement in which, subject to
such reasonable regulations as it may prescribe, the Certificate Registrar shall
provide for the registration of Certificates and of transfers and

                                       16
<PAGE>

exchanges thereof pursuant to Section 3.05 of the Trust Agreement.
__________________________________ hereby accepts such appointment.

      Section 4.03. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of notice to the Issuer, the Note Registrar or
the Indenture Trustee that such Note has been acquired by a bona fide purchaser,
and provided that the requirements of Section 8-405 of the UCC are met, the
Issuer shall execute, and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note of the same Class; provided,
however, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, instead
of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen
Note when so due or payable without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer and the Indenture Trustee shall be entitled to recover
such replacement Note (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, 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 expense incurred by
the Issuer or the Indenture Trustee in connection therewith.

      Upon the issuance of any replacement Note under this Section 4.03, the
Issuer may require the payment by the Holder of such Note 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 Indenture Trustee) connected therewith.

      Every replacement Note issued pursuant to this Section 4.03 in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note 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 Notes duly issued hereunder.

      The provisions of this Section 4.03 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 Notes.

      Section 4.04. Persons Deemed Owners. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and interest, if any,
on such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and neither the Issuer, the Indenture Trustee nor any agent of the
Issuer or the Indenture Trustee shall be affected by notice to the contrary.

                                       17
<PAGE>

      Section 4.05. Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly canceled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly canceled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes canceled as provided in this Section 4.05, except as expressly
permitted by this Indenture. All canceled Notes may be held or disposed of by
the Indenture Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Request that they be destroyed or returned to it; provided however, that such
Issuer Request is timely and the Notes have not been previously disposed of by
the Indenture Trustee.

      Section 4.06. Book-Entry Notes. The Notes, upon original issuance, will be
issued in the form of typewritten Notes representing the Book-Entry Notes, to be
delivered to The Depository Trust Company, the initial Depository, by, or on
behalf of, the Issuer. Such Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of the initial Depository, and
no Beneficial Owner will receive a Definitive Note representing such Beneficial
Owner's interest in such Note, except as provided in Section 4.08. Unless and
until definitive, fully registered Notes (the "Definitive Notes") have been
issued to Beneficial Owners pursuant to Section 4.08:

            (i) the provisions of this Section 4.06 shall be in full force and
      effect;

            (ii) the Note Registrar and the Indenture Trustee shall be entitled
      to deal with the Depository for all purposes of this Indenture (including
      the payment of principal of and interest on the Notes and the giving of
      instructions or directions hereunder) as the sole holder of the Notes, and
      shall have no obligation to the Owners of Notes;

            (iii) to the extent that the provisions of this Section 4.06
      conflict with any other provisions of this Indenture, the provisions of
      this Section 4.06 shall control;

            (iv) the rights of Beneficial Owners shall be exercised only through
      the Depository and shall be limited to those established by law and
      agreements between such Owners of Notes and the Depository and/or the
      Depository Participants. Unless and until Definitive Notes are issued
      pursuant to Section 4.08, the initial Depository will make book-entry
      transfers among the Depository Participants and receive and transmit
      payments of principal of and interest on the Notes to such Depository
      Participants; and

            (v) whenever this Indenture requires or permits actions to be taken
      based upon instructions or directions of Holders of Notes evidencing a
      specified percentage of the Security Balances of the Notes, the Depository
      shall be deemed to represent such percentage only to the extent that it
      has received instructions to such effect from Beneficial Owners and/or
      Depository Participants owning or representing, respectively, such
      required percentage of the beneficial interest in the Notes and has
      delivered such instructions to the Indenture Trustee.

                                       18
<PAGE>

      Section 4.07. Notices to Depository. Whenever a notice or other
communication to the Note Holders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Beneficial Owners pursuant to
Section 4.08, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Depository, and shall have no obligation to the Beneficial Owners.

      Section 4.08. Definitive Notes. If (i) the Administrator advises the
Indenture Trustee in writing that the Depository is no longer willing or able to
properly discharge its responsibilities with respect to the Notes and the
Administrator is unable to locate a qualified successor, (ii) the Administrator
at its option advises the Indenture 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, Owners of Notes representing beneficial
interests aggregating at least a majority of the Security Balances of the Notes
advise the Depository in writing that the continuation of a book-entry system
through the Depository is no longer in the best interests of the Beneficial
Owners, then the Depository shall notify all Beneficial Owners and the Indenture
Trustee of the occurrence of any such event and of the availability of
Definitive Notes to Beneficial Owners requesting the same. Upon surrender to the
Indenture Trustee of the typewritten Notes representing the Book-Entry Notes by
the Depository, accompanied by registration instructions, the Issuer shall
execute and the Indenture Trustee shall authenticate the Definitive Notes in
accordance with the instructions of the Depository. None of the Issuer, the Note
Registrar or the Indenture 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 the issuance of Definitive Notes, the
Indenture Trustee shall recognize the Holders of the Definitive Notes as
Noteholders.

      Section 4.09. Tax Treatment. The Issuer has entered into this Indenture,
and the Notes will be issued, with the intention that, for federal, state and
local income, single business and franchise tax purposes, the Notes will qualify
as indebtedness of the Issuer. The Issuer, by entering into this Indenture, and
each Noteholder, by its acceptance of its Note (and each Beneficial Owner by its
acceptance of an interest in the applicable Book-Entry Note), agree to treat the
Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.

      Section 4.10. Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.06, 3.09,
3.16, 3.18 and 3.19, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.07 and the obligations of the Indenture Trustee under Section 4.11) and (vi)
the rights of Noteholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to the Notes, when

                  (A) either

                                       19
<PAGE>

                        (1) all Notes theretofore authenticated and delivered
                  (other than (i) Notes that have been destroyed, lost or stolen
                  and that have been replaced or paid as provided in Section
                  4.03 and (ii) Notes for whose payment money has theretofore
                  been deposited in trust or segregated and held in trust by the
                  Issuer and thereafter repaid to the Issuer or discharged from
                  such trust, as provided in Section 3.03) have been delivered
                  to the Indenture Trustee for cancellation; or

                        (2) all Notes not theretofore delivered to the Indenture
                  Trustee for cancellation

                              (a) have become due and payable,

                              (b) will become due and payable at the Final
                        Scheduled Payment Date within one year, or

                              (c) have been called for early redemption pursuant
                        to Section 5.02.

      and the Issuer, in the case of a. or b. above, has irrevocably deposited
      or caused to be irrevocably deposited with the Indenture Trustee cash or
      direct obligations of or obligations guaranteed by the United States of
      America (which will mature prior to the date such amounts are payable), in
      trust for such purpose, in an amount sufficient to pay and discharge the
      entire indebtedness on such Notes and Certificates then outstanding not
      theretofore delivered to the Indenture Trustee for cancellation when due
      on the Final Scheduled Payment Date;

                  (B) the Issuer has paid or caused to be paid all other sums
            payable hereunder and under the Insurance Agreement by the Issuer;
            and

                  (C) the Issuer has delivered to the Indenture Trustee and the
            Note Insurer an Officer's Certificate, an Opinion of Counsel and
            each meeting the applicable requirements of Section 10.01 each
            stating that all conditions precedent herein provided for relating
            to the satisfaction and discharge of this Indenture have been
            complied with and, if the Opinion of Counsel relates to a deposit
            made in connection with Section 4.10(A)(2)b. above, such opinion
            shall further be to the effect that such deposit will not have any
            material adverse tax consequences to the Issuer, any Noteholders or
            any Certificateholders.

      Section 4.11. Application of Trust Money. All monies deposited with the
Indenture Trustee pursuant to Section 4.10 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent or
Certificate Paying Agent, as the Indenture Trustee may determine, to the Holders
of Securities, of all sums due and to become due thereon for principal and
interest; but such monies need not be segregated from other funds except to the
extent required herein or required by law.

                                       20
<PAGE>

      Section 4.12. Subrogation and Cooperation. (a) The Issuer and the
Indenture Trustee acknowledge that (i) to the extent the Note Insurer makes
payments under the Note Insurance Policy on account of principal of or interest
on the Notes, the Note Insurer will be fully subrogated to the rights of such
Holders to receive such principal and interest from the Issuer, and (ii) the
Note Insurer shall be paid such principal and interest but only from the sources
and in the manner provided herein and in the Insurance Agreement for the payment
of such principal and interest.

      The Indenture Trustee shall cooperate in all respects with any reasonable
request by the Note Insurer for action to preserve or enforce the Note Insurer's
rights or interest under this Indenture or the Insurance Agreement without
limiting the rights of the Noteholders as otherwise set forth in the Indenture,
including, without limitation, upon the occurrence and continuance of a default
under the Insurance Agreement, a request to take any one or more of the
following actions:

            (i) institute Proceedings for the collection of all amounts then
      payable on the Notes, or under this Indenture in respect to the Notes and
      all amounts payable under the Insurance Agreement enforce any judgment
      obtained and collect from the Issuer monies adjudged due;

            (ii) 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;

            (iii) file or record all Assignments that have not previously been
      recorded;

            (iv) institute Proceedings from time to time for the complete or
      partial foreclosure of this Indenture; and

            (v) 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 Note Insurer hereunder.

      Section 4.13. Repayment of Monies Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
monies then held by any Administrator other than the Indenture Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Indenture Trustee to be held and applied according to
Section 3.05 and thereupon such Paying Agent shall be released from all further
liability with respect to such monies.

      Section 4.14. Temporary Notes. Pending the preparation of any Definitive
Notes, the Issuer may execute and upon its written direction, the Indenture
Trustee may authenticate and make available for delivery, temporary Notes that
are printed, lithographed, typewritten, photocopied or otherwise produced, in
any denomination, substantially of the tenor of the Definitive Notes in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Notes may
determine, as evidenced by their execution of such Notes.

                                       21
<PAGE>

      If temporary Notes are issued, the Issuer will cause Definitive Notes to
be prepared without unreasonable delay. After the preparation of the Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at the office or agency of the Indenture
Trustee, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Notes, the Issuer shall execute and the Indenture Trustee
shall authenticate and make available for delivery, in exchange therefor,
Definitive Notes of authorized denominations and of like tenor and aggregate
principal amount. Until so exchanged, such temporary Notes shall in all respects
be entitled to the same benefits under this Indenture as Definitive Notes.

                                   ARTICLE V

                              DEFAULT AND REMEDIES

      Section 5.01. Events of Default. "Event of Default," wherever used herein,
shall have the meaning provided in Article I; provided, however, that no Event
of Default will occur under clause (i) or clause (ii) of the definition of
"Event of Default" if the Issuer fails to make payments of principal of and
interest on the Notes so long as the Note Insurer makes payments sufficient
therefore under the Note Insurance Policy.

      The Issuer shall deliver to the Indenture Trustee and the Note Insurer,
within five days after learning of the occurrence of an Event of Default,
written notice in the form of an Officer's Certificate of any event which with
the giving of notice and the lapse of time would become an Event of Default
under clause (iii) of the definition of "Event of Default", its status and what
action the Issuer is taking or proposes to take with respect thereto.

      Section 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default should occur and be continuing or if the Master Servicer shall
purchase all of the Mortgage Loans pursuant to Section 8.08 of the Servicing
Agreement, then and in every such case the Indenture Trustee or the Holders of
Notes representing not less than a majority of the Security Balances of all
Notes may declare the Notes to be immediately due and payable, by a notice in
writing to the Issuer (and to the Indenture Trustee if given by Noteholders),
and upon any such declaration the unpaid principal amount of such Class of
Notes, together with accrued and unpaid interest thereon through the date of
acceleration, shall become immediately due and payable. Unless the prior written
consent of the Note Insurer shall have been obtained by the Indenture Trustee,
the Payment Date upon which such accelerated payment is due and payable shall
not be a Payment Date under the Note Insurance Policy and the Indenture Trustee
shall not be authorized under Section 3.29 to make a draw therefor.

      At any time after such declaration of acceleration of maturity with
respect to an Event of Default has been made and before a judgment or decree for
payment of the money due has been obtained by the Indenture Trustee as
hereinafter in this Article V provided, the Holders of Notes representing a
majority of the Security Balances of all Notes, by written notice to the Issuer
and the Indenture Trustee, may waive the related Event of Default and rescind
and annul such declaration and its consequences if:

                                       22
<PAGE>

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

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

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

            (ii) all Events of Default, other than the nonpayment of the
      principal of the Notes that has become due solely by such acceleration,
      have been cured or waived as provided in Section 5.12.

      No such rescission shall affect any subsequent default or impair any right
consequent thereto.

      Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee. (a) The Issuer covenants that if (i) default is made in the
payment of any interest on any Note when the same becomes due and payable, and
such default continues for a period of five days, or (ii) default is made in the
payment of the principal of or any installment of the principal of any Note when
the same becomes due and payable, the Issue shall, upon demand of the Indenture
Trustee, pay to it, for the benefit of the Holders of Notes and of the Note
Insurer, the whole amount then due and payable on the Notes for principal and
interest, with interest upon the overdue principal, and 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 Indenture Trustee and its agents and counsel.

      (b) In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Indenture Trustee, in its own name and as trustee of an express
trust, subject to the provisions of Section 10.17 hereof 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 other obligor upon the Notes and collect in the manner provided by
law out of the property of the Issuer or other obligor the Notes, wherever
situated, the monies adjudged or decreed to be payable.

      (c) If an Event of Default occurs and is continuing, the Indenture Trustee
subject to the provisions of Section 10.17 hereof may, as more particularly
provided in Section 5.04, in its discretion, proceed to protect and enforce its
rights and the rights of the Noteholders and the Note Insurer, by such
appropriate Proceedings as the Indenture Trustee shall deem most effective 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 to enforce any other proper remedy or legal or equitable
right vested in the Indenture Trustee by this Indenture or by law.

      (d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings

                                       23
<PAGE>

under Title 11 of the United States Code or any other applicable federal or
state bankruptcy, insolvency or other similar law, or in case a receiver,
assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or
similar official shall have been appointed for or taken possession of the Issuer
or its property or such other obligor or Person, or in case of any other
comparable judicial Proceedings relative to the Issuer or other obligor upon the
Notes, or to the creditors or property of the Issuer or such other obligor, the
Indenture Trustee, irrespective of whether the principal of any Notes shall then
be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Indenture Trustee shall have made any demand
pursuant to the provisions of this Section, shall be entitled and empowered, by
intervention in such Proceedings or otherwise:

            (i) to file and prove a claim or claims for the whole amount of
      principal and interest owing and unpaid in respect of the Notes and to
      file such other papers or documents as may be necessary or advisable in
      order to have the claims of the Indenture Trustee (including any claim for
      reasonable compensation to the Indenture Trustee and each predecessor
      Indenture Trustee, and their respective agents, attorneys and counsel, and
      for reimbursement of all expenses and liabilities incurred, and all
      advances made, by the Indenture Trustee and each predecessor Indenture
      Trustee, except as a result of negligence or bad faith) and of the
      Noteholders allowed in such Proceedings;

            (ii) unless prohibited by applicable law and regulations, to vote on
      behalf of the Holders of Notes in any election of a trustee, a standby
      trustee or Person performing similar functions in any such Proceedings;

            (iii) to collect and receive any monies or other property payable or
      deliverable on any such claims and to distribute all amounts received with
      respect to the claims of the Noteholders and of the Indenture Trustee on
      their behalf; and

            (iv) to file such proofs of claim and other papers or documents as
      may be necessary or advisable in order to have the claims of the Indenture
      Trustee or the Holders of Notes allowed in any judicial proceedings
      relative to the Issuer, its creditors and its property;

and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.

      (e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any

                                       24
<PAGE>

Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.

      (f) All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.

      (g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Notes, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.

      Section 5.04. Remedies; Priorities. (a) If an Event of Default shall have
occurred and be continuing, the Indenture Trustee subject to the provisions of
Section 10.17 hereof may do one or more of the following (subject to Section
5.05):

            (i) institute Proceedings in its own name and as trustee of an
      express trust for the collection of all amounts then payable on the Notes
      or under this Indenture with respect thereto, whether by declaration or
      otherwise, and all amounts payable under the Insurance Agreement, enforce
      any judgment obtained, and collect from the Issuer and any other obligor
      upon such Notes monies adjudged due;

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

            (iii) exercise any remedies of a secured party under the UCC and
      take any other appropriate action to protect and enforce the rights and
      remedies of the Indenture Trustee, the Holders of the Notes and the Note
      Insurer; and

            (iv) 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;

provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, unless (A) the
Indenture Trustee obtains the consent of the Holders of 100% of the aggregate
Principal Balances of the Notes and the Note Insurer, which consent will not be
unreasonably withheld, (B) the proceeds of such sale or liquidation
distributable to Holders are sufficient to discharge in full all amounts then
due and unpaid upon the Notes for principal and interest and to reimburse the
Note Insurer for any amounts drawn under the Note Insurance Policy and any other
amounts due the Note Insurer under the Insurance Agreement or (C) the Indenture
Trustee determines that the Mortgage Loans will not continue to provide
sufficient funds for the payment of principal of and interest on the Notes as
they would have become due if the Notes had not been declared due and payable,
and the Indenture Trustee obtains the consent of the Note Insurer, which consent
will not be unreasonably withheld, and of

                                       25
<PAGE>

the Holders of a majority of the aggregate Principal Balances of the Notes. In
determining such sufficiency or insufficiency with respect to clause (B) and
(C), the Indenture Trustee may, but need not, obtain and rely upon an opinion of
an Independent investment banking or accounting firm of national reputation as
to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose. Notwithstanding the foregoing, so long as an
Event of Servicer Termination has not occurred, any Sale of the Trust Estate
shall be made subject to the continued Servicing of the Mortgage Loans by the
Master Servicer as provided in the Servicing Agreement.

      (b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order:

            FIRST: to the Indenture Trustee for amounts due under Section 6.07;

            SECOND: to each Class of Noteholders for amounts due and unpaid on
            the related Class Notes for interest and to each Noteholder of such
            Class in each case, ratably, without preference or priority of any
            kind, according to the amounts due and payable on such Class of
            Notes for interest from amounts available in the Trust Estate for
            such Noteholders;

            THIRD: to Holders of each Class of Notes for amounts due and unpaid
            on the related Class of Notes for principal, from amounts available
            in the Trust Estate for such Noteholders, and to each Noteholder of
            such Class in each case ratably, without preference or priority of
            any kind, according to the amounts due and payable on such Class of
            Notes for principal, until the Security Balances of each Class of
            Notes is reduced to zero;

            FOURTH: to the Issuer for amounts required to be distributed to the
            Certificateholders in respect of interest and principal pursuant to
            the Trust Agreement;

            FIFTH: To the payment of all amounts due and owing to the Note
            Insurer under the Insurance Agreement;

            SIXTH: to the Issuer for amounts due under Article VIII of the Trust
            Agreement; and

            SEVENTH: to the payment of the remainder, if any to the Issuer or
            any other person legally entitled thereto.

      The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 5.04. At least 15 days before
such record date, the Indenture Trustee shall mail to each Noteholder a notice
that states the record date, the payment date and the amount to be paid.

      Section 5.05. Optional Preservation of the Trust Estate. If the Notes have
been declared to be due and payable under Section 5.02 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not,

                                       26
<PAGE>

elect to take and maintain possession of the Trust Estate. It is the desire of
the parties hereto and the Noteholders that there be at all times sufficient
funds for the payment of principal of and interest on the Notes and other
obligations of the Issuer including payment to the Note Insurer, and the
Indenture Trustee shall take such desire into account when determining whether
or not to take and maintain possession of the Trust Estate. In determining
whether to take and maintain possession of the Trust Estate, the Indenture
Trustee may, but need not, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.

      Section 5.06. Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless and subject to the provisions of Section 10.17 hereof:

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

            (ii) the Holders of not less than 25% of the Security Balances of
      the Notes have made written request to the Indenture Trustee to institute
      such Proceeding in respect of such Event of Default in its own name as
      Indenture Trustee hereunder;

            (iii) such Holder or Holders have offered to the Indenture Trustee
      reasonable indemnity against the costs, expenses and liabilities to be
      incurred in complying with such request;

            (iv) the Indenture Trustee for 60 days after its receipt of such
      notice, request and offer of indemnity has failed to institute such
      Proceedings; and

            (v) no direction inconsistent with such written request has been
      given to the Indenture Trustee during such 60-day period by the Holders of
      a majority of the Security Balances of the Notes.

It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes 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.

      In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Security Balances of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.

      Section 5.07. Unconditional Rights of Noteholders to Receive Principal and
Interest. Notwithstanding any other provisions in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this

                                       27
<PAGE>

Indenture 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 5.08. Restoration of Rights and Remedies. If the Indenture Trustee
or any Noteholder 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 Indenture Trustee or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee and
the Noteholders 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 Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.

      Section 5.09. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders 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 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 5.10. Delay or Omission Not a Waiver. No delay or omission of the
Indenture Trustee or any Holder of any Note 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 V or by law to the Indenture
Trustee or to the Noteholders may be exercised from time to time, and as often
as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as
the case may be.

      Section 5.11. Control By Noteholders. The Holders of a majority of the
Security Balances of Notes shall have the right to direct the time, method and
place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Notes or exercising any trust or power conferred on
the Indenture Trustee; provided that:

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

            (ii) subject to the express terms of Section 5.04, any direction to
      the Indenture Trustee to sell or liquidate the Trust Estate shall be by
      Holders of Notes representing not less than 100% of the Security Balances
      of Notes;

            (iii) if the conditions set forth in Section 5.05 have been
      satisfied and the Indenture Trustee elects to retain the Trust Estate
      pursuant to such Section, then any direction to the Indenture Trustee by
      Holders of Notes representing less than 100% of the Security Balances of
      Notes to sell or liquidate the Trust Estate shall be of no force and
      effect; and

            (iv) the Indenture Trustee may take any other action deemed proper
      by the Indenture Trustee that is not inconsistent with such direction.

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<PAGE>

Notwithstanding the rights of Noteholders set forth in this Section, subject to
Section 6.01, the Indenture Trustee need not take any action that it determines
might involve it in liability or might materially adversely affect the rights of
any Noteholders not consenting to such action.

      Section 5.12. Waiver of Past Defaults. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.02, the
Holders of Notes of not less than a majority of the Security Balances of the
Notes may waive any past Event of Default and its consequences except an Event
of Default (a) with respect to payment of principal of or interest on any of the
Notes or (b) in respect of a covenant or provision hereof which cannot be
modified or amended without the consent of the Holder of each Note or (c) the
waiver of which would materially and adversely affect the interests of the Note
Insurer or modify its obligation under the Note Insurance Policy. In the case of
any such waiver, the Issuer, the Indenture Trustee and the Holders of the Notes
shall be restored to their former positions and rights hereunder, respectively;
but no such waiver shall extend to any subsequent or other Event of Default or
impair any right consequent thereto.

