MID STATE TRUST VI
S-11/A, 1997-05-29
INVESTORS, NEC
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<PAGE>
   
      AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1997
    
 
                                                      REGISTRATION NO. 333-23667
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
   
                         PRE-EFFECTIVE AMENDMENT NO. 4
                                       TO
                                   FORM S-11
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
    
                            ------------------------
 
                               MID-STATE TRUST VI
                   (Name of trust issuing Asset Backed Notes)
                  OF WHICH MID-STATE HOMES, INC. IS DEPOSITOR
      (Exact name of registrant as specified in its governing instruments)
                            ------------------------
 
                               MID-STATE TRUST VI
                          C/O WILMINGTON TRUST COMPANY
                            1100 NORTH MARKET STREET
                           WILMINGTON, DELAWARE 19890
                                 (302) 651-1000
                    (Address of principal executive offices)
                            ------------------------
 
                           WILMINGTON TRUST COMPANY,
                     AS OWNER TRUSTEE OF MID-STATE TRUST VI
                            1100 NORTH MARKET STREET
                           WILMINGTON, DELAWARE 19890
                                 (302) 651-1000
                   ATTENTION: CORPORATE TRUST ADMINISTRATION
                    (Name and address of agent for service)
                            ------------------------
 
      THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
 
<TABLE>
<S>                               <C>                               <C>
    JORDAN M. SCHWARTZ, ESQ.           EDWARD A. PORTER, ESQ.           RENWICK D. MARTIN, ESQ.
     PATRICK T. QUINN, ESQ.            MID-STATE HOMES, INC.                BROWN & WOOD LLP
 CADWALADER, WICKERSHAM & TAFT     1500 NORTH DALE MABRY HIGHWAY         ONE WORLD TRADE CENTER
        100 MAIDEN LANE                 TAMPA, FLORIDA 33607            NEW YORK, NEW YORK 10048
    NEW YORK, NEW YORK 10038               (813) 871-4811                    (212) 839-5300
         (212) 504-6000
</TABLE>
 
                            ------------------------
 
    APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
 
    If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
 
    If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
 
    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
                            ------------------------
 
                        CALCULATION OF REGISTRATION FEE
 
<TABLE>
<CAPTION>
                                                                        PROPOSED MAXIMUM    PROPOSED MAXIMUM
        TITLE OF EACH CLASS OF SECURITIES              AMOUNT TO       OFFERING PRICE PER  AGGREGATE OFFERING      AMOUNT OF
                TO BE REGISTERED                     BE REGISTERED            UNIT               PRICE*         REGISTRATION FEE
<S>                                                <C>                 <C>                 <C>                 <C>
Mid-State Trust VI Asset Backed Notes**               $439,150,000            100%            $439,150,000       $133,075.76***
</TABLE>
 
  * Estimated for the purpose of calculating the registration fee.
 
 ** This Registration Statement also registers an indeterminate amount of Notes
    to be sold by Lehman Brothers Inc. in market making transactions, to the
    extent required.
 
   
*** Previously paid.
    
                            ------------------------
 
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
                             CROSS-REFERENCE SHEET
 
<TABLE>
<CAPTION>
ITEM AND CAPTION
IN FORM S-11                                                                           IN PROSPECTUS
- -----------------------------------------------------------------  ------------------------------------------------------
<C>        <S>                                                     <C>
       1.  Forepart of Registration Statement and Outside Front
             Cover Page of Prospectus............................  Outside Front Cover
       2.  Inside Front and Outside Back Cover Pages of
             Prospectus..........................................  Inside Front Cover; Outside Back Cover
       3.  Summary Information, Risk Factors and Ratio of
             Earnings to Fixed Charges...........................  Summary of Terms; Risk Factors
       4.  Determination of Offering Price.......................                            *
       5.  Dilution                                                                          *
       6.  Selling Security Holders..............................                            *
       7.  Plan of Distribution..................................  Plan of Distribution
       8.  Use of Proceeds.......................................  Summary of Terms; Use of Proceeds
       9.  Selected Financial Data...............................                            *
      10.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations.................                            *
      11.  General Information as to Registrant..................  The Issuer
      12.  Policy with Respect to Certain Activities.............  The Issuer; The Indenture; The Servicing Agreement
      13.  Investment Policies of Registrant.....................  The Issuer; The Indenture; The Accounts
      14.  Description of Real Estate............................  Security; The Accounts
      15.  Operating Data........................................                            *
      16.  Tax Treatment of Registrant and its Security
             Holders.............................................  Material Federal Income Tax Consequences
      17.  Market Price of and Dividends on the Registrant's
             Common Equity and Related Stockholder Matters.......                            *
      18.  Description of Registrant's Securities................  Outside Front Cover; Summary of Terms; The Issuer;
                                                                     Description of the Notes; Security; The Indenture;
                                                                     Material Federal Income Tax Consequences
      19.  Legal Proceedings.....................................  Risk Factors
      20.  Security Ownership of Certain Beneficial Owners and
             Management..........................................  The Issuer
      21.  Directors and Executive Officers......................                            *
      22.  Executive Compensation................................                            *
      23.  Certain Relationships and Related Transactions........  The Issuer
      24.  Selection, Management and Custody of Registrant's
             Investments.........................................  The Issuer
      25.  Policies with Respect to Certain Transactions.........                            *
      26.  Limitations of Liability..............................  The Issuer
      27.  Financial Statements and Information..................                            *
      28.  Interests of Named Experts and Counsel................                            *
      29.  Disclosure of Commission Position on Indemnification
             for Securities Act Liabilities......................                            *
</TABLE>
 
- ------------------------
 
*   Omitted since item is not applicable, or answer is negative.
<PAGE>
PROSPECTUS
 
   
                    SUBJECT TO COMPLETION, DATED MAY 29, 1997
    
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
                                  $439,150,000
 
                               MID-STATE TRUST VI
 
              $287,750,000 [      ]% ASSET-BACKED NOTES, CLASS A-1
              $ 57,750,000 [      ]% ASSET-BACKED NOTES, CLASS A-2
              $ 45,100,000 [      ]% ASSET-BACKED NOTES, CLASS A-3
              $ 48,550,000 [      ]% ASSET-BACKED NOTES, CLASS A-4
                             ---------------------
                             MID-STATE HOMES, INC.
                                    SERVICER
                             ---------------------
 
    Mid-State Trust VI (the "Issuer" or the "Trust"), a business trust
established by Mid-State Homes, Inc. ("Mid-State," the "Depositor" or the
"Servicer"), is offering $439,150,000 aggregate principal amount of Asset Backed
Notes (the "Notes"). The Trust will issue four classes (each, a "Class") of
Notes, designated as the Class A-1, Class A-2, Class A-3 and Class A-4 Notes.
Interest on the Notes will be payable quarterly on each January 1, April 1, July
1 and October 1 (each, a "Payment Date"), commencing July 1, 1997. The amount of
interest payable on each Payment Date will equal the interest accrued during the
three-month period ending on the day prior to such Payment Date (each such
period, an "Interest Accrual Period"). On each Payment Date, subject to the
availability of funds, a payment of principal of the Notes, in the amount
described herein, will be applied to the Notes. See "DESCRIPTION OF THE
NOTES--Interest and Principal Payments."
 
