8-K 1 a091_form8-k.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended Date of Report: November 19, 2003 --------------------------------- (date of earliest event reported) WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC ------------------------------------------- (Exact name of Registrant as Specified in Charter) North Carolina 333-109298-03 56-1967773 -------------- ------------- ---------- (State or Other (Commission (I.R.S. Employer Jurisdiction of Incorporation) File Number) Identification Number) One Wachovia Center ------------------- 301 South College Street, Suite D --------------------------------- Charlotte, North Carolina 28288 ------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (704) 374-4868 -------------- Wachovia Asset Securitization, Inc. ----------------------------------- (Former Name or Former Address, if Changed Since Last Report) Items 1 through 4, Item 6, Item 8 and Item 9 are not included because they are not applicable. Item 5. Other Events. ------------ On November 19, 2003, Wachovia Asset Securitization Issuance, LLC caused the issuance and sale of the Wachovia Asset Securitization Issuance, LLC Asset-Backed Notes, Series 2003-HE3, pursuant to an Indenture, dated as of November 19, 2003, among Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, as Issuer, U.S. Bank National Association, as Indenture Trustee and Wachovia Bank, National Association, as Paying Agent. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. ------------------------------------------------------------------ (a) Not applicable (b) Not applicable (c) Exhibits: The following execution copies of Exhibits to the Form S-3 Registration Statement of the Registrant are hereby filed. 4.1 Servicing Agreement, dated as of November 19, 2003, among Wachovia Bank, National Association, as Servicer and Paying Agent, the Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, as Issuer, and U.S. Bank National Association, as Indenture Trustee. 4.2 Trust Agreement, dated as of November 19, 2003, between Wachovia Asset Securitization Issuance, LLC, as Depositor, and Wilmington Trust Company, as Owner Trustee. 4.3 Indenture, dated as of November 19, 2003, among Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, as Issuer, U.S. Bank National Association, as Indenture Trustee and Wachovia Bank, National Association, as Paying Agent. 4.4 Auction Agent Agreement, dated as of November 19, 2003, among Wachovia Asset Securitization Issuance, LLC, as Holder of the Certificates, Wachovia Capital Markets, LLC, as Auction Agent, and the U.S. Bank National Association, as Indenture Trustee. 4.5 Broker-Dealer Agreement, dated as of November 19, 2003, among Wachovia Capital Markets, LLC, as Auction Agent, Wachovia Capital Markets, LLC, as Broker-Dealer and Wachovia Asset Securitization Issuance, LLC, as inital Holder of the Certificates. 10.1 Mortgage Loan Purchase Agreement, dated as of November 19, 2003, between Wachovia Bank, National Association, as Seller and as Servicer, and Wachovia Asset Securitization Issuance, LLC, as Purchaser or Depositor. 10.2 Note Guaranty Insurance Policy and Endorsement thereto issued by MBIA Insurance Corporation , relating to Wachovia Asset Securitization Issuance, LLC Asset-Backed Notes, Series 2003-HE3. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC By: /s/ Robert Perret ------------------------------------ Name: Robert Perret Title: Vice President Date: December 1, 2003 EXHIBIT INDEX Exhibit Number Description -------------- ----------- 4.1 Servicing Agreement, dated as of November 19, 2003, among Wachovia Bank, National Association, as Servicer and Paying Agent, the Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, as Issuer, and U.S. Bank National Association, as Indenture Trustee. 4.2 Trust Agreement, dated as of November 19, 2003, between Wachovia Asset Securitization Issuance, LLC, as Depositor, and Wilmington Trust Company, as Owner Trustee. 4.3 Indenture, dated as of November 19, 2003, among Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, as Issuer, U.S. Bank National Association, as Indenture Trustee and Wachovia Bank, National Association, as Paying Agent. 4.4 Auction Agent Agreement, dated as of November 19, 2003, among U.S. Bank National Association, as Indenture Trustee, Wachovia Capital Markets, LLC, as Auction Agent and Wachovia Asset Securitization Issuance, LLC, as Holder of the Certificates. 4.5 Broker-Dealer Agreement, dated as of November 19, 2003, among Wachovia Capital Markets, LLC, as Auction Agent, Wachovia Capital Markets, LLC, as Broker-Dealer and Wachovia Asset Securitization Issuance, LLC, as initial Holder of the Certificates. 10.1 Mortgage Loan Purchase Agreement, dated as of November 19, 2003, between Wachovia Bank, National Association, as Seller and as Servicer, and Wachovia Asset Securitization Issuance, LLC, as Purchaser or Depositor. 10.2 Note Guaranty Insurance Policy and Endorsement thereto issued by MBIA Insurance Corporation, relating to Wachovia Asset Securitization Issuance, LLC Asset-Backed Notes, Series 2003-HE3. [EXECUTION COPY] ================================================================================ WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC as Depositor and WILMINGTON TRUST COMPANY, as Owner Trustee ---------------------------------------- TRUST AGREEMENT Dated as of November 19, 2003 ---------------------------------------- WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC 2003-HE3 TRUST Wachovia Asset Securitization Issuance, LLC Asset-Backed Certificates, Series 2003-HE3 ================================================================================

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-iv- This trust agreement, dated as of November 19, 2003 (as amended from time to time, the "Trust Agreement"), is between Wachovia Asset Securitization Issuance, LLC, a North Carolina corporation, as depositor (the "Depositor"), and Wilmington Trust Company, a Delaware banking corporation, as owner trustee (the "Owner Trustee"). WITNESSETH: WHEREAS, the Depositor and the Owner Trustee desire to form a Delaware statutory trust; NOW, THEREFORE, In consideration of the mutual agreements herein contained, the Depositor and the Owner Trustee agree as follows: ARTICLE I Definitions Section 1.01. Definitions. For all purposes of this Trust Agreement, except ----------- as otherwise expressly provided herein or unless the context otherwise requires, capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in Appendix A to the indenture dated as of November 19, 2003 (the "Indenture"), among Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, as Issuer, Wachovia Bank National Association, as Paying Agent, and U.S. Bank National Association, as Indenture Trustee, and such Appendix A is hereby incorporated by reference and made are part of this Trust Agreement. All other capitalized terms used herein shall have the meanings specified herein. Section 1.02. Other Definitional Provisions. ----------------------------- (a) All terms defined in this Trust Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (b) As used in this Trust Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Trust Agreement or in any such certificate or other document, and accounting terms partly defined in this Trust Agreement or in any such certificate or other document to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Trust Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Trust Agreement or in any such certificate or other document shall control. (c) The words "hereof," "herein," "hereunder" and words of similar import when used in this Trust Agreement shall refer to this Trust Agreement as a whole and not to any particular provision of this Trust Agreement; Section and Exhibit references contained in this Trust Agreement are references to Sections and Exhibits in or to this Trust Agreement unless otherwise 1 specified; the term "including" shall mean "including without limitation"; "or" shall include "and/or"; and the term "proceeds" shall have the meaning ascribed thereto in the UCC. (d) The definitions contained in this Trust Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. (e) 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. ARTICLE II Organization Section 2.01. Name. The trust created hereby shall be known as "Wachovia ---- Asset Securitization Issuance, LLC 2003-HE3 Trust," in which name the Owner Trustee may conduct the business of the Trust, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. Section 2.02. Office. The office of the Trust shall be in care of the Owner ------ Trustee at the Corporate Trust Office or at such other address in Delaware as the Owner Trustee may designate by written notice to the Certificateholders, the Depositor, and the Enhancer. Section 2.03. Purposes and Powers. The purpose of the Trust is to engage in ------------------- the following activities: (a) to issue the Notes pursuant to the Indenture and the Certificates pursuant to this Trust Agreement and to sell the Notes and the Certificates; (b) to purchase the Mortgage Loans and to pay the organizational, start-up and transactional expenses of the Trust; (c) to assign, grant, transfer, pledge and convey the Mortgage Loans pursuant to the Indenture and to hold, manage and distribute to the Certificateholders pursuant to Section 5.01 any portion of the Mortgage Loans released from the Lien of, and remitted to the Trust pursuant to, the Indenture; (d) to enter into and perform its obligations under the Basic Documents to which it is to be a party; (e) to engage in those activities, including entering into agreements, that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith, including, without limitation, to accept additional contributions of equity that are not subject to the Lien of the Indenture; and 2 (f) subject to compliance with the Basic Documents, to engage in such other activities as may be required in connection with conservation of the Trust Estate and the making of distributions to the Securityholders. The Trust is hereby authorized to engage in the foregoing activities. The Trust shall not engage in any activity other than in connection with the foregoing or other than as required or authorized by the terms of this Trust Agreement or the other Basic Documents while any Note is outstanding without the consent of the holders of Certificates evidencing a majority of the aggregate Certificate Percentage Interest of the Certificates, the Indenture Trustee, the Enhancer and the holders of Notes representing a majority of the Note Balance of the Notes; provided that any Certificate registered in the name of the Seller or an Affiliate of the Seller will not be considered a Certificate for purposes of such consent; provided, further, that if 100% of the Certificates are held by the Seller or an Affiliate of the Seller, the consent of the Certificateholders will not be required. Section 2.04. Appointment of Owner Trustee. The Depositor hereby appoints ---------------------------- the Owner Trustee as trustee of the Trust effective as of the date hereof, to have all the rights, powers and duties set forth herein. Section 2.05. Initial Capital Contribution of Trust Estate. In ---------------------------------------------------- consideration of the delivery by the Owner Trustee, on behalf of the Trust, of the Securities to the Depositor or its designee, upon the order of the Depositor, the Depositor, as of the Closing Date and concurrently with the execution and delivery hereof, does hereby transfer, assign, set over and otherwise convey to the Trust, without recourse, but subject to the other terms and provisions of this Trust Agreement, all of the right, title and interest of the Depositor in and to the Trust Estate. The foregoing transfer, assignment, set over and conveyance does not, and is not intended to, result in a creation or an assumption by the Trust of any obligation of the Depositor or any other Person in connection with the Trust Estate or under any agreement or instrument relating thereto, except as specifically set forth herein. The Owner Trustee, on behalf of the Trust, acknowledges the conveyance to the Trust by the Depositor, as of the Closing Date, of the Trust Estate, including all right, title and interest of the Depositor in and to the Trust Estate. Concurrently with such conveyance and in exchange therefor, the Trust has pledged the Trust Estate to the Indenture Trustee and has executed the Certificates and the Notes and caused them to be duly authenticated and delivered. Section 2.06. Declaration of Trust. The Owner Trustee hereby declares that -------------------- it shall hold the Trust Estate in trust upon and subject to the conditions set forth herein for the use and benefit of the Certificateholders, subject to the obligations of the Trust under the Basic Documents. It is the intention of the parties hereto that the Trust constitute a statutory trust under the Statutory Trust Statute and that this Trust Agreement constitute the governing instrument of such statutory trust. Effective as of the date hereof, the Owner Trustee shall have all rights, powers and duties set forth herein and in the Statutory Trust Statute with respect to accomplishing the purposes of the Trust. It is the intention of the parties hereto that solely for federal, state and local income and franchise tax purposes, for so long as 100% of the Certificates are held by a single person or entity, the Trust shall be treated as an entity wholly owned by such person or entity, with the assets of the entity being the Trust Estate, and the Notes being debt of the entity, and the provisions of this Trust Agreement shall be interpreted to further this intention. If more than one person owns the Certificates, it is the further intention of the parties hereto that solely for federal, state and local 3 income and franchise tax purposes the Owner Trust shall be treated as a partnership, with the assets of the partnership being Trust Estate, the partners of the partnership being the Certificateholders and the Notes being debt of the partnership. The provisions of this Trust Agreement shall be interpreted to further such intentions. Neither the Depositor nor any Certificateholder shall have any personal liability for any liability or obligation of the Trust, other than the indemnification obligations as provided in Section 7.2 herein. Section 2.07. Title to Trust Property. Legal title to the Trust Estate ------------------------ shall be vested at all times in the Trust as a separate legal entity except where applicable law in any jurisdiction requires title to any part of the Trust Estate to be vested in a trustee or trustees, in which case title shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a separate trustee, as the case may be. Section 2.08. Situs of Trust. The Trust will be located and administered in -------------- the State of Delaware. All bank accounts maintained by the Owner Trustee on behalf of the Trust shall be located in the State of Delaware or the State of New York. The Trust shall not have any employees in any state other than Delaware; provided, however, that nothing herein shall restrict or prohibit the Owner Trustee from having employees within or without the State of Delaware or taking actions outside the State of Delaware in order to comply with Section 2.03. Payments will be received by the Trust only in Delaware, New York or the Corporate Trust Office of the Certificate Paying Agent, and payments will be made by the Trust only from Delaware, New York or the Corporate Trust Office of the Certificate Paying Agent. The only office of the Trust will be at the Corporate Trust Office of the Owner Trustee in Delaware. Section 2.09. Representations and Warranties of the Depositor. The ---------------------------------------------------- Depositor hereby represents and warrants to the Owner Trustee and the Enhancer that: (a) The Depositor has been duly formed, is validly existing in good standing under the laws of the state of its formation, and is duly qualified to do business and is in good standing under the laws of each jurisdiction where the character of its property, the nature of its business or the performance of its obligations, if any, under the Basic Documents make such qualification necessary. The jurisdiction of organization of the Depositor is Delaware and the Depositor is a "registered organization" (within the meaning of Section 9-102 of the UCC in effect in Delaware). (b) The Depositor has all requisite power and authority to own its properties, to conduct its business, to execute and deliver each of the Basic Documents to be executed and delivered by the Depositor and to enter into and perform all of its obligations thereunder and any of the transactions contemplated thereby. (c) Each Basic Document to be executed and delivered by the Depositor has been duly authorized, executed and delivered by the Depositor and, assuming the due execution and delivery by the other parties thereto, constitutes a legal, valid and binding agreement, enforceable against the Depositor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity). 4 (d) The execution and delivery by the Depositor of the Basic Documents to which the Depositor is a party and the performance by the Depositor of its obligations thereunder do not (A) violate any of the provisions of the organizational documents of the Depositor, (B) violate any provision of any law, governmental rule or regulation currently in effect applicable to the Depositor or to its properties or by which the Depositor or its properties may be bound or affected, which violation would materially and adversely affect the right of the Trust to enforce the obligations of the Depositor to perform any of the applicable provisions of the Basic Documents, (C) violate any judgment, decree, writ, injunction, award, determination or order currently in effect applicable to the Depositor or to its properties or by which the Depositor or its properties are bound or affected, which violation would materially and adversely affect the right of the Trust to enforce the obligations of the Depositor to perform any of the applicable provisions of the Basic Documents, (D) conflict in any material respect with, or result in a breach in any material respect of, or constitute a default in any material respect under, any of the provisions of any indenture, mortgage, deed of trust, contract or other instrument to which the Depositor is a party or by which it is bound, which conflict, breach or default would materially and adversely affect the right of the Depositor to perform any of the applicable provisions of the Basic Documents, or (E) result in the creation or imposition of any Lien upon any of the properties of the Depositor pursuant to the terms of any such indenture, mortgage, deed of trust, contract or other instrument (other than the Basic Documents). (e) No consent, approval, order or authorization by, and no filing with or notice to, any court or other governmental authority in respect of the Depositor is required in connection with the authorization, execution, delivery or performance by the Depositor of the Basic Documents to which it is a party. (f) There are no pending or, to the best of the Depositor's knowledge, threatened, actions, suits, proceedings or investigations before any court, administrative agency, arbitrator or governmental body that, if decided adversely, would materially and adversely affect (A) the condition (financial or otherwise), business or operations of the Depositor or (B) the ability of the Depositor to perform its obligations under, or the validity or enforceability of, the Basic Documents to which it is a party. (g) The Depositor is solvent, and the Depositor does not contemplate any pending insolvency or believe or have reason to believe that it will not be able to pay its debts and other obligations as they become due. The Depositor did not transfer the Transferred Property pursuant to this Agreement with any intent to hinder, delay or defraud any of its creditors. (h) Immediately prior to (1) the transfer hereunder, the Depositor had good and marketable title to the interest in the Initial Transferred Property conveyed to it, free and clear of all Liens, pledges, charges, encumbrances, security interests or adverse claims of any nature, and this Agreement constitutes a valid assignment and transfer to the Trust of all right, title and interest of the Depositor in and to the Initial Transferred Property and (2) the transfer under the related Subsequent Transfer Agreement, the Depositor had good and marketable title to the interest in the related Subsequent Transferred Property conveyed to it, free and clear of all liens, pledges, charges, encumbrances, security interests or adverse claims of any nature and this Agreement and the related Subsequent Transfer Agreement, when executed and delivered, will constitute a valid assignment and transfer to the Trust of all right, title and interest of the Depositor in and to the related Subsequent Transferred Property. 5 (i) The Depositor is not in default under any agreement, contract, instrument or indenture to which such party is a party or by which such party or its respective properties is or are bound, or with respect to any order of any court, administrative agency, arbitrator or governmental body, that would have a material adverse effect on the transactions contemplated under the Basic Documents; and no event has occurred that with notice or lapse of time or both would constitute such a default with respect to any such agreement, contract, instrument or indenture, or with respect to any such order of any court, administrative agency, arbitrator or governmental body. (j) The chief executive office of the Depositor is located at the address set forth in Section 10.04. (k) The Depositor acquired title to its interest in the Transferred Property in good faith, without notice of any adverse claim to the Transferred Property. (l) The Depositor has caused its computer and accounting records to be marked to show that a sale of, or a security interest in, the Transferred Property has been made or granted to the Issuer. (m) The purchase price paid by the Depositor for the portion of the Transferred Property relating to the Closing Date or related Subsequent Transfer Date, as applicable, is the fair market value of such portion of the Transferred Property. (n) This Agreement creates a valid and continuing security interest (as defined in the applicable UCC) in the Loan Agreements in favor of the Issuer, which security interest is prior to all other Liens (except as expressly permitted otherwise in this Indenture), and is enforceable as such as against creditors of and purchasers from the Issuer. (o) The Loan Agreements constitute "accounts," "general intangibles" or "instruments" within the meaning of the applicable UCC. (p) The Depositor owns and has good and marketable title to the Loan Agreements free and clear of any Lien of any Person. (q) The Depositor has received all consents and approvals required by the terms of the Loan Agreements to the sale of the Loan Agreements hereunder to the Trust. (r) The Depositor has caused or will have caused, within ten days, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Loan Agreements granted to the Trust hereunder. (s) Other than the security interest granted to the Trust pursuant to this Agreement, the Depositor has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Loan Agreements. The Depositor has not authorized the filing of and is not aware of any financing statements against the Depositor that include a description of collateral covering the Loan Agreements other than any financing statement relating to the security interest granted to the Depositor hereunder or any security interest that has been terminated. The Depositor is not aware of any judgment or tax lien filings against the Depositor. 6 (t) The Servicer, on behalf of the Depositor, has in its possession all original copies of the Loan Agreements. The Loan Agreements do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Depositor, the Trust and the Indenture Trustee. All financing statements filed or to be filed against the Depositor in favor of the Trust in connection herewith describing the Loan Agreements contain a statement to the following effect: "A purchase of or security interest in any collateral described in this financing statement will violate the rights of the Trust." (u) None of the Mortgage Notes that constitute or evidence the Mortgage Loans has any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Trust. The representations and warranties set forth in Section 2.09(n) through (t) shall not be waived without the prior written consent of Standard and Poor's. Upon notice from the Enhancer, the Issuer, the Owner Trustee, the Indenture Trustee, the Paying Agent or the Servicer, as applicable, of a breach of the Depositor's respective representations or warranties above that materially and adversely affects the interests of the Securityholders or the Enhancer in any Mortgage Loan, the Depositor shall, within 90 days of its discovery or its receipt of notice of such breach, either (i) cure such breach in all material respects or (ii) to the extent that such breach is with respect to a Mortgage Loan or a Related Document, either (A) repurchase such Mortgage Loan from the Purchaser or its assignee at the Repurchase Price, or (B) substitute one or more Eligible Substitute Loans received from the Seller pursuant to the Purchase Agreement. It is understood and agreed that the obligation of the Depositor to cure any breach, or to repurchase or substitute for any Mortgage Loan as to which such a breach has occurred and is continuing, shall constitute the sole remedy respecting such breach available to the Enhancer (other than with respect to the Enhancer's rights under the Insurance Agreement), the Issuer, the Certificateholders (or the Owner Trustee on behalf of the Certificateholders) and the Noteholders (or the Indenture Trustee on behalf of the Noteholders) against the Depositor. Section 2.10. Payment of Trust Fees. The Owner Trustee shall pay the Trust's fees and expenses incurred with respect to the performance of the Trust's duties under the Indenture. ARTICLE III Conveyance of the Mortgage Loans; Certificates Section 3.01. Conveyance of the Mortgage Loans. -------------------------------- (a) The Depositor, by the execution and delivery of this Agreement, does hereby sell, assign, set over, and otherwise convey to the Trust, without recourse (except as expressly provided herein), all of its right, title and interest, whether now owned or existing or hereafter created, arising, or acquired, in, to and under (i) the Initial Mortgage Loans and the other related Initial Transferred Property and (ii) the Subsequent Mortgage Loans and other related Subsequent Transferred Property, in each case purchased by the Depositor from the Seller pursuant to the Purchase Agreement; provided, however, that the Trust does not assume any obligations (including any obligations to fund Draws) arising under or related to the Related Documents. Such 7 conveyance shall be deemed to be made: (1) with respect to the Cut-Off Date Principal Balances relating to the Initial Mortgage Loans, as of the Closing Date; (2) with respect to the Cut-Off Date Principal Balances relating to the Subsequent Mortgage Loans, as of the related Subsequent Transfer Date; (3) with respect to the amount of each Additional Balance created on or after the Cut-Off Date or the Subsequent Cut-Off Date, as applicable, and prior to the commencement of the Rapid Amortization Period, as of the later of the Closing Date or the related Subsequent Cut-Off Date, as applicable, and the date that the corresponding Draw was made pursuant to the related Loan Agreement, subject to the receipt by the Depositor of consideration therefor as provided herein under Section 3.02(c). (b) The Depositor hereby assigns to the Trust all of the Depositor's right, title and interest to and under the Purchase Agreement and any Subsequent Transfer Agreement executed by the Depositor as Purchaser, including without limitation the Depositor's right to enforce the obligations of the Seller thereunder (including the Seller's obligation to repurchase Mortgage Loans as the result of a breach of the Seller's representations and warranties in the Purchase Agreement). (c) In connection with the conveyance by the Depositor of the Initial Mortgage Loans, the Depositor further agrees, at its own expense, on or prior to the Closing Date, to indicate in its books and records that the Initial Mortgage Loans have been sold to the Trust pursuant to this Agreement, and to deliver to the Trust true and complete lists of all of the Mortgage Loans specifying for each Mortgage Loan the information contained in the Mortgage Loan Schedule. The Mortgage Loan Schedule is attached as Exhibit A to the Servicing Agreement and is hereby incorporated into and made a part of this Agreement. (d) Upon the sale of the Initial Mortgage Loans and the Subsequent Mortgage Loans, as applicable, the ownership of each related Loan Agreement, each related Mortgage and the contents of the related Mortgage File shall be vested in the Trust and the ownership of all records and documents with respect to the Initial Mortgage Loans and the Subsequent Mortgage Loans, as applicable, that are prepared by or that come into the possession of the Depositor, as seller of the Initial Mortgage Loans hereunder and the Subsequent Mortgage Loans under the related Subsequent Transfer Agreement, or by the Servicer under this Agreement shall immediately vest in the Trust, and shall be retained and maintained in trust by the Servicer at the will of the Trust, in such custodial capacity only, or in trust by the Indenture Trustee if the Mortgage Files are required to be transferred by the Servicer to the Indenture Trustee, pursuant to the Servicing Agreement; provided, however, that any records and documents that come into the possession of the Depositor shall be promptly delivered to the Servicer or the Indenture, as applicable. The Depositor's records will accurately reflect the sale of the Initial Mortgage Loans by it to the Trust. The Trust hereby acknowledges its acceptance of all right, title and interest to the property conveyed to it pursuant to this Section 3.01. (e) The parties hereto intend that the transactions set forth herein constitute a sale, including for accounting purposes, by the Depositor to the Trust of the Depositor's right, title and interest in and to the Mortgage Loans and the other Transferred Property, and not a secured borrowing. In the event the transactions set forth herein are deemed not to be a sale, the Depositor hereby grants to the Trust a security interest in all of the Depositor's right, title and interest, whether now owned or hereafter acquired, in, to and under the Transferred Property to secure all of the 8 Depositor's obligations hereunder, and this Agreement shall and hereby does constitute a security agreement under applicable law. Each of the Mortgage Loan Schedules is hereby incorporated by reference and made a part of this Trust Agreement. The Depositor agrees to take or cause to be taken such actions and to execute such documents, including without limitation the authorization and the filing of any continuation statements with respect to the UCC financing statements filed with respect to the Mortgage Loans and other Transferred Property by the Depositor on the Closing Date, if any, and any amendments thereto required to reflect a change in the name or corporate structure of the Depositor or the filing of any additional UCC financing statements due to the change in the principal office or jurisdiction of organization of the Depositor as are necessary to perfect and protect the Trust' and its assignees' interests in the Transferred Property. The Depositor shall file any such continuation statements on a timely basis. Section 3.02. Payment of Purchase Price for Subsequent Mortgage Loans and ------------------------------------------------------------ Additional Balances. ------------------- (a) The "Purchase Price" for the Subsequent Mortgage Loans and the other Subsequent Transferred Property to be paid by the Trust to the Depositor on the related Subsequent Transfer Date shall be 100 percent of the related Cut-Off Date Principal Balances thereof (as identified on the Mortgage Loan Schedule attached to the related Subsequent Transfer Agreement provided by the Depositor). In the case of each Additional Balance transferred hereunder created on or after the Cut-Off Date or Subsequent Cut-Off Date, as applicable, and prior to the commencement of the Rapid Amortization Period, the Purchase Price thereof shall be 100 percent of the principal amount of the related Draw under the related Loan Agreement as of the later of the Closing Date or Subsequent Transfer Date, as applicable, and the date of creation of such Additional Balance, adjusted to reflect such factors as the Depositor and the Trust mutually agree will result in a Purchase Price determined to be the fair market value of such Additional Balance and the related Transferred Property. (b) With respect to each Subsequent Mortgage Loan transferred pursuant to a Subsequent Transfer Agreement and each Additional Balance transferred hereunder or pursuant to a Subsequent Transfer Agreement with respect to any Mortgage Loan, as applicable, the Trust shall pay or cause to be paid to the Depositor or its designee the Purchase Price specified above in Section 3.02(a) for such Additional Balance or Subsequent Mortgage Loan in one of the following ways, as applicable: (i) a cash payment pursuant to Section 3.02(a) hereof in an amount equal to the related Draw or Cut-Off Date Principal Balance, as applicable, if then available from Principal Collections on any Payment Date or amounts on deposit in the Funding Account, as applicable, or (ii) with respect to an Additional Balance only, an increase in the Additional Balance Increase Amount as of the day on which such Additional Balance was created, equal to the amount of such Additional Balance. Section 3.03. Draws During Rapid Amortization Period. During the Rapid ---------------------------------------- Amortization Period, any Excluded Draws shall not be Additional Balances, and the ownership of the related balances shall be retained by the Seller. Payments and collections allocable pursuant to Section 3.04 to an Excluded Draw shall not be deposited into the Custodial Account, the Distribution Account or the Note Payment Account, and shall be distributed by the Servicer to the Seller no less frequently than monthly in accordance with reasonable instructions provided by the Seller. 9 Section 3.04. Allocation. The Depositor, the Trust and the Servicer agree ---------- that all collections on the Mortgage Loans will be allocated and applied as provided by the terms of the related Loan Agreements or by applicable law. Except with respect to Liquidation Loss Amounts, if the Loan Agreement or applicable law does not specify a method of allocation and application for particular Collections, such Collections shall be allocated and applied (i) first, to interest pro rata (based on the respective amounts coming due on such day) among the amounts coming due on such dates, and (ii) then, to principal in the order of the dates on which such amounts were first incurred. If, as a result of the provisions of this Section 3.04, Collections are allocated to Excluded Draws, such Collections shall not be property of the Purchaser or its assignees and shall be paid by the Servicer to the Seller as provided in Section 3.03. Liquidation Loss Amounts shall be allocated as provided in the definition of Excluded Amount. Section 3.05. Addition of Subsequent Mortgage Loans. The transfer by the -------------------------------------- Depositor of any Subsequent Mortgage Loans to the Issuer, is conditioned upon the satisfaction of each of the following conditions on or prior to the related Subsequent Transfer Date: (a) the Depositor shall have provided the Indenture Trustee, the Issuer, the Paying Agent, the Enhancer and the Rating Agencies with a timely Addition Notice substantially in the form of Exhibit I attached hereto, which notice shall be given no later than five Business Days prior to the related Subsequent Transfer Date, and shall designate the Subsequent Mortgage Loans to be sold to the Issuer and the aggregate Principal Balance of such Subsequent Mortgage Loans as of the related Subsequent Cut-Off Date; (b) the Depositor shall have delivered to the Indenture Trustee, the Paying Agent, the Enhancer and the Rating Agencies duly executed Subsequent Transfer Agreement substantially in the form of Exhibit J, (A) confirming the satisfaction of each condition precedent specified in this Section 3.05(b) and in Section 2 of the related Subsequent Transfer Agreement and (B) including a Mortgage Loan Schedule listing the Subsequent Mortgage Loans; (c) as of each Subsequent Transfer Date, as evidenced by delivery to the Indenture Trustee of the Subsequent Transfer Agreement, the Depositor shall not be insolvent, made insolvent by such transfer or aware of any pending insolvency; (d) such sale and transfer shall not result in a material adverse tax consequence to the Issuer or, due to any action or inaction on the part of the Seller, to the Securityholders; and (e) the Depositor shall have provided each of the Enhancer and each Rating Agency with loan level information in the Enhancer's and each such Rating Agency's standard format no later than five Business Days prior to the related Subsequent Transfer Date, which shall designate the Subsequent Mortgage Loans to be sold to the Issuer, and shall receive verbal consent from the Enhancer and verbal confirmation from each Rating Agency that the addition of the Subsequent Mortgage Loans will not result in a Rating Event. Within five Business Days after each Subsequent Transfer Date, the Depositor shall deliver to the Issuer, the Rating Agencies, the Enhancer, the Paying Agent and the Indenture Trustee a copy of the Mortgage Loan Schedule reflecting the Subsequent Mortgage Loans in electronic format. 10 Section 3.06. Initial Ownership. Upon the formation of the Trust by the ------------------ contribution by the Depositor pursuant to Section 2.05 and the conveyance of the Initial Mortgage Loans pursuant to Section 3.01 and the issuance of the Certificates, Depositor shall be the sole Certificateholder. Section 3.07. Issuance of Certificates. The Certificates shall be issued in ------------------------ minimum denominations of a Percentage Interest of 10.0000% and integral multiples of 0.0001% in excess thereof. The Certificates shall be issued in substantially the form attached hereto as Exhibit A. The Certificates shall be executed on behalf of the Trust by manual or facsimile signature of an authorized officer of the Owner Trustee and authenticated in the manner provided in Section 3.08. Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefit of this Trust Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the authentication and delivery of such Certificates or did not hold such offices at the date of authentication and delivery of such Certificates. A Person shall become a Certificateholder and shall be entitled to the rights and subject to the obligations of a Certificateholder hereunder upon such Person's acceptance of a Certificate duly registered in such Person's name, pursuant to Section 3.09. A transferee of a Certificate shall become a Certificateholder and shall be entitled to the rights and subject to the obligations of a Certificateholder hereunder upon such transferee's acceptance of a Certificate duly registered in such transferee's name pursuant to and upon satisfaction of the conditions set forth in Section 3.09. Section 3.08. Authentication of Certificates. Concurrently with the -------------------------------- acquisition of the Initial Mortgage Loans by the Trust, the Owner Trustee or the Certificate Paying Agent shall cause the Certificates in an initial Percentage Interest of 100.00% to be executed on behalf of the Trust, authenticated by the Indenture Trustee and delivered to or upon the written order of the Depositor, signed by its chairman of the board, its president or any vice president, without further corporate action by the Depositor, in authorized denominations. No Certificate shall entitle the Certificateholder thereof to any benefit under this Trust Agreement or be valid for any purpose unless there shall appear on such Certificate a certificate of authentication substantially in the form set forth in Exhibit A hereto, executed by the Owner Trustee or the Indenture Trustee, by manual signature, and such authentication shall constitute conclusive evidence that such Certificate has been duly authenticated and delivered hereunder. All Certificates shall be dated the date of their authentication. Section 3.09. Registration of and Limitations on Transfer and Exchange of ------------------------------------------------------------ Certificates. The Certificate Registrar shall keep or cause to be kept, at the ------------ office or agency maintained pursuant to Section 3.13, a Certificate Register 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 exchanges of Certificates as herein provided. The Paying Agent shall be the initial Certificate Registrar. If the Certificate Registrar resigns or is removed, the Owner Trustee shall appoint a successor Certificate Registrar. Subject to satisfaction of the conditions set forth below, upon surrender for registration of transfer of any Certificate at the office or agency maintained pursuant to Section 3.13, the Owner Trustee shall execute, authenticate and deliver (or shall cause the Indenture Trustee as its 11 authenticating agent to authenticate and deliver), in the name of the designated transferee or transferees, one or more new Certificates in authorized denominations of a like aggregate amount dated the date of authentication by the Owner Trustee or the Indenture Trustee. At the option of a Certificateholder, Certificates may be exchanged for other Certificates of authorized denominations of a like aggregate amount upon surrender of the Certificates to be exchanged at the office or agency maintained pursuant to Section 3.13. The initial Certificateholder agrees to not transfer any Certificate during either the Revolving Period or the Managed Amortization Period, unless the initial Certificateholder receives an Opinion of Counsel stating that such transfer of the Certificate will not adversely affect the opinion delivered on the Closing Date by such counsel regarding the transfer of the Mortgage Loans by Seller to the Depositor. Every Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Certificate Registrar duly executed by the Certificateholder or such Certificateholder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer or exchange shall be cancelled and subsequently disposed of by the Certificate Registrar in accordance with its customary practice. No service charge shall be made for any registration of transfer or exchange of Certificates, but the Owner Trustee or the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Certificates. Except as described below, each Certificateholder shall establish its non-foreign status by submitting to the Certificate Paying Agent an IRS Form W-9 and the Certificate of Non-Foreign Status (in substantially the form attached hereto as Exhibit F). A Certificate may be transferred to a Certificateholder unable to establish its non-foreign status as described in the preceding paragraph only if such Certificateholder provides an Opinion of Counsel to the Depositor, the Certificate Registrar and the Enhancer, which Opinion of Counsel shall not be an expense of the Trust, the Owner Trustee, the Certificate Registrar, the Enhancer or the Depositor, satisfactory to the Depositor, the Certificate Registrar and the Enhancer, that such transfer (1) will not affect the tax status of the Owner Trust and (2) will not adversely affect the interests of any Securityholder or the Enhancer, including, without limitation, as a result of the imposition of any United States federal withholding taxes on the Owner Trust (except to the extent that such withholding taxes would be payable solely from amounts otherwise distributable to the Certificate of the prospective transferee). If such transfer occurs and such foreign Certificateholder becomes subject to such United States federal withholding taxes, any such taxes will be withheld by the Certificate Paying Agent at the direction of the Servicer. Each Certificateholder unable to establish its non-foreign status shall submit to the Certificate Paying Agent a copy of its Form W-8BEN, Form W-8ECI or Form W-8IMY, or such successor forms thereto as required by then-applicable regulations, and shall resubmit such form every three years or with such frequency as required by then-applicable regulations. In addition, prior to any transfer of a Certificate prior to September of 2008 to a Certificateholder that cannot establish its non-foreign status, the Certificateholder shall deliver to the Owner Trustee, the Paying Agent and the Indenture Trustee, at the expense of the Certificateholder, an Opinion of Counsel that no withholding tax would apply to payments made under the Yield Maintenance Agreement. 12 No transfer, sale, pledge or other disposition of a Certificate shall be made unless such transfer, sale, pledge or other disposition is exempt from the registration requirements of the Securities Act and any applicable state securities laws or is made in accordance with the Securities Act and such state laws. In the event of any such transfer, the Certificate Registrar or the Depositor shall prior to such transfer require the transferee to execute (A) either (i) (a) an investment letter in substantially the form attached hereto as Exhibit C (or in such form and substance reasonably satisfactory to the Certificate Registrar and the Depositor) which investment letters shall not be an expense of the Trust, the Owner Trustee, the Certificate Registrar, the Servicer or the Depositor and which investment letter states that, among other things, such transferee (a) is a "qualified institutional buyer" as defined under Rule 144A, acting for its own account or the accounts of other "qualified institutional buyers" as defined under Rule 144A, and (b) is aware that the proposed transferor intends to rely on the exemption from registration requirements under the Securities Act, provided by Rule 144A or (ii) (a) a written Opinion of Counsel acceptable to and in form and substance satisfactory to the Certificate Registrar and the Depositor that such transfer may be made pursuant to an exemption, describing the applicable exemption and the basis therefor, from the Securities Act and such state laws or is being made pursuant to the Securities Act and such state laws, which Opinion of Counsel shall not be an expense of the Trust, the Owner Trustee, the Certificate Registrar, the Servicer or the Depositor and (b) the transferee executes a representation letter, substantially in the form of Exhibit D hereto, and the transferor executes a representation letter, substantially in the form of Exhibit E hereto, each acceptable to and in form and substance satisfactory to the Certificate Registrar and the Depositor certifying the facts surrounding such transfer, which representation letters shall not be an expense of the Trust, the Owner Trustee, the Certificate Registrar, the Servicer or the Depositor and (B) the Certificate of Non-Foreign Status (in substantially the form attached hereto as Exhibit F) acceptable to and in form and substance reasonably satisfactory to the Certificate Registrar and the Depositor, which certificate shall not be an expense of the Trust, the Owner Trustee, the Certificate Registrar or the Depositor. If such Certificateholder is unable to provide a Certificate of Non-Foreign Status, such Certificateholder must provide an Opinion of Counsel as described in the preceding paragraph. The Certificateholder desiring to effect such transfer shall, and does hereby agree to, indemnify the Trust, the Owner Trustee, the Certificate Registrar, the Certificate Paying Agent, the Indenture Trustee, the Servicer, the Paying Agent, the Enhancer and the Depositor against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws. No transfer of Certificates or any interest therein shall be made to any Plan, any Person acting, directly or indirectly, on behalf of any such Plan or any Person acquiring such Certificates with Plan Assets unless the Depositor, the Owner Trustee, the Certificate Registrar, the Enhancer and the Servicer are provided with an Opinion of Counsel that establishes to the satisfaction of the Depositor, the Owner Trustee, the Certificate Registrar, the Enhancer and the Servicer that the purchase of Certificates is permissible under applicable law, will not constitute or result in any prohibited transaction under ERISA or Section 4975 of the Code and will not subject the Depositor, the Owner Trustee, the Certificate Registrar, the Certificate Paying Agent, the Indenture Trustee, the Paying Agent, the Enhancer or the Servicer to any obligation or liability (including obligations or liabilities under ERISA or Section 4975 of the Code) in addition to those undertaken in this Trust Agreement, which Opinion of Counsel shall not be an expense of the Depositor, the Owner Trustee, the Certificate Registrar, the Enhancer or the Servicer. In lieu of such Opinion of Counsel, a Plan, any Person acting, directly or indirectly, on behalf of any such Plan or any Person acquiring such Certificates with Plan Assets of a Plan may provide a certification in the form of Exhibit G to this Trust Agreement, which the Depositor, the Owner Trustee, the Certificate Registrar, the Certificate Paying Agent, the Indenture Trustee, the Paying Agent, the Enhancer and the Servicer may rely upon 13 without further inquiry or investigation. Neither an Opinion of Counsel nor a certification will be required in connection with the initial transfer of any such Certificate by the Depositor to an Affiliate of the Depositor (in which case, the Depositor or any such Affiliate shall be deemed to have represented that such Affiliate is not a Plan or a Person investing Plan Assets of any Plan) and the Owner Trustee shall be entitled to conclusively rely upon a representation (which, upon the request of the Owner Trustee, shall be a written representation) from the Depositor of the status of such transferee as an Affiliate of the Depositor. In addition, no transfer of a Certificate shall be permitted, and no such transfer shall be registered by the Certificate Registrar or be effective hereunder, unless evidenced by an Opinion of Counsel addressed to the Certificate Registrar, the Servicer and the Enhancer that establishes that such transfer or the registration of such transfer would not cause the Trust to be classified as a publicly traded partnership, by having more than 100 Certificateholders at any time during the taxable year of the Trust, an association taxable as a corporation, a corporation or a taxable mortgage pool for federal and relevant state income tax purposes, which Opinion of Counsel shall not be an expense of the Certificate Registrar and shall be an expense of the proposed transferee. No Opinion of Counsel will be required if such transfer is made to a nominee of an existing beneficial holder of a Certificate. In addition, no transfer, sale, assignment, pledge or other disposition of a Certificate shall be made unless the proposed transferee executes a representation letter substantially in the form of Exhibit H hereto, that (1) the transferee is acquiring such Certificate for its own behalf and is not acting as agent or custodian for any other Person or entity in connection with such acquisition and (2) if the transferee is a partnership, grantor trust or S corporation for federal income tax purposes, the Certificates acquired are not more than 50% of the assets of the partnership, grantor trust or S corporation. Section 3.10. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any ------------------------------------------------- mutilated Certificate shall be surrendered to the Certificate Registrar, or if the Certificate Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there shall be delivered to the Certificate Registrar, the Indenture Trustee and the Owner Trustee such security or indemnity as may be required by them to save each of them and the Issuer from harm, then in the absence of notice to the Certificate Registrar, the Indenture Trustee or the Owner Trustee that such Certificate has been acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee or the Indenture Trustee, as the Trust's authenticating agent, shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor and denomination. In connection with the issuance of any new Certificate under this Section 3.10, the Owner Trustee, the Indenture Trustee or the Certificate Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section 3.10 shall constitute conclusive evidence of ownership in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. Section 3.11. Persons Deemed Certificateholders. Prior to due presentation --------------------------------- of a Certificate for registration of transfer, the Owner Trustee, the Certificate Registrar or any Certificate Paying Agent may treat the Person in whose name any Certificate is registered in the Certificate Register as the owner of such Certificate for the purpose of receiving distributions pursuant to 14 Section 5.02 and for all other purposes whatsoever, and none of the Trust, the Owner Trustee, the Certificate Registrar or the Certificate Paying Agent shall be bound by any notice to the contrary. Section 3.12. Access to List of Certificateholders' Names and Addresses. ------------------------------------------------------------ The Certificate Registrar shall furnish or cause to be furnished to the Depositor or the Owner Trustee, within 15 days after receipt by the Certificate Registrar of a written request therefor from the Depositor or the Owner Trustee, a list, in such form as the Depositor or the Owner Trustee, as the case may be, may reasonably require, of the names and addresses of the Certificateholders as of the most recent Record Date. If three or more Certificateholders, or one or more Certificateholders evidencing not less than 25% of the Certificate Percentage Interest, apply in writing to the Owner Trustee or the Certificate Registrar, and such application states that the applicants desire to communicate with other Certificateholders, with respect to their rights under this Agreement or under the Certificates and such application is accompanied by a copy of the communication that such applicants propose to transmit, then the Owner Trustee shall, within five (5) Business Days after the receipt of such application, afford such applicants access during normal business hours to the current list of Certificateholders. Each Certificateholder, by receiving and holding a Certificate, shall be deemed to have agreed not to hold any of the Trust, the Depositor, the Certificate Registrar, the Certificate Paying Agent or the Owner Trustee accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. Section 3.13. Maintenance of Office or Agency. The Owner Trustee, on behalf ------------------------------- of the Trust, shall maintain an office or offices or agency or agencies where Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Owner Trustee in respect of the Certificates and the Basic Documents may be served. The Owner Trustee initially designates the Corporate Trust Office of the Certificate Registrar (or such other office as the Certificate Registrar may specify to the Owner Trustee) as its office for such purposes. The Owner Trustee shall give prompt written notice to the Depositor, the Certificateholders, the Indenture Trustee and the Enhancer of any change in the location of the Certificate Register or any such office or agency. Section 3.14. Certificate Paying Agent. ------------------------ (a) The Certificate Paying Agent shall make distributions to Certificateholders from the Distribution Account on behalf of the Trust in accordance with the provisions of the Certificates and Section 5.01 hereof from payments remitted to the Certificate Paying Agent by the Paying Agent pursuant to Section 3.05 of the Indenture. The Trust hereby appoints the Paying Agent as the Certificate Paying Agent. The Certificate Paying Agent shall: (i) hold all sums held by it for the payment of amounts due with respect to the Certificates 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; (ii) give the Owner Trustee notice of any default by the Trust of which a Responsible Officer of the Certificate Paying Agent has actual knowledge in the making of any payment required to be made with respect to the Certificates; 15 (iii) at any time during the continuance of any such default, upon the written request of the Owner Trustee, forthwith pay to the Owner Trustee on behalf of the Trust all sums so held in trust by such Certificate Paying Agent; (iv) immediately resign as Certificate Paying Agent and forthwith pay to the Owner Trustee on behalf of the Trust all sums held by it in trust for the payment of Certificates if at any time it ceases to act as Paying Agent under the Indenture or meet the standards required to be met by the Paying Agent at the time of its appointment under the Indenture; (v) comply with all requirements of the Code with respect to the withholding from any payments made by it on any Certificates of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith; and (vi) make available to the Owner Trustee a copy of the Servicing Certificate prepared with respect to each Payment Date by the Servicer pursuant to Section 4.01 of the Servicing Agreement. (b) The Trust may revoke such power and remove the Certificate Paying Agent if the Owner Trustee determines in its sole discretion that the Certificate Paying Agent shall have failed to perform its obligations under this Trust Agreement in any material respect. The Paying Agent shall be permitted to resign as Certificate Paying Agent upon 30 days' written notice to the Owner Trustee and the Enhancer; provided, however, that the Paying Agent is also resigning as Paying Agent under the Indenture at such time. In the event that the Paying Agent shall no longer be the Certificate Paying Agent under this Trust Agreement and Paying Agent under the Indenture, the Owner Trustee shall appoint a successor to act as Certificate Paying Agent (which shall be a bank or trust company) and which shall also be the successor Paying Agent under the Indenture. The Owner Trustee shall cause such successor Certificate Paying Agent or any additional Certificate Paying Agent appointed by the Owner Trustee to execute and deliver to the Owner Trustee an instrument to the effect set forth in this Section 3.14 as it relates to the Certificate Paying Agent. The Certificate Paying Agent shall return all unclaimed funds to the Trust and upon removal of a Certificate Paying Agent such Certificate Paying Agent shall also return all funds in its possession to the Trust. The provisions of Sections 6.01, 6.04 and 7.01 shall apply to the Certificate Paying Agent to the extent applicable. Any reference in this Trust Agreement to the Certificate Paying Agent shall include any co-paying agent unless the context requires otherwise. (c) The Certificate Paying Agent shall establish and maintain with itself the Distribution Account in which the Certificate Paying Agent shall deposit, on the same day as it is received from the Servicer, the Indenture Trustee or Paying Agent, each remittance received by the Certificate Paying Agent with respect to payments made pursuant to the Indenture or the Servicing Agreement. Pending any such distribution, funds deposited in the Distribution Account on a Payment Date and not distributed to the Certificateholders on such Payment Date shall be invested by the Certificate Paying Agent in Permitted Investments selected by the Servicer (or if no selection is made by the Servicer in Permitted Investments described in clause (v) of the definition thereof) maturing no later than the Business Day preceding the next succeeding Payment Date (except that any investment in the institution with which the Distribution Account is maintained may mature or be payable on demand on such Payment Date and shall not be sold or disposed of prior to the maturity). All investment income earned in respect of funds on deposit in the Distribution Account 16 shall be credited to the Distribution Account, except that an amount equal to one day's interest on any such investment shall be for the benefit of the Certificate Paying Agent. A portion of any losses incurred in respect of any such investments shall be deposited in the Distribution Account by the Certificate Paying Agent out of its own funds immediately as realized in an amount such that the percentage of any such loss allocated to the Certificate Paying Agent shall equal a fraction, the numerator of which equals one (1) and the denominator of which equals the number of days the funds in the Distribution Account were invested in such investment. The remainder of any such losses shall be charged against the Distribution Account. The Certificate Paying Agent shall make all distributions on the Certificates as provided in Section 3.05 of the Indenture and Section 5.01(a) of this Trust Agreement from moneys on deposit in the Distribution Account. Section 3.15. Cooperation. The Owner Trustee shall cooperate in all ----------- respects with any reasonable request by the Enhancer for action to preserve or enforce the Enhancer's rights or interest under this Trust Agreement or the Insurance Agreement, consistent with this Trust Agreement and without limiting the rights of the Certificateholders as otherwise expressly set forth in this Trust Agreement. Section 3.16. [Reserved]. -------- Section 3.17. Subordination. Except as otherwise provided in the Basic ------------- Documents, for so long as any Notes are outstanding or unpaid, the Certificateholders will generally be subordinated in right of payment, under the Certificates or otherwise, to payments to the Noteholders under, or otherwise related to, the Indenture. If an Event of Default has occurred and is continuing under the Indenture, the Certificates will be fully subordinated to obligations owing by the Trust to the Noteholders and the Enhancer under, or otherwise related to, the Indenture, and no distributions will be made on the Certificates until the Noteholders, the Paying Agent, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar and the Indenture Trustee and the Enhancer have been irrevocably paid in full. Section 3.18. No Priority Among Certificates. All Certificateholders shall ------------------------------ rank equally as to amounts distributable upon the liquidation, dissolution or winding up of the Trust, with no preference or priority being afforded to any Certificateholders over any other Certificateholders. ARTICLE IV Authority and Duties of Owner Trustee Section 4.01. General Authority. The Owner Trustee is authorized and ------------------ directed to execute and deliver the Basic Documents to which the Trust is to be a party and each certificate or other document attached as an exhibit to or contemplated by the Basic Documents to which the Trust is to be a party, as well as any certificate that supports the factual assumptions made in any Opinion of Counsel delivered on the Closing Date, and any amendment or other agreement or instrument described herein, in each case, in such form as the Owner Trustee shall approve, as evidenced conclusively by the Owner Trustee's execution thereof. In addition to the foregoing, the Owner Trustee is obligated to take all actions required of the Trust pursuant to the Basic Documents. Section 4.02. General Duties. The Owner Trustee shall be responsible to --------------- administer the Trust pursuant to the terms of this Trust Agreement and the other Basic Documents to which the 17 Trust is a party and in the interest of the Certificateholders, subject to the Basic Documents and in accordance with the provisions of this Trust Agreement. Section 4.03. Action upon Instruction. ----------------------- (a) Subject to this Article IV and Section 10.13 of this Trust Agreement and in accordance with the terms of the Basic Documents, the Certificateholders may by written instruction direct the Owner Trustee in the management of the Trust. Such direction may be exercised at any time by written instruction of the Certificateholders pursuant to this Article IV. (b) Notwithstanding the foregoing, the Owner Trustee shall not be required to take any action hereunder or under any Basic Document if the Owner Trustee shall have reasonably determined, or shall have been advised by counsel, that such action is likely to result in liability on the part of the Owner Trustee or is contrary to the terms hereof or of any other Basic Document or is otherwise contrary to law. (c) Whenever the Owner Trustee is unable to decide between alternative courses of action permitted or required by the terms of this Trust Agreement or under any other Basic Document, or in the event that the Owner Trustee is unsure as to the application of any provision of this Trust Agreement or any other Basic Document or any such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Trust Agreement permits any determination by the Owner Trustee or is silent or is incomplete as to the course of action that the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee shall promptly give notice (in such form as shall be appropriate under the circumstances) to the Certificateholders (with a copy to the Enhancer) requesting instruction as to the course of action to be adopted, and to the extent the Owner Trustee acts in good faith in accordance with any written instructions received from Certificateholders of Certificates representing a majority of the aggregate Certificate Percentage Interest of the Certificates, the Owner Trustee shall not be liable on account of such action to any Person. If the Owner Trustee shall not have received appropriate instruction within 10 days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Trust Agreement or the other Basic Documents, as it shall deem to be in the best interests of the Certificateholders, and the Owner Trustee shall have no liability to any Person for such action or inaction. Section 4.04. No Duties Except as Specified under Specified Documents or in ------------------------------------------------------------- Instructions. The Owner Trustee shall not have any duty or obligation to manage, ------------ make any payment with respect to, register, record, sell, dispose of, or otherwise deal with the Trust Estate, or to otherwise take or refrain from taking any action under, or in connection with, any document contemplated hereby to which the Owner Trustee is a party, except as expressly provided (i) in accordance with the powers granted to and the authority conferred upon the Owner Trustee pursuant to this Trust Agreement, (ii) in accordance with the Basic Documents and (iii) in accordance with any document or instruction delivered to the Owner Trustee pursuant to Section 4.03; and no implied duties or obligations shall be read into this Trust Agreement or any other Basic Document against the Owner Trustee. The Owner Trustee shall have no responsibility for filing any financing or continuation statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or lien granted to it hereunder or to 18 prepare or file any filing with the Commission for the Trust or to record this Trust Agreement or any other Basic Document. The Owner Trustee nevertheless agrees that it will, at its own cost and expense, promptly take all action as may be necessary to discharge any liens on any part of the Trust Estate that result from actions by, or claims against, the Owner Trustee that are not related to the ownership or the administration of the Trust Estate. Section 4.05. Restrictions. ------------ (a) The Owner Trustee shall not take any action (i) that is inconsistent with the purposes of the Trust set forth in Section 2.03 or (ii) that, to the actual knowledge of the Owner Trustee, would cause the Trust to be treated as an association (or a publicly-traded partnership) taxable as a corporation or a taxable mortgage pool for federal income tax purposes or at any time that any of the Notes or Certificates are outstanding or any obligations are due and owing to the Enhancer under the Insurance Agreement. The Certificateholders shall not direct the Owner Trustee to take action that would violate the provisions of this Section 4.05. (b) The Owner Trustee shall not convey or transfer any of the Trust's properties or assets, including those included in the Trust Estate, to any person unless (i) it shall have received an Opinion of Counsel to the effect that such transaction will not have any material adverse tax consequence to the Trust or any Certificateholder and (ii) such conveyance or transfer shall not violate the provisions of Section 3.16(b) of the Indenture. Section 4.06. Prior Notice to Certificateholders and the Enhancer with ----------------------------------------------------------- Respect to Certain Matters. With respect to the following matters, the Owner --------------------------- Trustee shall not take action unless, at least 30 days before the taking of such action, the Owner Trustee shall have notified the Certificateholders and the Enhancer in writing of the proposed action and the Enhancer and the Certificateholders of Certificates representing a majority of the aggregate Certificate Percentage Interest of the Certificates shall not have notified the Owner Trustee in writing prior to the 30th day after such notice is given that such Certificateholders have withheld consent or provided alternative direction: (a) the initiation of any Proceeding by the Trust (except Proceedings brought in connection with the collection of cash distributions due and owing under the Mortgage Loans) and the compromise of any Proceeding brought by or against the Trust (except with respect to the aforementioned Proceedings for collection of cash distributions due and owing under the Mortgage Loans); (b) the election by the Trust to file an amendment to the Certificate of Trust (unless such amendment is required to be filed under the Statutory Trust Statute); (c) the amendment of any of the Basic Documents in circumstances where the consent of any Noteholder is required; (d) the amendment of any of the Basic Documents in circumstances where the consent of any Noteholder is not required and such amendment materially and adversely affects the interest of the Certificateholders; 19 (e) the appointment pursuant to the Indenture of a successor Note Registrar, Paying Agent or Indenture Trustee or pursuant to this Trust Agreement of a successor Certificate Registrar or Certificate Paying Agent or the consent to the assignment by the Note Registrar, Paying Agent, Indenture Trustee, Certificate Registrar or Certificate Paying Agent of its obligations under the Indenture or this Trust Agreement, as applicable. Section 4.07. Action by Certificateholders with Respect to Certain Matters. ------------------------------------------------------------ The Owner Trustee shall not have the power, except upon the written direction of Certificateholders evidencing not less than a majority of the aggregate Certificate Percentage Interest of the Certificates, and with the consent of the Enhancer, to (a) remove the Servicer under the Servicing Agreement pursuant to Section 7.01 thereof or (b) except as expressly provided in the Basic Documents, sell the Mortgage Loans after the termination of the Indenture. Section 4.08. Action by Certificateholders with Respect to Bankruptcy. The ------------------------------------------------------- Owner Trustee shall not have the power to commence a voluntary Proceeding in bankruptcy relating to the Trust without the unanimous prior approval of all Certificateholders, and with the prior written consent of the Enhancer, and the delivery to the Owner Trustee by each such Certificateholder of a certificate certifying that such Certificateholder reasonably believes that the Trust is insolvent. Section 4.09. Restrictions on Certificateholders' Power. The ------------------------------------------------- Certificateholders shall not direct the Owner Trustee to take or to refrain from taking any action if such action or inaction would be contrary to any obligation of the Trust or the Owner Trustee under this Trust Agreement or any of the other Basic Documents or would be contrary to Section 2.03, nor shall the Owner Trustee be obligated to follow any such direction, if given. Section 4.10. Majority Control. Except as expressly provided herein, any ---------------- action that may be taken by the Certificateholders under this Trust Agreement may be taken by the Certificateholders of Certificates evidencing not less than a majority of the aggregate Certificate Percentage Interest of the Certificates. Except as expressly provided herein, any written notice of the Certificateholders delivered pursuant to this Trust Agreement shall be effective if signed by the Certificateholders evidencing not less than a majority of the aggregate Certificate Percentage Interest of the Certificates at the time of the delivery of such notice. Section 4.11. Doing Business in Other Jurisdictions. Notwithstanding ----------------------------------------- anything contained herein to the contrary, neither Wilmington Trust Company nor the Owner Trustee shall be required to take any action in any jurisdiction other than in the State of Delaware if the taking of such action will, even after the appointment of a co-trustee or separate trustee in accordance with Section 9.05 hereof, (i) require the consent or approval or authorization or order of or the giving of notice to, or the registration with or the taking of any other action in respect of, any state or other governmental authority or agency of any jurisdiction other than the State of Delaware; (ii) result in any fee, tax or other governmental charge under the laws of the State of Delaware becoming payable by Wilmington Trust Company, or (iii) subject Wilmington Trust Company to personal jurisdiction in any jurisdiction other than the State of Delaware for causes of action arising from acts unrelated to the consummation of the transactions by Wilmington Trust Company or the Owner Trustee, as the case may be, contemplated hereby. Section 4.12. Removal of Mortgage Loans. Subject to and in accordance with ------------------------- Section 3.22 of the Servicing Agreement, the Issuer may notify the Owner Trustee of its direction to the Servicer 20 to remove Mortgage Loans from the Trust Estate. Promptly following receipt of any such request, the Owner Trustee shall deliver to the Servicer the written notice and request required to be delivered to the Servicer pursuant to Section 3.22 of the Servicing Agreement. Any Mortgage Loans removed from the Trust Estate pursuant to Section 3.22 of the Servicing Agreement shall be property of the Issuer and, upon the written request of the Certificateholders holding 100% of the Certificate Percentage Interests of the Certificates, be released to the Certificateholders as a dividend and in accordance with the written instructions of such Certificateholders. ARTICLE V Application of Trust Funds Section 5.01. Distributions. ------------- (a) On each Payment Date and on any date on which the Trust is terminated pursuant to Section 8.01, the Certificate Paying Agent shall distribute to the Certificateholders all funds on deposit in the Distribution Account and available therefor as provided in Section 3.05 of the Indenture. All distributions made pursuant to this Section to any Certificates shall be distributed to the Certificateholders pro rata based on the respective Percentage Interests thereof. (b) In the event that any withholding tax is imposed on the distributions (or allocations of income) to a Certificateholder, such tax shall reduce the amount otherwise distributable to such Certificateholder in accordance with this Section 5.01. The Certificate Paying Agent is hereby authorized and directed to retain or cause to be retained from amounts otherwise distributable to the Certificateholders sufficient funds for the payment of any tax that is legally owed by the Trust (but such authorization shall not prevent the Owner Trustee from contesting any such tax in appropriate Proceedings, and withholding payment of such tax, if permitted by law, pending the outcome of such Proceedings). The amount of any withholding tax imposed with respect to a Certificateholder shall be treated as cash distributed to such Certificateholder at the time it is withheld by the Certificate Paying Agent and remitted to the appropriate taxing authority. If there is a possibility that withholding tax is payable with respect to a distribution (such as a distribution to a non-U.S. Certificateholder), the Certificate Paying Agent may in its sole discretion withhold such amounts in accordance with this paragraph (b). (c) Distributions to Certificateholders shall be subordinated to the creditors of the Trust, including the Noteholders. Section 5.02. Method of Payment. Subject to Section 8.01(c), distributions ----------------- required to be made to Certificateholders on any Payment Date as provided in Section 5.01 shall be made to each Certificateholder of record on the preceding Record Date by wire transfer, in immediately available funds, to the account of each Certificateholder at a bank or other entity having appropriate facilities therefor, if such Certificateholder shall have provided to the Certificate Registrar appropriate written instructions at least five Business Days prior to such Payment Date. Section 5.03. Signature on Returns. The Servicer shall sign on behalf of -------------------- the Trust the tax returns, if any, of the Trust. 