      Upon any such waiver, any Event of Default arising therefrom shall be
deemed to have been cured and not to have occurred, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Event of
Default or impair any right consequent thereto.

      Section 5.13. Undertaking for Costs. All parties to this Indenture agree,
and each Holder of any Note by such Holder's 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 Indenture Trustee for any action taken, suffered or omitted by it as
Indenture 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 5.13 shall not apply to (a) any suit instituted by
the Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the Security
Balances of the Notes or (c) any suit instituted by any Noteholder for the
enforcement of the payment of principal of or interest on any Note on or after
the respective due dates expressed in such Note and in this Indenture.

      Section 5.14. 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 law wherever enacted, now or at any time hereafter in
force, that may affect the covenants 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 shall not
hinder, delay or impede the execution of any power herein granted to the
Indenture Trustee, but will suffer and permit the execution of every such power
as though no such law had been enacted.

      Section 5.15. Sale of Trust Estate. (a) The power to effect any sale or
other disposition (a "Sale") of any portion of the Trust Estate pursuant to
Section 5.04 is expressly subject to the provisions of Section 5.05 and this
Section 5.15. The power to effect any such Sale shall not be exhausted by any
one or more Sales as to any portion of the Trust Estate remaining unsold, but

                                       29
<PAGE>

shall continue unimpaired until the entire Trust Estate shall have been sold or
all amounts payable on the Notes and under this Indenture and under the
Insurance Agreement shall have been paid. The Indenture Trustee may from time to
time postpone any public Sale by public announcement made at the time and place
of such Sale. The Indenture Trustee hereby expressly waives its right to any
amount fixed by law as compensation for any Sale.

      (b) The Indenture Trustee shall not in any private Sale sell the Trust
Estate, or any portion thereof, unless

            (1) the Holders of all Notes and the Note Insurer consent to or
direct the Indenture Trustee to make, such Sale, or

            (2) the proceeds of such Sale would be not less than the entire
amount which would be payable to the Noteholders under the Notes and the Note
Insurer in respect of amounts drawn under the Note Insurance Policy and any
other amounts due the Note Insurer under the Insurance Agreement, in full
payment thereof in accordance with Section 5.02, on the Payment Date next
succeeding the date of such Sale, or

            (3) The Indenture Trustee determines, in its sole discretion, that
the conditions for retention of the Trust Estate set forth in Section 5.05
cannot be satisfied (in making any such determination, the Indenture Trustee may
rely upon an opinion of an Independent investment banking firm obtained and
delivered as provided in Section 5.05), and the Note Insurer consents to such
Sale, which consent will not be unreasonably withheld and the Holders
representing at least ______% of the Security Balances of the Notes consent to
such Sale.

The purchase by the Indenture Trustee of all or any portion of the Trust Estate
at a private Sale shall not be deemed a Sale or other disposition thereof for
purposes of this Section 5.15(b).

      (c) Unless the Holders and the Note Insurer have otherwise consented or
directed the Indenture 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 5.15 has not been
established by the Indenture Trustee and no Person bids an amount equal to or
greater than such amount, the Indenture 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 Notes may bid for and with the consent
of the Note Insurer 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 Notes 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 Notes, in case the amounts 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 Indenture Trustee may bid for and acquire the property
offered for Sale in connection with any Sale thereof, and, subject to any
requirements of, and to the extent

                                       30
<PAGE>

permitted by, applicable law in connection therewith, may purchase all or any
portion of the Trust Estate in a private sale, 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 Notes and Holders of Certificates and amounts owing to the Note
Insurer as a result of such Sale in accordance with Section 5.04(b) 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 Notes in order to complete any such
Sale or in order for the net Sale price to be credited against such Notes, and
any property so acquired by the Indenture Trustee shall be held and dealt with
by it in accordance with the provisions of this Indenture;

            (3) the Indenture 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 there of;

            (4) the Indenture 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 Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any monies.

      Section 5.16. Action on Notes. The Indenture Trustee's right to seek and
recover judgment on the Notes or 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 Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Trust Estate or upon any
of the assets of the Issuer. Any money or property collected by the Indenture
Trustee shall be applied in accordance with Section 5.04(b).

      Section 5.17. Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer in its capacity as holder of the Mortgage
Loans, shall take all such lawful action as the Indenture Trustee may request to
cause the Issuer to compel or secure the performance and observance by the
Seller and the Master Servicer, as applicable, of each of their obligations to
the Issuer under or in connection with the Mortgage Loan Purchase Agreement and
the Servicing Agreement, and to exercise any and all rights, remedies, powers
and privileges lawfully available to the Issuer under or in connection with the
Mortgage Loan Purchase Agreement and the Servicing Agreement to the extent and
in the manner directed by the Indenture Trustee, as pledgee of the Mortgage
Loans, including the transmission of notices of default on the part of the
Seller or the Master Servicer thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Seller or the Master Servicer of each of their obligations under the Mortgage
Loan Purchase Agreement and the Servicing Agreement.

                                       31
<PAGE>

      (b) If an Event of Default has occurred and is continuing, the Indenture
Trustee, as pledgee of the Mortgage Loans, subject to the rights of the Note
Insurer under the Servicing Agreement may, and at the direction (which direction
shall be in writing or by telephone (confirmed in writing promptly thereafter))
of the Holders of 66-2/3% of the Security Balances of the Notes shall, exercise
all rights, remedies, powers, privileges and claims of the Issuer against the
Seller or the Master Servicer under or in connection with the Mortgage Loan
Purchase Agreement and the Servicing Agreement, including the right or power to
take any action to compel or secure performance or observance by the Seller or
the Master Servicer, as the case may be, of each of their obligations to the
Issuer thereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the Mortgage Loan Purchase Agreement and the Servicing
Agreement, as the case may be, and any right of the Issuer to take such action
shall not be suspended.

                                   ARTICLE VI

                              THE INDENTURE TRUSTEE

      Section 6.01. Duties of Indenture Trustee. (a) If an Event of Default has
occurred and is continuing, the Indenture Trustee shall exercise 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 such person's own affairs.

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

            (i) the Indenture Trustee undertakes to perform such duties and only
      such duties as are specifically set forth in this Indenture and no implied
      covenants or obligations shall be read into this Indenture against the
      Indenture Trustee; and

            (ii) in the absence of bad faith on its part, the Indenture 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 Indenture Trustee and conforming to the
      requirements of this Indenture; however, the Indenture Trustee shall
      examine the certificates and opinions to determine whether or not they
      conform to the requirements of this Indenture.

      (c) The Indenture 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:

            (i) this paragraph does not limit the effect of paragraph (b) of
      this Section 6.01;

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

            (iii) the Indenture 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 (A) pursuant to

                                       32
<PAGE>

      Section 5.11 or (B) from the Note Insurer, which it is entitled to give
      under any of the Basic Documents.

      (d) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.

      (e) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Trust Agreement.

      (f) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur 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 to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.

      (g) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Indenture Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.

      Section 6.02. Rights of Indenture Trustee. (a) The Indenture Trustee may
rely on any document believed by it to be genuine and to have been signed or
presented by the proper person. The Indenture Trustee need not investigate any
fact or matter stated in the document.

      (b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on an Officer's Certificate or Opinion of Counsel.

      (c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.

      (d) The Indenture 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; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.

      (e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.

      Section 6.03. Individual Rights of Indenture Trustee. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture

                                       33
<PAGE>

Trustee. Any Administrator, Note Registrar, co-registrar or co-paying agent may
do the same with like rights. However, the Indenture Trustee must comply with
Sections 6.11 and 6.12.

      Section 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.

      Section 6.05. Notice of Event of Default. If an Event of Default occurs
and is continuing and if it is known to a Responsible Officer of the Indenture
Trustee, the Indenture Trustee shall give notice thereof to the Note Insurer.
The Trustee shall mail to each Noteholder notice of the Event of Default within
90 days after it occurs. Except in the case of an Event of Default in payment of
principal of or interest on any Note, the Indenture Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Noteholders.

      Section 6.06. Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder such information as may be required to
enable such holder to prepare its federal and state income tax returns. In
addition, upon the Issuer's written request, the Indenture Trustee shall
promptly furnish information reasonably requested by the Issuer that is
reasonably available to the Indenture Trustee to enable the Issuer to perform
its federal and state income tax reporting obligations.

      Section 6.07. Compensation and Indemnity. The Issuer shall or shall cause
the Administrator to pay to the Indenture Trustee on each Payment Date
reasonable compensation for its services. The Indenture Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall or shall cause the Administrator to reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer shall or shall cause the Administrator to
indemnify the Indenture Trustee against any and all loss, liability or expense
(including attorneys' fees) incurred by it in connection with the administration
of this trust and the performance of its duties hereunder. The Indenture Trustee
shall notify the Issuer and the Administrator promptly of any claim for which it
may seek indemnity. Failure by the Indenture Trustee to so notify the Issuer and
the Administrator shall not relieve the Issuer or the Administrator of its
obligations hereunder. The Issuer shall or shall cause the Administrator to
defend any such claim, and the Indenture Trustee may have separate counsel and
the Issuer shall or shall cause the Administrator to pay the fees and expenses
of such counsel. Neither the Issuer nor the Administrator need reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Indenture Trustee through the Indenture Trustee's own willful misconduct,
negligence or bad faith.

      The Issuer's payment obligations to the Indenture Trustee pursuant to this
Section 6.07 shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after

                                       34
<PAGE>

the occurrence of an Event of Default specified in Section 5.01(iv) or (v) with
respect to the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other applicable
federal or state bankruptcy, insolvency or similar law.

      Section 6.08. Replacement of Indenture Trustee. No resignation or removal
of the Indenture Trustee and no appointment of a successor Indenture Trustee
shall become effective until the acceptance of appointment by the successor
Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee may
resign at any time by so notifying the Issuer and the Note Insurer. The Holders
of a majority of Security Balances of the Notes may remove the Indenture Trustee
by so notifying the Indenture Trustee and the Note Insurer and may appoint a
successor Indenture Trustee. The Issuer shall remove the Indenture Trustee if:

            (i) the Indenture Trustee fails to comply with Section 6.11;

            (ii) the Indenture Trustee is adjudged a bankrupt or insolvent;

            (iii) a receiver or other public officer takes charge of the
      Indenture Trustee or its property; or

            (iv) the Indenture Trustee otherwise becomes incapable of acting.

      If the Indenture Trustee resigns or is removed or if a vacancy exists in
the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee.

      A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon, the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture Trustee to
the successor Indenture Trustee.

      If a successor Indenture Trustee does not take office within 60 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Issuer or the Holders of a majority of Security Balances of the
Notes may petition any court of competent jurisdiction for the appointment of a
successor Indenture Trustee.

      If the Indenture Trustee fails to comply with Section 6.11, any Noteholder
may petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee.

      Notwithstanding the replacement of the Indenture Trustee pursuant to this
Section, the Issuer's and the Administrator's obligations under Section 6.07
shall continue for the benefit of the retiring Indenture Trustee.

      Section 6.09. Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or

                                       35
<PAGE>

transferee corporation without any further act shall be the successor Indenture
Trustee; provided, that such corporation or banking association shall be
otherwise qualified and eligible under Section 6.11. The Indenture Trustee shall
provide the Rating Agencies prior written notice of any such transaction.

      In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.

      Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee. (a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the Noteholders,
such title to the Trust Estate, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Indenture Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.08 hereof.

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

            (i) all rights, powers, duties and obligations conferred or imposed
      upon the Indenture Trustee shall be conferred or imposed upon and
      exercised or performed by the Indenture Trustee and such separate trustee
      or co-trustee jointly (it being understood that such separate trustee or
      co-trustee is not authorized to act separately without the Indenture
      Trustee joining in such act), except to the extent that under any law of
      any jurisdiction in which any particular act or acts are to be performed
      the Indenture Trustee shall be incompetent or unqualified to perform such
      act or acts, in which event such rights, powers, duties and obligations
      (including the holding of title to the Trust Estate or any portion thereof
      in any such jurisdiction) shall be exercised and performed singly by such
      separate trustee or co-trustee, but solely at the direction of the
      Indenture Trustee;

            (ii) no trustee hereunder shall be personally liable by reason of
      any act or omission of any other trustee hereunder; and

            (iii) the Indenture Trustee may at any time accept the resignation
      of or remove any separate trustee or co-trustee.

                                       36
<PAGE>

      (c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.

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

      Section 6.11. Eligibility; Disqualification. The Indenture Trustee shall
at all times satisfy the requirements of TIA ss. 310(a). The Indenture Trustee
shall have a combined capital and surplus of at least [$50,000,000] as set forth
in its most recent published annual report of condition and it or its parent
shall have a long-term debt rating of [Baa3] or better by [Moody's]. The
Indenture Trustee shall comply with TIA ss. 310(b), including the optional
provision permitted by the second sentence of TIA ss. 310(b)(9); provided,
however, that there shall be excluded from the operation of TIA ss. 310(b)(1)
any indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.

      Section 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated.

      Section 6.13. Representation and Warranty. The Indenture Trustee hereby
represents that:

            (i) The Indenture Trustee is duly organized and validly existing as
      a corporation in good standing under the laws of the State of ___________,
      with power and authority to own its properties and to conduct its business
      as such properties are currently owned and such business is presently
      conducted.

            (ii) The Indenture Trustee has the power and authority to execute
      and deliver this Indenture and to carry out its terms; and the execution,
      delivery and performance of this Indenture have been duly authorized by
      the Indenture Trustee by all necessary corporate action.

                                       37
<PAGE>

            (iii) The consummation of the transactions contemplated by this
      Indenture and the fulfillment of the terms hereof do not conflict with,
      result in any breach of any of the terms and provisions of, or constitute
      (with or without notice or lapse of time) a default under, the articles of
      incorporation or bylaws of the Indenture Trustee or any agreement or other
      instrument to which the Indenture Trustee is a party or by which it is
      bound

            (iv) To the Indenture Trustee's best knowledge, there are no
      proceedings or investigations pending or threatened before any court,
      regulatory body, administrative agency or other governmental
      instrumentality having jurisdiction over the Indenture Trustee or its
      properties: (A) asserting the invalidity of this Indenture (B) seeking to
      prevent the consummation of any of the transactions contemplated by this
      Indenture or (C) seeking any determination or ruling that might materially
      and adversely affect the performance by the Indenture Trustee of its
      obligations under, or the validity or enforceability of, this Indenture.

      Section 6.14. Directions to Indenture Trustee. The Indenture Trustee is
hereby directed:

      (a) to accept the pledge of the Mortgage Loans and hold the assets of the
Trust in trust for the Noteholders; (b) to issue, execute and deliver the Notes
substantially in the form prescribed by Exhibit A in accordance with the terms
of this Indenture; and

      (c) to take all other actions as shall be required to be taken by the
terms of this Indenture.

      Section 6.15. [ No Consent to Certain Acts of Depositor. The Indenture
Trustee shall not consent to any action proposed to be taken by the Depositor
pursuant to Article [_________] of the Depositor's Restated Certificate of
Incorporation.]

      Section 6.16. Indenture Trustee May Own Securities. The Indenture Trustee,
in its individual or any other capacity may become the owner or pledgee of
Securities with the same rights it would have if it were not Indenture Trustee.

                                  ARTICLE VII

                         NOTEHOLDERS' LISTS AND REPORTS

      Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after each Record Date, a list, in such form
as the Indenture Trustee may reasonably require, of the names and addresses of
the Holders of Notes as of such Record Date, (b) at such other times as the
Indenture Trustee and the Note Insurer 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 Indenture Trustee is the Note
Registrar, no such list shall be required to be furnished.

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<PAGE>

      Section 7.02. Preservation of Information; Communications to Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Notes contained in the
most recent list furnished to the Indenture Trustee as provided in Section 7.01
and the names and addresses of Holders of Notes received by the Indenture
Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any
list furnished to it as provided in such Section 7.01 upon receipt of a new list
so furnished.

      (b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.

      (c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA ss. 312(c).

      Section 7.03. Reports by Issuer. (a) The Issuer shall:

            (i) file with the Indenture Trustee, within 15 days after the Issuer
      is required to file the same 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 from time to
      time by rules and regulations prescribe) that the Issuer may be required
      to file with the Commission pursuant to Section 13 or 15(d) of the
      Exchange Act;

            (ii) file with the Indenture Trustee, and the Commission in
      accordance with rules and regulations prescribed from time to time by the
      Commission such additional information, documents and reports with respect
      to compliance by the Issuer with the conditions and covenants of this
      Indenture as may be required from time to time by such rules and
      regulations; and

            (iii) supply to the Indenture Trustee (and the Indenture Trustee
      shall transmit by mail to all Noteholders described in TIA ss. 313(c))
      such summaries of any information, documents and reports required to be
      filed by the Issuer pursuant to clauses (i) and (ii) of this Section
      7.03(a) and by rules and regulations prescribed from time to time by the
      Commission.

      (b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.

      Section 7.04. Reports by Indenture Trustee. If required by TIA ss. 313(a),
within 60 days after each January 1 beginning with January 1, ______, the
Indenture Trustee shall mail to each Note holder as required by TIA ss. 313(c)
and to the Note Insurer a brief report dated as of such date that complies with
TIA ss. 313(a). The Indenture Trustee also shall comply with TIA ss. 313(b).

      A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.

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<PAGE>

                                  ARTICLE VIII

                      ACCOUNTS, DISBURSEMENTS AND RELEASES

      Section 8.01. Collection of Money. Except as otherwise expressly provided
herein, the Indenture 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 Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Trust Estate, the Indenture 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 under this
Indenture and any right to proceed thereafter as provided in Article V.

      Section 8.02. Trust Accounts. (a) On or prior to the Closing Date, the
Issuer shall cause the Indenture Trustee to establish and maintain, in the name
of the Indenture Trustee, for the benefit of the Noteholders and the Certificate
Paying Agent, on behalf of the Certificateholders and the Note Insurer, the
Payment Account as provided in Section 3.01 of this Indenture.

      (b) All monies deposited from time to time in the Payment Account pursuant
to the Servicing Agreement and all deposits therein pursuant to this Indenture
are for the benefit of the Noteholders and the Certificate Paying Agent, on
behalf of the Certificateholders and all investments made with such monies
including all income or other gain from such investments are for the benefit of
the Master Servicer as provided by the Servicing Agreement.

      On each Payment Date during the Funding Period the Indenture Trustee shall
withdraw Net Principal Collections from the Payment Account and deposit Net
Principal Collections to the Funding Account.

      On each Payment Date, the Indenture Trustee shall distribute all amounts
on deposit in the Payment Account (after giving effect to the withdrawal
referred to in the preceding paragraph) to Noteholders in respect of the Notes
and in its capacity as Certificate Paying Agent to Certificateholders in the
order of priority set forth in Section 3.05 (except as otherwise provided in
Section 5.04(b).

      The Master Servicer may direct the Indenture Trustee to invest any funds
in the Payment Account in Eligible Investments maturing no later than the
Business Day preceding each Payment Date and shall not be sold or disposed of
prior to the maturity. Unless otherwise instructed by the Master Servicer, the
Indenture Trustee shall invest all funds in the Payment Account in Eligible
Investments.

      (c) On or before the Closing Date the Issuer shall open, at the Corporate
Trust Office, an account which shall be the "Funding Account". The Master
Servicer may direct the Indenture Trustee to invest any funds in the Funding
Account in Eligible Investments maturing no later than the Business Day
preceding each Payment Date and shall not be sold or disposed of prior to

                                       40
<PAGE>

the maturity. Unless otherwise instructed by the Master Servicer, the Indenture
Trustee shall invest all funds in the Payment Account in its Corporate Trust
Short Term Investment Fund so long as it is an Eligible Investment. During the
Funding Period, any amounts received by the Indenture Trustee in respect of Net
Principal Collections for deposit in the Funding Account, together with any
Eligible Investments in which such monies are or will be invested or reinvested
during the term of the Notes, shall be held by the Indenture Trustee in the
Funding Account as part of the Trust Estate, subject to disbursement and
withdrawal as herein provided: Amounts on deposit in the Funding Account in
respect of Net Principal Collections may be withdrawn on each Deposit Date and
(1) paid to the Issuer in payment for Additional Loans by the deposit of such
amount to the Collection Account and (2) at the end of the Funding Period any
amounts remaining in the Funding Account after the withdrawal called for by
clause (1) shall be deposited in the Payment Account to be included in the
payment of principal on the Payment Date that is the last day of the Funding
Period.

      (d) (i) Any investment in the institution with which the Funding Account
is maintained may mature on such Payment Date and (ii) any other investment may
mature on such Payment Date if the Indenture Trustee shall advance funds on such
Payment Date to the Funding Account in the amount payable on such investment on
such Payment Date, pending receipt thereof to the extent necessary to make
distributions on the Notes and the Certificates) and shall not be sold or
disposed of prior to maturity.

      Section 8.03. Officer's Certificate. The Indenture Trustee shall receive
at least [seven] days notice when requested by the Issuer to take any action
pursuant to Section 8.05(a), accompanied by copies of any instruments to be
executed, and the Indenture Trustee shall also require, as a condition to such
action, an Officer's Certificate, in form and substance satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with.

      Section 8.04. Termination Upon Distribution to Noteholders. This Indenture
and the respective obligations and responsibilities of the Issuer and the
Indenture Trustee created hereby shall terminate upon the distribution to
Noteholders, Certificate Paying Agent, on behalf of the Certificateholders and
the Indenture Trustee of all amounts required to be distributed pursuant to
Article III; provided, however, that in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the survivor of the
descendants of Joseph P. Kennedy, the late ambassador of the United States to
the Court of St. James, living on the date hereof.

      Section 8.05. Release of Trust Estate. (a) Subject to the payment of its
fees and expenses, the Indenture Trustee may, and when required by the
provisions of this Indenture shall, execute instruments to release property from
the lien of this Indenture, or convey the Indenture Trustee's interest in the
same, in a manner and under circumstances that are not inconsistent with the
provisions of this Indenture. No party relying upon an instrument executed by
the Indenture Trustee as provided in Article VIII hereunder shall be bound to
ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent, or see to the application of any monies.