    The Notes will be secured by (i) certain building and installment sale
contracts, promissory notes, related mortgages and other security agreements
(the "Accounts") owned directly or indirectly by the Depositor (collectively,
the "Mortgage Collateral") on February 28, 1997 (the "Cut-Off Date"), which will
be transferred to the Trust on the Closing Date (as defined under "Transaction
Summary" herein), and (ii) the Collection Account described herein under
"SECURITY--Collection Account".
 
    THE RIGHTS OF HOLDERS OF EACH CLASS OF NOTES OTHER THAN THE CLASS A-1 NOTES
TO RECEIVE PAYMENTS WILL, IN EACH CASE, BE SUBORDINATED TO THE RIGHTS OF HOLDERS
OF EACH CLASS WITH A HIGHER NUMERICAL CLASS DESIGNATION.
 
    The Notes may be redeemed on any Payment Date at the option of the Issuer if
the aggregate principal amount of each Class of Notes outstanding is less than
or equal to 10% of the original aggregate principal amount of such Class of
Notes. See "DESCRIPTION OF THE NOTES--Redemption of the Notes."
 
    There is currently no secondary market for the Notes. The underwriters named
herein under "Plan of Distribution" (the "Underwriters") intend to make a
secondary market in the Notes, but have no obligation to do so. There can be no
assurance that a secondary market for the Notes will develop or, if it does
develop, that it will continue. Further, no application will be made to list the
Notes on any securities exchange. Accordingly, the liquidity of the Notes may be
limited.
 
   
    PROSPECTIVE INVESTORS SHOULD CONSIDER AND REVIEW THE INFORMATION UNDER "RISK
FACTORS" ON PAGE 12.
    
 
   
    Capitalized terms used in this Prospectus are defined at the locations
identified in the "Index to Principal Defined Terms" beginning on page 69.
    
 
    It is a condition of issuance that the Class A-1 Notes be rated "Aaa" by
Moody's Investors Service, Inc. ("Moody's") and "AAA" by Standard & Poor's
Ratings Services ("Standard & Poor's"); the Class A-2 Notes be rated at least
"Aa2" by Moody's and "AA+" by Standard & Poor's; the Class A-3 Notes be rated at
least "A2" by Moody's and "AA" by Standard & Poor's; and the Class A-4 Notes be
rated at least "Baa2" by Moody's and "BBB" by Standard & Poor's.
                         ------------------------------
     THE NOTES REPRESENT OBLIGATIONS OF THE TRUST ONLY AND DO NOT REPRESENT
 OBLIGATIONS OF OR INTERESTS IN THE DEPOSITOR OR ANY AFFILIATE THEREOF.
           NEITHER THE NOTES NOR THE ACCOUNTS WILL BE INSURED OR
                 GUARANTEED BY ANY GOVERNMENTAL AGENCY OR
                      INSTRUMENTALITY OR ANY OTHER ENTITY.
                         ------------------------------
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
    AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
       COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
         ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
                              TO THE CONTRARY IS A CRIMINAL
                                    OFFENSE.
 
<TABLE>
<CAPTION>
                                                                                                            PROCEEDS TO
                                                      PRICE TO PUBLIC (1)     UNDERWRITING DISCOUNT      DEPOSITOR (1)(2)
<S>                                                 <C>                      <C>                      <C>
Per Class A-1 Note................................          [    ]%                  [    ]%                  [    ]%
Per Class A-2 Note................................          [    ]%                  [    ]%                  [    ]%
Per Class A-3 Note................................          [    ]%                  [    ]%                  [    ]%
Per Class A-4 Note................................          [    ]%                  [    ]%                  [    ]%
Total.............................................        $[        ]              $[        ]              $[        ]
</TABLE>
 
(1) Plus accrued interest, if any, from April 1, 1997.
(2) Before deducting expenses, estimated to be $1,149,000.
                         ------------------------------
 
   
    The Notes are offered by the Underwriters subject to prior sale, when, as
and if issued to and accepted by them and subject to the Underwriters' right to
reject orders in whole or in part. It is expected that delivery of the Notes
will be made in book-entry form only through the Same Day Funds Settlement
System of The Depository Trust Company on or about June   , 1997.
    
                         ------------------------------
 
LEHMAN BROTHERS
 
               DONALDSON, LUFKIN & JENRETTE
                            Securities Corporation
 
                               MERRILL LYNCH & CO.
 
                                             NATIONSBANC CAPITAL MARKETS, INC.
 
                                                          SALOMON BROTHERS INC
 
   
June   , 1997
    
<PAGE>
    CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES INCLUDING
OVER-ALLOTMENT, AND STABILIZING TRANSACTIONS IN SUCH SECURITIES, DURING AND
AFTER THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION."
 
    This Prospectus may be used by Lehman Brothers Inc., to the extent required,
in connection with market making transactions in the Notes. Lehman Brothers Inc.
may act as principal or agent in such transactions.
 
                             AVAILABLE INFORMATION
 
    The Issuer has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (including any amendments thereto) under
the Securities Act of 1933, as amended, with respect to the Notes. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete; with respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. The Registration Statement and such other reports and
information filed by the Issuer can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 7 World Trade Center, Suite 1300, New York, New York
10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The Commission also maintains a site on the World Wide Web at
"http://www.sec.gov" at which users can view and download copies of reports,
proxy and information statements and other information filed electronically
through the Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system.
The Issuer has filed the Registration Statement, including all exhibits thereto,
through the EDGAR system and therefore such materials should be available by
logging onto the Commission's Web site. The Commission maintains computer
terminals providing access to the EDGAR system at each of the offices referred
to above. Copies of such material also can be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
 
    The address of the principal executive offices of the Issuer is Mid-State
Trust VI, c/o Wilmington Trust Company, 1100 North Market Street, Wilmington,
Delaware 19890, Attention: Corporate Trust Administration and the telephone
number of the principal executive offices of the Issuer is (302) 651-1000.
 
                                       2
<PAGE>
                             REPORTS TO NOTEHOLDERS
 
    Unless and until Definitive Notes are issued, quarterly unaudited reports as
to the payments made on the Notes will be prepared by the Indenture Trustee and
sent on behalf of the Issuer only to Cede & Co. ("Cede"), as nominee of The
Depository Trust Company ("DTC") and registered holder of the Notes. Because the
beneficial owners of Notes issued in book-entry form will not be Noteholders, as
that term is used in the Indenture, unless Definitive Notes are issued such
reports will not be made available to such owners. See "Description of the
Notes--Registration of Notes." Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
The contents of such reports are described herein under "The Indenture--Reports
to Noteholders." The Issuer will file with the Commission such periodic reports
as are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder. The
Issuer does not intend to file periodic reports under the Exchange Act following
the expiration of the reporting period prescibed by Rule 15d-1 of Regulation 15D
under the Exchange Act.
 