21 Section 5.04. Statements to Certificateholders. On each Payment Date, the --------------------------------- Certificate Paying Agent shall make available to each Certificateholder the Servicing Certificate provided to the Owner Trustee and the Certificate Paying Agent by the Servicer pursuant to Section 4.01 of the Servicing Agreement with respect to such Payment Date. Section 5.05. Tax Reporting. The Certificateholders by their acceptance of ------------- a Certificate, agree to appoint the Servicer as their agent and the Servicer, as agent for such holders under the Servicing Agreement, has agreed to perform all duties necessary to comply with federal and state income tax laws. Any Certificateholder that holds 100% of the Certificates agrees by its purchase of 100% of the Certificates to treat the Trust Estate as an entity wholly owned by such Certificateholder for purposes of federal and state income tax, franchise tax and any other tax measured in whole or in part by income, with the assets of the entity being the assets held by the Trust, and the Notes being debt of the Trust. ARTICLE VI Concerning the Owner Trustee Section 6.01. Acceptance of Trusts and Duties. The Owner Trustee accepts ------------------------------- the trusts hereby created and agrees to perform its duties hereunder with respect to such trusts, but only upon the terms of this Trust Agreement. The Owner Trustee and the Certificate Paying Agent also agree to disburse all moneys actually received by it constituting part of the Trust Estate upon the terms of this Trust Agreement and the other Basic Documents to which each is a party. The Owner Trustee shall not be answerable or accountable hereunder or under any Basic Document under any circumstances, except (i) for its own willful misconduct, negligence or bad faith or negligent failure to act or (ii) in the case of the inaccuracy of any representation or warranty contained in Section 6.03 expressly made by the Owner Trustee. In particular, but not by way of limitation (and subject to the exceptions set forth in the preceding sentence): (a) no provision of this Trust Agreement or any other Basic Document shall require the Owner Trustee to expend or risk funds or otherwise incur any financial liability in the performance of any of its rights, duties or powers hereunder or under any other Basic Document if the Owner Trustee shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it; (b) under no circumstances shall the Owner Trustee be liable for indebtedness evidenced by or arising under any of the Basic Documents, including the principal of and interest on the Notes; (c) the Owner Trustee shall not be responsible for or in respect of the validity or sufficiency of this Trust Agreement or for the due execution hereof by the Depositor for the form, character, genuineness, sufficiency, value or validity of any of the Trust Estate, or for or in respect of the validity or sufficiency of the Basic Documents, the Notes, the Certificates, other than the certificate of authentication on the Certificates, if executed by the Owner Trustee and the Owner Trustee shall in no event assume or incur any liability, duty, or obligation to any Noteholder or to any Certificateholder, other than as expressly provided for herein or in the other Basic Documents; 22 (d) the execution, delivery, authentication and performance by the Owner Trustee of this Trust Agreement will not require the authorization, consent or approval of, the giving of notice to, the filing or registration with, or the taking of any other action with respect to, any governmental authority or agency; (e) the Owner Trustee shall not be liable for the default or misconduct of the Depositor, Indenture Trustee, the Certificate Paying Agent, the Paying Agent or the Servicer under any of the Basic Documents or otherwise and the Owner Trustee shall have no obligation or liability to perform the obligations of the Certificate Paying Agent, the Paying Agent, the Depositor or the Trust under this Trust Agreement or the other Basic Documents that are required to be performed by the Indenture Trustee or the Paying Agent under the Indenture or the Seller under the Purchase Agreement; and (f) the Owner Trustee shall be under no obligation to exercise any of the rights or powers vested in it or duties imposed by this Trust Agreement, or to institute, conduct or defend any litigation under this Trust Agreement or otherwise or in relation to this Trust Agreement or any other Basic Document, at the request, order or direction of any of the Certificateholders, unless such Certificateholders have offered to the Owner Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred by the Owner Trustee therein or thereby. The right of the Owner Trustee to perform any discretionary act enumerated in this Trust Agreement or in any other Basic Document shall not be construed as a duty, and the Owner Trustee shall not be answerable for other than its negligence, bad faith or willful misconduct in the performance of any such act. Section 6.02. Furnishing of Documents. The Owner Trustee shall furnish to ----------------------- the Securityholders promptly upon receipt of a written reasonable request therefor, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Trust under the Basic Documents other than the Yield Maintenance Agreement. Section 6.03. Representations and Warranties. The Owner Trustee hereby -------------------------------- represents and warrants to the Depositor, for the benefit of the Certificateholders, that: (a) It is a banking corporation duly organized and validly existing in good standing under the laws of the State of Delaware. It has all requisite corporate power and authority to execute, deliver and perform its obligations under this Trust Agreement; (b) It has taken all corporate action necessary to authorize the execution and delivery by it of this Trust Agreement, and this Trust Agreement will be executed and delivered by one of its officers who is duly authorized to execute and deliver this Trust Agreement on its behalf; (c) Neither the execution nor the delivery by it of this Trust Agreement, nor the consummation by it of the transactions contemplated hereby nor compliance by it with any of the terms or provisions hereof will contravene any federal or Delaware law, governmental rule or regulation governing the banking or trust powers of the Owner Trustee or any judgment or order binding on it, or constitute any default under its charter documents or bylaws or any indenture, mortgage, contract, agreement or instrument to which it is a party or by which any of its properties may be bound; 23 (d) This Trust Agreement, assuming due authorization, execution and delivery by the Owner Trustee and the Depositor, constitutes a valid, legal and binding obligation of the Owner Trustee, enforceable against it in accordance with the terms hereof subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights generally and to general principles of equity, regardless of whether such enforcement is considered in a proceeding in equity or at law; (e) The Owner Trustee is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or governmental agency, which default might have consequences that would materially and adversely affect the condition (financial or other) or operations of the Owner Trustee or its properties or might have consequences that would materially adversely affect its performance hereunder; and (f) No litigation is pending or, to the best of the Owner Trustee's knowledge, threatened against the Owner Trustee which would prohibit its entering into this Trust Agreement or performing its obligations under this Trust Agreement. Section 6.04. Reliance; Advice of Counsel. --------------------------- (a) The Owner Trustee shall incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond, or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties. The Owner Trustee may accept a certified copy of a resolution of the board of directors or other governing body of any corporate party as conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact or matter the method of determination of which is not specifically prescribed herein, the Owner Trustee may for all purposes hereof rely on a certificate, signed by the president or any vice president or by the treasurer or other authorized officers of the relevant party, as to such fact or matter and such certificate shall constitute full protection to the Owner Trustee for any action taken or omitted to be taken by it in good faith in reliance thereon. (b) In the exercise or administration of the Trust hereunder and in the performance of its duties and obligations under this Trust Agreement or the other Basic Documents, the Owner Trustee (i) may act directly or through its agents, attorneys, custodians or nominees (including persons acting under a power of attorney) pursuant to agreements entered into with any of them, and the Owner Trustee shall not be liable for the conduct or misconduct of such agents, attorneys, custodians or nominees (including persons acting under a power of attorney) if such persons have been selected by the Owner Trustee with reasonable care, and (ii) may consult with counsel, accountants and other skilled persons to be selected with reasonable care and employed by it at the expense of the Trust. The Owner Trustee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the opinion or advice of any such counsel, accountants or other such Persons and not contrary to this Trust Agreement or any other Basic Document. Section 6.05. Not Acting in Individual Capacity. Except as provided in this --------------------------------- Article VI, in accepting the trusts hereby created Wilmington Trust Company acts solely as Owner Trustee hereunder and not in its individual capacity, and all Persons having any claim against the Owner 24 Trustee by reason of the transactions contemplated by this Trust Agreement or any other Basic Document shall look only to the Trust Estate for payment or satisfaction thereof. Section 6.06. Owner Trustee Not Liable for Certificates or Related ----------------------------------------------------------- Documents. The recitals contained herein and in the Certificates (other than the --------- signatures of the Owner Trustee on the Certificates) shall be taken as the statements of the Depositor, and the Owner Trustee assumes no responsibility for the correctness thereof. The Owner Trustee makes no representations as to the validity or sufficiency of this Trust Agreement, of any other Basic Document or of the Certificates (other than the signatures of the Owner Trustee on the Certificates) or the Notes, or of any Related Documents. The Owner Trustee shall at no time have any responsibility or liability with respect to the sufficiency of the Trust Estate or its ability to generate the payments to be distributed to Certificateholders under this Trust Agreement or the Noteholders under the Indenture, including, the compliance by the Depositor or the Seller with any warranty or representation made under any Basic Document or in any related document or the accuracy of any such warranty or representation, or any action of the Certificate Paying Agent, the Certificate Registrar, the Paying Agent or the Indenture Trustee taken in the name of the Owner Trustee. Section 6.07. Owner Trustee May Own Certificates and Notes. The Owner ----------------------------------------------- Trustee in its individual or any other capacity may become the owner or pledgee of Certificates or Notes and may deal with the Depositor, the Seller, the Certificate Paying Agent, the Certificate Registrar, the Paying Agent and the Indenture Trustee in transactions with the same rights as it would have if it were not Owner Trustee. 25 ARTICLE VII Compensation of Owner Trustee Section 7.01. Owner Trustee's Fees and Expenses. The Owner Trustee shall ---------------------------------- receive as compensation for its services hereunder such fees as have been separately agreed upon before the date hereof in accordance with Section 6.06 of the Servicing Agreement, and the Owner Trustee shall be reimbursed for its reasonable expenses hereunder and under the other Basic Documents, including the reasonable compensation, expenses and disbursements of such agents, representatives, experts and counsel as the Owner Trustee may reasonably employ in connection with the exercise and performance of its rights and its duties hereunder and under the other Basic Documents which shall be payable by the Servicer pursuant to Section 3.11 of the Servicing Agreement. Section 7.02. Indemnification. The Certificateholders of the majority of --------------- the Percentage Interest of the Certificates shall indemnify, defend and hold harmless the Owner Trustee and its successors, assigns, agents and servants (collectively, the "Indemnified Parties") from and against, any and all liabilities, obligations, losses, damages, taxes, claims, actions and suits, and any and all reasonable costs, expenses and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever (collectively, "Expenses") which may at any time be imposed on, incurred by, or asserted against the Owner Trustee or any Indemnified Party in any way relating to or arising out of this Trust Agreement, the other Basic Documents, the Trust Estate, the administration of the Trust Estate or the action or inaction of the Owner Trustee hereunder; provided, however, that: (a) such Certificateholder shall not be liable for or required to indemnify an Indemnified Party from and against Expenses arising or resulting from the Owner Trustee's willful misconduct, negligence or bad faith or as a result of any inaccuracy of a representation or warranty contained in Section 6.03 expressly made by the Owner Trustee; (b) with respect to any such claim, the Indemnified Party shall have given such Certificateholder written notice thereof promptly after the Indemnified Party shall have actual knowledge thereof; (c) while maintaining control over its own defense, such Certificateholder shall consult with the Indemnified Party in preparing such defense; and (d) notwithstanding anything in this Trust Agreement to the contrary, such Certificateholder shall not be liable for settlement of any claim by an Indemnified Party entered into without the prior consent of such Certificateholder, which consent shall not be unreasonably withheld. The indemnities contained in this Section shall survive the resignation or termination of the Owner Trustee or the termination of this Trust Agreement. In the event of any Proceeding for which indemnity may be sought pursuant to this Section 7.02, the Owner Trustee's choice of legal counsel, if other than the legal counsel retained by the Owner Trustee in connection with the execution and delivery of this Trust Agreement, shall be subject to the approval of the Certificateholder of the majority of the Percentage Interest of the Certificates, which approval shall not be unreasonably withheld. In addition, upon written notice to the Owner Trustee and with the 26 consent of the Owner Trustee, which consent shall not be unreasonably withheld, the Certificateholder of the majority of the Percentage Interest of the Certificates shall have the right to assume the defense of any Proceeding against the Owner Trustee. ARTICLE VIII Termination of Trust Agreement Section 8.01. Termination of Trust Agreement. ------------------------------ (a) This Trust Agreement (other than this Article VIII) and the Trust shall terminate and be of no further force or effect upon the final distribution of all moneys or other property or proceeds of the Trust Estate in accordance with the terms of the Indenture and this Trust Agreement. The bankruptcy, liquidation, dissolution, death or incapacity of any Certificateholder shall not (i) operate to terminate this Trust Agreement or the Trust, (ii) entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any Proceeding in any court for a partition or winding up of all or any part of the Trust or the Trust Estate or (iii) otherwise affect the rights, obligations and liabilities of the parties hereto. (b) Except as provided in Section 8.01(a), neither the Depositor nor any Certificateholder shall be entitled to revoke or terminate the Trust. (c) Notice of any termination of the Trust, specifying the Payment Date on which Certificateholders shall surrender their Certificates to the Certificate Paying Agent for payment of the final distribution thereon and cancellation thereof, shall be given by the Certificate Paying Agent by letter to the Certificateholders and the Enhancer mailed within five Business Days of receipt of notice of such termination from the Owner Trustee, stating (i) the Payment Date upon or with respect to which final payment of the Certificates shall be made upon presentation and surrender of the Certificates at the office of the Certificate Paying Agent therein designated, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such Payment Date is not applicable, payments being made only upon presentation and surrender of the Certificates at the office of the Certificate Paying Agent therein specified. The Certificate Paying Agent shall give such notice to the Owner Trustee and the Certificate Registrar at the time such notice is given to Certificateholders. Upon presentation and surrender of the Certificates, the Certificate Paying Agent shall cause to be distributed to Certificateholders amounts distributable on such Payment Date pursuant to Section 5.01. In the event that all of the Certificateholders shall not have surrendered their Certificates for cancellation within six months after the date specified in the above mentioned written notice, the Certificate Paying Agent shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. Subject to applicable laws with respect to escheat of funds, if within one year following the Payment Date on which final payment of the Certificates was to have been made pursuant to Section 5.01, all the Certificates shall not have been surrendered for cancellation, the Certificate Paying Agent may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Certificateholders concerning surrender of their Certificates, and the cost thereof shall be paid out of the funds and other assets that shall remain subject to this Trust Agreement. Any funds remaining in the Distribution Account after exhaustion of such remedies shall be distributed by the Certificate 27 Paying Agent to the Certificateholder of the majority of the Percentage Interest of the Certificates with respect to which such amounts are due. (d) Upon the winding up of the Trust and its termination, the Owner Trustee shall cause the Certificate of Trust to be cancelled by filing a certificate of cancellation with the Secretary of State in accordance with the provisions of Section 3810(c) of the Statutory Trust Statute. ARTICLE IX Successor Owner Trustees and Additional Owner Trustees Section 9.01. Eligibility Requirements for Owner Trustee. The Owner Trustee ------------------------------------------ shall at all times be a corporation satisfying the provisions of Section 3807(a) of the Statutory Trust Statute; authorized to exercise corporate trust powers; having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal or state authorities; and having (or having a parent that has) long-term debt obligations with a rating of at least A by Moody's, Standard & Poor's or Fitch, if rated by Fitch. If such corporation shall publish reports of condition at least annually pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of this Section 9.01, the Owner Trustee shall resign immediately in the manner and with the effect specified in Section 9.02. Section 9.02. Replacement of Owner Trustee. The Owner Trustee may at any ----------------------------- time resign and be discharged from the trusts hereby created by giving 30 days' prior written notice thereof to the Enhancer, the Indenture Trustee, the Paying Agent and the Depositor. Upon receiving such notice of resignation, the Indenture Trustee shall promptly appoint a successor Owner Trustee with the consent of the Enhancer, which consent shall not be unreasonably withheld, by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Owner Trustee and one copy to the successor Owner Trustee. If no successor Owner Trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Owner Trustee may petition any court of competent jurisdiction for the appointment of a successor Owner Trustee. If at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of Section 9.01 and shall fail to resign after written request therefor by the Indenture Trustee (and the Indenture Trustee shall make such request upon (i) the written direction of the Enhancer, so long as the Enhancer is not in default under the Policy, or (ii) the written direction of holders of Notes representing not less than a majority of the Note Balance of the Notes if the Enhancer is in default under the Policy), or if at any time the Owner Trustee shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Owner Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Indenture Trustee may, and, at the direction of the Enhancer, shall, remove the Owner Trustee. If the Indenture Trustee shall remove the Owner Trustee under the authority of the immediately preceding sentence, the Indenture Trustee shall promptly appoint a successor Owner Trustee reasonably acceptable to 28 the Enhancer by written instrument, in duplicate, one copy of which instrument shall be delivered to the outgoing Owner Trustee so removed and one copy to the successor Owner Trustee, and shall pay all fees owed to the outgoing Owner Trustee. If the Indenture Trustee is unable to appoint a successor Owner Trustee within 60 days after any such direction, the Indenture Trustee may petition any court of competent jurisdiction for the appointment of a successor Owner Trustee. Any resignation or removal of the Owner Trustee and appointment of a successor Owner Trustee pursuant to any of the provisions of this Section shall not become effective until acceptance of appointment by the successor Owner Trustee pursuant to Section 9.03 and payment of all fees and expenses owed to the outgoing Owner Trustee. Section 9.03. Successor Owner Trustee. Any successor Owner Trustee ------------------------- appointed pursuant to Section 9.02 shall execute, acknowledge and deliver to the Indenture Trustee, the Paying Agent and to its predecessor Owner Trustee an instrument accepting such appointment under this Trust Agreement, and thereupon the resignation or removal of the predecessor Owner Trustee shall become effective, and such successor Owner Trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor under this Trust Agreement, with like effect as if originally named as Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees and expenses deliver to the successor Owner Trustee all documents and statements and monies held by it under this Trust Agreement; and the predecessor Owner Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Owner Trustee all such rights, powers, duties and obligations. No successor Owner Trustee shall accept appointment as provided in this Section 9.03 unless at the time of such acceptance such successor Owner Trustee shall be eligible pursuant to Section 9.01. Upon acceptance of appointment by a successor Owner Trustee pursuant to this Section 9.03, the Paying Agent shall mail notice thereof to all Certificateholders, the Indenture Trustee, the Noteholders, the Rating Agencies and the Enhancer. If the Paying Agent shall fail to mail such notice within 10 days after acceptance of such appointment by the successor Owner Trustee, the successor Owner Trustee shall cause such notice to be mailed at the expense of the Paying Agent. Section 9.04. Merger or Consolidation of Owner Trustee. Any Person into ------------------------------------------ which the Owner Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Owner Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Owner Trustee, shall be the successor of the Owner Trustee hereunder, without the execution or filing of any instrument or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding; provided, however, that such Person shall be eligible pursuant to Section 9.01; provided, further, that the Owner Trustee shall mail notice of such merger or consolidation to the Rating Agencies. Section 9.05. Appointment of Co-Trustee or Separate Trustee. ------------------------------------------------------- Notwithstanding any other provisions of this Trust Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Estate may at the time be located, the Owner 29 Trustee shall have the power and shall execute and deliver all instruments to appoint one or more Persons to act as co-trustee, jointly with the Owner Trustee, or as separate trustee or trustees, of all or any part of the Trust Estate, and to vest in such Person, in such capacity, such title to the Trust or any part thereof and, subject to the other provisions of this Section, such powers, duties, obligations, rights and trusts as the Owner Trustee may consider necessary or desirable. No co-trustee or separate trustee under this Trust Agreement shall be required to meet the terms of eligibility as a successor Owner Trustee pursuant to Section 9.01 and no notice of the appointment of any co-trustee or separate trustee shall be required pursuant to Section 9.03. Each separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (a) All rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred upon and exercised or performed by the Owner 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 Owner 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 Owner 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 Owner Trustee; (b) No trustee under this Trust Agreement shall be personally liable by reason of any act or omission of any other trustee under this Trust Agreement; and (c) The Owner Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. Any notice, request or other writing given to the Owner 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 Trust Agreement and the conditions of this Article IX. 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 Owner Trustee or separately, as may be provided therein, subject to all the provisions of this Trust Agreement, specifically including every provision of this Trust Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Owner Trustee. Each such instrument shall be filed with the Owner Trustee. Any separate trustee or co-trustee may at any time appoint the Owner Trustee as 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 Trust 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 Owner Trustee, to the extent permitted by law, without the appointment of a new or successor co-trustee or separate trustee. 30 ARTICLE X Miscellaneous Section 10.01. Amendments. ---------- (a) This Trust Agreement may be amended from time to time by the parties hereto as specified in this Section 10.01, provided that any such amendment, except as provided in paragraph (e) below, shall be accompanied by an Opinion of Counsel addressed to the Owner Trustee and the Enhancer to the effect that such amendment complies with the provisions of this Section. (b) If the purpose of any such amendment (as detailed therein) is to correct any mistake, eliminate any inconsistency, cure any ambiguity or deal with any matter not covered in this Trust Agreement (i.e., to give effect to the intent of the parties), it shall not be necessary to obtain the consent of any Certificateholders, but the Owner Trustee shall be furnished with (i) a letter from each Rating Agency that the amendment will not result in a Rating Event, determined without regard to the Policy and (ii) an Opinion of Counsel to the effect that such action will not adversely affect in any material respect the interests of any Certificateholder, and the consent of the Enhancer shall be obtained. (c) If the purpose of the amendment is to prevent the imposition of any federal or state taxes at any time that any Security is outstanding (i.e., technical in nature), it shall not be necessary to obtain the consent of any Certificateholder, but the Owner Trustee shall be furnished with an Opinion of Counsel that such amendment is necessary or helpful to prevent the imposition of such taxes and is not materially adverse to any Certificateholder and the consent of the Enhancer shall be obtained. (d) If the purpose of the amendment is to add or eliminate or change any provision of the Trust Agreement other than as contemplated in (b) and (c) above, the amendment shall require (i) the consent of the Enhancer and an Opinion of Counsel to the effect that such action will not adversely affect in any material respect the interests of any Certificateholder and (ii) either (A) a letter from each Rating Agency that such amendment will not cause a Rating Event, if determined without regard to the Policy or (B) the consent of Certificateholders evidencing a majority of the aggregate Certificate Percentage Interest and the Indenture Trustee; provided, however, that no such amendment shall reduce in any manner the amount of, or delay the timing of, payments received that are required to be distributed on any Certificate without the consent of each Certificateholder affected thereby and the Enhancer, or reduce the aforesaid percentage of Certificates the Certificateholders of which are required to consent to any such amendment, without the consent of the Certificateholders of all such Certificates then outstanding; provided, further, that no Certificate registered in the name of the Seller or an Affiliate of the Seller shall be considered a Certificate for purposes of such consent. (e) No amendment of this Trust Agreement may provide for the holding of any of the Certificates in book-entry form. (f) If the purpose of any such amendment is to provide for the issuance of additional Certificates representing an interest in the Trust, it shall not be necessary to obtain the 31 consent of any Certificateholder, but the Owner Trustee shall be furnished with (i) an Opinion of Counsel to the effect that such action will not adversely affect in any material respect the interests of any Certificateholders and (ii) a letter from each Rating Agency to the effect that such amendment will not cause a Rating Event, if determined without regard to the Policy, and the consent of the Enhancer shall be obtained. (g) Promptly after the execution of any such amendment or consent, the Owner Trustee shall furnish written notification of the substance of such amendment or consent to each Certificateholder, the Indenture Trustee, the Paying Agent, the Enhancer and each of the Rating Agencies. It shall not be necessary for the consent of Certificateholders or the Indenture Trustee pursuant to this Section 10.01 to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents (and any other consents of Certificateholders provided for in this Trust Agreement or in any other Basic Document) and of evidencing the authorization of the execution thereof by Certificateholders shall be subject to such reasonable requirements as the Owner Trustee may prescribe. (h) In connection with the execution of any amendment to any agreement to which the Trust is a party, other than this Trust Agreement, the Owner Trustee shall be entitled to receive and conclusively rely upon an Opinion of Counsel to the effect that such amendment is authorized or permitted by the documents subject to such amendment and that all conditions precedent in the Basic Documents for the execution and delivery thereof by the Trust or the Owner Trustee, as the case may be, have been satisfied. (i) The Owner Trustee may, but shall not be obligated to, execute any amendment which adversely affects its rights, duties or immunities hereunder. Promptly after the execution of any amendment to the Certificate of Trust, the Owner Trustee shall cause the filing of such amendment with the Secretary of State. Section 10.02. No Legal Title to Trust Estate. The Certificateholders shall ------------------------------ not have legal title to any part of the Trust Estate. The Certificateholders shall be entitled to receive distributions with respect to their undivided beneficial interest therein only in accordance with Articles V and VIII. No transfer, by operation of law or otherwise, of any right, title or interest of the Certificateholders to and in their ownership interest in the Trust Estate shall operate to terminate this Trust Agreement or the trusts hereunder or entitle any transferee to an accounting or to the transfer to it of legal title to any part of the Trust Estate. Section 10.03. Limitations on Rights of Others. Except for Section 2.07, -------------------------------- the provisions of this Trust Agreement are solely for the benefit of the Owner Trustee, the Depositor, the Certificateholders, the Enhancer and, to the extent expressly provided herein, the Paying Agent, the Indenture Trustee and the Noteholders, and nothing in this Trust Agreement (other than Section 2.07), whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Trust Estate or under or in respect of this Trust Agreement or any covenants, conditions or provisions contained herein. 32 Section 10.04. Notices. ------- (a) Unless otherwise expressly specified or permitted by the terms hereof, all notices shall be in writing and shall be deemed given upon receipt: if to the Owner Trustee, addressed to its Corporate Trust Office; if to the Paying Agent, addressed to its Corporate Trust Office; if to the Certificate Paying Agent, addressed to its Corporate Trust Office; if to the Depositor, addressed to Wachovia Asset Securitization Issuance, LLC, One Wachovia Center, 301 South College Street, Suite D, Charlotte, North Carolina 28288-5578, Attention: Robert J. Perret, Telecopier: (704) 383-8121; if to the Enhancer, addressed to MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504, Attention: Insured Portfolio Management--Structured Finance (Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust), telecopier number (914) 756-3810; if to the Rating Agencies, addressed to Moody's Investors Service, Inc., 99 Church Street, 4th Floor, New York, New York 10001 and Standard & Poor's, a division of The McGraw-Hill Companies, Inc., 55 Water Street, New York, New York 10004, Attention: Structured Finance Department - MBS; or, as to each of the foregoing Persons, at such other address as shall be designated by such Person in a written notice to each of the other foregoing Persons. (b) Any notice required or permitted to be given to a Certificateholder shall be given by first-class mail, postage prepaid, at the address of such Certificateholder as shown in the Certificate Register. Any notice so mailed within the time prescribed in this Trust Agreement to a Certificateholder shall be conclusively presumed to have been duly given, whether or not such Certificateholder receives such notice. (c) A copy of any notice delivered to the Owner Trustee or the Trust shall also be delivered to the Depositor. Section 10.05. Severability. Any provision of this Trust 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, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 10.06. Separate Counterparts. This Trust Agreement may be executed --------------------- by the parties hereto in any number of counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 10.07. Successors and Assigns. All representations, warranties, ---------------------- covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the Enhancer, the Depositor, the Owner Trustee and its successors and each Certificateholder and its successors and permitted assigns, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by a Certificateholder shall bind the successors and assigns of such Certificateholder. Section 10.08. No Petition. The Owner Trustee, by entering into this Trust ----------- Agreement, and each Certificateholder, by accepting a Certificate, hereby covenants and agrees that it will not at any time institute against the Depositor or the Trust, or join in any institution against the Depositor or the Trust of, any bankruptcy Proceedings under any United States federal or state bankruptcy or 33 similar law in connection with any obligations to the Certificates, the Notes, this Trust Agreement or any of the other Basic Documents. Section 10.09. No Recourse. Each Certificateholder, by accepting a ------------ Certificate, acknowledges that such Certificateholder's Certificate represents a beneficial interest in the Trust only and does not represent an interest in or obligation of the Depositor, the Seller, the Owner Trustee, the Indenture Trustee, the Paying Agent or any Affiliate thereof, and that no recourse may be had against such Persons or their assets, except as may be expressly set forth or contemplated in the Certificates, this Trust Agreement or the other Basic Documents. Section 10.10. Headings. The headings of the various Articles and Sections -------- herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. Section 10.11. GOVERNING LAW. THIS TRUST AGREEMENT SHALL BE CONSTRUED IN ------------- ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, 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 10.12. Integration. This Trust Agreement constitutes the entire ----------- agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understanding pertaining thereto. Section 10.13. Rights of Enhancer to Exercise Rights of Certificateholders. ----------------------------------------------------------- By accepting its Certificate, each Certificateholder agrees that unless a Enhancer Default exists, the Enhancer shall have the right to exercise all rights of the Certificateholders under this Trust Agreement without any further consent of the Certificateholders. Nothing in this Section, however, shall alter or modify in any way, the fiduciary obligations of the Owner Trustee to the Certificateholders pursuant to this Trust Agreement, or create any fiduciary obligation of the Owner Trustee to the Enhancer. The Enhancer shall be an express third party beneficiary of this Trust Agreement. 34 IN WITNESS WHEREOF, the Depositor and the Owner 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. WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC as Depositor By: /s/ Robert J. Perret ------------------------------------ Name: Robert J. Perret Title: Vice President WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee, except with respect to the representations and warranties contained in Section 6.03 hereof By: /s/ Kathleen A. Pendelini ------------------------------------ Name: Kathleen A. Pendelini Title: Financial Services Officer Acknowledged and Agreed: U.S. BANK NATIONAL ASSOCIATION not in its individual capacity but solely as Indenture Trustee By: /s/ Shannon M. Rantz -------------------------------------- Name: Shannon M. Rantz Title: Assistant Vice President WACHOVIA BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Certificate Registrar and Certificate Paying Agent By: /s/ Gregory Yanok -------------------------------------- Name: Gregory Yanok Title: Vice President 35 WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC 2003 HE-3 TRUST By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By: /s/ Kathleen A. Pendelini -------------------------------------- Name: Kathleen A. Pendelini Title: Financial Services Officer 36 EXHIBIT A FORM OF CERTIFICATE THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE NOTES AS DESCRIBED IN THE AGREEMENT (AS DEFINED HEREIN). THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND STATE LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND SUCH STATE LAWS AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3.05 OF THE AGREEMENT. NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE CERTIFICATE REGISTRAR SHALL HAVE RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO THE PROHIBITED TRANSACTION RESTRICTIONS AND THE FIDUCIARY RESPONSIBILITY REQUIREMENTS OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY SUCH PLAN OR ANY PERSON USING "PLAN ASSETS," WITHIN THE MEANING OF THE DEPARTMENT OF LABOR REGULATIONS SECTION 2510.3-101, TO ACQUIRE THIS CERTIFICATE (EACH, A "PLAN INVESTOR"), OR (ii) IF THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN INVESTOR, AN OPINION OF COUNSEL ACCEPTABLE TO AND IN FORM AND SUBSTANCE SATISFACTORY TO THE DEPOSITOR, THE OWNER TRUSTEE, THE SERVICER AND THE CERTIFICATE REGISTRAR, OR A CERTIFICATION IN THE FORM OF EXHIBIT G TO THE AGREEMENT, TO THE EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE IS PERMISSIBLE UNDER APPLICABLE LAW, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT ENACTMENTS) AND WILL NOT SUBJECT THE DEPOSITOR, THE OWNER TRUSTEE, THE SERVICER, THE CERTIFICATE REGISTRAR, OR THE CERTIFICATE PAYING AGENT TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE) IN ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT. THE TRANSFEREE OF THIS CERTIFICATE SHALL BE SUBJECT TO UNITED STATES FEDERAL WITHHOLDING TAX UNLESS THE CERTIFICATE REGISTRAR SHALL HAVE RECEIVED A CERTIFICATE OF NON-FOREIGN STATUS CERTIFYING AS TO THE TRANSFEREE'S STATUS AS A U.S. PERSON OR CORPORATION OR PARTNERSHIP UNDER U.S. LAW. A-1 THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE SELLER, THE DEPOSITOR, THE SERVICER, THE INDENTURE TRUSTEE, THE OWNER TRUSTEE, THE PAYING AGENT OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS EXPRESSLY PROVIDED IN THE AGREEMENT OR THE OTHER BASIC DOCUMENTS. A-2 Certificate No. 1 Cut-Off Date: November 1, 2003 Date of Trust Agreement: November 19, 2003 First Payment Date: Percentage Interest: 100% December 26, 2003 Final Payment Date: November 25, 2033 WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC ASSET-BACKED CERTIFICATES, SERIES 2003-HE3 evidencing a fractional undivided interest in Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust (the "Issuer"), the property of which consists primarily of the Mortgage Loans. This Certificate is payable solely from the assets of the Trust Estate, and does not represent an obligation of or interest in the Depositor, the Seller, the Servicer, the Indenture Trustee, the Paying Agent, or the Owner Trustee or any of their Affiliates. This Certificate is not guaranteed or insured by any governmental agency or instrumentality or by the Depositor, the Seller, the Servicer, the Indenture Trustee, the Paying Agent or the Owner Trustee or any of their affiliates. None of the Depositor, the Seller, the Servicer, the Indenture Trustee, the Paying Agent or the Owner Trustee or any of their Affiliates will have any obligation with respect to any certificate or other obligation secured by or payable from payments on the Certificates. This certifies that Wachovia Asset Securitization Issuance, LLC is the registered owner of the Certificate Percentage Interest evidenced by this Certificate (as set forth on the face hereof) in certain distributions with respect to the Trust Estate, consisting primarily of the Mortgage Loans, created by Wachovia Asset Securitization Issuance, LLC (the "Depositor"). The Trust (as defined herein) was created pursuant to a trust agreement dated as of November 19, 2003 (as amended and supplemented from time to time, the "Agreement"), between the Depositor and Wilmington Trust Company, as owner trustee (the "Owner Trustee," which term includes any successor entity under the Agreement), a summary of certain of the pertinent provisions of which is set forth hereafter. Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in Appendix A to the indenture dated as of November 19, 2003, among the Trust, the Paying Agent and the Indenture Trustee. This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Certificateholder of this Certificate by virtue of the acceptance hereof assents and by which such Certificateholder is bound. Pursuant to the terms of the Agreement, a distribution will be made on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (the "Payment Date"), commencing on the first Payment Date specified above, to the Person in whose name this Certificate is registered at the close of business on the last day (or if such last day is not a Business Day, the Business Day immediately preceding such last day) of the month immediately preceding the month of such distribution (the "Record Date"), in an amount equal to the pro rata A-3 portion evidenced by this Certificate (based on the Percentage Interest stated on the face hereon) of the amount, if any, required to be distributed to Certificateholders of Certificates on such Payment Date. Distributions on this Certificate will be made as provided in the Agreement by the Certificate Paying Agent by wire transfer to the Certificateholder of record in the Certificate Register without the presentation or surrender of this Certificate or the making of any notation hereon. Pursuant to the Agreement, the Trust has issued the Certificates. Except as otherwise provided in the Agreement and notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Certificate Paying Agent of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency designated by the Certificate Registrar for that purpose. No transfer of this Certificate will be made unless such transfer is exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and any applicable state securities laws or is made in accordance the Securities Act and such state laws. In the event that such a transfer is to be made, (i) the Certificate Registrar or the Depositor may require an opinion of counsel acceptable to and in form and substance satisfactory to the Certificate Registrar and the Depositor that such transfer is exempt (describing the applicable exemption and the basis therefor) from or is being made pursuant to the registration requirements of the Securities Act, and of any applicable statute of any state and (ii) the transferee shall execute an investment letter in the form described in the Agreement and (iii) the Certificate Registrar shall require the transferee to execute an investment letter and a Certificate of Non-Foreign Status in the form described by the Agreement (or if a Certificate of Non-Foreign Status is not provided, an Opinion of Counsel as described in the Agreement), which investment letter and certificate or Opinion of Counsel shall not be at the expense of the Trust, the Owner Trustee, the Certificate Registrar or the Depositor. The Certificateholder hereof desiring to effect such transfer shall, and does hereby agree to, indemnify the Trust, the Owner Trustee, the Depositor, the Servicer, the Certificate Registrar, the Enhancer and the Certificate Paying Agent against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws. In connection with any such transfer, the Certificate Registrar (unless otherwise directed by the Depositor) will also require either (i) a representation letter, in the form as described by the Agreement, stating that the transferee is not an employee benefit or other plan subject to the prohibited transaction restrictions or the fiduciary responsibility requirements of ERISA or Section 4975 of the Code (a "Plan"), any person acting, directly or indirectly, on behalf of any such Plan or any Person using the "plan assets," within the meaning of the Department of Labor Regulations Section 2510.3-101, to effect such acquisition (collectively, a "Plan Investor") or (ii) if such transferee is a Plan Investor, an opinion of counsel acceptable to and in form and substance satisfactory to the Depositor, the Owner Trustee, the Servicer and the Certificate Registrar, or a certification in the form of Exhibit G to the Agreement, to the effect that the purchase or holding of such Certificate is permissible under applicable law, will not constitute or result in a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or comparable provisions of any subsequent enactments) and will not subject the Depositor, the Owner Trustee, the Servicer, the Enhancer or the Certificate Registrar to any obligation or liability (including obligations or liabilities under Section 406 of ERISA or Section 4975 of the Code) in addition to those undertaken in the Agreement. This Certificate is one of a duly authorized issue of Certificates designated as Wachovia Asset Securitization Issuance, LLC Asset-Backed Certificates of the Series specified hereon (the "Certificates"). A-4 The Certificateholder of this Certificate, by its acceptance hereof, agrees that it will look solely to the funds on deposit in the Distribution Account that have been released from the Lien of the Indenture for payment hereunder and that neither the Owner Trustee in its individual capacity nor the Depositor is personally liable to the Certificateholders for any amount payable under this Certificate or the Agreement or, except as expressly provided in the Agreement, subject to any liability under the Agreement. The Certificateholder of this Certificate acknowledges and agrees that its rights to receive distributions in respect of this Certificate are subordinated to the rights of the Noteholders and the Enhancer as described in the Indenture. Each Certificateholder, by its acceptance of a Certificate, covenants and agrees that such Certificateholder will not at any time institute against the Depositor or the Trust, or join in any institution against the Depositor or the Trust 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 Certificates, the Notes, the Agreement or any of the other Basic Documents. The Agreement permits the amendment thereof as specified below, provided that any amendment be accompanied by the consent of the Enhancer and an Opinion of Counsel to the Owner Trustee to the effect that such amendment complies with the provisions of the Agreement and will not cause the Trust to be subject to an entity level tax. If the purpose of any such amendment is to correct any mistake, eliminate any inconsistency, cure any ambiguity or deal with any matter not covered, it shall not be necessary to obtain the consent of any Certificateholder, but the Owner Trustee shall be furnished with a letter from each Rating Agency to the effect that such amendment will not cause a Rating Event, determined without regard to the Policy, and the consent of the Enhancer shall be obtained. If the purpose of any such amendment is to prevent the imposition of any federal or state taxes at any time that any Security is Outstanding, it shall not be necessary to obtain the consent of the any Certificateholder, but the Owner Trustee shall be furnished with an Opinion of Counsel that such amendment is necessary or helpful to prevent the imposition of such taxes and is not materially adverse to any Certificateholder and the consent of the Enhancer shall be obtained. If the purpose of the amendment is to add or eliminate or change any provision of the Agreement, other than as specified in the preceding two sentences, the amendment shall require either (a) a letter from each Rating Agency to the effect that such amendment will not cause a Rating Event, determined without regard to the Policy or (b) the consent of Certificateholders of a majority of the Percentage Interests of the Certificates and the Indenture Trustee; provided, however, that no such amendment shall (i) reduce in any manner the amount of, or delay the time of, payments received that are required to be distributed on any Certificate without the consent of all Certificateholders affected thereby and the Enhancer, or (ii) reduce the aforesaid percentage of Certificates the Certificateholders of which are required to consent to any such amendment without the consent of the Certificateholders of all such Certificates then outstanding. As provided in the Agreement and subject to certain limitations therein set forth, the transfer of this Certificate is registrable in the Certificate Register upon surrender of this Certificate for registration of transfer at the Corporate Trust Office of the Certificate Registrar, accompanied by a written instrument of transfer in form satisfactory to the Certificate Registrar duly executed by the Certificateholder hereof or such Certificateholder's attorney duly authorized in writing, and thereupon one or more new Certificates of authorized denominations evidencing the same aggregate A-5 Percentage Interest will be issued to the designated transferee. The initial Certificate Registrar appointed under the Agreement is the Paying Agent. Except as provided in the Agreement, the Certificates are issuable only in minimum denominations of a 10.0000% Percentage Interest and in integral multiples of 0.0001% Percentage Interest in excess thereof. As provided in the Agreement and subject to certain limitations therein set forth, the Certificates are exchangeable for new Certificates of authorized denominations, as requested by the Certificateholder surrendering the same. This Certificate is issued in the Percentage Interest above. No service charge will be made for any such registration of transfer or exchange, but the Owner Trustee or the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Owner Trustee, the Certificate Paying Agent, the Certificate Registrar and any agent of the Owner Trustee, the Certificate Paying Agent, or the Certificate Registrar may treat the Person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Owner Trustee, the Certificate Paying Agent, the Certificate Registrar or any such agent shall be affected by any notice to the contrary. This Certificate shall be governed by and construed in accordance with the laws of the State of Delaware. The obligations created by the Agreement in respect of this Certificate and the Trust created thereby shall terminate upon the final distribution of all moneys or other property or proceeds of the Trust Estate in accordance with the terms of the Indenture and the Agreement. It is the intent of the Depositor, the Issuer and the Certificateholder that for federal, state and local income, single business and franchise tax purposes, (a) the Trust will not be treated as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool and (b) the Trust will not fail to be treated as a disregarded entity. Unless the certificate of authentication hereon shall have been executed by an authorized officer of the Owner Trustee, or the Indenture Trustee, as authenticating agent by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. A-6 IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in its individual capacity, has caused this Certificate to be duly executed. WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC 2003-HE3 TRUST By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee Dated: November 19, 2003 By: ------------------------------------ Authorized Signatory CERTIFICATE OF AUTHENTICATION This is one of the Certificates referred to in the within mentioned Agreement. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By: -------------------------------------- Authorized Signatory or , --------------------------------------- as Authenticating Agent of the Owner Trustee By: -------------------------------------- Authorized Signatory A-7 ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE -------------------------------------------------------------------------------- (Please print or type name and address, including postal zip code, of assignee) -------------------------------------------------------------------------------- the within Certificate, and all rights thereunder, hereby irrevocably constituting and appointing -------------------------------------------------------------------------------- to transfer said Certificate on the books of the Certificate Registrar, with full power of substitution in the premises. Dated: */ ------------------------------------ - Signature Guaranteed: */ ------------------------------------ - --------------- */ NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. A-8 DISTRIBUTION INSTRUCTIONS The assignee should include the following for the information of the Certificate Paying Agent: Distribution shall be made by wire transfer in immediately available funds to ------------------------------------------------------------ ------------------------------------------------------------ for the account of , account number , or, if ------------------------- ----------- mailed by check, to . ---------------------------- Applicable statements should be mailed to . --------------------------------- --------------------------------------- Signature of assignee or agent (for authorization of wire transfer only) A-9 EXHIBIT B CERTIFICATE OF TRUST OF WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC 2003-HE3 TRUST THE UNDERSIGNED, Wilmington Trust Company, as owner trustee (the "Trustee"), for the purpose of forming a statutory trust does hereby certify as follows: 1. The name of the statutory trust is: WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC 2003-HE3 TRUST 2. The name and business address of the Trustee of the statutory trust in the State Delaware is Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890. 3. The statutory trust reserves the right to amend, alter, change, or repeal any provision contained in this Certificate of Trust in the manner now or hereafter prescribed by law. 4. This Certificate of Trust shall be effective upon filing. THE UNDERSIGNED, being the Trustee hereinbefore named, for the purpose of forming a statutory trust pursuant to the provisions of the Delaware Statutory Trust Act, does make this certificate of trust, hereby declaring and further certifying that this is its act and deed and that to the best of the undersigned's knowledge and belief the facts herein stated are true. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as owner trustee under the trust agreement to be dated as of November 19, 2003 By: ------------------------------------ Name: Title: Dated: November 19, 2003 B-1 EXHIBIT C [FORM OF RULE 144A INVESTMENT REPRESENTATION] Description of Rule 144A Securities, including numbers: ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- The undersigned seller, as registered holder (the "Seller"), intends to transfer the Rule 144A Securities described above to the undersigned buyer (the "Buyer"). 1. In connection with such transfer and in accordance with the agreements pursuant to which the Rule 144A Securities were issued, the Seller hereby certifies the following facts: Neither the Seller nor anyone acting on its behalf has offered, transferred, pledged, sold or otherwise disposed of the Rule 144A Securities, any interest in the Rule 144A Securities or any other similar security to, or solicited any offer to buy or accept a transfer, pledge or other disposition of the Rule 144A Securities, any interest in the Rule 144A Securities or any other similar security from, or otherwise approached or negotiated with respect to the Rule 144A Securities, any interest in the Rule 144A Securities or any other similar security with, any person in any manner, or made any general solicitation by means of general advertising or in any other manner, or taken any other action, that would constitute a distribution of the Rule 144A Securities under the Securities Act of 1933, as amended (the "1933 Act"), or that would render the disposition of the Rule 144A Securities a violation of Section 5 of the 1933 Act or require registration pursuant thereto, and that the Seller has not offered the Rule 144A Securities to any person other than the Buyer or another "qualified institutional buyer" as defined in Rule 144A under the 1933 Act. 2. The Buyer warrants and represents to, and covenants with, the Owner Trustee and the Depositor, pursuant to Section 3.09 of the trust agreement dated as of November 19, 2003 (the "Agreement"), between Wachovia Asset Securitization Issuance, LLC, as depositor (the "Depositor"), and Wilmington Trust Company, as owner trustee (the "Owner Trustee"), as follows: a. The Buyer understands that the Rule 144A Securities have not been registered under the 1933 Act or the securities laws of any state. b. The Buyer considers itself a substantial, sophisticated institutional investor having such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of investment in the Rule 144A Securities. c. The Buyer has been furnished with all information regarding the Rule 144A Securities that it has requested from the Seller, the Indenture Trustee, the Owner Trustee or the Servicer. d. Neither the Buyer nor anyone acting on its behalf has offered, transferred, pledged, sold or otherwise disposed of the Rule 144A Securities, any interest in the Rule 144A Securities or any other similar security to, or solicited any offer to buy or accept a transfer, pledge or other disposition of the Rule 144A Securities, any interest in the Rule C-1 144A Securities or any other similar security from, or otherwise approached or negotiated with respect to the Rule 144A Securities, any interest in the Rule 144A Securities or any other similar security with, any person in any manner, or made any general solicitation by means of general advertising or in any other manner, or taken any other action, that would constitute a distribution of the Rule 144A Securities under the 1933 Act or that would render the disposition of the Rule 144A Securities a violation of Section 5 of the 1933 Act or require registration pursuant thereto, nor will it act, nor has it authorized or will it authorize any person to act, in such manner with respect to the Rule 144A Securities. e. The Buyer is a "qualified institutional buyer" as that term is defined in Rule 144A under the 1933 Act and has completed either of the forms of certification to that effect attached hereto as Annex 1 or Annex 2. The Buyer is aware that the sale to it is being made in reliance on Rule 144A. The Buyer is acquiring the Rule 144A Securities for its own account or the accounts of other qualified institutional buyers, understands that such Rule 144A Securities may be resold, pledged or transferred only (i) to a person reasonably believed to be a qualified institutional buyer that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A, or (ii) pursuant to another exemption from registration under the 1933 Act. 3. The Buyer represents that: (i) either (a) or (b) is satisfied, as marked below: ___ a. The Buyer is not any employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the Internal Revenue Code of 1986, as amended (the "Code"), a Person acting, directly or indirectly, on behalf of any such plan or any Person acquiring such Certificates with "plan assets" of a Plan within the meaning of the Department of Labor Regulations Section 2510.3-101; or ___ b. The Buyer will provide the Depositor, the Owner Trustee, the Certificate Registrar, the Enhancer and the Servicer with either: (x) an opinion of counsel, satisfactory to the Depositor, the Owner Trustee, the Certificate Registrar, the Enhancer and the Servicer, to the effect that the purchase and holding of a Certificate by or on behalf of the Buyer is permissible under applicable law, will not constitute or result in a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or comparable provisions of any subsequent enactments) and will not subject the Depositor, the Owner Trustee, the Certificate Registrar, the Certificate Paying Agent, the Enhancer or the Servicer to any obligation or liability (including liabilities under ERISA or Section 4975 of the Code) in addition to those undertaken in the Trust Agreement, which opinion of counsel shall not be an expense of the Depositor, the Owner Trustee, the Certificate Registrar, the Enhancer or the Servicer; or (y) in lieu of such opinion of counsel, a certification in the form of Exhibit G to the Trust Agreement; and (ii) the Buyer is familiar with the prohibited transaction restrictions and fiduciary responsibility requirements of Sections 406 and 407 of ERISA and Section 4975 of the Code C-2 and understands that each of the parties to which this certification is made is relying and will continue to rely on the statements made in this paragraph 3. This document may be executed in one or more counterparts and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed to be an original; such counterparts, together, shall constitute one and the same document. Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in Appendix A to the indenture dated as of November 19, 2003, among the Trust, the Paying Agent and the Indenture Trustee. C-3 IN WITNESS WHEREOF, each of the parties has executed this document as of the date set forth below. Print Name of Seller Print Name of Buyer By: By: ------------------------------- -------------------------------------- Name: Name: Title: Title: Taxpayer Identification: Taxpayer Identification: No. No. ------------------------------ -------------------------------------- Date: Date: ----------------------------- ------------------------------------ C-4 ANNEX 1 TO EXHIBIT C QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A [For Buyers Other Than Registered Investment Companies] The undersigned hereby certifies as follows in connection with the Rule 144A Investment Representation to which this certification is attached: 1. As indicated below, the undersigned is the President, Chief Financial Officer, Senior Vice President or other executive officer of the Buyer. 2. In connection with purchases by the Buyer, the Buyer is a "qualified institutional buyer" as that term is defined in Rule 144A under the Securities Act of 1933 ("Rule 144A") because (i) the Buyer owned and/or invested on a discretionary basis $ 1 in securities (except for the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year (such amount being calculated in accordance with Rule 144A) and (ii) the Buyer satisfies the criteria in the category marked below. ____ Corporation, etc. The Buyer is a corporation (other than a bank, ----------------- savings and loan association or similar institution), Massachusetts or similar business trust, partnership, or charitable organization described in Section 501(c)(3) of the Internal Revenue Code. ____ Bank. The Buyer (a) is a national bank or banking institution ---- organized under the laws of any state, territory or the District of Columbia, the business of which is substantially confined to banking and is supervised by the state or territorial banking commission or similar official or is a foreign bank or equivalent institution, and (b) has an audited net worth of at least $25,000,000 as demonstrated in its latest annual financial statements, a copy of which is attached hereto. ____ Savings and Loan. The Buyer (a) is a savings and loan association, ----------------- building and loan association, cooperative bank, homestead association or similar institution, which is supervised and examined by a state or federal authority having supervision over any such institutions or is a foreign savings and loan association or equivalent institution and (b) has an audited net worth of at least $25,000,000 as demonstrated in its latest annual financial statements. ____ Broker-Dealer. The Buyer is a dealer registered pursuant to Section 15 ------------- of the Securities Exchange Act of 1934, as amended. ____ Insurance Company. The Buyer is an insurance company whose primary and ----------------- predominant business activity is the writing of insurance or the reinsuring of risks underwritten by insurance companies and which is subject to supervision by the -------- 1 Buyer must own and/or invest on a discretionary basis at least $100,000,000 in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or invest on a discretionary basis at least $10,000,000 in securities. C-5 insurance commissioner or a similar official or agency of a state or territory or the District of Columbia. ____ State or Local Plan. The Buyer is a plan established and maintained by ------------------- a state, its political subdivisions, or any agency or instrumentality of the state or its political subdivisions, for the benefit of its employees. ____ ERISA Plan. The Buyer is an employee benefit plan within the meaning ---------- of Title I of the Employee Retirement Income Security Act of 1974, as amended. ____ Investment Adviser. The Buyer is an investment adviser registered ------------------- under the Investment Advisers Act of 1940. as amended. ____ SBIC. The Buyer is a Small Business Investment Company licensed by the ---- U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended. ____ Business Development Company. The Buyer is a business development ------------------------------ company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended. ____ Trust Fund. The Buyer is a trust fund whose trustee is a bank or trust ---------- company and whose participants are exclusively (a) plans established and maintained by a state, its political subdivisions, or any agency or instrumentality of the state or its political subdivisions, for the benefit of its employees, or (b) employee benefit plans within the meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended, but is not a trust fund that includes as participants individual retirement accounts or H.R. 10 plans. 3. The term "securities" as used herein does not include (i) securities of issuers that are affiliated with the Buyer, (ii) securities that are part of an unsold allotment to or subscription by the Buyer, if the Buyer is a dealer, (iii) bank deposit notes and certificates of deposit, (iv) loan participations, (v) repurchase agreements, (vi) securities owned but subject to a repurchase agreement and (vii) currency, interest rate and commodity swaps. 4. For purposes of determining the aggregate amount of securities owned and/or invested on a discretionary basis by the Buyer, the Buyer used the cost of such securities to the Buyer and did not include any of the securities referred to in the preceding paragraph. Further, in determining such aggregate amount, the Buyer may have included securities owned by subsidiaries of the Buyer, but only if such subsidiaries are consolidated with the Buyer in its financial statements prepared in accordance with generally accepted accounting principles and if the investments of such subsidiaries are managed under the Buyer's direction. However, such securities were not included if the Buyer is a majority-owned, consolidated subsidiary of another enterprise and the Buyer is not itself a reporting company under the Securities Exchange Act of 1934, as amended. 5. The Buyer acknowledges that it is familiar with Rule 144A and understands that the seller to it and other parties related to the Rule 144A Securities are relying and will continue to rely on the statements made herein because one or more sales to the Buyer may be in reliance on Rule 144A. C-6 ______ ______ Will the Buyer be purchasing the Rule 144A Yes No Securities only for the Buyer's own account? 6. If the answer to the foregoing question is "no", the Buyer agrees that, in connection with any purchase of securities sold to the Buyer for the account of a third party (including any separate account) in reliance on Rule 144A, the Buyer will only purchase for the account of a third party that at the time is a "qualified institutional buyer" within the meaning of Rule 144A. In addition, the Buyer agrees that the Buyer will not purchase securities for a third party unless the Buyer has obtained a current representation letter from such third party or taken other appropriate steps contemplated by Rule 144A to conclude that such third party independently meets the definition of "qualified institutional buyer" set forth in Rule 144A. 7. The Buyer will notify each of the parties to which this certification is made of any changes in the information and conclusions herein. Until such notice is given, the Buyer's purchase of Rule 144A Securities will constitute a reaffirmation of this certification as of the date of such purchase. Print Name of Buyer By: -------------------------------------- Name: Title: Date: ------------------------------------ C-7 ANNEX 2 TO EXHIBIT C QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A [For Buyers That Are Registered Investment Companies] The undersigned hereby certifies as follows in connection with the Rule 144A Investment Representation to which this certification is attached: 1. As indicated below, the undersigned is the President, Chief Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a "qualified institutional buyer" as that term is defined in Rule 144A under the Securities Act of 1933 ("Rule 144A") because Buyer is part of a Family of Investment Companies (as defined below), is such an officer of the Adviser. 2. In connection with purchases by Buyer, the Buyer is a "qualified institutional buyer" as defined in Rule 144A because (i) the Buyer is an investment company registered under the Investment Company Act of 1940, and (ii) as marked below, the Buyer alone, or the Buyer's Family of Investment Companies, owned at least $100,000,000 in securities (other than the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year. For purposes of determining the amount of securities owned by the Buyer or the Buyer's Family of Investment Companies, the cost of such securities was used. ____ The Buyer owned $________________ in securities (other than the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year (such amount being calculated in accordance with Rule 144A). ____ The Buyer is part of a Family of Investment Companies which owned in the aggregate $____________ in securities (other than the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year (such amount being calculated in accordance with Rule 144A). 3. The term "Family of Investment Companies" as used herein means two or more registered investment companies (or series thereof) that have the same investment adviser or investment advisers that are affiliated (by virtue of being majority owned subsidiaries of the same parent or because one investment adviser is a majority owned subsidiary of the other). 4. The term "securities" as used herein does not include (i) securities of issuers that are affiliated with the Buyer or are part of the Buyer's Family of Investment Companies, (ii) bank deposit notes and certificates of deposit, (iii) loan participations, (iv) repurchase agreements, (v) securities owned but subject to a repurchase agreement and (vi) currency, interest rate and commodity swaps. 5. The Buyer is familiar with Rule 144A and understands that each of the parties to which this certification is made are relying and will continue to rely on the statements made herein because one or more sales to the Buyer will be in reliance on Rule 144A. In addition, the Buyer will only purchase for the Buyer's own account. 8 6. The undersigned will notify each of the parties to which this certification is made of any changes in the information and conclusions herein. Until such notice, the Buyer's purchase of Rule 144A Securities will constitute a reaffirmation of this certification by the undersigned as of the date of such purchase. ----------------------------------------- Print Name of Buyer By: -------------------------------------- Name: Title: IF AN ADVISER: ----------------------------------------- Print Name of Buyer Date: ------------------------------------ C-9 EXHIBIT D FORM OF INVESTOR REPRESENTATION LETTER ________________, ____ Wachovia Asset Securitization Issuance, LLC One Wachovia Center 301 South College Street, Suite D Charlotte, North Carolina 28288-5578 U.S. Bank National Association 60 Livingston Avenue EP-MN-WS3D St. Paul, Minnesota 55107-2292 Attn: Corporate Trust Services - WASI - 2003-HE3 Wachovia Bank, National Association 401 South Tryon Street-NC 1179 Charlotte, NC 28288 Attn: Structure Finance Trust Services Re: Wachovia Asset Securitization Issuance, LLC Asset-Backed Certificates, Series 2003-HE3 ------------------------------------------- Ladies and Gentlemen: ___________________ (the "Purchaser") intends to purchase from _________________ (the "Seller") ____% Certificate Percentage Interest of Series 2003-HE3 (the "Certificates"), issued pursuant to the trust agreement dated as of November 19, 2003 (the "Trust Agreement"), between Wachovia Asset Securitization Issuance, LLC, as depositor (the "Depositor") and Wilmington Trust Company, as owner trustee (the "Owner Trustee"). Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in Appendix A to the indenture dated as of November 19, 2003, among the Trust, the Paying Agent and the Indenture Trustee. The Purchaser hereby certifies, represents and warrants to, and covenants with, the Depositor and the Certificate Registrar that: 1. The Purchaser understands that (a) the Certificates have not been and will not be registered or qualified under the Securities Act of 1933, as amended (the "Act"), or any state securities law, (b) the Company is not required to so register or qualify the Certificates, (c) the Certificates may be resold only if registered and qualified pursuant to the provisions of the Act or any state securities law, or if an exemption from such registration and qualification is available, (d) the Trust Agreement contains restrictions regarding the transfer of the Certificates and (e) the Certificates will bear a legend to the foregoing effect. D-1 2. The Purchaser is acquiring the Certificates for its own account for investment only and not with a view to or for sale in connection with any distribution thereof in any manner that would violate the Act or any applicable state securities laws. 3. The Purchaser is (a) a substantial, sophisticated institutional investor having such knowledge and experience in financial and business matters, and, in particular, in such matters related to securities similar to the Certificates, such that it is capable of evaluating the merits and risks of investment in the Certificates, (b) able to bear the economic risks of such an investment and (c) an "accredited investor" within the meaning of Rule 501(a) promulgated pursuant to the Act. 4. The Purchaser has been furnished with, and has had an opportunity to review a copy of the Trust Agreement and such other information concerning the Certificates, the Mortgage Loans and the Depositor as has been requested by the Purchaser from the Depositor or the Seller and is relevant to the Purchaser's decision to purchase the Certificates. The Purchaser has had any questions arising from such review answered by the Depositor or the Seller to the satisfaction of the Purchaser. 