                                       41
<PAGE>

      (b) The Indenture Trustee shall, at such time as (i) there are no Notes
Outstanding, (ii) all sums due the Indenture Trustee pursuant to this Indenture
have been paid, and (iii) all sums due the Note Insurer have been paid, release
any remaining portion of the Trust Estate that secured the Notes from the lien
of this Indenture.

      (c) [ The Indenture Trustee shall release property from the lien of this
Indenture pursuant to this Section 8.05 only upon receipt of an request from the
Issuer accompanied by an [Officers' Certificate], [an Opinion of Counsel,] and a
letter from the Note Insurer, stating that the Note Insurer has no objection to
such request from the Issuer.]

      Section 8.06. Surrender of Notes Upon Final Payment. By acceptance of any
Note, the Holder thereof agrees to surrender such Note to the Indenture Trustee
promptly, prior to such Note holder's receipt of the final payment thereon.

                                   ARTICLE IX

                             SUPPLEMENTAL INDENTURES

      Section 9.01. Supplemental Indentures Without Consent of Noteholders. (a)
Without the consent of the Holders of any Notes but with the consent of the Note
Insurer and prior notice to the Rating Agencies and the Note Insurer, the Issuer
and the Indenture Trustee, when authorized by an Issuer Request, at any time and
from time to time, may enter into one or more indentures supplemental hereto
(which shall conform to the provisions of the Trust Indenture Act as in force at
the date of the execution thereof), in form satisfactory to the Indenture
Trustee, for any of the following purposes:

            (i) 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 Indenture 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;

            (ii) to evidence the succession, in compliance with the applicable
      provisions hereof, of another person to the Issuer, and the assumption by
      any such successor of the covenants of the Issuer herein and in the Notes
      contained;

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

            (iv) to convey, transfer, assign, mortgage or pledge any property to
      or with the Indenture Trustee;

            (v) to cure any ambiguity, to correct or supplement any provision
      herein or in any supplemental indenture that may be inconsistent with any
      other provision herein or in any supplemental indenture

            (vi) to make any other provisions with respect to matters or
      questions arising under this Indenture or in any supplemental indenture;
      provided, that such action shall not materially and adversely affect the
      interests of the Holders of the Notes;

                                       42
<PAGE>

            (vii) to evidence and provide for the acceptance of the appointment
      hereunder by a successor trustee with respect to the Notes and to add to
      or change any of the provisions of this Indenture as shall be necessary to
      facilitate the administration of the trusts hereunder by more than one
      trustee, pursuant to the requirements of Article VI; or

            (viii) 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;

provided, however, that no such indenture supplements shall be entered into
unless the Indenture Trustee shall have received an Opinion of Counsel that
entering into such indenture supplement will not have any material adverse tax
consequences to the Noteholders.

      The Indenture 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.

      (b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Request, may, also without the consent of any of the Holders of the Notes but
with the consent of the Note Insurer and prior notice to the Rating Agencies and
the Note Insurer, 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 Notes under this Indenture; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel, (i)
adversely affect in any material respect the interests of any Noteholder or (ii)
cause the Issuer to be subject to an entity level tax.

      Section 9.02. Supplemental Indentures With Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Request, also
may, with prior notice to the Rating Agencies and, with the written consent of
the Note Insurer and with the consent of the Holders of not less than a majority
of the Security Balances of each Class of Notes affected thereby, by Act of such
Holders delivered to the Issuer and the Indenture Trustee, 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 Notes under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Note affected
thereby:

            (i) change the date of payment of any installment of principal of or
      interest on any Note, or reduce the principal amount thereof or the
      interest rate thereon, change the provisions of this Indenture relating to
      the application of collections on, or the proceeds of the sale of, the
      Trust Estate to payment of principal of or interest on the Notes, or
      change any place of payment where, or the coin or currency in which, any
      Note or the interest thereon is payable, or impair the right to institute
      suit for the enforcement of the provisions of this Indenture requiring the
      application of funds available therefor, as provided in Article V, to the
      payment of any such amount due on the Notes on or after the respective due
      dates thereof;

                                       43
<PAGE>

            (ii) reduce the percentage of the Security Balances of the Notes,
      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 certain provisions of this Indenture or certain
      defaults hereunder and their consequences provided for in this Indenture;

            (iii) modify or alter the provisions of the proviso to the
      definition of the term "Outstanding" or modify or alter the exception in
      the definition of the term "Holder";

            (iv) reduce the percentage of the Security Balances of the Notes
      required to direct the Indenture Trustee to direct the Issuer to sell or
      liquidate the Trust Estate pursuant to Section 5.04;

            (v) modify any provision of this Section 9.02 except to increase any
      percentage specified herein or to provide that certain additional
      provisions of this Indenture or the Basic Documents cannot be modified or
      waived without the consent of the Holder of each Note affected thereby;

            (vi) modify any of the provisions of this Indenture in such manner
      as to affect the calculation of the amount of any payment of interest or
      principal due on any Note on any Payment Date (including the calculation
      of any of the individual components of such calculation); or

            (vii) 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 or, except as otherwise permitted or contemplated herein,
      terminate the lien of this Indenture on any property at any time subject
      hereto or deprive the Holder of any Note of the security provided by the
      lien of this Indenture; and provided, further, that such action shall not,
      as evidenced by an Opinion of Counsel, cause the Issuer to be subject to
      an entity level tax.

      The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such determination
shall be conclusive upon the Holders of all Notes, whether theretofore or
thereafter authenticated and delivered hereunder. The Indenture Trustee shall
not be liable for any such determination made in good faith.

      It shall not be necessary for any Act of Noteholders under this Section
9.02 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 Indenture Trustee of
any supplemental indenture pursuant to this Section 9.02, the Indenture Trustee
shall mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture 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
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the

                                       44
<PAGE>

modification thereby of the trusts created by this Indenture, the Indenture
Trustee shall be entitled to receive, and subject to Sections 6.01 and 6.02,
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 Indenture Trustee may, but shall not be obligated to, enter into
any such supplemental indenture that affects the Indenture Trustee's own rights,
duties, liabilities or immunities under this Indenture or otherwise.

      Section 9.04. Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and shall be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Indenture Trustee, the Issuer and the Holders of the Notes shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.

      Section 9.05. Conformity With Trust Indenture Act. Every amendment of this
Indenture and every supplemental indenture executed pursuant to this Article IX
shall conform to the requirements of the Trust Indenture Act as then in effect
so long as this Indenture shall then be qualified under the Trust Indenture Act.

      Section 9.06. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.

                                   ARTICLE X

                                  MISCELLANEOUS

      Section 10.01. Compliance Certificates and Opinions, Etc. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee and to the Note Insurer (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and (ii) 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, no additional certificate or opinion need be
furnished.

      Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:

                                       45
<PAGE>

                        (1) a statement that each signatory of such certificate
                  or opinion has read or has caused to be 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 or opinion are based;

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

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

                        (5) if the Signer of such Certificate or Opinion is
                  required to be Independent, the Statement required by the
                  definition of the term "Independent".

      (b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 10.01(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the Issuer
of the Collateral or other property or securities to be so deposited.

            (ii) Whenever the Issuer is required to furnish to the Indenture
      Trustee an Officer's Certificate certifying or stating the opinion of any
      signer thereof as to the matters described in clause (i) above, the Issuer
      shall also deliver to the Indenture Trustee an Independent Certificate as
      to the same matters, if the fair value to the Issuer of the securities to
      be so deposited and of all other such securities made the basis of any
      such withdrawal or release since the commencement of the then-current
      fiscal year of the Issuer, as set forth in the certificates delivered
      pursuant to clause (i) above and this clause (ii), is ____% or more of the
      Security Balances of the Notes, but such a certificate need not be
      furnished with respect to any securities so deposited, if the fair value
      thereof to the Issuer as set forth in the related Officer's Certificate is
      less than $_________ or less than one percent of the Security Balances of
      the Notes.

            (iii) Whenever any property or securities are to be released from
      the lien of this Indenture, the Issuer shall also furnish to the Indenture
      Trustee an Officer's Certificate certifying or stating the opinion of each
      person signing such certificate as to the fair value (within 90 days of
      such release) of the property or securities proposed to be released and
      stating that in the opinion of such person the proposed release will not
      impair the security under this Indenture in contravention of the
      provisions hereof.

                                       46
<PAGE>

                  (iv) Whenever the Issuer is required to furnish to the
            Indenture Trustee an Officer's Certificate certifying or stating the
            opinion of any signer thereof as to the matters described in clause
            (iii) above, the Issuer shall also furnish to the Indenture Trustee
            an Independent Certificate as to the same matters if the fair value
            of the property or securities and of all other property, other than
            property as contemplated by clause (v) below or securities released
            from the lien of this Indenture since the commencement of the
            then-current calendar year, as set forth in the certificates
            required by clause (iii) above and this clause (iv), equals ____% or
            more of the Security Balances of the Notes, but such certificate
            need not be furnished in the case of any release of property or
            securities if the fair value thereof as set forth in the related
            Officer's Certificate is less than $_______ or less than one percent
            of the then Security Balances of the Notes.

                  (v) Notwithstanding any provision of this Indenture, the
            Issuer may, without compliance with the requirements of the other
            provisions of this Section 10.01, (A) collect, sell or otherwise
            dispose of the Mortgage Loans as and to the extent permitted or
            required by the Basic Documents or (B) make cash payments out of the
            Payment Account as and to the extent permitted or required by the
            Basic Documents [, so long as the Issuer shall deliver to the
            Indenture Trustee every six months, commencing _____________, an
            Officer's Certificate of the Issuer stating that all the
            dispositions of Collateral described in clauses (A) or (B) above
            that occurred during the preceding six calendar months were in the
            ordinary course of the Issuer's business and that the proceeds
            thereof were applied in accordance with the Basic Documents].

      Section 10.02. Form of Documents Delivered to Indenture 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 Authorized 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 or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Seller, the
Issuer or the Administrator, stating that the information with respect to such
factual matters is in the possession of the Seller, the Issuer or the
Administrator, unless such 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.

      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.

                                       47
<PAGE>

      Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture 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, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.

      Section 10.03. Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents 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 Indenture 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 Noteholders 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 Indenture Trustee and the Issuer, if made in
the manner provided in this Section 10.03.

      (b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.

      (c) The ownership of Notes shall be proved by the Note Registrar.

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

      Section 10.04. Notices, Etc., to Indenture Trustee, Issuer, Note Insurer
and Rating Agencies. Any request, demand, authorization, direction, notice,
consent, waiver or Act of Note holders or other documents provided or permitted
by this Indenture shall be in writing and if such request, demand,
authorization, direction, notice, consent, waiver or act of Noteholders is to be
made upon, given or furnished to or filed with:

            (i) the Indenture Trustee by any Noteholder or by the Issuer shall
      be sufficient for every purpose hereunder if made, given, furnished or
      filed in writing to or with the Indenture Trustee at the Corporate Trust
      Office. The Indenture Trustee shall promptly transmit any notice received
      by it from the Noteholders to the Issuer, or

            (ii) the Issuer by the Indenture Trustee or by any Noteholder shall
      be sufficient for every purpose hereunder if in writing and mailed
      first-class, postage prepaid

                                       48
<PAGE>

      to the Issuer addressed to: Park Place Trust Series ____-_, in care of
      [Name of Owner Trustee] _________________, __________, ______________,
      Attention of _________________________________________ with a copy to the
      Administrator at ________________ Attention: __________
      __________________________, or at any other address previously furnished
      in writing to the Indenture Trustee by the Issuer or the Administrator.
      The Issuer shall promptly transmit any notice received by it from the
      Noteholders to the Indenture Trustee, or

      (iii) the Note Insurer by the Issuer, the Indenture Trustee or by any
Noteholders shall be sufficient for every purpose hereunder to in writing and
mailed, first-class postage pre-paid, or personally delivered or telecopied to:
[Name of Note Insurer], ________________, ________, _______________, Attention:
_________________, ___________________________, Telephone ______________.
Telecopier ______________. The Note Insurer shall promptly transmit any notice
received by it from the Issuer, the Indenture Trustee or the Noteholders to the
Issuer or Indenture Trustee, as the case may be.

      Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally delivered
or mailed by certified mail, return receipt requested, to (i) in the case of
[Moody's], at the following address: [Moody's Investors Service, Inc., ABS
Monitoring Department, 99 Church Street, New York, New York 10007] and (ii) in
the case of [Standard & Poor's], at the following address: [Standard & Poor's
Ratings Group, 26 Broadway (15th Floor), New York, New York 10004, Attention of
Asset Backed Surveillance Department]; or as to each of the foregoing, at such
other address as shall be designated by written notice to the other parties.

      Section 10.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at such Person's as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given regardless of
whether such notice is in fact actually received.

      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.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a 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 Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any

                                       49
<PAGE>

manner of giving such notice as shall be satisfactory to the Indenture Trustee
shall be deemed to be a sufficient giving of such notice.

      Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute an Event of Default.

      Section 10.06. Alternate Payment and Notice Provisions. Notwithstanding
any provision of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Administrator to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer shall furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee shall cause payments to be made
and notices to be given in accordance with such agreements.

      Section 10.07. Conflict With Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.

      The provisions of TIA ss.ss. 310 through 317 that impose duties on any
Person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.

      Section 10.08. Effect of Headings. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.

      Section 10.09. Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors, co-trustees and agents.

      Section 10.10. Separability. In case any provision in this Indenture or in
the Notes 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 10.11. Benefits of Indenture. The Note Insurer and its successors
and assigns shall be a third-party beneficiary to the provisions of this
Indenture. Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, and the Noteholders, and any other party secured hereunder, and any
other Person with an ownership interest in any part of the Trust Estate, any
benefit or any legal or equitable right, remedy or claim under this Indenture.

      Section 10.12. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes 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 date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.

                                       50
<PAGE>

      Section 10.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

      Section 10.14. Counterparts. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.

      Section 10.15. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.

      Section 10.16. Issuer Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes of
this Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Article VI, VII and VIII of the Trust Agreement.

      Section 10.17. No Petition. The Indenture Trustee, by entering into this
Indenture, and each Noteholder, by accepting a Note, 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 Notes, this Indenture or any
of the Basic Documents.

      Section 10.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it shall permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the 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 certified public

                                       51
<PAGE>

accountants, and to discuss the Issuer's affairs, finances and accounts with the
Issuer's officers, employees, and Independent certified public accountants, all
at such reasonable times and as often as may be reasonably requested. The
Indenture Trustee shall and shall cause its representatives to hold in
confidence all such information except to the extent disclosure may be required
by law (and all reasonable applications for confidential treatment are
unavailing) and except to the extent that the Indenture Trustee may reasonably
determine that such disclosure is consistent with its obligations hereunder.

      Section 10.19. Authority of the Administrator. Each of the parties to this
Indenture acknowledges that the Issuer and the Owner Trustee have each appointed
the Administrator to act as its agent to perform the duties and obligations of
the Issuer hereunder. Unless otherwise instructed by the Issuer or the Owner
Trustee, copies of all notices, requests, demands and other documents to be
delivered to the Issuer or the Owner Trustee pursuant to the terms hereof shall
be delivered to the Administrator. Unless otherwise instructed by the Issuer or
the Owner Trustee, all notices, requests, demands and other documents to be
executed or delivered, and any action to be taken, by the Issuer or the Owner
Trustee pursuant to the terms hereof may be executed, delivered and/or taken by
the Administrator pursuant to the Administration Agreement.

                                       52
<PAGE>

      IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused their
names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.

                                     Park Place Trust Series ____- _,
                                     as Issuer

                                     By:________________________________________
                                     not in its individual capacity
                                     but solely as Owner Trustee

                                     By:________________________________________
                                     Name:______________________________________
                                     Title: ____________________________________

                                     ___________________________________________
                                     as Indenture Trustee, as Certificate Paying
                                     Agent and as Note Registrar

                                     By:________________________________________
                                     Name:______________________________________
                                     Title: ____________________________________

_____________________________________
hereby accepts the appointment as
Certificate Paying Agent pursuant to
Section 3.03 hereof and as Certificate
Registrar pursuant to Section 4.02
hereof.

                                     By:________________________________________
                                     Name:______________________________________
                                     Title: ____________________________________

                                       53
<PAGE>

STATE OF _________    )
                      ) ss.:
COUNTY OF ________    )

      On this ____ day of __________, before me personally appeared
______________, to me known, who being by me duly sworn, did depose and say,
that he resides at _________________, __________________ _____, that he is the
of the Owner Trustee, one of the corporations described in and which executed
the above instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation; and that he signed his name
thereto by like order.

                               __________________________
                                      Notary Public

[NOTARIAL SEAL]

STATE OF ________     )
                      ) ss.:
COUNTY OF ________    )

         On this ____ day of __________, before me personally appeared , to me
known, who being by me duly sworn, did depose and say, that he resides at , that
he is the ______________ of ________________, as Indenture Trustee, one of the
corporations described in and which executed the above instrument; that he knows
the seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation; and that he signed his name thereto by like order.

                               __________________________
                                      Notary Public

[NOTARIAL SEAL]

<PAGE>

                                   APPENDIX A

                                   DEFINITIONS

            Adjustable Rate Mortgage Loan: A Mortgage Loan with a Mortgage Rate
that is subject to periodic adjustment calculated on the basis of the Index,
plus an applicable Gross Margin. Each Adjustable Rate Mortgage Loan is secured
by a first lien on the related Mortgaged Property.

            Adjustment Date: As to each Adjustable Rate Mortgage Loan, each date
set forth in the related Mortgage Note on which an adjustment to the interest
rate on such Mortgage Loan becomes effective.

            Administrative Fee: The amount of the fee payable to the Owner
Trustee together with the amount of the premium payable to the Note Insurer,
which will accrue at ______% per annum based on the Note Principal Balance of
the Notes.

            Advance: As to any Mortgage Loan, any advance made by the Master
Servicer, pursuant to Section 4.04 of the Servicing Agreement.

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

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

            Assignment Of Mortgage: An assignment of Mortgage, notice of
transfer or equivalent instrument, in recordable form, which is sufficient under
the laws of the jurisdiction wherein the related Mortgaged Property is located
to reflect of record the sale of the Mortgage, which assignment, notice of
transfer or equivalent instrument may be in the form of one or more blanket
assignments covering Mortgages secured by Mortgaged Properties located in the
same county, if permitted by law.

            Authorized Newspaper: A newspaper of general circulation in the
_______ of ___________, The City of ___________, printed in the English language
and customarily published on each Business Day, whether or not published on
Saturdays, Sundays or holidays.

            Authorized Officer: With respect to the Issuer, any officer of the
Owner Trustee who is authorized to act for the Owner Trustee in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by the Owner Trustee to the Indenture

<PAGE>

Trustee on the Closing Date (as such list may be modified or supplemented from
time to time thereafter).

            Available Funds: As to any Payment Date, an amount equal to the
amount on deposit in the Payment Account on such Payment Date and available for
distribution to the Noteholders (minus, if the Notes have been declared due and
payable following an Event of Default on such Payment Date, any amounts owed to
the Indenture Trustee by the Issuer pursuant to Section 6.07 of the Indenture).

            Available Funds Cap Carry-Forward Amount: With respect to the Notes
and any Payment Date, an amount equal to the sum of (x) the amount, if any, by
which (a) the lesser of (1) the amount payable if clause (i) of the definition
of Note Interest Rate is used to calculate interest and (2) the amount payable
if the Maximum Note Interest Rate is used to calculate interest exceeds (b) the
amount payable if clause (ii) of the definition of Note Interest Rate is used to
calculate interest and (y) the interest accrued during the prior Interest Period
on the amount of any Available Funds Cap Carry-Forward Amount immediately prior
to such Payment Date, calculated on the basis of a 360-day year and the actual
number of days elapsed and using the Note Interest Rate applicable to such
Payment Date minus (z) the aggregate of all amounts distributed to the
Noteholders on all prior Payment Dates pursuant to Section 3.05(v) of the
Indenture.

            Available Funds Interest Rate: As to any Payment Date, a per annum
rate equal to the lesser of (x) the fraction, expressed as a percentage, the
numerator of which is (i) an amount equal to (A) 1/12 of the aggregate Principal
Balance of the then outstanding Mortgage Loans times the weighted average of the
Expense Adjusted Mortgage Rates on the then outstanding Mortgage Loans minus (B)
the Administrative Fee for such Payment Date, and the denominator of which is
(ii) an amount equal to (A) the then outstanding aggregate Note Principal
Balance of the Notes multiplied by (B) the actual number of days elapsed in the
related Interest Period divided by 360 and (y) the Maximum Note Interest Rate.

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

            Basic Documents: The Trust Agreement, the Certificate of Trust, the
Indenture, the Mortgage Loan Purchase Agreement, the Insurance Agreement, the
Servicing Agreement, and the other documents and certificates delivered in
connection with any of the above.

            Beneficial Owner: With respect to any Note, the Person who is the
beneficial owner of such Note as reflected on the books of the Depository or on
the books of a Person maintaining an account with such Depository (directly as a
Depository Participant or indirectly through a Depository Participant, in
accordance with the rules of such Depository).

            Book-Entry Notes: Beneficial interests in the Notes, ownership and
transfers of which shall be made through book entries by the Depository as
described in Section 4.06 of the Indenture.

            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, Delaware or
California or in the city in

                                       2
<PAGE>

which the corporate trust offices of the Indenture Trustee or the Note Insurer
are located, are required or authorized by law to be closed.

            Business Trust Statute: Chapter 38 of Title 12 of the Delaware Code,
12 DEL. Code ss.ss.3801 ET seq., as the same may be amended from time to time.

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

            Certificate Distribution Account: The account or accounts created
and maintained pursuant to Section 3.10(d) of the Trust Agreement. The
Certificate Distribution Account shall be an Eligible Account.

            Certificate Paying Agent: The meaning specified in Section 3.10 of
the Trust Agreement.

            Certificate Percentage Interest: With respect to each Certificate,
the Certificate Percentage Interest on the face thereof.

            Certificate Register: The register maintained by the Certificate
Registrar in which the Certificate Registrar shall provide for the registration
of Certificates and of transfers and exchanges of Certificates.

            Certificate Registrar: Initially, the Indenture Trustee, in its
capacity as Certificate Registrar, or any successor to the Indenture Trustee in
such capacity.

            Certificate of Trust: The Certificate of Trust filed for the Trust
pursuant to Section 3810(a) of the Business Trust Statute.

            Certificates: The Park Place Securities, Inc, Park Place Trust
Certificates, Series ____-_, evidencing the beneficial ownership interest in the
Issuer and executed by the Owner Trustee in substantially the form set forth in
Exhibit A to the Trust Agreement.