                                       3
<PAGE>
                                SUMMARY OF TERMS
 
   
    THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.
TERMS NOT DEFINED IN THIS SUMMARY ARE USED AS DEFINED ELSEWHERE IN THIS
PROSPECTUS. SEE "INDEX TO PRINCIPAL DEFINED TERMS" BEGINNING ON PAGE 69.
    
 
   
<TABLE>
<S>                            <C>
Securities Offered...........  The Class A-1, Class A-2, Class A-3 and Class A-4 Notes will
                               be issued pursuant to an indenture (the "Indenture") dated
                               as of May 1, 1997, between Mid-State Trust VI, a business
                               trust, and First Union National Bank of Florida, as trustee
                               (the "Indenture Trustee") for the benefit of the holders of
                               the Notes. See "DESCRIPTION OF THE NOTES." The Notes will be
                               offered for purchase in denominations of $1,000 and integral
                               multiples thereof in book-entry form only. On or about
                               June  , 1997 (the "Closing Date"), Mid-State will transfer
                               the Accounts to the Issuer, and the Issuer will issue the
                               Notes, which will initially be overcollateralized as
                               described under "RISK FACTORS-- Limited
                               Overcollateralization." The Issuer's sole source of funds to
                               make payments on the Notes will be collections on the
                               Accounts. The Notes will have the characteristics set forth
                               under "DESCRIPTION OF THE NOTES" and in the following table.
</TABLE>
    
 
                                SUMMARY OF NOTES
 
   
<TABLE>
<CAPTION>
                                                   CLASS A-1       CLASS A-2       CLASS A-3       CLASS A-4
                                                 --------------  --------------  --------------  --------------
<S>                                              <C>             <C>             <C>             <C>
Size...........................................  $  287,750,000  $   57,750,000  $   45,100,000  $   48,550,000
Payment Window (in months)*....................             301             301             301             301
Initial Weighted Average Life (in years)*......           10.27           10.27           10.27           10.27
Expected Maturity*.............................    July 1, 2022    July 1, 2022    July 1, 2022    July 1, 2022
Stated Maturity Date**.........................    July 1, 2025    July 1, 2025    July 1, 2025    July 1, 2025
Maturity Date..................................    July 1, 2035    July 1, 2035    July 1, 2035    July 1, 2035
Initial Subordination..........................  $  174,537,289  $  116,787,289  $   71,687,289  $   23,137,289
</TABLE>
    
 
    The Payment Dates for each Class of Notes are January 1, April 1, July 1 and
October 1 commencing July 1, 1997.
 
- ------------------------
 
 * Assumes 4.5% CPR; computed on the basis of the assumptions under "DESCRIPTION
   OF THE NOTES--Weighted Average Life of the Notes."
 
** Assumes 0% CPR; computed on the basis of the assumptions under "DESCRIPTION
   OF THE NOTES--Weighted Average Life of the Notes."
 
<TABLE>
<S>                            <C>
Issuer.......................  The Issuer is a business trust established under the laws of
                               Delaware by a trust agreement dated as of March 1, 1997 (the
                               "Trust Agreement") between the Depositor and Wilmington
                               Trust Company, not in its individual capacity but solely as
                               owner trustee (the "Owner Trustee"). The settlor and sole
                               beneficiary of the Issuer is the Depositor, an indirect
                               wholly-owned subsidiary of Walter Industries, Inc. ("Walter
                               Industries"). The Owner Trustee will act as trustee of the
                               Trust. See "THE ISSUER." The Notes will be obligations
                               solely of the Issuer.
</TABLE>
 
                                       4
<PAGE>
 
<TABLE>
<S>                            <C>
Interest and Principal
  Payments on the Notes......  Interest on each Class of the Notes will be payable from
                               Available Funds on each Payment Date in an amount equal to
                               interest accrued during the three-month period ending on the
                               day prior to the Payment Date (each such period, an
                               "Interest Accrual Period"), with respect to (i) the Class
                               A-1 Notes at the Class A-1 Note Rate, (ii) the Class A-2
                               Notes at the Class A-2 Note Rate, (iii) the Class A-3 Notes
                               at the Class A-3 Note Rate and (iv) the Class A-4 Notes at
                               the Class A-4 Note Rate, in each such case on the unpaid
                               principal balance of the applicable Class of Notes. The
                               "Note Rate" of the Class A-1, Class A-2, Class A-3 and Class
                               A-4 Notes is [  ]%, [  ]%, [  ]% and [  ]%, respectively.
                               Interest will be calculated on the basis of a 360-day year
                               consisting of twelve 30-day months. See "DESCRIPTION OF THE
                               NOTES--Interest and Principal Payments."
 
                               "Available Funds" for a Payment Date are the funds in the
                               Collection Account representing (i) collections on the
                               Accounts during the three-month period (each such period, a
                               "Collection Period") ending on the close of business on the
                               last business day of the second month preceding the month in
                               which such Payment Date occurs plus (ii) any net
                               reinvestment income earned on funds described in clause (i)
                               above, from the date two business days prior to the
                               preceding Payment Date through the date two business days
                               prior to such Payment Date (each such period, a
                               "Reinvestment Period"). Available Funds will be net of
                               Issuer Expenses paid to the time of calculation thereof. On
                               each Payment Date, Available Funds will be paid first to the
                               Classes of Notes in the order of their numerical Class
                               designations until each has received a full payment of
                               interest together with any unpaid interest which was due in
                               respect of a previous Payment Date and then to the Classes
                               of Notes in the order of their numerical Class designations
                               until each receives the payment in respect of unreimbursed
                               losses, together with interest thereon, and principal
                               described herein under "DESCRIPTION OF THE NOTES--Interest
                               and Principal Payments."
 
                               Following the Target Overcollateralization Date, unless
                               there exists an uncured Trigger Event, the portion, if any,
                               of the funds remaining on any Payment Date after the
                               allocation of Available Funds described in the preceding
                               paragraph will be released to the Issuer on that Payment
                               Date, free of the lien of the Indenture, and will no longer
                               be available to make payments on the Notes. Such funds will
                               then be distributed to the owner of the beneficial interest
                               in the Issuer, which will initially be Mid-State. See
                               "DESCRIPTION OF THE NOTES-- Interest and Principal
                               Payments."
 
Record Date..................  The record date for each Payment Date is the fifteenth day
                               of the month preceding the month of such Payment Date (the
                               "Record Date").
 