5. The Purchaser has not and will not nor has it authorized or will it authorize any person to (a) offer, pledge, sell, dispose of or otherwise transfer any Certificate, any interest in any Certificate or any other similar security to any person in any manner, (b) solicit any offer to buy or to accept a pledge, disposition of other transfer of any Certificate, any interest in any Certificate or any other similar security from any person in any manner, (c) otherwise approach or negotiate with respect to any Certificate, any interest in any Certificate or any other similar security with any person in any manner, (d) make any general solicitation by means of general advertising or in any other manner or (e) take any other action, that (as to any of (a) through (d) above) would constitute a distribution of any Certificate under the Act, that would render the disposition of any Certificate a violation of Section 5 of the Act or any state securities law, or that would require registration or qualification pursuant thereto. The Purchaser will not sell or otherwise transfer any of the Certificates, except in compliance with the provisions of the Trust Agreement. 6. The Purchaser represents: (i) that either (a) or (b) is satisfied, as marked below: ____ a. The Purchaser is not any employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the Internal Revenue Code of 1986, as amended (the "Code"), a Person acting, directly or indirectly, on behalf of any such plan or any Person acquiring such Certificates with "plan assets" of a Plan within the meaning of the Department of Labor Regulations Section 2510.3-101; or ____ b. The Purchaser will provide the Depositor, the Owner Trustee, the Certificate Registrar, the Enhancer and the Servicer with either: (x) an opinion of counsel, satisfactory to the Depositor, the Owner Trustee, the Certificate Registrar, the Enhancer and the Servicer, to the effect that the purchase and holding of a Certificate by or on behalf of the Purchaser is permissible under applicable law, D-2 will not constitute or result in a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or comparable provisions of any subsequent enactments) and will not subject the Depositor, the Owner Trustee, the Certificate Registrar, the Certificate Paying Agent, the Enhancer or the Servicer to any obligation or liability (including liabilities under ERISA or Section 4975 of the Code) in addition to those undertaken in the Trust Agreement, which opinion of counsel shall not be an expense of the Depositor, the Owner Trustee, the Certificate Registrar, the Enhancer or the Servicer; or (y) in lieu of such opinion of counsel, a certification in the form of Exhibit G to the Trust Agreement; and (ii) the Purchaser is familiar with the prohibited transaction restrictions and fiduciary responsibility requirements of Sections 406 and 407 of ERISA and Section 4975 of the Code and understands that each of the parties to which this certification is made is relying and will continue to rely on the statements made in this paragraph 6. 7. The Purchaser is not a non-United States person. Very truly yours, ----------------------------------------- By: -------------------------------------- Name: Title: D-3 EXHIBIT E FORM OF TRANSFEROR REPRESENTATION LETTER _______________, ____ Wachovia Asset Securitization Issuance, LLC One Wachovia Center 301 South College Street, Suite D Charlotte, North Carolina 28288-5578 U.S. Bank National Association 60 Livingston Avenue EP-MN-WS3D St. Paul, Minnesota 55107-2292 Attention: Corporate Trust Services - WASI -- 2003-HE3 Wachovia Bank, National Association 401 South Tryon Street-NC 1179 Charlotte, NC 28288 Attn: Structure Finance Trust Services Re: Wachovia Asset Securitization Issuance, LLC Asset-Backed Certificates, Series 2003-HE3 ------------------------------------------- Ladies and Gentlemen: _______________ (the "Purchaser") intends to purchase from _______________ (the "Seller") a ______% Percentage Interest of Certificates of Series 2003-HE3 (the "Certificates"), issued pursuant to the trust agreement dated as of November 19, 2003 (the "Trust Agreement"), between Wachovia Asset Securitization Issuance, LLC, as depositor (the "Depositor"), and Wilmington Trust Company, as owner trustee (the "Owner Trustee"). Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in Appendix A to the indenture dated as of November 19, 2003, among the Trust, the Paying Agent and the Indenture Trustee. The Seller hereby certifies, represents and warrants to, and covenants with, the Depositor and the Certificate Registrar that: Neither the Seller nor anyone acting on its behalf has (a) offered, pledged, sold, disposed of or otherwise transferred any Certificate, any interest in any Certificate or any other similar security to any person in any manner, (b) has solicited any offer to buy or to accept a pledge, disposition or other transfer of any Certificate, any interest in any Certificate or any other similar security from any person in any manner, (c) has otherwise approached or negotiated with respect to any Certificate, any interest in any Certificate or any other similar security with any person in any manner, (d) has made any general solicitation by means of general advertising or in any other manner, or (e) has taken any other action, that (as to any of (a) through (e) above) would constitute a distribution of the Certificates under the Securities Act of 1933 (the "Act"), that would render the disposition of any E-1 Certificate a violation of Section 5 of the Act or any state securities law, or that would require registration or qualification pursuant thereto. The Seller will not act, in any manner set forth in the E-2 foregoing sentence with respect to any Certificate. The Seller has not and will not sell or otherwise transfer any of the Certificates, except in compliance with the provisions of the Trust Agreement. Very truly yours, ----------------------------------------- (Seller) By: -------------------------------------- Name: Title: E-3 EXHIBIT F FORM OF CERTIFICATE OF NON-FOREIGN STATUS This Certificate of Non-Foreign Status is delivered pursuant to Section 3.09 of the trust agreement dated as of November 19, 2003 (the "Trust Agreement"), between Wachovia Asset Securitization Issuance, LLC, as depositor (the "Depositor"), and Wilmington Trust Company, as owner trustee, in connection with the acquisition of, transfer to or possession by the undersigned, whether as beneficial owner (the "Beneficial Owner"), or nominee on behalf of the Beneficial Owner of Wachovia Asset Securitization Issuance, LLC Asset-Backed Certificates, Series 2003-HE3 (the "Certificates"). Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in Appendix A to the indenture dated as of November 19, 2003, among the Trust, the Paying Agent and the Indenture Trustee. Each holder must complete Part I, Part II (if the holder is a nominee), and in all cases sign and otherwise complete Part III. In addition, each holder shall submit with the Certificate an IRS Form W-9 relating to such holder. To confirm to the Trust that the provisions of Sections 871, 881 or 1446 of the Internal Revenue Code (relating to withholding tax on foreign partners) do not apply in respect of the Certificates held by the undersigned, the undersigned hereby certifies: Part I - Complete Either A or B A. Individual as Beneficial Owner 1. I am (the Beneficial Owner is ) not a non-resident alien for purposes of U.S. income taxation; 2. My (the Beneficial Owner's) name and home address are: ------------------------------------------ ------------------------------------------ ; and ------------------------------------------ 3. My (the Beneficial Owner's) U.S. taxpayer identification number (Social Security Number) is _________________________. B. Corporate, Partnership or Other Entity as Beneficial Owner 1. (Name of the Beneficial Owner) is not a foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Code and Treasury Regulations; 2. The Beneficial Owner's office address and place of incorporation (if applicable) is F-1 ------------------------------------------ ------------------------------------------ ; and ------------------------------------------ 3. The Beneficial Owner's U.S. employer identification number is _____________________. Part II - Nominees If the undersigned is the nominee for the Beneficial Owner, the undersigned certifies that this Certificate has been made in reliance upon information contained in: ____ an IRS Form W-9 ____ a form such as this or substantially similar provided to the undersigned by an appropriate person and (i) the undersigned agrees to notify the Trust at least thirty (30) days prior to the date that the form relied upon becomes obsolete, and (ii) in connection with change in Beneficial Owners, the undersigned agrees to submit a new Certificate of Non-Foreign Status to the Trust promptly after such change. Part III - Declaration The undersigned, as the Beneficial Owner or a nominee thereof, agrees to notify the Trust within sixty (60) days of the date that the Beneficial Owner becomes a foreign person. The undersigned understands that this certificate may be disclosed to the Internal Revenue Service by the Trust and any false statement contained therein could be punishable by fines, imprisonment or both. Under penalties of perjury, I declare that I have examined this certificate and to the best of my knowledge and belief it is true, correct and complete and will further declare that I will inform the Trust of any change in the information provided above, and, if applicable, I further declare that I have the authority* to sign this document. --------------------------------------- Name --------------------------------------- Title (if applicable) --------------------------------------- Signature and Date *NOTE: If signed pursuant to a power of attorney, the power of attorney must accompany this certificate. F-2 EXHIBIT G FORM OF ERISA REPRESENTATION LETTER ___________________, _____ Wachovia Asset Securitization Issuance, LLC One Wachovia Center 301 South College Street, Suite D Charlotte, North Carolina 28288-5578 Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Wachovia Bank, National Association One Wachovia Center 301 South College Street Charlotte, North Carolina 28288 U.S. Bank National Association 60 Livingston Avenue EP-MN-WS3D St. Paul, Minnesota 55107-2292 Attention: Corporate Trust Services - WASI -- 2003-HE3 Re: Wachovia Asset Securitization Issuance, LLC Asset-Backed Certificates, Series 2003-HE3 ------------------------------------------- Dear Sirs: ____________________ (the "Transferee") intends to acquire from _____________________ (the "Transferor") a ____% Percentage Interest of Wachovia Asset Securitization Issuance, LLC Asset-Backed Certificates, Series 2003-HE3 (the "Certificates"), issued pursuant to a trust agreement dated as of November 19, 2003, between Wachovia Asset Securitization Issuance, LLC, as depositor (the "Depositor"), and Wilmington Trust Company, as owner trustee (the "Owner Trustee"). Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in Appendix A to the indenture dated as of November 19, 2003, among the Trust, the Paying Agent and the Indenture Trustee. The Transferee hereby certifies, represents and warrants to, and covenants with, the Depositor, the Owner Trustee, the Certificate Registrar, the Enhancer and the Servicer that: The Certificates (i) are not being acquired by, and will not be transferred to, any employee benefit plan within the meaning of Section 3(3) of the Employee Retirement Income G-1 Security Act of 1974, as amended ("ERISA"), or other retirement arrangement, including individual retirement accounts and annuities, Keogh plans and bank collective investment funds and insurance company general or separate accounts in which such plans, accounts or arrangements are invested, that is subject to Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code") (any of the foregoing, a "Plan"), (ii) are not being acquired with "plan assets" of a Plan within the meaning of the Department of Labor ("DOL") Regulations Section 2510.3-101, and (iii) will not be transferred to any entity that is deemed to be investing in plan assets within the meaning of the DOL Regulations Section 2510.3-101. The Transferee is familiar with the prohibited transaction restrictions and fiduciary responsibility requirements of Sections 406 and 407 of ERISA and Section 4975 of the Code and understands that each of the parties to which this certification is made is relying and will continue to rely on the statements made herein. Very truly yours, ----------------------------------------- By: -------------------------------------- Name: Title: G-2 EXHIBIT H FORM OF REPRESENTATION LETTER ____________________, _____ Wachovia Asset Securitization Issuance, LLC One Wachovia Center 301 South College Street, Suite D Charlotte, North Carolina 28288-5578 Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Wachovia Bank, National Association One Wachovia Center 301 South College Street Charlotte, North Carolina 28288 U.S. Bank National Association 60 Livingston Avenue EP-MN-WS3D St. Paul, Minnesota 55107-2292 Attention: Corporate Trust Services - WASI -- 2003-HE3 Re: Wachovia Asset Securitization Issuance, LLC Asset-Backed Certificates, Series 2003-HE3 -------------------------------------------- Dear Sirs: ____________________ (the "Transferee") intends to acquire from ______________________ (the "Transferor") a ____% Percentage Interest of Wachovia Asset Securitization Issuance, LLC Asset-Backed Certificates, Series 2003-HE3 (the "Certificates"), issued pursuant to a trust agreement dated as of November 19, 2003 (the "Trust Agreement"), Wachovia Asset Securitization Issuance, LLC, as depositor (the "Depositor"), and Wilmington Trust Company, as owner trustee (the "Owner Trustee"). Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in Appendix A to the indenture dated as of November 19, 2003, among the Trust, the Paying Agent and the Indenture Trustee. The Transferee hereby certifies, represents and warrants to, and covenants with, the Depositor, the Owner Trustee, the Certificate Registrar and the Servicer that: (1) the Transferee is acquiring the Certificate for its own behalf and is not acting as agent or custodian for any other person or entity in connection with such acquisition; and H-1 (2) the Transferee is not a partnership, grantor trust or S corporation for federal income tax purposes, or, if the Transferee is a partnership, grantor trust or S corporation for federal income tax purposes, the Certificates are not more than 50% of the assets of the partnership, grantor trust or S corporation. Very truly yours, ----------------------------------------- By: -------------------------------------- Name: Title: H-2 EXHIBIT I FORM OF ADDITION NOTICE DATE: U.S. Bank National Association MBIA Insurance Corporation 60 Livingston Avenue 113 King Street EP-MN-WS3D Armonk, New York 10504 St. Paul, Minnesota 55107-2292 Attention: Structured Finance--Mortgage Attention: Corporate Trust Services Backed - WASI -- 2003-HE3 Wachovia Asset Securitization Moody's Investors Service, Inc. Issuance, LLC 2003-HE3 Trust 99 Church Street c/o Wilmington Trust Company, New York, New York 10007 as Owner Trustee Rodney Square North Standard & Poor's, a division of The 1100 North Market Street McGraw-Hill Companies, Inc. Wilmington, Delaware 19890-0001 26 Broadway Attn: Corporate Trust Administration New York, New York 10004-1064 Wachovia Bank, National Association Wilmington Trust Company 401 South Tryon Street-NC 1179 Rodney Square North Charlotte, NC 28288 1100 North Market Street Attn: Structure Finance Trust Services Wilmington, Delaware 19890-0001 Re: WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC ------------------------------------------- Ladies and Gentlemen: Pursuant to Section 3.05 of the Trust Agreement, dated as of November 19, 2003 (the "Trust Agreement"), among and Wachovia Asset Securitization Issuance, LLC, as Depositor and Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, as Issuer, the Depositor, the Issuer has designated the Subsequent Mortgage Loans identified on the Mortgage Loan Schedule attached hereto to be sold to the Issuer on _________, ____, with an aggregate Principal Balance of $__________. Capitalized terms not otherwise defined herein have the meaning set forth in the Appendix A to the Indenture dated as of November 19, 2003, among the Issuer, the Paying Agent and U.S. Bank National Association, as indenture trustee. I-1 Please acknowledge your receipt of this notice by countersigning the enclosed copy in the space indicated below and returning it to the attention of the undersigned. Very truly yours, WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC 2003-HE3 TRUST, as Issuer By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: -------------------------------------- Name: Title: WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC as Depositor By: -------------------------------------- Name: Title: EXHIBIT J FORM OF TRANSFER AGREEMENT Pursuant to this Subsequent Transfer Agreement No._____ (the "Agreement"), dated as of ____________, _____, between Wachovia Asset Securitization Issuance, LLC, as seller (the "Depositor"), and Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust (the "Issuer") and pursuant to the Trust Agreement dated as of November 19, 2003 (the "Trust Agreement"), among the Depositor and the Issuer, the Depositor and the Issuer agree to the sale by the Depositor and the purchase by the Issuer of the mortgage loans listed on the attached Schedule of Subsequent Mortgage Loans (the "Subsequent Mortgage Loans"). Capitalized terms used and not defined herein have their respective meanings as set forth in Appendix A to the Indenture dated as of November 19, 2003, among the Issuer, Wachovia Bank, National Association, as Paying Agent (the "Paying Agent"), and U.S. Bank National Association, as indenture trustee (the "Indenture Trustee"), which meanings are incorporated by reference herein. All other capitalized terms used herein shall have the meanings specified herein. Section 1. Sale of Subsequent Mortgage Loans. (a) The Depositor, by the execution and delivery of this Agreement, does hereby sell, assign, set over, and otherwise convey to the Issuer, without recourse (except as expressly provided herein and in the Trust Agreement), all of its right, title and interest, whether now owned or existing or hereafter created, arising, or acquired, in, to and under the following: (i) the Subsequent Mortgage Loans identified on the Mortgage Loan Schedule attached hereto as Attachment B and the other related Subsequent Transferred Property purchased by the Depositor from the Seller pursuant to the Purchase Agreement; provided, however, that the Issuer does not assume any obligations (including any obligations to fund Draws) arising under or related to the Related Documents. Such conveyance shall be deemed to be made: (1) with respect to the Cut-Off Date Principal Balances, with respect to the Subsequent Mortgage Loans, as of the related Subsequent Transfer Date; and (2) with respect to the amount of each Additional Balance created on or after the Subsequent Cut-Off Date and prior to the commencement of the Rapid Amortization Period, as of the later of the related Subsequent Cut-Off Date and the date that the corresponding Draw was made pursuant to the related Loan Agreement, subject to the receipt by the Depositor of consideration therefore as provided in Section 3.02(c) of the Trust Agreement. The Depositor, contemporaneously with the delivery of this Agreement, has delivered or caused to be delivered to the Issuer each item set forth in Section 3.04 of the Trust Agreement. The transfer to the Issuer by the Depositor of the Subsequent Mortgage Loans identified on the Mortgage Loan Schedule shall be absolute and is intended by the parties hereto to constitute a sale by the Depositor to the Issuer on the Subsequent Transfer Date of all the Depositor's right, title and interest in and to the Subsequent Mortgage Loans, and other related Subsequent Transferred Property as and to the extent described above, and the Issuer hereby acknowledges such transfer. In the event the transactions set forth herein are deemed not to be a sale, the Depositor hereby grants to the Issuer a security interest in all of the Depositor's right, title and interest, whether now owned or hereafter acquired, in, to and under the Subsequent Transferred Property to secure all of the Depositor's obligations hereunder, and this Agreement shall and hereby does constitute a security agreement under applicable law. The Depositor agrees to take or cause to be taken such actions and to execute such documents, including without limitation the authorization and filing of any continuation statements with respect to the UCC financing statements filed with respect to the Subsequent Transferred Property by the Depositor on the related Subsequent Transfer Date, if any, and any amendments thereto required to reflect a change in the name or corporate structure of the Depositor or the filing of any additional UCC financing statements due to the change in the principal office or jurisdiction of organization of the Depositor as are necessary to perfect and protect the Issuer's interests in the Subsequent Transferred Property. The Depositor shall file any such continuation statements or amendments on a timely basis. (b) The expenses and costs relating to the delivery of the Subsequent Mortgage Loans and the related Subsequent Transferred Property, this Agreement and the Mortgage Loan Purchase Agreement shall be borne by the Depositor. (c) Additional terms of the sale are set forth on Attachment A hereto. Section 2. Conditions Precedent; Assignment. (a) The Depositor hereby affirms the representations and warranties made by it and set forth in Section 2.09 of the Trust Agreement as of the date hereof. The Depositor hereby confirms that each of the conditions set forth in Section 2.2(b) of the Mortgage Loan Purchase Agreement have been satisfied in connection with the Subsequent Transfer Agreement, dated as of the date hereof, between the Seller and the Depositor as Purchaser and Section 3.05(c) of the Trust Agreement, respectively, are satisfied as of the date hereof. (b) The Depositor is solvent, is able to pay its debts as they become due and has capital sufficient to carry on its business and its obligations hereunder; it will not be rendered insolvent by the execution and delivery of this Instrument or by the performance of its obligations hereunder nor is it aware of any pending insolvency; no petition of bankruptcy (or similar insolvency proceeding) has been filed by or against the Depositor prior to the date hereof. (c) All terms and conditions of the Trust Agreement relating to the Subsequent Mortgage Loans are hereby ratified and confirmed; provided, however, that in the event of any conflict the provisions of this Agreement shall control over the conflicting provisions of the Mortgage Loan Purchase Agreement. (d) The Depositor hereby assigns to the Issuer all of the Depositor's right, title and interest to and under the Subsequent Transfer Agreement, dated as of _______ __, ____ between the Seller and the Depositor as Purchaser, including the Depositor's right to enforce the obligations of the Seller thereunder (including the Seller's obligation to repurchase Mortgage Loans as the result of a breach of the Seller's representations and warranties in such Subsequent Transfer Agreement and the Purchase Agreement). Section 3. GOVERNING LAW. THIS INSTRUMENT SHALL BE CONSTRUED IN ACCORDANCE ------------- WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 4. Counterparts. This Instrument may be executed in counterparts, ------------ each of which, when so executed, shall be deemed to be an original and together shall constitute one and the same instrument. Section 5. Successors and Assigns. This Agreement shall inure to the ------------------------ benefit of and be binding upon the Depositor and the Purchaser and their respective successors and assigns. WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC, as Depositor By: -------------------------------------- Name: Title: WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC 2003-HE3 TRUST, as Issuer By: -------------------------------------- Name: Title: Acknowledged and Accepted: U.S. BANK NATIONAL ASSOCIATION, not in its individual capacity but solely as Indenture Trustee By: ------------------------------------ Name: Title: Attachments ----------- A. Additional terms of sale. B. Schedule of Subsequent Mortgage Loans. C. Depositor's Officer's Certificate. WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC 2002-HE3 TRUST ATTACHMENT A TO FORM OF SUBSEQUENT TRANSFER AGREEMENT ______________, _____ A. 1. Subsequent Cut-Off Date: 2. Pricing Date: 3. Subsequent Transfer Date: 4. Aggregate Principal Balance of the Subsequent Mortgage Loans as of the Subsequent Cut-Off Date: 5. Purchase Price: 100.00% B. As to all Subsequent Mortgage Loans: 1. Longest stated term to maturity: ______ months 2. Minimum Loan Rate: ______% 3. Maximum Loan Rate: ______% [EXECUTION COPY] WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC 2003-HE3 TRUST, Issuer, and U.S. BANK NATIONAL ASSOCIATION Indenture Trustee and WACHOVIA BANK, NATIONAL ASSOCIATION Paying Agent ------------------------ INDENTURE ------------------------ Dated as of November 19, 2003 WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC ASSET-BACKED NOTES, SERIES 2003-HE3

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-v- RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939 AND INDENTURE PROVISIONS* Trust Indenture Act Section Indenture Section ---------------- ----------------- 310(a)(1)............................................... 6.11 (a)(2)............................................... 6.11 (a)(3)............................................... 6.10 (a)(4)............................................... Not Applicable (a)(5)............................................... 6.11 (b).................................................. 6.08, 6.11 (c).................................................. Not Applicable 311(a).................................................. 6.12 (b).................................................. 6.12 (c).................................................. Not Applicable 312(a).................................................. 7.01, 7.02(a) (b).................................................. 7.02(b) (c).................................................. 7.02(c) 313(a).................................................. 7.04 (b).................................................. 7.04 (c).................................................. 7.03(a)(iii),7.04 (d).................................................. 7.04 314(a).................................................. 3.10, 7.03(a) (b)................................................. 3.07 (c)(1)............................................... 8.05(c), 10.01(a) (c)(2)............................................... 8.05(c), 10.01(a) (c)(3)............................................... Not Applicable (d)(1)............................................... 8.05(c), 10.01(b) (d)(2)............................................... 8.05(c), 10.01(b) (d)(3)............................................... 8.05(c), 10.01(b) (e).................................................. 10.01(a) 315(a).................................................. 6.01(b) (b).................................................. 6.05 (c).................................................. 6.01(a) (d).................................................. 6.01(c) (d)(1)............................................... 6.01(c) (d)(2)............................................... 6.01(c) (d)(3)............................................... 6.01(c) (e).................................................. 5.13 316(a)(1)(A)............................................ 5.11 316(a)(1)(B)............................................ 5.12 316(a)(2)............................................... Not Applicable 316(b).................................................. 5.07 317(a)(1)............................................... 5.04 317(a)(2)............................................... 5.03(d) 317(b).................................................. 3.03(a) 318(a).................................................. 10.07 ----------- *This reconciliation and tie shall not, for any purpose, be deemed to be part of the within indenture. -i- This Indenture, dated as of November 19, 2003, is among Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, a Delaware statutory trust, as issuer (the "Issuer"), U.S. Bank National Association, as indenture trustee (the "Indenture Trustee") and Wachovia Bank, National Association, the paying agent (the "Paying Agent"). WITNESSETH: Each party hereto agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Noteholders of the Issuer's Wachovia Asset Securitization Issuance, LLC Asset-Backed Notes, Series 2003-HE3, Class A (the "Notes") and the Enhancer. GRANTING CLAUSE: The Issuer hereby Grants to the Indenture Trustee, all of the Issuer's right, title and interest in and to all of the following: (a) the Initial Mortgage Loans and any Subsequent Mortgage Loans (together with the Cut-Off Date Principal Balances and any Additional Balances arising thereafter to and including the date immediately preceding the commencement of the Rapid Amortization Period), and all monies due or to become due thereunder; (b) the Note Payment Account, and all funds on deposit or credited thereto from time to time and all proceeds thereof; (c) the Funding Account, and all funds on deposit or credited thereto from time to time; (d) the Yield Maintenance Agreement; (e) all hazard insurance policies; (f) all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas and other minerals, consisting of, arising from, or relating to, any of the foregoing; and (g) all present and future claims, demands, causes and choses 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 foregoing Grant shall inure to the benefit of the Enhancer in respect of draws made on the Policy and amounts owing from time to time pursuant to the Insurance Agreement (regardless of whether such amounts relate to the Notes or the Certificates), and such Grant shall continue in full force and effect for the benefit of the Enhancer until all such amounts owing to it have been repaid in full. Each of the Mortgage Loan Schedules is hereby incorporated by reference and made a part of this Indenture. 1 The Indenture Trustee, as trustee on behalf of the Noteholders, 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 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"), such 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 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: (a) a term has the meaning assigned to it; (b) 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; (c) "or" includes "and/or"; (d) "including" means "including without limitation"; (e) words in the singular include the plural and words in the plural include the singular; 2 (f) the term "proceeds" has the meaning ascribed thereto in the UCC; and (g) 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. 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 the Notes, as evidenced by their execution thereof. 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 such Note. The Notes shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods, 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 $500,000,000. Each Note shall be dated the date of its authentication. The Notes shall be issuable as registered Notes and shall be issuable in minimum denominations of $25,000 and integral multiples of $1,000 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. 3 ARTICLE III COVENANTS --------- Section 3.01 Collection of Payments With Respect to the Mortgage Loans. --------------------------------------------------------- The Paying Agent shall establish and maintain with itself the Note Payment Account in which the Paying Agent shall, subject to the terms of this paragraph, deposit, on the same day as it is received from the Servicer, each remittance received by the Indenture Trustee with respect to the Mortgage Loans. The Paying Agent shall distribute 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 Note Payment Account. Section 3.02 Maintenance of Office or Agency. The Issuer will maintain ------------------------------- in the City of Minneapolis, Minnesota, 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 Paying Agent 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 Paying Agent with the address thereof, such surrenders, notices and demands may be made or served at its Corporate Trust Office, and the Issuer hereby appoints the Paying Agent as its agent to receive all such surrenders, notices and demands. Section 3.03 Money for Payments to be Held in Trust; Paying Agent. 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 Note Payment Account pursuant to Section 3.01 shall be made on behalf of the Issuer by the Paying Agent or by the Indenture Trustee or another paying agent appointed by the Indenture Trustee pursuant to Section 6.08 to act as Paying Agent hereunder and under the Servicing Agreement, and no amounts so withdrawn from the Note Payment Account for payments of Notes shall be paid over to the Issuer except as provided in this Section 3.03. The Issuer hereby appoints Wachovia Bank, National Association to act as initial Paying Agent hereunder and under the Servicing Agreement. Wachovia Bank, National Association hereby accepts such appointment. The Issuer will cause each Paying Agent other than the initial Paying Agent or 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 or the initial Paying Agent acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section 3.03, that such Paying Agent will: (a) 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; (b) give the Indenture Trustee and the Enhancer written 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; (c) at any time during the continuance of any such default, upon the written request of the Indenture Trustee, except in the case where the same party is both the Indenture Trustee and 4 the Paying Agent, in which case no such written request will be needed, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent; (d) 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 be the Certificate Paying Agent or to meet the standards required to be met by a paying agent at the time of its appointment; (e) 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 thereon and with respect to any applicable reporting requirements in connection therewith; and (f) deliver to the Indenture Trustee and the Paying Agent, except in the case where such party is both the Indenture Trustee and the Paying Agent, in which case no such delivery is required, a copy of the statement to Noteholders prepared with respect to each Payment Date by the Servicer pursuant to Section 4.01 of the Servicing Agreement. 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 the 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 Noteholder 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 the Paying Agent with respect to such trust money shall thereupon cease; provided, however, that the Indenture Trustee or the Paying Agent, before being required to make any such repayment, shall at the expense and written direction of the Issuer cause to be published once, in an Authorized Newspaper, 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 or the Paying Agent may also adopt and employ, at the expense and written direction of the Issuer, any other reasonable means of notification of such repayment (including, but not limited to, mailing notice of such repayment to Noteholders the Notes which 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 the Paying Agent, at the last address of record for each such Noteholder). Section 3.04 Existence. The Issuer will keep in full effect its --------- existence, rights and franchises as a statutory 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 5 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 Priority of Distributions; Defaulted Interest. --------------------------------------------- (a) In accordance with Section 3.04(b) of the Servicing Agreement, the priority of distributions on each Payment Date from Principal Collections and Interest Collections with respect to the Mortgage Loans, any optional advance of delinquent principal and/or interest on the Mortgage Loans made by the Servicer in respect of the related Collection Period, any amounts received by the Paying Agent under the Yield Maintenance Agreement with respect to such Payment Date, any Deficiency Amount with respect to Mortgage Loans or the Notes deposited into the Note Payment Account, and any amounts transferred to the Note Payment Account from the Funding Account pursuant to Section 3.19 of the Servicing Agreement and any amounts transferred from the Custodial Account to the Distribution Account for distribution hereunder, is as follows: (i) During the Revolving Period: (1) from available Interest Collections (exclusive of the pro rata portion of interest attributable to Additional Balances represented by the Additional Balance Increase Amount that has been withdrawn from the Custodial Account pursuant to Section 3.04(a) of the Servicing Agreement), to the Enhancer, the amount of the premium for the Policy and any unpaid premium for the Policy, with interest thereon as provided in the Insurance Agreement; (2) (x) from any remaining Interest Collections (exclusive of the pro rata portion of interest attributable to Additional Balances represented by the Additional Balance Increase Amount that has been withdrawn from the Custodial Account pursuant to Section 3.04(a) of the Servicing Agreement), payments received under the Yield Maintenance Agreement, if any, and any Deficiency Amount paid with respect to the Notes and deposited into the Note Payment Account pursuant to Section 3.28(a)(ii), to the Note Payment Account, for payment by the Paying Agent to the Noteholders, interest for the related Interest Period at the Note Rate on the Note Balance immediately prior to such Payment Date, other than any Interest Shortfalls and excluding any Relief Act Shortfalls allocated thereto pursuant to Section 3.05(e), and (y) from the pro rata portion of interest attributable to Additional Balances represented by the Additional Balance Increase Amount, to pay to the holders of the Certificates interest on the Additional Balance Increase Amount; (3) from Net Principal Collections, to the Distribution Account, for distribution to the holders of the Certificates, an amount equal to the Additional Balance Increase Amount; (4) any remaining Net Principal Collections to the Funding Account as set forth in the Servicing Agreement; 6 (5) from any remaining amounts, to the Enhancer, to reimburse it for prior draws made on the Policy, with interest thereon, as provided in the Insurance Agreement; (6) on and after the Payment Date in March 2004, from Excess Spread, to the Funding Account, the amount necessary so that the Overcollateralization Amount is not less than the Overcollateralization Target Amount; (7) from remaining Excess Spread, to the Distribution Account, for distribution to the holders of the Certificates, an amount equal to the Additional Balance Increase Amount; (8) from any remaining amounts, to the Enhancer, any other amounts owed to the Enhancer, with interest thereon, pursuant to the Insurance Agreement; (9) from any remaining Excess Spread, to the Note Payment Account, for payment by the Paying Agent to the Noteholders any Interest Shortfalls for such Payment Date and any prior Payment Dates to the extent not previously paid, together with interest thereon at the Note Rate (as adjusted from time to time); (10) from any remaining amounts, (x) to the Indenture Trustee, any amounts owing to the Indenture Trustee and (y) to the Paying Agent, any amounts owing to the Paying Agent, in each case pursuant to Section 6.07 to the extent remaining unpaid; and (11) any remaining amounts, to the Distribution Account, for distribution to the holders of the Certificates by the Certificate Paying Agent in accordance with the Trust Agreement. (ii) During the Managed Amortization Period: (1) from available Interest Collections (exclusive of the pro rata portion of interest attributable to Additional Balances represented by the Additional Balance Increase Amount that has been withdrawn from the Custodial Account pursuant to Section 3.04(a) of the Servicing Agreement), to the Enhancer, the amount of the premium for the Policy and any unpaid premium for the Policy, with interest thereon as provided in the Insurance Agreement; (2) (x) from any remaining Interest Collections (exclusive of the pro rata portion of interest attributable to Additional Balances represented by the Additional Balance Increase Amount that has been withdrawn from the Custodial Account pursuant to Section 3.04(a) of the Servicing Agreement), payments received under the Yield Maintenance Agreement, if any, and any Deficiency Amount with respect to the Notes deposited into the Note Payment Account pursuant to Section 3.28(a)(ii), to the Note Payment Account, for payment by the Paying Agent to the Noteholders, interest for the related Interest Period at the related Note Rate on the Note Balance immediately prior to such Payment Date, other than any 7 Interest Shortfalls and excluding any Relief Act Shortfalls allocated thereto pursuant to Section 3.05(e), and (y) from the pro rata portion of interest attributable to Additional Balances represented by the Additional Balance Increase Amount, to pay interest to the holders of the Certificates on the Additional Balance Increase Amount; (3) from Net Principal Collections, to the Distribution Account, for distribution to the holders of the Certificates, an amount equal to the Additional Balance Increase Amount; (4) from any remaining amounts, to the Note Payment Account, the Principal Distribution Amount for payment by the Paying Agent to the Noteholders, including any amount on deposit in the Note Payment Account on such Payment Date pursuant to Section 3.28(a)(iii), until the Note Balance of the Notes has been reduced to zero; (5) from any remaining amounts, to the Enhancer, to reimburse it for prior draws made on the Policy, with interest thereon, as provided in the Insurance Agreement; (6) on and after the Payment Date in March 2004, from Excess Spread, to the Note Payment Account, the amount necessary to be applied on such Payment Date for payment by the Paying Agent to the Noteholders, on a pro rata basis, so that the Overcollateralization Amount is not less than the Overcollateralization Target Amount; (7) from remaining Excess Spread, to the Distribution Account, for distribution to the holders of the Certificates, an amount equal to the Additional Balance Increase Amount; (8) from any remaining amounts, to the Enhancer, any other amounts owed to the Enhancer, with interest thereon, pursuant to the Insurance Agreement; (9) from any remaining Excess Spread, to the Note Payment Account, for payment by the Paying Agent to the Noteholders any Interest Shortfalls for such Payment Date and any prior Payment Dates to the extent not previously paid, together with interest thereon at the Note Rate (as adjusted from time to time); (10) from any remaining amounts, (x) to the Indenture Trustee, any amounts owing to the Indenture Trustee and (y) to the Paying Agent, any amounts owing to the Paying Agent, in each case pursuant to Section 6.07 to the extent remaining unpaid; and (11) any remaining amounts, to the Distribution Account, for distribution to the holders of the Certificates by the Certificate Paying Agent in accordance with the Trust Agreement. (iii) During the Rapid Amortization Period: 8 (1) from available Interest Collections (exclusive of the pro rata portion of interest attributable to Additional Balances represented by the Additional Balance Increase Amount that has been withdrawn from the Custodial Account pursuant to Section 3.04(a) of the Servicing Agreement), to the Enhancer, the amount of the premium for the Policy and any unpaid premium for the Policy, with interest thereon as provided in the Insurance Agreement; (2) (x) from any remaining Interest Collections (exclusive of the pro rata portion of interest attributable to Additional Balances represented by the Additional Balance Increase Amount that has been withdrawn from the Custodial Account pursuant to Section 3.04(a) of the Servicing Agreement), payments received under the Yield Maintenance Agreement, if any, and any Deficiency Amount with respect to the Notes deposited into the Note Payment Account pursuant to Section 3.28(a)(ii), to the Note Payment Account, for payment by the Paying Agent to the Noteholders, interest for the related Interest Period at the related Note Rate on the Note Balance immediately prior to such Payment Date, other than any Interest Shortfalls and excluding any Relief Act Shortfalls allocated thereto pursuant to Section 3.05(e), and (y) from the pro rata portion of interest attributable to Additional Balances represented by the Additional Balance Increase Amount, to pay to the holders of the Certificates, interest on the Additional Balance Increase Amount; (3) from any remaining amounts, to the Note Payment Account, the Principal Distribution Amount for payment by the Paying Agent to the Noteholders, on a pro rata basis, including any amount on deposit in the Note Payment Account on such Payment Date pursuant to Section 3.28(a)(iii), until the Note Balance of the Notes has been reduced to zero; (4) from Principal Collections, to the Distribution Account, for distribution to the holders of the Certificates, an amount equal to the Additional Balance Increase Amount; (5) from any remaining amounts, to the Enhancer, to reimburse it for prior draws made on the Policy, with interest thereon as provided in the Insurance Agreement; (6) on and after the Payment Date in March 2004, from Excess Spread, to the Note Payment Account, the amount necessary to be applied on such Payment Date for payment by the Paying Agent to the Noteholders, so that the Overcollateralization Amount is not less than the Overcollateralization Target Amount; (7) from remaining Excess Spread, to the Distribution Account, for distribution to the holders of the Certificates, an amount equal to the Additional Balance Increase Amount; 9 (8) from any remaining amounts, to the Enhancer, any other amounts owed to the Enhancer, with interest thereon, pursuant to the Insurance Agreement; (9) from any remaining Excess Spread, to the Note Payment Account, for payment by the Paying Agent to the Noteholders any Interest Shortfalls for such Payment Date and any prior Payment Dates to the extent not previously paid, together with interest thereon at the Note Rate (as adjusted from time to time); (10) from any remaining amounts, (x) to the Indenture Trustee, any amounts owing to the Indenture Trustee and (y) to the Paying Agent, any amounts owing to the Paying Agent, in each case pursuant to Section 6.07 to the extent remaining unpaid; and (11) any remaining amounts, to the Distribution Account, for distribution to the holders of the Certificates by the Certificate Paying Agent in accordance with the Trust Agreement. For purposes of the foregoing, the Note Balance on each Payment Date during the Amortization Periods will be reduced on a pro rata basis (any such reduction, an "Unpaid Principal Amount") by the Liquidation Loss Amounts (other than amounts allocated in respect of the Excluded Amount) for such Payment Date, but only to the extent that such Liquidation Loss Amounts are not otherwise covered by payments made pursuant to clauses (ii)(4) or (ii)(6) during the Managed Amortization Period, and (iii)(3) or (iii)(6) during the Rapid Amortization Period, or by a draw on the Policy, and the Overcollateralization Amount for that Payment Date is zero. (b) On each Payment Date, the Paying Agent shall apply, from amounts on deposit in the Note Payment Account, and in accordance with the Servicing Certificate, the amounts set forth above in the order of priority set forth in Section 3.05(a). The Indenture Trustee and the Paying Agent shall be entitled to rely conclusively on the accuracy and completeness of each Servicing Certificate delivered to it by the Servicer and neither the Indenture Trustee nor the Paying Agent shall be obligated, absent manifest error, to verify, recalculate, reconcile or recompute any amount contained in such Servicing Certificate. (c) Amounts paid to Noteholders shall be paid in respect of the Notes in accordance with the applicable percentage as set forth in paragraph (d) below. Interest on the Notes will be computed on the basis of the actual number of days in each Interest Period and a 360-day year. Interest will be paid to the Notes on a pari passu basis. Interest will accrue on the Additional Balance Increase Amount at the Net Loan Rate. Any installment of interest or principal payable on any Note that is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall be paid to the Noteholder of record thereof on the immediately preceding Record Date by wire transfer to an account specified in writing by such Noteholder reasonably satisfactory to the Paying Agent, or by check or money order mailed to such Noteholder at such Noteholder's address appearing in the Note Register, in the amount required to be distributed to such Noteholder on such Payment Date pursuant to such Noteholder's Notes; provided, however, that the Paying Agent shall not pay to any such Noteholder any amounts required to be withheld from a payment to such Noteholder by the Code. 10 (d) Principal of each Note shall be due and payable in full on the Final Payment Date as provided in the applicable form of Note set forth in Exhibit A. All principal payments on the Notes shall be made on a pro rata basis and in accordance with the priorities set forth in paragraphs (a) and (b) above to the Noteholders entitled thereto in accordance with the related Percentage Interests represented thereby. Upon written notice to the Paying Agent by the Issuer, the Paying Agent shall notify the Person in the name of which a Note is registered at the close of business on the Record Date preceding the Final Payment Date or other final Payment Date, as applicable. Such notice shall be mailed no later than five Business Days prior to the Final Payment Date or such other final Payment Date and, unless such Note is then a Book-Entry Note, shall specify that payment of the principal amount and any interest due with respect to such Note at the Final Payment Date or such 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. On each Payment Date, the Overcollateralization Amount available to cover any Liquidation Loss Amounts (other than amounts allocated in respect of the Excluded Amount) on such Payment Date shall be deemed to be reduced by an amount equal to such Liquidation Loss Amounts (except to the extent that such Liquidation Loss Amounts were covered on such Payment Date by a payment in respect of Liquidation Loss Amounts). (e) With respect to any Payment Date, interest payments on the Notes will be reduced by any Relief Act Shortfalls for the related Collection Period on a pro rata basis in accordance with the amount of interest payable on the Notes on such Payment Date, absent such reduction. Section 3.06 Protection of Trust Estate. -------------------------- (a) The Issuer shall 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; (iii) cause the Trust 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, if no Opinion of Counsel has yet been delivered pursuant to Section 3.07) unless the Indenture Trustee 11 and the Enhancer 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. Section 3.07 Opinions as to Trust Estate. --------------------------- On the Closing Date, the Issuer shall furnish to the Indenture Trustee, the Paying Agent, the Enhancer and the Owner Trustee an Opinion of Counsel at the expense of the Issuer stating that, upon delivery of the Loan Agreements relating to the Initial Mortgage Loans to the Indenture Trustee or the Servicer, in the State of North Carolina, the Indenture Trustee will have a perfected, first priority security interest in such Mortgage Loans. On or before December 31st in each calendar year, beginning in 2004, the Issuer shall furnish to the Indenture Trustee, the Paying Agent and the Enhancer an Opinion of Counsel at the expense of the Issuer either stating that, in the opinion of such counsel, no further action is necessary to maintain a perfected, first priority security interest in the Mortgage Loans until December 31 in the following calendar year or, if any such action is required to maintain such security interest in the Mortgage Loans, 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 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 shall 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. (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. (c) The Issuer shall not take any action or permit any action to be taken by others that would release any Person from any of such Person's covenants or obligations under any of the documents relating to the Mortgage Loans or under any instrument included in the Trust Estate, or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any of the documents relating to the Mortgage Loans or any such instrument, except such actions as the Servicer is expressly permitted to take in the Servicing Agreement. (d) The Issuer may retain an administrator 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: 12 (a) 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 pursuant to Section 5.04 hereof; (b) 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; (c) (i) 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, (ii) 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 (iii) permit the lien of this Indenture not to constitute a valid first priority security interest in the Trust Estate; or (d) impair or cause to be impaired the Issuer's interest in the Mortgage Loans, the Purchase Agreement or in any other Basic Document, if any such action would materially and adversely affect the interests of the Noteholders and the Enhancer. Section 3.10 Annual Statement as to Compliance. The Issuer shall ------------------------------------ deliver to the Indenture Trustee, the Paying Agent and the Enhancer, within 120 days after the end of each fiscal year of the Issuer (commencing with the fiscal year ending on December 31, 2003), an Officer's Certificate stating, as to the Authorized Officer signing such Officer's Certificate, that: (a) a review of the activities of the Issuer during such year and of its performance under this Indenture and the Trust Agreement has been made under such Authorized Officer's supervision; and (b) 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 and the provisions of the Trust Agreement 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 Recordation of Assignments. The Issuer shall enforce the -------------------------- obligation, if any, of the Seller under the Purchase Agreement to execute any Assignments of Mortgage and of the Servicer to submit or cause to be submitted for recordation all Assignments of Mortgages in accordance with Section 3.17 of the Servicing Agreement within 60 days of receipt of recording information by the Servicer. Section 3.12 Representations and Warranties Concerning the Mortgage --------------------------------------------------------- Loans. The Indenture Trustee, as pledgee of the Mortgage Loans, shall have the ----- benefit of the representations and warranties made by the Seller in Sections 3.1 of the Purchase Agreement, concerning the Mortgage Loans and the right to enforce the remedies against the Seller provided in such 13 Section 3.1, as applicable, to the same extent as though such representations and warranties were made directly to the Indenture Trustee. Section 3.13 Assignee of Record of the Mortgage Loans. As pledgee of ----------------------------------------- the Mortgage Loans, the Indenture Trustee shall hold title to the Mortgage Loans by being named as payee in the endorsements or assignments of the Loan Agreements and assignee in the Assignments of Mortgage to be delivered under Section 2.1 of the Purchase Agreement. Except as expressly provided in the Purchase Agreement or in the Servicing Agreement with respect to any specific Mortgage Loan, the Indenture Trustee shall not execute any endorsement or assignment or otherwise release or transfer such title to any of the Mortgage Loans until such time as the remaining Trust Estate may be released pursuant to Section 8.05(b). The Indenture Trustee's holding of such title shall in all respects be subject to its fiduciary obligations to the Noteholders hereunder. Section 3.14 Servicer as Agent and Bailee of the Indenture Trustee. ------------------------------------------------------- Solely for purposes of perfection under Section 9-313 or 9-314 of the UCC or other similar applicable law, rule or regulation of the state in which such property is held by the Servicer, the Issuer and the Indenture Trustee hereby acknowledge that the Servicer is acting as agent and bailee of the Indenture Trustee in holding amounts on deposit in the Custodial Account pursuant to Section 3.03 of the Servicing Agreement that are allocable to the Mortgage Loans, as well as the agent and bailee of the Indenture Trustee in holding any Related Documents released to the Servicer pursuant to Section 3.07(b) 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 Servicer. It is intended that, by the Servicer's acceptance of such agency pursuant to Section 3.03 of the Servicing Agreement, the Indenture Trustee, as a pledgee of the Mortgage Loans, will be deemed to have possession of such Related Documents, such monies and such other items for purposes of Section 9-313 or 9-314 of the UCC of the state in which such property is held by the 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; 14 (ii) immediately after giving effect to such transaction, no Event of Default shall have occurred and be continuing; (iii) the Enhancer shall have consented thereto and each Rating Agency shall have notified the Issuer that such transaction will not cause a Rating Event, without taking into account the Policy; (iv) the Issuer shall have received an Opinion of Counsel (and shall have delivered copies thereof to the Indenture Trustee, the Paying Agent and the Enhancer) 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, the Paying Agent and the Enhancer 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). (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 and the Paying Agent, in a form satisfactory to the Indenture Trustee and the Paying Agent, 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 Noteholders under the Notes and the rights of the Enhancer under this Indenture, (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 Enhancer shall have consented thereto, and each Rating Agency shall have notified the Issuer that such transaction will not cause a Rating Event, if determined without regard to the Policy; 15 (iv) the Issuer shall have received an Opinion of Counsel (and shall have delivered copies thereof to the Indenture Trustee and the Paying Agent) 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 and the Paying Agent 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. (b) Upon a conveyance or transfer of all the assets and properties of the Issuer pursuant to Section 3.16(b), the Issuer shall 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 other 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 Owner Trustee Not Liable for Certificates or Related --------------------------------------------------------- Documents. The recitals contained herein shall be taken as the statements of the --------- Issuer, and the Owner Trustee, the 16 Paying Agent and the Indenture Trustee assume no responsibility for the correctness of the recitals contained herein. The Owner Trustee, the Paying Agent and the Indenture Trustee make no representations as to the validity or sufficiency of this Indenture or any other Basic Document, of the Certificates (other than the signatures of the Owner Trustee or the Indenture Trustee on the Certificates) or the Notes, or of any Related Documents. The Owner Trustee, the Paying Agent and the Indenture Trustee shall at no time have any responsibility or liability with respect to the sufficiency of the Trust Estate or its ability to generate the payments to be distributed to Certificateholders under the Trust Agreement or the Noteholders under this Indenture, including, the compliance by the Depositor or the Seller with any warranty or representation made under any Basic Document or in any related document or the accuracy of any such warranty or representation, or any action of the Certificate Paying Agent, the Certificate Registrar or any other person taken in the name of the Owner Trustee, the Paying Agent or the Indenture Trustee. 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 and (y) payments to the Servicer pursuant to the terms of the Servicing Agreement. The Issuer will not, directly or indirectly, make payments to or distributions from the Custodial Account except in accordance with this Indenture and the other Basic Documents. Section 3.24 Notice of Events of Default. The Issuer shall give the --------------------------- Indenture Trustee, the Paying Agent, the Enhancer and the Rating Agencies prompt written notice of each Event of Default hereunder and under the Trust Agreement. Section 3.25 Further Instruments and Acts. Upon request of the Paying ------------------------------ Agent or the Indenture Trustee, the Issuer shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. Section 3.26 Statements to Noteholders. On each Payment Date, each of -------------------------- the Paying Agent and the Certificate Registrar shall make available to the Depositor, the Owner Trustee, each Rating Agency, each Noteholder, each Certificateholder and the Enhancer, the Servicing Certificate provided to the Paying Agent by the Servicer relating to such Payment Date and delivered pursuant to Section 4.01 of the Servicing Agreement. The Paying Agent will make the Servicing Certificate (and, at its option, any additional files containing the same information in an alternative format) available each month to Securityholders and the Enhancer, and other parties to this Indenture via the Paying Agent's internet website. The Paying Agent's internet website shall initially be located at "www.firstlinkabs.com". Assistance in using the website can be obtained by calling the Paying Agent's customer service desk at (800) 665-9359. Parties that are unable to use the above distribution options are entitled to have a paper copy mailed to them via first class mail by calling the customer service desk and indicating such. The Paying Agent shall have the right to change the way monthly statements to Securityholders are 17 distributed in order to make such distribution more convenient and/or more accessible to the above parties and the Paying Agent shall provide timely and adequate notification to all above parties regarding any such changes. The Paying Agent may require registration and acceptance of a disclaimer in connection with providing access to its website. Section 3.27 Determination of Note 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 Servicer shall determine LIBOR and the Note Rate for such Interest Period and shall inform the Issuer, the Paying Agent and the Depositor by means of facsimile transmission, in writing or other electronic means. Section 3.28 Payments Under the Policy. ------------------------- (a) (i) If the Servicing Certificate specifies a Deficiency Amount for any Payment Date, the Indenture Trustee shall make a draw on the Policy in an amount specified in the Servicing Certificate for such Payment Date or, if no amount is specified, the Indenture Trustee shall act in accordance with Section 3.28(b)(ii). (ii) The Indenture Trustee shall deposit or cause to be deposited such draw on the Policy into the Note Payment Account on such Payment Date to the extent such amount relates to clause (i) of the definition of "Deficiency Amount" for payment to Owners (as defined in the Policy) on the related Payment Date. Any Payment made by the Enhancer under the Policy will be applied solely to the payment of the Notes or, in the case of money deposited into the Funding Account, to the purchase of Additional Balances, and for no other purpose. The Enhancer's payment obligations under the Policy with respect to particular Deficiency Amounts and Preference Amounts will be discharged to the extent funds equal to the applicable Deficiency Amounts and Preference Amounts are paid by the Enhancer to, or at the direction of, the Indenture Trustee in accordance with the Indenture Trustee's request, whether or not such funds are properly applied by the Indenture Trustee. Payment of Deficiency Amounts and Preference Amounts will be made only at the time set forth in the Policy, and no accelerated Insured Payments (as defined in the Policy) will be made except to the extent that the Enhancer has specified an earlier date for payment at its sole option. (iii) To the extent such amount relates to clause (ii) of the definition of "Deficiency Amount," the Indenture Trustee shall (A) during the Revolving Period, deposit such amount into the Funding Account as Principal Collections and (B) during the Amortization Periods, deposit such amount into the Note Payment Account. (b) (i) The Indenture Trustee shall submit, if a Deficiency Amount is specified in any statement to Securityholders prepared pursuant to Section 4.01 of the Servicing Agreement and furnished to the Indenture Trustee, the Notice (in the form attached as Exhibit A to the Policy) to the Enhancer and the Fiscal Agent no later than 12:00 noon, New York City time, on the second (2nd) Business Day prior to the applicable Payment Date; provided, that if such Notice is received by the Fiscal Agent after 12:00 noon, New York City time, on such Business Day, it will be deemed to be received before 12:00 noon, New York City time, on the following Business Day. If any such Notice is not in proper form or is otherwise insufficient for the purpose of making a claim under the Policy, it will be deemed not to have been received for purposes of making such claim, and the Enhancer or the Fiscal Agent, as the case may be, will promptly so advise the Indenture Trustee in 18 writing and the Indenture Trustee may submit an amended or corrected Notice. If such an amended or corrected Notice is in proper form and is otherwise sufficient for the purpose of making a claim under the Policy, it will be deemed to have been timely received on the Business Day of such resubmission; provided, that if such notice is received by the Fiscal Agent after 12:00 noon, New York City time, it shall be deemed to be received before 12:00 noon, New York City time, on the following Business Day. (ii) If no Deficiency Amount is specified in the Servicing Certificate, then on the Business Day preceding the Payment Date, the Paying Agent shall check the amount on deposit in the Note Payment Account after remittance by the Servicer, and shall determine whether the amounts on deposit therein, plus amounts stated in the Servicing Certificate to be payable under the Yield Maintenance Agreement, are sufficient to make all payments required pursuant to the Servicing Certificate. If the Paying Agent determines that such amounts are not sufficient to make all such payments, the Paying Agent shall immediately notify the Servicer and the Servicer shall recalculate the amounts indicated on the Servicing Certificate and determine whether there is in fact a Deficiency Amount for such Payment Date. The Servicer shall notify the Paying Agent in writing of such recalculated amount, even if such amount is zero, and if a Deficiency Amount exists, the Paying Agent will instruct the Indenture Trustee to make a draw on the Policy for the amount of such Deficiency Amount and shall remit such amounts to the Noteholders upon receipt thereof from the Enhancer. (c) The Enhancer will have the right to inspect account statements for the Note Payment Account and the Funding Account at reasonable times upon reasonable written notice to the Paying Agent. (d) Only the Indenture Trustee on behalf of the Holders pursuant to the Servicing Certificate or a written servicer order will be entitled to make a claim for an Insured Payment under the Policy. (e) The Indenture Trustee will surrender the Policy to the Enhancer for cancellation upon the expiration of such Policy in accordance with Section 8.05(d) hereof. Section 3.29 Additional Enhancement. The Issuer (or the Servicer on its ---------------------- behalf) may, at its expense, in accordance with and upon satisfaction of the conditions set forth herein, but shall not be required to, arrange for any form of additional credit enhancement; provided, however, that no such additional credit enhancement shall be obtained if, as a result thereof, a Rating Agency would inform the Issuer that a Rating Event would occur (without taking the Policy into account); provided, further, that the issuer of any such additional credit enhancement and the timing and mechanism for drawing on such additional enhancement shall be acceptable to the Indenture Trustee and the Enhancer. It shall be a condition to procurement of any such additional credit enhancement that there be delivered to the Indenture Trustee, the Paying Agent and the Enhancer (a) an Opinion of Counsel, acceptable in form to the Indenture Trustee, the Paying Agent and the Enhancer, from counsel to the provider of such additional credit enhancement with respect to the enforceability thereof and such other matters as the Indenture Trustee, the Paying Agent or the Enhancer may require and (b) an Opinion of Counsel to the effect that the procurement of such additional enhancement would not (i) adversely affect in any material respect the tax status of the Notes or the Certificates or (ii) cause the Issuer to be taxable as an association (or a publicly traded 19 partnership) for federal income tax purposes or to be classified as a taxable mortgage pool within the meaning of Section 7701(i) of the Code. Section 3.30 Additional Representations of Issuer. ------------------------------------ The Issuer hereby represents and warrants to the Indenture Trustee and to the Paying Agent that as of the Closing Date: (a) This Indenture creates a valid and continuing security interest (as defined in the applicable UCC) in the Mortgage Notes in favor of the Indenture Trustee, which security interest is prior to all other Liens (except as expressly permitted otherwise in this Indenture), and is enforceable as such as against creditors of and purchasers from the Issuer. (b) The Loan Agreements constitute "instruments" within the meaning of the applicable UCC. (c) The Issuer owns and has good and marketable title to the Mortgage Notes free and clear of any Lien of any Person. (d) The original executed copy of each Loan Agreement (except for any Loan Agreement with respect to which a Lost Note Affidavit has been delivered to the Servicer) has been delivered to the Servicer. (e) The Issuer has received a written acknowledgment from the Servicer that the Servicer (in the capacity described in Section 3.14 hereof) is acting solely as agent of the Indenture Trustee, which agency shall be for the benefit of the Noteholders and the Enhancer. (f) Other than the security interest granted to the Indenture Trustee pursuant to this Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Mortgage Notes. The Issuer has not authorized the filing of and is not aware of any financing statements against the Issuer that include a description of collateral covering the Mortgage Notes other than any financing statement relating to the security interest granted to the Indenture Trustee hereunder or any security interest that has been terminated. The Issuer is not aware of any judgment or tax lien filings against the Issuer. (g) None of the Mortgage Notes has any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Indenture Trustee, except for (i) any endorsements that are part of a complete chain of endorsements from the originator of the Mortgage Note to the Indenture Trustee, and (ii) any marks or notations pertaining to Liens that have been terminated or released. (h) None of the provisions of this Section 3.30 shall be waived without the prior written confirmation from Standard & Poor's that such waiver shall not result in a reduction or withdrawal of the then-current rating of the Notes determined without regard to the Policy. Section 3.31 Yield Maintenance Agreement. --------------------------- (a) In the event that the Indenture Trustee or the Paying Agent does not receive any required payment from the Yield Maintenance Provider under the Yield Maintenance Agreement, 20 the Indenture Trustee, upon the written direction of any of the Enhancer, a majority of the Noteholders or the Servicer shall enforce the obligation of the Yield Maintenance Provider thereunder. The parties hereto acknowledge that the Yield Maintenance Provider shall make all calculations, and determine the amounts to be paid, under the Yield Maintenance Agreement. Absent manifest error, the Indenture Trustee and the Paying Agent, as applicable, may conclusively rely on such calculations and determinations. (b) The Indenture Trustee or the Paying Agent, as applicable, shall deposit or cause to be deposited any amount received under the Yield Maintenance Agreement into the Note Payment Account on the Payment Date for which such amount is received from the Yield Maintenance Provider under the Yield Maintenance Agreement. Section 3.32 Preference Claims Under Policy. ------------------------------ (a) In the event that the Indenture Trustee has received a certified copy of a final, nonappealable order of an appropriate court or other body exercising jurisdiction that any amount which was previously distributed to a Holder on the Notes is recoverable and is sought to be recovered as a voidable preference from such Holder by a trustee in bankruptcy pursuant to Title 11 of the United States Code in accordance with an Order (as defined below) (such amount, a "Preference Amount"), the Indenture Trustee will so notify the Enhancer, will comply with the provisions of the Policy to obtain payment by the Enhancer of such avoided payment, and will, at the time it provides notice to the Enhancer, notify the Paying Agent and the Holders by mail that, in the event that any Holder's payment is so recoverable, such Holder will be entitled to payment pursuant to the terms of the Policy. The Enhancer will pay any Preference Amount when due to be paid pursuant to an Order (as defined below), but in any event no earlier than one Business Day following actual receipt by the Enhancer of (i) a certified copy of a final, non-appealable order of a court or other body exercising jurisdiction in such insolvency proceeding to the effect that the Indenture Trustee, or Holder, as applicable, is required to return such Preference Amount paid during the term of this Policy because such Preference Amount was avoided as a preferential transfer or otherwise rescinded or required to be restored by the Indenture Trustee or Holder (the "Order"), (ii) an Opinion of Counsel satisfactory to the Enhancer that such order is final and not subject to appeal, (iii) an assignment, in form and substance satisfactory to the Enhancer, duly executed and delivered by the Indenture Trustee or Holder, irrevocably assigning to the Enhancer all rights and claims of the Indenture Trustee or Holder relating to or arising under the Notes against the debtor which paid such Preference Amount and (iv) appropriate instruments to effect the appointment of the Enhancer as agent for such Holder in any legal proceeding related to such Preference Amount; provided, that if such documents are received by the Enhancer after 12:00 noon, New York City time, on such Business Day, they will be deemed to be received before 12:00 noon, New York City time, on the following Business Day. Such payment will be disbursed to the receiver, conservator, debtor-in-possession or trustee in bankruptcy named in the Order, and not to the Indenture Trustee or the Holder directly, unless the Indenture Trustee or the relevant Holder has made a payment of the Preference Amount to the court or such receiver, conservator, debtor-in-possession or trustee in bankruptcy named in the Order, in which case the Enhancer will pay the Indenture Trustee, or as directed by the Indenture Trustee, to the extent of the payment of the Preference Amount, subject to the delivery of (a) the items referred to in clauses (i), (ii), (iii) and (iv) above to the Enhancer and (b) evidence satisfactory to the Enhancer that payment has been made to such court or receiver, conservator, debtor-in-possession or trustee in bankruptcy named in the Order. 