            Certificateholder: The Person in whose name a Certificate is
registered in the Certificate Register. Owners of Certificates that have been
pledged in good faith may be regarded as Holders if the pledgee establishes to
the satisfaction of the Indenture Trustee or the Owner Trustee, as the case may
be, the pledgee's right so to act with respect to such Certificates and that the
pledgee is not the Issuer, any other obligor upon the Certificates or any
Affiliate of any of the foregoing Persons.

            Closing Date: ______ __, 200_.

            Code: The Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.

                                       3
<PAGE>

            Collateral: The meaning specified in the Granting Clause of the
Indenture.

            Collection Account: The account or accounts created and maintained
pursuant to Section 3.06(d) of the Servicing Agreement. The Collection Account
shall be an Eligible Account.

            Combined Loan-to-Value Ratio: With respect to any Mortgage Loan and
any date, the percentage equivalent of a fraction, the numerator of which is the
Cut-Off Date Principal Balance of such Mortgage Loan and the denominator of
which is the outstanding principal balance as of the date of the origination of
such Mortgage Loan of any mortgage loan or mortgage loans that are secured by
liens on the Mortgaged Property that are senior or subordinate to the Mortgage
and the denominator of which is the Appraised Value of the related Mortgaged
Property.

            Compensating Interest: With respect to any Determination Date, an
amount equal to the lesser of (i) the aggregate amount of Prepayment Interest
Shortfall for the related Prepayment Period and (ii) the Servicing Fee for such
Determination Date.

            Converted Mortgage Loan: Any Convertible Mortgage Loan with respect
to which the interest rate borne by such Mortgage Loan has been converted from
an adjustable interest rate to a fixed interest rate.

            Convertible Mortgage Loan: Any Adjustable Rate Mortgage Loan which
by its terms grants to the related Mortgagor the option to convert the interest
rate borne by such Mortgage Loan from an adjustable interest rate to a fixed
interest rate.

            Converting Mortgage Loan: Any Convertible Mortgage Loan with respect
to which the related Mortgagor has given notice of his intent to convert from an
adjustable interest rate to a fixed interest rate and prior to the conversion of
such Mortgage Loan.

            Corporate Trust Office: With respect to the Indenture Trustee,
Certificate Registrar, Certificate Paying Agent and Paying Agent, the principal
corporate trust office of the Indenture Trustee and Note Registrar at which at
any particular time its corporate trust business shall be administered, which
office at the date of the execution of this instrument is located at
____________, __________, ______, __________ _____, Attention: ________ ___
______, except that for purposes of Section 4.02 of the Indenture and Section
3.09 of the Trust Agreement, such term shall include the Indenture Trustee's
office or agency at _______________, ________, ________ _____, Attention:
___________ _________. With respect to the Owner Trustee, the principal
corporate trust office of the Owner Trustee at which at any particular time its
corporate trust business shall be administered, which office at the date of the
execution of this Trust Agreement is located at ________________________, ______
____________, ________________________, __________, ________ _____, Attention:
________________________________.

            Cut-Off Date: With respect to the Mortgage Loans, ______ 1, 200_.

                                       4
<PAGE>

            Cut-Off Date Principal Balance: With respect to any Mortgage Loan,
the unpaid principal balance thereof as of the opening of business on the last
day of the related Due Period immediately prior to the Cut-Off Date.

            Debt Service Reduction: With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction constituting 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.

            Deficiency Amount: The meaning provided in the Note Insurance
Policy.

            Deficient Valuation: With respect to any Mortgage Loan, a valuation
by a court of competent jurisdiction of the Mortgaged Property in an amount less
than the then outstanding indebtedness under the Mortgage Loan, or any reduction
in the amount of principal to be paid in connection with any scheduled Monthly
Payment that constitutes a permanent forgiveness of principal, which valuation
or reduction results from a proceeding under the Bankruptcy Code.

            Definitive Notes: The meaning specified in Section 4.06 of the
Indenture.

            Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced
with an Eligible Substitute Mortgage Loan.

            Depositor: Park Place Securities, Inc., a Delaware corporation, or
its successor in interest.

            Depository or Depository Agency: The Depository Trust Company or a
successor appointed by the Indenture Trustee with the approval of the Depositor.
Any successor to the Depository shall be an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act and the
regulations of the Securities and Exchange Commission thereunder.

            Depository Participant: A Person for whom, from time to time, the
Depository effects book-entry transfers and pledges of securities deposited with
the Depository.

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

            Due Date: The first day of the month of the related Payment Date.

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

                                       5
<PAGE>

            Eligible Account: An account that is any of the following: (i)
maintained with a depository institution the short term deposits of which have
been rated by each Rating Agency in its highest rating available, or (ii) an
account or accounts in a depository institution in which such accounts are fully
insured to the limits established by the FDIC, provided that any deposits not so
insured shall, to the extent acceptable to the Note Insurer and each Rating
Agency, as evidenced in writing, be maintained such that (as evidenced by an
Opinion of Counsel delivered to the Indenture Trustee, the Note Insurer and each
Rating Agency) the Indenture Trustee have a claim with respect to the funds in
such account or a perfected first security interest against any collateral
(which shall be limited to Eligible Investments) securing such funds that is
superior to claims of any other depositors or creditors of the depository
institution with which such account is maintained, or (iii) in the case of the
Collection Account, either (A) a trust account or accounts maintained at the
Corporate Trust Department of the Indenture Trustee or (B) an account or
accounts maintained at the Corporate Trust Department of the Indenture Trustee,
as long as its short term debt obligations are rated P-1 by Moody's and A-1 by
Standard & Poor's or better and its long term debt obligations are rated A2 by
Moody's and A by Standard & Poor's or better, or (iv) in the case of the
Collection Account and the Payment Account, a trust account or accounts
maintained in the corporate trust division of the Indenture Trustee, or (v) an
account or accounts of a depository institution acceptable to each Rating Agency
as evidenced in writing by each Rating Agency that use of any such account as
the Collection Account or the Payment Account will not reduce the rating
assigned to any of the Securities by such Rating Agency below investment grade
without taking into account the Note Insurance Policy and acceptable to the Note
Insurer as evidenced in writing.

            Eligible Investments: One or more of the following:

            (i) direct obligations of, and obligations fully guaranteed by, the
      United States of America, the Federal Home Mortgage Corporation, the
      Federal National Mortgage Association, the Federal Home Loan Banks or any
      agency or instrumentality of the United States of America the obligations
      of which are backed by the full faith and credit of the United States of
      America;

            (ii) (A) demand and time deposits in, certificates of deposit of,
      banker's acceptances issued by or federal funds sold by any depository
      institution or trust company (including the Indenture Trustee or its agent
      acting in their respective commercial capacities) incorporated under the
      laws of the United States of America or any State thereof and subject to
      supervision and examination by federal and/or state authorities, so long
      as at the time of such investment or contractual commitment providing for
      such investment, such depository institution or trust company has a short
      term unsecured debt rating in the highest available rating category of
      each of the Rating Agencies and provided that each such investment has an
      original maturity of no more than 365 days, and (B) any other demand or
      time deposit or deposit which is fully insured by the Federal Deposit
      Insurance Corporation;

            (iii) repurchase obligations with a term not to exceed 30 days with
      respect to any security described in clause (i) above and entered into
      with a depository institution or trust company (acting as a principal)
      rated "A" or higher by S&P and A2 or higher by Moody's; provided, however,
      that collateral transferred pursuant to such repurchase

                                       6
<PAGE>

      obligation must (A) be valued weekly at current market price plus accrued
      interest, (B) pursuant to such valuation, equal, at all times, 105% of the
      cash transferred by the Indenture Trustee in exchange for such collateral
      and (C) be delivered to the Indenture Trustee or, if the Indenture Trustee
      is supplying the collateral, an agent for the Indenture Trustee, in such a
      manner as to accomplish perfection of a security interest in the
      collateral by possession of certificated securities.

            (iv) securities bearing interest or sold at a discount issued by any
      corporation incorporated under the laws of the United States of America or
      any State thereof which has a long term unsecured debt rating in the
      highest available rating category of each of the Rating Agencies at the
      time of such investment;

            (v) commercial paper having an original maturity of less than 365
      days and issued by an institution having a short term unsecured debt
      rating in the highest available rating category of each of the Rating
      Agencies at the time of such investment;

            (vi) a guaranteed investment contract approved by each of the Rating
      Agencies and the Note Insurer and issued by an insurance company or other
      corporation having a long term unsecured debt rating in the highest
      available rating category of each of the Rating Agencies at the time of
      such investment;

            (vii) money market funds having ratings in the highest available
      long-term rating category of each of the Rating Agencies at the time of
      such investment; any such money market funds which provide for demand
      withdrawals being conclusively deemed to satisfy any maturity requirement
      for Eligible Investments set forth in the Indenture; and

            (viii) any investment approved in writing by each of the Rating
      Agencies and the Note Insurer.

The Indenture Trustee may purchase from or sell to itself or an affiliate, as
principal or agent, the Eligible Investments listed above.

provided, however, that each such instrument shall be acquired in an arm's
length transaction and no such instrument shall be an Eligible Investment if it
represents, either (1) the right to receive only interest payments with respect
to the underlying debt instrument or (2) the right to receive both principal and
interest payments derived from obligations underlying such instrument and the
principal and interest payments with respect to such instrument provide a yield
to maturity greater than 120% of the yield to maturity at par of such underlying
obligations; provided further, however, that each such instrument acquired shall
not be acquired at a price in excess of par.

            Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by
the Seller for a Deleted Mortgage Loan which must, on the date of such
substitution, as confirmed in an Officer's Certificate delivered to the
Indenture Trustee, (i) have an outstanding principal balance, after deduction of
the principal portion of the monthly payment due in the month of substitution
(or in the case of a substitution of more than one Mortgage Loan for a Deleted
Mortgage Loan, an aggregate outstanding principal balance, after such
deduction), not in excess of the

                                       7
<PAGE>

outstanding principal balance of the Deleted Mortgage Loan (the amount of any
shortfall to be deposited by the Seller in the Collection Account in the month
of substitution); (ii) comply with each representation and warranty set forth in
clauses (ii) through (lxxvii) of Section 3.1(b) of the Mortgage Loan Purchase
Agreement other than clauses (ii), (iii), (v)-(xi), (xiii)-(xiv), (l), (lxvi),
(lxviii), (lxxi)-(lxxiii); (iii) have a Mortgage Rate and Gross Margin no lower
than and not more than 1% per annum higher than the Mortgage Rate and Gross
Margin, respectively, of the Deleted Mortgage Loan as of the date of
substitution; (iv) have a Combined Loan-to-Value Ratio at the time of
substitution no higher than that of the Deleted Mortgage Loan at the time of
substitution; (v) have a remaining term to stated maturity not greater than (and
not more than one year less than) that of the Deleted Mortgage Loan and (vi) not
be 30 days or more delinquent.

            ERISA: The Employee Retirement Income Security Act of 1974, as
amended.

            Event of Default: With respect to the Indenture, 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):

            (i) a default in (a) the payment of the Interest Payment Amount or
      the Principal Payment Amount with respect to a Payment Date on such
      Payment Date or (b) the Subordination Increase Amount or the Available
      Funds Cap Carry-Forward Amount, but only, with respect to clause (b), to
      the extent funds are available to make such payment as provided in the
      Indenture; or

            (ii) the failure by the Issuer on the Final Scheduled Payment Date
      to reduce the Note Principal Balance to zero; or

            (iii) there occurs a default in the observance or performance of any
      covenant or agreement of the Issuer made in the Indenture, or any
      representation or warranty of the Issuer made in the Indenture or in any
      certificate or other writing delivered pursuant hereto or in connection
      herewith proving to have been incorrect in any material respect as of the
      time when the same shall have been made, and such default shall continue
      or not be cured, or the circumstance or condition in respect of which such
      representation or warranty was incorrect shall not have been eliminated or
      otherwise cured, for a period of 30 days after there shall have been
      given, by registered or certified mail, to the Issuer by the Indenture
      Trustee or to the Issuer and the Indenture Trustee by the Note Insurer, or
      if a Note Insurer Default exists the Holders of at least 25% of the
      Outstanding Amount of the Notes, a written notice specifying such default
      or incorrect representation or warranty and requiring it to be remedied
      and stating that such notice is a notice of default hereunder; or

            (iv) there occurs the filing of a decree or order for relief by a
      court having jurisdiction in the premises in respect of the Issuer or any
      substantial part of the Trust Estate in an involuntary case under any
      applicable federal or state bankruptcy, insolvency or other similar law
      now or hereafter in effect, or appointing a receiver, liquidator,
      assignee, custodian, trustee, sequestrator or similar official of the
      Issuer or for any substantial part of the Trust Estate, or ordering the
      winding-up or liquidation of the

                                       8
<PAGE>

      Issuer's affairs, and such decree or order shall remain unstayed and in
      effect for a period of 60 consecutive days; or

            (v) there occurs the commencement by the Issuer of a voluntary case
      under any applicable federal or state bankruptcy, insolvency or other
      similar law now or hereafter in effect, or the consent by the Issuer to
      the entry of an order for relief in an involuntary case under any such
      law, or the consent by the Issuer to the appointment or taking possession
      by a receiver, liquidator, assignee, custodian, trustee, sequestrator or
      similar official of the Issuer or for any substantial part of the assets
      of the Trust Estate, or the making by the Issuer of any general 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 any action by the
      Issuer in furtherance of any of the foregoing.

            Event of Servicer Termination: With respect to the Servicing
Agreement, a Servicing Default as defined in Section 6.01 of the Servicing
Agreement.

            Excess Subordination Amount: With respect to any Payment Date, the
excess, if any, of (a) the Subordination Amount that would apply on such Payment
Date after taking into account all distributions to be made on such Payment Date
(exclusive of any reductions thereto attributable to Subordination Reduction
Amounts on such Payment Date) over (b) the Required Subordination Amount for
such Payment Date.

            Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

            Expense Adjusted Mortgage Rate: For any Mortgage Loan, the rate
equal to the then applicable Mortgage Rate thereon minus the sum of (i) the
Minimum Spread and (ii) the Servicing Fee Rate and (iii) the Indenture Trustee
Fee Rate.

            Expenses: The meaning specified in Section 7.02 of the Trust
Agreement.

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

            FHLMC: The Federal Home Loan Mortgage Corporation, or any successor
thereto.

            Final Scheduled Payment Date: The Payment Date occurring in
_________, _____.

            Fixed Rate Mortgage Loan: Any Mortgage Loan with a fixed rate of
interest.

            FNMA: The Federal National Mortgage Association, or any successor
thereto.

            Foreclosure Profit: With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Principal Balance (plus accrued and unpaid interest
thereon at the applicable Mortgage Rate from the date interest was last paid
through the date of receipt of the final Liquidation Proceeds) of such
Liquidated Mortgage Loan immediately prior to the final recovery of its
Liquidation Proceeds.

                                       9
<PAGE>

            Grant: Pledge, bargain, sell, warrant, alienate, remise, release,
convey, assign, transfer, create, and grant a lien upon and a security interest
in and right of set-off against, deposit, set over and confirm pursuant to the
Indenture. A Grant of the Collateral or of any other agreement or instrument
shall include all rights, powers and options (but none of the obligations) of
the granting party thereunder, including the immediate and continuing right to
claim for, collect, receive and give receipt for principal and interest payments
in respect of such collateral or other agreement or instrument and all other
moneys payable thereunder, 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 that the granting party is or may be entitled to do
or receive thereunder or with respect thereto.

            Gross Margin: With respect to any Adjustable Rate Mortgage Loan, the
percentage set forth as the "Gross Margin" for such Mortgage Loan on the
Mortgage Loan Schedule, as adjusted from time to time in accordance with the
terms of the Servicing Agreement.

            Indemnified Party: The meaning specified in Section 7.02 of the
Trust Agreement.

            Indenture: The indenture dated as of ______ 1, ____, between the
Issuer, as debtor, and the Indenture Trustee, as Indenture Trustee.

            Indenture Trustee: _________________________________________, a
national banking association, and its successors and assigns or any successor
indenture trustee appointed pursuant to the terms of the Indenture.

            Indenture Trustee Fee: With respect to each Mortgage Loan and any
Payment Date the product of (i) the Indenture Trustee Fee Rate divided by 12 and
(ii) the Principal Balance of such Mortgage Loans as of such date.

            Indenture Trustee Fee Rate: _____% per annum.

            Independent: When used with respect to any specified Person, the
Person (i) is in fact independent of the Issuer, any other obligor on the Notes,
the Seller, the Issuer, the Depositor and any Affiliate of any of the foregoing
Persons, (ii) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, the Seller,
the Issuer, the Depositor or any Affiliate of any of the foregoing Persons and
(iii) is not connected with the Issuer, any such other obligor, the Seller, the
Issuer, the Depositor or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.

            Independent Certificate: A certificate or opinion to be delivered to
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 10.01 of the Indenture,
made by an Independent appraiser or other expert appointed by an Issuer Order
and approved by the Indenture Trustee in the exercise of reasonable care, and
such opinion or certificate shall state that the signer has read the definition
of "Independent" in this Indenture and that the signer is Independent within the
meaning thereof.

                                       10
<PAGE>

            Index: With respect to any Adjustable Rate Mortgage Loan, index for
the adjustment of the Mortgage Rate set forth as such on the related Mortgage
Note.

            Initial Note Principal Balance: With respect to the Notes,
$______________.

            Initial Subservicer: _____________, a __________ corporation.

            Insolvency Event: With respect to a specified Person, (a) the filing
of a decree or order for relief by a court having jurisdiction in the premises
in respect of such Person or any substantial part of its property in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
such Person's affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or (b) the commencement by such
Person of a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by such Person to the
entry of an order for relief in an involuntary case under any such law, or the
consent by such Person to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or the making by such
Person of any general assignment for the benefit of creditors, or the failure by
such Person generally to pay its debts as such debts become due or the admission
by such Person in writing (as to which the Indenture Trustee shall have notice)
of its inability to pay its debts generally, or the adoption by the Board of
Directors or managing member of such Person of a resolution which authorizes
action by such Person in furtherance of any of the foregoing.

            Insurance Agreement: The insurance and reimbursement agreement dated
as of _____ 1, _____, among the Master Servicer, the Seller, the Depositor, the
Issuer, Indenture Trustee and the Note Insurer, including any amendments and
supplements thereto.

            Insurance Proceeds: Proceeds paid by any insurer (other than the
Note Insurer) pursuant to any insurance policy covering a Mortgage Loan which
are required to be remitted to the Master Servicer, or amounts required to be
paid by the Master Servicer pursuant to the Servicing Agreement, net of any
component thereof (i) covering any expenses incurred by or on behalf of the
Master Servicer in connection with obtaining such proceeds, (ii) that is applied
to the restoration or repair of the related Mortgaged Property, (iii) released
to the Mortgagor in accordance with the Master Servicer's normal servicing
procedures or (iv) required to be paid to any holder of a mortgage senior to
such Mortgage Loan.

            Insured Payment: Shall have the meaning set forth in the Note
Insurance Policy.

            Interest Determination Date: With respect to any Interest Period,
the second London Business Day preceding the commencement of such Interest
Period.

            Interest Payment Amount: With respect to any Payment Date, an amount
equal to interest accrued during the related Interest Period on the Note
Principal Balance thereof at the then-applicable Note Interest Rate, minus any
Prepayment Interest Shortfalls and Relief Act Shortfalls to the extent not
covered by the Master Servicer by Compensating Interest for such Payment Date.

                                       11
<PAGE>

            Interest Period: With respect to any Payment Date other than the
first Payment Date, the period beginning on the preceding Payment Date and
ending on the day preceding such Payment Date, and in the case of the first
Payment Date, the period beginning on the Closing Date and ending on the day
preceding the first Payment Date.

            Interest Rate Adjustment Date: With respect to each Mortgage Loan,
the date or dates on which the Mortgage Rate is adjusted in accordance with the
related Mortgage Note.

            Issuer: Park Place Trust Series ____-__, a Delaware business trust,
or its successor in interest.

            Issuer Request: A written order or request signed in the name of the
Issuer by any one of its Authorized Officers and approved in writing by the Note
Insurer, so long as no Note Insurer Default exists and delivered to the
Indenture Trustee.

            LIBOR Business Day: Any day other than (i) a Saturday or a Sunday or
(ii) a day on which banking institutions in the State of New York, Delaware or
California, or in the city of London, England are required or authorized by law
to be closed.

            Lien: Any mortgage, deed of trust, pledge, conveyance,
hypothecation, assignment, participation, deposit arrangement, encumbrance, lien
(statutory or other), preference, priority right or interest or other security
agreement or preferential arrangement of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing and the filing of any financing statement under the UCC
(other than any such financing statement filed for informational purposes only)
or comparable law of any jurisdiction to evidence any of the foregoing;
provided, however, that any assignment pursuant to Section 6.02 of the Servicing
Agreement shall not be deemed to constitute a Lien.

            Lifetime Rate Cap: With respect to each Mortgage Loan with respect
to which the related Mortgage Note provides for a lifetime rate cap, the maximum
Mortgage Rate permitted over the life of such Mortgage Loan under the terms of
such Mortgage Note, as set forth on the Mortgage Loan Schedule and initially as
set forth on Exhibit A to the Servicing Agreement.

            Liquidated Mortgage Loan: With respect to any Payment Date, any
Mortgage Loan in respect of which the Master Servicer has determined, in
accordance with the servicing procedures specified in the Servicing Agreement,
as of the end of the related Prepayment Period that substantially all
Liquidation Proceeds which it reasonably expects to recover with respect to the
disposition of the related REO Property have been recovered.

            Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead)
which are incurred by or on behalf of the Master Servicer in connection with the
liquidation of any Mortgage Loan and not recovered under any insurance policy,
such expenses including, without limitation, legal fees and expenses, any
unreimbursed amount expended (including, without limitation, amounts advanced to
correct defaults on any mortgage loan which is senior to such Mortgage Loan and
amounts advanced to keep current or pay off a mortgage loan that is senior to
such Mortgage Loan) respecting the related Mortgage Loan and any related and
unreimbursed

                                       12
<PAGE>

expenditures for real estate property taxes or for property restoration,
preservation or insurance against casualty loss or damage.

            Liquidation Proceeds: Proceeds (including Insurance Proceeds but not
including amounts drawn under the Note Insurance Policy) received in connection
with the liquidation of any Mortgage Loan or related REO Property, whether
through trustee's sale, foreclosure sale or otherwise.