Subordination................  The rights of holders of each Class of Notes other than the
                               Class A-1 Notes (each, a "Subordinated Class") to receive
                               payments will, in each case, be subordinated to the extent
                               described herein, to the
</TABLE>
 
                                       5
<PAGE>
 
   
<TABLE>
<S>                            <C>
                               rights of holders of each Class with a prior numerical Class
                               designation. See "RISK FACTORS--Risks of Subordination."
                               This subordination is intended to enhance the likelihood of
                               timely receipt by the holders of the Class A-1 Notes of the
                               full amount of interest and principal to which such Class is
                               entitled. Similarly, but to decreasing degrees, this
                               subordination is also intended to enhance the likelihood of
                               timely receipt by the holders of the Class A-2 and Class A-3
                               Notes of the full amount of interest and principal to which
                               such Class is entitled on each Payment Date. The protection
                               afforded to the holders of the Class A-1, Class A-2 and
                               Class A-3 Notes by means of subordination will be
                               accomplished by (i) the allocation of losses on the Accounts
                               to the respective Classes of Notes in reverse numerical
                               order of their Class designations and (ii) with respect to
                               interest, the application of the Available Funds on each
                               Payment Date in the sequential order provided by the
                               Available Funds Allocation. See "DESCRIPTION OF THE
                               NOTES--Interest and Principal Payments."
 
Optional Redemption of
  Notes......................  All (but not less than all) Classes of Notes may be redeemed
                               on any Payment Date at the option of the Issuer, at 100% of
                               the unpaid principal amount of each Class of Notes plus
                               accrued interest, if, after giving effect to the payment of
                               principal that would be made on such Payment Date absent
                               such redemption, the aggregate principal amount of each
                               Class of Notes outstanding (prior to allocations of any
                               Realized Loss Amounts) is less than or equal to 10% of the
                               original aggregate principal amount of such Class of Notes.
 
Events of Default............  An Event of Default with respect to the Notes is defined in
                               the Indenture to include one or more of the following
                               events: (i) a default in the payment of any amount due under
                               the Notes by the Maturity Date; (ii) a failure to apply
                               funds in the Collection Account in accordance with the
                               Indenture and such failure continues for a period of two
                               days; (iii) a default in the payment when due of interest on
                               any Class of Notes and the expiration of a 30-day grace
                               period (provided that neither the reimbursement of any
                               Realized Loss Amounts nor interest on any Realized Loss
                               Amounts in respect of any Class of Notes will be deemed due
                               unless there exist Available Funds sufficient to pay such
                               amount and all prior amounts under the Available Funds
                               Allocation); (iv) the failure to pay the Outstanding
                               Principal Balance of each class of Notes on the Maturity
                               Date; (v) a default in the observance of certain negative
                               covenants in the Indenture, (vi) a default in the observance
                               of any other covenant in the Indenture, and the continuation
                               of any such default for a period of thirty days after notice
                               or (vii) certain events of bankruptcy or insolvency with
                               respect to the Issuer. Notwithstanding the foregoing, prior
                               to the Maturity Date, any of the events described in the
                               preceding sentence will not be an Event of Default (i) in
                               respect of the Class A-2 Notes until the Class A-1 Notes
                               have been paid in full, (ii) in respect of the Class A-3
                               Notes until the Class A-1 Notes and Class A-2 Notes have
                               been paid in full and (iii) in respect of the Class A-4
                               Notes until the Class A-1
</TABLE>
    
 
                                       6
<PAGE>
 
   
<TABLE>
<S>                            <C>
                               Notes, Class A-2 Notes and Class A-3 Notes have been paid in
                               full. See "THE INDENTURE--Events of Default."
 
                               Prior to the Maturity Date, upon the occurrence of an Event
                               of Default, the Indenture Trustee or the holders entitled to
                               at least 66 2/3% of the Voting Rights of the Class of Notes
                               with the lowest numerical Class designation then outstanding
                               may declare the principal of the Notes to be immediately due
                               and payable; provided, however, that such Class of Notes or
                               the Indenture Trustee may make such declaration only if the
                               Event of Default affects, and in the case of a default in
                               the payment of the Notes such payment default relates to,
                               the Class of Notes with the lowest numerical Class
                               designation then outstanding. On or after the Maturity Date,
                               if an Event of Default occurs or shall have occurred, the
                               Indenture Trustee shall declare the principal of the Notes
                               to be immediately due and payable. See "THE
                               INDENTURE--Rights Upon Event of Default."
 
Security.....................  Payments of amounts due on the Notes will be secured by the
                               following (collectively, the "Collateral"):
 
  A. Mortgage Collateral.....  9,220 Accounts, having on February 28, 1997 (the "Cut-Off
                               Date") an aggregate Economic Balance of approximately
                               $462,287,289, will secure the Notes. Such Accounts will
                               have, as of the Cut-Off Date, a weighted average finance
                               charge of approximately 9.40% and a weighted average
                               remaining term to maturity of approximately 24.7 years. See
                               "THE MORTGAGE COLLATERAL" and "SECURITY."
 
                               SERVICER; SERVICING AGREEMENT; SUBSERVICING. Mid-State or
                               any successor servicer will perform all servicing functions
                               in respect of the Accounts as required by the Servicing
                               Agreement dated as of May 1, 1997 among the Issuer, the
                               Servicer and the Indenture Trustee (the "Servicing
                               Agreement") either directly or through one or more
                               subservicers. The Servicing Agreement will (i) define the
                               Servicer's servicing obligations; (ii) provide for the
                               payment of a servicing fee of $25 per month for each Account
                               outstanding from the Issuer to the Servicer; (iii) include
                               certain representations and warranties; (iv) impose
                               reporting requirements on the Servicer; and (v) include
                               events of default. Jim Walter Homes, Inc. ("Jim Walter
                               Homes"), an affiliate of the Depositor or unaffiliated third
                               parties will perform certain servicing functions with
                               respect to the Accounts pursuant to a subservicing agreement
                               (the "Subservicing Agreement"). See "THE SERVICING
                               AGREEMENT."
 
                               CERTAIN CONTRACTUAL RIGHTS. The Issuer will assign to the
                               Indenture Trustee all of its right, title and interest
                               (including the right to compel performance of the
                               subservicer) under the Servicing Agreement and under the
                               Purchase and Sale Agreement described below.
 
  B. Collection Account......  Prior to the Closing Date, a collection account relating to
                               the Collateral (the "Collection Account") will be
                               established with and in the name of the Indenture Trustee.
                               On the Closing Date, the Issuer will deposit into the
                               Collection Account cash in an amount equal to all payments
                               (including prepayments) received in respect of the Accounts
                               since the Cut-Off Date and up to the date that is five
                               business days prior to the Closing Date. Thereafter, as long
                               as any Note remains
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                                       7
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                               outstanding, all payments received in respect of the
                               Accounts and required to be so deposited will be deposited
                               in the Collection Account. The foregoing amounts deposited
                               into the Collection Account, less Issuer Expenses, will be
                               available to make payments of principal of, and interest on,
                               the Notes. Amounts on deposit in the Collection Account will
                               be invested in Eligible Investments. See
                               "SECURITY--Collection Account."
 