21 (b) The Indenture Trustee will promptly notify the Enhancer of any proceeding or the institution of any action (of which a Responsible Officer of the Indenture Trustee has actual knowledge) seeking the avoidance as a preferential transfer under applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (a "Note Preference Claim") of any payment made to a Holder that has been deemed a preferential transfer and recoverable, or theretofore recovered, from such Holder pursuant to Title 11 of United States Code in accordance with an Order. Each Holder, by its purchase of Notes, and the Indenture Trustee hereby agree that so long as no Enhancer Default has occurred and is continuing, the Enhancer may at any time during the continuation of any proceeding relating to a Note Preference Claim direct all matters relating to such Note Preference Claim, including (i) the direction of any appeal of any order relating to any Note Preference Claim and (ii) the posting of any surety, supersedeas or performance bond pending any such appeal at the expense of the Enhancer, but subject to reimbursement as provided in the Insurance Agreement. In addition, and without limitation of the foregoing, as set forth in Section 4.12, the Enhancer will be subrogated to, and each Holder and the Indenture Trustee hereby delegate and assign, to the fullest extent permitted by law, the rights of the trustee and each Holder in the conduct of any proceeding with respect to a Note Preference Claim, including all rights of any party to an adversary proceeding action with respect to any court order issued in connection with any such Note Preference Claim. 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 the minimum initial Note Balance of $25,000 and integral multiples of $1,000 in excess thereof. The Indenture Trustee, Paying Agent, Note Registrar and the Enhancer 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 Noteholders 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 Noteholder 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, Indenture Trustee, Note Registrar and Paying Agent, 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, at the request of the Servicer and with the approval of the Issuer may appoint a 22 successor Depository. If no 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 and upon Issuer Order, authenticated by the Indenture Trustee 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 the Note Registrar's 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. The Issuer hereby appoints Wachovia Bank, National Association as the initial Note Registrar. Wachovia Bank, National Association hereby accepts such appointment. Subject to the restrictions and limitations set forth below, upon surrender for registration of transfer of any Note at the Note Registrar's Corporate Trust Office, the Issuer shall execute, and the Indenture Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes in the authorized initial Note Balance 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, in each case in the authorized initial Note Balance 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 Issuer shall execute and the Indenture Trustee shall authenticate and deliver the Notes which the Noteholder 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 Noteholder 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 imposed 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 cancelled by the Note Registrar and delivered to the Indenture Trustee for subsequent destruction without liability on the part of either. The Issuer hereby appoints Wachovia Bank, National Association as Certificate Registrar to keep at its Corporate Trust Office a Certificate Register pursuant to Section 3.13 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 exchanges thereof 23 pursuant to Section 3.09 of the Trust Agreement. Wachovia Bank, National Association hereby accepts such appointment. Each purchaser of a Note, by its acceptance of the Note, shall be deemed to have represented that the acquisition of such Note by the purchaser does not constitute or give rise to a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code, for which no statutory, regulatory or administrative exemption is available. Section 4.03 Mutilated, Destroyed, Lost or Stolen Notes. If (i) any -------------------------------------------- mutilated Note is surrendered to the Note Registrar, or the Note Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to the Note Registrar such security or indemnity as may be required by it to hold the Issuer, the Enhancer and the Note Registrar harmless, then, in the absence of notice to the Issuer or the Note Registrar 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 receipt of an Issuer 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, the Enhancer and the Note Registrar 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, the Enhancer or the Note Registrar in connection therewith. Upon the issuance of any replacement Note under this Section 4.03, the Issuer may require the payment by the Noteholder 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 and the Note Registrar) 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 Paying Agent, the Note Registrar, the Indenture Trustee and 24 any agent of the Issuer, the Paying Agent, the Note Registrar 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 none of the Issuer, the Paying Agent, the Note Registrar, the Enhancer, the Indenture Trustee or any agent of the Issuer, the Paying Agent, the Note Registrar, the Enhancer or the Indenture Trustee shall be affected by notice to the contrary. Section 4.05 Cancellation. All Notes surrendered for payment, ------------ registration of transfer, exchange or redemption shall, if surrendered to any Person other than the Note Registrar, be delivered to the Note Registrar and shall be promptly cancelled by the Note Registrar. The Issuer may at any time deliver to the Note Registrar 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 cancelled by the Note Registrar. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section 4.05, except as expressly permitted by this Indenture. All cancelled Notes may be held or disposed of by the Note Registrar 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 Note Registrar. Section 4.06 Book-entry Notes. The Notes, upon original issuance, shall ---------------- 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 shall 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: (a) the provisions of this Section 4.06 shall be in full force and effect; (b) the Note Registrar, the Enhancer, the Paying Agent 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 Beneficial Owners; (c) 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; (d) 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 25 (e) whenever this Indenture requires or permits actions to be taken based upon instructions or directions of Noteholders of Notes evidencing a specified percentage of the Note Balance 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. Section 4.07 Notices to Depository. Whenever a notice or other ----------------------- communication to the Noteholders of the Notes 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 or the Paying Agent, as applicable, shall give all such notices and communications specified herein to be given to Noteholders of the Notes to the Depository, and shall have no obligation to the Beneficial Owners. Section 4.08 Definitive Notes. If (i) in the actual knowledge of ----------------- Responsible Officers of the Indenture Trustee or the Paying Agent the Depository is no longer willing or able to properly discharge its responsibilities with respect to the Notes and the Indenture Trustee, the Paying Agent or Depositor is unable to locate a qualified successor, (ii) after the occurrence of an Event of Default, Beneficial Owners of Notes representing beneficial interests aggregating at least a majority of the Note Balance 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, the Paying Agent 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 Note Registrar 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 Paying Agent, the Note Registrar or the Indenture Trustee shall be liable for any delay in delivery of such instructions, and each may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Notes, the Indenture Trustee, the Note Registrar and the Paying Agent shall recognize the Noteholders 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 be treated as indebtedness for purposes of such taxes. 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 for purposes of such taxes. Section 4.10 Satisfaction and Discharge of Indenture. This Indenture ---------------------------------------- shall cease to be of further effect with respect to the Notes, and shall be discharged and satisfied, 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, Note Registrar and Paying Agent hereunder (including the rights of the Indenture Trustee, Note Registrar and Paying Agent under Section 6.07 and the obligations of the Indenture Trustee, Note Registrar and Paying Agent under Section 4.11) and (vi) the rights of Noteholders and the Enhancer as beneficiaries hereof with respect to the property so deposited with 26 the Indenture Trustee or the Paying Agent 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: (i) 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 Note Registrar for cancellation; or (ii) all Notes not theretofore delivered to the Note Registrar for cancellation: (A) have become due and payable; (B) will become due and payable at the Final Payment Date within one year; or (C) have been declared immediately due and payable pursuant to Section 5.02; and the Issuer, in the case of Section 4.10(a)(ii)(A) or (B) above, has irrevocably deposited or caused to be irrevocably deposited with the Indenture Trustee or the Paying Agent 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 Note Registrar for cancellation when due on the Final Payment Date, as evidenced to the Note Registrar and the Enhancer by an accountant's letter or an Officer's Certificate of the Issuer; (b) the Issuer has paid or caused to be paid all other sums payable hereunder and under the Insurance Agreement to the Enhancer; and (c) the Issuer has delivered to the Indenture Trustee, the Paying Agent and the Enhancer an Officer's Certificate and an Opinion of Counsel, each meeting the applicable requirements of Section 10.01 and 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)(ii)(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 -------------------------- Paying Agent 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 Paying Agent may determine, to the Securityholders 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. 27 Section 4.12 Subrogation and Cooperation. --------------------------- (a) Any and all Deficiency Amounts and Preference Amounts disbursed by the Indenture Trustee from claims made under the Policy will not be considered payment by the Trust with respect to the Notes, and will not discharge the obligations of the Trust with respect thereto. The Enhancer will, upon any payment pursuant to the Policy, in furtherance and not in limitation of its equitable right of subrogation and its rights under the Insurance Agreement, to the extent it makes any payment with respect to the Notes, become subrogated to the rights of any Holders to receive any and all amounts due in respect of the Notes as to which such payment was made. Subject to and conditioned upon any payment with respect to the Notes by or on behalf of the Enhancer, the Paying Agent will assign to the Enhancer all rights to the payment of interest or principal with respect to the Notes which are then due for payment to the extent of all payments made by the Enhancer, and the Enhancer may exercise any option, vote, right, power or the like with respect to the Notes to the extent that it has made payment pursuant to the Policy. To evidence such subrogation, the Note Registrar will note the Enhancer's rights as subrogee upon the register of Holders. The foregoing subrogation will in all cases be subject to the rights of the Holders to receive all Deficiency Amounts in respect of the Notes. Notwithstanding anything herein to the contrary, the Enhancer shall be paid such principal and interest 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 and the Paying Agent shall cooperate in all respects with any reasonable request by the Enhancer for action to preserve or enforce the Enhancer's rights or interest under this Indenture or the Insurance Agreement, consistent with this Indenture and without limiting the rights of the Noteholders as otherwise set forth in the Indenture, including upon the occurrence and continuance of an event of default under the Insurance Agreement, a request (which request shall be in writing) 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 and to 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 (as defined in Section 5.15 hereof) called and conducted in any manner permitted by law; (iii) file or record all Assignments of Mortgage that have not previously been recorded, if filing is required in accordance with the Servicing Agreement; (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 UCC and take any other appropriate action to protect and enforce the rights and remedies of the Enhancer hereunder. 28 Following the payment in full of the Notes, the Enhancer shall continue to have all rights and privileges provided to it under this Section and in all other provisions of this Indenture, until all amounts owing to the Enhancer have been paid in full. 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 Paying Agent (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. 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 Note Registrar, without charge to the Noteholder. 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. The Issuer shall deliver to the ------------------ Indenture Trustee, the Paying Agent and the Enhancer, within five days after learning of the occurrence of any event that with the giving of notice and the lapse of time would become an Event of Default under clause (b) of the definition of "Event of Default" written notice in the form of an Officer's Certificate of 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 shall occur and be continuing, then and in every such case the Indenture Trustee, acting at the written direction of the Enhancer (so long as no Enhancer Default exists) or the Noteholders of Notes representing not less than a majority of the Note Balance of the Notes (if an Enhancer Default exists), 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 the Notes, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable. 29 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 provided in this Article V, the Enhancer (so long as no Enhancer Default exists) or the Noteholders of Notes representing a majority of the Note Balance of the Notes (if an Enhancer Default exists), by written notice to the Issuer and the Indenture Trustee, may in writing waive the related Event of Default and rescind and annul such declaration and its consequences if: (a) the Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay: (i) 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; (ii) all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements, advances and indemnification of the Indenture Trustee, Paying Agent, Note Registrar and their respective agents and counsel; and (iii) 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 there is a default in the payment of (i) any interest on any Note when the same becomes due and payable, and such default continues for a period of five days, or (ii) the principal of or any installment of the principal of any Note when the same becomes due and payable, the Issuer shall, upon demand of the Indenture Trustee, pay to it or the Paying Agent, for the benefit of the Noteholders and the Enhancer, the entire amount then due and payable on the Notes for principal and interest, with interest on 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, advances and indemnification owed to the Indenture Trustee and its agents (including, without limitation, the Paying Agent) 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 on the Notes and collect in the manner provided by law out of the property of the Issuer or other obligor on the Notes, wherever situated, the monies adjudged or decreed to be payable. 30 (c) If an Event of Default shall occur and be 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 Enhancer 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) If there shall be pending, relative to the Issuer or any other obligor on the Notes or any Person having or claiming an ownership interest in the Trust Estate, Proceedings under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or other similar law, or if 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 if there shall be any other comparable judicial Proceedings relative to the Issuer or other any other obligor on the Notes, or relative to the creditors or property of the Issuer or such other obligor, then 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 entire 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, willful misconduct or bad faith) and of the Noteholders and the Enhancer allowed in such Proceedings; (ii) unless prohibited by applicable law and regulations, to vote on behalf of the Noteholders and the Enhancer 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 Noteholders 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 and the Enhancer to make payments to the Indenture Trustee, and, in the event the Indenture Trustee shall consent to the making of payments 31 directly to such Noteholders and the Enhancer, 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, willful misconduct 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 and the Enhancer any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Noteholder thereof or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder and the Enhancer 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, indemnification and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Noteholders and the Enhancer. (g) In any Proceedings to which the Indenture Trustee shall be a party (including any Proceedings involving the interpretation of any provision of this Indenture), the Indenture Trustee shall be held to represent all Noteholders, 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, then the Indenture Trustee, subject to the provisions of Section 10.17 hereof, with the written consent of the Enhancer may, or, at the written direction of the Enhancer, shall, do one or more of the following, in each case 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 on the 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 Noteholders and the Enhancer; and 32 (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 written consent of the Enhancer, so long as no Enhancer Default exists, or, if an Enhancer Default exists, the Noteholders of 100% of the Note Balance of the Notes, (B) the proceeds of such sale or liquidation distributable to Noteholders are sufficient to discharge in full all amounts then due and unpaid upon the Notes for principal and interest and to reimburse the Enhancer for any amounts drawn under the Policy and any other amounts due the Enhancer 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 written consent of the Enhancer and the Noteholders of 66 2/3% of the Note Balance of the Notes. In determining such sufficiency or insufficiency with respect to clause (B) and (C) above, the Indenture Trustee may, but need not, obtain and rely, and shall be protected in relying in good faith, 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, provided that a Servicing Default shall not have occurred, any Sale (as defined in Section 5.15 hereof) of the Trust Estate shall be made subject to the continued servicing of the Mortgage Loans by the Servicer as provided in the Servicing Agreement. Notwithstanding any sale of the Mortgage Loans pursuant to this Section 5.04(a), the Indenture Trustee shall, for so long as any principal or accrued interest on the Notes remains unpaid, continue to act as Indenture Trustee hereunder and to draw amounts payable under the Policy in accordance with its terms. (b) If the Indenture Trustee collects any money or property pursuant to this Article V, it, or the Paying Agent on its behalf, shall pay out such money or property in the following order: FIRST: to the Indenture Trustee, the Paying Agent and the Note Registrar for amounts due under Section 6.07; SECOND: to the Noteholders for amounts due and unpaid on the related Notes for interest, including accrued and unpaid interest on the Notes for any prior Payment Date, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for interest from amounts available in the Trust Estate for such Noteholders, but excluding any Interest Shortfalls; THIRD: to the Noteholders for amounts due and unpaid on the related Notes for principal, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal, from amounts available in the Trust Estate for such Noteholders, until the Note Balance of such Notes have been reduced to zero; FOURTH: to the payment of all amounts due and owing the Enhancer under the Insurance Agreement; 33 FIFTH: to the Noteholders for amounts due and unpaid on the related Notes for Interest Shortfalls, if any, including any unpaid Interest Shortfalls on the Notes for any prior Payment Date, ratably, without preference or priority of any kind, according to such amounts due and payable from amounts available in the Trust Estate for such Noteholders; SIXTH: to the Certificate Paying Agent 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, or the Paying Agent on behalf of 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 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 (with the prior written consent of the Enhancer so long as no Enhancer Default exists), but need not (but shall at the written direction of the Enhancer so long as no Enhancer Default exists), 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 hereunder including payment to the Enhancer, 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, and shall be protected in relying in good faith, 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 Noteholder shall have any right to ------------------- institute any Proceeding, judicial or otherwise, with respect to this Indenture, including with respect to the Policy, 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: (a) such Noteholder shall have previously given written notice to the Indenture Trustee of a continuing Event of Default; (b) the Noteholders of not less than 25% of the Note Balance of the Notes shall 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; (c) such Noteholder or Noteholders shall have offered the Indenture Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred by it in complying with such request; 34 (d) the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute such Proceedings; (e) unless an Enhancer Default has occurred, the Enhancer has given its written consent to the proposed proceedings; and (f) no written direction inconsistent with such written request shall have been given to the Indenture Trustee during such 60-day period by the Noteholders of a majority of the Note Balance of the Notes or by the Enhancer. It is understood and intended that no Noteholder 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 Noteholders or to obtain or to seek to obtain priority or preference over any other Noteholders 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 Noteholders, each representing less than a majority of the Note Balance of the Notes, the Indenture Trustee shall act at the direction of the group of Noteholders with the greater Note Balance. In the event that the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Noteholders representing the same Note Balance, then 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. Subject to the provisions of this Indenture, the Noteholder 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 Indenture and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Noteholder. 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, the Enhancer or 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, 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. 35 Section 5.10 Delay or Omission Not a Waiver. No delay or omission of ------------------------------- the Indenture Trustee, the Enhancer or any Noteholder 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 Enhancer or Noteholders. The Enhancer (so long ---------------------------------- as no Enhancer Default exists) or if an Enhancer Default exists, the Noteholders of a majority of the Note Balance of Notes, shall have the right to direct in writing 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: (a) such direction shall not be in conflict with any rule of law or with this Indenture; (b) 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 the Enhancer (so long as no Enhancer Default exists) or if an Enhancer Default exists, by the Noteholders of Notes representing not less than 100% of the Note Balance of the Notes; (c) if the conditions set forth in Section 5.05 shall 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 Noteholders of Notes representing less than 100% of the Note Balance of the Notes to sell or liquidate the Trust Estate shall be of no force and effect; and (d) the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction. 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 (in its sole discretion) might involve it in liability or might materially adversely affect the rights of any Noteholders not consenting to such action, unless the Trustee has received satisfactory indemnity from the Enhancer or a Noteholder. 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 Enhancer (so long as no Enhancer Default exists) or if an Enhancer Default exists, the Noteholders of not less than a majority of the Note Balance of the Notes, may waive in writing 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 that cannot be modified or amended without the consent of the Noteholder of each Note. In the case of any such waiver, the Issuer, the Indenture Trustee, the Enhancer and the Noteholders shall be restored to their respective former positions and rights hereunder; 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. 36 Section 5.13 Undertaking for Costs. All parties to this Indenture ---------------------- agree, and each Noteholder by such Noteholder's acceptance of the related Note shall be deemed to have agreed, that any court may in its discretion require, in any Proceeding for the enforcement of any right or remedy under this Indenture, or in any Proceeding against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such Proceeding of an undertaking to pay the costs of such Proceeding, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such Proceeding, 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 Proceeding instituted by the Indenture Trustee, (b) any Proceeding instituted by any Noteholder, or group of Noteholders, in each case holding in the aggregate more than 10% of the Note Balance of the Notes or (c) any Proceeding 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 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 (which, for the avoidance of doubt, does not include any fees or other expenses payable to the Indenture Trustee pursuant to this Indenture). (b) The Indenture Trustee shall not in any private Sale sell the Trust Estate, or any portion thereof, unless: (i) the Enhancer, if no Enhancer Default exists, or, if an Enhancer Default exists, the Noteholders of 100% of the Note Balance of the Notes, direct the Indenture Trustee in writing to make such Sale, (ii) the proceeds of such Sale would be not less than the entire amount that would be payable to the Noteholders under the Notes, the Certificateholders under the Certificates and the Enhancer in respect of amounts drawn under the Policy and any other amounts due the Enhancer under the Insurance Agreement (as certified by the Enhancer in 37 writing to the Indenture Trustee), in full payment thereof in accordance with Section 5.02, on the Payment Date next succeeding the date of such Sale, or (iii) 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 and shall be protected in relying in good faith upon an opinion of an Independent investment banking firm obtained and delivered as provided in Section 5.05), and the Enhancer, so long as no Enhancer Default exists, consents in writing to such Sale, and, if an Enhancer Default exists, the Noteholders of Notes representing at least 66 2/3% of the Note Balance of the Notes consent in writing 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 Enhancer, so long as no Enhancer Default exists, or, if an Enhancer Default exists, the Noteholders of 100% of the Note Balance of the Notes, shall 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 (ii) 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, then the Indenture Trustee shall bid an amount at least $1.00 more than the highest other bid, which bid shall be subject to the provisions of Section 5.15(d)(ii) herein. (d) In connection with a Sale of all or any portion of the Trust Estate: (i) any Noteholder may bid for and, with the consent of the Enhancer, 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 Noteholders thereof after being appropriately stamped to show such partial payment; (ii) 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 permitted by, applicable law in connection therewith, may purchase all or any portion of the Trust Estate in a private sale; (iii) 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 thereof; (iv) 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 38 (v) 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 written request from the Enhancer or the Indenture Trustee (with the written consent of the Enhancer), the Issuer, in its capacity as owner of the Mortgage Loans, shall, with the written consent of the Enhancer, 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 Servicer, as applicable, of each of their obligations to the Issuer under or in connection with the 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 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 Servicer thereunder and the institution of legal or administrative actions or proceedings to compel or secure performance by the Seller or the Servicer of each of their obligations under the Purchase Agreement and the Servicing Agreement. (b) If an Event of Default shall have occurred and be continuing, the Indenture Trustee, as pledgee of the Mortgage Loans, subject to the rights of the Enhancer hereunder and under the Servicing Agreement, may, and at the direction (which direction shall be in writing) of the Enhancer or, if an Enhancer Default exists, the Noteholders of 66 2/3% of the Note Balance of the Notes, shall, exercise all rights, remedies, powers, privileges and claims of the Issuer against the Seller or the Servicer under or in connection with the 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 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 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. In connection therewith, as determined by the Indenture Trustee, the Issuer shall take all actions necessary to effect the transfer of the Mortgage Loans to the Indenture Trustee. 39 ARTICLE VI The Indenture Trustee and the Paying Agent ------------------------------------------ Section 6.01 Duties of Indenture Trustee and the Paying Agent. ------------------------------------------------ (a) (i) If an Event of Default shall have occurred and be 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. (ii) Except during the continuance of an Event of Default: (1) the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and any other Basic Document to which it is a party and no implied covenants or obligations shall be read into this Indenture or any such other Basic Document against the Indenture Trustee; and (2) 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, reports or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture and any other Basic Document to which it is a party; provided, however, that the Indenture Trustee shall examine the certificates, reports and opinions to determine whether or not they conform to the requirements of this Indenture and any other Basic Document to which it is a party. (iii) 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: (1) this paragraph does not limit the effect of paragraph (a)(i) of this Section 6.01; (2) 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 (3) 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 pursuant to Section 5.11 or any direction from the Enhancer or the Noteholders that the Enhancer or the Noteholders are is entitled to give under any of the Basic Documents. (iv) 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. 40 (v) 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. (vi) 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. (vii) 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 TIA. (viii) [reserved]. (ix) [reserved]. (x) The Indenture Trustee shall not be required to take notice or be deemed to have notice or knowledge of any Event of Default (except for an Event of Default specified in clause (a) of the definition thereof) unless a Responsible Officer of the Indenture Trustee shall have received written notice or have actual knowledge thereof. In the absence of receipt of such notice or such knowledge, the Indenture Trustee may conclusively assume that there is no default or Event of Default. (xi) The Indenture Trustee shall have no duty to see to any recording or filing of any Assignment of Mortgage (except as provided in Section 4.12) or any financing statement or continuation statement evidencing a security interest or to see to the maintenance of any such recording or filing or to any rerecording or refiling of any thereof. (b) (i) The Paying Agent undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and any other Basic Document to which it is a party and no implied covenants or obligations shall be read into this Indenture or any such other Basic Document against the Paying Agent; and (ii) in the absence of bad faith on its part, the Paying Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates, reports or opinions furnished to the Paying Agent and conforming to the requirements of this Indenture and any other Basic Document to which it is a party; provided, however, that the Paying Agent shall examine the certificates, reports and opinions to determine whether or not they conform to the requirements of this Indenture and any other Basic Document to which it is a party. (iii) The Paying Agent may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that the Paying Agent shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Paying Agent was negligent in ascertaining the pertinent facts. (iv) The Paying Agent shall not be liable for interest on any money received by it except as the Paying Agent may agree in writing with the Issuer. 41 (v) Money held in trust by the Paying Agent need not be segregated from other funds except to the extent required by law or the terms of this Indenture or the Trust Agreement. (vi) No provision of this Indenture shall require the Paying Agent 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. (vii) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Paying Agent shall be subject to the provisions of this Section 6.01 and to the provisions of TIA. (viii) The Paying Agent shall not be required to take notice or be deemed to have notice or knowledge of any Event of Default (except for an Event of Default specified in clause (a) of the definition thereof) unless a Responsible Officer of the Paying Agent shall have received written notice or have actual knowledge thereof. In the absence of receipt of such notice or such knowledge, the Paying Agent may conclusively assume that there is no default or Event of Default. (ix) The Paying Agent hereby accepts appointment as Certificate Paying Agent under the Trust Agreement and agrees to be bound by the provisions of the Trust Agreement relating to the Certificate Paying Agent. The Paying Agent hereby agrees to be bound by the provisions of the Trust Agreement. Section 6.02 Rights of Indenture Trustee and Paying Agent. -------------------------------------------- (a) (i) The Indenture Trustee and the Paying Agent may rely and shall be protected in acting or refraining from acting in good faith upon any resolution, Officer's Certificate, opinion of counsel, certificate of auditors, or any other certificate, statement, instrument, report, notice, consent or other document believed by it to be genuine and to have been signed or presented by the proper person. Neither the Indenture Trustee nor the Paying Agent need investigate any fact or matter stated in any such document. (ii) Before the Indenture Trustee or the Paying Agent, as applicable, acts or refrains from acting, it may require an Officer's Certificate or an Opinion of Counsel. Neither the Indenture Trustee nor the Paying Agent, as applicable, shall be liable for any action it takes or omits to take in good faith in reliance on any such Officer's Certificate or Opinion of Counsel. (iii) The Indenture Trustee or the Paying Agent, as applicable, 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 neither the Indenture Trustee nor the Paying Agent shall 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. (iv) Neither the Indenture Trustee nor the Paying Agent shall be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its 42 rights or powers; provided, however, that the Indenture Trustee's or the Paying Agent's conduct, as applicable, does not constitute willful misconduct, negligence or bad faith. (v) The Indenture Trustee and the Paying Agent 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. (vi) Neither the Indenture Trustee nor the Paying Agent, as applicable, shall be personally liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture, unless it shall be proved that the Indenture Trustee or the Paying Agent, as applicable, was negligent in ascertaining the pertinent facts. (vii) Prior to the occurrence of an Event of Default hereunder, and after the curing or waiver of all Events of Default that may have occurred, neither the Indenture Trustee nor the Paying Agent, as applicable, shall be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless requested in writing to do so by the Enhancer or the Noteholders representing a majority of the Note Balance; provided, however, that if the payment within a reasonable time to the Indenture Trustee or the Paying Agent, as applicable, of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee or the Paying Agent, as applicable, not assured to the Indenture Trustee or the Paying Agent, as applicable, by the security afforded to it by the terms of this Indenture, the Indenture Trustee or the Paying Agent, as applicable, may require indemnity satisfactory to such party against such cost, expense or liability as a condition to taking any such action. (viii) Neither the Indenture Trustee nor the Paying Agent shall be under any obligation to exercise any of the trusts or powers vested in it by this Indenture or to institute, conduct or defend any litigation hereunder or in relation hereto at the request, order or direction of any of the Enhancer or the Noteholders, pursuant to the provisions of this Indenture, unless the Enhancer or the Noteholders shall have offered to the Indenture Trustee or the Paying Agent, as applicable, reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; nothing contained herein shall, however, relieve the Indenture Trustee or the Paying Agent, as applicable, of the obligation, upon the occurrence of an Event of Default (which has not been cured or waived), to exercise such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise as a prudent investor would exercise or use under the circumstances in the conduct of such investor's own affairs. (ix) Anything in this Indenture to the contrary notwithstanding, in no event shall either the Indenture Trustee or the Paying Agent, as applicable, be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Indenture Trustee or the Paying Agent, as applicable, has been advised of the likelihood of such loss or damage and regardless of the form of action, so long as the action taken by such party was in accordance with this Indenture and the Insurance Agreement. 43 (b) The Paying Agent undertakes only to perform such duties as are specifically set forth in the Basic Documents and no implied covenants or obligations shall be read into the Basic Documents against the Paying Agent. Section 6.03 Individual Rights of Indenture Trustee and the Paying -------------------------------------------------------- Agent. 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 Trustee. The Paying Agent, Note Registrar, any other paying agent, co-registrar or co-paying agent may do the same with like rights. However, the Indenture Trustee and the Paying Agent must comply with Sections 6.11 and 6.12. Section 6.04 Disclaimer of the Indenture Trustee and Paying Agent. -------------------------------------------------------- Neither the Indenture Trustee nor the Paying Agent shall be (i) responsible for and makes any representation as to the validity, sufficiency or adequacy of this Indenture or the Notes or any other Basic Document to which it is a party, (ii) accountable for the Issuer's use of the proceeds from the Notes, (iii) responsible for any statement of the Issuer in this 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 thereon or (iv) responsible or liable for any acts or omissions of any of the Servicer, the Depositor, the Owner Trustee, the Yield Maintenance Provider, the Depository or any Depository Participant. Section 6.05 Notice of Event of Default. If an Event of Default shall -------------------------- occur and be continuing, and if such Event of Default is known to a Responsible Officer of the Indenture Trustee or the Paying Agent, then the Indenture Trustee or the Paying Agent, as applicable, shall give notice thereof to the Enhancer. The Indenture Trustee or the Paying Agent, as applicable, shall mail to each Noteholder notice of such Event of Default within 90 days after it occurs. Except in the case of an Event of Default with respect to the payment of principal of or interest on any Note, the Indenture Trustee or the Paying Agent, as applicable, may withhold such notice if and so long as a committee of its Responsible Officers in good faith determines that withholding such notice is in the interests of the Noteholders. Section 6.06 Reports by Paying Agent to Noteholders. The Paying Agent --------------------------------------- shall deliver to each Noteholder such information as may be required to enable such Noteholder to prepare its federal and state income tax returns. In addition, upon Issuer Request, the Paying Agent shall promptly furnish such information reasonably in writing requested by the Issuer that is reasonably available to the Paying Agent to enable the Issuer to perform its federal and state income tax reporting obligations. Section 6.07 Compensation and Indemnity. -------------------------- (a) The Indenture Trustee shall be compensated and indemnified by the Servicer in accordance with Section 6.06 of the Servicing Agreement. All amounts owing the Indenture Trustee hereunder in excess of such amount, as well as any amount owed to the Indenture Trustee in accordance with Section 6.06 of the Servicing Agreement, to the extent the Servicer has failed to pay such amount, shall be paid solely as provided in Section 3.05 hereof (subject to the priorities set forth therein). The Indenture Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in 44 addition to the compensation for its services. Such expenses shall include the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee's agents, counsel, accountants and experts. The Issuer shall indemnify the Indenture Trustee against any and all loss, liability or expense (including attorneys' fees and expenses) 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 promptly of any claim for which it may seek indemnity. Failure by the Indenture Trustee to so notify the Issuer shall not relieve the Issuer of its obligations hereunder. The Issuer shall defend any such claim, and the Indenture Trustee may have separate counsel and the Issuer shall pay the fees and expenses of such counsel. The Issuer is not obligated to 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 the occurrence of an Event of Default specified in clause (c) or (d) of the definition thereof with respect to the Issuer, such 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. (b) The Paying Agent shall be compensated and indemnified by the Servicer in accordance with Section 6.06 of the Servicing Agreement. All amounts owing the Paying Agent hereunder in excess of such amount, as well as any amount owed to the Paying Agent in accordance with Section 6.06 of the Servicing Agreement, to the extent the Servicer has failed to pay such amount, shall be paid solely as provided in Section 3.05 hereof (subject to the priorities set forth therein). The Issuer shall reimburse the Paying Agent 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, expenses, disbursements and advances of the Paying Agent's agents, counsel, accountants and experts. The Issuer shall indemnify the Paying Agent against any and all loss, liability or expense (including attorneys' fees and expenses) incurred by it in connection with the administration of this trust and the performance of its duties hereunder. The Paying Agent shall notify the Issuer promptly of any claim for which it may seek indemnity. Failure by the Paying Agent to so notify the Issuer shall not relieve the Issuer of its obligations hereunder. The Issuer shall defend any such claim, and the Paying Agent may have separate counsel and the Issuer shall pay the fees and expenses of such counsel. The Issuer is not obligated to reimburse any expense or indemnify against any loss, liability or expense incurred by the Paying Agent through the Paying Agent's own willful misconduct, negligence or bad faith. The Issuer's payment obligations and indemnities to the Paying Agent pursuant to this Section shall survive the discharge of this Indenture or the earlier resignation or removal of the Paying Agent. When the Indenture Trustee incurs expenses after the occurrence of an Event of Default specified in clause (c) or (d) of the definition thereof with respect to the Issuer, such 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 or Paying Agent. ------------------------------------------------ (a) 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 45 time by so notifying the Issuer and the Enhancer. The Enhancer (so long as no Enhancer Default exists) or if an Enhancer Default exists, the Noteholders of a majority of the Note Balance of the Notes, may remove the Indenture Trustee by so notifying the Indenture Trustee and the Enhancer in writing (if given by such Noteholders) and may appoint a successor Indenture Trustee. Unless a Servicer Default has occurred and is continuing, the appointment of any successor Indenture Trustee shall be subject to the prior written approval of the Servicer. 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 fulfilling its duties under the Basic Documents. If the Indenture Trustee resigns or is removed or if a vacancy exists in the office of the 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 with the consent of the Enhancer, which consent shall not be unreasonably withheld. In addition, the Indenture Trustee shall resign to avoid being directly or indirectly controlled by the Issuer. 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 the 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, then the retiring Indenture Trustee, the Issuer or the Noteholders of a majority of Note Balance 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 obligations under Section 6.07 shall continue for the benefit of the retiring Indenture Trustee. (b) No resignation or removal of the Paying Agent and no appointment of a successor paying agent shall become effective until the acceptance of appointment by the successor paying agent pursuant to this Section 6.08. The Paying Agent may resign at any time by so notifying the Issuer, the Indenture Trustee and the Enhancer. The Enhancer (so long as no Enhancer Default exists) or if an Enhancer Default exists, the Noteholders of a majority of the Note Balance of the 46 Notes, may remove the Paying Agent by so notifying the Paying Agent and the Enhancer (if given by such Noteholders) in writing and may appoint a successor paying agent. The Indenture Trustee shall remove the Paying Agent if: (i) the Paying Agent is adjudged a bankrupt or insolvent; (ii) a receiver or other public officer takes charge of the Paying Agent or its property; (iii) the Paying Agent otherwise becomes incapable of acting; or (iv) the Paying Agent breaches any representation, warranty or covenant made by it under any Basic Document. If the Paying Agent resigns or is removed or if a vacancy exists in the office of Paying Agent for any reason (the Paying Agent in such event being referred to herein as the retiring Paying Agent), the Indenture Trustee shall promptly appoint a successor Paying Agent with the consent of the Enhancer, which consent shall not be unreasonably withheld. Any Paying Agent appointed hereunder shall also be the Certificate Paying Agent. A successor Paying Agent shall deliver a written acceptance of its appointment to the retiring Paying Agent, the Indenture Trustee, the Enhancer and the Issuer. Thereupon the resignation or removal of the retiring Paying Agent shall become effective, and the successor paying agent shall have all the rights, powers and duties of the Paying Agent under this Indenture. The retiring Paying Agent shall be paid all amounts owed to it upon its resignation or removal. The retiring Paying Agent shall promptly transfer all property held by it as Paying Agent to the successor paying agent. The retiring Paying Agent shall not be liable for the acts or omissions of any successor paying agent. If a successor paying agent does not take office concurrently with the effective resignation or removal of the Paying Agent, the Indenture Trustee will perform the duties of the Paying Agent until a successor paying agent takes office. Notwithstanding the replacement of the Paying Agent pursuant to this Section, the Issuer's and the Trust Administrator's obligations under Section 6.07 shall continue for the benefit of the retiring Paying Agent. Section 6.09 Successor Indenture Trustee or Paying Agent by Merger. ----------------------------------------------------- (a) 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, then the resulting, surviving or 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 with written notice of any such transaction occurring after the Closing Date. If at the time of any such succession by merger, conversion or consolidation, any of the Notes shall have been authenticated but not delivered, then any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated. If at such time any of the Notes shall not have been authenticated, any 47 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 that it is anywhere in the Notes or in this Indenture provided that the certificate of the Indenture Trustee shall have. (b) If the Paying Agent consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, then the resulting, surviving or transferee corporation or banking association without any further act shall be the successor paying agent; provided that such corporation or banking association shall be an Eligible Institution. 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 such 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 Issuer, 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 thereof, 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. (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 48 this Indenture 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 Indenture 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 and ------------------------------ the Paying Agent shall at all times satisfy the requirements of TIA ss. 310(a). Each of the Indenture Trustee and the Paying Agent shall individually 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 either (a) shall have a long-term debt rating of A or better by Moody's or (b) such other rating as would not cause any Rating Agency to lower the rating of the Notes below its initial rating thereof, without taking into account the Policy. 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 that has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated. Section 6.13 Representations and Warranties. ------------------------------ (a) The Indenture Trustee hereby represents and warrants that: (i) The Indenture Trustee is duly organized, validly existing and in good standing as a national bank under the laws of the United States with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is currently 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. (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 49 of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of organization 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. (v) The Indenture Trustee does not have notice of any adverse claim (as such terms are used in Section 8-302 of the UCC in effect in the State of Delaware) with respect to the Mortgage Loans. (b) The Paying Agent hereby represents and warrants that: (i) The Paying Agent is duly organized, validly existing and in good standing as a national banking association under the laws of the United States with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted. (ii) The Paying Agent 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 Paying Agent by all necessary corporate action. (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 organization or bylaws of the Paying Agent or any agreement or other instrument to which the Paying Agent is a party or by which it is bound. (iv) To the Paying Agent'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 Paying Agent 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 Paying Agent of its obligations under, or the validity or enforceability of, this Indenture. (v) The Paying Agent does not have notice of any adverse claim (as such terms are used in Section 8-302 of the UCC in effect in the State of Delaware) with respect to the Mortgage Loans. Section 6.14 Directions to Indenture Trustee. The Indenture Trustee is ------------------------------- hereby directed: 50 (a) to accept the pledge of the Mortgage Loans and hold the assets of the Trust in trust in accordance with the Granting Clause; (b) to authenticate 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 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. Section 6.16 Rights of Paying Agent, Certificate Paying Agent, Note ---------------------------------------------------------- Registrar and Certificate Registrar. All the rights and protections included in ----------------------------------- this Article VI for the Indenture Trustee shall also apply to the Indenture Trustee in its separate capacities, if applicable, as Paying Agent, Certificate Paying Agent, Note Registrar and Certificate Registrar. In addition, the Paying Agent shall be afforded the rights, indemnities and protections afforded to the Paying Agent pursuant to this Article VI and in the event that the Paying Agent is also acting as Note Registrar, the rights, indemnities and protections afforded to the Indenture Trustee pursuant to Article VI shall be afforded to such Note Registrar. ARTICLE VII Noteholders' Lists and Reports ------------------------------ Section 7.01 Issuer to Furnish Paying Agent Names and Addresses Of --------------------------------------------------------- Noteholders. The Issuer shall furnish or cause to be furnished to the Paying ----------- Agent (a) not more than five days after each Record Date, a list, in such form as the Paying Agent may reasonably require, of the names and addresses of the Noteholders as of such Record Date, and (b) at such other times as the Paying Agent and the Enhancer 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 for so long as the Paying Agent is the Note Registrar, no such list need be furnished. Section 7.02 Preservation of Information; Communications To ------------------------------------------------------ Noteholders. ----------- (a) The Paying Agent shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Noteholders contained in the most recent list furnished to the Paying Agent as provided in Section 7.01 and the names and addresses of the Noteholders received by the Paying Agent in its capacity as Note Registrar. The Paying Agent 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, the Paying Agent and the Note Registrar shall have the protection of TIA ss. 312(c). 51 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 the information, documents and other reports including any certifications required to be filed with Form 10-K by the Sarbanes-Oxley Act of 2002 (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 May 15, beginning with May 15, 2004, the Indenture Trustee shall make available to each Noteholder as required by TIA ss. 313(c) and to the Enhancer 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 distribution to Noteholders shall be filed by the Indenture Trustee with the Commission, if required, 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. ARTICLE VIII Accounts, Disbursements and Releases ------------------------------------ Section 8.01 Collection of Money. Except as otherwise expressly --------------------- provided herein, the Indenture Trustee or the Paying Agent 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 or the Paying Agent, as applicable, pursuant to this Indenture. The Indenture Trustee or the Paying Agent, as applicable, 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 52 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 Paying Agent to establish and maintain, in the name of the Paying Agent, for the benefit of the Noteholders, the Certificate Paying Agent, on behalf of the Certificateholders, and the Enhancer, the Note Payment Account as provided in Section 3.01 of this Indenture. (b) All monies deposited from time to time in the Note Payment Account pursuant to the Servicing Agreement and all deposits therein pursuant to this Indenture are for the benefit of the Noteholders, the Enhancer and the Certificate Paying Agent, on behalf of the Certificateholders, and all Permitted Investments made with such monies, including all income or other gain from such investments, are for the benefit of the Servicer, the Indenture Trustee and the Paying Agent as provided in Section 5.01 of the Servicing Agreement. On each Payment Date, the Paying Agent shall distribute, on behalf of the Indenture Trustee, all amounts on deposit in the Note Payment Account to the Noteholders in respect of the Notes and, in its capacity as Certificate Paying Agent, to the Certificateholders from the Distribution Account in the order of priority set forth in Section 3.05 (except as otherwise provided in Section 5.04(b)) and in accordance with the Servicing Certificate. The Paying Agent shall invest any funds in the Note Payment Account in Permitted Investments selected in writing by the Servicer maturing no later than the Business Day preceding the next succeeding Payment Date and shall not be sold or disposed of prior to the maturity (except that any investment in the institution with which the Note Payment Account is maintained may mature or be payable on demand on such Payment Date). In addition, such Permitted Investments shall not be purchased at a price in excess of par. The amount of any losses incurred in respect of any such investments shall be deposited in the Note Payment Account by the Servicer and the Paying Agent out of their own funds immediately as realized and shall be allocated between the Servicer and the Paying Agent on a pro rata basis, such that the percentage of any such loss allocated to the Paying Agent shall equal a fraction, the numerator of which equals one (1) and the denominator of which equals the number of days the funds in the Note Payment Account were invested in such investment. Subject to this Section 8.02(b) of the Indenture, and except as provided in this Section 5.01 of the Servicing Agreement, the Paying Agent shall not be liable for investment losses on funds on deposit in the Note Payment Account. 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. 53 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 the Noteholders, the Certificate Paying Agent on behalf of the Certificateholders, the Enhancer 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's, living on the date hereof. Section 8.05 Release of Trust Estate. ----------------------- (a) Subject to the payment of its fees, expenses and indemnification, the Indenture Trustee may, and when required by the provisions of this Indenture or the Servicing Agreement, 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 Person 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. (b) The Indenture Trustee shall, at such time as (i) there are no Notes Outstanding, (ii) all sums due the Indenture Trustee and the Paying Agent pursuant to this Indenture have been paid and (iii) all sums due the Enhancer 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 (i) an Issuer Request accompanied by an Officers' Certificate and a letter from the Enhancer stating that the Enhancer has no objection to such request from the Issuer, or (ii) a Request for Release from the Servicer in accordance with the Servicing Agreement. (d) The Indenture Trustee shall surrender the Policy to the Enhancer for cancellation upon the final payment of principal of and interest on the Notes. Section 8.06 Surrender of Notes Upon Final Payment. By acceptance of -------------------------------------- any Note, the Noteholder thereof agrees to surrender such Note to the Indenture Trustee promptly, prior to such Noteholder'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 Noteholders of any Notes, but with prior notice to the Rating Agencies and the prior written consent of the Enhancer (which consent shall not be unreasonably withheld) unless an Enhancer Default shall have occurred, the Issuer, the Paying Agent 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 54 provisions of the Trust Indenture Act as in force at the date of the execution thereof), in form satisfactory to the Indenture Trustee and the Paying Agent, 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 Noteholders or the Enhancer, 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 any error or 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 Noteholders or the Enhancer (as evidenced by an Opinion of Counsel); (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 TIA or under any similar federal statute hereafter enacted and to add to this Indenture such other provisions as may be expressly required by TIA; provided, however, that no such supplemental indenture shall be entered into -------- ------- unless the Indenture Trustee, the Paying Agent and the Enhancer shall have received an Opinion of Counsel to the effect that the execution of such supplemental indenture will not give rise to any material adverse tax consequence to the Noteholders. Each of the Paying Agent and 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, the Paying Agent and the Indenture Trustee, when authorized by an Issuer Request, may, without the consent of any Noteholder but with prior notice to the Rating 55 Agencies and the prior consent of the Enhancer, 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 Noteholders 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 the Enhancer or (ii) cause the Issuer to be subject to an entity level tax. Section 9.02 Supplemental Indentures With Consent of Noteholders. The ---------------------------------------------------- Issuer, the Paying Agent and the Indenture Trustee, when authorized by an Issuer Request, may, with prior notice to the Rating Agencies and with the written consent of the Enhancer and the Noteholders of not less than a majority of the Note Balance affected thereby, by Act (as defined in Section 10.03 hereof) of such Noteholders delivered to the Issuer, the Paying Agent 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 Noteholders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Noteholder of each Note affected thereby: (a) change the date of payment of any installment of principal of or interest on any Note, or reduce the principal amount thereof or the Note 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; (b) reduce the percentage of the Note Balance, the consent of the Noteholders of which is required for any such supplemental indenture, or the consent of the Noteholders 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; (c) 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 "Noteholder"; (d) reduce the percentage of the Note Balance 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; (e) 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 other Basic Documents cannot be modified or waived without the consent of the Noteholder of each Note affected thereby; (f) 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 56 (g) 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 Noteholder of any Note of the security provided by the lien of this Indenture; 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. Either the Paying Agent or the Indenture Trustee may in its discretion or at the advice of counsel determine whether or not any Notes would be affected by any supplemental indenture and any such determination shall be conclusive upon the Noteholders of all Notes, whether theretofore or thereafter authenticated and delivered hereunder. Neither the Indenture Trustee nor the Paying Agent shall be liable for any such determination made in good faith. It shall not be necessary for any Act (as defined in Section 10.03 hereof) 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, the Paying Agent and the Indenture Trustee of any supplemental indenture pursuant to this Section 9.02, the Paying Agent shall mail to the Noteholders 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 Paying Agent 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 modification thereby of the trusts created by this Indenture, the Indenture Trustee and the Paying Agent 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 and the Paying Agent may, but shall not be obligated to, enter into any such supplemental indenture that affects the Paying Agent's or 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 Paying Agent, the Note Registrar, the Issuer and the Noteholders 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 TIA as in effect at the time of such amendment or supplement so long as this Indenture shall then be qualified under TIA. 57 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 or the Paying Agent to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee, the Paying Agent and to the Enhancer (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: (i) 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; (ii) 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; (iii) 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; (iv) a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with; and (v) 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 or the Paying Agent 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 and the Paying 58 Agent 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 or the Paying Agent 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 and the Paying Agent 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 10% or more of the Note Balance 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 $25,000 or less than one percent of the Note Balance of the Notes. (iii) Whenever any property or securities are to be released from the lien of this Indenture, the Issuer shall furnish to the Indenture Trustee and the Paying Agent 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. (iv) Whenever the Issuer is required to furnish to the Indenture Trustee or the Paying Agent 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 and the Paying Agent 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 10% or more of the Note Balance 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 $25,000 or less than one percent of the Note Balance 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 upon, 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 Note 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 June 30, 2003, 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 (or such longer period, in the case of the first such Officer's Certificate) were in the ordinary course of the Issuer's business and that the proceeds thereof were applied in accordance with the Basic Documents. 59 Section 10.02 Form of Documents Delivered to Indenture Trustee or The --------------------------------------------------------- Paying Agent. ----------- 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 either Seller or the Issuer, stating that the information with respect to such factual matters is in the possession of either Seller or the Issuer, 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. Whenever in this Indenture, in connection with any application or certificate or report to the Indenture Trustee or the Paying Agent, 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 or the Paying Agent'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 60 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 Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Noteholder of any Note shall bind the Noteholder 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, Paying Agent, ------------------------------------------------------- Issuer, Enhancer, Yield Maintenance Provider and Rating Agencies. Any request, ------------------------------------------------------------------ demand, authorization, direction, notice, consent, waiver or Act of Noteholders 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: (a) the Indenture Trustee by any Noteholder, the Paying Agent 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 its Corporate Trust Office. The Indenture Trustee shall promptly transmit any notice received by it from the Noteholders to the Issuer, (b) the Issuer by the Indenture Trustee, the Paying Agent or by any Noteholder shall be sufficient for every purpose hereunder if in writing and mailed first-class, postage prepaid to the Issuer addressed to: Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, in care of the Owner Trustee, or at any other address previously furnished in writing to the Indenture Trustee and the Paying Agent by the Issuer. The Issuer shall promptly transmit any notice received by it from the Noteholders to the Indenture Trustee, (c) the Enhancer by the Issuer, the Indenture Trustee, the Paying Agent or by any Noteholder shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage pre-paid, or personally delivered or telecopied to: MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504, Attention: Insured Portfolio Management--Structured Finance (Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust), telecopier number (914) 765-3810. The Enhancer shall promptly transmit any notice received by it from the Issuer, the Paying Agent, the Indenture Trustee or the Noteholders to the Issuer, the Paying Agent or Indenture Trustee, as the case may be, (d) the Yield Maintenance Provider by the Issuer, the Paying Agent, the Indenture Trustee or by any Noteholder shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage pre-paid, or personally delivered or telecopied to: Wachovia Bank, National Association, 301 South College Street, DC-8, Charlotte, North Carolina 28202-0600, Attention: Bruce M. Young, Sr. Vice President, Risk Management, telecopier number 704-383-0575. The Yield Maintenance Provider shall promptly transmit any notice received by it from the Issuer, the Paying Agent, the Indenture Trustee or the Noteholders to the Issuer, the Paying Agent or 61 Indenture Trustee, as the case may be; or, as to each of the foregoing Persons, at such other address as shall be designated by written notice to the other foregoing Persons, or (e) the Paying Agent 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 Paying Agent at its Corporate Trust Office. 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, 26 Broadway, 15th Floor, New York, New York 10004, Attention: Asset Backed Surveillance Department; or, as to each of the foregoing Persons, at such other address as shall be designated by written notice to the other foregoing Persons. 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 address 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 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 Noteholder providing for a method of payment, or notice by the Indenture Trustee to such Noteholder, that is different from the methods provided for in this Indenture for such payments or notices. The Issuer shall furnish to the Paying Agent and the Indenture Trustee a 62 copy of each such agreement and the Indenture Trustee or the Paying Agent, as applicable, 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 TIA, 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 and the Paying Agent in this Indenture shall bind its successors, co-trustees and agents. Section 10.10 Severability. In case any provision in this Indenture or ------------ in the Notes shall be held invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. Section 10.11 Benefits of Indenture. Nothing in this Indenture or in --------------------- the Notes, express or implied, shall give to any Person, other than the parties hereto (including the Paying Agent in its capacities as Certificate Registrar, Certificate Paying Agent, Note Registrar and Paying Agent) and their successors hereunder, and the Noteholders, the Enhancer, 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. The Enhancer shall be an express third party beneficiary of this Indenture. The Enhancer, the Paying Agent and the Indenture Trustee acknowledge that nothing in this Indenture is intended to create any fiduciary obligation of the Indenture Trustee or the Paying Agent hereunder or under any other Basic Document to the Enhancer, except for the Indenture Trustee to the extent of its rights as a subrogee of the Noteholders in accordance with the provisions of Section 5.12 of this Indenture, and that Indenture Trustee's and the Paying Agent's other obligations hereunder and under any Basic Document to the Enhancer are intended to be contractual in nature. 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. 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 CONFLICTS OF LAW PROVISIONS (OTHER THAN SECTION 5- 63 1401 OF THE GENERAL OBLIGATIONS LAW), 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 counsel shall be reasonably acceptable to the Indenture Trustee and the Paying Agent) 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, the Paying Agent, the Note Registrar 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, the Paying Agent, the Note Registrar or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee, the Paying Agent, the Note Registrar or the Indenture Trustee or of any successor or assign of the Indenture Trustee, the Paying Agent, the Note Registrar or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Indenture Trustee, the Paying Agent, the Note Registrar and the Owner Trustee have no such obligations in their respective individual capacities), 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 Articles VI, VII and VIII of the Trust Agreement. Section 10.17 No Petition. The Indenture Trustee and the Paying Agent, ----------- by entering into this Indenture, and each Noteholder, by its acceptance of a Note, hereby covenants and agrees that it will not at any time institute against the Depositor, the Seller, the Servicer 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 other Basic Documents. Section 10.18 Inspection. The Issuer agrees that, on reasonable prior ---------- notice, it shall permit any representative of the Indenture Trustee or the Paying Agent, 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 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 64 as often as may be reasonably requested. The Indenture Trustee and the Paying Agent shall each 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 or the Paying Agent may reasonably determine that such disclosure is consistent with its obligations hereunder. 65 IN WITNESS WHEREOF, the Issuer, the Indenture Trustee and the Paying Agent 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. WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC 2003-HE3 TRUST, as Issuer By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By: /s/ Kathleen A. Pendelini ------------------------------------ Name: Kathleen A. Pendelini Title: Financial Services Officer U.S. BANK NATIONAL ASSOCIATION, as Indenture Trustee By: /s/ Shannon M. Rantz ------------------------------------ Name: Shannon M. Rantz Title: Assistant Vice President WACHOVIA BANK, NATIONAL ASSOCIATION, as Paying Agent pursuant to Section 3.03 hereof and as Note Registrar pursuant to Section 4.02 hereof. By: /s/ Gregory Yanok ------------------------------------ Name: Gregory Yanok Title: Vice President STATE OF MINNESOTA) ) ss.: COUNTY OF RAMSEY ) On this ___ day of November, 2003, before me personally appeared Shannon M. Rantz, to me known, who being by me duly sworn, did depose and say, that he/she resides at 60 Livingston Avenue, that he/she is the Asst. V.P. of Wilmington Trust Company, the Owner Trustee, one of the corporations described in and which executed the above instrument; that he/she 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/she signed his/her name thereto by like order. /s/ Shana Bloom ----------------------------------------- Notary Public Acknowledgements STATE OF DELAWARE ) ) ss.: COUNTY OF NEWCASTLE) On this 13 day of November, 2003, before me personally appeared Kathleen A. Pendelini, to me known, who being by me duly sworn, did depose and say, that he/she resides at Wilmington, DE, that he/she is the Financial Services Officer of U.S. Bank National Association, the Indenture Trustee, one of the corporations described in and which executed the above instrument; that he/she 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/she signed his/her name thereto by like order. /s/ Heather L. Maier ----------------------------------------- Notary Public Acknowledgements STATE OF NORTH CAROLINA) ) ss.: COUNTY OF MECKLENBURG ) On this ___ day of November, 2003, before me personally appeared Gregory Yanok, to me known, who being by me duly sworn, did depose and say, that he/she resides at Charlotte, NC, that he/she is the Vice President of Wachovia Bank, National Association, the Paying Agent, one of the corporations described in and which executed the above instrument; that he/she 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/she signed his/her name thereto by like order. /s/ Constance M. Tyma ----------------------------------------- Notary Public Acknowledgements