            Loan Year: With respect to any Mortgage Loan, the one year period
commencing on the day succeeding the origination of such Mortgage Loan and
ending on the anniversary date of such Mortgage Loan, and each annual period
thereafter.

            London Business Day: Any day on which banks in the City of London,
England are open and conducting transactions in United States dollars.

            Lost Note Affidavit: With respect to any Mortgage Loan as to which
the original Mortgage Note has been permanently lost or destroyed and has not
been replaced, an affidavit from the Seller certifying that the original
Mortgage Note has been lost, misplaced or destroyed (together with a copy of the
related Mortgage Note).

            Master Servicer: _______________________, a __________ corporation,
and its successors and assigns.

            Master Servicing Fee: With respect to each Mortgage Loan and any
Payment Date the product of (i) the Master Servicing Fee Rate divided by 12 and
(ii) the Principal Balance of such Mortgage Loans as of such date.

            Master Servicing Fee Rate: With respect to each Mortgage Loan, ____%
per annum.

            Maximum Note Interest Rate: With respect to any Payment Date, the
per annum rate equal to the fraction, expressed as a percentage, the numerator
of which is (i) an amount equal to (A) 1/12 of the aggregate Principal Balance
of the then outstanding Mortgage Loans times the weighted average of the Expense
Adjusted Maximum Mortgage Rates on the then outstanding Mortgage Loans minus (B)
the Administrative Fee for such Payment Date, and the denominator of which is
(ii) an amount equal to (A) the aggregate Note Principal Balance of the Notes
multiplied by (B) the actual number of days elapsed in the related Interest
Period divided by 360.

            Maximum Mortgage Rate: With respect to each Adjustable Rate Mortgage
Loan, the maximum Mortgage Rate.

            Minimum Mortgage Rate: With respect to each Adjustable Rate Mortgage
Loan, the minimum Mortgage Rate.

            Minimum Spread: ____% per annum.

                                       13
<PAGE>

            Monthly Payment: With respect to any Mortgage Loan (including any
REO Property) and any Due Date, the payment of principal and interest due
thereon in accordance with the amortization schedule at the time applicable
thereto (after adjustment, if any, for partial Prepayments and for Deficient
Valuations occurring prior to such Due Date but before any adjustment to such
amortization schedule by reason of any bankruptcy, other than a Deficient
Valuation, or similar proceeding or any moratorium or similar waiver or grace
period).

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

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

            Mortgage File: The file containing the Related Documents pertaining
to a particular Mortgage Loan and any additional documents required to be added
to the Mortgage File pursuant to the Mortgage Loan Purchase Agreement or the
Servicing Agreement.

            Mortgage Loan Purchase Agreement: The Mortgage Loan Purchase
Agreement, dated as of the Cut-Off Date, between the Seller, as seller, and the
Purchaser, as purchaser, with respect to the Mortgage Loans, dated as of ______
1, _____.

            Mortgage Loan Schedule: With respect to any date, the schedule of
Mortgage Loans held by the Issuer on such date. The initial schedule of Mortgage
Loans as of the Cut-Off Date is the schedule set forth in Exhibit A of the
Servicing Agreement, which schedule sets forth as to each Mortgage Loan

            (i)     the loan number and name of the Mortgagor;

            (ii)    the street address, city, state and zip code of the
                    Mortgaged Property;

            (iii)   the Mortgage Rate;

            (iv)    the Maximum Rate;

            (v)     the maturity date;

            (vi)    the original principal balance;

            (vii)   the first payment date;

            (viii)  the type of Mortgaged Property;

            (ix)    the Monthly Payment in effect as of the Cut-Off Date;

            (x)     the Cut-off Date Principal Balance;

            (xi)    the occupancy status;

            (xii)   the purpose of the Mortgage Loan;

                                       14
<PAGE>

            (xiii)  the Appraised Value of the Mortgaged Property;

            (xiv)   the original term to maturity;

            (xv)    the paid-through date of the Mortgage Loan;

            (xvi)   the Loan-to-Value Ratio; and

            (xvii)  whether or not the Mortgage Loan was underwritten pursuant
                    to a limited documentation program.

            The Mortgage Loan Schedule shall also set forth the total of the
amounts described under (ix) above for all of the Mortgage Loans.

            Mortgage Loans: At any time, collectively, all Mortgage Loans that
have been sold to the Depositor under the Mortgage Loan Purchase Agreement or
substituted for pursuant to Section 2.1 and 3.1 of the Mortgage Loan Purchase
Agreement and transferred and conveyed to the Issuer, in each case together with
the Related Documents, and that remain subject to the terms thereof.

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

            Mortgage Rate: With respect to any Mortgage Loan, the annual rate at
which interest accrues on such Mortgage Loan.

            Mortgaged Property: The underlying property, including real property
and improvements thereon, securing a Mortgage Loan.

            Mortgagor: The obligor or obligors under a Mortgage Note.

            Net Liquidation Proceeds: With respect to any Liquidated Mortgage
Loan, Liquidation Proceeds net of Liquidation Expenses.

            Net Monthly Excess Cashflow: For any Payment Date, the amount of
Available Funds and any Insured Payment remaining after distributions pursuant
to clauses (i) through (iii) of Section 3.05 of the Indenture (minus any Insured
Payment and any Subordination Reduction Amount).

            Net Mortgage Rate: With respect to any Mortgage Loan and any day,
the related Mortgage Rate less the sum of the related Servicing Fee Rate, the
Administrative Fee Rate and the Indenture Trustee Fee Rate.

            Nonrecoverable Advance: Any advance (i) which was previously made or
is proposed to be made by the Master Servicer; and (ii) which, in the good faith
judgment of the Master Servicer, will not or, in the case of a proposed advance,
would not, be ultimately recoverable by the Master Servicer from Liquidation
Proceeds, Insurance Proceeds or future payments on any Mortgage Loan.

                                       15
<PAGE>

            Note Insurance Policy: The bond guaranty insurance policy number
____, issued by the Note Insurer to the Indenture Trustee for the benefit of the
Noteholders.

            Note Insurer: _______________, a ________- insurance company, any
successor thereto or any replacement bond insurer substituted pursuant to
Section 3.29 of the Indenture.

            Note Insurer Default: The existence and continuance of any of the
following: (a) a failure by the Note Insurer to make a payment required under
the Note Insurance Policy in accordance with its terms; or (b)(i) the Note
Insurer (A) files any petition or commences any case or proceeding under any
provision or chapter of the Bankruptcy Code or any other similar federal or
state law relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization, (B) makes a general assignment for the benefit of its creditors,
or (C) has an order for relief entered against it under the Bankruptcy Code or
any other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization which is final and nonappealable;
or (ii) a court of competent jurisdiction, the New York Department of Insurance
or other competent regulatory authority enters a final and nonappealable order,
judgment or decree (A) appointing a custodian, trustee, agent or receiver for
the Note Insurer or for all or any material portion of its property or (B)
authorizing the taking of possession by a custodian, trustee, agent or receiver
of the Note Insurer (or the taking of possession of all or any material portion
of the property of the Note Insurer).

            Note Interest Rate: With respect to each Payment Date after the
first Payment Date, a floating rate equal to the lesser of (i) with respect to
each Payment Date up to and including the Payment Date in _________ _____,
One-Month LIBOR plus ____%, and with respect to each Payment Date thereafter,
One-Month LIBOR plus ____% and (ii) the Available Funds Interest Rate with
respect to such Payment Date. The Note Interest Rate for the first Payment Date
will equal ____% per annum.

            Note Owner: The Beneficial Owner of a Note.

            Note Percentage: With respect to any Payment Date and any Note, the
ratio expressed as a percentage of the Note Principal Balance of such Note to
the aggregate Note Principal Balance of all Notes immediately prior to such
Payment Date.

            Note Principal Balance: With respect to any Note, the initial Note
Principal Balance thereof minus all amounts distributed in respect of principal
with respect to such Note.

            Note Register: The register maintained by the Note Registrar in
which the Note Registrar shall provide for the registration of Notes and of
transfers and exchanges of Notes.

            Note Registrar: The Indenture Trustee, in its capacity as Note
Registrar.

            Noteholder: The Person in whose name a Note is registered in the
Note Register, except that, any Note registered in the name of the Depositor,
the Issuer or the Indenture Trustee or any Affiliate of any of them shall be
deemed not to be outstanding and the registered holder will not be considered a
Noteholder or holder for purposes of giving any request, demand, authorization,
direction, notice, consent or waiver under the Indenture or the Trust Agreement
provided that, in determining whether the Indenture Trustee shall be protected
in relying upon

                                       16
<PAGE>

any such request, demand, authorization, direction, notice, consent or waiver,
only Notes that the Indenture Trustee or the Owner Trustee knows to be so owned
shall be so disregarded. Owners of Notes that have been pledged in good faith
may be regarded as Holders if the pledgee establishes to the satisfaction of the
Indenture Trustee or the Owner Trustee the pledgee's right so to act with
respect to such Notes and that the pledgee is not the Issuer, any other obligor
upon the Notes or any Affiliate of any of the foregoing Persons. Any bonds on
which payments are made under the Note Insurance Policy shall be deemed
Outstanding until the Note Insurer has been reimbursed with respect thereto and
the Note Insurer shall be deemed the Noteholder thereof to the extent of such
unreimbursed payment.

            Notes: The Notes designated as the "Notes" in the Indenture.

            Officer's Certificate: With respect to the Master Servicer, a
certificate signed by the President, Managing Director, a Director, a Vice
President or an Assistant Vice President, of the Master Servicer and delivered
to the Indenture Trustee. With respect to the Issuer, a certificate signed by
any Authorized Officer of the Issuer, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 10.01 of the
Indenture, and delivered to the Indenture Trustee. Unless otherwise specified,
any reference in the Indenture to an Officer's Certificate shall be to an
Officer's Certificate of any Authorized Officer of the Issuer.

            One-Month Libor: With respect to any Interest Period, the rate
determined by the Indenture Trustee on the related Interest Determination Date
on the basis of the offered rates of the Reference Banks for one-month United
States dollar deposits, as such rates appear on the Reuters Screen LIBO Page, as
of 11:00 a.m. (London time) on such Interest Determination Date. On each
Interest Determination Date, One-Month LIBOR for the related Interest Period
will be established by the Indenture Trustee as follows:

            (i) If on such Interest Determination Date two or more Reference
      Banks provide such offered quotations, One-Month LIBOR for the related
      Interest Period shall be the arithmetic mean of such offered quotations
      (rounded upwards if necessary to the nearest whole multiple of 1/16%).

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

            Opinion of Counsel: A written opinion of counsel acceptable to Note
Insurer who may be in-house counsel for the Master Servicer if acceptable to the
Indenture Trustee, the Note Insurer and the Rating Agencies or counsel for the
Depositor, as the case may be.

            Original Specified Subordination Amount: An amount equal to ____% of
the aggregate Principal Balance of the Mortgage Loans as of the Cut-Off Date.

            Original Value: Except in the case of a refinance Mortgage Loan, the
lesser of the Appraised Value or sales price of Mortgaged Property at the time a
Mortgage Loan is closed, and

                                       17
<PAGE>

for a refinance Mortgage Loan, the Original Value is the value of such property
set forth in an appraisal acceptable to the Master Servicer.

            Outstanding: With respect to the Notes, as of the date of
determination, all Notes theretofore executed, authenticated and delivered under
this Indenture except:

            (i) Notes theretofore canceled by the Note Registrar or delivered to
      the Indenture Trustee for cancellation; and

            (ii) Notes in exchange for or in lieu of which other Notes have been
      executed, authenticated and delivered pursuant to the Indenture unless
      proof satisfactory to the Indenture Trustee is presented that any such
      Notes are held by a holder in due course;

all Notes that have been paid with funds provided under the Note Insurance
Policy shall be deemed to be Outstanding until the Note Insurer has been
reimbursed with respect thereto.

            Owner Trust: The Park Place Trust Series ____-__ to be created
pursuant to the Trust Agreement.

            Owner Trust Estate: The corpus of the Issuer created by the Trust
Agreement which consists of items in Section 2.01 of the Trust Agreement.

            Owner Trustee: ________________________ and its successors and
assigns or any successor owner trustee appointed pursuant to the terms of the
Trust Agreement.

            Owner Trustee Fee:

            Owner Trustee Fee Rate: ______% per annum.

            Paying Agent: Any paying agent or co-paying agent appointed pursuant
to Section 3.03 of the Indenture, which initially shall be the Indenture
Trustee.

            Payment Account: The account established by the Indenture Trustee
pursuant to Section 8.02 of the Indenture and Section 4.03 of the Servicing
Agreement. The Payment Account shall be an Eligible Account.

            Payment Date: The [25th] day of each month, or if such day is not a
Business Day, then the next Business Day.

            Percentage Interest: With respect to any Note, the percentage
obtained by dividing the Note Principal Balance of such Note by the aggregate of
the Note Principal Balances of all Notes. With respect to any Certificate, the
percentage on the face thereof.

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

                                       18
<PAGE>

            Pool Balance: With respect to any date, the aggregate of the
Principal Balances of all Mortgage Loans as of such date.

            Preference Amount: Any amount previously distributed to an Owner on
the Notes that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.

            Premium Amount: The amount of premium due to the Note Insurer in
accordance with the terms of the Insurance Agreement.

            Prepayment Interest Shortfall: As to any Payment Date and any
Mortgage Loan (other than a Mortgage Loan relating to an REO Property) that was
the subject of (a) a Principal Prepayment in full during the related Prepayment
Period, an amount equal to the excess of interest accrued during the related
Prepayment Period at the Net Mortgage Rate on the Principal Balance of such
Mortgage Loan over the amount of interest (adjusted to the Net Mortgage Rate)
paid by the Mortgagor for such Prepayment Period to the date of such Principal
Prepayment in full or (b) a partial Prepayment during the prior calendar month,
an amount equal to interest accrued during the related Prepayment Period at the
Net Mortgage Rate on the amount of such partial Prepayment.

            Prepayment Period: As to any Payment Date, the calendar month
preceding the month of distribution.

            Primary Insurance Policy: Each primary policy of mortgage guaranty
insurance issued by a Qualified Insurer or any replacement policy therefor.

            Principal Balance: With respect to any Mortgage Loan or related REO
Property, at any given time, (i) the Cut-off Date Principal Balance of the
Mortgage Loan, minus (ii) the sum of (a) the principal portion of the Monthly
Payments due with respect to such Mortgage Loan or REO Property during each Due
Period ending prior to the most recent Payment Date which were received or with
respect to which an Advance was made, and (b) all Principal Prepayments with
respect to such Mortgage Loan or REO Property, and all Insurance Proceeds,
Liquidation Proceeds and REO Proceeds, to the extent applied by the Master
Servicer as recoveries of principal in accordance with the Servicing Agreement
with respect to such Mortgage Loan or REO Property, and (c) any Realized Loss
with respect thereto for any previous Payment Date.

            Principal Payment Amount: With respect to any Payment Date (a) other
than the Final Scheduled Payment Date, and the first Payment Date following any
acceleration of the Notes following an Event of Default, the lesser of (a) the
sum of the Available Funds remaining after distributions pursuant to clause (i)
of Section 3.05 of the Indenture and any portion of any Insured Payment for such
Payment Date representing a Subordination Deficit and (b) the sum of:

      (1) the principal portion of all Monthly Payments received during the
related Due Period or advanced on each Mortgage Loan;

                                       19
<PAGE>

      (2) the Principal Balance of any Mortgage Loan repurchased during the
related Prepayment Period (or deemed to have been so repurchased) pursuant to
the Mortgage Loan Purchase Agreement or Section 3.18 of the Servicing Agreement
and the amount of any Substitution Adjustment Amounts during the related
Prepayment Period;

      (3) the principal portion of all other unscheduled collections (including,
without limitation, Principal Prepayments in full, partial Prepayments,
Insurance Proceeds, Liquidation Proceeds and REO Proceeds) received during the
related Prepayment Period to the extent applied by the Master Servicer as
payments or recoveries of principal of the related Mortgage Loan;

      (4) any Insured Payment made with respect to any Subordination Deficit;
and

      minus

      (5) the amount of any Subordination Reduction Amount for such Payment
Date;

      and (b) with respect to the Final Scheduled Payment Date, and the first
Payment Date following any acceleration of the Notes following an Event of
Default, the amount necessary to reduce the Note Principal Balance to zero.

            Principal Prepayment: Any payment of principal made by the Mortgagor
on a Mortgage Loan which is received in advance of its scheduled Due Date and
which is not accompanied by an amount of interest representing scheduled
interest due on any date or dates in any month or months subsequent to the month
of prepayment.

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

            Purchase Price: The meaning specified in Section 2.2(a) of the
Mortgage Loan Purchase Agreement.

            Purchaser: _______________________, a ________ corporation, and its
successors and assigns.

            Qualified Insurer: A mortgage guaranty insurance company duly
qualified as such under the laws of the state of its principal place of business
and each state having jurisdiction over such insurer in connection with the
insurance policy issued by such insurer, duly authorized and licensed in such
states to transact a mortgage guaranty insurance business in such states and to
write the insurance provided by the insurance policy issued by it, approved as
an insurer by the Master Servicer and as a FNMA-approved mortgage insurer.

            Rating Agency: Any nationally recognized statistical rating
organization, or its successor, that rated the Notes at the request of the
Depositor at the time of the initial issuance of the Notes. Initially, Moody's
or Standard & Poor's. If such organization or a successor is no longer in
existence, "Rating Agency" shall be such nationally recognized statistical
rating organization, or other comparable Person, designated by the Note Insurer
so long as no Note Insurer Default exists, notice of which designation shall be
given to the Indenture Trustee. References herein to the highest short term
unsecured rating category of a Rating Agency shall

                                       20
<PAGE>

mean A-1 or better in the case of Standard & Poor's and P-1 or better in the
case of Moody's and in the case of any other Rating Agency shall mean such
equivalent ratings. References herein to the highest long-term rating category
of a Rating Agency shall mean "AAA" in the case of Standard & Poor's and "Aaa"
in the case of Moody's and in the case of any other Rating Agency, such
equivalent rating.

            Realized Loss: With respect to each Mortgage Loan (or REO Property)
as to which a Cash Liquidation or REO Disposition has occurred, an amount (not
less than zero) equal to (i) the Principal Balance of the Mortgage Loan (or REO
Property) as of the date of Cash Liquidation or REO Disposition, plus (ii)
interest (and REO Imputed Interest, if any) at the Net Mortgage Rate from the
Due Date as to which interest was last paid or advanced to Noteholders up to the
last day of the month in which the Cash Liquidation (or REO Disposition)
occurred on the Principal Balance of such Mortgage Loan (or REO Property)
outstanding during each Due Period that such interest was not paid or advanced,
minus (iii) the proceeds, if any, received during the month in which such Cash
Liquidation (or REO Disposition) occurred, to the extent applied as recoveries
of interest at the Net Mortgage Rate and to principal of the Mortgage Loan, net
of the portion thereof reimbursable to the Master Servicer or any Subservicer
with respect to related Advances or expenses as to which the Master Servicer or
Subservicer is entitled to reimbursement thereunder but which have not been
previously reimbursed. With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation. With respect to each Mortgage Loan which has become the object of a
Debt Service Reduction, the amount of such Debt Service Reduction.

            Record Date: With respect to the Notes and any Payment Date, the
last day of the calendar month preceding such Payment Date.

            Reference Banks: Bankers Trust Company, Barclay's Bank PLC, The Bank
of Tokyo and National Westminster Bank PLC and their successors in interest;
provided that if any of the foregoing banks are not suitable to serve as a
Reference Bank, then any leading banks selected by the Indenture Trustee which
are engaged in transactions in Eurodollar deposits in the international
Eurocurrency market (i) with an established place of business in London, (ii)
not controlling, under the control of or under common control with the Company
or any Affiliate thereof, (iii) whose quotations appear on the Reuters Screen
LIBO Page on the relevant Interest Determination Date and (iv) which have been
designated as such by the Indenture Trustee.

            Registered Holder: The Person in whose name a Note is registered in
the Note Register on the applicable Record Date.

            Related Documents: With respect to each Mortgage Loan, the documents
specified in Section 2.1(b) of the Mortgage Loan Purchase Agreement and any
documents required to be added to such documents pursuant to the Mortgage Loan
Purchase Agreement, the Trust Agreement, Indenture or the Servicing Agreement.

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

                                       21
<PAGE>

            Relief Act Shortfall: For any Payment Date, As to any Payment Date
and any Mortgage Loan (other than a Mortgage Loan relating to an REO Property)
any shortfalls relating to the Relief Act or similar legislation or regulations.

            REO Acquisition: The acquisition by the Master Servicer on behalf of
the Indenture Trustee for the benefit of the Noteholders of any REO Property
pursuant to Section 3.13 of the Servicing Agreement.

            REO Disposition: As to any REO Property, a determination by the
Master Servicer that it has received substantially all Insurance Proceeds,
Liquidation Proceeds, REO Proceeds and other payments and recoveries (including
proceeds of a final sale) which the Master Servicer expects to be finally
recoverable from the sale or other disposition of the REO Property.

            REO Imputed Interest: As to any REO Property, for any period, an
amount equivalent to interest (at the Net Mortgage Rate that would have been
applicable to the related Mortgage Loan had it been outstanding) on the unpaid
principal balance of the Mortgage Loan as of the date of acquisition thereof for
such period.

            REO Proceeds: Proceeds, net of expenses, received in respect of any
REO Property (including, without limitation, proceeds from the rental of the
related Mortgaged Property) which proceeds are required to be deposited into the
Collection Account only upon the related REO Disposition.

            REO Property: A Mortgaged Property that is acquired by the Issuer in
foreclosure or by deed in lieu of foreclosure.

            Repurchase Event: With respect to any Mortgage Loan, either (i) a
discovery that, as of the Closing Date the related Mortgage was not a valid lien
on the related Mortgaged Property subject only to (A) the lien of any prior
mortgage indicated on the Mortgage Loan Schedule, (B) the lien of real property
taxes and assessments not yet due and payable, (C) covenants, conditions, and
restrictions, rights of way, easements and other matters of public record as of
the date of recording of such Mortgage and such other permissible title
exceptions as are permitted and (D) other matters to which like properties are
commonly subject which do not materially adversely affect the value, use,
enjoyment or marketability of the related Mortgaged Property or (ii) with
respect to any Mortgage Loan as to which the Seller delivers an affidavit
certifying that the original Mortgage Note has been lost or destroyed, a
subsequent default on such Mortgage Loan if the enforcement thereof or of the
related Mortgage is materially and adversely affected by the absence of such
original Mortgage Note.