C. Class A-4 Reserve
  Account....................  Prior to the Closing Date, a reserve account (the "Class A-4
                               Reserve Account") will be established with and in the name
                               of the Indenture Trustee and will be assigned by the Issuer
                               to the Indenture Trustee as security for the Class A-4
                               Notes. On the Closing Date, the Issuer will deposit into the
                               Class A-4 Reserve Account cash in an amount equal to one
                               year of interest on the initial principal balance of the
                               Class A-4 Notes at the Note Rate thereof ($[          ]). If
                               on any Payment Date, Available Funds, less amounts thereof
                               paid on the Class A-1, Class A-2 and Class A-3 Notes in
                               respect of interest, are insufficient to make full payment
                               of interest on the Class A-4 Notes, the Indenture Trustee
                               will withdraw the amount of the deficiency from the Class
                               A-4 Reserve Account (or the amount on deposit therein, if
                               less) and deposit such amount in the Collection Account for
                               payment to holders of the Class A-4 Notes. Any amount so
                               withdrawn from the Class A-4 Reserve Account will be
                               reimbursed to such account on future Payment Dates to the
                               extent of the excess, if any, of Available Funds for such
                               future Payment Date over the total current and past due
                               interest payable on all Classes of Notes on such future
                               Payment Date. Other than any such reimbursement, no person
                               will have any obligation to deposit any amounts in the Class
                               A-4 Reserve Account following the Closing Date. On each
                               Payment Date, any excess of the amount on deposit in the
                               Class A-4 Reserve Account (following the Available Funds
                               Allocation and any required withdrawals from the Class A-4
                               Reserve Account in respect of shortfalls in Available Funds)
                               over the Maximum Reserve Amount will be withdrawn therefrom
                               by the Indenture Trustee and remitted to the Issuer free of
                               the lien of the Indenture. The "Maximum Reserve Amount" on
                               any Payment Date will equal the greater of (i) one year of
                               interest on the principal balance of the Class A-4 Notes
                               following payments on the Notes and allocations of losses on
                               such Payment Date and (ii) one half of the initial amount
                               deposited in the Class A-4 Reserve Account. See
                               "SECURITY--Class A-4 Reserve Account."
 
Representations and
  Warranties Concerning the
  Mortgage Collateral........  The Issuer will represent and warrant, among other things,
                               that (i) the information delivered to the Indenture Trustee
                               with respect to the Mortgage Collateral is true and correct
                               as of the date such information was given; (ii) at the
                               Closing Date, each mortgage, deed of trust or other security
                               agreement that constitutes the Mortgage Collateral shall
                               constitute a valid first priority lien upon and secure title
                               to the property (the "Mortgaged Property") described therein
                               and such security agreement and the promissory note secured
                               thereby are enforceable in accordance with their terms; and
                               (iii) at the Closing
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                                       8
<PAGE>
 
   
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                               Date, the Issuer is the sole owner of each Account, has good
                               title to such Account and has full right and authority to
                               transfer such Account and to grant a security interest in
                               such Account to the Indenture Trustee.
 
                               Within 90 days of the earlier of discovery by or notice to
                               the Issuer of any breach of a representation or warranty
                               which materially and adversely affects the interests of the
                               Noteholders in an Account, the Issuer is required to use its
                               best efforts to cure such breach in all material respects.
                               If such breach is not or cannot be cured within such 90-day
                               period or, with the prior written consent of the Indenture
                               Trustee, such longer period as specified in such consent,
                               the Issuer is required to either (i) deposit in the
                               Collection Account an amount equal to 100% of the current
                               Economic Balance of the affected Account, at which time such
                               affected Account will be released from the lien of the
                               Indenture or (ii) remove such Account from the lien of the
                               Indenture and substitute one or more qualified substitute
                               accounts. See "THE INDENTURE--Representations and Warran-
                               ties."
 
                               The obligation of the Issuer to cure any such breach or to
                               repurchase or substitute for the affected Account will be
                               the sole remedy available to the Trustee or Noteholders in
                               respect of the related breach.
 
Origination of Accounts......  All of the Accounts were originated by Jim Walter Homes. Jim
                               Walter Homes is in the business of marketing and supervising
                               the construction of standardized, partially-finished,
                               detached, single-family residential homes. The homes are
                               sold directly to customers through approximately 109 branch
                               offices, serving approximately 24 states, primarily in the
                               southern region of the United States. The Accounts were
                               acquired by the Depositor from Jim Walter Homes. See "THE
                               DEPOSITOR."
 
Purchase and Sale
  Agreement..................  The Depositor and the Issuer will enter into a Purchase and
                               Sale Agreement dated as of the Closing Date (the "Purchase
                               and Sale Agreement") pursuant to which the Depositor will
                               sell and assign, and the Issuer will purchase, all of the
                               Accounts. See "THE PURCHASE AND SALE AGREEMENT."
 
Servicer.....................  Mid-State Homes, Inc. will act as the Servicer under the
                               Servicing Agreement. See "THE SERVICING AGREEMENT."
 
Indenture Trustee............  As of the date of the Indenture, First Union National Bank
                               of Florida will act as the Indenture Trustee. See "THE
                               INDENTURE--The Indenture Trustee."
 
Owner Trustee................  Wilmington Trust Company will be the Owner Trustee pursuant
                               to the Trust Agreement. The Owner Trustee will be obligated
                               to (i) execute and deliver the Indenture, the Notes, the
                               Servicing Agreement, the Purchase and Sale Agreement and all
                               other documents and instruments related thereto, (ii)
                               acquire the Collateral and to pledge the Collateral as
                               security for the Notes, (iii) issue the Notes pursuant to
                               the Indenture and (iv) take whatever action shall be
                               required to be taken by the Owner Trustee by, and subject
                               to, the terms of the Trust Agreement. The liability of the
                               Owner Trustee in connection with the
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                                       9
<PAGE>
 
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                               issuance and sale of the Notes and in respect of the
                               Issuer's obligations under the Notes is limited solely to
                               the express obligations of the Owner Trustee set forth in
                               the Trust Agreement and the Indenture. See "THE TRUST
                               AGREEMENT."
 
Risk Factors.................  Various risk factors related to the purchase of Notes are
                               discussed under "Risk Factors," including, among others, (i)
                               the factors (including the effect of changes in mortgage
                               market interest rates) affecting the weighted average life
                               of the Notes and the reinvestment risk borne by investors
                               and (ii) the risks related to the subordination of each
                               Class of Notes (other than the Class A-1 Notes) to the
                               Classes of Notes having prior numerical Class designations.
 
Legal Investment
  Considerations.............  The Notes will not constitute "mortgage related securities"
                               for purposes of the Secondary Mortgage Market Enhancement
                               Act of 1984, as amended. As a result, the appropriate
                               characterization of the Notes under various legal investment
                               restrictions, and thus the ability of investors subject to
                               these restrictions to purchase the Notes, may be subject to
                               significant interpretative uncertainties. Investors should
                               consult their legal advisors to determine whether and to
                               what extent the Notes constitute legal investments for them.
                               See "LEGAL INVESTMENT CONSIDERATIONS."
 