EXHIBIT A FORM OF NOTE UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS NOTE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE SELLER, THE DEPOSITOR, THE SERVICER, THE INDENTURE TRUSTEE, THE OWNER TRUSTEE, THE PAYING AGENT, THE NOTE REGISTRAR OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS EXPRESSLY PROVIDED IN THE INDENTURE OR THE OTHER BASIC DOCUMENTS. WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC 2003-HE3 TRUST Wachovia Asset Securitization Issuance, LLC Asset-Backed Note, Series 2003-HE3, Class A Registered Initial Note Balance: $[ ] -------------- No. 1 Note Rate: Variable CUSIP No. [____] Wachovia Asset Securitization Issuance, LLC 2003-HE3, a statutory trust duly organized and existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO. or its registered assigns, the principal sum of [__________________] dollars ($[__________]), payable on each Payment Date in an amount equal to the pro rata portion allocable hereto (based on the Initial Note Balance specified above and the Initial Note Balance) of the aggregate amount, if any, payable from the Note Payment Account in respect of principal of the Notes (defined below) pursuant to Section 3.05 of the indenture dated as of November 19, 2003 (the "Indenture"), among the Issuer, U.S. Bank National Association, as indenture trustee (the "Indenture Trustee"), and Wachovia Bank, National Association, as Paying Agent (the "Paying Agent"); provided, however, that the entire unpaid principal amount of this Note shall be due and payable on the Payment Date in November 2033, to the extent not previously A-1 paid on a prior Payment Date. Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in Appendix A to the Indenture. Interest on the Notes will be paid monthly on each Payment Date at the Note Rate for the related Interest Period subject to limitations that may result in Interest Shortfalls and reduced by Relief Act Shortfalls (as further described in the Indenture). The Note Rate for each Interest Period will be a floating rate equal to the least of (i) LIBOR plus 0.25% per annum and (ii) the Net WAC Rate. LIBOR for the Notes and each applicable Interest Period will be determined 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 by the Servicer as set forth in the Indenture. All determinations of LIBOR by the Servicer shall, in the absence of manifest error, be conclusive for all purposes, and each holder of this Note, by accepting this Note, agrees to be bound by such determination. Interest on this Note will accrue for each Payment Date from the most recent Payment Date on which interest has been paid (in the case of the first Payment Date, from the Closing Date) to but excluding such Payment Date. Interest will be computed on the basis of the actual number of days in each Interest Period and a year assumed to consist of 360 days. Principal of and interest on this Note shall be paid in the manner specified on the reverse hereof. Principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note. This Note is one of a duly authorized issue of Notes of the Issuer, designated as its Wachovia Asset Securitization Issuance, LLC Asset-Backed Notes, Series 2003-HE3 (the "Notes"), all issued under the Indenture, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Paying Agent, the Indenture Trustee and the Noteholders. The Notes are subject to all terms of the Indenture. The Notes are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture. This Note is entitled to the benefits of an irrevocable and unconditional financial guaranty insurance policy issued by MBIA Insurance Corporation. Principal of and interest on this Note will be payable on each Payment Date, commencing on December 26, 2003, as described in the Indenture. "Payment Date" means the twenty-fifth day of each month, or, if any such date is not a Business Day, then the next succeeding Business Day. The entire unpaid principal amount of this Note shall be due and payable in full on the Payment Date in November 2033 pursuant to the Indenture, to the extent not previously paid on a prior Payment Date. Notwithstanding the foregoing, if an Event of Default shall have occurred and be continuing, then the Indenture Trustee, the Enhancer or the holders of Notes representing not less than a majority of the Note Balance of the Notes, with the consent of the Enhancer, may declare the Notes to be immediately due and payable in the manner provided in Section 5.02 of the A-1-2 Indenture. All principal payments on the Notes shall be made pro rata to the Noteholders entitled thereto. Any installment of interest or principal, if any, payable on any Note that is punctually paid or duly provided for by the Issuer on the applicable Payment Date shall be paid to the related Noteholder on the preceding Record Date, by wire transfer to an account specified in writing by such Noteholder reasonably satisfactory to the Paying Agent as of the preceding Record Date or, if no such instructions have been delivered to the Paying Agent, by check or money order to such Noteholder mailed to such Noteholder's address as it appears in the Note Register, the amount required to be distributed to such Noteholder on such Payment Date pursuant to such Noteholder's Notes; provided, however, that the Paying Agent shall not pay to such Noteholder any amount required to be withheld from a payment to such Noteholder by the Code. Any reduction in the principal amount of this Note (or any one or more predecessor Notes) effected by any payments made on any Payment Date shall be binding upon all future holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Paying Agent, in the name of and on behalf of the Issuer, will notify the Person who was the registered Noteholder hereof as of the Record Date preceding such Payment Date by notice mailed or transmitted by facsimile prior to such Payment Date, and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the address specified in such notice of final payment. As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the Corporate Trust Office of the Note Registrar, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Note Registrar duly executed by, the Noteholder hereof or such Noteholder's attorney duly authorized in writing, with such signature guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agent's Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Exchange Act, and thereupon one or more new Notes in authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, 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 this Note. Each Noteholder or Beneficial Owner of a Note, by its acceptance of a Note, or, in the case of a Beneficial Owner of a Note, a beneficial interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee, the Seller, the Servicer, the Depositor or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee, the Paying Agent, the Note Registrar 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 or employee of the Indenture Trustee, the Paying Agent, the Note Registrar or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuer, the A-1-3 Owner Trustee, the Paying Agent, the Note Registrar or the Indenture Trustee or of any successor or assign of the Indenture Trustee, the Paying Agent, the Note Registrar or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed 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. Each Noteholder or Beneficial Owner of a Note, by its acceptance of a Note or, in the case of a Beneficial Owner of a Note, a beneficial interest in a Note, covenants and agrees by accepting the benefits of the Indenture that such Noteholder or Beneficial Owner will not at any time institute against the Depositor, the Seller, the Servicer or the Issuer, or join in any institution against the Depositor, the Seller, the Servicer or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or the other Basic Documents. The Issuer has entered into the Indenture and this Note is 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. Each Noteholder by its acceptance of a Note (and each Beneficial Owner of a Note by its acceptance of a beneficial interest in a Note), agrees to treat the Notes for federal, state and local income, single business and franchise tax purposes as indebtedness of the Issuer. Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee, the Note Registrar, the Paying Agent and any agent of the Issuer, the Note Registrar, the Paying Agent or the Indenture Trustee may treat the Person in the name of which this Note is registered (as of the day of determination or as of such other date as may be specified in the Indenture) as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuer, the Indenture Trustee, the Note Registrar, the Paying Agent or any such agent shall be affected by notice to the contrary. The Indenture permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer, the Paying Agent and the Indenture Trustee and the rights of the Noteholders under the Indenture at any time by the Issuer, the Paying Agent and the Indenture Trustee with the consent of the Enhancer and the holders of Notes representing a majority of the Note Balance of the Notes then Outstanding and with prior notice to the Rating Agencies. The Indenture also contains provisions permitting the holders of Notes representing specified percentages of the Note Balance, on behalf of the Noteholders, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Noteholder of this Note (or any one of more predecessor Notes) shall be conclusive and binding upon such Noteholder and upon all future holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Issuer, the Paying Agent and the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Noteholders but with prior notice to the Rating Agencies and the Enhancer. A-1-4 The term "Issuer" as used in this Note includes any successor or the Issuer under the Indenture. The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Indenture Trustee and the Noteholders under the Indenture. The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth. This Note and the Indenture shall be construed in accordance with the laws of the State of New York, without reference to its conflicts of law provisions, and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency herein prescribed. Anything herein to the contrary notwithstanding, except as expressly provided in the Basic Documents, none of Wilmington Trust Company in its individual capacity, U.S. Bank National Association in its individual capacity, any owner of a beneficial interest in the Issuer, or any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on this Note or the performance of, or the failure to perform, any of the covenants, obligations or indemnifications contained in the Indenture. The Noteholder of this Note, by its acceptance hereof, agrees that, except as expressly provided in the Basic Documents, in the case of an Event of Default under the Indenture, such Noteholder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; provided, however, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note. The Servicer shall have the right to purchase from the Issuer all of the Mortgage Loans and related REO Property if the Note Balance of the Notes as of any Payment Date is less than 10% of the Note Balance of the Notes as of the Closing Date, (provided that a draw on the Policy would not occur as a result of such purchase, and provided further that the purchase price will provide sufficient funds to pay the outstanding Note Balance and accrued and unpaid interest on the Notes to the Payment Date on which such amounts are to be distributed to the Securityholders), at a price equal to 100% of the aggregate unpaid Principal Balance of all such remaining Mortgage Loans, plus accrued and unpaid interest thereon at the weighted average of the Loan Rates thereon up to the date preceding the Payment Date on which such amounts are to be distributed to the Securityholders (and in the case of REO Property, the fair market value of the REO Property), plus any amounts due and owing to the Enhancer under the Insurance Agreement related to the Mortgage Loans or the Notes (and any unpaid Servicing Fee relating to the Mortgage Loans shall be deemed to have been paid at such time), plus any Interest Shortfall and interest owed thereon to the Noteholders. The purchase price paid by the Servicer shall also include certain amounts owed by the Seller pursuant to the Purchase Agreement that remain unpaid on the date of such purchase. A-1-5 Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose. A-1-6 IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Issuer and not in its individual capacity, has caused this Note to be duly executed. WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC 2003-HE3 TRUST By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee Dated: November 19, 2003 By: ------------------------------------ Authorized Signatory CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Indenture. U.S. BANK NATIONAL ASSOCIATION, not in its individual capacity but solely as Indenture Trustee Dated: November 19, 2003 By: ------------------------------------ Authorized Signatory A-1-7 ASSIGNMENT Social Security or taxpayer I.D. or other identifying number of assignee: _______________ FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfer unto -------------------------------- (name and address of assignee) the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints __________________________________________________________________, ___________________________, attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. Dated: */ ---------------------------------- ---------------------------------- Signature Guaranteed: */ ---------------------------------- --------------- * NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Term Note in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which requirements include membership or participation in STAMP or such other "signature guarantee program" as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-1-8 STATEMENT OF INSURANCE OBLIGATIONS: $500,000,000 Wachovia Asset Securitization Issuance, LLC Asset-Backed Notes, Series 2003-HE3 MBIA Insurance Corporation (the "Insurer") has issued a Note Guaranty Insurance Policy (the "Policy") relating to the Obligations containing the following provisions, the Policy being on file at the Corporate Trust Office of the Indenture Trustee. The Insurer, in consideration of the payment of the premium and subject to the terms of the Policy, thereby unconditionally and irrevocably guarantees to any Owner (as defined below) that an amount equal to each full and complete Insured Payment will be received from the Insurer by U.S. Bank National Association, or its successors, as indenture trustee for the Owners (the "Indenture Trustee"), on behalf of the Owners, for distribution by the Indenture Trustee to each Owner of each Owner's proportionate share of the Insured Payment. The Insurer's obligations under the Policy with respect to a particular Insured Payment shall be discharged to the extent funds equal to the applicable Insured Payment are received by the Indenture Trustee, whether or not such funds are properly applied by the Indenture Trustee. Insured Payments shall be made only at the time set forth in the Policy, and no accelerated Insured Payments shall be made regardless of any acceleration of the Obligations, unless such acceleration is at the sole option of the Insurer. Notwithstanding the foregoing paragraph, the Policy does not cover shortfalls, if any, attributable to the liability of the Issuer or the Indenture Trustee for withholding taxes, if any (including interest and penalties in respect of any such liability), Interest Shortfalls or Relief Act Shortfalls. In addition, the Policy does not cover any payments required to be made under the Yield Maintenance Agreement. The Insurer will pay any Insured Payment that is a Preference Amount on the Business Day following receipt on a Business Day by the Fiscal Agent (as described below) of (a) a certified copy of the order requiring the return of a preference payment, (b) an opinion of counsel satisfactory to the Insurer that such order is final and not subject to appeal, (c) an assignment in such form as is reasonably required by the Insurer, irrevocably assigning to the Insurer all rights and claims of the Owner relating to or arising under the Obligations against the debtor which made such preference payment or otherwise with respect to such preference payment and (d) appropriate instruments to effect the appointment of the Insurer as agent for such Owner in any legal proceeding related to such preference payment, such instruments being in a form satisfactory to the Insurer, provided that if such documents are received after 12:00 noon, New York City time, on such Business Day, they will be deemed to be received on the following Business Day. Such payments shall be disbursed to the receiver or trustee in bankruptcy named in the final order of the court exercising jurisdiction on behalf of the Owner and not to any Owner directly unless such Owner has returned principal or interest paid on the Obligations to such receiver or trustee in bankruptcy, in which case such payment shall be disbursed to such Owner. The Insurer will pay any other amount payable under the Policy no later than 12:00 noon, New York City time, on the later of the Payment Date on which the related Deficiency Amount is due or the second Business Day following receipt in New York, New York on a Business Day by U.S. Bank Trust National Association, as Fiscal Agent for the Insurer, or any successor fiscal agent appointed by the Insurer (the "Fiscal Agent"), of a Notice (as described below), provided that if such Notice is received after 12:00 noon, New York City time, on such Business Day, it will be deemed to be received on the following Business Day. If any such Notice received by the Fiscal Agent is not in proper form or is otherwise insufficient for the purpose of making claim under the Policy, it shall be deemed not to have been received by the Fiscal Agent for purposes of this paragraph, and the Insurer or the Fiscal Agent, as the case may be, shall promptly so advise the Indenture Trustee and the Indenture Trustee may submit an amended Notice. Insured Payments due under the Policy, unless otherwise stated in the Policy, will be disbursed by the Fiscal Agent to the Indenture Trustee on behalf of the Owners by wire transfer of immediately available funds in the amount of the Insured Payment less, in respect of Insured Payments related to Preference Amounts, any amount held by the Indenture Trustee for the payment of such Insured Payment and legally available therefor. The Fiscal Agent is the agent of the Insurer only, and the Fiscal Agent shall in no event be liable to Owners for any acts of the Fiscal Agent or any failure of the Insurer to deposit, or cause to be deposited, sufficient funds to make payments due under the Policy. Subject to the terms of the Agreement, the Insurer shall be subrogated to the rights of each Owner to receive payments under the Obligations to the extent of any payment by the Insurer under the Policy. As used in the Policy, the following terms shall have the following meanings: "Agreement" means the Indenture dated as of November 19, 2003 among Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, as Issuer, Wachovia Bank, National Association, as Paying Agent, and the Indenture Trustee, as Indenture Trustee, without regard to any amendment or supplement thereto, unless such amendment or supplement has been approved in writing by the Insurer. "Business Day" means any day other than (a) a Saturday or a Sunday (b) a day on which the Insurer is closed or (c) a day on which banking institutions in New York City or in the city in which the corporate trust office of the Indenture Trustee under the Agreement is located are authorized or obligated by law or executive order to close. "Deficiency Amount" means, with respect to any Payment Date, the sum of (i) the excess, if any, of (a) the accrued interest on the Obligations, excluding any Relief Act Shortfalls and Interest Shortfalls and any amounts required to be paid under the Yield Maintenance Agreement for such Payment Date, at the Note Rate over (b) the amount available for interest distributions on the Obligations on such Payment Date, including, without limitation, from amounts on deposit in the Note Payment Account and (ii) the Guaranteed Principal Amount. "Final Payment Date" means November 25, 2033. 10 "Guaranteed Principal Amount" means (i) with respect to any Payment Date other than the Final Payment Date, the excess, if any, of (a) the Note Balance as of such Payment Date, after taking into account all amounts available under the Agreement to reduce the Note Balance or to increase the amount on deposit in the Funding Account, over (b) the sum of (I) the Pool Balance as of the close of business on the last day of the related Collection Period and (II) the amount on deposit in the Funding Account as of the last day of the related Collection Period or (ii) with respect to the Final Payment Date, the Note Balance as of the Final Payment Date, after giving effect to all other distributions of principal on the Obligations on the Final Payment Date. "Insured Payment" means (a) as of any Payment Date, any Deficiency Amount and (b) any Preference Amount. "Notice" means the telephonic or telegraphic notice, promptly confirmed in writing by facsimile substantially in the form of Exhibit A attached to the Policy, the original of which is subsequently delivered by registered or certified mail, from the Indenture Trustee specifying the Insured Payment which shall be due and owing on the applicable Payment Date. "Owner" means each Noteholder (as defined in the Agreement) who, on the applicable Payment Date, is entitled under the terms of the applicable Obligations to payment thereunder. "Preference Amount" means any amount previously distributed to an Owner on the Obligations 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. Capitalized terms used in the Policy and not otherwise defined in the Policy shall have the respective meanings set forth in the Agreement as of the date of execution of the Policy, without giving effect to any subsequent amendment to or modification of the Agreement unless such amendment or modification has been approved in writing by the Insurer. Any notice under the Policy or service of process on the Fiscal Agent may be made at the address listed below for the Fiscal Agent or such other address as the Insurer shall specify in writing to the Indenture Trustee. The notice address of the Fiscal Agent is 15th Floor, 61 Broadway, New York, New York 10006, Attention: Municipal Registrar and Paying Agency, or such other address as the Fiscal Agent shall specify to the Indenture Trustee in writing. THE POLICY IS BEING ISSUED UNDER AND PURSUANT TO, AND SHALL BE CONSTRUED UNDER, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. No defenses, set-offs and counterclaims of any kind available to the Insurer so as to deny payment of any amount due in respect of this Policy will be valid and the Insurer hereby waives and agrees not to assert any and all such defenses, set-offs and counterclaims so as to deny payment of any amount due in respect of this Policy, including, without limitation, any such rights acquired by subrogation, assignment or otherwise. 11 The insurance provided by the Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. The Policy is not cancelable for any reason. The premium on the Policy is not refundable for any reason, including payment, or provision being made for payment, prior to maturity of the Obligations. MBIA INSURANCE CORPORATION 12 APPENDIX A DEFINITIONS Addition Notice: With respect to (i) the transfer of Subsequent ---------------- Mortgage Loans to the Purchaser by the Seller as provided in Section 2.2 of the Purchase Agreement, or (ii) the transfer of Subsequent Mortgage Loans to the Issuer by the Depositor as provided in Section 3.05 of the Trust Agreement, as the context requires, a notice given by the Seller or Depositor, as applicable, in the manner provided by the terms of the Purchase Agreement (in substantially the form set forth in Exhibit 3 to such agreement) or the Trust Agreement (in substantially the form set forth in Exhibit I to such agreement), as applicable. Additional Balance: With respect to any Mortgage Loan, any Draw made by ------------------ the related Mortgagor pursuant to the related Loan Agreement after the Cut-Off Date or Subsequent Cut-Off Date, together with all money due or to become due in respect of such Draw; provided, however, that any Draw during the Rapid Amortization Period shall be an Excluded Draw, shall not be acquired by the Trust and shall not be an Additional Balance. Additional Balance Increase Amount: Shall mean (a) the excess, if any, ---------------------------------- of (i) the aggregate principal amount of Additional Balances from the related Collection Period and prior Collection Periods conveyed to the Trust Estate, over (ii) Principal Collections and Excess Spread from the Funding Account and/or the Custodial Account applied to purchase those Additional Balances minus (b) amounts paid on previous Payment Dates to the holders of the Certificates pursuant to Section 3.19 of the Servicing Agreement and Sections 3.05(a)(i)(3), (i)(7), (ii)(3), (ii)(7), (iii)(4) and (iii)(7) of the Indenture with respect to any Additional Balance Increase Amount. Administration Agreement: The Administration Agreement dated as of the ------------------------- Closing Date between Wachovia and the Issuer. 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. Amortization Periods: Collectively, the Managed Amortization Period and -------------------- the Rapid Amortization Period. Appraised Value: With respect to any Mortgage Loan, the appraised value --------------- of the related Mortgaged Property determined in the appraisal used in the origination of that Mortgage Loan, which may have been obtained at an earlier time, but in no event more than twelve months from origination; provided, however, that if the Mortgage Loan was originated simultaneously with a senior lien on the related Mortgaged Property, the Appraised Value shall be the lesser of the appraised value at the origination of the senior lien and the sales price for the related Mortgaged Property. Assignment of Mortgage: With respect to any Mortgage, an assignment, ---------------------- notice of transfer or equivalent instrument, in recordable form, sufficient under the laws of the jurisdiction in which the related Mortgaged Property is located to reflect the conveyance of such 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 jurisdiction. Authorized Newspaper: A newspaper of general circulation in the Borough -------------------- of Manhattan, The City of New York, 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 Trustee and the Paying Agent on the Closing Date (as such list may be modified or supplemented from time to time thereafter). Bankruptcy Code: The Bankruptcy Code of 1978, as amended. --------------- Basic Documents: The Trust Agreement, the Indenture, the Purchase ---------------- Agreement, the Insurance Agreement, the Policy, the Servicing Agreement, the Yield Maintenance Agreement, the Administration Agreement, any Subsequent Transfer 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). Billing Cycle: With respect to any Mortgage Loan and Due Date, the -------------- calendar month preceding such Due Date. 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 the New York Stock Exchange or banking institutions in the States of New York, North Carolina, Delaware or the State in which the Corporate Trust Offices of the Indenture Trustee or the Paying Agent are located are required or authorized by law or executive order to be closed. Certificate Balance: The excess, if any, of the Principal Balance of -------------------- the Mortgage Loans over the aggregate outstanding principal balance of the Notes. Certificate Distribution Amount: For any Payment Date, the amount, if --------------------------------- any, distributable on the Certificates for such Payment Date pursuant to Sections 3.05(a)(i)(2), (i)(3), (i)(7), (i)(11), (ii)(2), (ii)(3), (ii)(7), (ii)(11), (iii)(2), (iii)(4), (iii)(7) and (iii)(11) of the Indenture, Section 3.04(a) of the Servicing Agreement and Sections 5.01(a) and 8.01(c) of the Trust Agreement. Certificate of Trust: The Certificate of Trust filed for the Trust --------------------- pursuant to Section 3810(a) of the Statutory Trust Statute. -2- Certificate Paying Agent: The Paying Agent, as further described in ------------------------- Section 3.14 of the Trust Agreement, or any successor Certificate Paying Agent appointed pursuant to the Trust Agreement. Certificate Percentage Interest: With respect to any Payment Date and -------------------------------- any Certificate, the Percentage Interest for such Certificate. 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 Paying Agent, in its capacity as --------------------- Certificate Registrar. Certificateholder: The Person in whose name a Certificate is registered ----------------- in the Certificate Register, except that any Certificate registered in the name of the Issuer, the Owner Trustee or the Indenture Trustee or any Affiliate of the Owner Trustee or the Indenture Trustee shall be deemed not to be outstanding, and the registered holder will not be considered a Certificateholder for purposes of giving any request, demand, authorization, direction, notice, consent or waiver under the Indenture or the Trust Agreement; provided, however, that in determining whether the Indenture Trustee, the Paying Agent or the Owner Trustee, as applicable, shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Certificates that the Indenture Trustee, the Paying Agent or the Owner Trustee knows to be so owned shall be so disregarded. Owners of Certificates that have been pledged in good faith may be regarded as Certificateholders if the pledgee establishes to the satisfaction of the Indenture Trustee, the Paying Agent 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 the Owner Trustee or the Indenture Trustee. Certificates: The Certificates issued pursuant to the Trust Agreement. ------------ Closing Date: November 19, 2003. ------------ Code: The Internal Revenue Code of 1986, as amended, and the rules and ---- regulations promulgated thereunder. Collateral: The meaning specified in the Granting Clause of the ---------- Indenture. Collection Period: With respect to any Mortgage Loan and Payment Date, ----------------- the calendar month preceding any such Payment Date. Collection Policy: The meaning specified in Section 3.01(b) of the ------------------ Servicing Agreement. Collections: With respect to any Collection Period, all Interest ----------- Collections and Principal Collections during such Collection Period. Combined Loan-to-Value Ratio or CLTV: With respect to each Mortgage -------------------------------------- Loan, the ratio, expressed as a percentage, of (a) the sum of (i) the Credit Limit thereof and (ii) any outstanding principal balance, at origination of such Mortgage Loan, of all other mortgage loans, if any, secured -3- by senior or subordinate liens on the related Mortgaged Property, over (b) the Appraised Value of that Mortgage Loan. Commission: The Securities and Exchange Commission. ---------- Condemnation Proceeds: All awards or settlements in respect of a ---------------------- Mortgaged Property, whether permanent or temporary, partial or entire, by exercise of the power of eminent domain or condemnation, in any case to the extent not applied to the restoration or repair of such Mortgaged Property or required to be released to a Mortgagor in accordance with the terms of the related Loan Agreement, the Collection Policy or applicable law. Corporate Trust Office: With respect to the Indenture Trustee, the ------------------------ principal corporate trust office of the Indenture Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of the execution of this Indenture is located at 60 Livingston Avenue, EP-MN-WS3D, St. Paul, Minnesota 55107-2292. With respect to the Paying Agent, Certificate Registrar, Note Registrar and Certificate Paying Agent, the principal corporate trust office of the Paying Agent at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this Indenture is located at 401 South Tryon Street, Charlotte, North Carolina 28202. 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 Indenture is located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration. Credit Limit: With respect to any Mortgage Loan, the maximum Principal ------------ Balance permitted under the terms of the related Loan Agreement. Credit Grade: A credit application scoring methodology developed by the ------------ Seller to measure the credit risk of a borrower. Custodial Account: The account or accounts created and maintained by ------------------ the Servicer pursuant to Section 3.03(b) of the Servicing Agreement, in which the Servicer shall deposit or cause to be deposited certain amounts in respect of the Mortgage Loans. Cut-Off Date: The opening of business on November 1, 2003. ------------ Cut-Off Date Principal Balance: With respect to any Initial Mortgage ------------------------------- Loan or Subsequent Mortgage Loan, the unpaid principal balance thereof as of the close of business on the last day of the Billing Cycle immediately prior to the Cut-Off Date or Subsequent Cut-Off Date, as the case may be. Debt-to-Income Ratio: All of the Mortgagor's monthly debt divided by --------------------- the Mortgagor's monthly gross income, determined in accordance with the Seller's underwriting guidelines. Default: Any occurrence which is or with notice or the lapse of time or ------- both would become an Event of Default. Deficiency Amount: With respect to any Payment Date, the sum of (i) the ----------------- excess, if any, of (a) the accrued interest on the Obligations, excluding any Relief Act Shortfalls and Interest Shortfalls -4- and any amounts required to be paid under the Yield Maintenance Agreement for such Payment Date, at the Note Rate over (b) the amount available for interest distributions on the Obligations on such Payment Date, including, without limitation, from amounts on deposit in the Note Payment Account and (ii) the Guaranteed Principal Amount. Definitive Notes: Any definitive, fully registered Note, as described ----------------- in Section 4.08 of the Indenture. Deleted Loan: A Mortgage Loan replaced or to be replaced with an ------------- Eligible Substitute Loan. Depositor: Wachovia Asset Securitization Issuance, LLC, a North --------- Carolina limited liability company, or its successor in interest. Depository: The Depository Trust Company or a successor appointed by ---------- the Indenture Trustee or the Depositor with the approval of the Issuer. 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 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 18th day of ------------------- the month in which such Payment Date occurs or if such day is not a Business Day, the next succeeding Business Day. Distribution Account: The account or accounts created and maintained by -------------------- the Certificate Paying Agent pursuant to Section 3.14(c) of the Trust Agreement. The Certificate Paying Agent will make all distributions on the Certificates from money on deposit in the Distribution Account. Draw: With respect to any Mortgage Loan, a borrowing by the related ---- Mortgagor under the related Loan Agreement. Due Date: With respect to each Mortgage Loan, the date on which monthly -------- payments on such Mortgage Loan are due. Eligible Account: An account that is either (a) a segregated account ----------------- with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any domestic branch of a foreign bank), having corporate trust powers and acting as trustee for funds deposited in such account, so long as any of the securities of such depository institution shall have a credit rating from each of Standard & Poor's and Moody's in one of its generic rating categories which signifies investment grade. Eligible Institution: An institution that is either a depository --------------------- institution, which may include the Indenture Trustee, the Paying Agent or the Owner Trustee, organized under the laws of the United States of America or any one of the States thereof or the District of Columbia, the deposits in which are insured by the FDIC and which at all times has a short-term unsecured debt rating of at least A-1+ by Standard & Poor's and P-1 by Moody's. -5- Eligible Substitute Loan: A Mortgage Loan substituted by the Seller for ------------------------ a Deleted Loan, which must, on the date of such substitution, as confirmed in an Officers' Certificate delivered to the Indenture Trustee and the Paying Agent, (i) comply with each representation and warranty set forth in Section 3.1(b) of the Purchase Agreement, other than clauses (xxiii), (xxxvii), (xxxviii), (xxxix), (xl), (xli), (xlii), (xliii) and (xliv) as of the date of substitution; (ii) have a Loan Rate, Net Loan Rate and Gross Margin no lower than and not more than 1% per annum higher than the Loan Rate, Net Loan Rate and Gross Margin, respectively, of the Deleted Loan as of the date of substitution; (iii) have a CLTV at the time of substitution no higher than that of the Deleted Loan at the Cut-Off Date or Subsequent Cut-Off Date, as applicable; (iv) have a remaining term to stated maturity not greater than (and not more than one year less than) that of the Deleted Loan; and (v) not be 30 days or more delinquent. Enhancer: MBIA Insurance Corporation and any of its successors and -------- assigns. Enhancer Default: Any failure by the Enhancer to make a payment ----------------- required under the Policy in accordance with its terms. 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): (a) a default in the payment of the principal of, any installment of the principal of or interest on any Note when the same becomes due and payable, and such default shall continue for a period of five days; (b) there occurs a default in the observance or performance in any material respect 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 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 that has a material adverse effect on the Noteholders or the Enhancer, 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 Enhancer or the Noteholders of at least 25% of the Note Balance 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; (c) 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, servicer, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Trust -6- Estate, or ordering the winding-up or liquidation of the Issuer's affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (d) 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, servicer, 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. Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. Excess Spread: With respect to any Payment Date and without taking into account any draw on the Policy for such Payment Date, the excess, if any, of (i) Interest Collections (exclusive of the pro rata portion of interest attributable to Additional Balances represented by any Additional Balance Increase Amount) for the related Collection Period with respect to the Mortgage Loans over (ii) the sum of (x) the premium for the Policy for such Payment Date, plus any unpaid premium from prior Payment Dates with interest thereon at the Late Payment Rate, and (y) the amounts paid on such Payment Date to the Noteholders of the Notes pursuant to Section 3.05(a)(i)(2), (ii)(2) and (iii)(2) of the Indenture, plus payments made under the Yield Maintenance Agreement, to the extent not used to pay interest on the Notes at the Note Rate. Excluded Amount: For any Payment Date during the Rapid Amortization Period, the portion of the Principal Collections and Interest Collections for each Collection Period allocated to an Excluded Draw as provided in Section 2.4 of the Purchase Agreement; provided, however, that the Excluded Amount with respect to any Liquidation Loss Amount shall be the pro rata portion of such Liquidation Loss Amount on the Mortgage Loans during the related Collection Period attributable to Excluded Draws, or such other allocation as may be required by applicable law. Excluded Draw: Any Draw made by a Mortgagor during the Rapid Amortization Period, which shall not be transferred to the Trust Estate. Expenses: The meaning specified in Section 7.02 of the Trust Agreement. -------- Fannie Mae: Fannie Mae, formerly the Federal National Mortgage ----------- Association, or any successor thereto. FDIC: The Federal Deposit Insurance Corporation or any successor ---- thereto. FICO: A consumer credit scoring methodology developed by Fair, Isaac ---- Company as applied by the Seller to rank potential borrowers based on the likelihood that they would pay their credit obligations. Final Payment Date: The Payment Date occurring in November 2033. ------------------ -7- Fiscal Year: The fiscal year of the Trust, which shall end on December ----------- 31 of each year. Foreclosure Profit: With respect to a Liquidated Mortgage Loan, the ------------------- amount, if any, by which (i) the aggregate of Liquidation Proceeds net of Liquidation Expenses exceeds (ii) the Principal Balance of such Liquidated Mortgage Loan (plus accrued and unpaid interest thereon at the applicable Loan Rate from the date interest was last paid through the date of receipt of the final Liquidation Proceeds) immediately prior to the final recovery of the related Liquidation Proceeds. Freddie Mac: Freddie Mac, formerly the Federal Home Loan Mortgage ------------ Corporation, or any successor thereto. Funding Account: The account established and maintained pursuant to ---------------- Section 3.19 of the Servicing Agreement. GAAP: Generally accepted accounting principles. ---- 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. A Grant of any item of Collateral or of any other property 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 item of 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 Mortgage Loan, the percentage set ------------ forth as the "Margin" for such Mortgage Loan on the Mortgage Loan Schedule. Guaranteed Principal Amount: An amount equal to (i) with respect to any --------------------------- Payment Date other than the Final Payment Date, the excess, if any, of (a) the Note Balance as of such Payment Date, after taking into account all amounts available under the Agreement to reduce the Note Balance or to increase the amount on deposit in the Funding Account, over (b) the sum of (I) the Pool Balance as of the close of business on the last day of the related Collection Period and (II) the amount on deposit in the Funding Account as of the last day of the related Collection Period or (ii) with respect to the Final Payment Date, the Note Balance as of the Final Payment Date, after giving effect to all other distributions of principal on the Obligations on the Final Payment Date. Indemnified Party: The meaning specified in Section 7.02 of the Trust ------------------ Agreement. Indenture: The Indenture dated as of the Closing Date among the Issuer, --------- the Paying Agent and the Indenture Trustee. Indenture Trustee: U.S. Bank National Association, a national banking ----------------- association, and its successors and assigns or any successor indenture trustee appointed pursuant to the terms of the Indenture. -8- Independent: When used with respect to any specified Person, such ----------- Person (i) is in fact independent of the Issuer, any other obligor on the Notes, the Seller, 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 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 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 and the Paying Agent 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 and the Paying Agent 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. Initial Certificate Balance: $0. --------------------------- Initial Mortgage Loans: The adjustable rate home equity revolving lines ---------------------- of credit (i) sold by the Seller to the Purchaser pursuant to Section 2.1 of the Purchaser Agreement or (ii) sold by the Depositor to the Issuer pursuant to Section 3.01 of the Trust Agreement, as context requires, which are listed on the applicable Mortgage Loan Schedule on the Closing Date. Initial Note Balance: $500,000,000. -------------------- Initial Transferred Property: All of the Seller's right, title and ------------------------------ interest, whether now owned or existing or hereafter created, arising, or acquired, in, to and under the following: (i) the Initial Mortgage Loans (including the Cut-Off Date Principal Balances of such Initial Mortgage Loans now existing and all Additional Balances arising thereunder after the Cut-Off Date through and including the date immediately preceding the commencement of the Rapid Amortization Period), all interest due or to become due thereon on or after the Cut-Off Date, all monies due or to become due thereon, all collections in respect thereof received on or after the Cut-Off Date and all accounts, chattel paper, general intangibles, contract rights and certificates of deposit related to the Initial Mortgage Loans; provided, however, that any Principal Balance represented by a Draw made during the Rapid Amortization Period and interest thereon and money due or to become due in respect thereof will not be or be deemed to be transferred to the Purchaser, and the Seller in such event shall retain ownership of each Principal Balance represented by each such Draw and interest thereon and money due or to become due in respect thereof; (ii) the interest of the Seller in any insurance policies in respect of the Initial Mortgage Loans; (iii) the interest of the Seller in the Mortgages and the Loan Agreements related to each Initial Mortgage Loan and the other Related Documents and (iv) all proceeds of the foregoing. 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 -9- 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 Agreement dated as of November 1, -------------------- 2003, among the Servicer, the Seller, the Depositor, the Issuer, the Owner Trustee, the Indenture Trustee, the Paying Agent and the Enhancer, including any amendments and supplements thereto. Insurance Proceeds: Proceeds paid by any insurer (other than the ------------------- Enhancer) pursuant to any insurance policy covering a Mortgage Loan which are required to be remitted to the Servicer, or amounts required to be paid by the Servicer pursuant to the next to last sentence of Section 3.05 of the Servicing Agreement, net of any component thereof (i) covering any expenses incurred by or on behalf of the 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 related Mortgagor in accordance with the Servicer's normal servicing procedures or (iv) required to be paid to any holder of a mortgage senior to such Mortgage Loan. Insured Payment: As defined in the Policy. --------------- Interest Collections: With respect to any Payment Date, the sum of all -------------------- payments by or on behalf of Mortgagors and any other amounts constituting interest (including without limitation such portion of Insurance Proceeds, Net Liquidation Proceeds, Repurchase Prices and any payment by the Servicer pursuant to Section 8.10 of the Servicing Agreement as is allocable to interest on the applicable Mortgage Loan, but excluding the Excluded Amount) as is paid by the Seller or the Servicer (including any optional servicing advance) or is collected and applied by the Servicer under the Mortgage Loans, exclusive of the pro rata portion thereof attributable to any Excluded Amounts, and reduced by the Servicing Fee for the related Collection Period and by any fees (including annual fees) or late charges or similar administrative fees paid by Mortgagors during the related Collection Period, plus any amounts in respect of investment earnings on amounts on deposit in the Funding Account pursuant to the Servicing Agreement. The terms of the related Loan Agreement shall determine the portion of each payment in respect of such Mortgage Loan that constitutes principal or interest. Interest Period: With respect to the Notes and 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 Loan Rate is adjusted in accordance with the related Loan Agreement. -10- Interest Shortfall: With respect to any Payment Date on which LIBOR ------------------- plus 0.25% per annum exceeds the Net WAC Rate, the sum of (a) the excess of the amount of interest that would have accrued on the Notes during the related Interest Period had the Note Rate been equal to LIBOR plus 0.25% per annum over the amount of interest that actually accrued on the Notes during that Interest Period at the Net WAC Rate; and (b) any amounts required to be paid under the Yield Maintenance Agreement, which were not paid by the Yield Maintenance Provider. Interest Shortfalls are not included as interest payments on the Notes for any Payment Date. Such amount shall accrue interest at the related Note Rate (as adjusted from time to time) and shall be paid on future Payment Dates only to the extent funds are available therefor as set forth in Section 3.05(a) of the Indenture. Issuer or Trust: Wachovia Asset Securitization Issuance, LLC 2003-HE3 --------------- Trust, a Delaware statutory trust, or its successor in interest. Issuer Order or Issuer Request: A written order or request signed in ------------------------------- the name of the Issuer by any one of its Authorized Officers and delivered to the Indenture Trustee or the Paying Agent. Late Payment Rate: The meaning ascribed thereto in the Insurance ------------------- Agreement. LIBOR: With respect to (a) any Interest Period other than the first ----- Interest Period, the rate for United States dollar deposits for one month that appears on the Telerate Screen Page 3750 as of 11:00 a.m., London, England time, on the second LIBOR Business Day prior to the first day of that Interest Period or (b) the first Interest Period, the rate for United States dollar deposits for one month that appears on the Telerate Screen Page 3750 as of 11:00 a.m., London, England time, two LIBOR Business Days prior to the Closing Date. If such rate does not appear on such page (or other page as may replace that page on that service, or if such service is no longer offered, such other service for displaying LIBOR or comparable rates as may be reasonably selected by the Servicer), the rate will be the Reference Bank Rate. If no Reference Bank Rate is available, LIBOR will be LIBOR applicable to the preceding Payment Date. LIBOR Business Day: Any day other than (i) a Saturday or a Sunday or -------------------- (ii) a day on which banking institutions 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. Liquidated Mortgage Loan: With respect to any Payment Date, any -------------------------- Mortgage Loan in respect of which the Servicer has determined, in accordance with the servicing procedures specified in the Servicing Agreement, as of the end of the related Collection Period that substantially all -11- Liquidation Proceeds which it reasonably expects to recover, if any, with respect to the disposition of the related REO Property have been recovered. Liquidation Expenses: All out-of-pocket expenses (exclusive of ---------------------- overhead) incurred by or on behalf of the Servicer in connection with the liquidation of any Mortgage Loan and not recovered under any insurance policy, including 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 such Mortgage Loan and any related and unreimbursed expenditures for real estate property taxes or for property restoration, preservation or insurance against casualty loss or damage. Liquidation Loss Amount: With respect to any Payment Date and any ------------------------- Mortgage Loan that became a Liquidated Mortgage Loan (excluding the Excluded Draw) during the related Collection Period, the unrecovered portion of the Principal Balance of such Mortgage Loan and any unpaid accrued interest thereon at the end of such Collection Period, after giving effect to the Net Liquidation Proceeds applied in reduction of such Principal Balance. Liquidation Proceeds: Proceeds (including Insurance Proceeds but not --------------------- including amounts drawn under the Policy) if any received in connection with the liquidation of any Mortgage Loan or related REO Property, whether through trustee's sale, foreclosure sale or otherwise. Loan Agreement: With respect to each Mortgage Loan, the credit line --------------- agreement, pursuant to which the related Mortgagor agrees to pay the indebtedness evidenced thereby and secured by the related Mortgage as modified or amended. Loan Rate: With respect to any Mortgage Loan and any day, the per annum --------- rate of interest applicable under the related Loan Agreement. Lost Note Affidavit: With respect to any Mortgage Loan as to which the ------------------- original Loan Agreement has been permanently lost or destroyed and has not been replaced, an affidavit from the Seller certifying that the original Loan Agreement has been lost, misplaced or destroyed (together with a copy of the related Loan Agreement, if available). Managed Amortization Event: The occurrence of any date prior to the ---------------------------- commencement of the Managed Amortization Period on which the amount on deposit in the Funding Account equals or exceeds $20,000,000. Managed Amortization Period: The period beginning on the first day ----------------------------- following the end of the Revolving Period and ending on the earlier of (i) November 30, 2006 and (ii) the occurrence of a Rapid Amortization Event. Maximum Loan Rate: With respect to each Mortgage Loan, the maximum loan ----------------- rate thereon specified in the related Loan Agreement. Minimum Monthly Payment: With respect to any Mortgage Loan and any ------------------------- month, the minimum amount required to be paid by the related Mortgagor in such month. Moody's: Moody's Investors Service, Inc., or its successor in interest. ------- -12- Mortgage: The mortgage, deed of trust or other instrument creating a -------- first or junior lien on an estate in fee simple interest in real property securing a Mortgage Loan. Mortgage File: With respect to each Mortgage Loan, the documents -------------- specified in Section 2.1(d) of the Purchase Agreement and any documents required to be added to such documents pursuant to the Purchase Agreement, the Trust Agreement or the Servicing Agreement. Mortgage Loans: At any time, all Initial Mortgage Loans and Subsequent -------------- Mortgage Loans, including Additional Balances, if any, that have been sold to the Purchaser or the Issuer, as the context requires, together with all monies due or become due thereunder or the Related Documents, and that remain subject to the terms thereof. Mortgage Loan Schedule: In connection with (a) the Purchase Agreement, ---------------------- the schedule of Initial Mortgage Loans as of the Cut-Off Date set forth in Exhibit 1 of the Purchase Agreement, and as of each Subsequent Cut-Off Date, the related schedule of Subsequent Mortgage Loans, which schedule sets forth the loan number, the lien position of the related Mortgage, the Cut-Off Date Principal Balance, the Credit Limit, the FICO score, the CLTV, the Credit Grade, the Debt-to-Income Ratio and Gross Margin, as amended or supplemented from time to time in accordance with the Purchase Agreement, and (b) the Servicing Agreement, the schedule of Initial Mortgage Loans as of the Cut-Off Date set forth in Exhibit A of the Servicing Agreement, and as of each Subsequent Cut-Off Date, the related schedule of Subsequent Mortgage Loans, which schedule sets forth the loan number, the lien position of the related Mortgage, the Cut-Off Date Principal Balance, the Credit Limit, the FICO store, the CLTV, the Credit Grade, the Debt-to-Income Ratio and Gross Margin, as amended or supplemented from time to time in accordance with the Servicing Agreement. Mortgaged Property: The underlying property, including real property ------------------ and improvements thereon, securing a Mortgage Loan. Mortgagor: The obligor or obligors under a Loan Agreement. --------- Net Liquidation Proceeds: With respect to any Liquidated Mortgage Loan, ------------------------ Liquidation Proceeds net of Liquidation Expenses minus the pro rata portion of such amount that is attributable to any Excluded Amount (but not including the portion, if any, of such amount that exceeds the Principal Balance of, plus accrued and unpaid interest on, such Mortgage Loan at the end of the Collection Period immediately preceding the Collection Period in which such Mortgage Loan became a Liquidated Mortgage Loan). Net Loan Rate: With respect to any Payment Date and any Mortgage Loan, ------------- the Loan Rate of that Mortgage Loan as of the first day of the calendar month in which the related Interest Period begins, net of the Servicing Fee Rate, adjusted to an effective rate reflecting the methods by which interest is calculated on the Notes during such Interest Period. Net Principal Collections: With respect to any Payment Date, the --------------------------- excess, if any, of Principal Collections for such Payment Date over the aggregate amount of Additional Balances created or Subsequent Mortgage Loans purchased, in each case during the related Collection Period, conveyed to the Issuer and paid for with amounts on deposit in the Custodial Account. -13- Net WAC Rate: With respect to any Payment Date, a fraction expressed as ------------ a per annum rate, the numerator of which is the sum of (i) the interest due on the Mortgage Loans, less the sum of (a) the amount of the Servicing Fee on the Mortgage Loans, (b) the amount of the premium on the Policy and (c) the pro rata portion of interest attributable to Additional Balances represented by any Additional Balance Increase Amount, and (ii) payments required to be made under the Yield Maintenance Agreement, if any, in each case as of such Payment Date or the related Collection Period, as applicable, and the denominator of which is the outstanding Note Balance, as further adjusted by multiplying such rate by a fraction, the numerator of which is 360 and the denominator of which is the actual number of days in the related Interest Period. Nonrecoverable P&I Advance: Any P&I Advance previously made or proposed -------------------------- to be made in respect of a Mortgage Loan that, in the judgment (in accordance with the Collection Policy) of the Servicer, will not be ultimately recoverable, together with any accrued and unpaid interest thereon, from late Collections or any other recovery on or in respect of such Mortgage Loan. Note Balance: With respect to any Payment Date the Initial Note Balance ------------ reduced by all payments of principal on the Notes prior to such Payment Date or reduction thereof by application of the Liquidation Loss Amounts. 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 for purposes of giving any request, demand, authorization, direction, notice, consent or waiver under the Indenture or the Trust Agreement; provided, however, that in determining whether the Indenture Trustee, the Paying Agent or the Owner Trustee, as applicable, shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that the Indenture Trustee, the Paying Agent or the Owner Trustee, as the case may be, knows to be so owned shall be so disregarded. Owners of Notes that have been pledged in good faith may be regarded as Noteholders if the pledgee thereof establishes to the satisfaction of the Indenture Trustee, the Paying Agent or the Owner Trustee such pledgee's right so to act with respect to such Notes and that such pledgee is not the Issuer, any other obligor on the Notes or any Affiliate of any of the foregoing Persons. Note Owner or Owner: The Beneficial Owner of a Note. ------------------- Note Payment Account: The account established by the Paying Agent ---------------------- pursuant to Section 8.02 of the Indenture and Section 5.01 of the Servicing Agreement. Amounts deposited in the Note Payment Account will be distributed by the Paying Agent in accordance with Section 3.05 of the Indenture. Note Rate: A floating rate equal to the lesser of (i) LIBOR plus 0.25% --------- per annum and (ii) the Net WAC Rate. 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 Paying Agent, in its capacity as Note Registrar. -------------- -14- Notes: The Class A Wachovia Asset Securitization Issuance, LLC ----- Asset-Backed Notes, Series 2003-HE3, in substantially the form set forth in Exhibit A to the Indenture. Notional Balance: With respect to any Payment Date, the lesser of (i) ----------------- the amount set forth under `Scheduled Notional Balance' on Schedule I to the Indenture for that Payment Date and (ii) the Note Balance for that Payment Date. Obligations: The Notes. ----------- Officer's Certificate: With respect to the Servicer, a certificate ---------------------- signed by the President, Managing Director, a Director, a Vice President or an Assistant Vice President, of the Servicer and delivered to the Indenture Trustee or the Paying Agent. 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 or the Paying Agent. 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. Opinion of Counsel: A written opinion of counsel of a law firm -------------------- reasonably acceptable to the recipient thereof. Any Opinion of Counsel for the Servicer may be provided by in-house counsel for the Servicer if reasonably acceptable. 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 cancelled 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; provided, however, that for purposes of effectuating the Enhancer's right of -------- ------- subrogation as set forth in Section 4.12 of the Indenture only, all Notes that have been paid with funds provided under the Policy shall be deemed to be Outstanding until the Enhancer has been reimbursed with respect thereto. Overcollateralization Amount: With respect to any Payment Date, the ----------------------------- amount, if any, by which the sum of (a) the Pool Balance (exclusive of the portion relating to any Excluded Draw) and (b) the Funding Account, in each case as of the close of business on the last day of the related Collection Period, exceeds the Note Balance. Overcollateralization Release Amount: (I) With respect to any Payment ------------------------------------- Date on or after the Stepdown Date, provided that the Stepdown Delinquency Test and Stepdown Cumulative Loss Test each have been met, the lesser of (a) the Net Principal Collections for such Payment Date and (b) the excess, if any, of (i) the Overcollateralization Amount for such Payment Date, assuming that 100% of the Net Principal Collections is applied as a principal payment on the Notes on such Payment Date, over (ii) the Overcollateralization Target Amount for such Payment Date; and (II) with respect to any Payment Date on which either the Stepdown Delinquency Test or the Stepdown Cumulative Loss Test has not been met, zero. For the avoidance of doubt, the Overcollateralization -15- Release Amount with respect to any Payment Date during the Rapid Amortization Period shall be zero. Overcollateralization Target Amount: (I) With respect to any Payment ------------------------------------- Date on or after the payment date in March 2004 and prior to the Stepdown Date, an amount equal to the sum of (a) 1.00% of the Note Balance as of the Closing Date and (b) 100% of the aggregate Principal Balances of all Mortgage Loans that are 180 days or more contractually delinquent as of the last day of the related Collection Period (including Mortgage Loans that are in foreclosure or are REO Loans); and (II) with respect to any Payment Date on or after the Stepdown Date, (a) if the Stepdown Delinquency Test and the Stepdown Cumulative Loss Test have each been met, an amount equal to 2.00% of the Note Balance on such Payment Date; or (b) if either of the Stepdown Delinquency Test or the Stepdown Cumulative Loss Test has not been met, an amount equal to the Overcollateralization Target Amount as of the immediately preceding Payment Date; provided, however, that the Overcollateralization Target Amount will remain equal to the Overcollateralization Target Amount as of the immediately preceding Payment Date until both (i) the Stepdown Delinquency Test and (ii) the Stepdown Cumulative Loss Test have each been met; and provided further, however, that in no event shall the Overcollateralization Target Amount be less than the greater of (x) 0.50% of the Note Balance as of the Closing Date and (y) the sum of the three largest outstanding Mortgage Loans (by Principal Balance as of such Payment Date). Owner Trust: Wachovia Asset Securitization Issuance, LLC 2003-HE3 ------------ Trust, created by the Certificate of Trust pursuant to the Trust Agreement. Owner Trustee: Wilmington Trust Company, not in its individual capacity ------------- but solely as owner trustee, and its successors and assigns or any successor Owner Trustee appointed pursuant to the terms of the Trust Agreement. Ownership Interest: As to any Certificate, any ownership or security ------------------- interest in such Certificate, including any interest in such Certificate as the Certificateholder thereof and any other interest therein, whether direct or indirect, legal or beneficial, as owner or as pledgee. P&I Advance: The meaning specified in Section 3.21 of the Servicing ----------- Agreement. Paying Agent: Wachovia Bank, National Association, a national banking association, and its successors and assigns or any successor paying agent appointed pursuant to the terms of the Indenture. 