            Repurchase Price: With respect to any Mortgage Loan required to be
repurchased on any date pursuant to the Mortgage Loan Purchase Agreement or
purchased by the Master Servicer pursuant to the Servicing Agreement, an amount
equal to the sum, without duplication, of (i) 100% of the Principal Balance
thereof (without reduction for any amounts charged off) and (ii) unpaid accrued
interest at the Mortgage Rate on the outstanding principal balance thereof from
the Due Date to which interest was last paid by the Mortgagor to the first day
of the month following the month of purchase plus (iii) the amount of Advances
and any unreimbursed

                                       22
<PAGE>

Servicing Advances or unreimbursed Advances made with respect to such Mortgage
Loan plus (iv) any other amounts owed to the Master Servicer or the Subservicer
pursuant to Section 3.07 of the Servicing Agreement not included in clause (iii)
of this definition.

            Required Subordination Amount: [With respect to any Payment Date
occurring from the initial Payment Date and ending on the later of (i) the date
on which the aggregate Principal Balance of the Mortgage Loans is 50% of the
initial aggregate Principal Balance of the Mortgage Loans and (ii) the 30th
Payment Date, the greater of:

      (a) the Original Specified Subordination Amount; and

      (b) two times the excess of (1) 50% of the aggregate Principal Balance of
the Mortgage Loans which are 91 or more days delinquent (including Mortgage
Loans in foreclosure and REO Properties) as of such date over (2) two times the
current Net Monthly Excess Cash Flow for such Payment Date; and

      with respect to any Payment Date thereafter, the greatest of:

      (a) the lesser of (1) the Original Specified Subordination Amount and (2)
two times ____% times the aggregate Note Principal Balance as of such Payment
Date;

      (b) two times the excess of (A) 50% of the aggregate Principal Balance of
the Mortgage Loans which are 91 or more days delinquent (including Mortgage
Loans in foreclosure and REO Properties) as of such date over (B) two times the
current Net Monthly Excess Cash Flow for such Payment Date;

      (c) 0.5% of the Cut-Off Date Principal Balance of the Mortgage Loans; and

      (d) an amount equal to the outstanding balance of the four largest
Mortgage Loans as of the Cut-Off Date;]

      provided, however, that if (x) a Servicer Default has occurred and is
continuing as of such Payment Date, and such Servicer Default has not been
waived by the Note Insurer or (y) a claim has been made on the Note Insurance
Policy by the Indenture Trustee, the Required Subordination Amount shall not
decrease on any Payment Date.

            Reserve Interest Rate: With respect to any Interest Determination
Date, the rate per annum that the Indenture Trustee determines to be either (i)
the arithmetic mean (rounded upwards if necessary to the nearest whole multiple
of 1/16%) of the three-month United States dollar lending rates which New York
City banks selected by the Indenture Trustee are quoting on the relevant
Interest Determination Date to the principal London offices of leading banks in
the London interbank market or (ii) in the event that the Indenture Trustee can
determine no such arithmetic mean, the lowest three-month United States dollar
lending rate which New York City banks selected by the Indenture Trustee are
quoting on such Interest Determination Date to leading European banks.

            Responsible Officer: With respect to the Indenture Trustee, any
officer of the Indenture Trustee with direct responsibility for the
administration of the Trust Agreement and

                                       23
<PAGE>

also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.

            Securities Act: The Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

            Security: Any of the Certificates or Notes.

            Securityholder or Holder: Any Noteholder or a Certificateholder.

            Security Instrument: A written instrument creating a valid first
lien on a Mortgaged Property securing a Mortgage Note, which may be any
applicable form of mortgage, deed of trust, deed to secure debt or security
deed, including any riders or addenda thereto.

            Seller: _______________________, a __________ corporation, and its
successors and assigns.

            Servicing Account: The separate trust account created and maintained
by the Master Servicer or each Subservicer with respect to the Mortgage Loans or
REO Property, which shall be an Eligible Account, for collection of taxes,
assessments, insurance premiums and comparable items as described in Section
3.08 of the Servicing Agreement.

            Servicing Advances: All customary, reasonable and necessary "out of
pocket" costs and expenses incurred in connection with a default, delinquency or
other unanticipated event in the performance by the Master Servicer of its
servicing obligations, including, without duplication, but not limited to, the
cost of (i) the preservation, restoration and protection of a Mortgaged
Property, (ii) any enforcement or judicial proceedings, including foreclosures,
(iii) the management and liquidation of any REO Property and (iv) compliance
with the obligations under Sections 3.10, 3.11, 3.13 of the Servicing Agreement.

            Servicing Agreement: The Servicing Agreement dated as of ______ 1,
____, between the Master Servicer and the Issuer.

            Servicing Certificate: A certificate completed and executed by a
Servicing Officer on behalf of the Master Servicer in accordance with Section
4.01 of the Servicing Agreement.

            Servicing Default: The meaning assigned in Section 6.01 of the
Servicing Agreement.

            Servicing Fee: With respect to any Mortgage Loan, the sum of the
related Master Servicing Fee and the related Subservicing Fee.

            Servicing Fee Rate: With respect to any Mortgage Loan, the sum of
the related Master Servicing Fee Rate and the Subservicing Fee Rate.

            Servicing Officer: Any officer of the Master Servicer involved in,
or responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature

                                       24
<PAGE>

appear on a list of servicing officers furnished to the Indenture Trustee (with
a copy to the Note Insurer) by the Master Servicer, as such list may be amended
from time to time.

            Single Note: A Note in the amount of $_________.

            Standard & Poor's: Standard & Poor's Ratings Service, or its
successor in interest.

            Subordination Amount: As of any Payment Date, the excess, if any, of
(x) the sum of the aggregate Principal Balances of the Mortgage Loans as of the
close of business on the last day of the related Due Period as of such Payment
Date over (y) the Note Principal Balance of the Notes as of such Payment Date
(and following the making of all distributions on such Payment Date)

            Subordination Deficit: With respect to any Payment Date, the amount,
if any, by which (x) the aggregate Note Principal Balance of the Notes as of
such Payment Date, and following the making of all distributions to be made on
such Payment Date (except for any payment to be made as to principal from
proceeds of the Note Insurance Policy), exceeds (y) the aggregate Principal
Balances of the Mortgage Loans as of the close of business on the preceding Due
Date on such Payment Date.

            Subordination Increase Amount: With respect to any Payment Date, the
amount of any Net Monthly Excess Cashflow (including any Subordination Reduction
Amount) available in the Payment Account to increase the Subordination Amount up
to the Required Subordination Amount.

            Subordination Reduction Amount: With respect to any Payment Date, an
amount equal to the lesser of (a) the Excess Subordination Amount and (b) the
principal collections received by the Master Servicer with respect to the prior
Due Period.

            Subservicer: Any Person with whom the Master Servicer has entered
into a Subservicing Agreement as a Subservicer by the Master Servicer and
acceptable to the Note Insurer and the Indenture Trustee, including the Initial
Subservicers.

            Subservicing Account: An Eligible Account established or maintained
by a Sub servicer as provided for in Section 3.06(e) of the Servicing Agreement.

            Subservicing Agreement: The written contract between the Master
Servicer and any Subservicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02 of the Servicing Agreement.

            Subservicing Fee: With respect to each Mortgage Loan and any date of
determination, the product of (i) the Subservicing Fee Rate divided by 12 and
(ii) the Principal Balance of such Mortgage Loans as of such date.

            Subservicing Fee Rate: For any date of determination, ____% per
annum.

                                       25
<PAGE>

            Substitution Adjustment Amount: With respect to any Eligible
Substitute Mortgage Loan, the amount as defined in Section 2.03 of the Servicing
Agreement.

            Telerate Screen Page 3750: The display designated as page 3750 on
the Telerate Service (or such other page as may replace page 3750 on that
service for the purpose of displaying London interbank offered rates of major
banks). If such rate does not appear on such page (or such other page as may
replace that page on that service, or if such service is no longer offered, such
other service for displaying One-Month LIBOR or comparable rates as may be
selected by the Issuer after consultation with the Indenture Trustee), the rate
will be the Reference Bank Rate.

            Treasury Regulations: Regulations, including proposed or temporary
Regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.

            Trust Agreement: The Trust Agreement dated as of ______ 1, _____
between the Owner Trustee and the Depositor.

            Trust Estate: The meaning specified in the Granting Clause of the
Indenture.

            Trust Indenture Act or TIA: The Trust Indenture Act of 1939, as
amended from time to time, as in effect on any relevant date.

            UCC: The Uniform Commercial Code, as amended from time to time, as
in effect in any specified jurisdiction.

            Weighted Average Net Mortgage Rate: With respect to the Mortgage
Loans in the aggregate, and any Due Date, the average of the Net Mortgage Rate
for each Mortgage Loan as of the last day of the related Due Period weighted on
the basis of the related Principal Balances out standing as of the last day of
the related Due Period for each Mortgage Loan as determined by the Master
Servicer in accordance with the Master Servicer's normal servicing procedures.

                                       26Exhibit 4.1 to Insignia Systems, Inc. Form 8-K (05-20-04)

EXHIBIT 4.1  

PURCHASE AGREEMENT  

        THIS
PURCHASE AGREEMENT (“Agreement”) is made as of the 20th day of May, 2004 by and
among Insignia Systems, Inc., a Minnesota corporation (the “Company”), and the
Investors set forth on the signature pages affixed hereto (each an “Investor”
and collectively the “Investors”). 

Recitals 

        A.       
The Company and the Investors are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D (“Regulation D”), as promulgated by the
U.S. Securities and Exchange Commission (the “SEC”) under the
Securities Act of 1933, as amended; and 

        B.       
On the First Closing Date (as defined below), the Investors wish to purchase
from the Company, and the Company wishes to sell and issue to the Investors,
upon the terms and conditions stated in this Agreement, an aggregate of
2,000,000 shares (the “Initial Shares”) of the Company’s Common
Stock, par value $0.01 per share (together with any securities into which such
shares may be reclassified the “Common Stock”); and 

        C.       
On the First Closing Date, the parties hereto will execute and deliver a
Registration Rights Agreement, in the form attached hereto as Exhibit A (the
“Registration Rights Agreement”), pursuant to which the Company will
agree to provide certain registration rights under the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder, and applicable
state securities laws; and 

        D.       
The Company shall have the right, subject to certain circumstances, to cause the
Investors to purchase from the Company, upon the terms and conditions stated in
this Agreement, an additional 1,785,800 shares of Common Stock (appropriately
adjusted for any stock split, reverse stock split, stock dividend or other
reclassification or combination of the Common Stock occurring after the date
hereof) (the “Option Shares”). 

        In
consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows: 

        1.   Definitions. In
addition to those terms defined above and elsewhere in this Agreement, for the
purposes of this Agreement, the following terms shall have the meanings set
forth below: 

                “Affiliate”
means, with respect to any Person, any other Person which directly or indirectly through
one or more intermediaries Controls, is controlled by, or is under common control with,
such Person. 

4 

                “Business
Day” means a day, other than a Saturday or Sunday, on which banks in
New York City are open for the general transaction of business. 

                “Closing
Date” shall mean either the First Closing Date or the Option Closing
Date, as applicable. 

                “Common
Stock Equivalents” means any securities of the Company or any other
Person which would entitle the holder thereof to acquire at any time Common
Stock, including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock. 

                “Company’s
Knowledge” means the actual knowledge of the executive officers
(as defined in Rule 405 under the 1933 Act) of the Company, after due
inquiry.

                “Confidential
Information” means trade secrets, confidential information and know-how
(including but not limited to ideas, formulae, compositions, processes,
procedures and techniques, research and development information, computer
program code, performance specifications, support documentation, drawings,
specifications, designs, business and marketing plans, and customer and supplier
lists and related information). 

                “Control”
(including the terms “controlling”, “controlled by” or
“under common control with”) means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise. 

                “Effective
Date” means the date on which the initial Registration Statement (as
defined in the Registration Rights Agreement) is declared effective by the SEC.

                “First
Closing Date” has the meaning set forth in Section 2.2. 

                “Initial
Purchase Price” means Two Million Five Hundred Thousand Dollars ($2,500,000). 

                “Intellectual
Property” means all of the following: (i) patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not reduced to
practice); (ii) trademarks, service marks, trade dress, trade names, corporate names,
logos, slogans and Internet domain names, together with all goodwill associated with each
of the foregoing; (iii) copyrights and copyrightable works; (iv) registrations,
applications and renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and documentation). 

                “Material
Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, results of operations, condition (financial or otherwise), business, or
prospects of the 

5 

Company or (ii) the ability of the
Company to perform its obligations under the Transaction Documents. 

                “Nasdaq”
means The Nasdaq Stock Market, Inc. 

                “Option
Closing Date” has the meaning set forth in Section 3.4. 

                “Option
Purchase Price” means Two Million Five Hundred Thousand One Hundred
Twenty Dollars ($2,500,120). 

                “Person”
means an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority or any other
form of entity not specifically listed herein. 

                “Proposal”
has the meaning set forth in Section 7.8. 

                “SEC
Filings” has the meaning set forth in Section 4.6. 

                “Registration
Statement” has the meaning set forth in the Registration Rights Agreement. 

                “Shares” means
the shares of Common Stock being purchased by the Investors hereunder and, unless the
context otherwise requires, includes the Initial Shares and the Option Shares. 

                “Subsidiary”
of any Person means another Person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at least a
majority of its Board of Directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of which) is owned directly or
indirectly by such first Person. 

                “Transaction
Documents” means this Agreement and the Registration Rights Agreement. 

                “1933
Act” means the Securities Act of 1933, as amended, or any successor statute,
and the rules and regulations promulgated thereunder. 

                “1934
Act” means the Securities Exchange Act of 1934, as amended, or any successor
statute, and the rules and regulations promulgated thereunder. 

        2.    Purchase and Sale of the Initial Shares; First Closing.  

                2.1   Purchase
and Sale of Initial Shares. Subject to the terms and conditions of this
Agreement, on the First Closing Date (as defined below), each of the Investors
shall severally, and not jointly, purchase, and the Company shall sell and issue
to the Investors, the 

6 

Initial Shares in the respective
amounts set forth opposite the Investors’ names on the signature pages attached
hereto in exchange for the Initial Purchase Price as specified in Section 3 below. 

                2.2   First
Closing. Upon confirmation that the other conditions to closing
specified herein have been satisfied or duly waived by the Investors, the Company shall
deliver to Lowenstein Sandler PC, in trust, a certificate or certificates, registered in
such name or names as the Investors may designate, representing the Initial Shares, with
instructions that such certificates are to be held for release to the Investors only upon
payment in full of the Initial Purchase Price to the Company by all the Investors. Upon
such receipt by Lowenstein Sandler PC of the certificates, each Investor shall promptly,
but no more than one Business Day thereafter, cause a wire transfer in same day funds to
be sent to the account of the Company as instructed in writing by the Company, in an
amount representing such Investor’s pro rata portion of the Initial Purchase Price as
set forth on the signature pages to this Agreement. On the date the Company receives the
Initial Purchase Price, the certificates evidencing the Initial Shares shall be released
to the Investors. Such date is hereinafter referred to as the “First Closing
Date”. The closing of the purchase and sale of the Initial Shares shall take place at
the offices of Lowenstein Sandler PC, 1330 Avenue of the Americas, 21st Floor, New York,
New York, or at such other location and on such other date as the Company and the
Investors shall mutually agree. 

        3.    Purchase
and Sale of the Option Shares; Option Closing. 

                3.1   Put
Option. The Company shall have the nontransferable option (the “Put
Option”) to sell to the Investors and to require the Investors to acquire,
severally and not jointly, all, but not less than all, of the Option Shares for
an aggregate purchase price equal to the Option Purchase Price. Subject to the
terms hereof, the Company may exercise the Put Option at any time from and after
the two (2)-month anniversary of the Effective Date and ending at
5:00 p.m., New York time, on the fifteen (15)-month anniversary of the
First Closing Date (the “Expiration Time”) by providing written notice
of such exercise to the Investors, which notice shall set forth the proposed
closing date on which the Option Shares will be sold, which date shall not be
less than five (5) Business Days after the date of such notice (the
“Notice Date”). The Company shall only have the right to exercise the
Put Option in the event that (i) the closing bid price of a share of Common
Stock as reported on Nasdaq equals or exceeds $2.80 (appropriately adjusted for
any stock split, reverse stock split, stock dividend or other reclassification
or combination of the Common Stock occurring after the date hereof) for a period
of twenty (20) consecutive trading days ending on the trading day
immediately preceding the Notice Date (the “Measurement Period”) and
(ii) at all times during the Measurement Period the Registration Statement
(as defined in the Registration Rights Agreement) has been effective and
available for sales of the Initial Shares by the Investors. In the event that
the Call Option (as defined below) is duly exercised pursuant to the provisions
of Section 3.2, the Put Option shall immediately terminate and be of no
further force and effect. 

                3.2   Call Option. The
Investors shall have the nontransferable option (the “Call Option”) to
acquire from the Company and to require the Company to sell to the Investors,
severally and not jointly, all, but not less than all, of the Option Shares for
an aggregate purchase price equal to the Option Purchase Price. The Investors
may exercise the Call Option at any time 

7 

from and after the First Closing Date
and ending at the Expiration Time by providing written notice of such exercise to the
Company, which notice shall set forth the proposed closing date on which the Option Shares
will be sold, which date shall not be less than five (5) Business Days after the date of
such notice. In the event that the Put Option is duly exercised pursuant to the provisions
of Section 3.1, the Call Option shall immediately terminate and be of no further force and
effect. 

                3.3   Purchase
and Sale of Option Shares. Upon the due exercise of the Put Option or the
Call Option, as applicable, and subject to the terms and conditions of this
Agreement, on the Option Closing Date (as defined below), each of the Investors
shall severally and not jointly, purchase, and the Company shall sell and issue
to the Investors, the Option Shares in exchange for the Option Purchase Price as
specified in Section 3 below. The Investors shall have the right to allocate the
Option Shares among the Investors as they determine in their sole discretion.

                3.4   Option
Closing. Upon confirmation that the other conditions to closing specified
herein have been satisfied or duly waived by the Investors, the Company shall
deliver to Lowenstein Sandler PC, in trust, a certificate or certificates,
registered in such name or names as the Investors may designate, representing
the Option Shares, with instructions that such certificates are to be held for
release to the Investors only upon payment in full of the Option Purchase Price
to the Company by the Investors. Upon such receipt by Lowenstein Sandler PC of
the certificates, each Investor shall promptly, but no more than one Business
Day thereafter, cause a wire transfer in same day funds to be sent to the
account of the Company as instructed in writing by the Company, in an amount
representing such Investor’s pro rata portion of the Option Purchase Price.
On the date the Company receives the Option Purchase Price, the certificates
evidencing the Option Shares shall be released to the Investors. Such date is
hereinafter referred to as the “Option Closing Date”. The closing of
the purchase and sale of the Option Shares shall take place at the offices of
Lowenstein Sandler PC, 1330 Avenue of the Americas, 21st Floor, New York, New
York, or at such other location and on such other date as the Company and the
Investors shall mutually agree. 

        4.    Representations
and Warranties of the Company. The Company hereby represents and warrants to
the Investors that, except as set forth in the schedules delivered herewith
(collectively, the “Disclosure Schedules”): 

                4.1   Organization,
Good Standing and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota and has all requisite corporate power and authority to carry on its
business as now conducted and to own its properties. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification or leasing necessary unless the
failure to so qualify has not and could not reasonably be expected to have a
Material Adverse Effect. The Company has no Subsidiaries. 

                4.2   Authorization. The
Company has full power and authority and, except for approval of the Proposal by
its stockholders as contemplated in Section 7.8, has taken all 

8 

requisite action on the part of the
Company, its officers, directors and stockholders necessary for (i) the authorization,
execution and delivery of the Transaction Documents, (ii) authorization of the performance
of all obligations of the Company hereunder or thereunder, and (iii) the authorization,
issuance and delivery of the Shares. The Transaction Documents constitute the legal, valid
and binding obligations of the Company, enforceable against the Company in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability, relating to or affecting
creditors’ rights generally. 

                4.3   Capitalization.
Schedule 4.3 sets forth (a) the authorized capital stock of the Company on the date hereof;
(b) the number of shares of capital stock issued and outstanding;
(c) the number of shares of capital stock issuable pursuant to the
Company’s stock plans; and (d) the number of shares of capital stock
issuable and reserved for issuance pursuant to securities (other than the
Shares) exercisable for, or convertible into or exchangeable for any shares of
capital stock of the Company. All of the issued and outstanding shares of the
Company’s capital stock have been duly authorized and validly issued and
are fully paid, nonassessable and free of pre-emptive rights and were issued in
full compliance with applicable state and federal securities law and any rights
of third parties. Except as described on Schedule 4.3, no Person is
entitled to pre-emptive or similar statutory or contractual rights with respect
to any securities of the Company. Except as described on
Schedule 4.3, there are no outstanding warrants, options,
convertible securities or other rights, agreements or arrangements of any
character under which the Company is or may be obligated to issue any equity
securities of any kind and except as contemplated by this Agreement, the Company
is not currently in negotiations for the issuance of any equity securities of
any kind. Except as described on Schedule 4.3 and except for the
Registration Rights Agreement, there are no voting agreements, buy-sell
agreements, option or right of first purchase agreements or other agreements of
any kind among the Company and any of the securityholders of the Company
relating to the securities of the Company held by them. Except as described on
Schedule 4.3 and except as provided in the Registration Rights
Agreement, no Person has the right to require the Company to register any
securities of the Company under the 1933 Act, whether on a demand basis or in
connection with the registration of securities of the Company for its own
account or for the account of any other Person.  

                Except
as described on Schedule 4.3, the issuance and sale of the Shares
hereunder will not obligate the Company to issue shares of Common Stock or other
securities to any other Person (other than the Investors) and will not result in
the adjustment of the exercise, conversion, exchange or reset price of any
outstanding security. 

                Except
as described on Schedule 4.3, the Company does not have outstanding
stockholder purchase rights or “poison pill” or any similar arrangement in
effect giving any Person the right to purchase any equity interest in the Company upon the
occurrence of certain events. 

                4.4   Valid
Issuance. The Shares have been duly and validly authorized and, when issued
and paid for pursuant to this Agreement, will be validly issued, fully paid and
nonassessable, and shall be free and clear of all encumbrances and restrictions
(other than those 

9 

created by the Investors), except for
restrictions on transfer set forth in the Transaction Documents or imposed by applicable
securities laws. 