ERISA Considerations.........  Under the Employee Retirement Income Security Act of 1974,
                               as amended ("ERISA"), and the Internal Revenue Code of 1986,
                               as amended (the "Code"), a pension or other employee benefit
                               plan covered by ERISA or retirement arrangements which are
                               subject to ERISA or Section 4975 of the Code (collectively,
                               "Plans") with respect to which the Depositor or any
                               affiliate is a service provider, may acquire the Notes only
                               under certain limited circumstances. Brown & Wood LLP,
                               counsel for the Underwriters and special counsel for the
                               Issuer as to ERISA matters, is of the opinion that the Notes
                               will be considered debt instruments rather than equity
                               interests of the Issuer for ERISA purposes. See "ERISA
                               CONSIDERATIONS."
 
Tax Status of the Notes......  The Notes will be treated as debt for federal income tax
                               purposes. If the Notes are issued with original issue
                               discount, Noteholders generally will be required to include
                               the original issue discount in gross income over the life of
                               the Notes. The Notes will not constitute "loans secured by
                               an interest in real property" for "domestic building and
                               loan associations" or "real estate assets" for "real estate
                               investment trusts." See "MATERIAL FEDERAL INCOME TAX CONSE-
                               QUENCES."
 
Use of Proceeds..............  The net proceeds of the offering of the Notes will be used
                               by the Issuer to purchase the Mortgage Collateral from the
                               Depositor. See "USE OF PROCEEDS."
 
Ratings......................  It is a condition of issuance that the Class A-1 Notes be
                               rated "Aaa" by Moody's Investors Service, Inc. ("Moody's")
                               and "AAA" by Standard & Poor's Ratings Services ("Standard &
                               Poor's"); the Class A-2 Notes be rated at least "Aa2" by
                               Moody's and "AA+" by Standard & Poor's; the Class A-3 Notes
                               be rated at least "A2" by Moody's and "AA" by Standard &
                               Poor's; and the Class A-4 Notes be rated at least
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                                       10
<PAGE>
 
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                               "Baa2" by Moody's and "BBB" by Standard & Poor's. The rating
                               of each Class of Notes by Standard & Poor's addresses the
                               likelihood of timely payment of interest and the ultimate
                               payment of principal on the Notes. The rating of each Class
                               of Notes by Moody's addresses the likelihood of the ultimate
                               payment of principal and interest on the Notes. A security
                               rating is not a recommendation to buy, sell or hold the
                               Notes. See "NOTE RATINGS."
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                                       11
<PAGE>
                                  RISK FACTORS
 
    Prospective investors should consider the following risk factors in
considering the purchase of Notes.
 
LIMITED LIQUIDITY OF NOTES
 
    There currently is no secondary market for the Notes. The Underwriters
intend to make a market in the Notes but are not obligated to do so. There can
be no assurance that such a market will develop or, if one does develop, that it
will provide Noteholders with liquidity of investment or will continue for the
life of the Notes. Further, no application will be made to list the Notes on any
securities exchange. Accordingly, the liquidity of the Notes may be limited.
 
LIMITED ASSETS OF THE ISSUER
 
    The Notes will represent obligations of the Issuer, whose assets will
consist solely of the Collateral pledged as security under the Indenture. No
recourse is available with respect to payments on the Notes to the Depositor,
Jim Walter Homes, or any other affiliate of the Depositor. If the Issuer is
unable to make the payments due on the Notes and an Event of Default under the
Indenture occurs and the maturity of the Notes is accelerated, it is unlikely
that the Issuer will be able to pay the accelerated principal amount due on the
Notes at the time of acceleration. None of the Notes or the Accounts will be
guaranteed or insured by any governmental instrumentality or any other entity.
 
RISKS IN THE EVENT OF INSOLVENCY OF THE DEPOSITOR
 
    Under the Purchase and Sale Agreement, the Depositor will represent and
warrant that it has validly sold and assigned to the Issuer all of its right,
title and interest in the Accounts. However, if, in a bankruptcy proceeding
involving the Depositor, a bankruptcy trustee, the Depositor as debtor in
possession or a creditor of the Depositor were to take the position that (i) the
transfer of the Accounts to the Issuer should be recharacterized as a transfer
for security rather than a sale or (ii) the assets of the Issuer (including the
Mortgage Collateral) should be substantively consolidated into the bankruptcy
estate of the Depositor, then delays in payments on the Notes could occur and
(should the bankruptcy court rule in favor of such bankruptcy trustee, debtor in
possession or creditor) reductions in payments on the Notes could result. It is
possible that the risk of recharacterizing the sale of the Accounts as a
transfer for security is increased by the position to be taken by the Depositor
that the transfer of the Accounts is not a sale under generally accepted
accounting principles or for income and other tax purposes and that the risk of
substantive consolidation is increased by the fact that the Issuer is a trust of
which the Depositor is the sole beneficiary.
 
    The Purchase and Sale Agreement will provide that, if the intended sale is
recharacterized as a transfer for security, then the Depositor thereby grants to
the Issuer a security interest in the Mortgage Collateral. To the extent that
the Depositor is deemed to have granted a security interest in the Accounts to
the Issuer and such security interest was validly perfected (see "Grant of
Security Interest In Mortgage Collateral; Risks of Defective Security Interest"
below) more than 90 days prior to any insolvency of the Depositor, was not
granted or taken with the intent to hinder, delay or defraud the Depositor or
its creditors and has been validly assigned to the Indenture Trustee, such
security interest should not be subject to avoidance in the event of the
insolvency of the Depositor. In such event, while payments already made to the
Indenture Trustee with respect to the Accounts should not be subject to recovery
by a bankruptcy trustee of the Depositor, delays in payments on the Notes and
possible reductions in the amount of those payments could occur.
 
LIMITED RIGHTS OF SUBORDINATE NOTEHOLDERS
 
   
    Prior to the Maturity Date, no holder of any Class of Notes will have the
right to declare the principal of the Notes to be immediately due and payable
other than the holders entitled to 66 2/3% of the Voting
    
 
                                       12
<PAGE>
   
Rights of the Class of Notes with the lowest numerical Class designation then
outstanding. See "THE INDENTURE--Rights Upon Event of Default."
    