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 and Payment Date, the -------------------- percentage obtained by dividing the Note Balance of such Note by the Note Balance of all Notes prior to such Payment Date. With respect to any Certificate and any Payment Date, the Percentage Interest stated on the face of such Certificate. Permitted Investments: One or more of the following: --------------------- -16- (i) obligations of or fully guaranteed as to principal and interest by the United States or any agency or instrumentality thereof when such obligations are backed by the full faith and credit of the United States; (ii) repurchase agreements on obligations specified in clause (i) above maturing not more than one month from the date of acquisition thereof; provided, however, that the unsecured short-term debt obligations of the party agreeing to repurchase such obligations are at the time rated "A-2" or higher by Standard and Poor's and "P-2" or higher by Moody's; (iii) federal funds, certificates of deposit, demand deposits, time deposits and bankers' acceptances (which shall each have an original maturity of not more than 90 days and, in the case of bankers' acceptances, shall in no event have an original maturity of more than 365 days or a remaining maturity of more than 30 days) denominated in United States dollars of any U.S. depository institution or trust company incorporated under the laws of the United States or any state thereof or of any domestic branch of a foreign depository institution or trust company; provided, however, that the short-term debt obligations of such depository institution or trust company, other than U.S. Bank National Association, (or, if the only Rating Agency is Standard & Poor's, in the case of the principal depository institution in a depository institution holding company, debt obligations of the depository institution holding company) at the date of acquisition thereof have been rated by each Rating Agency in its highest short-term rating category available; provided, further, that if the only Rating Agency is Standard & Poor's and if the depository or trust company is a principal subsidiary of a bank holding company and the debt obligations of such subsidiary are not separately rated, the applicable rating shall be that of the bank holding company; provided, further, that if the only Rating Agency is Standard & Poor's and the original maturity of such short-term debt obligations of a domestic branch of a foreign depository institution or trust company shall exceed 30 days, the short-term rating of such institution shall be A-1+; (iv) commercial paper (having original maturities of not more than 365 days) of any corporation incorporated under the laws of the United States or any state thereof which on the date of acquisition has been rated by each Rating Agency in its highest short-term rating category available; provided, however, that such commercial paper shall have a remaining maturity of not more than 30 days; (v) a money market fund or a qualified investment fund (including without limitation, any such fund for which the Indenture Trustee, the Paying Agent, an Affiliate of the Indenture Trustee or an Affiliate of the Paying Agent acts as an advisor or a manager) rated by each Rating Agency in one of its two highest long-term rating categories available; and (vi) other obligations or securities that are acceptable to each Rating Agency as a Permitted Investment hereunder and will not cause a Rating Event, and which are acceptable to the Enhancer, as evidenced in writing; provided, however, that in no event shall such other obligation or security be rated less than "AA/A-1" or "Aa3/P-1" by Standard and Poor's or Moody's, respectively; -17- provided, however, that no instrument shall be a Permitted Investment if it -------- ------- represents, either (1) the right to receive only interest payments with respect to the underlying debt instrument or (2) the right 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. References herein to the highest long-term rating category available debt shall mean AAA in the case of Standard & Poor's and Aaa in the case of Moody's, and references herein to the highest short-term rating category available shall mean A-1+ in the case of Standard & Poor's and P-1 in the case of Moody's. Person: Any legal individual, corporation, partnership, joint venture, ------ association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof. Plan: Any employee benefit plan or certain other retirement plans and ---- arrangements, including individual retirement accounts and annuities, Keogh plans and bank collective investment funds and insurance company general or separate accounts in which such plans, accounts or arrangements are invested, that are subject to ERISA or Section 4975 of the Code, as described in Section 3.09 of the Trust Agreement. Plan Assets: The meaning specified in Section 2510.3-101 of the ------------ Department of Labor Regulations and as described in Section 3.09 of the Trust Agreement. Policy: The financial guaranty insurance policy #42821, and any ------ endorsement thereto, dated as of the Closing Date, issued by the Enhancer. Pool Balance: With respect to any date, the aggregate Principal Balance ------------ of all Mortgage Loans as of such date. Predecessor Note: With respect to any Note, every previous Note ----------------- evidencing all or a portion of the same debt as that evidenced by such Note; and, for the purpose of this definition, any Note authenticated and delivered under Section 4.03 of the Indenture in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as such mutilated, lost, destroyed or stolen Note. Preference Amount: As defined in Section 3.32 of the Indenture. ----------------- Prime: The prime rate as published in the Eastern Edition of The Wall ----- Street Journal on the 25th day of the prior calendar month. If more than one prime rate is published on the 25th day of the prior calendar month, "Prime" shall equal the highest prime rate published on such date. If the prime rate is not published on the 25th day of the prior calendar month, "Prime" shall equal the prime rate published on the last business day prior to such 25th day. Principal Balance: With respect to any Mortgage Loan, other than a ------------------ Liquidated Mortgage Loan, and as of any day, the related Cut-Off Date Principal Balance, plus (i) any Additional Balances in respect of such Mortgage Loan conveyed to the Trust, minus (ii) all collections credited as principal in respect of any such Mortgage Loan in accordance with the related Loan Agreement (except any such collections that are allocable to any Excluded Draw) and applied in reduction of the Principal Balance thereof. For purposes of this definition, a Liquidated Mortgage Loan shall be deemed to have a Principal Balance equal to the Principal Balance of the related Mortgage Loan -18- immediately prior to the final recovery of substantially all related Liquidation Proceeds and a Principal Balance of zero thereafter. Principal Collections: With respect to any Payment Date, the aggregate --------------------- of the following amounts: (i) the total amount of payments made by or on behalf of the related Mortgagor, received and applied as payments of principal on such Mortgage Loan during the related Collection Period, as reported by the Servicer or the related Subservicer; (ii) any Net Liquidation Proceeds allocable as a recovery of principal received in connection with such Mortgage Loan during the related Collection Period; (iii) if such Mortgage Loan was repurchased by the Seller pursuant to the Purchase Agreement during the related Collection Period, 100% of the Principal Balance thereof as of the date of such purchase and if any Eligible Substitute Loan is substituted for a Deleted Loan, the Substitution Adjustment Amount; and (iv) any other amounts received as payments on or proceeds of such Mortgage Loan during the Collection Period, to the extent applied in reduction of the Principal Balance thereof; provided, however, that Principal Collections shall be reduced by any amounts -------- ------- withdrawn from the Custodial Account pursuant to clauses (d) and (j) of Section 3.04 of the Servicing Agreement, and shall not include any portion of such amounts attributable to any Excluded Amount in respect of any Mortgage Loan that are allocable to principal of such Mortgage Loan and not otherwise excluded from the amounts specified in (i) through (iv) above. Principal Distribution Amount: For any Payment Date (i) during the ------------------------------- Revolving Period, zero, (ii) during the Managed Amortization Period, Net Principal Collections for the Mortgage Loans, less (x) amounts paid to Certificateholders in respect of the Additional Balance Increase Amount for that Payment Date and (y) any Overcollateralization Release Amount, plus the amount, if any, transferred from the Funding Account to the Note Payment Account pursuant to Section 3.19(d)(iii) of the Servicing Agreement, (iii) during the Rapid Amortization Period, Principal Collections for the Mortgage Loans; provided, however, that on any Payment Date during the Managed Amortization Period or the Rapid Amortization Period, the Principal Distribution Amount for such Payment Date shall include, from Excess Spread, to the extent available or, to the extent not available, from a draw on the Policy (but only to the extent the Overcollateralization Amount is zero), an amount equal to the aggregate of the Liquidation Loss Amounts, if any, for such Payment Date, but only to the extent necessary to increase the Overcollateralization Amount to the Overcollateralization Target Amount, and (iv) the Outstanding Note Balance on the Final Payment Date. Proceeding: Any suit in equity, action at law or other judicial or ---------- administrative proceeding. Prospectus Supplement: The prospectus supplement dated November 12, ---------------------- 2003, relating to the Notes. -19- Purchase Agreement: The Mortgage Loan Purchase Agreement, dated as of ------------------ the Closing Date, between the Seller and Servicer and the Purchaser. Purchase Price: The amounts specified in Section 2.3(a) of the Purchase -------------- Agreement. Purchaser: Wachovia Asset Securitization Issuance, LLC as purchaser --------- under the Purchase Agreement, and its successors and assigns. Rapid Amortization Event: Any one of the following events: ------------------------ (a) the failure on the part of the Seller (i) to make any payment or deposit required to be made under the Purchase Agreement within three Business Days after the date such payment or deposit is required to be made; or (ii) to observe or perform in any material respect any other covenants or agreements of the Seller set forth in the Purchase Agreement, which failure continues unremedied for a period of 60 days after written notice and such failure materially and adversely affects the interests of the Securityholders or the Enhancer; provided, however, that a Rapid Amortization Event shall not be deemed -------- ------- to have occurred if Seller has repurchased or caused to be repurchased or substituted for the affected Mortgage Loan during such period (or within an additional 60 days with the consent of the Indenture Trustee and the Enhancer) in accordance with the provisions of the Purchase Agreement; (b) if any representation or warranty made by the Seller in the Purchase Agreement proves to have been incorrect in any material respect when made and which continues to be incorrect in any material respect for a period of 90 days after written notice and as a result of which the interests of the Securityholders or the Enhancer are materially and adversely affected; provided, however, that a Rapid -------- ------- Amortization Event shall not be deemed to have occurred if the Seller has repurchased or caused to be repurchased or substituted for the affected Mortgage Loan during such period (or within an additional 60 days with the consent of the Indenture Trustee and the Enhancer) in accordance with the provisions of the Purchase Agreement; (c) the entry against the Seller of a decree or order by a court or agency or supervisory authority having jurisdiction under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or other similar law, or if a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Depositor or its property, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; (d) the Seller shall voluntarily submit to Proceedings under Title 11 of the United States Code or any other applicable federal or state bankruptcy, insolvency or other similar law relating to the Seller or of or relating to all or substantially all of its property; or the Seller shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations; -20- (e) the Issuer shall become subject to regulation by the Commission as an investment company within the meaning of the Investment Company Act of 1940, as amended; (f) a Servicing Default shall occur and be unremedied under the Servicing Agreement and a qualified successor Servicer shall not have been appointed; (g) the occurrence of a draw on the Policy, and the failure of the Enhancer to be reimbursed for such draw in accordance with the Insurance Agreement, which failure continues unremedied for a period of ninety (90) days after written notice to the Servicer; (h) the Issuer (or a portion thereof) is determined to be a taxable mortgage pool or an association (or a publicly-traded partnership) taxable as a corporation or a taxable mortgage pool for federal income tax purposes; (i) an event of default under the Insurance Agreement; or (j) an Event of Default has occurred and continues beyond the expiration of the applicable cure period. (k) In the case of any event described in (a), (b), (f), or (i), a Rapid Amortization Event shall be deemed to have occurred only if, after any applicable grace period described in such clauses, any of the Indenture Trustee, the Enhancer or, with the consent of the Enhancer, Securityholders evidencing not less than 51% of the aggregate Securities Balance, by written notice to the Seller, the Servicer, the Depositor and the Owner Trustee (and to the Indenture Trustee, if given by the Enhancer or the Securityholders), declare that a Rapid Amortization Event has occurred as of the date of such notice. In the case of any event described in clauses (c), (d), (e), (g), (h) or (j), a Rapid Amortization Event shall be deemed to have occurred without any notice or other action on the part of the Indenture Trustee, the Securityholders or the Enhancer immediately upon the occurrence of such event; provided, however, that any Rapid Amortization Event may be -------- ------- waived and deemed of no effect with the written consent of the Enhancer and each Rating Agency, subject to the satisfaction of any conditions to such waiver. Rapid Amortization Period: The period beginning on the earlier of (i) --------------------------- the first day following the end of the Managed Amortization Period and (ii) the occurrence of a Rapid Amortization Event, and ending upon the termination of the Issuer. Rating Agency: Each of Moody's, Standard & Poor's or, if any such -------------- organization or a successor thereto is no longer in existence, such nationally recognized statistical rating organization, or other comparable Person, designated by the Depositor and reasonably acceptable to the Enhancer, notice of which designation shall be given to the Indenture Trustee, the Paying Agent and the Servicer. References herein to the highest short term unsecured rating category of a Rating Agency shall 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, shall mean such equivalent rating. -21- Rating Event: The qualification, reduction or withdrawal by a Rating ------------ Agency of its then-current rating of the Notes, without regard to the Policy. Record Date: With respect to the Notes and any Payment Date, unless ------------ Notes are no longer held in book-entry form, the close of business on the Business Day immediately preceding such Payment Date and if the Notes are no longer held in book-entry form, the close of business on the last Business Day of the calendar month preceding the month of such Payment Date. Recovery Fee: A customary fee calculated based on additional recovery ------------ amounts charged for the collection of such additional recovery amounts on any Mortgage Loan after the date that such Mortgage Loan became a Liquidated Mortgage Loan. Reference Bank Rate: With respect to any Interest Period, as follows: ------------------- the arithmetic mean (rounded upwards, if necessary, to the nearest one sixteenth of one percent) of the offered rates for United States dollar deposits for one month which are offered by the Reference Banks as of 11:00 a.m., London, England time, on the first or the second LIBOR Business Day (as applicable) prior to the first day of such Interest Period to prime banks in the London interbank market in amounts approximately equal to the sum of the outstanding Note Balance of the Notes; provided, however, that at least two Reference Banks provide such rate. If fewer than two such rates are provided, the Reference Bank Rate will be the arithmetic mean of the rates quoted by one or more major banks in New York City, selected by the Servicer after consultation with the Enhancer, as of 11:00 a.m., New York time, on such date for loans in U.S. Dollars to leading European banks for a period of one month in amounts approximately equal to the Note Balance of the Notes. If no quotations can be obtained, the Reference Bank Rate will be the Reference Bank Rate applicable to the preceding Interest Period. Reference Banks: Shall mean at least three major banks in the London ---------------- interbank market selected by the Paying Agent, as provided in the Indenture. Related Documents: With respect to each Mortgage Loan, the documents ------------------ contained in the Mortgage File. Relief Act Shortfalls: With respect to any Payment Date, for any ---------------------- Mortgage Loan as to which there has been a reduction in the amount of interest collectible thereon for the related Collection Period as a result of the application of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended, the shortfall, if any, equal to (i) one month's interest on the Principal Balance of such Mortgage Loan at the applicable Loan Rate, over (ii) the interest collectible on such Mortgage Loan during such Collection Period. REO Proceeds: Proceeds (net of any directly related expenses incurred ------------ by or on behalf of the Servicer for the proper operation, management and maintenance of the related REO Property and of any reserves reasonably required from time to time to be maintained to satisfy anticipated liabilities) received in respect of all REO Properties (including, without limitation, proceeds from the rental of the related Mortgaged Property) that are received prior to the final liquidation of such Mortgaged Property. REO Property: A Mortgaged Property that is acquired by the Trust in ------------- foreclosure or by deed in lieu of foreclosure. -22- Representative: Wachovia Capital Markets, LLC, as representative of the -------------- Underwriters. Repurchase Event: With respect to any Mortgage Loan, either (i) a ----------------- discovery that, as of the Closing Date with respect to an Initial Mortgage Loan or the related Subsequent Transfer Date with respect to any Subsequent Mortgage Loan, 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 customarily accepted for similar loans and (D) other matters to which like properties are commonly subject that 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 either Seller delivers an affidavit certifying that the original Loan Agreement 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 Loan Agreement. Repurchase Price: With respect to any Mortgage Loan required to be ----------------- repurchased on any date pursuant to the Purchase Agreement, purchased by the Depositor pursuant to the Trust Agreement or purchased by the Servicer pursuant to the Servicing Agreement, an amount equal to the sum of (i) 100% of the Principal Balance thereof (without reduction for any amounts charged off) and (ii) unpaid accrued interest at the Loan Rate (or with respect to the last day of the month in the month of repurchase, the Loan Rate will be the Loan Rate in effect as of the second to last day in such month) on the outstanding Principal Balance thereof from the Due Date to which interest was last paid by the related Mortgagor to the first day of the month following the month of purchase. Required Insurance Policy: With respect to any Mortgage Loan, any --------------------------- insurance policy which is required to be maintained from time to time under the Servicing Agreement or the related Subservicing Agreement in respect of such Mortgage Loan. Responsible Officer: With respect to the Indenture Trustee, the Paying ------------------- Agent or the Certificate Paying Agent, any officer of the Indenture Trustee, the Paying Agent or Certificate Paying Agent with direct responsibility for the administration of the Trust Estate pursuant to the Indenture and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject, in each case having direct responsibility for the administration of the Basic Documents. Revolving Period: The period beginning on the Closing Date and ending ----------------- on the earlier of (i) November 30, 2004, and (ii) the occurrence of a Managed Amortization Event or a Rapid Amortization Event. Secretary of State: The Secretary of State of the State of Delaware. ------------------ Securities Act: The Securities Act of 1933, as amended, and the rules --------------- and regulations promulgated thereunder. Securities Balance: The Note Balance or Certificate Balance, as the ------------------- context may require. Security: Any Certificate or a Note, as the context may require. -------- -23- Securityholder: Any Noteholder or Certificateholder. -------------- Seller: Wachovia, as seller under the Purchase Agreement, and its ------ successors and assigns. Servicer: Wachovia, and its successors and assigns. -------- Servicer Termination Triggers: A Servicer Termination Trigger will be ------------------------------- hit if the percentage of cumulative losses on the Mortgage Loans (exclusive of the pro rata portion thereof relating to any Excluded Amount or the Additional Balances represented by Additional Balance Increase Amount) as of any date exceed the applicable percentage listed in the chart below of the Pool Balance as of the Closing Date: Months Percentage ------ ---------- 1 - 24 2.00% 25 - 36 2.75% 37 - 48 3.75% 49 - 60 4.25% 61 - 72 5.00% 73+ 5.75% Servicing Advance: The meaning specified in Section 3.08 of the ------------------ Servicing Agreement. Servicing Agreement: The Servicing Agreement dated as of the Closing -------------------- Date among the Servicer, the Issuer, the Paying Agent and the Indenture Trustee. Servicing Certificate: A certificate completed and executed by a ---------------------- Servicing Officer on behalf of the Servicer in accordance with Section 4.01 of the Servicing Agreement. Servicing Default: Any one of the following events: ----------------- (i) any failure by the Servicer to deposit in the Custodial Account, Funding Account, Note Payment Account or Distribution Account any deposit required to be made under the terms of this Agreement that continues unremedied for a period of three (3) Business Days after the earlier of (A) the date upon which written notice of such failure shall have been given to the Servicer by the Issuer or the Indenture Trustee and (B) the first date on which the Servicer has actual knowledge of such failure; (ii) any failure on the part of the Servicer duly to observe or perform any other covenants or agreements of the Servicer set forth in this Agreement, which failure, in each case, materially and adversely affects the interests of the Securityholders, and which failure continues unremedied for a period of 45 days after the earlier of (A) the date on which written notice of such failure, requiring the same to be remedied, and stating that such notice is a "Notice of Default" hereunder, shall have been given to the Servicer by the Issuer or the Indenture Trustee and (B) the first date on which the Servicer has actual knowledge of such failure; (iii) the entry against the Servicer of a decree or order by a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a trustee, -24- conservator, receiver or liquidator in any conservatorship, receivership, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding up or liquidation of its affairs; or (iv) the consent by the Servicer to the appointment of a trustee, conservator, receiver or liquidator in any insolvency, conservatorship, receivership, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Servicer or of or relating to all or substantially all of its property; or the commencement of an involuntary case relating to the Servicer under any applicable federal or state bankruptcy, insolvency or other similar law and such case shall either be consented to by the Servicer or shall not have been dismissed or stayed within sixty (60) day of its commencement; or the Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations. Servicing Fee: With respect to any Mortgage Loan and any Collection -------------- Period, the product of (i) the Servicing Fee Rate divided by 12 and (ii) the related Principal Balance as of the first day of such Collection Period. Servicing Fee Rate: 0.50% per annum. ------------------ Servicing Officer: Any officer of the Servicer involved in, or responsible for, the administration and servicing of the Mortgage Loans whose name and specimen signature appear on a list of servicing officers furnished to the Indenture Trustee (with a copy to the Paying Agent and the Enhancer) by the Servicer, as such list may be amended from time to time. Standard & Poor's: Standard & Poor's Ratings Services, a division of ----------------- The McGraw-Hill Companies, Inc. or its successor in interest. Statutory Trust Statute: Chapter 38 of Title 12 of the Delaware Code, ------------------------ 12 Del. Codess.ss.3801 et seq., as the same may be amended from time to time. --- ------ -- ---- Stepdown Cumulative Loss Test: With respect to any date of ---------------------------------- determination, a test that is met if the percentage of the cumulative losses on the Mortgage Loans (exclusive of the pro rata portion thereof relating to any Excluded Amount) as of such date of determination is less than the applicable percentage listed below of the aggregate Principal Balances of the Mortgage Loans as of the Closing Date: Months Percentage ------ ---------- 31 - 48 1.50% 49 - 60 2.00% 61+ 2.50% Stepdown Date: The later to occur of (i) the thirty-first Payment Date ------------- and (ii) the Payment Date on which the Note Balance immediately prior to that Payment Date is less than or equal to 50% of the Initial Note Balance. -25- Stepdown Delinquency Test: With respect to any date of determination, --------------------------- the Stepdown Delinquency Test shall be met if the six month rolling average sixty-day delinquency rate (including Mortgage Loans that are in foreclosure or are REO Loans) on the Mortgage Loans (exclusive of the pro rata portion thereof relating to any Excluded Draw) as of such date of determination is, measured as a percentage of the Pool Balance as of each date of determination, less than 3.50%. Subsequent Cut-Off Date: With respect to any Subsequent Mortgage Loan, ----------------------- the date specified in the related Subsequent Transfer Agreement. Subsequent Mortgage Loan: An adjustable rate home equity revolving line ------------------------ of credit (i) sold by the Seller to the Purchaser pursuant to Section 2.2 of the Purchase Agreement and the applicable Subsequent Transfer Agreement, or (ii) sold by the Depositor to the Issuer pursuant to Sections 3.01 and 3.05 of the Trust Agreement and the applicable Subsequent Transfer Agreement, as the context requires, such adjustable rate home equity revolving line of credit being identified on the Mortgage Loan Schedule attached to the related Subsequent Transfer Agreement, as set forth in such Subsequent Transfer Agreement. Subsequent Net Recovery Amounts: Amounts collected on a Mortgage Loan -------------------------------- after the Mortgage Loan becomes a Liquidated Mortgage Loan, net of any Recovery Fee. Subsequent Transfer Agreement: Each Subsequent Transfer Agreement, ------------------------------- dated as of a Subsequent Transfer Date (i) executed by the Seller and the Purchaser substantially in the form of Exhibit 2 to the Purchase Agreement, or (ii) executed by the Depositor and the Issuer substantially in the form of Exhibit J to the Trust Agreement, as the context requires, by which the related Subsequent Mortgage Loans are sold to the Purchaser or the Issuer, as applicable. Subsequent Transfer Date: With respect to each Subsequent Transfer -------------------------- Agreement, the date on which the related Subsequent Mortgage Loans are sold to the Purchaser or the Issuer, as applicable. Subsequent Transferred Property: Collectively with respect to each --------------------------------- Subsequent Transfer Date, all of the right, title and interest of the Seller whether now owned or existing or hereafter created, arising, or acquired, in, to and under the following: (i) the related Subsequent Mortgage Loans (including the related Cut-Off Date Principal Balances then existing and all Additional Balances arising thereunder after the Subsequent Cut-Off Date through and including the date immediately preceding the commencement of the Rapid Amortization Period) and interest due or to become due thereon on and after the related Subsequent Cut-Off Date and money due or to become due in respect thereof, all interest accruing thereon, all monies due or to become due thereon, all collections in respect thereof received on or after the Subsequent Cut-Off Date and all accounts, chattel paper, general intangibles, contract rights and certificates of deposit related to the Subsequent Mortgage Loans; provided, however, that any Principal Balance represented by a Draw made during the Rapid Amortization Period and interest thereon and money due or to become due in respect thereof will not be or be deemed to be transferred to the Purchaser, and the Seller in such event shall retain ownership of each Principal Balance represented by each such Draw; (ii) the interest of the Seller in any insurance policies in respect of the Subsequent Mortgage Loans; (iii) the interest of the Seller in the Mortgages and the Loan Agreements related to each Subsequent Mortgage Loan and the other Related Documents and (iv) all proceeds of the foregoing. -26- Subservicer: Each Person that enters into a Subservicing Agreement as a ----------- subservicer of Mortgage Loans. Subservicing Agreement: The written contract between the Servicer and ----------------------- any Subservicer relating to servicing and administration of certain Mortgage Loans as provided in Section 3.01 of the Servicing Agreement. Substitution Adjustment Amount: With respect to any Eligible Substitute ------------------------------ Loan and any Deleted Loan, the amount, if any, as determined by the Servicer, by which the aggregate principal balance of all such Eligible Substitute Loans as of the date of substitution is less than the aggregate Principal Balance of all such Deleted Loans (after application of the principal portion of the Monthly Payments due in the month of substitution that are to be distributed to the Securityholders in the month of substitution). Telerate Screen Page 3750: The display page so designated on the Bridge ------------------------- Telerate Capital Markets Report (or such other page as may replace page 3750 on such service for the purpose of displaying London interbank offered rates of major banks, or, if such service is no longer offered, such other service for displaying London interbank offered rates or comparable rates as may be selected by the Paying Agent after consultation with the Servicer. Transfer: Any direct or indirect transfer, sale, pledge, hypothecation -------- or other form of assignment of any Ownership Interest in a Certificate. Transfer Date: The Payment Date on which the Servicer, upon receipt of ------------- written notice and direction from the Issuer, shall cause the retransfer of Mortgage Loans from the Trust Estate to the Issuer, pursuant to Section 3.22(a) of the Servicing Agreement. Transferee: Any Person who is acquiring by Transfer any Ownership ---------- Interest in a Certificate. Transfer Notice Date: The fifth Business Day prior to the Transfer Date -------------------- for which the Servicer shall give the Indenture Trustee, the Paying Agent, the Rating Agencies and the Enhancer a notice of the proposed retransfer of Mortgage Loans, pursuant to Section 3.22(a) of the Servicing Agreement. Transferor: Any Person who is disposing by Transfer of any Ownership ---------- Interest in a Certificate. Transferred Property: The Initial Transferred Property and the ---------------------- Subsequent Transferred Property. 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 the Closing Date, ---------------- between the Owner Trustee and the Depositor. -27- 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 in effect from time to time, as in --- effect in any specified jurisdiction. Underwriters: Each of Wachovia Capital Markets, LLC and Credit Suisse ------------ First Boston LLC. Underwriting Agreement: The underwriting agreement dated November 12, ----------------------- 2003, among Wachovia Capital Markets, LLC, Credit Suisse First Boston LLC and the Depositor. Uniform Single Attestation Program for Mortgage Bankers: The Uniform --------------------------------------------------------- Single Attestation Program for Mortgage Bankers, as published by the Mortgage Bankers Association of America and effective with respect to fiscal periods ending on or after December 15, 1995. Unpaid Principal Amount: As defined in Section 3.05(a) of the -------------------------- Indenture. Wachovia: Wachovia Bank, National Association, a national banking -------- association. Yield Maintenance Agreement: The Master Agreement dated as of November --------------------------- 19, 2003 between Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust and Wachovia, along with its Schedule and the Confirmation reference no. 290294. Yield Maintenance Provider: Wachovia. -------------------------- -28- [EXECUTION COPY] ================================================================================ WACHOVIA BANK, NATIONAL ASSOCIATION as Servicer, WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC 2003-HE3 TRUST as Issuer, WACHOVIA BANK, NATIONAL ASSOCIATION as Paying Agent and U.S. BANK NATIONAL ASSOCIATION as Indenture Trustee ------------------------------- SERVICING AGREEMENT Dated as of November 19, 2003 ------------------------------- ================================================================================

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-iii- 36 This Servicing Agreement, dated as of November 19, 2003 (the "Agreement"), is among Wachovia Bank, National Association, as servicer (the "Servicer"), the Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, as issuer (the "Issuer"), Wachovia Bank, National Association, as Paying Agent (the "Paying Agent"), and U.S. Bank National Association, as indenture trustee (the "Indenture Trustee"). WITNESSETH: ----------- WHEREAS, pursuant to the terms of the Purchase Agreement (as defined herein), Wachovia Bank, National Association, as seller (in such capacity, "Seller") and as servicer, will sell to Wachovia Asset Securitization Issuance, LLC, as purchaser (in such capacity, the "Purchaser"), the Initial Mortgage Loans on the Closing Date, and may sell Subsequent Mortgage Loans on one or more Subsequent Transfer Dates, together with the Related Documents on the Closing Date and any Subsequent Transfer Date, and thereafter all Additional Balances created on or after the Cut-Off Date and any such Subsequent Transfer Date; WHEREAS, Wachovia Asset Securitization Issuance, LLC, as depositor (in such capacity, the "Depositor"), will sell the Initial Mortgage Loans and assign all of its rights under the Purchase Agreement to the Issuer, together with the Related Documents on the Closing Date, and thereafter Subsequent Mortgage Loans and Additional Balances relating to the Mortgage Loans created on or after the Cut-Off Date; WHEREAS, pursuant to the terms of the Trust Agreement, the Issuer will issue the Certificates; WHEREAS, pursuant to the terms of the Indenture, the Issuer will issue the Notes; and WHEREAS, pursuant to the terms of this Agreement, the Servicer will service the Mortgage Loans directly or through one or more Subservicers. NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE I Definitions Section 1.01. Definitions. For all purposes of this Agreement, 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 contained in Appendix A to the indenture dated as of November 19, 2003 (the "Indenture"), among the Issuer, the Paying Agent and the Indenture Trustee, which is incorporated by reference herein. All other capitalized terms used herein shall have the meanings specified herein. Section 1.02. Other Definitional Provisions. ----------------------------- (a) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. 1 (b) As used in this Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in any such certificate or other document, to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Agreement or in any such certificate or other document shall control. (c) The words "hereof," "herein," "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section and Exhibit references contained in this Agreement are references to Sections and Exhibits in or to this Agreement unless otherwise specified; the term "including" shall mean "including without limitation"; "or" shall include "and/or"; and the term "proceeds" shall have the meaning ascribed thereto in the UCC. (d) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as the feminine and neuter genders of such terms. (e) 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. Section 1.03. Interest Calculations. All calculations of interest ---------------------- hereunder that are made in respect of the Principal Balance of a Mortgage Loan shall be made on a daily basis using a 365-day year. All calculations of interest on the Notes shall be made on the basis of the actual number of days in an Interest Period and a year assumed to consist of 360-days. The calculation of the Servicing Fee shall be made on the basis of a 360-day year consisting of twelve 30-day months. All dollar amounts calculated hereunder shall be rounded to the nearest penny with one-half of one penny being rounded up. ARTICLE II Representations and Warranties Section 2.01. Representations and Warranties Regarding the Servicer. ------------------------------------------------------- The Servicer represents and warrants to the Issuer, the Enhancer and for the benefit of the Indenture Trustee, as pledgee of the Mortgage Loans, as of the Closing Date: (a) The Servicer is a national banking association duly organized and validly existing under the laws of the United States of America and is or will be in compliance with the laws of each state in which any Mortgaged Property is located to the extent necessary to ensure the enforceability of each Mortgage Loan; 2 (b) The Servicer has the power and authority to make, execute, deliver and perform its obligations under this Agreement and all of the transactions contemplated under this Agreement, has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement, and has duly executed and delivered this Agreement; (c) The Servicer is not required to obtain the consent of any other Person or any consents, licenses, approvals or authorizations from, or registrations or declarations with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement, except for such consents, licenses, approvals or authorizations, or registrations or declarations, as shall have been obtained or filed, as the case may be; (d) The execution and delivery of this Agreement by the Servicer and the performance and compliance with the terms of this Agreement by the Servicer will not violate the Articles of Association or Bylaws of the Servicer, or constitute a material default (or an event which, with notice or lapse of time, or both, would constitute a material default) under, or result in the material breach of, any material contract, agreement or other instrument to which the Servicer is a party or which may be applicable to the Servicer or any of its respective assets; (e) No litigation is currently pending, or to the knowledge of the Servicer threatened, against the Servicer, that in the opinion of the Servicer has a reasonable likelihood of resulting in a material adverse effect on the transactions contemplated by this Agreement; (f) This Agreement constitutes a legal, valid and binding obligation of the Servicer, enforceable against the Servicer in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights in general, as they may be applied in the context of the insolvency of a national banking association, and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law), and by public policy considerations underlying the securities laws, to the extent that such public policy considerations limit the enforceability of the provisions of this Agreement which purport to provide indemnification from liabilities under applicable securities laws; and (g) The Servicer is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or governmental agency, which default might have consequences that would materially and adversely affect the condition (financial or otherwise) or operations of the Servicer or its respective properties or might have consequences that would materially adversely affect the respective performance of the Servicer hereunder. The foregoing representations and warranties shall survive any termination of the Servicer hereunder. Section 2.02. Representations and Warranties of the Issuer. The Issuer -------------------------------------------- hereby represents and warrants to the Servicer and for the benefit of the Indenture Trustee, as pledgee of the Mortgage Loans, as of the Closing Date: (a) the Issuer is a statutory trust duly formed and in good standing under the laws of the State of Delaware and has full power, authority and legal right to execute and deliver this Agreement 3 and to perform its obligations under this Agreement, and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement; and (b) the execution and delivery by the Issuer of this Agreement and the performance by the Issuer of its obligations under this Agreement will not violate any provision of any law or regulation governing the Issuer or any order, writ, judgment or decree of any court, arbitrator or governmental authority or agency applicable to the Issuer or any of its assets. Such execution, delivery, authentication and performance will not require the authorization, consent or approval of, the giving of notice to, the filing or registration with, or the taking of any other action with respect to, any governmental authority or agency regulating the activities of limited liability companies. Such execution, delivery, authentication and performance will not conflict with, or result in a breach or violation of, any mortgage, deed of trust, lease or other agreement or instrument to which the Issuer is bound. Section 2.03. Enforcement of Representations and Warranties. The ------------------------------------------------- Servicer, on behalf of and subject to the direction of the Indenture Trustee, as pledgee of the Mortgage Loans, or the Issuer, shall enforce the representations and warranties of the Seller pursuant to the Purchase Agreement. Upon the discovery by the Seller, the Depositor, the Servicer, the Indenture Trustee, the Enhancer or the Issuer of a breach of any of the representations and warranties made by the Seller in the Purchase Agreement, in respect of any Mortgage Loan which materially and adversely affects the interests of the Securityholders or the Enhancer, the party discovering such breach shall give prompt written notice to the other parties. The Servicer shall promptly notify the Seller of such breach and request that, pursuant to the terms of the Purchase Agreement, the Seller either (i) cure such breach in all material respects within 90 days from the date the Seller was notified of such breach or (ii) purchase such Mortgage Loan from the Issuer at the price and in the manner set forth in Section 3.1(d) of the Purchase Agreement; provided, however, that the Seller shall, subject to the conditions set forth in the Purchase Agreement, have the option to substitute an Eligible Substitute Loan or Loans for such Mortgage Loan. In the event that the Seller elects to substitute one or more Eligible Substitute Loans pursuant to Section 3.1(d) of the Purchase Agreement, the Seller shall deliver to the Servicer, in accordance with the Purchase Agreement, with respect to such Eligible Substitute Loans, the original Loan Agreement, the Mortgage, and such other documents and agreements as are required by the Purchase Agreement. Payments due with respect to Eligible Substitute Loans in the month of substitution shall not be transferred to the Issuer and will be retained by the Servicer and remitted by the Servicer to the Seller on the next succeeding Payment Date except to the extent that a payment less than the applicable Minimum Monthly Payment has been received by the Issuer for such month in respect of the Mortgage Loan to be removed. The Servicer shall amend or cause to be amended the Mortgage Loan Schedule to reflect the removal of such Mortgage Loan and the substitution of the Eligible Substitute Loans and the Servicer shall promptly deliver the amended Mortgage Loan Schedule to the Owner Trustee and Indenture Trustee. It is understood and agreed that the obligation of the Seller to cure such breach or purchase or substitute for such Mortgage Loan as to which such a breach has occurred and is continuing shall constitute the sole remedy respecting such breach available to the Issuer and the Indenture Trustee, as pledgee of the Mortgage Loans, against the Seller. In connection with the purchase of or substitution for any such Mortgage Loan by the Seller, the Issuer shall assign to the Seller all of its right, title and interest in respect of the Purchase Agreement applicable to such Mortgage Loan. 4 ARTICLE III Administration and Servicing of Mortgage Loans Section 3.01. The Servicer. ------------ (a) The Issuer, by execution and delivery of this Agreement, does hereby appoint the Servicer for, and subject to the terms of this Agreement, the Servicer assumes responsibility for, the servicing of the Mortgage Loans. Each original Mortgage File and any Related Documents delivered to the Servicer by the Seller pursuant to the provisions of this Agreement and any Subsequent Transfer Agreement shall be held in trust by the Servicer for the benefit of the Trust in accordance with the terms of this Agreement. The Servicer's possession of any portion of any original Mortgage File, any Related Documents or copies thereof shall be maintained in accordance with the provisions of this Agreement to facilitate the servicing of the related Mortgage Loans pursuant to this Agreement. (b) The Servicer shall service and administer the Mortgage Loans in a manner generally consistent with the terms of this Agreement and the collection policy set forth on Exhibit B (the "Collection Policy") and in a manner that shall be normal and usual in its mortgage servicing activities. Subject to the Collection Policy and the terms of this Agreement (including without limitation Sections 3.08 and 3.09), the Servicer shall have full power and authority to do any and all things in connection with such servicing and administration which it may deem necessary or desirable, it being understood, however, that the Servicer shall at all times remain responsible to the Issuer, the Paying Agent, the Indenture Trustee and, as a third-party beneficiary hereunder, the Enhancer for the performance of its duties and obligations hereunder. The Servicer will at all times apply the same standards and follow the same procedures with respect to the decision to commence litigation, and in prosecuting and litigating with respect to the Mortgage Loans as it applies and follows with respect to mortgage loans like the Mortgage Loans generally. (c) The Servicer shall enforce the respective rights and interests of the Issuer and the Indenture Trustee in and under each Mortgage Loan, including the Mortgaged Property and any other related security. The Servicer is hereby authorized and empowered, in performing its duties hereunder, subject to the limitations set forth herein, to execute and deliver, on behalf of itself, the Issuer, the Indenture Trustee or any of them, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge and all other comparable instruments with respect to the Mortgage Loans and the Mortgaged Properties. The Issuer and the Indenture Trustee, as applicable, shall execute any powers of attorney and other documents furnished to them by the Servicer and necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder. In addition, the Servicer may, at its own discretion, obtain credit information in the form of a "credit score" from a credit repository. On the Closing Date, the Indenture Trustee shall deliver to the Servicer a limited power of attorney substantially in the form of Exhibit C hereto. No costs incurred by the Servicer in respect of Servicing Advances shall, for the purposes of distributions to the Noteholders, be added to the amount owing under the related Mortgage Loan. 5 Notwithstanding anything to the contrary contained herein, the Servicer, in servicing and administering the Mortgage Loans, shall employ or cause to be employed procedures (including collection, foreclosure and management procedures with respect to REO Property) and exercise the same care that it customarily employs and exercises in servicing and administering mortgage loans for its own account, in accordance with accepted mortgage servicing practices of prudent lending institutions servicing mortgage loans similar to the Mortgage Loans and giving due consideration to the Noteholders', the Enhancer's and the Trust's reliance on the Servicer. If the Mortgage did not have a Lien senior to the related Mortgage Loan on the related Mortgaged Property as of the Cut-Off Date or related Subsequent Cut-Off Date, as applicable, then the Servicer, in such capacity, may not consent to the placing of a Lien senior to that of the Mortgage on the related Mortgaged Property. If the Mortgage had a Lien senior to the related Mortgage Loan on the related Mortgaged Property as of the Cut-Off Date or related Subsequent Cut-Off Date, as applicable, then the Servicer, in such capacity, may consent to the refinancing of such prior senior Lien, provided that (i) the resulting CLTV of such Mortgage Loan is no higher than the greater of the CLTV prior to such refinancing or 100%; (ii) the interest rate for the loan evidencing the refinanced senior Lien is no higher than the interest rate on the loan evidencing the existing senior Lien immediately prior to the date of such refinancing (meaning, in the case of an adjustable rate loan, a substantially similar index and a gross margin no higher than that of the existing senior Lien); and (iii) the loan evidencing the refinanced senior Lien is not subject to negative amortization. In connection with servicing the Mortgage Loans, the Servicer may take reasonable actions to encourage or effect the termination of Loan Agreements that have become dormant. The relationship of the Servicer (and of any successor to the Servicer as servicer under this Agreement) to the Issuer, the Paying Agent and the Indenture Trustee under this Agreement is intended by the parties to be that of an independent contractor and not that of a joint venturer, partner or agent. (d) The Servicer may enter into Subservicing Agreements with Subservicers for the servicing and administration of certain of the Mortgage Loans, provided that notwithstanding such appointment, the Servicer shall remain liable for the performance of all servicing duties delegated by it. The Servicer shall provide written notice to the Indenture Trustee, the Paying Agent and the Enhancer upon entering into a Subservicing Agreement. References in this Agreement to actions taken or to be taken by the Servicer in servicing the Mortgage Loans include actions taken or to be taken by a Subservicer on behalf of the Servicer and any amount actually received by such Subservicer in respect of a Mortgage Loan shall be deemed to have been received by the Servicer whether or not actually received by the Servicer. Each Subservicing Agreement will be upon such terms and conditions as are not inconsistent with this Agreement and as the Servicer and the Subservicer have agreed. With the approval of the Servicer, a Subservicer may delegate its servicing obligations to third-party servicers, but such Subservicers will remain obligated under the related Subservicing Agreements. The Servicer and the Subservicer may enter into amendments to the related Subservicing Agreements; provided, however, that any such amendments shall not cause the Mortgage Loans to be serviced in a manner that would be materially inconsistent with the standards set forth in this Agreement. The Servicer shall be entitled to terminate any Subservicing Agreement in accordance with the terms and conditions thereof and without any limitation by virtue of this Agreement; provided, however, that in the event of termination of any Subservicing Agreement by 6 the Servicer or the Subservicer, the Servicer shall either act as servicer of the related Mortgage Loan or enter into a Subservicing Agreement with a successor Subservicer which will be bound by the terms of the related Subservicing Agreement. The Servicer shall be entitled to enter into any agreement with a Subservicer for indemnification of the Servicer and nothing contained in this Agreement shall be deemed to limit or modify such indemnification. In the event that the rights, duties and obligations of the Servicer are terminated hereunder, any successor to the Servicer in its sole discretion may, to the extent permitted by applicable law, terminate the existing Subservicing Agreement with any Subservicer in accordance with the terms of the applicable Subservicing Agreement or assume the terminated Servicer's rights and obligations under such subservicing arrangements which termination or assumption will not violate the terms of such arrangements. As part of its servicing activities hereunder, the Servicer, for the benefit of the Indenture Trustee, the Paying Agent, the Enhancer and the Securityholders, shall use reasonable efforts to enforce the obligations of each Subservicer under the related Subservicing Agreement, to the extent that the non-performance of any such obligation would have a material adverse effect on a Mortgage Loan. Such enforcement, including, without limitation, the legal prosecution of claims, termination of Subservicing Agreements and the pursuit of other appropriate remedies, shall be in such form and carried out to such an extent and at such time as the Servicer, in its good faith business judgment, would require were it the owner of the related Mortgage Loans. The Servicer shall pay the costs of such enforcement at its own expense, and shall be reimbursed therefor only (i) from a general recovery resulting from such enforcement to the extent, if any, that such recovery exceeds all amounts due in respect of the related Mortgage Loan or (ii) from a specific recovery of costs, expenses or attorneys fees against the party against whom such enforcement is directed. Section 3.02. Collection of Certain Mortgage Loan Payments. -------------------------------------------- (a) The Servicer shall make reasonable efforts to collect all payments called for under the terms and provisions of the Mortgage Loans, and shall, to the extent such procedures shall be consistent with this Agreement and generally consistent with the Collection Policy, follow such collection procedures as shall be normal and usual in its general mortgage servicing activities and consistent with the procedures the Servicer employs in servicing all other Mortgage Loans in the servicing portfolio with characteristics similar to those of the Mortgage Loans. Consistent with the foregoing, and without limiting the generality of the foregoing, the Servicer may in its discretion (i) waive any late payment charge, penalty interest or other fees which may be collected in the ordinary course of servicing a Mortgage Loan and (ii) arrange with a Mortgagor a schedule for the payment of principal and interest due and unpaid; provided, however, that such arrangement is consistent with the Servicer's policies with respect to home equity mortgage loans. The Servicer may also extend the Due Date for payment due on a Mortgage Loan in accordance with the Collection Policy; provided, however, that the Servicer shall first determine that any such waiver or extension will not impair the coverage of any related insurance policy or materially adversely affect the Lien of the related Mortgage or the interests of the Securityholders or the Enhancer, and the Servicer shall not grant any such waiver or extension that would have any such effect. Consistent with the terms of this Agreement, the Servicer may also: (i) waive, modify or vary any term of any Mortgage Loan (including reduce the Credit Limit); 7 (ii) consent to the postponement of strict compliance with any such term or in any manner grant indulgence to any Mortgagor; (iii) arrange with a Mortgagor a schedule for the payment of principal and interest due and unpaid; (iv) forgive any portion of the amounts contractually owed under the Mortgage Loan; (v) capitalize past due amounts owed under the Mortgage Loan by adding any amounts in arrearage to the existing principal balance of the Mortgage Loan (a "Capitalization Workout") which will result in an increased monthly payment amount, provided that: (A) the amount added to the existing principal balance of the Mortgage Loan (the "Capitalized Amount") shall be no greater than five times the Mortgagor's current Minimum Monthly Payment amount; and (B) the Servicer shall not enter into a Capitalization Workout unless the CLTV of the Mortgage Loan prior to the Capitalization Workout equals or exceeds 80% and the Mortgagor has qualified for the Capitalization Workout under the Servicer's servicing guidelines; or (vi) reset the maturity date for the Mortgage Loan, but in no event shall such reset date extend beyond the end of the Collection Period preceding the Final Payment Date; or any combination of the foregoing, if in the Servicer's determination such waiver, modification, postponement or indulgence is not materially adverse to the interests of the Securityholders or the Enhancer; provided, however, that the Servicer may not, pursuant to this Section 3.02, modify or permit any Subservicer to modify any Mortgage Loan (including without limitation any modification that would change the Loan Rate, forgive the payment of any principal or interest (unless in connection with the liquidation of the related Mortgage Loan) or extend the final maturity date of such Mortgage Loan) unless such Mortgage Loan is in default or, in the judgment of the Servicer, such default is reasonably foreseeable or except as provided in Section 3.06. In connection with any such waiver, modification, postponement or indulgence, the Servicer shall use reasonable efforts to maximize the receipt of principal and interest thereon. The general terms of any waiver, modification, forgiveness, postponement or indulgence with respect to any of the Mortgage Loans will be included in the Servicing Certificate, and such Mortgage Loans will not be considered "delinquent" for the purposes of the Basic Documents so long as the Mortgagor complies with the terms of such waiver, modification, forgiveness, postponement or indulgence. Section 3.03. Custodial Duties ---------------- (a) The Servicer is hereby appointed as custodian of the documents in each Mortgage File. (b) The Servicer shall establish the Custodial Account, which shall be an Eligible Account, titled "Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust Custodial Account," in which the Servicer or the Issuer, as applicable, shall deposit or cause to be deposited any amounts representing payments and collections in respect of the Mortgage Loans received by it subsequent to the applicable Cut-Off Date or Subsequent Cut-Off Date (other than in respect of the payments referred to in the following paragraph), within one Business Day following receipt thereof (or 8 otherwise on or prior to the Closing Date), including the following payments and collections received or made by it (without duplication): (i) all payments of principal of or interest on the Mortgage Loans (other than amounts in respect of the Excluded Amount) received or advanced by the Servicer, net of any portion of the interest thereof retained by any Subservicer as subservicing fees; (ii) Net Liquidation Proceeds, net of any related Foreclosure Profit and all Subsequent Net Recovery Amounts; (iii) all proceeds of any Mortgage Loans repurchased by the Seller pursuant to the Purchase Agreement, including any indemnity payments paid by the Seller pursuant to Section 3.1(d) of the Purchase Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Eligible Substitute Loan pursuant to the Purchase Agreement; (iv) Insurance Proceeds, other than Net Liquidation Proceeds, resulting from any insurance policy maintained on a Mortgaged Property; (v) REO proceeds and Condemnation Proceeds; and (vi) amounts required to be paid by the Servicer pursuant to Section 8.10; provided, however, that with respect to each Collection Period, the Servicer shall be permitted to retain from payments in respect of interest on the Mortgage Loans, the Servicing Fee for such Collection Period. The foregoing requirements respecting deposits to the Custodial Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Custodial Account amounts representing Foreclosure Profits, fees (including annual fees) or late charge penalties, payable by Mortgagors (such amounts to be retained as additional servicing compensation in accordance with Section 3.10 hereof), or amounts received by the Servicer for the accounts of Mortgagors for application towards the payment of taxes, insurance premiums, assessments and similar items. In the event any amount not required to be deposited in the Custodial Account is so deposited, the Servicer may at any time withdraw such amount from the Custodial Account, any provision herein to the contrary notwithstanding, and pay such amount to the Person entitled to such amount. The Servicer shall retain all Foreclosure Profits as additional servicing compensation. Payments and collections allocable to an Excluded Amount shall not be deposited into the Custodial Account, the Distribution Account or the Note Payment Account, but shall be distributed by the Servicer to the Seller pursuant to Section 3.04. If the Servicer makes any P&I Advances pursuant to Section 3.21 the Servicer shall be entitled to reimbursement itself by withdrawing from the Custodial Account, as provided herein, any amounts so advanced. The Servicer may cause the institution maintaining the Custodial Account to invest any funds in the Custodial Account in Permitted Investments, which investments shall mature not later than the Business Day preceding the next succeeding Payment Date, and which investments shall not be sold or disposed of prior to maturity. In addition, no such Permitted Investment shall be purchased at a price in excess of par. Except as provided above, all income and gain realized from any such investment shall inure to the benefit of the Servicer and shall be subject to its withdrawal or order from time to time. The amount of any losses incurred in respect of the 9 principal amount of any such investments shall be deposited in the Custodial Account by the Servicer out of its own funds immediately as realized. (c) The Servicer shall promptly report in writing to the Owner Trustee, the Paying Agent and the Indenture Trustee any material failure on the Servicer's part to hold the Mortgage Files and maintain its records and computer systems as herein provided and promptly take appropriate action to remedy any such failure. Following the occurrence of a Servicing Default as set forth in Section 7.01(a)(iii) or (iv), the Issuer or the Indenture Trustee shall immediately terminate the rights of the Servicer to perform the duties as custodian with respect to the Mortgage Files for the Mortgage Loans. Following the occurrence of a Servicing Default as set forth in Section 7.01(a)(i) or (ii), the Issuer or the Indenture Trustee shall, upon 60 days prior written notice, terminate the rights of the Servicer to perform the duties as custodian with respect to the Mortgage Files for the Mortgage Loans. Upon the termination of the Servicer's rights to perform the duties as custodian with respect to any Mortgage Files, the Servicer shall deliver each such Mortgage File to the Indenture Trustee or its designee in accordance with the instructions of the Indenture Trustee. (d) Upon taking possession of the Mortgage Files, the Servicer shall (i) maintain possession of the Mortgage Files and (ii) exercise the same degree of care with respect to the possession of the Mortgage Files as it would if they were its own property. The Mortgage Files shall at all times be held by the Servicer segregated from any similar documents. In performing its duties as custodian, the Servicer shall act with reasonable care, using that degree of skill and attention that other servicers exercise with respect to the loan files relating to all comparable loans that they service. Mortgage Files shall be held for the benefit of the Indenture Trustee, the Enhancer and the Securityholders. Section 3.04. Withdrawals from the Custodial Account. The Servicer -------------------------------------- shall, from time to time as provided herein, make withdrawals from the Custodial Account of amounts on deposit therein pursuant to Section 3.02 that are attributable to the Mortgage Loans for the following purposes: (a) on each Determination Date, the Servicer shall determine the pro rata portion of the Interest Collections deposited into the Custodial Account with respect to the related Collection Period that relate to the Additional Balance Increase Amount and, prior to 1:00 p.m. (EST) on the Business Day prior to the related Payment Date, the Servicer shall withdraw such amounts from the Custodial Account and deposit such amounts into the Distribution Account established by the Certificate Paying Agent for distribution to the Certificateholders pursuant to Section 5.01 of the Trust Agreement; (b) on each Determination Date, the Servicer shall determine the aggregate amounts to be withdrawn from the Custodial Account and applied pursuant to Section 3.05(a) of the Indenture and, prior to 1:00 p.m. (EST) on the Business Day prior to the related Payment Date, the Servicer shall withdraw such amounts from the Custodial Account and deposit such amounts into the Note Payment Account, the Funding Account or the Distribution Account, as applicable, for distribution by the Paying Agent, in each case in accordance with Section 3.05 of the Indenture and in the order of priority set forth in Section 3.05(a) of the Indenture for such Payment Date and in accordance with the Servicing Certificate; 10 (c) to pay to the Seller any monthly payments received from the Mortgagors that do not constitute Transferred Property; (d) prior to the commencement of the Rapid Amortization Period, from Principal Collections on the Mortgage Loans, and, on and after the Payment Date in March 2004, if Principal Collections are not sufficient from Excess Spread, to pay to the Seller, as assignee of the Depositor, the amount of any Additional Balances, as and when created during the related Collection Period, but only to the extent that amounts on deposit in the Funding Account are not sufficient for such purpose; provided that Excess Spread shall not be so applied if the Enhancer has not been reimbursed for all draws made under the Policy, with interest; and provided further that Excess Spread (calculated with respect to the following Payment Date) in the Custodial Account will not be applied to purchase Additional Balances to the extent that after such purchase the Overcollateralization Amount would exceed the Overcollateralization Target Amount, calculated in each case as of the following Payment Date; (e) to the extent deposited to the Custodial Account, to reimburse itself or the related Subservicer for previously unreimbursed expenses incurred in maintaining individual insurance policies pursuant to Section 3.05, for Servicing Advances, for fees payable pursuant to Section 3.08, for expenses payable pursuant to Section 3.10, for amounts reimbursable pursuant to Section 6.03 or Liquidation Expenses, paid pursuant to Section 3.08 or otherwise reimbursable pursuant to the terms of this Agreement (to the extent not payable pursuant to Section 3.10), such withdrawal right being limited to amounts received on particular Mortgage Loans (other than any Repurchase Price in respect thereof) that represent late recoveries of the payments for which such advances were made, or from related Net Liquidation Proceeds or the proceeds of the purchase of such Mortgage Loan; (f) to pay itself an amount equal to the related Servicing Fee (to the extent not retained pursuant to Section 3.03); (g) to the extent deposited in the Custodial Account, to pay to the Servicer as additional servicing compensation any (i) interest or investment income earned on funds deposited in the Custodial Account that it is entitled to withdraw pursuant to Section 3.03, and (ii) Foreclosure Profits (to the extent permitted by law); (h) to pay to the Seller, with respect to any Mortgage Loan or property acquired in respect thereof that has been purchased or otherwise transferred to the Seller, the Servicer or other entity, all amounts received thereon and not required to be distributed to Securityholders as of the date on which the related Purchase Price or Repurchase Price is determined; (i) to withdraw any other amount, determined without duplication with respect to an other amount provided for in this Section 3.04, deposited in the Custodial Account that was not required to be deposited therein pursuant to Section 3.03; (j) to pay to the Servicer, with respect to any Mortgage Loan for which the Servicer has made a P&I Advance that has not been previously reimbursed to the extent of receipts of late recoveries of such payments from the related Mortgagor, out of related Net Liquidation Proceeds or the proceeds of the purchase of such Mortgage Loan; and 11 (k) to reimburse the Servicer for any advances or expenses that have not been previously reimbursed pursuant to such clauses (e) or (j). Since, in connection with withdrawals pursuant to clauses (c), (e), (f), (h) and (j), the Servicer's entitlement thereto is limited to collections or other recoveries on the related Mortgage Loan, the Servicer shall keep and maintain separate accounting, on a Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any withdrawal from the Custodial Account pursuant to such clauses. Notwithstanding any other provision of this Agreement, the Servicer shall be entitled to be reimbursed itself for any previously unreimbursed expenses incurred pursuant to Section 3.08 or otherwise reimbursable pursuant to the terms of this Agreement that the Servicer determines to be otherwise nonrecoverable, by withdrawal from the Custodial Account of amounts on deposit therein attributable to the Mortgage Loans on any Business Day prior to the Payment Date succeeding the date of such determination. If any deposit required to be made by the Servicer pursuant to Section 3.04(b) is not made when due, the Servicer shall pay to the Paying Agent, out of the Servicer's own funds, one day of interest on such late payment, at a per annum rate equal to the effective Federal Funds Rate for such date. Such interest shall be remitted to the Paying Agent on the same day that the Servicer remits the late remittance to the Paying Agent. Section 3.05......Maintenance of Hazard Insurance; Property Protection Expenses. To the extent permitted under the related Loan Agreement and Mortgage, and to the extent the Servicer receives notice that a hazard insurance policy has been cancelled, the Servicer shall cause to be maintained for each Mortgage Loan hazard insurance naming the Servicer or related Subservicer as loss payee thereunder providing extended coverage in an amount which is at least equal to the lesser of (i) the maximum insurable value of the improvements securing such Mortgage Loan from time to time or (ii) the combined principal balance owing on such Mortgage Loan and any mortgage loan senior to such Mortgage Loan from time to time; provided, however, that such coverage may not be less than the minimum amount required to fully compensate for any loss or damage on a replacement cost basis. The Servicer shall use its best efforts to monitor that hazard insurance is maintained as described in the previous sentence in the same manner as it would for mortgage loans in its own portfolio. The Servicer shall cause to be maintained on property acquired upon foreclosure, or deed in lieu of foreclosure, of any Mortgage Loan, fire insurance with extended coverage in an amount which is at least equal to the amount necessary to avoid the application of any co-insurance clause contained in the related hazard insurance policy, the premium for which shall be a Servicing Advance within the meaning of Section 3.08. Amounts collected by the Servicer under any such policies (other than amounts to be applied to the restoration or repair of the related Mortgaged Property or property thus acquired or amounts released to the Mortgagor in accordance with the Servicer's normal servicing procedures) shall be deposited in the Custodial Account to the extent called for by Section 3.03. In cases in which any Mortgaged Property is located at any time during the life of a Mortgage Loan in a federally designated flood area, to the extent permitted under the related Loan Agreement and Mortgage, and to the extent the Servicer receives notice that the related flood insurance has been cancelled, the hazard insurance to be maintained for the related Mortgage Loan shall include flood insurance (to the extent available). All such flood insurance shall be in amounts equal to the lesser of (i) the amount required to compensate for any loss or damage to the related Mortgaged Property on a replacement cost basis and (ii) the maximum amount of such insurance available for such Mortgaged Property under the national flood insurance program (assuming that the area in which such Mortgaged Property is located is participating in such 12 program). The Servicer shall use its best efforts to monitor such flood insurance as described in the previous sentence in the same manner as it would for mortgage loans in its own portfolio. The Servicer shall be under no obligation to require that any Mortgagor maintain earthquake or other additional insurance and shall be under no obligation itself to maintain any such additional insurance on property acquired in respect of a Mortgage Loan, other than pursuant to such applicable laws and regulations as shall at any time be in force and as shall require such additional insurance. If the Servicer shall obtain and maintain a blanket policy consistent with its general mortgage servicing activities insuring against hazard losses on all of the Mortgage Loans, it shall conclusively be deemed to have satisfied its obligations as set forth in the first sentence of this Section 3.05, it being understood and agreed that such policy may contain a deductible clause, in which case the Servicer shall, in the event that there shall not have been maintained on the related Mortgaged Property a policy complying with the first sentence of this Section 3.05 and there shall have been a loss which would have been covered by such policy, deposit in the Custodial Account the amount of such loss that would have otherwise been covered. Any such deposit by the Servicer shall be made on the last Business Day of the Collection Period in the month in which payments under any such policy would have been deposited in the Custodial Account. In connection with its activities as servicer of the Mortgage Loans, the Servicer agrees to present, on behalf of itself, the Issuer and the Indenture Trustee, claims under any such blanket policy. Section 3.06. Modification Agreements. ----------------------- (a) The Servicer or the related Subservicer, as the case may be, shall be entitled to (a) execute assumption agreements, substitution agreements, and instruments of satisfaction or cancellation or of partial or full release or discharge, or any other document contemplated by this Agreement and other comparable instruments with respect to the Mortgage Loans and with respect to the related Mortgaged Properties (and the Issuer and the Indenture Trustee each shall promptly execute any such documents on request of the Servicer) and (b) approve the granting of an easement thereon in favor of another Person, any alteration or demolition of such Mortgaged Properties or other similar matters, if it has determined, exercising its good faith business judgment in the same manner as it would if it were the owner of the related Mortgage Loans, that the security for, and the timely and full collectability of, such Mortgage Loans would not be adversely affected thereby. A partial release pursuant to this Section 3.06 shall be permitted only if the CLTV for the related Mortgage Loan after such partial release does not exceed the CLTV for such Mortgage Loan as of the Cut-Off Date or related Subsequent Cut-Off Date, as applicable. Any fee collected by the Servicer or the related Subservicer for processing such request will be retained by the Servicer or such Subservicer as additional servicing compensation. (b) Notwithstanding any other provision of this Agreement to the contrary, the Servicer, at its option and in its sole discretion, may modify any Mortgage Loan to (i) change the Loan Rate payable on the related Mortgage Loan, (ii) increase the credit limit on the related Mortgage Loan above the limit stated in the related Loan Agreement, (iii) refinance the existing senior Lien or place a new senior Lien related to a Mortgage Loan resulting in a CLTV Ratio above the previous CLTV Ratio for such Mortgage Loan, or (iv) make any other material modification to the related Mortgage Loan; provided, however, that without the consent of the Enhancer, the aggregate Principal Balance of the Mortgage Loans modified by this Section 3.06(b) shall not exceed five percent (5%) of the Pool Balance as of the Cut-Off Date; provided, further, that any decision by the Servicer to modify a Mortgage Loan shall be normal and usual in accordance with its general mortgage servicing activities and consistent with the procedures the Servicer employs in servicing all other Mortgage Loans in the 13 servicing portfolio with characteristics similar to those of the Mortgage Loans (including, but not limited to, analysis of credit scores, overall customer relationships and comparable industry standards). Section 3.07. Trust Estate; Related Documents. ------------------------------- (a) When required by the provisions of this Agreement, the Issuer or the Indenture Trustee shall execute instruments furnished to them by the Servicer to release property from the terms of the Trust Agreement or Indenture, as applicable, or convey the Issuer's or the Indenture Trustee's interest in the same, in a manner and under circumstances that are not inconsistent with the provisions of this Agreement. No party relying upon an instrument executed by the Issuer or the Indenture Trustee as provided in this Section 3.07 shall be bound to ascertain the Issuer's or the Indenture Trustee's authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys. (b) Upon receipt of a Request for Release from the Servicer, substantially in the form of Exhibit D hereto, to the effect that a Mortgage Loan has been the subject of a final payment or a prepayment in full and such Mortgage Loan has been terminated or that substantially all Net Liquidation Proceeds that have been determined by the Servicer in its reasonable judgment to be finally recoverable have been recovered, and upon deposit to the Custodial Account of such final monthly payment, prepayment in full together with accrued and unpaid interest to the date of such payment with respect to such Mortgage Loan or, if applicable, Net Liquidation Proceeds, the Indenture Trustee shall execute such Related Documents furnished to it, along with such documents as the Servicer or the related Mortgagor may request to evidence satisfaction and discharge of such Mortgage Loan, upon request of the Servicer. Section 3.08. Realization upon Defaulted Mortgage Loans. ----------------------------------------- (a) The Servicer shall, consistent with the provisions of the Mortgage and the Collection Policy, foreclose upon or otherwise comparably convert (which may include acquisition of an REO Property) the ownership of any Mortgaged Property securing a Mortgage Loan (but shall not sell or convey such Mortgage Loan) in the event of a default under the Mortgage when no satisfactory arrangements can be made for collection of delinquent payments pursuant to Section 3.02, subject to the provisions contained in this Section 3.08(a) and only if the Servicer determines that there is sufficient equity in the related Mortgaged Property to justify such foreclosure. In connection with such foreclosure or other conversion, the Servicer shall use reasonable efforts to realize upon such defaulted Mortgage Loan in such manner as will maximize the receipt of principal and interest thereon, taking into account, among other things, the timing of foreclosure proceedings. The Servicer shall pay all costs and expenses incurred by it in any such proceedings; provided, however, that such costs and expenses shall be deemed to be a "Servicing Advance" and the Servicer shall be reimbursed therefor as provided in Section 3.04 hereof; provided, further, that, in any case in which the Mortgaged Property shall have suffered damage such that the complete restoration thereof is not fully reimbursable by insurance policies required to be maintained with respect thereto, the Servicer shall not be required to expend its own funds to restore such Mortgaged Property unless it shall determine, in good faith, that such restoration will increase the Liquidation Proceeds to the Trust after reimbursement to itself for such expenses. In addition to the reimbursement of its costs and expenses, the Servicer shall be entitled to a reasonable and customary fee as agreed to by the 14 Servicer and the Issuer for performing any foreclosure activities pursuant to this Section 3.08(a), which fee shall be payable pursuant to Section 3.04. (b) Any Liquidation Proceeds, Insurance Proceeds, REO Proceeds or Condemnation Proceeds received in respect of a Mortgaged Property shall be deposited in the Custodial Account pursuant to Section 3.03 and applied pursuant to Section 3.04. (c) In connection with such foreclosure or other conversion, the Servicer shall exercise collection and foreclosure procedures in accordance with the Collection Policy and with the same degree of care and skill in its exercise or use as it would exercise or use under the circumstances in the conduct of its own affairs. The Servicer shall take into account the existence of any hazardous substances, hazardous wastes or solid wastes, as such terms are defined in the Comprehensive Environmental Response Compensation and Liability Act, the Resource Conservation and Recovery Act of 1976, or other federal, state or local environmental legislation, on a Mortgaged Property in determining whether to foreclose upon or otherwise comparably convert the ownership of a Mortgaged Property. Any amounts advanced in connection with such foreclosure or other action shall constitute "Servicing Advances." Section 3.09. Management and Sale of REO Property. The Servicer shall ----------------------------------- manage, conserve, protect and operate each REO Property solely for the purpose of its prudent and prompt disposition and sale; provided, however, that the Servicer shall complete such sale and disposition no later than, and the Trust shall not retain ownership of any REO Property for longer than, 36 months after the date on which such REO Property is acquired by the Trust. The Servicer shall, either itself or through an agent selected by the Servicer, manage, conserve, protect and operate the REO Property in the same manner that it manages, conserves, protects and operates other foreclosed property for its own account, and in the same manner that similar property in the same locality as the REO Property is managed. The Servicer shall attempt to sell the same (and may temporarily rent the same) on such terms and conditions as the Servicer deems to be in the best interest of the Securityholders, the Enhancer and the Trust. The Servicer shall cause to be set aside pursuant to Section 3.03, no later than five Business Days after the receipt thereof, all revenues received with respect to the conservation and disposition of the related REO Property net of funds necessary for the proper operation, management and maintenance of the REO Property and the fees of any managing agent acting on behalf of the Servicer. The disposition of REO Property shall be carried out by the Servicer for cash at such price, and upon such terms and conditions, as the Servicer deems to be in the best interest of the Securityholders, the Enhancer and the Trust. The cash proceeds of sale of the REO Property shall be promptly set aside pursuant to Section 3.03 as received from time to time and, as soon as practicable thereafter, the expenses of such sale shall be paid. Any costs or advances of the Servicer pursuant to this Section 3.09 also shall constitute Servicing Advances. The Servicer shall reimburse itself for any related unreimbursed Servicing Advances and unpaid Servicing Fees pursuant to Section 3.04. Section 3.10. Issuer and Indenture Trustee to Cooperate. Upon receipt ------------------------------------------ of payment in full, the Servicer is authorized to execute, pursuant to the authorization contained in Section 3.01(c), an instrument of satisfaction regarding the related Mortgage, which instrument of satisfaction shall be 15 recorded by the Servicer if required by applicable law and be delivered to the Person entitled thereto. It is understood and agreed that any expenses incurred in connection with such instrument of satisfaction or transfer shall be reimbursed from amounts deposited in the Custodial Account as provided in Section 3.04. From time to time and as appropriate for the servicing or foreclosure of any Mortgage Loan and in accordance with the provisions hereof, upon request of the Servicer to the Issuer, of a Request for Release, in the form attached hereto as Exhibit D, Issuer or Indenture Trustee shall promptly execute such documents, in the forms provided by the Servicer, as shall be necessary for the prosecution of any such proceedings or the taking of other servicing actions. In order to facilitate the foreclosure of the Mortgage securing any Mortgage Loan that is in default following recordation of the related Assignment of Mortgage to the Indenture Trustee or the Issuer if required in accordance with the provisions of the Purchase Agreement or this Agreement, the Indenture Trustee or the Issuer shall, if so requested in writing by the Servicer, promptly execute an appropriate assignment in the form provided by the Servicer to assign such Mortgage Loan for the purpose of collection to the Servicer (any such assignment shall unambiguously indicate that the assignment is for the purpose of collection only), and, upon such assignment, the Servicer as assignee for collection will thereupon bring all required actions in its own name and otherwise enforce the terms of such Mortgage Loan and deposit or credit the Net Liquidation Proceeds, exclusive of Foreclosure Profits, received with respect thereto into the Custodial Account. In the event that all delinquent payments due under any such Mortgage Loan are paid by the Mortgagor and any other defaults are cured, then the Servicer as assignee for collection shall promptly reassign such Mortgage Loan to the Indenture Trustee and return all Related Documents to the place where the related Mortgage File was being maintained. In connection with the Issuer's obligation to cooperate as provided in this Section 3.10 and all other provisions of this Agreement requiring the Issuer to authorize or permit any actions to be taken with respect to the Mortgage Loans, the Indenture Trustee, as pledgee of the Mortgage Loans and as assignee of record of the Mortgage Loans on behalf of the Issuer pursuant to Section 3.13 of the Indenture, expressly agrees, on behalf of the Issuer, to take all such actions on behalf of the Issuer and promptly to execute and return all instruments reasonably required by the Servicer in connection therewith; provided, however, that if the Servicer requests a signature of the Indenture Trustee on behalf of the Issuer, then the Servicer shall deliver to the Indenture Trustee an Officer's Certificate stating that such signature is necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties under this Agreement. Section 3.11. Compensation; Payment of Certain Expenses. ----------------------------------------- (a) As compensation for its services hereunder, the Servicer shall be entitled to receive the Servicing Fee in accordance with Section 3.03(b) and Section 3.04 as compensation for its services hereunder. Moreover, late payment charges and the other amounts specified in Section 3.03(b) shall be retained by the Servicer as additional servicing compensation. (b) The Servicer shall be required to pay all expenses incurred by it in connection with its servicing or administrative activities hereunder, and all fees and expenses of the Owner Trustee, the Paying Agent, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar and the Indenture Trustee, and shall not be entitled to reimbursement therefor except as otherwise provided in this Agreement. 