                4.5   Consents. Except
for approval of the Proposal by its stockholders as contemplated in
Section 7.8, the execution, delivery and performance by the Company of the
Transaction Documents and the offer, issuance and sale of the Shares require no
consent of, action by or in respect of, or filing with, any Person, governmental
body, agency, or official other than filings that have been made pursuant to
applicable state securities laws and post-sale filings pursuant to applicable
state and federal securities laws which the Company undertakes to file within
the applicable time periods. Subject to the accuracy of the representations and
warranties of each Investor set forth in Section 5 hereof, the Company has
taken all action necessary to exempt (i) the issuance and sale of the
Shares and (ii) the other transactions contemplated by the Transaction
Documents from the provisions of any shareholder rights plan or other
“poison pill” arrangement, any anti-takeover, business combination or
control share law or statute binding on the Company or to which the Company or
any of its assets and properties may be subject and any provision of the
Company’s Articles of Incorporation or By-laws that is or could reasonably
be expected to become applicable to the Investors as a result of the
transactions contemplated hereby, including without limitation, the issuance of
the Shares and the ownership, disposition or voting of the Shares by the
Investors or the exercise of any right granted to the Investors pursuant to this
Agreement or the other Transaction Documents. On or prior to the date hereof,
each of W. Robert Ramsdell and Scott F. Drill have executed and
delivered to the Company agreements, true and complete copies of which have been
provided to the Purchasers, pursuant to which they have agreed to vote their
shares of Common Stock for the approval of the Proposal at the Stockholders
Meeting (as defined in Section 7.8). Such agreements are in full force and
effect and shall not be amended, modified, supplemented or rescinded without the
prior written consent of the Investors. 

                4.6   Delivery
of SEC Filings; Business. The Company has made available to the Investors
through the EDGAR system, true and complete copies of the Company’s most
recent Annual Report on Form 10-K for the fiscal year ended
December 31, 2003 (the “10-K”), and all other reports filed by
the Company pursuant to the 1934 Act since the filing of the 10-K and prior
to the date hereof (collectively, the “SEC Filings”). The SEC Filings
are the only filings required of the Company pursuant to the 1934 Act for such
period. The Company is engaged in all material respects only in the business
described in the SEC Filings and the SEC Filings contain a complete and accurate
description in all material respects of the business of the Company, taken as a
whole.

                4.7   Use
of Proceeds. The net proceeds of the sale of the Shares hereunder shall be
used by the Company for working capital and general corporate purposes. 

                4.8   No
Material Adverse Change. Since December 31, 2003, except as identified and
described in the SEC Filings or as described on Schedule 4.8, there
has not been: 

                        (i)    any
change in the assets, liabilities, financial condition or operating results of
the Company from that reflected in the financial statements included in the
10-K, except as disclosed in Form 10-Q for the quarter ending March 31, 2004,
and except for changes 

10 

in the ordinary course of business
which have not and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate; 

                        (ii)    any
declaration or payment of any dividend, or any authorization or payment of any
distribution, on any of the capital stock of the Company, or any redemption or
repurchase of any securities of the Company; 

                        (iii)    any
material damage, destruction or loss, whether or not covered by insurance to any
assets or properties of the Company; 

                        (iv)    any
waiver, not in the ordinary course of business, by the Company of a material
right or of a material debt owed to it; 

                        (v)    any
satisfaction or discharge of any lien, claim or encumbrance or payment of
any obligation by the Company, except in the ordinary course of business and
which is not material to the assets, properties, financial condition, operating
results or business of the Company taken as a whole (as such business is
presently conducted and as it is proposed to be conducted); 

                        (vi)    any
change or amendment to the Company’s Articles of Incorporation or by-laws,
or material change to any material contract or arrangement by which the Company
is bound or to which any of its assets or properties is subject; 

                        (vii)    any
material labor difficulties or labor union organizing activities with
respect to employees of the Company; 

                        (viii)    any
material transaction entered into by the Company other than in the ordinary
course of business; 

                        (ix)    the
loss of the services of any key employee, or material change in the
composition or duties of the senior management of the Company; 

                        (x)    the
loss or threatened loss of any customer which has had or could reasonably be
expected to have a Material Adverse Effect; or 

                        (xi)    any
other event or condition of any character that has had or could reasonably
be expected to have a Material Adverse Effect. 

              4.9   SEC Filings; S-3 Eligibility.  

                        (a)    At
the time of filing thereof, the SEC Filings complied as to form in all material
respects with the requirements of the 1934 Act and did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. 

11 

                        (b)    Each
registration statement and any amendment thereto filed by the Company since
January 1, 2002 pursuant to the 1933 Act and the rules and regulations
thereunder, as of the date such statement or amendment became effective,
complied as to form in all material respects with the 1933 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein not misleading; and each prospectus filed pursuant to Rule 424(b)
under the 1933 Act, as of its issue date and as of the closing of any sale of
securities pursuant thereto did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. 

                        (c)    The
Company is eligible to use Form S-3 to register the Registrable Securities (as
such term is defined in the Registration Rights Agreement) for sale by the
Investors as contemplated by the Registration Rights Agreement. 

                4.10   No
Conflict, Breach, Violation or Default. Subject to the approval of the
Proposal by its stockholders as contemplated in Section 7.8, the execution,
delivery and performance of the Transaction Documents by the Company and the
issuance and sale of the Shares will not conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a default under
(i) the Company’s Articles of Incorporation or the Company’s
Bylaws, both as in effect on the date hereof (true and complete copies of which
have been made available to the Investors), or (ii)(a) any statute, rule,
regulation or order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company or any of its assets or
properties, or (b) any agreement or instrument to which the Company is a
party or by which the Company is bound or to which any of its assets or
properties is subject.

                4.11   Tax
Matters. The Company has timely prepared and filed all tax returns required
to have been filed by the Company with all appropriate governmental agencies and
timely paid all taxes shown thereon or otherwise owed by it. The charges,
accruals and reserves on the books of the Company in respect of taxes for all
fiscal periods are adequate in all material respects, and there are no material
unpaid assessments against the Company nor, to the Company’s Knowledge, any
basis for the assessment of any additional taxes, penalties or interest for any
fiscal period or audits by any federal, state or local taxing authority except
for any assessment which is not material to the Company. All taxes and other
assessments and levies that the Company is required to withhold or to collect
for payment have been duly withheld and collected and paid to the proper
governmental entity or third party when due. There are no tax liens or claims
pending or, to the Company’s Knowledge, threatened against the Company or
any of its assets or property. Except as described on Schedule 4.11, there are
no outstanding tax sharing agreements or other such arrangements between the
Company and any other corporation or entity.  

                4.12   Title
to Properties. Except as disclosed in the SEC Filings, the Company has good
and marketable title to all real properties and all other properties and assets
owned by it, in each case free from liens, encumbrances and defects that would
materially affect the value thereof or materially interfere with the use made or
currently planned to be made thereof by it and except as disclosed in the SEC
Filings, the Company holds any leased real or personal 

12 

property under valid and enforceable
leases with no exceptions that would materially interfere with the use made or currently
planned to be made thereof by it. 

                4.13   Certificates,
Authorities and Permits. The Company possesses adequate certificates,
authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by it, and the Company has not
received any notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit that, if determined adversely to the
Company, could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate. 

                4.14   No
Labor Disputes. No material labor dispute with the employees of the Company
exists or, to the Company’s Knowledge, is imminent. 

                4.15   Intellectual Property. 

                        (a)    To
the Company’s Knowledge, all Intellectual Property of the Company is
currently in compliance with all legal requirements (including timely filings,
proofs and payments of fees) and is valid and enforceable. No Intellectual
Property of the Company which is necessary for the conduct of Company’s
business as currently conducted or as currently proposed to be conducted has
been or is now involved in any cancellation, dispute or litigation, and, to the
Company’s Knowledge, no such action is threatened. No patent of the Company
has been or is now involved in any interference, reissue, re-examination or
opposition proceeding. 

                        (b)    All
of the licenses and sublicenses and consent, royalty or other agreements
concerning Intellectual Property which are necessary for the conduct of the
Company’s business as currently conducted or as currently proposed to be
conducted to which the Company is a party or by which any of its assets are
bound (other than generally commercially available, non-custom, off-the-shelf
software application programs having a retail acquisition price of less than
$10,000 per license) (collectively, “License Agreements”) are valid
and binding obligations of the Company and, to the Company’s Knowledge, the
other parties thereto, enforceable in accordance with their terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
affecting the enforcement of creditors’ rights generally, and there exists
no event or condition which will result in a material violation or breach of or
constitute (with or without due notice or lapse of time or both) a default by
the Company under any such License Agreement. 

                        (c)    To
the Company’s Knowledge, the Company owns or has the valid right to use all
of the Intellectual Property that is necessary for the conduct of the
Company’s business as currently conducted or as currently proposed to be
conducted and for the ownership, maintenance and operation of the Company’s
properties and assets, free and clear of all liens, encumbrances, adverse claims
or obligations to license all such owned Intellectual Property and Confidential
Information, other than licenses entered into in the ordinary course of the
Company’s business. 

13 

                        (d)    To
the Company’s Knowledge, the conduct of the Company’s business as
currently conducted does not infringe or otherwise impair or conflict with
(collectively, “Infringe”) any Intellectual Property rights of any
third party or any confidentiality obligation owed to a third party, and, to the
Company’s Knowledge, the Intellectual Property and Confidential Information
of the Company which are necessary for the conduct of Company’s business as
currently conducted or as currently proposed to be conducted are not being
Infringed by any third party. There is no litigation or order pending or
outstanding or, to the Company’s Knowledge, threatened or imminent, that
seeks to limit or challenge or that concerns the ownership, use, validity or
enforceability of any Intellectual Property or Confidential Information of the
Company and the Company’s use of any Intellectual Property or Confidential
Information owned by a third party, and, to the Company’s Knowledge, there
is no valid basis for the same. 

                        (e)    The
consummation of the transactions contemplated hereby and by the other
Transaction Documents will not result in the alteration, loss, impairment of or
restriction on the Company’s ownership or right to use any of the
Intellectual Property or Confidential Information which is necessary for the
conduct of Company’s business as currently conducted or as currently
proposed to be conducted. 

                        (f)    The
Company has taken reasonable steps to protect the Company’s rights in its
Intellectual Property and Confidential Information. Each employee, consultant
and contractor who has had access to Confidential Information which is necessary
for the conduct of Company’s business as currently conducted or as
currently proposed to be conducted has executed an agreement to maintain the
confidentiality of such Confidential Information and has executed appropriate
agreements that are substantially consistent with the Company’s standard
forms thereof, except where the failure to do so has not had and could not
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate. To the Company’s Knowledge, except under confidentiality
obligations, there has been no material disclosure of any of the Company’s
Confidential Information to any third party. 

                4.16   Environmental
Matters. To the Company’s Knowledge, the Company is not in violation of
any statute, rule, regulation, decision or order of any governmental agency or
body or any court, domestic or foreign, relating to the use, disposal or release
of hazardous or toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
(collectively, “Environmental Laws”), does not own or operate any real
property contaminated with any substance that is subject to any Environmental
Laws, is not liable for any off-site disposal or contamination pursuant to any
Environmental Laws, and is not subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim has had
or could reasonably be expected to have a Material Adverse Effect, individually
or in the aggregate; and there is no pending or, to the Company’s
Knowledge, threatened investigation that might lead to such a claim. 

                4.17   Litigation.
Except as described on Schedule 4.17, there are no pending
actions, suits or proceedings against or affecting the Company or any of its
properties; and to the Company’s Knowledge, no such actions, suits or
proceedings are threatened or contemplated. 

14 

                4.18   Financial
Statements. The financial statements included in each SEC Filing present
fairly, in all material respects, the financial position of the Company as of
the dates shown and its results of operations and cash flows for the periods
shown, and such financial statements have been prepared in conformity with
United States generally accepted accounting principles applied on a consistent
basis (“GAAP”) (except as may be disclosed therein or in the notes
thereto, and, in the case of quarterly financial statements, as permitted by
Form 10-Q under the 1934 Act). Except as set forth in the financial statements
of the Company included in the SEC Filings filed prior to the date hereof or as
described on Schedule 4.18, the Company has not incurred any liabilities,
contingent or otherwise, except those incurred in the ordinary course of
business, consistent (as to amount and nature) with past practices since the
date of such financial statements, none of which, individually or in the
aggregate, have had or could reasonably be expected to have a Material Adverse
Effect.  

                4.19   Insurance
Coverage. The Company maintains in full force and effect insurance coverage
that is customary for comparably situated companies for the business being
conducted and properties owned or leased by the Company, and the Company
reasonably believes such insurance coverage to be adequate against all
liabilities, claims and risks against which it is customary for comparably
situated companies to insure. 

                4.20   Compliance
with Nasdaq Continued Listing Requirements. The Company is in compliance
with applicable Nasdaq continued listing requirements. There are no proceedings
pending or, to the Company’s Knowledge, threatened against the Company
relating to the continued listing of the Company’s Common Stock on Nasdaq
and the Company has not received any notice of, nor to the Company’s
Knowledge is there any basis for, the delisting of the Common Stock from Nasdaq.

                4.21   Brokers
and Finders. No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim
against or upon the Company or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company, other than as described in
Schedule 4.21. 

                4.22   No
Directed Selling Efforts or General Solicitation. Neither the Company nor
any Person acting on its behalf has conducted any general solicitation or
general advertising (as those terms are used in Regulation D) in connection with
the offer or sale of any of the Shares. 

                4.23   No
Integrated Offering. Neither the Company nor any of its Affiliates, nor any
Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any Company security or solicited any offers to buy any
security, under circumstances that would adversely affect reliance by the
Company on Section 4(2) for the exemption from registration for the
transactions contemplated hereby or would require registration of the Shares
under the 1933 Act. 

                4.24   Private
Placement. The offer and sale of the Shares to the Investors as contemplated
hereby is exempt from the registration requirements of the 1933 Act. 

15 

                4.25   Questionable
Payments. Neither the Company nor, to the Company’s Knowledge, any of
its current or former stockholders, directors, officers, employees, agents or
other Persons acting on behalf of the Company, has on behalf of the Company or
in connection with its business:   (a) used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity; (b) made any direct or indirect
unlawful payments to any governmental officials or employees from corporate
funds; (c) established or maintained any unlawful or unrecorded fund of
corporate monies or other assets; (d) made any false or fictitious entries
on the books and records of the Company; or (e) made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment of any
nature. 

                4.26   Transactions
with Affiliates. Except as disclosed in the SEC Filings or as disclosed on
Schedule 4.26, none of the officers or directors of the Company and,
to the Company’s Knowledge, none of the employees of the Company is
presently a party to any transaction with the Company (other than as holders of
stock options and/or warrants, and for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the Company’s Knowledge, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner. 

                4.27   Internal
Controls. The Company is in material compliance with the provisions of the
Sarbanes-Oxley Act of 2002 currently applicable to the Company. The Company
maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in 1934
Act Rules 13a-14 and 15d-14) for the Company and designed such disclosure
controls and procedures to ensure that material information relating to the
Company is made known to the certifying officers by others within those
entities, particularly during the period in which the Company’s most
recently filed period report under the 1934 Act, as the case may be, is being
prepared. The Company’s certifying officers have evaluated the
effectiveness of the Company’s controls and procedures as of a date within
90 days prior to the filing date of the most recently filed periodic report
under the 1934 Act (such date, the “Evaluation Date”). The Company
presented in its most recently filed periodic report under the 1934 Act the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes in the
Company’s internal controls (as such term is defined in Item 307(b) of
Regulation S-K) or, to the Company’s Knowledge, in other factors that
could significantly affect the Company’s internal controls. The Company
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP and the applicable
requirements of the 1934 Act. 

16 

                4.28   Disclosures. Except
as listed on Schedule 4.28, neither the Company nor any Person acting on
its behalf has provided the Investors or their agents or counsel with any
information that constitutes or might constitute material, non-public
information. The written materials delivered to the Investors in connection with
the transactions contemplated by the Transaction Documents do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading. 

        5.    Representations
and Warranties of the Investors. Each of the Investors hereby severally, and
not jointly, represents and warrants to the Company that: 

                5.1   Organization
and Existence. Such Investor is a validly existing corporation, limited
partnership or limited liability company and has all requisite corporate,
partnership or limited liability company power and authority to invest in the
Shares pursuant to this Agreement. 

                5.2   Authorization. The
execution, delivery and performance by such Investor of the Transaction
Documents to which such Investor is a party have been duly authorized and will
each constitute the valid and legally binding obligation of such Investor,
enforceable against such Investor in accordance with their respective terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability, relating to or affecting
creditors’ rights generally. 

                5.3   Purchase
Entirely for Own Account. The Shares to be received by such Investor
hereunder will be acquired for such Investor’s own account, not as nominee
or agent, and not with a view to the resale or distribution of any part thereof
in violation of the 1933 Act, and such Investor has no present intention of
selling, granting any participation in, or otherwise distributing the same in
violation of the 1933 Act without prejudice, however, to such Investor’s
right at all times to sell or otherwise dispose of all or any part of such
Shares in compliance with applicable federal and state securities laws. Nothing
contained herein shall be deemed a representation or warranty by such Investor
to hold the Shares for any period of time. Such Investor is not a broker-dealer
registered with the SEC under the 1934 Act or an entity engaged in a business
that would require it to be so registered and is not affiliated with any such
broker-dealer. 

                5.4   Investment
Experience. Such Investor acknowledges that it can bear the economic risk
and complete loss of its investment in the Shares and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment contemplated hereby. 

                5.5   Disclosure
of Information. Such Investor has had an opportunity to receive all
additional information related to the Company requested by it and to ask
questions of and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the Shares. Such
Investor acknowledges receipt of copies of the SEC Filings. Such Investor also
acknowledges receipt and review of the Risk Factors set forth in 

17 

Schedule 5.5,
and understands that an investment in the Company entails risk, and that such
Investor could lose some or all of its investment in the Company. Neither such
inquiries, nor such Risk Factors nor any other due diligence investigation
conducted by such Investor shall modify, amend or affect such Investor’s
right to rely on the Company’s representations and warranties contained in
this Agreement.  

                5.6   Restricted
Securities. Such Investor understands that the Shares are characterized as
“restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the 1933 Act only in
certain limited circumstances. 

                5.7   Legends. It
is understood that, except as provided below, certificates evidencing the Shares
may bear the following or any similar legend: 

                        (a)    “The
securities represented hereby may not be transferred unless (i) such
securities have been registered for sale pursuant to the Securities Act of 1933,
as amended, (ii) such securities may be sold pursuant to Rule 144(k),
or (iii) the Company has received an opinion of counsel reasonably
satisfactory to it that such transfer may lawfully be made without registration
under the Securities Act of 1933 or qualification under applicable state
securities laws.” 

                        (b)    If
required by the authorities of any state in connection with the issuance of sale
of the Shares, the legend required by such state authority. 

                5.8   Accredited
Investor. Such Investor is an accredited investor as defined in Rule 501(a)
of Regulation D, as amended, under the 1933 Act. 

                5.9   No
General Solicitation. Such Investor did not learn of the investment in the
Shares as a result of any public advertising or general solicitation.

                5.10   Brokers
and Finders. No Person will have, as a result of the transactions
contemplated by the Transaction Documents, any valid right, interest or claim
against or upon the Company or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of such Investor. 

                5.11   Prohibited
Transactions. During the last thirty (30) days prior to the date
hereof, such Investor has not, directly or indirectly, effected or agreed to
effect any short sale, whether or not against the box, established any “put
equivalent position” (as defined in Rule 16a-1(h) under the 1934 Act)
with respect to the Common Stock, granted any other right (including, without
limitation, any put or call option) with respect to the Common Stock or with
respect to any security that includes, relates to or derived any significant
part of its value from the Common Stock or otherwise sought to hedge its
position in the Shares (each, a “Prohibited Transaction”). Prior to
the earliest to occur of (i) the termination of this Agreement,
(ii) the Effective Date (as defined in the Registration Rights Agreement)
or (iii) the Effectiveness Deadline (as defined in the Registration Rights
Agreement), such Investor shall not engage, directly or indirectly, in a

18 

Prohibited Transaction.
Such Investor acknowledges that the representations and warranties contained in
this Section 5.11 are being made for the benefit of the Investors as well
as the Company and that each of the other Investors shall have an independent
right to assert any claims against such Investor arising out of any breach or
violation of the provisions of this Section 5.11. 

        6.    Conditions to Closing.  

                6.1   Conditions
to the Investors’ Obligations. The obligation of each Investor to
purchase the Shares at each closing is subject to the fulfillment to such
Investor’s satisfaction, on or prior to the relevant Closing Date, of the
following conditions, any of which may be waived by such Investor (as to itself
only):  

                        (a)    The
representations and warranties made by the Company in Section 4 hereof
qualified as to materiality shall be true and correct at all times prior to and
on the Closing Date, except to the extent any such representation or warranty
expressly speaks as of an earlier date, in which case such representation or
warranty shall be true and correct as of such earlier date, and, the
representations and warranties made by the Company in Section 4 hereof not
qualified as to materiality shall be true and correct in all material respects
at all times prior to and on the Closing Date, except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and correct in all material
respects as of such earlier date. The Company shall have performed in all
material respects all obligations and conditions herein required to be performed
or observed by it on or prior to the Closing Date. 

                        (b)    The
Company shall have obtained any and all consents, permits, approvals,
registrations and waivers (including, without limitation, approval of the
Proposal by its stockholders in accordance with applicable law and the
applicable requirements of any stock exchange or market on which the Common
Stock is traded or quoted) necessary or appropriate for consummation of the
purchase and sale of the Shares and the consummation of the other transactions
contemplated by the Transaction Documents, all of which shall be in full force
and effect. 

                        (c)    The
Company shall have executed and delivered the Registration Rights Agreement.

                        (d)    The
Company shall have received confirmation from Nasdaq to the effect that that the
Shares being issued on the relevant Closing Date have been approved for
inclusion in The Nasdaq SmallCap Market upon official notice of issuance.

                        (e)    No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated hereby or in the
other Transaction Documents. 

19 

                        (f)    The
Company shall have delivered a Certificate, executed on behalf of the Company by
its Chief Executive Officer or its Chief Financial Officer, dated as of the
Closing Date, certifying to the fulfillment of the conditions specified in
subsections (a), (b), (d), (e) and (i) of this Section 6.1. 