 
LIMITED OVERCOLLATERALIZATION
 
    As of the Cut-Off Date, the aggregate Economic Balance of the Accounts (the
"Aggregate Economic Balance") was approximately $462,287,289. On each Payment
Date prior to the Target Overcollateralization Date, unless there exists an
uncured Trigger Event, Available Funds (which are net of Issuer Expenses), if
any, in excess of the amount of interest due on the Notes on such Payment Date
("Remaining Available Funds") will be applied to pay principal of the Notes in
accordance with the Available Funds Allocation as set forth under "DESCRIPTION
OF THE NOTES--Interest and Principal Payments" which, in the absence of losses
or delinquencies on the Accounts, will have the effect of increasing the level
of overcollateralization from the original level. The Notes will be
overcollateralized by the Accounts to the extent, if any, by which (a) the
aggregate Economic Balance of the Accounts exceeds (b) the outstanding principal
amount of the Notes. The amount of such overcollateralization will be reduced or
eliminated to the extent that losses incurred in respect of defaulted Accounts,
together with payments on the Accounts, cause the Economic Balance of the
Accounts to decline more than the principal amount of the Notes declines on
account of payments of principal thereon. If the protection afforded to the
Notes by such overcollateralization were to be exhausted, and the Accounts
incurred further losses, such losses would be allocated first to the Class A-4
Notes, then to the Class A-3 Notes, then to the Class A-2 Notes and finally to
the Class A-1 Notes, in each case until the principal balance of such Class of
Notes has been reduced to zero. See "THE ACCOUNTS" and "DESCRIPTION OF THE
NOTES--Interest and Principal Payments."
 
RISKS OF SUBORDINATION
 
    The protection afforded to the holders of the Class A-1, Class A-2 and Class
A-3 Notes by means of subordination will be accomplished by (i) the allocation
of losses on the Accounts to the Classes of Notes in reverse order of their
numerical Class designations and (ii) with respect to interest, the application
of the Available Funds on each Payment Date in the sequential order provided by
the Available Funds Allocation. The rights of the holders of the Class A-2 Notes
to receive payments of interest on the Class A-2 Notes will be subordinated to
such rights of the holders of the Class A-1 Notes; the rights of the holders of
the Class A-3 Notes to receive payments of interest will be subordinated to such
rights of the holders of the Class A-1 and Class A-2 Notes; and the rights of
the holders of the Class A-4 Notes to receive payments of interest will be
subordinated to such rights of the holders of the Class A-1, Class A-2 and Class
A-3 Notes, all to the extent described herein under "DESCRIPTION OF THE NOTES--
Interest and Principal Payments." Accordingly, on any Payment Date any
deficiency in the availability of funds to pay interest or principal on the
Notes will result in shortfalls in the payment of the Notes first to the Class
A-4 Notes, then to the Class A-3 Notes, then to the Class A-2 Notes and then to
the Class A-1 Notes. Further, in the event that the overcollateralization
described above is exhausted, any losses on the Accounts will be similarly
allocated to the Classes of Notes in reverse numerical order.
 
NO ADVANCE OBLIGATION
 
   
    Since neither the Servicer nor any other party is required to advance
delinquent payments on the Accounts, significant delinquencies (especially if
combined with substantial losses on the Accounts) may result in the inability to
make full payments of interest to all Classes of Notes on a Payment Date.
Because Available Funds are allocated on each Payment Date to the Classes of
Notes in the order of their numerical Class designations, the more subordinate
Classes of Notes (in the case of the Class A-4 Notes, to the extent that funds
on deposit in the Class A-4 Reserve Account are depleted) are more likely to
suffer any such shortfalls in interest than the more senior Classes of Notes.
    
 
                                       13
<PAGE>
LOSSES ON ACCOUNTS
 
    In most cases, amounts realized upon resale of repossessed properties may be
less than the outstanding Economic Balances of the related Accounts at the time
of repossession. In addition, certain states have adopted statutes limiting the
right of mortgagees to obtain deficiency judgments against customers following
foreclosure. In the event that the amount realized upon resale is less than the
outstanding Economic Balance of the related Account, the Servicer may be unable
to collect the amount of such deficiency. If losses incurred in connection with
repossessing homes are at levels higher than those historically experienced, the
ability of the Issuer to make required payments on the Notes may be adversely
affected and the Noteholders may incur a loss on their investment. See "THE
ACCOUNTS" and "CERTAIN LEGAL ASPECTS OF THE ACCOUNTS AND RELATED
MATTERS--Anti-Deficiency Legislation and Other Limitations on Creditors."
 
MORTGAGE COLLATERAL INCLUDES DELINQUENT ACCOUNTS
 
    As of the Cut-Off Date, approximately 0.98%, 0.55% and 2.67% of the Accounts
as a percentage of total Accounts had payments which were past due 31-60 days,
61-90 days and 91 or more days, respectively. 2.08% of the Accounts were in
foreclosure. Accounts which are in foreclosure or bankruptcy continue to be
included in the applicable delinquency categories described in the preceding
sentence. See "DESCRIPTION OF THE ACCOUNTS--Servicing" and "--Repossessions."
Investors should consider the risk that any of the Accounts may become defaulted
Accounts and subsequently the properties securing such Accounts may become
repossessed properties. See "--Losses on Accounts." Defaults by homeowners on
the Accounts may result in the failure of the Noteholders on a given Payment
Date to receive payments in full in respect of interest or principal. The
allocation of losses on the Accounts to the Classes of Notes in reverse order of
their numerical designations may more likely result in a reduction of the
principal balance of the more subordinate Classes of Notes than of the more
senior Classes of Notes without a corresponding payment of principal thereon.
See "--Risks of Subordination." Such events may cause a significant delay in the
receipt of principal by the holders of the more subordinate Classes of Notes, or
may cause such Classes of Notes to fail to receive any payment in respect of
principal, and to a lesser extent, interest, on a given Payment Date.
 
EFFECT OF PREPAYMENTS ON YIELD AND WEIGHTED AVERAGE LIFE
 
    The weighted average life and the maturity of each Class of the Notes will
be affected by the prepayment experience on the Accounts and the rate and
frequency of delinquencies of payments due on the Accounts. Prepayments on the
Accounts may be influenced by a variety of economic, geographic, social and
other factors, including national and local economic conditions, repossessions,
aging, seasonality and interest rates. Other factors affecting prepayments on
the Accounts include changes in housing needs, job transfers and unemployment.
Liquidations of defaulted Accounts are generally expected to result in resale of
the repossessed properties and the subsequent origination of new Accounts rather
than cash. In general, if prevailing interest rates fall significantly below the
effective financing rates on the Accounts, the rate of prepayments on the
Accounts is likely to be higher than if prevailing interest rates remain close
to or above the effective financing rates borne by such Accounts. Conversely, if
prevailing interest rates rise above the effective financing rates on such
Accounts, the rate of prepayment would be expected to decrease. As noted above,
no party is required to advance delinquent payments on the Accounts. Even if
Available Funds are sufficient to make full payments of interest on all Classes
of Notes, any such delinquencies will reduce the amount of Remaining Available
Funds available to make payments of principal in respect of the Notes. Any such
delinquencies occurring on or prior to the Target Overcollateralization Date or
during the existence of an uncured Trigger Event will have the effect of
extending the weighted average lives of all Classes of Notes. Following the
Target Overcollateralization Date, any such delinquencies may have the effect of
extending the weighted average lives of all Classes of Notes to the extent that
such delinquencies
 
                                       14
<PAGE>
exceed the amount otherwise distributable to the owner of the beneficial
interest in the Issuer. See "DESCRIPTION OF THE NOTES--Weighted Average Life of
the Notes."
 