16 Section 3.12. Annual Statement as to Compliance. --------------------------------- (a) The Servicer shall deliver to the Issuer, the Indenture Trustee, the Paying Agent, the Depositor and the Underwriter, with a copy to the Enhancer, beginning March 31, 2004, and on or before March 31 of each year thereafter, an Officer's Certificate stating that (i) a review of the activities of the Servicer during the preceding calendar year and of its performance under any servicing agreements to which it is a party, including this Agreement, has been made under such officer's supervision and (ii) to the best of such officer's knowledge, based on such review, the Servicer has complied in all material respects with the minimum servicing standards set forth in the Uniform Single Attestation Program for Mortgage Bankers and has fulfilled all of its material obligations in all material respects throughout such year, or, if there has been material noncompliance with such servicing standards or a default in the fulfillment in all material respects of any such obligation relating to this Agreement, such statement shall include a description of such noncompliance or specify each such default, as the case may be, known to such officer and the nature and status thereof. (b) The Servicer shall deliver to the Issuer and the Indenture Trustee, with a copy to the Enhancer and the Paying Agent, promptly after having obtained knowledge thereof, but in no event later than five Business Days thereafter, written notice by means of an Officer's Certificate of any event which with the giving of notice or the lapse of time or both, would become a Servicing Default. Section 3.13. Annual Servicing Report. Beginning March 31, 2004 and on ----------------------- or before March 31 of each year thereafter, the Servicer at its expense shall cause a firm of nationally recognized independent public accountants (which firm may also render other services to the Servicer) to furnish a report to the Issuer, each Rating Agency, the Paying Agent and the Indenture Trustee, with a copy to the Enhancer, stating its opinion that, on the basis of an examination conducted by such firm substantially in accordance with standards established by the American Institute of Certified Public Accountants, the assertions made pursuant to Section 3.12 regarding compliance with the minimum servicing standards set forth in the Uniform Single Attestation Program for Mortgage Bankers during the preceding calendar year are fairly stated in all material respects, subject to such exceptions and other qualifications that, in the opinion of such firm, such accounting standards require it to report. Section 3.14. Access to Certain Documentation and Information Regarding --------------------------------------------------------- the Mortgage Loans. Whenever required by statute or regulation, the Servicer ------------------- shall provide to the Enhancer, any Securityholder upon reasonable request (or a regulator for a Securityholder) or the Indenture Trustee, reasonable access to the documentation regarding the Mortgage Loans. Such access shall be afforded without charge, but only upon reasonable request and during normal business hours at the offices of the Servicer. Nothing in this Section 3.14 shall derogate from the obligation of the Servicer to observe any applicable law prohibiting disclosure of information regarding Mortgagors, and the failure of the Servicer to provide access as provided in this Section 3.14 as a result of such obligation shall not constitute a breach of this Section 3.14. Section 3.15. Maintenance of Certain Servicing Insurance Policies. The --------------------------------------------------- Servicer shall, during the term of its service as Servicer, maintain in force and effect (i) a policy or policies of insurance covering errors and omissions in the performance of its obligations as Servicer hereunder and (ii) a fidelity bond in respect of its officers, employees or agents. Each such policy or policies 17 and fidelity bond shall be at least equal to the coverage that would be required by Fannie Mae or Freddie Mac, whichever is greater, for Persons performing servicing for mortgage loans purchased by such entity. The Servicer shall furnish a copy of such policy or policies and/or fidelity bond to the Enhancer upon the Enhancer's reasonable request therefor. Section 3.16. Information Required by the Internal Revenue Service and -------------------------------------------------------- Reports of Foreclosures and Abandonments of Mortgaged Property. The Servicer ----------------------------------------------------------------- shall prepare and deliver all federal and state information reports with respect to the Mortgage Loans when and as required by all applicable state and federal income tax laws. In particular, with respect to the requirement under Section 6050J of the Code to the effect that the Servicer or Subservicer shall make reports of foreclosures and abandonments of any mortgaged property for each year beginning in 2003, the Servicer or Subservicer shall file reports relating to each instance occurring during the previous calendar year in which the Issuer (a) acquired an interest in any Mortgaged Property through foreclosure or other comparable conversion in full or partial satisfaction of a Mortgage Loan, or (b) knew or had reason to know that any Mortgaged Property had been abandoned. The reports from the Servicer or Subservicer shall be in form and substance sufficient to meet the reporting requirements imposed by Section 6050J and Section 6050H (reports relating to mortgage interest received) of the Code. Section 3.17. Assignments; Recordings of Assignments. -------------------------------------- (a) Concurrently herewith, the Depositor has contracted to acquire the Mortgage Loans from the Seller and the Issuer has Granted its right, title and interest in the Mortgage Loans and other Transferred Property constituting the Trust Estate to the Indenture Trustee to secure payments on the Notes. The Seller will deliver the original Loan Agreements to the Servicer on behalf of the Depositor, endorsed or assigned in blank, to effect the transfer to the Issuer of the Loan Agreements and all related Mortgages and other loan documents. The parties hereto acknowledge and agree that the Mortgage Loans shall for all purposes be deemed to have been transferred from the Seller to the Depositor, from the Depositor to the Issuer and from the Issuer to the Indenture Trustee. (b) If the credit rating of Wachovia is withdrawn or reduced to "BBB+" by Standard & Poor's or "Baa1" by Moody's, the Servicer shall, within 30 days of any such withdrawal or reduction, at its own expense, prepare Assignments of Mortgage (which may be included in one or more blanket assignments if permitted by applicable law) in recordable form from the Seller to "U.S. Bank National Association, as Indenture Trustee under that certain Indenture dated as of November 19, 2003, for Wachovia Asset Securitization, Inc. 2003-HE3 Trust". In addition, if the credit rating of Wachovia is withdrawn or reduced to below "BBB-" by Standard & Poor's or below "Baa3" by Moody's, the Servicer shall, within 60 days of any such withdrawal or reduction, at its own expense, complete and submit for recording in the appropriate public office for real property records the Assignments of Mortgage for each Mortgage Loan, provided that no such recordation will be required in any state where, in the opinion of counsel acceptable to the Enhancer, such recording is not required to protect the Indenture Trustee's interests in the Mortgage Loan against the claim of any subsequent transferee or any creditor of the Seller. While such assignment to be recorded is being recorded, the Servicer shall retain a photocopy of such assignment. If any assignment is lost or returned unrecorded to the Servicer because of any defect therein, the Servicer shall prepare a substitute assignment or cure such defect, as the case may be, and the Servicer shall cause such 18 assignment to be recorded in accordance with this paragraph. Any Assignment of Mortgage required to be recorded hereunder shall be retained in the Mortgage File. Section 3.18. [Reserved]. -------- Section 3.19. Funding Account and Distribution Account. ---------------------------------------- (a) No later than the Closing Date, the Indenture Trustee shall establish and maintain on behalf of the Enhancer and the Noteholders one or more segregated trust accounts, which shall be Eligible Accounts, titled "Funding Account, U.S. Bank National Association, as Indenture Trustee for Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust" (the "Funding Account"). On the Business Day prior to each Payment Date during the Revolving Period, the Servicer shall withdraw from the Custodial Account and deposit (x) into the Funding Account (i) the aggregate amount of Principal Collections remaining after the purchase of all Additional Balances and Subsequent Mortgage Loans, and (ii) on and after the Payment Date occurring in March 2004, from Excess Spread the amount necessary to be applied so that the Overcollateralization Amount is not less than the Overcollateralization Target Amount, and (y) into the Distribution Account established by the Certificate Paying Agent, the Additional Balance Increase Amount, in each case to the extent available and subject to the provisions of Section 3.05(a) of the Indenture. (b) On each Subsequent Transfer Date, the Servicer shall instruct the Indenture Trustee in writing to withdraw from the Funding Account an amount equal to the aggregate Principal Balance as of the related Subsequent Cut-Off Date of the Subsequent Mortgage Loans to be sold to the Trust on such Subsequent Transfer Date and allocate such withdrawal to amounts on deposit in the Funding Account, and to pay such amount to or upon the order of the Seller upon satisfaction of the conditions set forth in this Agreement, in the Purchase Agreement and in the related Subsequent Transfer Agreement with respect thereto. (c) The Servicer may cause the institution maintaining the Funding Account to invest any funds therein in Permitted Investments having a maturity of up to 90 days or maturing or otherwise available not later than the Business Day preceding the related Payment Date on which funds are scheduled to be withdrawn to purchase Subsequent Mortgage Loans or Additional Balances, provided that no such investment may be sold or disposed of prior to maturity. If no instructions are received as to which Permitted Investments the funds are to be invested in, the funds shall be invested in Permitted Investments described in clause (v) of such definition. In addition, no such Permitted Investment shall be purchased at a price in excess of par. At any time when the Indenture Trustee is maintaining the Funding Account, any request by the Servicer to invest funds on deposit therein shall be in writing, delivered to the Indenture Trustee at or before 10:30 a.m., New York time, if such investment is to be made on such day. The Servicer shall certify that the requested investment is a Permitted Investment maturing at or prior to the time required hereby. Any such investment shall be registered in the name of the Indenture Trustee or its nominee, and to the extent that any such investment is certificated, such investment shall be maintained with the Indenture Trustee at its Corporate Trust Office. All net income or other gain received from any such investment shall be deposited into or credited to the Custodial Account as Interest Collections, and may be withdrawn therefrom in accordance with Section 3.05 of the Indenture. 19 (d) From time to time the Indenture Trustee shall make withdrawals from the Funding Account in accordance with written instructions from the Servicer as follows: (i) on each Payment Date during the Revolving Period, any amounts on deposit in the Funding Account, including Excess Spread, shall be withdrawn and applied, to the extent available to the Seller, as designee of the Depositor, as payment for Additional Balances, if any, in an amount equal to (A) the aggregate of all Draws during the related Collection Period or (B) if the Servicer has applied amounts on deposit in the Custodial Account representing Principal Collections received during such Collection Period to the purchase of Additional Balances, the excess, if any, of the aggregate of all Draws during the related Collection Period over the amount on deposit in the Funding Account; (ii) on each Subsequent Transfer Date, any amounts on deposit in the Funding Account, to the extent not used to purchase Additional Balances, shall be withdrawn and applied as payment for Subsequent Mortgage Loans, if any, in an amount equal to the aggregate Principal Balance as of the related Subsequent Cut-Off Date of the Subsequent Mortgage Loans; (iii) prior to 3:00 p.m. (EST) on the Business Day prior to the Payment Date immediately following the last day of the Revolving Period, any amounts remaining on deposit in the Funding Account, if any, after giving effect to clauses (i) and (ii) above, shall be first deposited into the Distribution Account in an amount equal to the lesser of (A) the Additional Balance Increase Amount and (B) the amount on deposit in the Funding Account, and then shall be deposited to the Note Payment Account for payment to the Noteholders pursuant to Section 3.05 of the Indenture. Section 3.20. [Reserved]. -------- Section 3.21. P&I Advances. ------------ (a) The Servicer, in its sole discretion, may deposit into the Custodial Account (from its own funds) an amount equal to the aggregate amount of principal of or interest on Mortgage Loans that were delinquent as of the end of any Collection Period ("P&I Advances"). The Servicer shall notify the Indenture Trustee and the Paying Agent by a certificate of the Servicing Officer of (i) the aggregate amount of P&I Advances for a Payment Date and (ii) the amount of any Nonrecoverable P&I Advances for such Payment Date. (b) Notwithstanding anything herein to the contrary, no P&I Advance shall be required to be made hereunder or shall be made hereunder if such P&I Advance would, if made, constitute a Nonrecoverable P&I Advance. On the fourth Business Day before each Payment Date, the Servicer shall determine whether each P&I Advance made with respect to any previous Payment Date is a Nonrecoverable P&I Advance. Section 3.22. Transfer of Mortgage Loans. -------------------------- (a) Subject to the conditions set forth below, the Servicer, upon receipt of written notice and direction from the Issuer, shall cause the retransfer of Mortgage Loans from the Trust Estate to the Issuer as of the close of business on a Payment Date (the "Transfer Date"). On the fifth Business Day (the "Transfer Notice Date") prior to the Transfer Date designated in such notice, the Servicer shall give the Indenture Trustee, the Rating Agencies, the Paying Agent and the Enhancer a 20 notice of the proposed retransfer that contains a list of the Mortgage Loans to be retransferred. Such retransfers of Mortgage Loans shall be permitted upon satisfaction of the following conditions: (i) No Rapid Amortization Event has occurred; (ii) On the Transfer Date, the Overcollateralization Amount (after giving effect to the removal from the Trust Estate of the Mortgage Loans proposed to be retransferred) will equal or exceed the Overcollateralization Target Amount; (iii) The retransfer of any Mortgage Loans on any Transfer Date during the Managed Amortization Period shall not, in the reasonable belief of the Servicer, cause a Rapid Amortization Event to occur or an event which with notice or lapse of time or both would constitute a Rapid Amortization Event; (iv) On or before the Transfer Date, the Servicer shall have delivered to the Indenture Trustee and the Paying Agent a revised Mortgage Loan Schedule showing that the Mortgages Loans transferred to the Certificateholders are no longer owned by the Trust Estate; (v) The Servicer shall represent and warrant that the Mortgage Loans to be removed from the Trust Estate were selected at random and the Servicer shall have received the consent of the Enhancer as to the selection of the particular Mortgage Loans to be removed; and (vi) The Enhancer shall have consented to the Transfer; (vii) Notice of such removal has been given to the Rating Agencies; (viii) Such transfer may only occur once per month; (ix) The Outstanding Principal Balance of the Transferred Mortgage Loans shall not be greater than the Outstanding Additional Balance Increase Amount immediately prior to such transfer; and (x) The Servicer shall have delivered to the Indenture Trustee, the Paying Agent and the Enhancer an Officer's Certificate certifying that the items set forth in subparagraphs (i) through (ix), inclusive, have been performed or are true and correct, as the case may be. The Indenture Trustee and the Paying Agent may conclusively rely on such Officer's Certificate, shall have no duty to make inquiries with regard to the matters set forth therein and shall incur no liability in so relying. The Servicer shall not be permitted to effect the retransfer of any Mortgage Loan except under the conditions specified above. Upon receiving the requisite notice and direction from the Issuer, the Servicer shall perform in a timely manner those acts required of it, as specified above. Upon satisfaction of the above conditions, on the Transfer Date the Servicer shall deliver, or cause to be delivered, to the Issuer a written itemization of each Mortgage Loan being transferred, together with the Mortgage File for each such Mortgage Loan, and the Indenture Trustee shall execute and deliver to the Issuer or its designee such other documents prepared by the Servicer as shall be reasonably necessary to transfer such Mortgage Loans to the Certificateholders. Any such transfer of the Trust Estate's right, title and interest in and to Mortgage Loans shall be without 21 recourse, representation or warranty by or of the Indenture Trustee or the Trust Estate to the Issuer or its designee. ARTICLE IV Servicing Certificate Section 4.01. Statements to Securityholders. ----------------------------- (a) With respect to each Payment Date, on the Business Day following the related Determination Date, the Servicer shall forward the Servicing Certificate to the Indenture Trustee and the Paying Agent, and the Paying Agent, pursuant to Section 3.26 of the Indenture, shall on such Payment Date make such Servicing Certificate available to each Certificateholder, each Noteholder, the Depositor, the Owner Trustee, the Certificate Paying Agent, the Paying Agent and each Rating Agency, with a copy to the Enhancer. The Servicing Certificate shall set forth the following information as to the Notes and Certificates, to the extent applicable: (i) the aggregate amount of (a) Interest Collections, (b) Principal Collections (and, with respect to any Payment Date relating to the Managed Amortization Period, Net Principal Collections) and (c) Substitution Adjustment Amounts for such Collection Period; (ii) the amount of such distribution as principal to the Noteholders; (iii) the amount of such distribution as interest to the Noteholders, the amount thereof, if any, payable in respect of unpaid Interest Shortfalls, and the amount of any Interest Shortfalls for the related Payment Date; (iv) each Deficiency Amount, if any, for such Payment Date and the aggregate amount of prior draws on the Policy thereunder not yet reimbursed; (v) the amount, if any, received under the Yield Maintenance Agreement; (vi) the amount of such distribution to the Certificateholders; (vii) the amount of any Additional Balance Increase Amount payable to the Certificateholders and the amount of Principal Collections paid in respect of such Additional Balance Increase Amount; (viii) the aggregate Principal Balance of the Mortgage Loans as of the end of the preceding Collection Period; (ix) the number and aggregate Principal Balances of Mortgage Loans (a) as to which the Minimum Monthly Payment is delinquent for 30-59 days, 60-89 days, 90-119 days, 120-149 days, 150-179 days and 180 or more days, respectively, (b) the related Mortgaged Property of which has been foreclosed upon and (c) as to which the related Mortgaged Property has become REO Property, in each case as of the end of the preceding Collection Period; provided, however, that such information shall not be provided on the statements relating to the first Payment Date; (x) LIBOR for the related Interest Period; 22 (xi) the Note Rate for the Notes for such Payment Date; (xii) the Net WAC Rate for the related Collection Period; (xiii) prior to the second Determination Date following the commencement of the Rapid Amortization Period, the aggregate amount of Additional Balances created during the previous Collection Period and conveyed to the Issuer prior to the commencement of the Rapid Amortization Period; (xiv) the aggregate Liquidation Loss Amounts (other than amounts allocated in respect of the Excluded Amount) with respect to the related Collection Period, the amount distributed as principal to Noteholders in respect of Liquidation Loss Amounts and the aggregate of the Liquidation Loss Amounts (minus any Subsequent Net Recovery Amounts and other than amounts allocated in respect of the Excluded Amount) from all Collection Periods to date expressed as dollar amount and as a percentage of the aggregate Cut-Off Date Principal Balances of the Mortgage Loans; (xv) the Note Balance of the Notes and the Certificate Balance of the Certificates after giving effect to the distribution of principal on such Payment Date; (xvi) the balance of the Funding Account as of the end of the preceding Collection Period; (xvii) the Percentage Interest applicable to each of the Securities, after application of payments made on such Payment Date; (xviii) the Overcollateralization Amount as of the end of the preceding Collection Period; (xvii) the aggregate Principal Balance of Subsequent Mortgage Loans transferred to the Trust Estate since the Closing Date; (xix) the arithmetic average of the Net Excess Spread Percentage for the two most recently concluded Collection Periods; (xx) the arithmetic average of the Net Excess Spread Percentage for the three most recently concluded Collection Periods; (xxi) on or after the Stepdown Date, a statement (yes or no) as to whether each of the Stepdown Delinquency Test and the Stepdown Cumulative Loss Test have been met as of the related Payment Date; (xxii) the aggregate outstanding Principal Balance of the three largest Mortgage Loans as of the close of business on the last day of the related Collection Period; and (xxiii) the Overcollateralization Target Amount. 23 In the case of information furnished pursuant to clauses (ii) and (iii) above, the amounts shall be expressed as an aggregate dollar amount per Note or Certificate, as applicable, with a $25,000 denomination and per Certificate with a denomination equal to a 100% Percentage Interest. If a Managed Amortization Event, a Rapid Amortization Event or a Servicing Default shall occur, on the Business Day following the related Determination Date, the Servicer shall forward to the Indenture Trustee and the Paying Agent, a statement to such effect, including the nature of such Rapid Amortization Event or Servicing Default. The Paying Agent shall deliver or cause to be delivered by mail to each Certificateholder, each Noteholder, the Enhancer, the Depositor, the Owner Trustee, the Certificate Paying Agent and each Rating Agency, notice of such Managed Amortization Event, Rapid Amortization Event or Servicing Default, including, in the case of a Rapid Amortization Event or a Servicing Default, the nature thereof. Such statement may be included in, or separate from, the regular statement sent to Securityholders. The Paying Agent shall make the Servicing Certificate (and, at its option, any additional files containing the same information in an alternative format) available each month to Securityholders and the Enhancer, and other parties to this Agreement via the Paying Agent's internet website. The Paying Agent's internet website shall initially be located at "www.firstlinkabs.com". Assistance in using the website can be obtained by calling the Paying Agent's customer service desk at (800) 665-9359. Parties that are unable to use the above distribution option are entitled to have a paper copy mailed to them via first class mail by calling the customer service desk and indicating such. The Paying Agent shall have the right to change the way the statements to Securityholders are distributed in order to make such distribution more convenient and/or more accessible to the above parties and the Paying Agent shall provide timely and adequate notification to all above parties regarding any such changes. The Paying Agent may require registration and the acceptance of a disclaimer in connection with access to its website (b) The Servicer shall forward to the Paying Agent any other information reasonably requested by the Paying Agent necessary to make distributions pursuant to Section 3.05 of the Indenture. Prior to the close of business on the Business Day next succeeding each Determination Date, the Servicer shall furnish a written statement to the Certificate Paying Agent, the Paying Agent and the Indenture Trustee setting forth the aggregate amounts required to be withdrawn from the Custodial Account and deposited into the Note Payment Account, Funding Account and/or Distribution Account on the Business Day preceding the related Payment Date pursuant to Section 3.04. The determination by the Servicer of such amounts shall, in the absence of obvious error, be deemed to be presumptively correct for all purposes hereunder, and the Owner Trustee, the Paying Agent and the Indenture Trustee shall be protected in relying upon the same without any independent check or verification. In addition, upon the Issuer's written request, the Servicer shall promptly furnish such information reasonably requested by the Issuer that is reasonably available to the Servicer to enable the Issuer to perform its federal and state income tax reporting obligations. Section 4.02. Tax Returns and 1934 Act Reports -------------------------------- (a) The Servicer agrees to perform the obligations of the Servicer set forth in Section 5.03 of the Trust Agreement. The Servicer will prepare and file or cause to be prepared and filed all tax and information returns of the Trust Estate. 24 (b) The Servicer shall prepare all reports on behalf of the Trust Estate, including, but not limited to, all Forms 8-K and Forms 10-K, and, when applicable, any Form 15, that are required under the Securities Exchange Act of 1934, as amended, and any certifications required by the Sarbanes-Oxley Act of 2002 to be filed with such Forms 10-K. The Servicer shall continue to file all Forms 8-K and Forms 10-K with respect to the Trust Estate until directed by the Depositor in writing to discontinue such filings. ARTICLE V Note Payment Account Section 5.01. Note Payment Account. The Paying Agent shall establish --------------------- and maintain an Eligible Account entitled "Wachovia Bank, National Association, as Paying Agent, for the benefit of the Securityholders, the Indenture Trustee, the Certificate Paying Agent and the Enhancer, pursuant to the Indenture, dated as of November 19, 2003, among Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, Wachovia Bank, National Association and U.S. Bank National Association" (the "Note Payment Account"). On each Payment Date, amounts on deposit in the Note Payment Account shall be distributed by the Paying Agent in accordance with Section 3.05 of the Indenture. The Paying Agent shall invest or cause the institution maintaining the Note Payment Account to invest the funds therein in Permitted Investments designated in the name of the Paying Agent, which investments shall mature not later than the Business Day next preceding the Payment Date next following the date of such investment (except that any investment in the institution with which the Note Payment Account is maintained may mature or be payable on demand on such Payment Date). In addition, no such Permitted Investment shall be purchased at a price in excess of par. All income and gain realized from any such investment shall be for the benefit of the Servicer and shall be subject to its withdrawal or order from time to time, except that an amount equal to one day's interest on any such investment shall be for the benefit of the Paying Agent. The amount of any losses incurred in respect of any such investments shall be deposited in the Note Payment Account by the Servicer and the Paying Agent out of their own funds immediately as realized and shall be allocated between the Servicer and the Paying Agent on a pro rata basis, such that the percentage of any such loss allocated to the Paying Agent shall equal a fraction, the numerator of which equals one (1) and the denominator of which equals the number of days the funds in the Note Payment Account were invested in such investment. Subject to Section 8.02(b) of the Indenture, and except as provided in this Section 5.01, the Paying Agent shall not be liable for investment losses on funds on deposit in the Note Payment Account. ARTICLE VI The Servicer Section 6.01. Liability of the Servicer. The Servicer shall be liable ------------------------- in accordance herewith only to the extent of the obligations specifically imposed upon and undertaken by the Servicer herein. Section 6.02. Merger or Consolidation of, or Assumption of the ------------------------------------------------------- Obligations of, the Servicer. Any corporation into which the Servicer may be ----------------------------- merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Servicer shall be a party, or any corporation succeeding to the business of the Servicer, 25 shall be the successor of the Servicer hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. The Servicer may assign its rights and delegate its duties and obligations under this Agreement, provided that the Person accepting such assignment or delegation shall be a Person qualified to service mortgage loans, is reasonably satisfactory to the Enhancer (provided, however, that such consent to assignment may not be unreasonably withheld), is willing to service the Mortgage Loans and executes and delivers to the Issuer (with a copy to the Enhancer) an agreement, in form and substance reasonably satisfactory to the Enhancer, that contains an assumption by such Person of the due and punctual performance and observance of each covenant and condition to be performed or observed by the Servicer under this Agreement; provided, further, that no Rating Event will occur as a result of such assignment and delegation (as evidenced by a letter to such effect from each Rating Agency) if determined without regard to the Policy; provided, further, that the Owner Trustee, the Paying Agent, the Enhancer and the Indenture Trustee shall receive an Opinion of Counsel to the effect that such assignment or delegation will not cause the Issuer to be treated as an association (or a publicly-traded partnership) taxable as a corporation for federal income tax purposes. Section 6.03. Limitation on Liability of the Servicer and Others. ------------------------------------------------------ Neither the Servicer nor any of the directors or officers or employees or agents of the Servicer shall be under any liability to the Issuer, the Owner Trustee, the Paying Agent, the Indenture Trustee or the Securityholders for any action taken or for refraining from the taking of any action in good faith pursuant to this Agreement; provided, however, that this provision shall not protect the Servicer or any such Person against any liability that would otherwise be imposed by reason of its willful misfeasance, bad faith or gross negligence in the performance of its duties hereunder or by reason of its reckless disregard of its obligations and duties hereunder. The Servicer and any director or officer or employee or agent of the Servicer may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Servicer and any director, officer, employee or agent of the Servicer shall be indemnified by the Issuer and held harmless against any loss, liability or expense incurred in connection with any legal action relating to this Agreement or the Securities, including any amount paid to the Owner Trustee, the Paying Agent or the Indenture Trustee pursuant to Section 6.06(b), other than any loss, liability or expense related to any specific Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense shall be otherwise reimbursable pursuant to this Agreement) and any loss, liability or expense incurred by reason of the Servicer's willful misfeasance, bad faith or gross negligence in the performance of its duties hereunder or by reason of its reckless disregard of its obligations and duties hereunder. The Servicer shall not be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its duties to service the Mortgage Loans in accordance with this Agreement, and that in its opinion may involve it in any expense or liability; provided, however, that the Servicer may in its sole discretion undertake any such action that it may deem necessary or desirable in respect of this Agreement, the rights and duties of the parties hereto and the interests of the Securityholders and the Enhancer. In such event, the reasonable legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Issuer, and the Servicer shall be entitled to be reimbursed therefor. The Servicer's right to indemnity or reimbursement pursuant to this Section 6.03 shall survive any resignation or termination of the Servicer pursuant to Section 6.04 or 7.01 with respect to any losses, expenses, costs or liabilities arising prior to such resignation or termination (or arising from events that occurred prior to such resignation or termination). 26 Section 6.04. Servicer Not to Resign. Subject to the provisions of ---------------------- Section 6.02, the Servicer shall not resign from the obligations and duties hereby imposed on it except (a) upon determination that the performance of its obligations or duties hereunder are no longer permissible under applicable law or are in material conflict by reason of applicable law with any other activities carried on by it or its subsidiaries or Affiliates, the other activities of the Servicer so causing such a conflict being of a type and nature carried on by the Servicer or its subsidiaries or Affiliates at the date of this Agreement or (b) upon satisfaction of the following conditions: (i) the Servicer shall have proposed a successor servicer to the Issuer and the Indenture Trustee in writing and such proposed successor servicer is reasonably acceptable to the Issuer, the Indenture Trustee and the Enhancer; (ii) each Rating Agency shall have delivered a letter to the Issuer, the Enhancer and the Indenture Trustee prior to the appointment of the successor servicer stating that the proposed appointment of such successor servicer as Servicer hereunder will not cause a Rating Event, if determined without regard to the Policy; and (iii) such proposed successor servicer is reasonably acceptable to the Enhancer, as evidenced by a letter to the Issuer and the Indenture Trustee; provided, however, that no such resignation by the Servicer shall become effective until such successor servicer or, in the case of (a) above, the Indenture Trustee, as pledgee of the Mortgage Loans, shall have assumed the Servicer's responsibilities and obligations hereunder or the Indenture Trustee, as pledgee of the Mortgage Loans, shall have designated a successor servicer in accordance with Section 7.02. Any such resignation shall not relieve the Servicer of responsibility for any of the obligations specified in Sections 7.01 and 7.02 as obligations that survive the resignation or termination of the Servicer. Any such determination permitting the resignation of the Servicer shall be evidenced by an Opinion of Counsel to such effect delivered to the Indenture Trustee and the Enhancer. Section 6.05. Delegation of Duties. In the ordinary course of business, -------------------- the Servicer at any time may delegate any of its duties hereunder to any Person, including any of its Affiliates, that agrees to conduct such duties in accordance with standards comparable to those with which the Servicer complies pursuant to Section 3.01. Such delegation shall not relieve the Servicer of its liabilities and responsibilities with respect to such duties and shall not constitute a resignation within the meaning of Section 6.04. Section 6.06. Payment of Indenture Trustee's, the Paying Agent's and -------------------------------------------------------- Owner Trustee's Fees and Expenses; Indemnification. -------------------------------------------------- (a) After the Closing Date, the Servicer covenants and agrees to pay to the Owner Trustee, the Paying Agent, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar, the Indenture Trustee and any co-trustee of the Indenture Trustee or the Owner Trustee from time to time, and the Owner Trustee, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar, the Paying Agent, the Indenture Trustee and any such co-trustee shall be entitled to, reasonable compensation for all services rendered by each of them in the execution of the trusts created under the Trust Agreement and the Indenture and in the exercise and performance of any of the powers and duties under the Trust Agreement or the Indenture, as the case may be, of the Owner Trustee, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar, the Paying Agent, the Indenture Trustee and any co-trustee, and the Servicer will pay or reimburse the Note Registrar, the Certificate Paying Agent, the Certificate Registrar, the Paying Agent, the Indenture Trustee and any co-trustee upon request for all reasonable expenses, disbursements and advances incurred or made by the Note Registrar, the Certificate Paying Agent, the Certificate Registrar, the Paying Agent, the Indenture Trustee or any co-trustee in accordance with any of the provisions of 27 this Agreement, the Indenture, the Trust Agreement, or any other Basic Document (which payment shall not be limited by any law in regards to the compensation of a trustee of an express trust) except any such expense, disbursement or advance as may arise from its negligence, willful misfeasance or bad faith. In addition, the Indenture Trustee shall be entitled to be reimbursed from the Servicer for all reasonable costs associated with the transfer of servicing from the predecessor servicer pursuant to Section 7.02 hereunder, including, without limitation, any reasonable costs or expenses associated with the complete transfer of all servicing data and the completion, correction or manipulation of such servicing data as may be required by the Indenture Trustee to correct any errors or insufficiencies in the servicing data or otherwise to enable the Indenture Trustee or successor Servicer to service the Mortgage Loans properly and effectively. (b) The Servicer agrees to indemnify the Indenture Trustee, the Paying Agent, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar and the Owner Trustee for, and to hold the Indenture Trustee (and any Responsible Officer thereof), the Paying Agent, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar and the Owner Trustee, as the case may be, harmless against, any loss, liability or expense incurred without negligence, bad faith or willful misconduct on the part of the Indenture Trustee, the Paying Agent, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar or the Owner Trustee, as the case may be, arising out of, or in connection with, the acceptance and administration of the Issuer and the assets thereof, including the costs and expenses (including reasonable legal fees and expenses) of defending the Indenture Trustee, the Paying Agent, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar or the Owner Trustee, as the case may be, against any claim in connection with the exercise or performance of any of its powers or duties under any Basic Document; provided, however, that: (i) with respect to any such claim, the Indenture Trustee, the Paying Agent, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar or Owner Trustee, as the case may be, shall have given the Servicer written notice thereof promptly after the Indenture Trustee, the Paying Agent, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar or Owner Trustee, as the case may be, shall have actual knowledge thereof; (ii) while maintaining control over its own defense, the Issuer, the Indenture Trustee, the Paying Agent, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar or Owner Trustee, as the case may be, shall cooperate and consult fully with the Servicer in preparing such defense; and (iii) notwithstanding anything in this Agreement to the contrary, the Servicer shall not be liable for settlement of any claim by the Indenture Trustee, the Paying Agent, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar or the Owner Trustee, as the case may be, entered into without the prior consent of the Servicer. No termination of this Agreement or resignation or removal of the Paying Agent, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar or the Indenture Trustee shall affect the obligations created by this Section 6.06 of the Servicer to indemnify the Indenture Trustee, the Paying Agent, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar and the Owner Trustee under the conditions and to the extent set forth herein. 28 Notwithstanding the foregoing, the indemnification provided by the Servicer in this Section 6.06(b) shall not pertain to any loss, liability or expense of the Indenture Trustee, the Paying Agent, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar or the Owner Trustee, including the costs and expenses of defending itself against any claim, incurred in connection with any actions taken by the Indenture Trustee, the Paying Agent, the Note Registrar, the Certificate Paying Agent, the Certificate Registrar or the Owner Trustee at the written direction of the Noteholders or Certificateholders, as the case may be, pursuant to the terms of this Agreement. ARTICLE VII Default Section 7.01. Servicing Default. ----------------- (a) If any one of the following events (each, a "Servicing Default") shall occur and be continuing: (i) any failure by the Servicer to deposit in any of the Custodial Account, the Note Payment Account, the Funding Account or the Distribution Account any deposit required to be made under the terms of this Agreement that continues unremedied for a period of three (3) Business Days after the earlier of (A) the date upon which written notice of such failure shall have been given to the Servicer by the Issuer or the Indenture Trustee or to the Servicer, the Issuer and the Indenture Trustee by the Enhancer and (B) the first date on which the Servicer has actual knowledge of such failure; (ii) any failure on the part of the Servicer duly to observe or perform any other covenants or agreements of the Servicer set forth in this Agreement, which failure, in each case, materially and adversely affects the interests of the Securityholders, and which failure continues unremedied for a period of 45 days after the earlier of (A) the date on which written notice of such failure, requiring the same to be remedied, and stating that such notice is a "Notice of Default" hereunder, shall have been given to the Servicer by the Issuer or the Indenture Trustee or to the Servicer, the Issuer and the Indenture Trustee by the Enhancer and (B) the first date on which the Servicer has actual knowledge of such failure; (iii) the entry against the Servicer of a decree or order by a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a trustee, conservator, receiver or liquidator in any conservatorship, receivership, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding up or liquidation of its affairs; or (iv) the consent by the Servicer to the appointment of a trustee, conservator, receiver or liquidator in any insolvency, conservatorship, receivership, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Servicer or of or relating to all or substantially all of its property; or the commencement of an involuntary case relating to the Servicer under any applicable federal or state bankruptcy, insolvency or other similar law and such case shall either be consented to by the Servicer or shall not have been dismissed or stayed within sixty (60) day of its commencement; or the Servicer shall admit in writing its inability 29 to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations; then, and in every such case, so long as a Servicing Default shall not have been remedied by the Servicer, either the Depositor, the Enhancer (so long as no Enhancer Default exists), or the Indenture Trustee, at the written direction of the holders of at least 51% of the Outstanding Note Balance (if an Enhancer Default exists) by notice then given in writing to the Servicer, the Issuer and the Indenture Trustee, may terminate all of the rights and obligations of the Servicer as servicer under this Agreement other than its right to receive servicing compensation and reimbursement for servicing the Mortgage Loans hereunder during any period prior to the date of such termination, and the Issuer, the Enhancer or the Indenture Trustee (with the written consent of the Enhancer), may exercise any and all other remedies available at law or equity. The Servicer shall immediately notify the Indenture Trustee, the Issuer and each Rating Agency, the Enhancer and the Issuer in writing of any Servicing Default as to which it has actual knowledge. On or after the receipt by the Servicer of such written notice, all authority and power of the Servicer under this Agreement, whether with respect to the Securities or the Mortgage Loans or otherwise, shall pass to and be vested, subject to Section 7.02 hereof, as pledgee of the Mortgage Loans, in the Indenture Trustee, pursuant to and under this Section 7.01; and, without limitation, the Indenture Trustee is hereby authorized and empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement of each Mortgage Loan and related documents, or otherwise. The Servicer agrees to cooperate with the Issuer, the Enhancer and Indenture Trustee, as the case may be, in effecting the termination of the responsibilities and rights of the Servicer hereunder, including, without limitation, the transfer to the Indenture Trustee for the administration by it of all cash amounts relating to the Mortgage Loans that shall at the time be held by the Servicer and to be deposited by it in the Custodial Account, or that have been deposited by the Servicer in the Custodial Account or thereafter received by the Servicer with respect to the Mortgage Loans. All reasonable costs and expenses (including, but not limited to, attorneys' fees) incurred in connection with amending this Agreement to reflect such succession as Servicer pursuant to this Section 7.01 shall be paid by the predecessor Servicer (or if the predecessor Servicer is the Indenture Trustee, the initial Servicer) upon presentation of reasonable documentation of such costs and expenses. (b) Notwithstanding any termination of the activities of the Servicer hereunder, the Servicer shall be entitled to receive, out of any late collection of a payment on a Mortgage Loan that was due prior to the notice terminating the Servicer's rights and obligations hereunder and received after such notice, that portion to which the Servicer would have been entitled pursuant to Sections 3.03 and 3.09, as well as its Servicing Fee in respect thereof, and any other amounts payable to the Servicer hereunder the entitlement to which arose prior to the termination of its activities hereunder. Notwithstanding the foregoing, a delay in or failure of performance under clause (i) or (ii) of the definition of Servicing Default, after the applicable grace periods specified therein, shall not constitute a Servicing Default if such delay or failure could not be prevented by the exercise of reasonable diligence by the Servicer and such delay or failure was caused by an act of God or the public enemy, acts of declared or undeclared war, public disorder, rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes, earthquakes, floods or similar causes. The preceding sentence 30 shall not relieve the Servicer from using reasonable efforts to perform its respective obligations in a timely manner in accordance with the terms of this Agreement. The Servicer shall provide the Indenture Trustee, the Paying Agent, the Enhancer and the Securityholders with written notice of any such failure or delay by it, together with a description of its efforts to so perform its obligations. The Servicer shall immediately notify the Indenture Trustee, the Paying Agent, the Enhancer and the Issuer in writing of any Servicing Default. (c) If the Servicer Termination Triggers shall occur and be continuing with respect to a Payment Date, then in each and every such case, and so long as no Enhancer Default exists, the Enhancer may send written notice to the Securityholders of its intention to remove the Servicer and appoint a successor Servicer and the date on which such removal will take place; provided, however, that such date shall be at least 30 days from the date of such notice. None of the Indenture Trustee, the Paying Agent or the Securityholders shall have the right to initiate removal of the Servicer if a Servicer Termination Trigger has occurred. Section 7.02. Indenture Trustee to Act; Appointment of Successor. -------------------------------------------------- (a) On and after the time the Servicer receives a notice of termination pursuant to Section 7.01 or sends a notice pursuant to Section 6.04, the Indenture Trustee as pledgee of the Mortgage Loans shall itself become, or shall appoint an affiliate of the Indenture Trustee to become, the successor in all respects to the Servicer in its capacity as servicer under this Agreement and the transactions set forth or provided for herein and shall immediately assume all of the obligations of the Servicer to make advances on Mortgage Loans under Section 3.03(b) and will be subject to all other responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof as soon as practicable, but in no event later than 90 days after the Indenture Trustee becomes successor servicer. During such 90 day period, the Indenture Trustee, with the written consent of the Enhancer, may require the Servicer being terminated to continue to perform such servicing responsibilities (other than making advances on the Mortgage Loans under Section 3.03(b)) as the Indenture Trustee deems appropriate. In such event, the Servicer being terminated shall provide such services as directed by the Indenture Trustee until the earliest of the date the Indenture Trustee notifies such Servicer to discontinue providing such services, the date on which a successor servicer or the Indenture Trustee has assumed all responsibilities, duties and liabilities of the Servicer hereunder or the expiration of the 90 day period. The Servicer shall be entitled to the Servicing Fee hereunder for any period during which the Servicer is obligated to provide such services as if no termination of the Servicer had occurred. Nothing in this Agreement or in the Trust Agreement shall be construed to permit or require the Indenture Trustee to (i) succeed to the responsibilities, duties and liabilities of the initial Servicer in its capacity as Seller under the Purchase Agreement, (ii) be responsible or accountable for any act or omission of the Servicer prior to the issuance of a notice of termination hereunder, (iii) require or obligate the Indenture Trustee, in its capacity as successor Servicer, to purchase, repurchase or substitute any Mortgage Loan, (iv) fund any Additional Balances with respect to any Mortgage Loan, (v) fund any losses on any Permitted Investment directed by any other Servicer, or (vi) be responsible for the representations and warranties of the predecessor Servicer. As compensation therefor, the Indenture Trustee shall be entitled to such compensation as the Servicer would have been entitled to hereunder if no such notice of termination had been given. Notwithstanding the foregoing, if the Indenture Trustee is (x) unwilling to act as successor Servicer itself or to appoint an affiliate to become successor Servicer, or (y) legally unable so to act, the Indenture Trustee as pledgee of the Mortgage Loans may (in the situation described in clause (x)) or shall (in the situation described in 31 clause (y)) appoint or petition a court of competent jurisdiction to appoint any established housing and home finance institution, bank or other mortgage loan servicer having a net worth of not less than $10,000,000 as the successor to the Servicer hereunder in the assumption of all or any part of the responsibilities, duties or liabilities of the Servicer hereunder; provided, however, that any such successor Servicer shall be acceptable to the Enhancer, as evidenced by the Enhancer's prior written consent, which consent shall not be unreasonably withheld. Pending appointment of a successor to the Servicer hereunder, unless the Indenture Trustee is prohibited by law from so acting, the Indenture Trustee itself shall act or appoint an affiliate to act in such capacity as provided above. In connection with such appointment and assumption, the successor shall be entitled to receive compensation out of payments on Mortgage Loans in an amount equal to the compensation that the Servicer would otherwise have received pursuant to Section 3.11 (or such other compensation as the Indenture Trustee and such successor shall agree). The appointment of a successor Servicer shall not affect any liability of the predecessor Servicer that may have arisen under this Agreement prior to its termination as Servicer (including the obligation to purchase Mortgage Loans pursuant to Section 3.01, to pay any deductible under an insurance policy pursuant to Section 3.05 or to indemnify the Indenture Trustee pursuant to Section 6.06), nor shall any successor Servicer (including the Indenture Trustee) be liable for any acts or omissions of the predecessor Servicer or for any breach by such Servicer of any of its representations or warranties contained herein or in any related document or agreement. The Indenture Trustee and such successor shall take such action, consistent with this Agreement and the requirements (including any notice requirements) of applicable law, as shall be necessary to effectuate any such succession. Notwithstanding the foregoing, the Indenture Trustee, in its capacity as successor Servicer, shall not be responsible for the lack of information and/or documents that it cannot obtain through reasonable efforts or for failing to take any action that the Indenture Trustee is legally prohibited from taking by applicable law. (b) Any successor, including the Indenture Trustee, to the Servicer as servicer shall during its term as Servicer (i) continue to service and administer the Mortgage Loans for the benefit of the Securityholders, (ii) maintain in force a policy or policies of insurance covering errors and omissions in the performance of its obligations as Servicer hereunder and a fidelity bond in respect of its officers, employees and agents to the same extent as the Servicer is so required pursuant to Section 3.13 and (iii) be bound by the terms of the Insurance Agreement. (c) Any successor Servicer, including the Indenture Trustee, shall not be deemed in default or to have breached its duties hereunder if the predecessor Servicer shall fail to deliver any required deposit to the Custodial Account or otherwise cooperate with any required servicing transfer or succession hereunder. (d) All reasonable costs and expenses (including attorneys' fees) incurred in connection with the transfer of Mortgage Files and the servicing duties to a successor servicer hereunder shall be paid by the related predecessor servicer. Section 7.03. Notification to Securityholders. Upon any termination of ------------------------------- or appointment of a successor to the Servicer pursuant to this Article VII or Section 6.04, the Indenture Trustee shall give prompt written notice thereof to the Securityholders, the Enhancer, the Issuer and each Rating Agency. 32 ARTICLE VIII Miscellaneous Provisions Section 8.01. Amendment. This Agreement may be amended from time to --------- time by the parties hereto, but only by written instrument signed by the parties hereto; provided, however, that any such amendment shall be accompanied by a letter from each Rating Agency to the effect that such amendment will not result in a Rating Event if determined without regard to the Policy; provided, further, that the Enhancer, the Paying Agent and the Indenture Trustee shall consent thereto. Section 8.02. Exhibits. The exhibits to this Agreement are hereby -------- incorporated and made a part hereof and are an integral part of this Agreement. Section 8.03. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND ------------- CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICTS OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 8.04. Notices. All demands, notices and communications ------- hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by certified mail, return receipt requested, to (a) in the case of the Servicer, One Wachovia Center, 18th Floor, Charlotte, North Carolina 28288-0572, Attention: David Mason, Re: Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, Facsimile: (704) 383-3878, (b) in the case of the Enhancer, MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504, Attention: Insured Portfolio Management--Structured Finance (Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust), (c) in the case of Moody's, Home Mortgage Loan Monitoring Group, 4th Floor, 99 Church Street, New York, New York 10001, (d) in the case of Standard & Poor's, 55 Water Street, New York, New York 10004, Attention: Residential Mortgage Surveillance Group, (e) in the case of the Owner Trustee, Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, (f) in the case of the Issuer, Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, c/o the Owner Trustee at the address set forth in clause (e) above, (g) in the case of the Indenture Trustee, at the Corporate Trust Office of the Indenture Trustee, and (h) in the case of the Paying Agent, at the Corporate Trust Office of the Paying Agent; or, with respect to each of the foregoing Persons, at such other address as shall be designated by such Person in a written notice to the other foregoing Persons. Any notice required or permitted to be mailed to a Securityholder shall be given by first class mail, postage prepaid, at the address of such Securityholder as shown in the Note Register or Certificate Register, as the case may be. Any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the related Securityholder receives such notice. Any notice or other document required to be delivered or mailed by the Indenture Trustee to any Rating Agency shall be given on a reasonable efforts basis and only as a matter of courtesy and accommodation, and the Indenture Trustee shall have no liability for failure to deliver any such notice or document to any Rating Agency. 33 Section 8.05. Severability of Provisions. If any one or more of the ---------------------------- covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or the Securities or the rights of the Securityholders. Section 8.06. Protection of Confidential Information. The Servicer ----------------------------------------- shall keep confidential and shall not divulge to any party any information pertaining to the Mortgage Loans or any Mortgagor thereunder, except as required pursuant to this Agreement and except to the extent that it is necessary and appropriate for the Servicer to do so in working with legal counsel, auditors, taxing authorities, regulatory authorities or other governmental agencies or in accordance with the Collection Policy. Section 8.07. Third-Party Beneficiaries. This Agreement shall inure to ------------------------- the benefit of and be binding upon the parties hereto, the Securityholders, the Enhancer, the Owner Trustee and their respective successors and permitted assigns. Except as otherwise provided in this Agreement, no other Person shall have any right or obligation hereunder. The Enhancer shall be an express third-party beneficiary of this Agreement. Section 8.08. Counterparts. This instrument 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 8.09. Effect of Headings and Table of Contents. The Article and ---------------------------------------- Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 8.10. Termination upon Purchase by the Servicer or Liquidation -------------------------------------------------------- of All Mortgage Loans; Partial Redemption. ----------------------------------------- (a) The respective obligations and responsibilities of the Servicer, the Issuer, the Paying Agent and the Indenture Trustee created hereby shall terminate upon the last action required to be taken by the Issuer pursuant to the Trust Agreement and by the Indenture Trustee and the Paying Agent pursuant to the Indenture following the earlier of: (i) the date on or before which the Indenture or the Trust Agreement is terminated, or (ii) the purchase by the Servicer from the Issuer of all Mortgage Loans and REO Property in accordance with Section 8.10(b). (b) The Servicer shall have the right to purchase from the Issuer all of the Mortgage Loans and related REO Property if the Note Balance of the Notes as of any Payment Date is less than 10% of the Note Balance of the Notes as of the Closing Date, (provided that a draw on the Policy would not occur as a result of such purchase, and provided further that the purchase price will provide sufficient funds to pay the outstanding Note Balance and accrued and unpaid interest on the Notes to the Payment Date on which such amounts are to be distributed to the Securityholders), at a price equal to 100% of the aggregate unpaid Principal Balance of all such 34 remaining Mortgage Loans, plus accrued and unpaid interest thereon at the weighted average of the Loan Rates thereon up to the date preceding the Payment Date on which such amounts are to be distributed to the Securityholders (and in the case of REO Property, the fair market value of the REO Property), plus any amounts due and owing to the Enhancer under the Insurance Agreement related to the Mortgage Loans or the Notes (and any unpaid Servicing Fee relating to the Mortgage Loans shall be deemed to have been paid at such time), plus any Interest Shortfall and interest owed thereon to the Noteholders. The purchase price paid by the Servicer shall also include any amounts owed by the Seller pursuant to Section 3.01(d) of the Purchase Agreement in respect of any liability, penalty or expense that resulted from a breach of the representation and warranty set forth in Section 3.01(b)(xi), that remain unpaid on the date of such purchase. The Servicer shall send written notice to the Indenture Trustee, the Paying Agent and the Enhancer of its intent to exercise its right to purchase any of the Mortgage Loans pursuant to this Section 8.10(b). If such right is exercised by the Servicer, the Servicer shall deposit the amount calculated pursuant to this Section 8.08(b) with the Indenture Trustee or the Paying Agent pursuant to Section 4.10 of the Indenture and, upon the receipt of such deposit, the Indenture Trustee shall release to the Servicer, the files pertaining to the Mortgage Loans being purchased. The Servicer, at its expense, shall prepare and deliver to the Indenture Trustee for execution, at the time the related Mortgage Loans are to be released to the Servicer, appropriate documents assigning each such Mortgage Loans from the Indenture Trustee or the Issuer to the Servicer or the appropriate party. Section 8.11. Certain Matters Affecting the Indenture Trustee and the -------------------------------------------------------- Paying Agent. For all purposes of this Agreement, in the performance of any of ------------ each of their duties or in the exercise of any of either of their powers hereunder, the Indenture Trustee and the Paying Agent shall be subject to and entitled to the benefits of Article VI of the Indenture. Section 8.12. Owner Trustee, Paying Agent and Indenture Trustee Not -------------------------------------------------------- Liable for Related Documents. The recitals contained herein shall be taken as ----------------------------- the statements of the Servicer, and the Owner Trustee, the Paying Agent and the Indenture Trustee assume no responsibility for the correctness thereof. The Owner Trustee, the Paying Agent and the Indenture Trustee make no representations as to the validity or sufficiency of this Agreement, of any Basic Document or Related Document, or of the Certificates (other than the signatures of the Owner Trustee and the Indenture Trustee on the Certificates) or the Notes. The Owner Trustee, the Paying Agent and the Indenture Trustee shall at no time have any responsibility or liability with respect to the sufficiency of the Trust Estate or its ability to generate the payments to be distributed to Certificateholders under the Trust Agreement or the Noteholders under the Indenture, including the compliance by the Depositor, the Seller or the Servicer with any warranty or representation made under any Basic Document or the accuracy of any such warranty or representation, or any action of any person taken in the name of the Owner Trustee, the Paying Agent or the Indenture Trustee. 35 IN WITNESS WHEREOF, the Servicer, the Issuer, the Paying Agent and the Indenture Trustee have caused this Agreement to be duly executed by their respective officers or representatives all as of the day and year first above written. WACHOVIA BANK, NATIONAL ASSOCIATION, as Servicer By: /s/ David T. Mason ------------------------------------ Name: David T. Mason Title: Vice President WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC 2003-HE3 TRUST, as Issuer By: Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee By: /s/ Kathleen A. Pendelini ------------------------------------ Name: Kathleen A. Pendelini Title: Financial Services Officer WACHOVIA BANK, NATIONAL ASSOCIATION, as Paying Agent By: /s/ Gregory Yanok ------------------------------------ Name: Gregory Yanok Title: Vice President U.S. BANK NATIONAL ASSOCIATION, not in its individual capacity but solely as Indenture Trustee By: /s/ Shannon M. Rantz ------------------------------------ Name: Shannon M. Rantz Title: Assistant Vice President 36 EXHIBIT A MORTGAGE LOAN SCHEDULE A-1 EXHIBIT B COLLECTION POLICY [See attachment] B-1 EXHIBIT C LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PREMISES: That U.S. Bank National Association, as indenture trustee (the "Indenture Trustee"), under the indenture dated as of November 19, 2003 (the "Indenture"), among Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, as issuer, Wachovia Bank, National Association, as Paying Agent, and the Indenture Trustee, a national bank, and having its principal office located at 60 Livingston Avenue, EP-MN-WS3D, St. Paul, Minnesota 55107-2292, Attn: Client Manager - WASI 2003-HE3, hath made, constituted and appointed, and does by these presents make, constitute and appoint Wachovia Bank, National Association, a national banking association organized and existing under the laws of the United States of America, its true and lawful Attorney-in-Fact, with full power and authority to sign, execute, acknowledge, deliver, file for record, and record any instrument on its behalf, and to perform such other act or acts as may be customarily and reasonably necessary and appropriate, to effectuate the following enumerated transactions in respect of any of the Mortgages securing a Mortgage Loan and the related Loan Agreements for which the undersigned is acting as Indenture Trustee for various Securityholders (whether the undersigned is named therein as mortgagee or beneficiary or has become mortgagee by virtue of endorsement of such Loan Agreement secured by any such Mortgage) and for which Wachovia Bank, National Association is acting as Servicer pursuant to the Servicing Agreement. This appointment shall apply to the following enumerated transactions only: 1. The modification or re-recording of a Mortgage, where said modification or re-recording is for the purpose of correcting the Mortgage to conform same to the original intent of the parties thereto or to correct title errors discovered after such title insurance was issued and said modification or re-recording, in either instance, does not adversely affect the Lien of the Mortgage as insured. 2. The subordination of the Lien of a Mortgage to an easement in favor of a public utility company or a government agency or unit with powers of eminent domain; this section shall include, without limitation, the execution of partial satisfactions/releases, partial reconveyances or the execution of requests to trustees to accomplish same. 3. With respect to a Mortgage, the foreclosure, the taking of a deed in lieu of foreclosure, or the completion of judicial or non-judicial foreclosure or termination, cancellation or rescission of any such foreclosure, including, without limitation, any and all of the following acts: a. The substitution of trustee(s) serving under a Mortgage, in accordance with state law and the Mortgage; b. The preparation and issuance of statements of breach or non-performance; c. The preparation and issuance of notices of default; d. Cancellations/rescissions of notices of default and/or notices of sale; C-1 e. The taking of a deed in lieu of foreclosure; and f. Such other documents and actions as may be necessary under the terms of the Mortgage or state law to expeditiously complete said transactions. 4. The conveyance of the properties to the mortgage insurer, or the closing of the title to the property to be acquired as real estate owned, or conveyance of title to real estate owned. 5. The completion of loan assumption agreements. 6. The full satisfaction/release of a Mortgage or full reconveyance upon payment and discharge of all sums secured thereby, including, without limitation, cancellation of the related Loan Agreement. 7. The assignment of any Mortgage and the related Loan Agreement, in connection with the repurchase of the Mortgage Loan secured and evidenced thereby. 8. The full assignment of a Mortgage upon payment and discharge of all sums secured thereby in conjunction with the refinancing thereof, including, without limitation, the endorsement of the related Loan Agreement. 9. The modification or re-recording of a Mortgage, where said modification or re-recording is for the purpose of any modification pursuant to Section 4.01 of the Servicing Agreement. 10. The subordination of the Lien of a Mortgage, where said subordination is in connection with any modification pursuant to Section 3.01 of the Servicing Agreement, and the execution of partial satisfactions/releases in connection with such same Section 3.01. The undersigned gives said Attorney-in-Fact full power and authority to execute such instruments and to do and perform all and every act and thing necessary and proper to carry into effect the power or powers granted by or under this Limited Power of Attorney as fully as the undersigned might or could do, and hereby does ratify and confirm to all that said Attorney-in-Fact shall lawfully do or cause to be done by authority hereof. Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in Appendix A to the Indenture. C-2 Third parties without actual notice may rely upon the exercise of the power granted under this Limited Power of Attorney and may be satisfied that this Limited Power of Attorney shall continue in full force and effect and has not been revoked, unless an instrument of revocation has been made in writing by the undersigned. U.S. BANK NATIONAL ASSOCIATION, not in its individual capacity but solely as Indenture Trustee By: ------------------------------------ Name: Title: C-3 STATE OF ) SS. COUNTY OF ) On this [___] day of November, 2003, before me the undersigned, Notary Public of said State, personally appeared , personally known to me to be duly authorized officers of U.S. Bank National Association that executed the within instrument and personally known to me to be the persons who executed the within instrument on behalf of U.S. Bank National Association therein named, and acknowledged to me such U.S. Bank National Association executed the within instrument pursuant to its by-laws. WITNESS my hand and official seal. Notary Public in and for the State of ------------------------------- After recording, please mail to: Attn: ------------------------------------ C-4 EXHIBIT D FORM OF REQUEST FOR RELEASE DATE: TO: RE: REQUEST FOR RELEASE OF DOCUMENTS In connection with your administration of the Mortgage Loans, we request the release of the Mortgage File described below. Servicing Agreement Dated: Series #: Account #: Pool #: Loan #: Borrower Name(s): Reason for Document Request: (circle one) Mortgage Loan Prepaid in Full Mortgage Loan Repurchased "We hereby certify that all amounts received or to be received in connection with such payments which are required to be deposited have been or will be so deposited as provided in the Servicing Agreement." ----------------------------------------- Wachovia Bank, National Association Authorized Signature ********************************************************************** TO CUSTODIAN: Please acknowledge this request, and check off documents being enclosed with a copy of this form. You should retain this form for your files in accordance with the terms of the Servicing Agreement. Enclosed Documents: [ ] Loan Agreement Name ------------------------------------- Title ------------------------------------ D-1 [EXECUTION COPY] WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC, as Purchaser, and WACHOVIA BANK, NATIONAL ASSOCIATION, as Seller and Servicer, ------------------------------------ MORTGAGE LOAN PURCHASE AGREEMENT ------------------------------------ Dated as of November 19, 2003 TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS Section 1.1 Definitions.......................................................1 Section 1.2 Other Definitional Provisions.....................................2 ARTICLE II SALE OF MORTGAGE LOANS AND RELATED PROVISIONS Section 2.1 Sale of Mortgage Loans............................................2 Section 2.2 Sale of Subsequent Mortgage Loans.................................5 Section 2.3 Payment of Purchase Price.........................................7 Section 2.4 Allocation........................................................8 Section 2.5 Draws During the Rapid Amortization Period........................8 Section 2.6 Security Interest.................................................8 ARTICLE III REPRESENTATIONS AND WARRANTIES; REMEDIES FOR BREACH Section 3.1 Representations and Warranties of the Seller......................9 ARTICLE IV SELLER'S COVENANTS Section 4.1 Covenants of the Seller..........................................17 ARTICLE V [RESERVED] ARTICLE VI LIMITATION OF LIABILITY Section 6.1 Limitation on Liability of the Seller............................18 ARTICLE VII TERMINATION Section 7.1 Termination......................................................18 ARTICLE VIII MISCELLANEOUS PROVISIONS Section 8.1 Amendment........................................................18 Section 8.2 GOVERNING LAW....................................................18 Section 8.3 Notices..........................................................19 -i- TABLE OF CONTENTS (continued) Page ---- Section 8.4 Severability of Provisions.......................................20 Section 8.5 Relationship of Parties..........................................20 Section 8.6 Counterparts.....................................................20 Section 8.7 Further Agreements...............................................20 Section 8.8 Intention of the Parties.........................................20 Section 8.9 Successors and Assigns; Assignment of this Agreement.............21 Section 8.10 Survival.........................................................21 Section 8.11 Third-Party Beneficiary..........................................21 EXHIBIT 1 MORTGAGE LOAN SCHEDULE..........................................1-1 EXHIBIT 2 FORM OF SUBSEQUENT TRANSFER AGREEMENT...........................2-1 EXHIBIT 3 FORM OF ADDITION NOTICE.........................................3-1 EXHIBIT 4 FORM OF INITIAL CERTIFICATION...................................4-1 EXHIBIT 5 FORM OF FINAL CERTIFICATION.....................................5-1 -ii- This Mortgage Loan Purchase Agreement (this "Agreement"), dated as of November 19, 2003, is made by and between Wachovia Bank, National Association, as seller (in such capacity, the "Seller") and as servicer (in such capacity, the "Servicer"), and Wachovia Asset Securitization Issuance, LLC, as purchaser (the "Purchaser" or the "Depositor"). WITNESSETH: ----------- WHEREAS, the Seller, in the ordinary course of its business acquires and originates mortgage loans and acquired or originated all of the mortgage loans listed on the Mortgage Loan Schedule attached as Exhibit 1 hereto (the "Initial Mortgage Loans"); WHEREAS, the Seller owns the Initial Mortgage Loans, the Cut-Off Date Principal Balances and the Related Documents for the Initial Mortgage Loans, including rights to (a) any property acquired by foreclosure or deed in lieu of foreclosure or otherwise, and (b) the proceeds of any insurance policies covering the Initial Mortgage Loans; WHEREAS, the parties hereto desire that: (i) the Seller sell the Cut-Off Date Principal Balances of the Initial Mortgage Loans to the Purchaser on the Closing Date pursuant to the terms of this Agreement together with the Related Documents, and all Additional Balances relating to the Initial Mortgage Loans created on or after the Cut-Off Date and prior to the Rapid Amortization Period, (ii) the Seller may sell the applicable Cut-Off Date Principal Balances of the Subsequent Mortgage Loans to the Purchaser on one or more Subsequent Transfer Dates pursuant to the terms of the related Subsequent Transfer Agreement and all Additional Balances relating to the Subsequent Mortgage Loans created on or after the applicable Subsequent Cut-Off Date and prior to the Rapid Amortization Period and (iii) the Seller make certain representations and warranties on the Closing Date and on each Subsequent Transfer Date as applicable; WHEREAS, pursuant to the terms of the Trust Agreement and the applicable Subsequent Transfer Agreement, the Depositor will transfer the Mortgage Loans and other Transferred Property to the Issuer and the Issuer will issue the Certificates; WHEREAS, pursuant to the terms of the Servicing Agreement, the Servicer will service the Mortgage Loans; WHEREAS, pursuant to the terms of the Indenture, the Issuer will issue the Notes, secured by the Trust Estate; NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1 Definitions. For all purposes of this Agreement, 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 contained in Appendix A to the indenture dated as of November 19, 2003 (the "Indenture"), among Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, a Delaware statutory trust (the "Issuer"), U.S. 1 Bank National Association, a national banking association, as indenture trustee (the "Indenture Trustee") and Wachovia Bank, National Association, as paying agent (the "Paying Agent"), which is incorporated by reference herein. All other capitalized terms used herein shall have the meanings specified herein. Section 1.2 Other Definitional Provisions. All terms defined in this ------------------------------- Agreement (including those incorporated by reference) shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. As used in this Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in any such certificate or other document, to the extent not defined, shall have the respective meanings given to them under GAAP. To the extent that the definitions of accounting terms in this Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under GAAP, the definitions contained in this Agreement or in any such certificate or other document shall control. The words "hereof," "herein," "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section and Exhibit references contained in this Agreement are references to Sections and Exhibits in or to this Agreement unless otherwise specified; the term "including" shall mean "including without limitation"; "or" shall include "and/or"; and the term "proceeds" shall have the meaning ascribed thereto in the UCC. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as the feminine and neuter genders of such terms. 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. ARTICLE II SALE OF MORTGAGE LOANS AND RELATED PROVISIONS Section 2.1 Sale of Mortgage Loans. ---------------------- (a) The Seller, by the execution and delivery of this Agreement, does hereby sell, transfer, assign, set over, and otherwise convey to the Purchaser, without recourse (except as expressly provided herein), all of its right, title and interest, whether now owned or existing or hereafter created, arising, or acquired, in, to and under the Initial Transferred Property; provided, however, that the Purchaser does not assume the obligation under any Loan Agreement to fund Draws by the Mortgagor thereunder or any other obligation arising under or related to the Related 2 Documents, and the Purchaser shall not be obligated or permitted to fund any such Draws, it being agreed that the Seller will retain the obligation to fund future Draws. (b) The Initial Mortgage Loans, including the Cut-Off Date Principal Balances of such Initial Mortgage Loans, and all other related Initial Transferred Property, shall be sold by the Seller and purchased by the Purchaser on the Closing Date. The Subsequent Mortgage Loans, including the Cut-Off Date Principal Balances of such Subsequent Mortgage Loans, and all other related Subsequent Transferred Property, shall be sold by the Seller and purchased by the Purchaser on the related Subsequent Transfer Date. Additional Balances and the related Transferred Property arising after the Cut-Off Date or related Subsequent Cut-Off Date, as applicable, through and including the date immediately preceding the commencement of the Rapid Amortization Period shall be sold by the Seller and purchased by the Purchaser on the later of the Closing Date (or with respect to Subsequent Mortgage Loans, the applicable Subsequent Transfer Date) and the date of creation of such Additional Balance. (c) In connection with the conveyance by the Seller of the Initial Mortgage Loans and any Subsequent Mortgage Loans, the Seller further agrees, at its own expense, on or prior to the Closing Date with respect to the Cut-Off Date Principal Balances of the Initial Mortgage Loans and on or prior to the related Subsequent Cut-Off Date in the case of any Subsequent Mortgage Loans, to indicate in its books and records that the Initial Mortgage Loans have been sold to the Purchaser pursuant to this Agreement, and, in the case of the Subsequent Mortgage Loans, pursuant to the related Subsequent Transfer Agreement and to deliver to the Purchaser true and complete lists of all of the Mortgage Loans specifying for each Mortgage Loan the information contained in the Mortgage Loan Schedule. The Mortgage Loan Schedule shall be marked as Exhibit 1 to this Agreement and is hereby incorporated into and made a part of this Agreement. (d) In connection with the conveyance by the Seller of the Initial Mortgage Loans and any Subsequent Mortgage Loans, the Seller shall on behalf of the Purchaser deliver to, and deposit with the Servicer, at least five (5) Business Days before the Closing Date in the case of an Initial Mortgage Loan, and, three (3) Business Days prior to the related Subsequent Transfer Date in the case of a Subsequent Mortgage Loan, with respect to (i) below, or within 90 days of the Closing Date in the case of an Initial Mortgage Loan, and, 90 days of the related Subsequent Transfer Date, with respect to (ii) through (v) below, the following documents or instruments with respect to each Mortgage Loan: (i) the original Loan Agreement endorsed or assigned without recourse in blank (which endorsement shall contain either an original signature or a facsimile signature of an authorized officer of the Seller and which assignment may be included in one or more blanket assignments if permitted by applicable law) or, with respect to any Mortgage Loan as to which the original Loan Agreement has been permanently lost or destroyed and has not been replaced, a Lost Note Affidavit; (ii) the original Mortgage with evidence of recording thereon, or, if the original Mortgage has not yet been returned from the public recording office, a copy of the original Mortgage certified by the Seller that such Mortgage has been sent for recording, or a county certified copy of such Mortgage in the event the recording office keeps the original or if the original is lost; 3 (iii) originals of any intervening assignments of the Mortgage from the originator to the Seller, with evidence of recording thereon, or, if the original of any such intervening assignment has not yet been returned from the public recording office, a copy of such original intervening assignment certified by the Seller that such original intervening assignment has been sent for recording; and (iv) a true and correct copy of each assumption, modification, consolidation or substitution agreement, if any, relating to such Mortgage Loan; Within 90 days following delivery of the Mortgage Files to the Servicer pursuant to the preceding paragraph, the Servicer shall review the Mortgage Files and deliver to the Indenture Trustee and the Enhancer an initial certification in the form attached hereto as Exhibit 4 evidencing the status of the completeness of the Mortgage Files. If, in the course of such review, a material defect in any Mortgage File is discovered which may materially and adversely affect the value of the related Mortgage Loan, or the interests of the Indenture Trustee (as pledgee of the Mortgage Loans), the Noteholders, the Enhancer or the Certificateholders, including the Seller's failure to deliver any document required to be delivered to the Servicer on behalf of the Indenture Trustee, the Seller shall cure such defect, repurchase the related Mortgage Loan at the Repurchase Price or substitute an Eligible Substitute Loan therefor upon the same terms and conditions set forth in Section 3.1 hereof for breaches of representations and warranties as to the Mortgage Loans. Upon receipt of all documents required to be included in the Mortgage Files and no later than within one year of the Closing Date, the Servicer shall deliver to the Indenture Trustee and the Enhancer a final certification in the form attached hereto as Exhibit 5 evidencing the completeness of the Mortgage Files. The Seller on behalf of the Purchaser will deliver the original Loan Agreements to the Servicer, endorsed or assigned in blank, to effect the transfer to the Purchaser of the Loan Agreements and all related Mortgages and Related Documents. Concurrently herewith, the Purchaser has contracted to sell the Mortgage Loans to the Issuer, and the Issuer, in turn, has Granted its right, title and interest in the Mortgage Loans and other Transferred Property constituting the Trust Estate to the Indenture Trustee to secure payments on the Notes. To avoid the unnecessary expense and administrative inconvenience associated with the execution and recording of multiple assignment documents, the Seller may execute one or more assignments of mortgages naming the Indenture Trustee as assignee. Notwithstanding the fact that assignments of mortgages naming the Indenture Trustee as assignee have not been prepared and delivered, the parties hereto acknowledge and agree that the Mortgage Loans shall for all purposes be deemed to have been transferred from the Seller to the Purchaser, from the Purchaser to the Issuer, and from the Issuer to the Indenture Trustee. In instances where an original Mortgage or any original intervening assignment of Mortgage was not, in accordance with clause (iii) above, delivered by the Seller to the Servicer, as provided above, the Seller will deliver or cause to be delivered the originals or certified copies of such documents to the Servicer promptly upon receipt thereof. If an Assignment of Mortgage is required to be prepared under Section 3.17 of the Servicing Agreement, the Seller will promptly execute such Assignment of Mortgage upon request of the Servicer. 4 Upon sale of the Initial Mortgage Loans, the ownership of each related Loan Agreement (subject to the proviso in Section 2.1(a)), each related Mortgage and the contents of the related Mortgage File shall be vested in the Purchaser and the ownership of all records and documents with respect to the Mortgage Loans that are prepared by or that come into the possession of the Seller, as the seller of the Mortgage Loans hereunder, or by the Servicer under the Servicing Agreement shall immediately vest in the Purchaser, and shall be retained and maintained in trust by the Servicer at the will of the Purchaser, in such custodial capacity only; provided, however, that if Wachovia is no longer the Servicer under the Servicing Agreement, any records and documents that come into the possession of the Seller shall be promptly delivered to the Servicer. The Seller's records will accurately reflect the sale of the Mortgage Loans by it to the Purchaser. The Purchaser hereby acknowledges its acceptance of all right, title and interest to the property conveyed to it pursuant to this Section 2.1. Section 2.2 Sale of Subsequent Mortgage Loans. --------------------------------- (a) Subject to the conditions set forth in paragraphs (b) and (c) below (the satisfaction of which (other than the conditions specified in paragraphs (b)(i), (b)(ii) and (b)(iii)) shall be evidenced by an Officer's Certificate of the Seller dated the date of the related Subsequent Transfer Date), in consideration of the Purchaser's payment of the purchase price provided for in Section 2.3 on one or more Subsequent Transfer Dates, the Seller may, on the related Subsequent Transfer Date, sell, transfer, assign, set over and convey to the Purchaser without recourse (except as expressly provided herein), all of the right, title and interest of the Seller whether now owned or existing or hereafter created, arising, or acquired, in, to and under the Subsequent Transferred Property; provided, however, that the Purchaser does not assume the obligation under any Loan Agreement to fund Draws by the Mortgagor thereunder or any other obligation arising under or related to the Related Documents, and the Purchaser shall not be obligated or permitted to fund any such Draws, it being agreed that the Seller will retain the obligation to fund future Draws. Any transfer to the Purchaser by the Seller of Subsequent Mortgage Loans shall be absolute, and is intended by the Purchaser and the Seller to constitute and to be treated as a sale of such Subsequent Mortgage Loans by the Seller to the Purchaser. The Purchaser on each Subsequent Transfer Date shall acknowledge, by execution of the related Subsequent Transfer Agreement, its acceptance of all right, title and interest to the related Subsequent Mortgage Loans and other property, existing on the Subsequent Transfer Date and thereafter created, conveyed to it pursuant to this Section 2.2. The Purchaser shall be entitled to all scheduled principal payments due on and after each Subsequent Cut-Off Date, all other payments of principal due and collected on and after each Subsequent Cut-Off Date, all payments of interest on any related Subsequent Mortgage Loans due on or after the related Subsequent Cut-Off Date, all interest accruing thereon, all monies due or to become due thereon and all collections in respect thereof received on or after the Subsequent Cut-Off Date. Upon sale of the Subsequent Mortgage Loans, the ownership of each related Loan Agreement (subject to the proviso in Section 2.1(a)), each related Mortgage and the contents of the related Mortgage File shall be vested in the Purchaser and the ownership of all records and documents with respect to the Subsequent Mortgage Loans that are prepared by or that come into 5 the possession of the Seller, as the seller of the Subsequent Mortgage Loans, or by the Servicer under the Servicing Agreement shall immediately vest in the Purchaser, and shall be retained and maintained in trust by the Servicer at the will of the Purchaser, in such custodial capacity only; provided, however, that if Wachovia is no longer the Servicer under the Servicing Agreement, any records and documents that come into the possession of the Seller shall be promptly delivered to the Servicer. The Seller's records will accurately reflect the sale of the Subsequent Mortgage Loans by it to the Purchaser. (b) The Seller may transfer to the Purchaser, Subsequent Mortgage Loans and the other property and rights related thereto described in Section 2.2(a), and the Purchaser shall pay for such Subsequent Mortgage Loans, only upon the satisfaction of each of the following conditions on or prior to the related Subsequent Transfer Date: (i) the Seller shall have provided the Indenture Trustee, the Issuer, the Purchaser, Rating Agencies and the Enhancer with a timely Addition Notice substantially in the form of Exhibit 3, which notice shall be given no later than seven Business Days prior to the related Subsequent Transfer Date, and shall designate the Subsequent Mortgage Loans to be sold to the Purchaser and the aggregate Principal Balance of such Subsequent Mortgage Loans as of the related Subsequent Cut-Off Date; (ii) the Seller shall have delivered to the Purchaser, the Indenture Trustee and the Enhancer a duly executed Subsequent Transfer Agreement substantially in the form of Exhibit 2, (A) confirming the satisfaction of each condition precedent and making the representations specified in this Section 2.2(b) and in the related Subsequent Transfer Agreement and (B) including a Mortgage Loan Schedule listing the Subsequent Mortgage Loans; (iii) as of each Subsequent Transfer Date, as evidenced by delivery to the Indenture Trustee of the Subsequent Transfer Agreement in the form of Exhibit 2, the Seller shall not be insolvent, made insolvent by such transfer or aware of any pending insolvency; (iv) such sale and transfer shall not result in a material adverse tax consequence to the Purchaser or the Issuer or due to any action or inaction on the part of the Seller, to the Securityholders or the Enhancer; (v) the Revolving Period shall not have terminated; and (vi) the Enhancer and each Rating Agency (each, an "Approval Party") shall have approved the sale of the Subsequent Mortgage Loans (which approval shall not be unreasonably withheld) within five (5) Business Days of receipt of an electronic file containing the information regarding the Subsequent Mortgage Loans that was delivered to each Approval Party prior to the Closing Date with respect to the Initial Mortgage Loans; provided, that if an Approval Party shall not have notified the respective Seller within such five (5) Business Days that such Approval Party does not so approve, such sale of Subsequent Mortgage Loans shall be deemed approved by such Approval Party. The obligation of the Purchaser to purchase a Subsequent Mortgage Loan on any Subsequent Transfer Date is subject to the following conditions: (i) each such Subsequent Mortgage Loan must satisfy the representations and warranties specified in the related Subsequent Transfer 6 Agreement and this Agreement; (ii) the Seller has not selected such Subsequent Mortgage Loans in a manner that it reasonably believes is adverse to the interests of the Noteholders or the Enhancer; and (iii) as of the related Subsequent Cut-Off Date each Subsequent Mortgage Loan will satisfy the following criteria: (A) such Subsequent Mortgage Loan may not be 30 or more days contractually delinquent as of the related Subsequent Cut-Off Date; (B) the original stated term to maturity of such Subsequent Mortgage Loan will not exceed 480 months; (C) such Subsequent Mortgage Loan must have an outstanding Principal Balance of at least $1,000 and no more than $1,000,000 as of the related Subsequent Cut-Off Date; (D) such Subsequent Mortgage Loan will be underwritten substantially in accordance with the criteria set forth under " Description of the Mortgage Loans - Underwriting Standards" in the Prospectus Supplement; (E) such Subsequent Mortgage Loan shall not provide for negative amortization; and (F) following the purchase of the Subsequent Mortgage Loan by the issuer, the Mortgage Loans must have a weighted average loan margin, a weighted average remaining term to maturity and a weighted average CLTV Ratio at origination, as of each respective Subsequent Cut-Off Date, which would not vary materially from the Initial Mortgage Loans. (c) Within five Business Days after each Subsequent Transfer Date, the Seller shall deliver to the Purchaser, the Rating Agencies, the Indenture Trustee and the Enhancer a copy of the Mortgage Loan Schedule reflecting the Subsequent Mortgage Loans in electronic format. Section 2.3 Payment of Purchase Price. ------------------------- (a) The purchase price (the "Purchase Price") for the Initial Mortgage Loans and the related Initial Transferred Property to be paid by the Purchaser to the Seller on the Closing Date shall be an amount equal to one-hundred percent (100%) of the related Cut-Off Date Principal Balances. The Purchase Price paid for any Subsequent Mortgage Loans and related Subsequent Transferred Property to be paid by the Purchaser to the Seller on any Subsequent Transfer Date shall be one-hundred percent (100%) of the related Cut-Off Date Principal Balances thereof (as identified on the Mortgage Loan Schedule attached to the related Subsequent Transfer Agreement provided by the Seller). In the case of each Additional Balance and the related Transferred Property sold hereunder created on or after the Cut-Off Date or any Subsequent Cut-Off Date, as applicable, and prior to the commencement of the Rapid Amortization Period, the Purchase Price thereof shall be 100% of the principal amount of the related Draw under the related Loan Agreement on the later of the Closing Date or any Subsequent Cut-Off Date, as applicable, and the date of the creation of such Additional Balance, adjusted to reflect such factors as the Seller and the Purchaser mutually agree will result in a purchase price determined to be the fair market value of such Additional Balance and the related Transferred Property. (b) In consideration of the sale of the Initial Mortgage Loans and the related Transferred Property by the Seller to the Purchaser on the Closing Date, the Purchaser shall pay to the Seller on the Closing Date by wire transfer of immediately available funds to a bank account designated by the Seller, the amount specified above in paragraph (a) for the Initial Mortgage Loans and the related Transferred Property. In consideration of the sale of any Subsequent Mortgage Loan and the related Transferred Property by the Seller to the Purchaser on any Subsequent Transfer Date, the Purchaser shall pay to the Seller by wire transfer of immediately available funds to a bank account designated by the Seller, the amount specified above in paragraph (a) for the applicable Subsequent Mortgage Loans and the related Transferred Property. 7 (c) [Reserved] (d) With respect to each Additional Balance transferred hereunder with respect to any Mortgage Loan, the Purchaser shall pay or cause to be paid to the Seller or its designee the Purchase Price specified above for such Additional Balance and the related Transferred Property in cash on the Payment Date in the calendar month immediately following the calendar month in which such Additional Balance was created. (e) The Seller shall have no obligation to sell any Transferred Property to the Purchaser if the Seller is not paid the purchase price for such Transferred Property as provided herein. Section 2.4 Allocation. Except with respect to Liquidation Loss ---------- Amounts, the Seller, the Servicer, and the Purchaser agree that all collections on the Mortgage Loans will be allocated and applied as provided by the terms of the related Loan Agreements or by applicable law. Except with respect to Liquidation Loss Amounts, if the Loan Agreement or applicable law does not specify a method of allocation and application for particular collections, such collections shall be allocated and applied (i) first to interest, pro rata (based on the amounts coming due on such date) among the amounts coming due on such date) and (ii) then to principal, in the order of the dates on which such amounts for principal were first incurred. If, as a result of the provisions of this Section 2.4, collections are allocated to Excluded Draws, such collections shall not be property of the Purchaser or its assignees and shall be paid by the Servicer to the Seller as provided in Section 2.5. Liquidation Loss Amounts shall be allocated as provided in the definition of Excluded Amounts. Section 2.5 Draws During the Rapid Amortization Period. During the --------------------------------------------- Rapid Amortization Period, any Excluded Draw shall not be deemed Additional Balances, and the ownership of such Excluded Draws shall be retained by the Seller except as provided herein. Payments and collections allocable pursuant to Section 2.4 to an Excluded Draw shall not be deposited into the Custodial Account, the Distribution Account or the Note Payment Account, and shall be distributed by the Servicer to the Seller no less frequently than monthly in accordance with reasonable instructions provided by the Seller. Section 2.6 Security Interest. (a) The parties hereto intend that the ------------------ transactions set forth herein and in the Subsequent Transfer Agreements each constitute a sale by the Seller to the Purchaser of all the Seller's right, title and interest in and to the Mortgage Loans and the other Transferred Property, including for accounting purposes, and not a secured borrowing. In the event the transactions set forth herein or in any Subsequent Transfer Agreement are deemed not to be a sale, the Seller hereby grants to the Purchaser a security interest in the Transferred Property to secure all of the Seller's obligations hereunder, and this Agreement shall and hereby does constitute a security agreement under applicable law. The Seller agrees to take or cause to be taken such actions and to execute such documents, including without limitation the authorization and filing of any continuation statements with respect to the UCC financing statements filed with respect to the Mortgage Loans by the Purchaser on the Closing Date, if any, and any amendments thereto required to reflect a change in the name or corporate structure of the Seller or the filing of any additional UCC financing statements due to the change in the principal office or jurisdiction of organization of the Seller as are necessary to perfect and protect the Purchaser's and its assignee's interests in the 8 Transferred Property. The Seller shall file any such continuation statements or amendments on a timely basis. (b) To the extent that the Seller retains any interest in the Transferred Property, the Seller hereby grants to the Indenture Trustee for the benefit of the Noteholders a security interest in the Transferred Property, to secure the performance of all of the obligations of the Seller hereunder and under the other Basic Documents. With respect to this security interest, the Indenture Trustee shall have all of the rights that it has under the Indenture and the Basic Documents and all of the rights of a secured creditor under the UCC. ARTICLE III REPRESENTATIONS AND WARRANTIES; REMEDIES FOR BREACH Section 3.1 Representations and Warranties of the Seller. The Seller --------------------------------------------- represents and warrants to the Purchaser, as of the Closing Date or, as applicable, as of each Subsequent Transfer Date (or if otherwise specified below, as of the date so specified): (a) As to the Seller: (i) The Seller is a national banking association duly organized and validly existing under the laws of the United States of America and is in compliance with the laws of each state in which any Mortgaged Property is located to the extent necessary to ensure the enforceability of each Mortgage Loan; (ii) The Seller has the power and authority to make, execute, deliver and perform its obligations under this Agreement and each Subsequent Transfer Agreement to which it is a party and all of the transactions contemplated under this Agreement and each such Subsequent Transfer Agreement, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and each such Subsequent Transfer Agreement; (iii) The Seller is not required to obtain the consent of any other Person or any consents, licenses, approvals or authorizations from, or registrations or declarations with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement or each such Subsequent Transfer Agreement, except for such consents, licenses, approvals or authorizations, or registrations or declarations, as shall have been obtained or filed, as the case may be; (iv) The execution and delivery of this Agreement and any Subsequent Transfer Agreement to which it is a party by the Seller and its performance and compliance with the terms of this Agreement and each such Subsequent Transfer Agreement will not violate the Seller's Articles of Association or Bylaws or constitute a material default (or an event which, with notice or lapse of time, or both, would constitute a material default) under, or result in the material breach of, any material contract, agreement or other instrument to which the Seller is a party or which may be applicable to the Seller or any of its assets; (v) There are no pending or, to the best of the Seller's knowledge, threatened, actions, suits, proceedings or investigations before any court, tribunal, administrative 9 agency, arbitrator or governmental body that, if decided adversely, would materially and adversely affect (A) the condition (financial or otherwise), business or operations of the Seller, (B) the ability of the Seller to perform its obligations under, or the validity or enforceability of, the Basic Documents to which it is a party or (C) the transactions contemplated by this Agreement; (vi) This Agreement and each Subsequent Transfer Agreement to which it is a party constitutes a legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights in general, as they may be applied in the context of the insolvency of a national banking association, and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law), and by public policy considerations underlying the securities laws, to the extent that such public policy considerations limit the enforceability of the provisions of this Agreement which purport to provide indemnification from liabilities under applicable securities laws; (vii) This Agreement constitutes a valid transfer and assignment to the Purchaser of all right, title and interest of the Seller in and to the Initial Mortgage Loans, including the Cut-Off Date Principal Balances now existing and all Additional Balances thereafter arising to and including the day immediately preceding the Rapid Amortization Period, all monies due or to become due with respect thereto, and all proceeds of such Cut-Off Date Principal Balances with respect to the Initial Mortgage Loans; and this Agreement and the related Subsequent Transfer Agreement, when executed and delivered, will constitute a valid transfer and assignment to the Purchaser of all right, title and interest of the Seller in and to the Subsequent Mortgage Loans, including the Cut-Off Date Principal Balances of the Subsequent Mortgage Loans, all monies due or to become due with respect thereto, and all proceeds of such Cut-Off Date Principal Balances and nothing has been done by the Seller to impair the rights of the Purchaser, the Trustee, the Paying Agent, the Enhancer or the Securityholders with respect thereto; and (viii) The Seller is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or governmental agency, which default might have consequences that would materially and adversely affect the condition (financial or otherwise) or operations of the Seller or its properties or might have consequences that would materially adversely affect its performance hereunder. (b) As to each Initial Mortgage Loan (except as otherwise specified below) as of the Closing Date, or as to each Subsequent Mortgage Loan (except as otherwise specified below) as of the related Subsequent Transfer Date: (i) The information pertaining to each Mortgage Loan set forth in the Mortgage Loan Schedule delivered by the Seller was true and correct in all material respects as of the date or dates respecting which such information is initially furnished; (ii) Each Mortgaged Property is improved by a residential dwelling, which, to the best of the Seller's knowledge, does not constitute property other than real property under state law; 10 (iii) Each Mortgage Loan is being serviced by the Seller and there was only one originally executed Loan Agreement not stamped as a duplicate copy with respect to each such Mortgage Loan; (iv) The Loan Agreement with respect to each Mortgage Loan bears an adjustable Loan Rate; (v) Immediately prior to the transfer and assignment herein contemplated or under the related Subsequent Transfer Agreement, as applicable, the Seller held good and indefeasible title to, and was the sole owner of, each Mortgage Loan conveyed by the Seller subject to no liens (other than, with respect to any Mortgage Loan in a (A) second lien position, the lien of the related first mortgage and (B) third lien position, the lien of the related first mortgage and the related second mortgage), charges, mortgages, encumbrances or rights of others or other liens which will not be released simultaneously with such transfer and assignment and has full right and authority, under all governmental and regulatory bodies having jurisdiction over the ownership of the applicable Mortgage Loans to sell and assign the same pursuant to this Agreement or the related Subsequent Transfer Agreement, as applicable; (vi) To the best of the Seller's knowledge, there is no delinquent recording or other tax or fee or assessment lien on any Mortgaged Property, and each Mortgaged Property is free of material damage and is in good repair; (vii) No Mortgage Loan is subject to any right of rescission, valid set-off, counterclaim or defense, including the defense of usury, nor will the operation of any of the terms of the Loan Agreement or the Mortgage relating to any Mortgage Loan, or the exercise of any right thereunder, render either such Loan Agreement or such Mortgage unenforceable in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense, including the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto; (viii) To the best of the Seller's knowledge, each Mortgage Loan at the time it was made and the related Loan Agreement complied in all material respects with applicable local, state and federal laws, including, without limitation, usury, equal credit opportunity, disclosure, recording and all applicable anti-predatory lending laws; (ix) A policy of hazard insurance and flood insurance, if applicable, was required from the Mortgagor for the Mortgage Loan when the Mortgage Loan was originated; (x) Each Mortgage Loan and each Loan Agreement is the legal, valid and binding obligation of the maker thereof and is enforceable in accordance with its terms, except only as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity (whether considered in a proceeding or action in equity or at law); (xi) No Mortgage Loan is subject to the Home Ownership and Equity Protection Act of 1994. Furthermore, no Mortgage Loan either currently has, or in the future will have, single premium life provisions as part of the Loan Agreement; 11 (xii) Each Initial Mortgage Loan has an associated CLTV of no higher than 100%; (xiii) There is no proceeding pending or threatened for the total or partial condemnation of the Mortgaged Property, nor is such a proceeding currently occurring; (xiv) The related Loan Agreement is not and has not been secured by any collateral, pledged account or other security except the lien of the corresponding Mortgage; (xv) With respect to each Initial Mortgage Loan and Subsequent Mortgage Loan, as applicable, the related Mortgage File contains or will contain each of the documents and instruments specified to be included therein; (xvi) With respect to each Mortgage Loan that is not a first mortgage loan, either (i) no consent for the Mortgage Loan is required by the holder or holders of the related prior lien, (ii) such consent has been obtained and is contained in the related Mortgage File or (iii) no consent for the Mortgage Loan was required by relevant law; (xvii) The Mortgaged Property is located in the state identified in the Mortgage Loan Schedule and consists of a single parcel of real property with a residential dwelling erected thereon; (xviii) The related Mortgage contains customary and enforceable (subject to clause (x)) provisions which render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security, including, (i) in the case of a Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise by judicial foreclosure. There is no homestead or other exemption available to the Mortgagor which would materially interfere with the right to sell the Mortgaged Property at a trustee's sale or the right to foreclose the Mortgage; (xix) To the best of the Seller's knowledge, there is no default, breach, violation or event of acceleration existing under the Mortgage or the related Loan Agreement and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration; and the Seller has not waived any default, breach, violation or event of acceleration; (xx) At origination, each Initial Mortgage Loan has a draw period of not less than 60 months; (xxi) The Loan Agreement with respect to each Initial Mortgage Loan bears an adjustable Loan Rate with an index plus a margin that equals a rate per annum of no less than Prime minus 1.00%; (xxii) To the best of the Seller's knowledge, there are no mechanics' or similar liens or claims which have been filed for work, labor or material affecting the related Mortgaged Property which are, or may be liens prior or equal to the lien of the related Mortgage, except liens which are fully insured against by a title insurance policy referred to in clause (xxiv) below; 12 (xxiii) As of the Cut-Off Date or the related Subsequent Cut-Off Date, as applicable, no Mortgage Loan was 30 days or more delinquent in payment of principal or interest or the subject of a bankruptcy proceeding; (xxiv) A title search or other assurance of title customary in the relevant jurisdiction was obtained with respect to each Mortgage Loan; (xxv) Each original Mortgage was recorded, and all subsequent assignments of the original Mortgage required to be delivered to the Servicer pursuant to Section 2.1 have been recorded in the appropriate jurisdictions wherein such recordation is necessary to perfect the lien thereof (or are in the process of being recorded in accordance with local law); (xxvi) The Seller has not transferred the Mortgage Loans to the Purchaser with any intent to hinder, delay or defraud any of its creditors; (xxvii) No selection procedure reasonably believed by the Seller to be adverse to the interests of the Securityholders was utilized in selecting the Mortgage Loans; (xxviii) The Minimum Monthly Payment with respect to any Mortgage Loan is not less than the interest accrued at the applicable Loan Rate on the average daily Principal Balance during the interest period relating to the date on which such Minimum Monthly Payment is due; (xxix) The Seller has not received a notice of default of any senior mortgage loan related to a Mortgaged Property which has not been cured by a party other than the Seller; (xxx) No instrument of release or waiver has been executed in connection with the Mortgage Loans, and no Mortgagor has been released, in whole or in part, from its obligations in connection therewith; (xxxi) Each Mortgage Loan has been originated by the Seller in compliance in all material respects with the Seller's internal underwriting policies as in effect on the date of origination of such Mortgage Loan; (xxxii) Other than provisions relating to "promotional Finance Charges" and "promotional Advances," as each such term is used in the related Loan Agreements, or any similar terms used in any of the related Loan Agreements, there are no provisions in any of the related Loan Agreements that would interfere with the allocation provisions of the second sentence of Section 2.4; (xxxiii) No "Promotional Advances," as such term is used in the related Loan Agreements or any other similar type of advance that would be entitled to an allocation of payment contrary to the second sentence of Section 2.4 will be extended under any Mortgage Loan after the date on which the Rapid Amortization Period commences; (xxxiv) None of the Loan Agreements that constitute or evidence the Mortgage Loans has any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Purchaser; 13 (xxxv) None of the Mortgage Loans are "high cost home loans" under the Georgia Fair Lending Act, as amended, and no Mortgage Loans that are secured by mortgaged property in Georgia and were originated between October 1, 2002 and March 7, 2003 are subject to the Georgia Fair Lending Act; (xxxvi) None of the Mortgage Loans are "high cost home loans" under the New York Predatory Lending Law, codified as N.Y. Banking Law ss.6-I, N.Y. Gen. Bus. Law ss.771-a, and N.Y. Real Prop. Acts Law ss.1302; (xxxvii) As of the Cut-Off Date, the minimum CLTV of a Mortgage Loan is 2.00%, the highest CLTV of a Mortgage Loan is 100.00% and the weighted average CLTV for the Mortgage Loans is approximately 77.94%; (xxxviii) As of the Cut-Off Date, no more than approximately 19% of the Mortgage Loans, by Cut-Off Date Principal Balance, are secured by Mortgaged Properties which may have been appraised using a statistical property evaluation method provided by CASA(R); (xxxix) As of the Cut-Off Date, no more than approximately 10% of the Mortgage Loans, by Cut-Off Date Principal Balance, are secured by Mortgaged Properties which may have been appraised using a statistical property evaluation method provided by vendors other than CASA; (xl) As of the Cut-Off Date, the Loan Rates on the Mortgage Loans range between 3.000% per annum and 9.250% per annum. As of the Cut-Off Date, the weighted average Loan Rate for the Mortgage Loans is approximately 4.118% per annum; (xli) As of the Cut-Off Date, no more than approximately 20.55%, 18.61%, 16.16%, 12.20% and 10.11% of the Mortgage Loans, by Cut-Off Date Principal Balance, are secured by Mortgaged Properties located in Florida, New Jersey, Pennsylvania, North Carolina and Virginia, respectively; (xlii) (A) Each Mortgaged Property consists of a single parcel of real property with a single family or multi-family residence erected thereon, or an individual condominium unit or agricultural property with a residence erected thereon. (B) With respect to the Mortgage Loans, (a) approximately 3.46% (by Cut-Off Date Principal Balance) are secured by real property improved by individual condominium units, (b) approximately 92.87% (by Cut-Off Date Principal Balance) are secured by real property with a single family residence erected thereon, (c) approximately 3.64% (by Cut-Off Date Principal Balance) are secured by real property with a multi-family residence erected thereon and (3) approximately 0.03% are secured by agricultural property with a residence thereon; (xliii) As of the Cut-Off Date, (i) no more than approximately 57.97% of the Mortgage Loans, by Cut-Off Date Principal Balance, are secured by second liens and (ii) no more than approximately 1.39% of the Mortgage Loans, by Cut-Off Date Principal Balance, are secured by third liens; (xliv) As of the Cut-Off Date, no Mortgage Loan had a Principal Balance less than $5,004.68 and no Mortgage Loan had a Principal Balance in excess of $818,686.31; 14 (xlv) Each Mortgage Loan has been serviced since its origination in compliance with all applicable federal, state and local laws; (xlvi) No Mortgage Loan is scheduled to mature later than October 27, 2043; (xlvii) Each Mortgage Loan contains a provision for the acceleration of payment of the unpaid Principal Balance of the related Mortgage Loan in the event that the property securing such Mortgage Loan is sold or transferred without the prior written consent of the Mortgagee thereunder; (xlviii) As of the Cut-Off Date, no Mortgagor was the subject of any bankruptcy proceedings; (xlix) None of the Mortgage Loans were originated in the States of Maine or Nevada; (l) No Mortgage Loan provides for a prepayment premium; (li) The margin for the Mortgage Loans (which margin, when added to the applicable current index, establishes the interest rate to be paid to the applicable Mortgage Loans) ranges from -1.000% to 5.499%; (lii) The Pool Balance of the Initial Mortgage Loans as of the Cut-Off Date is $500,007,015.50; and (liii) No more than 5.58% (by Cut-Off Date Principal Balance) of the Initial Mortgage Loans are secured by non-primary residences. (c) As to each Subsequent Mortgage Loan as of the related Subsequent Cut-Off Date: (i) the original stated term to maturity of the Subsequent Mortgage Loan will not exceed 480 months; (ii) the Subsequent Mortgage Loan must have an outstanding Principal Balance of at least $1,000 and no more than $1,000,000 as of the Subsequent Cut-Off Date; (iii) the Subsequent Mortgage Loan will be underwritten substantially in accordance with the criteria used with respect to the Initial Mortgage Loans; (iv) the Subsequent Mortgage Loan shall not provide for negative amortization; and (v) following the purchase of the Subsequent Mortgage Loan by the Purchaser, the Mortgage Loans must have a weighted average Gross Margin, a weighted average remaining term to maturity and a weighted average CLTV Ratio at origination, as of each respective Subsequent Cut-Off Date, which would not vary materially from the Initial Mortgage Loans. 15 (d) Upon notice from the Purchaser, the Enhancer, the Owner Trustee, the Indenture Trustee or the Servicer, as applicable, of a breach of the Seller's respective representations or warranties in paragraph (a) above that materially and adversely affects the interests of the Securityholders or the Enhancer in any Mortgage Loan, the Seller shall, within 90 days of its discovery or its receipt of notice of such breach, either (i) cure such breach in all material respects or (ii) to the extent that such breach is with respect to a Mortgage Loan or a Related Document, either (A) repurchase such Mortgage Loan from the Purchaser or its assignee at the Repurchase Price, or (B) substitute one or more Eligible Substitute Loans for such Mortgage Loan, in each case in the manner and subject to the conditions and limitations set forth below. Upon discovery by the Seller or upon notice from the Purchaser, the Enhancer, the Owner Trustee, the Indenture Trustee or the Servicer, as applicable, of a breach of the Seller's representations or warranties in paragraphs (b) or (c) above, with respect to any Mortgage Loan, or upon the occurrence of a Repurchase Event, that materially and adversely affects the interests of the Securityholders, the Enhancer or the Purchaser in such Mortgage Loan (notice of which shall be given to the Purchaser by the Seller if it discovers the same), notwithstanding such Seller's lack of knowledge with respect to the substance of such representation and warranty, the Seller shall, within 90 days after the earlier of its discovery or receipt of notice thereof, either cure such breach or Repurchase Event in all material respects or either (i) repurchase such Mortgage Loan from the Purchaser or its assignee at the Repurchase Price, or (ii) substitute one or more Eligible Substitute Loans for such Mortgage Loan, in each case in the manner and subject to the conditions set forth below. The Repurchase Price for any such Mortgage Loan repurchased by the Seller shall be deposited or caused to be deposited by the Seller into the Custodial Account. If the breach of representation and warranty that gave rise to the obligation to repurchase or substitute a Mortgage Loan pursuant to this Section (d) was the representation and warranty set forth in clause (viii) of Section 3.1(b), then the Seller shall pay to the Issuer on behalf of the Trust Estate, concurrently with and in addition to the remedies provided in the preceding sentence, an amount equal to any liability, penalty or expense that was actually incurred and paid out of or on behalf of the Trust Estate, and that directly resulted from such breach, or if incurred and paid by the Trust Estate thereafter, concurrently with such payment. In the event that the Seller elects to substitute an Eligible Substitute Loan or Loans for a Deleted Loan pursuant to this Section 3.1, the Seller shall deliver to the Servicer on behalf of the Issuer, with respect to such Eligible Substitute Loan or Loans, the original Loan Agreement and all other documents and agreements as are required by Section 2.1(d), with the Loan Agreement endorsed as required by Section 2.1(d). No substitution will be made in any calendar month after the Determination Date for such month. Minimum Monthly Payments due with respect to Eligible Substitute Loans in the month of substitution shall not be part of the Trust Estate and will be retained by the Servicer and remitted by the Servicer to the Seller on the next succeeding Payment Date, provided that a payment at least equal to the applicable Minimum Monthly Payment for such month in respect of the Deleted Loan has been received by the Issuer. For the month of substitution, distributions to the Note Payment Account pursuant to the Servicing Agreement will include the Minimum Monthly Payment due on a Deleted Loan for such month and thereafter the Seller shall be entitled to retain all amounts received in respect of such Deleted Loan. The Servicer shall amend or cause to be amended the Mortgage Loan Schedule to reflect the removal of such Deleted Loan and the substitution of the Eligible Substitute Loan or Loans and the Servicer shall deliver the amended Mortgage Loan Schedule to the Owner Trustee and the Indenture Trustee. Upon such substitution, the Eligible Substitute Loan or Loans shall be subject to the terms of this 16 Agreement in all respects, the Seller shall be deemed to have made the representations and warranties with respect to the Eligible Substitute Loan contained herein set forth in Section 3.1(b), in each case, as of the date of substitution, and the Seller shall be deemed to have made a representation and warranty that each Mortgage Loan so substituted is an Eligible Substitute Loan as of the date of substitution. The Seller shall be obligated to repurchase or substitute for any Eligible Substitute Loan as to which a Repurchase Event has occurred or as to which the Seller has breached the Seller's representations and warranties in Section 3.1(b), in each case to the same extent as for any other Mortgage Loan, as provided herein. In connection with the substitution of one or more Eligible Substitute Loans for one or more Deleted Loans, the Servicer shall determine the Substitution Adjustment Amount and the Seller shall deposit such Substitution Adjustment Amount into the Custodial Account on the date of substitution, without any reimbursement therefor. Upon receipt by the Indenture Trustee on behalf of the Issuer of written notification, signed by a Servicing Officer, of the deposit of such Repurchase Price or of such substitution of an Eligible Substitute Loan (together with the complete related Mortgage File) and deposit of any applicable Substitution Adjustment Amount as provided above, the Servicer, on behalf of the Indenture Trustee, shall release to the Seller the related Mortgage File for the Mortgage Loan being repurchased or substituted for and the Indenture Trustee on behalf of the Issuer shall execute and deliver such instruments of transfer or assignment prepared by the Servicer, in each case without recourse, as shall be necessary to vest in the Seller or its respective designee such Mortgage Loan released pursuant hereto and thereafter such Mortgage Loan shall not be an asset of the Purchaser or the Issuer or part of the Trust Estate. It is understood and agreed that the obligation of the Seller to cure any breach of the Seller's representation and warranties in paragraphs (b) or (c) above, or to repurchase or substitute for any Mortgage Loan as to which such a breach has occurred and is continuing, shall constitute the sole remedy respecting such breach available to the Purchaser, the Issuer, the Enhancer (other than with respect to rights of the Enhancer under the Insurance Agreement), the Certificateholders (or the Owner Trustee on behalf of the Certificateholders) and the Noteholders (or the Indenture Trustee on behalf of the Noteholders) against the Seller. It is understood and agreed that the representations and warranties set forth in this Section 3.1 shall survive delivery of the respective Mortgage Files to the Issuer or the Servicer. ARTICLE IV SELLER'S COVENANTS Section 4.1 Covenants of the Seller. The Seller hereby agrees and ------------------------- covenants that: (a) except for the transfer hereunder, or under the related Subsequent Transfer Agreement, as applicable, the Seller will not sell, pledge, assign or transfer to any other Person, or grant, create, incur or assume any Lien on any Mortgage Loan or other Transferred Property, or any interest in the foregoing, except with respect to any Excluded Draw; (b) the Seller shall not convey, pledge or sell any Excluded Draw unless the Seller delivers an Opinion of Counsel to the Enhancer that such conveyance will not cause the Trust to become a taxable mortgage pool; 17 (c) the Seller shall notify the Purchaser and the Indenture Trustee of the existence of any Lien (other than as provided above) arising through or under the Seller on any Mortgage Loan immediately upon discovery thereof; and the Seller shall defend the right, title and interest of the Purchaser and the Indenture Trustee in, to and under the Mortgage Loans and other Transferred Property against all claims of third parties claiming through or under the Seller; and (d) in a sale of the Trust Estate upon an Event of Default pursuant to the Indenture, the Indenture Trustee shall have the right to sell all Excluded Draws in connection with such sale, provided that the Seller receives an amount equal to the fair market value for such Excluded Draws upon such sale. ARTICLE V [RESERVED] ARTICLE VI LIMITATION OF LIABILITY Section 6.1 Limitation on Liability of the Seller. None of the ------------------------------------------ directors, officers, employees or agents of the Seller shall be under any liability to the Purchaser, it being expressly understood that all such liability is expressly waived and released as a condition of, and as consideration for, the execution of this Agreement and any Subsequent Transfer Agreement. Except (i) with respect to its breach of any of its representations, warranties, or covenants herein, and (ii) as and to the extent expressly provided in this Agreement, the Seller shall not be under any liability to the Owner Trustee, the Indenture Trustee or the Securityholders. The Seller and any director, officer, employee or agent of the Seller may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder. ARTICLE VII TERMINATION Section 7.1 Termination. The obligations and responsibilities of the ----------- parties hereto shall terminate upon the termination of the Trust Agreement. ARTICLE VIII MISCELLANEOUS PROVISIONS Section 8.1 Amendment. This Agreement may be amended from time to time --------- by the parties hereto by written agreement with the prior written consent of the Enhancer, which consent shall not unreasonably be withheld. Section 8.2 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND -------------- CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICTS OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW) 18 AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 8.3 Notices. All demands, notices and communications hereunder ------- shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by certified mail, returned receipt requested and postage prepaid, addressed as follows: (i) if to the Seller: Wachovia Bank, National Association One Wachovia Center 18th Floor 301 College Street Charlotte, North Carolina 28288-0572 Attention: David Mason Re: Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust Telephone: (704) 383-6931 Facsimile: (704) 383-3878 (ii) if to the Purchaser: Wachovia Asset Securitization Issuance, LLC One Wachovia Center 301 South College Street, Suite D Charlotte, North Carolina 28288-5578 Attention: Robert J. Perret Re: Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust Telephone: (704) 374-4868 Facsimile: (704) 383-8121 (iii)if to the Issuer: c/o Wilmington Trust Company, as Owner Trustee Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration Re: Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust; or (iv) if to the Indenture Trustee: U.S. Bank National Association 60 Livingston Avenue EP-MN-WS3D St. Paul, Minnesota 55107-2292 Re: Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust 19 (v) if to the Enhancer: MBIA Insurance Corporation 113 King Street Armonk, New York 10504 Attention: Insured Portfolio Management--Structured Telephone: (914) 273-4545 Facsimile: (914) 765-3810; or, with respect to any of the foregoing Persons, at such other address as may hereafter be furnished to the other foregoing Persons in writing in accordance with this Section 8.3. Section 8.4 Severability of Provisions. If any one or more of the ---------------------------- covenants, agreements, provisions or terms of this Agreement shall be held invalid for any reason whatsoever, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement. Section 8.5 Relationship of Parties. Nothing herein contained shall be ----------------------- deemed or construed to create a partnership or joint venture among the parties hereto. Section 8.6 Counterparts. This Agreement may be executed in any number ------------ of counterparts, each of which, when so executed, shall be deemed to be an original and such counterparts, together, shall constitute one and the same agreement. Section 8.7 Further Agreements. The parties hereto each agree to ------------------- execute and deliver to the other such additional documents, instruments or agreements as may be necessary or appropriate to effectuate the purposes of this Agreement. Section 8.8 Intention of the Parties. It is the intention of the -------------------------- parties hereto that the Purchaser will be purchasing on the Closing Date, and the Seller will be selling on the Closing Date, the Initial Mortgage Loans, rather than the Purchaser providing a loan to the Seller secured by the Initial Mortgage Loans on the Closing Date; and that the Purchaser will be purchasing on each Subsequent Transfer Date, and the Seller will be selling on each Subsequent Transfer Date, the related Subsequent Mortgage Loans, rather than the Purchaser providing a loan to the Seller secured by the related Subsequent Mortgage Loans on each Subsequent Transfer Date. The Purchaser shall have the right to review the Mortgage Loans and the Related Documents to determine the characteristics of the Mortgage Loans which will affect the federal income tax consequences of owning the Mortgage Loans, and the Seller shall cooperate with all reasonable requests made by the Purchaser in the course of such review. 20 Section 8.9 Successors and Assigns; Assignment of this Agreement. ---------------------------------------------------- (a) This Agreement shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective permitted successors and assigns. The obligations of the Seller under this Agreement cannot be assigned or delegated to a third party without the consent of the Enhancer and the Purchaser (and the Issuer with respect to the transfer of the Subsequent Mortgage Loans), which consent shall be at each of the Enhancer, the Purchaser, and the Issuer's sole discretion, provided that the Seller may assign its obligations hereunder to any Affiliate of the Seller, to any Person succeeding to the business of the Seller, to any Person into which the Seller is merged and to any Person resulting from any merger, conversion or consolidation to which the Seller is a party. (b) As an inducement to the Purchaser to purchase the Initial Mortgage Loans and the Subsequent Mortgage Loans, the Seller acknowledges and consents to the Purchaser's transfer of its interest in this Agreement and each Subsequent Transfer Agreement to which it is a party to the Issuer pursuant to the Servicing Agreement and each related Subsequent Transfer Agreement executed by the Depositor and the Issuer, the grant of a security interest in such interest by the Issuer to the Indenture Trustee pursuant to the Indenture and the enforcement by the Indenture Trustee or the Servicer on behalf of the Indenture Trustee or the Issuer, of any right or remedy against the Seller pursuant to this Agreement. Such enforcement of a right or remedy by the Owner Trustee, the Indenture Trustee or the Servicer on behalf of the Indenture Trustee or the Issuer, as applicable, shall have the same force and effect as if the right or remedy had been enforced or exercised by the Purchaser directly. Section 8.10 Survival. The representations and warranties made herein -------- by the Seller and the provisions of Article VI hereof shall survive the purchase of the Initial Mortgage Loans hereunder and any transfer of Subsequent Mortgage Loans pursuant to this Agreement and the related Subsequent Transfer Agreement. Section 8.11 Third-Party Beneficiary. The Enhancer shall be an express ----------------------- third-party beneficiary hereof and shall be entitled to enforce the provisions of this Agreement as if a party hereto. 21 IN WITNESS WHEREOF, the parties hereto have caused their names to be signed to this Mortgage Loan Purchase Agreement by their respective officers thereunto duly authorized as of the day and year first above written. WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC, as Purchaser By: /s/ Robert J. Perret ------------------------------------- Name: Robert J. Perret Title: Vice President WACHOVIA BANK, NATIONAL ASSOCIATION, as Seller and Servicer By: /s/ David T. Mason ------------------------------------- Name: David T. Mason Title: Vice President Acknowledged and Accepted: U.S. Bank National Association, not in its individual capacity but solely as Indenture Trustee By: /s/ Shannon M. Rantz -------------------------------------- Name: Shannon M. Rantz Title: Assistant Vice President [Signature Page Mortgage Loan Purchase Agreement] EXHIBIT 1 MORTGAGE LOAN SCHEDULE EXHIBIT 2 FORM OF SUBSEQUENT TRANSFER AGREEMENT Pursuant to this Subsequent Transfer Agreement No.[___] (the "Agreement"), dated as of [___________, ____], between Wachovia Bank, National Association, as seller (the "Seller"), and Wachovia Asset Securitization Issuance, LLC (the "Purchaser") and pursuant to the mortgage loan purchase agreement dated as of November 19, 2003 (the "Mortgage Loan Purchase Agreement"), between the Seller, as seller and servicer, and the Purchaser, as purchaser, the Seller and the Purchaser agree to the sale by the Seller and the purchase by the Purchaser of the mortgage loans listed on the attached Schedule of Subsequent Mortgage Loans (the "Subsequent Mortgage Loans"). Capitalized terms used and not defined herein have their respective meanings as set forth in Appendix A to the indenture dated as of November 19, 2003, among the Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust (the "Issuer"), U.S. Bank National Association, as indenture trustee (the "Indenture Trustee") and Wachovia Bank, National Association, as paying agent (the "Paying Agent"), which meanings are incorporated by reference herein. All other capitalized terms used herein shall have the meanings specified herein. Section 1. Sale of Subsequent Mortgage Loans. --------------------------------- (a) The Seller does hereby sell, transfer, assign, set over and convey to the Purchaser, without recourse (except as expressly provided herein and in the Mortgage Loan Purchase Agreement), all of its right, title and interest whether now owned or existing or hereafter created, arising, or acquired, in, to and under the following: (i) the Subsequent Mortgage Loans identified on the Mortgage Loan Schedule attached hereto as Attachment B (including the related Cut-Off Date Principal Balances now existing and all Additional Balances arising thereunder after the Subsequent Cut-Off Date through and including the date immediately preceding the commencement of the Rapid Amortization Period), all scheduled principal payments due on and after the Subsequent Cut-Off Date, all other payments of principal due and collected on and after the Subsequent Cut-Off Date, all payments of interest on the Subsequent Mortgage Loans due on or after the Subsequent Cut-Off Date, all interest accruing thereon, all monies due or to become due thereon and all collections in respect thereof received on or after the Subsequent Cut-Off Date; provided, however, that any Principal Balance represented by a Draw made during the Rapid Amortization Period and interest thereon and money due or to become due in respect thereof will not be or deemed to be transferred to the Purchaser, and the Seller in such event shall retain ownership of each Principal Balance represented by each such Draw and interest thereon and money due or to become due in respect thereof; (ii) the interest of the Seller in any insurance policies in respect of the Subsequent Mortgage Loans; (iii) the interest of the Seller in the Mortgages and the Loan Agreements related to each Subsequent Mortgage Loan and the other Related Documents and (iv) all proceeds of the foregoing; provided, however, that the Purchaser does not assume the obligation under any Loan Agreement to fund Draws by the Mortgagor thereunder or any other obligation arising under or related to the Related Documents, and the Purchaser shall not be obligated or permitted to fund any such Draws, it being agreed that the Seller will retain the obligation to fund future Draws. The Seller, contemporaneously with the delivery of this Agreement, has delivered or caused to be delivered to the Purchaser each item set forth in Section 2.2 of the Mortgage Loan Purchase Agreement. The transfer to the Purchaser by the Seller of the Subsequent Mortgage Loans identified on the Mortgage Loan Schedule is intended by the parties hereto to constitute a sale by the Seller to the Purchaser on the Subsequent Transfer Date of all the Seller's right, title and interest in and to the Subsequent Mortgage Loans and the other Subsequent Transferred Property, including for accounting purposes, and not a secured borrowing. In the event the transactions set forth herein are deemed not to be a sale, the Seller hereby grants to the Purchaser a security interest in the Subsequent Transferred Property to secure all of the Seller's obligations hereunder, and this Agreement shall and hereby does constitute a security agreement under applicable law. The Seller agrees to take or cause to be taken such actions and to execute such documents, including without limitation the authorization and filing of any continuation statements with respect to the UCC financing statements filed with respect to the Subsequent Mortgage Loans by the Purchaser on the related Subsequent Transfer Date, if any, and any amendments thereto required to reflect a change in the name or corporate structure of the Seller or the filing of any additional UCC financing statements due to the change in the principal office or jurisdiction of organization of the Seller as are necessary to perfect and protect the Purchaser's interests in the Subsequent Transferred Property. The Seller shall file any such continuation statements or amendments on a timely basis. (b) The expenses and costs relating to the delivery of the Subsequent Mortgage Loans and the related Subsequent Transferred Property, this Agreement and the Mortgage Loan Purchase Agreement shall be borne by the Seller. (c) The Purchaser, by execution of this Agreement, acknowledges its acceptance of all of the Seller's right, title and interest to the Subsequent Mortgage Loans and the other related Subsequent Transferred Property. (d) Additional terms of the sale are set forth on Attachment A hereto. Section 2. Representations and Warranties; Conditions Precedent. ---------------------------------------------------- (a) The Seller hereby affirms the representations and warranties made by it and set forth in Section 3.1 of the Mortgage Loan Purchase Agreement that relate to the Seller or the Subsequent Mortgage Loans as of the date hereof. The Seller hereby confirms that each of the conditions set forth in Section 2.2(b) of the Mortgage Loan Purchase Agreement are satisfied as of the date hereof and further represents and warrants that the Mortgage Loan Schedule attached hereto is accurate as of the Subsequent Cut-Off Date. (b) The Seller is solvent, is able to pay its debts as they become due and has capital sufficient to carry on its business and its obligations hereunder; it will not be rendered insolvent by the execution and delivery of this instrument or by the performance of its obligations hereunder nor is it aware of any pending insolvency; no petition of bankruptcy (or similar insolvency proceeding) has been filed by or against the Seller prior to the date hereof. (c) All terms and conditions of the Mortgage Loan Purchase Agreement relating to the Subsequent Mortgage Loans are hereby ratified and confirmed; provided, however, that in the event Exhibit 2-2 of any conflict the provisions of this Agreement shall control over the conflicting provisions of the Mortgage Loan Purchase Agreement. Section 3. GOVERNING LAW. THIS INSTRUMENT SHALL BE CONSTRUED IN -------------- ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICTS OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 4. Counterparts. This Instrument may be executed in ------------ counterparts, each of which, when so executed, shall be deemed to be an original and together shall constitute one and the same instrument. Section 5. Successors and Assigns. This Agreement shall inure to the ---------------------- benefit of and be binding upon the Seller and the Purchaser and their respective successors and assigns. WACHOVIA BANK, NATIONAL ASSOCIATION, as Seller By: ------------------------------------ Name: Title: WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC, as Purchaser By: ------------------------------------ Name: Title: Acknowledged and Accepted: U.S. Bank National Association, not in its individual capacity but solely as Indenture Trustee By: ------------------------------------ Name: Title: Exhibit 2-3 Attachments ----------- A. Additional terms of sale. B. Schedule of Subsequent Mortgage Loans. C. Seller's Officer's Certificate. Exhibit 2-4 WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC ATTACHMENT A TO FORM OF SUBSEQUENT TRANSFER AGREEMENT ______________, ___ A. 1. Subsequent Cut-Off Date: 2. Pricing Date: 3. Subsequent Transfer Date: 4. Aggregate Principal Balance of the Subsequent Mortgage Loans as of the Subsequent Cut-Off Date: 5. Purchase Price: 100.00% B. As to all Subsequent Mortgage Loans: 1. Longest stated term to maturity: _____ months 2. Minimum Loan Rate: _____% 3. Maximum Loan Rate: _____% 8 EXHIBIT 3 FORM OF ADDITION NOTICE DATE: U.S. Bank National Association Moody's Investors Service, Inc. as Indenture Trustee 99 Church Street 60 Livingston Avenue New York, New York 10007 EP-MN-WS3D St. Paul, Minnesota 55107-2292 Wachovia Asset Securitization Issuance, Wilmington Trust Company, LLC One Wachovia Center as Owner Trustee 301 South College Street, Suite D Rodney Square North Charlotte, North Carolina 28288-5578 1100 North Market Street Wilmington, Delaware 19890-0001 Standard & Poor's, a division of MBIA Insurance Corporation The McGraw-Hill Companies, Inc. 113 King Street 26 Broadway Armonk, New York 10504 New York, New York 10004-1064 Attention: Structured Finance-- Mortgage Backed (Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust) Re: WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC ------------------------------------------- Ladies and Gentlemen: Pursuant to Section 2.2 of the mortgage loan purchase agreement dated as of November 19, 2003 (the "Purchase Agreement"), between Wachovia Bank, National Association, as Seller and Servicer and Wachovia Asset Securitization Issuance, LLC, as Purchaser, the Seller has designated the Subsequent Mortgage Loans identified on the Mortgage Loan Schedule attached hereto to be sold to the Purchaser on [ , ], with an aggregate Principal Balance of $[ ]. Capitalized terms not otherwise defined herein have the meaning set forth in the Appendix A to the indenture dated as of November 19, 2003, among Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, U.S. Bank National Association, as indenture trustee, and Wachovia Bank, National Association, as paying agent. Please acknowledge, as Purchaser, your receipt of this notice by countersigning the enclosed copy in the space indicated below and returning it to the attention of the undersigned. Very truly yours, WACHOVIA BANK, NATIONAL ASSOCIATION, as Seller By: ------------------------------------ Name: Title: WACHOVIA ASSET SECURITIZATION ISSUANCE, LLC, as Purchaser By: ------------------------------------ Name: Title: 7 EXHIBIT 4 FORM OF INITIAL CERTIFICATION [_______], 200[_] U.S. Bank National Association MBIA Insurance Corporation as Indenture Trustee 113 King Street 60 Livingston Avenue Armonk, New York 10504 EP-MN-WS3D Attention: Wachovia Asset St. Paul, Minnesota 55107-2292 Securitization Issuance, LLC Attention: Corporate Trust Services 2003-HE3 Trust Re: Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust ---------------------------------------------------------- Ladies and Gentlemen: In accordance with Section 2.1 of the mortgage loan purchase agreement dated as of November 19, 2003 (the "Purchase Agreement"), between Wachovia Bank, National Association, as Seller and Servicer and Wachovia Asset Securitization Issuance, LLC, as Purchaser, the undersigned, as Servicer, hereby certifies that it has received the following with respect to each Initial Mortgage Loan listed in the Mortgage Loan Schedule: Except for the exceptions listed on the schedule attached hereto, the Mortgage File for each of the Mortgage Loans includes all documents specified in Section 2.1(d) of the Purchase Agreement. Capitalized terms not otherwise defined herein have the meaning set forth in the Appendix A to the indenture dated as of November 19, 2003, between the Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, U.S. Bank National Association, as indenture trustee, and Wachovia Bank, National Association, as paying agent. WACHOVIA BANK, NATIONAL ASSOCIATION, as Servicer By: ------------------------------------ Name: Title: 8 EXHIBIT 5 FORM OF FINAL CERTIFICATION [ ], 200[ ] U.S. Bank National Association MBIA Insurance Corporation as Indenture Trustee 113 King Street 60 Livingston Avenue Armonk, New York 10504 EP-MN-WS3D Attention: Wachovia Asset St. Paul, Minnesota 55107-2292 Securitization Issuance, LLC Attention: Corporate Trust Services 2003-HE3 Trust Re: Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust ---------------------------------------------------------- Ladies and Gentlemen: In accordance with Section 2.1 of the mortgage loan purchase agreement dated as of November 19, 2003 (the "Purchase Agreement"), between Wachovia Bank, National Association, as Seller and Servicer and Wachovia Asset Securitization Issuance, LLC, as Purchaser, the undersigned, as Servicer, hereby certifies that it has received the following with respect to each Initial Mortgage Loan listed in the Mortgage Loan Schedule: Except for the exceptions listed on the schedule attached hereto, the Mortgage File for each of the Mortgage Loans includes all documents specified in Section 2.1(d) of the Purchase Agreement. Capitalized terms not otherwise defined herein have the meaning set forth in the Appendix A to the indenture dated as of November 19, 2003, between the Wachovia Asset Securitization Issuance, LLC 2003-HE3 Trust, U.S. Bank National Association, as indenture trustee, and Wachovia Bank, National Association, as paying agent. WACHOVIA BANK, NATIONAL ASSOCIATION, as Servicer By: ------------------------------------ Name: Title: 1-1 SCHEDULE A TO EXHIBIT 5 EXCEPTIONS TO FINAL CERTIFICATION 1-1

WACHOVIA ASSET SECURITIZATION IISSUANCE LLC 8-K