                        (g)    The
Company shall have delivered a Certificate, executed on behalf of the Company by
its Secretary, dated as of the Closing Date, certifying the resolutions adopted
by the Board of Directors of the Company approving the transactions contemplated
by this Agreement and the other Transaction Documents and the issuance of the
Shares, certifying the current versions of the Certificate of Incorporation and
Bylaws of the Company and certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of the
Company. 

                        (h)    The
Investors shall have received an opinion from Best & Flanagan LLP, the
Company’s counsel, dated as of the Closing Date, in form and substance
reasonably acceptable to the Investors and addressing such legal matters as the
Investors may reasonably request. 

                        (i)    No
stop order or suspension of trading shall have been imposed by Nasdaq, the SEC
or any other governmental or regulatory body with respect to public trading in
the Common Stock. 

                6.2   Conditions
to Obligations of the Company. The Company’s obligation to sell and
issue the Shares at each closing is subject to the fulfillment to the
satisfaction of the Company on or prior to the relevant Closing Date of the
following conditions, any of which may be waived by the Company: 

                        (a)    The
representations and warranties made by the Investors in Section 5 hereof shall
be true and correct in all material respects when made, and shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of said date. The Investors shall have
performed in all material respects all obligations and conditions herein
required to be performed or observed by them on or prior to the Closing Date.

                        (b)    The
Investors shall have executed and delivered the Registration Rights Agreement.

                        (c)    The
Investors shall have delivered the Initial Purchase Price or the Option Purchase
Price, as applicable, to the Company. 

                        (d)    The
Company’s stockholders shall have obtained the approval of the Proposal by
its stockholders in accordance with applicable law and the applicable
requirements of any stock exchange or market on which the Common Stock is traded
or quoted. 

              6.3   Termination
of Obligations to Effect Closing; Effects.  

20 

                (a)    The
obligations of the Company, on the one hand, and the Investors, on the other
hand, to effect any closing shall terminate as follows: 

                        (i)    Upon
the mutual written consent of the Company and the Investors; 

                        (ii)    By
the Company if any of the conditions set forth in Section 6.2 shall have become
incapable of fulfillment, and shall not have been waived by the Company;

                        (iii)    By
an Investor (with respect to itself only) if any of the conditions set forth in
Section 6.1 shall have become incapable of fulfillment, and shall not have been
waived by the Investor; or 

                        (iv)    By
either the Company or any Investor (with respect to itself only) if the First
Closing Date has not occurred on or prior to August 31, 2004; 

provided, however, that, except in
the case of clause (i) above, the party seeking to terminate its obligation to effect the
relevant closing shall not then be in breach of any of its representations, warranties,
covenants or agreements contained in this Agreement or the other Transaction Documents if
such breach has resulted in the circumstances giving rise to such party’s seeking to
terminate its obligation to effect such closing. 

                (b)    In
the event of termination by the Company or any Investor of its obligations to
effect a closing pursuant to this Section 6.3, written notice thereof shall
forthwith be given to the other Investors and the other Investors shall have the
right to terminate their obligations to effect such closing upon written notice
to the Company and the other Investors. Nothing in this Section 6.3 shall be
deemed to release any party from any liability for any breach by such party of
the terms and provisions of this Agreement or the other Transaction Documents or
to impair the right of any party to compel specific performance by any other
party of its obligations under this Agreement or the other Transaction
Documents. 

        7.    Covenants
and Agreements of the Company.  

                7.1   Reports. The
Company will furnish to such Investors and/or their assignees such information
relating to the Company and its Subsidiaries as from time to time may reasonably
be requested by such Investors and/or their assignees; provided, however, that
the Company shall not disclose material nonpublic information to the Investors,
or to advisors to or representatives of the Investors, unless prior to
disclosure of such information the Company identifies such information as being
material nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and any Investor wishing to obtain such
information enters into an appropriate confidentiality agreement with the
Company with respect thereto. 

21 

                7.2   No
Conflicting Agreements. The Company will not take any action, enter into any
agreement or make any commitment that would conflict or interfere in any
material respect with the Company’s obligations to the Investors under the
Transaction Documents. 

                7.3   Insurance. The
Company shall not materially reduce the insurance coverages described in Section 4.19. 

                7.4   Compliance
with Laws. The Company will comply in all material respects with all
applicable laws, rules, regulations, orders and decrees of all governmental
authorities. 

                7.5   Listing
of Underlying Shares and Related Matters. Promptly following the date
hereof, the Company shall take all necessary action to cause the Shares issued
on each Closing Date to be listed on the Nasdaq SmallCap Market no later than
the relevant Closing Date. Further, if the Company applies to have its Common
Stock or other securities traded on any other principal stock exchange or
market, it shall include in such application the Shares and will take such other
action as is necessary to cause such Common Stock to be so listed. The Company
will use commercially reasonable efforts to continue the listing and trading of
its Common Stock on the Nasdaq SmallCap Market and, in accordance, therewith,
will use commercially reasonable efforts to comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules
of such market or exchange, as applicable. 

                7.6   Termination
of Covenants. The provisions of Sections 7.1 through 7.4 shall
terminate and be of no further force and effect on the date on which the
Company’s obligations under the Registration Rights Agreement to register
or maintain the effectiveness of any registration covering the Registrable
Securities (as such term is defined in the Registration Rights Agreement) shall
terminate. 

                7.7   Removal
of Legends. Upon the earlier of (i) registration for resale pursuant to
the Registration Rights Agreement and receipt by the Company of the
Investor’s written confirmation that such Shares will not be disposed of
except in one of the states listed in Schedule 7.7 and in compliance with
the prospectus delivery requirements of the 1933 Act or
(ii) Rule 144(k) becoming available the Company shall, upon an
Investor’s written request, promptly cause certificates evidencing the
Investor’s Shares to be replaced with certificates which do not bear such
restrictive legends. When the Company is required to cause unlegended
certificates to replace previously issued legended certificates, if unlegended
certificates are not delivered to an Investor within five (5) Business Days
of submission by that Investor of legended certificate(s) to the Company’s
transfer agent together with a representation letter in customary form, the
Company shall be liable to the Investor for liquidated damages in an amount
equal to 1% of the aggregate purchase price of the Shares evidenced by such
certificate(s) for each thirty (30) day period (or portion thereof) beyond
such three (3) Business Day that the unlegended certificates have not been
so delivered.  

                7.8   Proxy
Statement; Stockholders Meeting. (a)   Promptly following the execution
and delivery of this Agreement the Company shall take all action necessary to
call a meeting of its stockholders (the “Stockholders Meeting”) for
the purpose of seeking approval of 

22 

the Company’s stockholders for
(i) the issuance and sale to the Investors of the Shares (the “Proposal”). In
connection therewith, the Company will promptly prepare and file with the SEC proxy
materials (including a proxy statement and form of proxy) for use at the Stockholders
Meeting and, after receiving and promptly responding to any comments of the SEC thereon,
shall promptly mail such proxy materials to the stockholders of the Company. Each Investor
shall promptly furnish in writing to the Company such information relating to such
Investor and its investment in the Company as the Company may reasonably request for
inclusion in the Proxy Statement. The Company will comply with Section 14(a) of the 1934
Act and the rules promulgated thereunder in relation to any proxy statement (as amended or
supplemented, the “Proxy Statement”) and any form of proxy to be sent to the
stockholders of the Company in connection with the Stockholders Meeting, and the Proxy
Statement shall not, on the date that the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to stockholders or at the time of the Stockholders
Meeting, contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein not false or misleading, or
omit to state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies or the Stockholders Meeting
which has become false or misleading. If the Company should discover at any time prior to
the Stockholders Meeting, any event relating to the Company or any of its affiliates,
officers or directors that is required to be set forth in a supplement or amendment to the
Proxy Statement, in addition to the Company’s obligations under the 1934 Act, the
Company will promptly inform the Investors thereof. 

                (b)    Subject
to their fiduciary obligations under applicable law (as determined in good faith
by the Company’s Board of Directors after consultation with the
Company’s outside counsel), the Company’s Board of Directors shall
recommend to the Company’s stockholders (and, subject to their fiduciary
obligations, not revoke or amend such recommendation) that the stockholders vote
in favor of the Proposal and shall cause the Company to take all commercially
reasonable action (including, without limitation, the hiring of a proxy
solicitation firm of nationally recognized standing) to solicit the approval of
the stockholders for the Proposal. Whether or not the Company’s Board of
Directors determines at any time after the date hereof that, due to its
fiduciary duties, it must revoke or amend its recommendation to the
Company’s stockholders, the Company shall be required to, and will take, in
accordance with applicable law and its Articles of Incorporation and Bylaws, all
action necessary to convene the Stockholders Meeting as promptly as practicable
to consider and vote upon the approval of the Proposal. 

                7.9   Right
of Option Refusal on Future Financings. From the date hereof until the later
of (i) one year after the First Closing Date or (ii) six months after
the Option Closing Date, if any, upon any financing by the Company of its Common
Stock or Common Stock Equivalents (a “Subsequent Financing”), each
Investor shall have the right to participate in up to 100% of such Subsequent
Financing. At least five (5) Business Days prior to the closing of the
Subsequent Financing, the Company shall deliver to each Investor a written
notice of its intention to effect a Subsequent Financing
(“Pre-Notice”), which Pre-Notice shall ask such Investor if it wants
to review the details of such financing (such additional notice, a
“Subsequent Financing Notice”). Upon the request of an Investor, and
only upon a request by such Investor, for a Subsequent Financing Notice, the
Company shall promptly, but no later than one Business 

23 

Day after such request, deliver a
Subsequent Financing Notice to such Investor. The Subsequent Financing Notice
shall describe in reasonable detail the proposed terms of such Subsequent
Financing, the amount of proceeds intended to be raised thereunder, the Person
with whom such Subsequent Financing is proposed to be effected, and attached to
which shall be a term sheet or similar document relating thereto. Each Investor
shall notify the Company by 6:30 p.m. (New York City time) on the fifth
(5th) Business Day after their receipt of the Subsequent Financing Notice of its
willingness to provide the Subsequent Financing on the terms described in the
Subsequent Financing Notice, subject to completion of mutually acceptable
documentation. If one or more Investors shall fail to so notify the Company of
their willingness to participate in the Subsequent Financing, the Investors
agreeing to participate in the Subsequent Financing (the “Participating
Investors”) shall have the right to provide all of the Subsequent
Financing. If one or more Investors fail to notify the Company of their
willingness to provide all of the Subsequent Financing and the Participating
Investors do not agree to provide all of the Subsequent Financing, the Company
may effect the remaining portion of such Subsequent Financing on the terms and
to the Persons set forth in the Subsequent Financing Notice; provided that the
Company must provide the Investors with a second Subsequent Financing Notice,
and the Investors will again have the right of first refusal set forth above in
this Section 7.9, if the Subsequent Financing subject to the initial
Subsequent Financing Notice is not consummated for any reason on the terms set
forth in such Subsequent Financing Notice within 60 Business Days after the date
of the initial Subsequent Financing Notice with the Person identified in the
Subsequent Financing Notice. In the event the Company receives responses to
Subsequent Financing Notices from Investors seeking to purchase more than the
financing sought by the Company in the Subsequent Financing such Investors shall
have the right to purchase their Pro Rata Portion (as defined below) of the
Common Stock or Common Stock Equivalents to be issued in such Subsequent
Financing. “Pro Rata Portion” is the ratio of (x) the amount
invested by such Investor pursuant to this Agreement (the “Subscription
Amount”) and (y) the aggregate sum of all of the Subscription Amounts.
Notwithstanding the foregoing, this Section 7.9 shall not apply in respect
of the issuance of (a) shares of Common Stock or options to employees,
consultants, officers or directors of the Company pursuant to any stock or
option plan duly adopted by a majority of the non-employee members of the Board
of Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose and (b) securities upon
the exercise of or conversion of any convertible securities, options or warrants
issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement. 

        8.    Survival and Indemnification.  

                8.1   Survival. The representations, warranties, covenants and agreements contained in
this Agreement shall survive the closing of the transactions contemplated by this
Agreement for a period of three years from the First Closing Date or the Option Closing
Date, if any. 

                8.2   Indemnification. The Company agrees to indemnify and hold harmless each Investor
and its Affiliates and their respective directors, officers, employees and agents from and
against any and all losses, claims, damages, liabilities and expenses (including without
limitation reasonable attorney fees and disbursements and other expenses incurred in 

24 

connection with investigating,
preparing or defending any action, claim or proceeding, pending or threatened and the
costs of enforcement thereof) (collectively, “Losses”) to which such Person may
become subject as a result of any breach of representation, warranty, covenant or
agreement made by or to be performed on the part of the Company under the Transaction
Documents, and will reimburse any such Person for all such amounts as they are incurred by
such Person. 

                8.3   Conduct
of Indemnification Proceedings. Promptly after receipt by any Person (the
“Indemnified Person”) of notice of any demand, claim or circumstances
which would or might give rise to a claim or the commencement of any action,
proceeding or investigation in respect of which indemnity may be sought pursuant
to Section 8.2, such Indemnified Person shall promptly notify the Company
in writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Person, and
shall assume the payment of all fees and expenses; provided,
however, that the failure of any Indemnified Person so to notify the
Company shall not relieve the Company of its obligations hereunder except to the
extent that the Company is materially prejudiced by such failure to notify. In
any such proceeding, any Indemnified Person shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person unless: (i) the Company and the Indemnified
Person shall have mutually agreed to the retention of such counsel; or
(ii) in the reasonable judgment of counsel to such Indemnified Person
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. The Company shall not be
liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent, or if there be a final judgment for the plaintiff, the Company
shall indemnify and hold harmless such Indemnified Person from and against any
loss or liability (to the extent stated above) by reason of such settlement or
judgment. Without the prior written consent of the Indemnified Person, which
consent shall not be unreasonably withheld, the Company shall not effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Person from all liability arising out
of such proceeding.  

        9.    Miscellaneous. 

                9.1   Successors
and Assigns. This Agreement may not be assigned by a party hereto without
the prior written consent of the Company or the Investors, as applicable,
provided, however, that subject to applicable state and federal securities laws,
an Investor may assign its rights and delegate its duties hereunder in whole or
in part to an Affiliate or to a third party acquiring some or all of its Shares
in a private transaction without the prior written consent of the Company or the
other Investors, after notice duly given by such Investor to the Company and the
other Investors, provided, that no such assignment or obligation shall affect
the obligations of such Investor hereunder. The provisions of this Agreement
shall inure to the benefit of and be binding upon the respective permitted
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.  

25 

                9.2   Counterparts;
Faxes. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Agreement may also be executed via facsimile,
which shall be deemed an original. 

                9.3   Titles
and Subtitles. The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement. 

                9.4   Notices. Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be
deemed given upon such delivery, (ii) if given by telex or telecopier, then
such notice shall be deemed given upon receipt of confirmation of complete
transmittal, (iii) if given by mail, then such notice shall be deemed given
upon the earlier of (A) receipt of such notice by the recipient or
(B) three days after such notice is deposited in first class mail, postage
prepaid, and (iv) if given by an internationally recognized overnight air
courier, then such notice shall be deemed given one business day after delivery
to such carrier. All notices shall be addressed to the party to be notified at
the address as follows, or at such other address as such party may designate by
ten days’ advance written notice to the other party: 

	  	If to the Company:  

	  	Insignia Systems, Inc.

6470 Sycamore Court North

Maple Grove, Minnesota 55369

Attention: Scott F. Drill, CEO

Fax: (763) 392-6222 

	  	With a copy to: 

	  	
Best & Flanagan LLP

Suite 4000

225 South Sixth Street

Minneapolis, Minnesota 55402

Attention: James C. Diracles

Fax: (612) 339-5897 

	  	If to the Investors: 

to the addresses set forth on the signature pages hereto. 

                9.5   Expenses. The
parties hereto shall pay their own costs and expenses in connection herewith,
except that the Company shall pay the reasonable fees and expenses of counsel to
the Investors under this Agreement and the Registration Rights Agreement, not to

26 

exceed $25,000. Such expenses shall
be paid not later than the First Closing Date, or if incurred thereafter, upon demand. In
addition to such fees, the Company shall reimburse the Investors upon demand for all
reasonable out-of-pocket expenses incurred by the Investors, including without limitation
reimbursement of attorneys’ fees and disbursements, in connection with any amendment,
modification or waiver of this Agreement or the other Transaction Documents requested by
the Company. In the event that legal proceedings are commenced by any party to this
Agreement against another party to this Agreement in connection with this Agreement or the
other Transaction Documents, the party or parties which do not prevail in such proceedings
shall severally, but not jointly, pay their pro rata share of the reasonable
attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred by the
prevailing party in such proceedings. 

                9.6   Amendments
and Waivers. Any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Investors. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any Shares
purchased under this Agreement at the time outstanding, each future holder of
all such Shares, and the Company. 

                9.7   Publicity. Except
as set forth below, no public release or announcement concerning the
transactions contemplated hereby shall be issued by the Company or the Investors
without the prior consent of the Company (in the case of a release or
announcement by the Investors) or the Investors (in the case of a release or
announcement by the Company) (which consents shall not be unreasonably
withheld), except as such release or announcement may be required by law or the
applicable rules or regulations of any securities exchange or securities market,
in which case the Company or the Investors, as the case may be, shall allow the
Investors or the Company, as applicable, to the extent reasonably practicable in
the circumstances, reasonable time to comment on such release or announcement in
advance of such issuance. By 8:30 a.m. (New York City time) on the trading
day immediately following the execution of this Agreement and the relevant
Closing Date, the Company shall issue a press release disclosing the execution
of this Agreement or the consummation of the transactions occurring on such
Closing Date, respectively. No later than the third trading day following the
relevant Closing Date, the Company will file a Current Report on Form 8-K
attaching the press release described in the foregoing sentence as well as
copies of the Transaction Documents. In addition, the Company will make such
other filings and notices in the manner and time required by the SEC and Nasdaq.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Investor, or include the name of any Investor in any filing with the SEC
(other than the Registration Statement and any exhibits to filings made in
respect of this transaction in accordance with periodic filing requirements
under the 1934 Act) or any regulatory agency or Nasdaq, without the prior
written consent of such Investor, except to the extent such disclosure is
required by law or trading market regulations, in which case the Company shall
provide the Investors with prior notice of such disclosure. 

                9.8   Severability. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof but shall be 

27 

interpreted as if it were written so
as to be enforceable to the maximum extent permitted by applicable law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted by
applicable law, the parties hereby waive any provision of law which renders any provision
hereof prohibited or unenforceable in any respect. 

                9.9   Entire Agreement. This
Agreement, including the Exhibits and the Disclosure Schedules, and the other
Transaction Documents constitute the entire agreement among the parties hereof
with respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter hereof and thereof. 

                9.10   Further
Assurances. The parties shall execute and deliver all such further
instruments and documents and take all such other actions as may reasonably be
required to carry out the transactions contemplated hereby and to evidence the
fulfillment of the agreements herein contained. 

                9.11   Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New York without regard to the choice of law principles thereof. Each of the
parties hereto irrevocably submits to the exclusive jurisdiction of the courts
of the State of New York located in New York County and the United States
District Court for the Southern District of New York for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this
Agreement and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same methods as are specified for the giving
of notices under this Agreement. Each of the parties hereto irrevocably consents
to the jurisdiction of any such court in any such suit, action or proceeding and
to the laying of venue in such court. Each party hereto irrevocably waives any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION
WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY
AS TO THIS WAIVER. 

                9.12   Independent
Nature of Investors’ Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the
obligations of any other Investor, and no Investor shall be responsible in any
way for the performance of the obligations of any other Investor under any
Transaction Document. The decision of each Investor to purchase Shares pursuant
to the Transaction Documents has been made by such Investor independently of any
other Investor. Nothing contained herein or in any Transaction Document, and no
action taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Investor acknowledges that no
other Investor has acted as agent for such Investor in connection with 

28 

making its investment hereunder and
that no Investor will be acting as agent of such Investor in connection with monitoring
its investment in the Shares or enforcing its rights under the Transaction Documents. Each
Investor shall be entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Investor to be joined
as an additional party in any proceeding for such purpose. The Company acknowledges that
each of the Investors has been provided with the same Transaction Documents for the
purpose of closing a transaction with multiple Investors and not because it was required
or requested to do so by any Investor. 

[signature page follows] 

29 

        IN
WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized
officers to execute this Agreement as of the date first above written. 

	 	 	 	 	 	 
	The Company:	 	INSIGNIA SYSTEMS, INC.
	

   		

By:  	 	

   	 
	 	

	   		Name:  	 	   	 
	   		Title:  	 	   	 

30 

	  	  	  	  	  	  
	The Investors: 	  	SPECIAL SITUATIONS FUND III, L.P. 
	

    		

By:   	 	

    	 
	 	

	   		Name:   	David M. Greenhouse 
	    		Title:   	General Partner 
	

Aggregate Initial Purchase Price:   $1,350,000
Number of Initial Shares:   1,080,000 
	

Address for Notice: 
	   		   	153 E. 53rd Street
55th Floor
New York, NY  10022 
	   		   	
with a copy to: 
	   		   	
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn:   John D. Hogoboom, Esq.
Telephone:   973.597.2500
Facsimile:   973.597.2400 
	  	  	

SPECIAL SITUATIONS CAYMAN FUND, L.P. 
	

    		

By:   	 	

    	 
	 	

	   		Name:   	David M. Greenhouse 
	    		Title:   	General Partner 
	

Aggregate Initial Purchase Price:   $450,000
Number of Initial Shares:   360,000 
	

Address for Notice: 
	   		   	153 E. 53rd Street
55th Floor
New York, NY  10022 

31 

	  	  	  	  	  	  
	   		   	
with a copy to: 
	   		   	
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn:   John D. Hogoboom, Esq.
Telephone:   973.597.2500
Facsimile:   973.597.2400 
	  	  	

SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P. 
	

    		

By:   	 	

    	 
	 	

	   		Name:   	David M. Greenhouse 
	    		Title:   	General Partner 
	

Aggregate Initial Purchase Price:   $700,000
Number of Initial Shares:   560,000 
	

Address for Notice: 
	   		   	153 E. 53rd Street
55th Floor
New York, NY  10022 
	   		   	
with a copy to: 
	   		   	
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn:   John D. Hogoboom, Esq.
Telephone:   973.597.2500
Facsimile:   973.597.2400 

32

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