    If Notes are purchased at a discount or a premium to their principal balance
and the purchaser calculates its anticipated yield to maturity based upon an
assumed rate of payment of principal that is faster or slower than that actually
experienced, the purchaser's actual yield to maturity will be different from
that initially calculated by the purchaser. Investors bear the risk of not being
able to reinvest payments of principal at a yield at least equal to the interest
rate borne by the Notes.
 
CONSUMER PROTECTION LAWS AND RISK OF CONSUMER LITIGATION
 
    The Accounts are subject to any claims or defenses that a customer may have
against Jim Walter Homes in connection with the sale, financing and construction
of such customer's home. Accordingly, the Servicer may not be able to recover
the amount due on an Account if a customer successfully asserts such claims or
defenses. See "CERTAIN LEGAL ASPECTS OF THE ACCOUNTS AND RELATED
MATTERS--Consumer Protection Laws."
 
    In May 1991, 444 plaintiffs filed a group action in a Texas state court and
named as defendants, among others, Mid-State Trust II (which had purchased
almost all of the plaintiffs' accounts from Mid-State) and its trustee,
Wilmington Trust Company. The plaintiffs sought damages, based upon certain
alleged construction defects, for common law fraud and for violation of the
Texas Deceptive Trade Practices Act and the Texas Consumer Credit Code, as well
as injunctive relief to prevent Mid-State Trust II from foreclosing or
attempting to collect on any of the related accounts. Such litigation was
settled pursuant to a court-approved settlement agreement in July 1995. The
settlement amount was approximately $3,600,000 in account balance reductions,
plus an approximate aggregate amount of $27,500 cash to certain homeowner
claimants and $2,900,000 as attorney's fees. In August 1993, the purchasers of
three homes in South Carolina instituted a class action against Jim Walter Homes
and Mid-State for alleged defects in their homes and claims under the South
Carolina Consumer Protection Code (the "South Carolina Code"). The class of
plaintiffs included approximately 1600 homeowners whose homes were completed
after December 27, 1989. The plaintiffs alleged violations of certain provisions
of the South Carolina Code relating to the right of homeowners to choose an
attorney to represent them in the closing of the purchase of their homes. In May
1995, the bankruptcy court approved a settlement of such class action, which
essentially provided for (i) a reduction in the balances owed by the class of
plaintiffs on the accounts in the aggregate principal amount of approximately
$15.5 million; (ii) cash disbursements of $1,000 each (with an aggregate cap of
$300,000) to certain classes of former homeowners who no longer had balances on
their accounts; (iii) waiver of the first two months' payments on the related
accounts after the settlement was implemented; and (iv) legal fees and expenses
for the plaintiffs' counsel in an amount less than $3 million. In February 1995,
Jim Walter Homes and Mid-State filed an adversary action for declaratory
judgment in the bankruptcy court in Tampa, Florida against all South Carolina
homeowners who purchased their homes between July 1, 1982 and December 27, 1989.
The complaint in the adversary action sought a declaration that Jim Walter Homes
and Mid-State did not violate the South Carolina Code. The adversary action was
settled for $3,000,000. The legal fees incurred by Jim Walter Homes and
Mid-State for such action were approximately $360,000. Since the litigation
described in this paragraph has been concluded, the Issuer does not believe that
such litigation will have a material adverse effect on the ongoing business,
operations or financial condition of Jim Walter Homes or the Depositor.
 
    No group or class action litigation is currently pending or, to the
knowledge of the Issuer, threatened, against Jim Walter Homes or Mid-State. In
the event that similar actions are brought in Texas, South Carolina or other
jurisdictions involving other accounts, possibly including Accounts to be sold
to the Issuer, it is possible that the Trust would be named a party thereto and
the costs associated with such a litigation could adversely affect payments on
the Notes.
 
                                       15
<PAGE>
    Jim Walter Homes and/or the Depositor are party to a number of other
lawsuits arising in the ordinary course of their businesses. While the results
of litigation cannot be predicted with certainty, the Issuer believes, based on
its assessments of the likelihood of prevailing in such litigation and the
magnitude of potential damages, that the final outcome of such other litigation
will not have a material adverse effect on the ongoing business, operations or
financial condition of Jim Walter Homes or the Depositor.
 
DEPENDENCE ON SERVICER
 
    The effective servicing of the Accounts requires a significantly greater
local presence and number of employees than does the servicing of traditional
mortgage loans. In addition, although the Servicing Agreement does not allow the
Servicer to resign except under limited circumstances, it does permit the
Issuer, the Indenture Trustee or the holders of a majority of the aggregate
principal amount of the Notes to remove the Servicer under certain limited
circumstances. If Mid-State were removed as Servicer, Mid-State's and Jim Walter
Homes' system and expertise may be difficult for a successor servicer to
replicate, and collections and recoveries on the Accounts may be adversely
affected. See "THE SERVICING AGREEMENT."
 
GRANT OF SECURITY INTEREST IN MORTGAGE COLLATERAL; RISKS OF DEFECTIVE SECURITY
  INTEREST
 
    The Issuer will grant to the Indenture Trustee, on behalf of the
Noteholders, a security interest in the promissory notes, building and
installment sale contracts and other security agreements underlying each Account
comprising the Mortgage Collateral. Local counsel in those jurisdictions where
greater than 1% (based on the Aggregate Economic Balance as of the Cut-Off Date)
of all the Mortgaged Properties are located ("Local Counsel") will render
opinions to the effect that, subject to customary exceptions regarding
enforcement of remedies in bankruptcy and the effect of equitable principles,
and assuming that certain procedures described therein related to the execution,
delivery and recordation of the mortgages and other documents relating to the
Accounts and the collateral assignment of such documents to the Indenture
Trustee are followed, the Indenture Trustee will have a valid assignment of the
mortgages, deeds of trust and similar security instruments included in the
Mortgage Collateral that were originated in each of their respective
jurisdictions. After the issuance of the Notes, the Indenture Trustee and the
Issuer intend to comply with the procedures set forth in such opinions. In
addition, the Issuer intends to comply with procedures customarily followed by
mortgage lenders and recommended by Local Counsel with respect to the creation
and perfection in favor of the Indenture Trustee of a lien on the promissory
notes and building and installment sale contracts and other security agreements
included in the Mortgage Collateral and collections thereof. However, there can
be no assurance that such procedures will be adequate to create and perfect a
security interest in all items included in the Mortgage Collateral and all
amounts in the Collection Account. If the security interest of the Indenture
Trustee is challenged, delays in payments on the Notes and possible reductions
in the amount of payments of principal of, and interest on, the Notes could
occur.
 
RISKS OF UNDERWRITING PRACTICES
 
    As described herein under "THE ACCOUNTS--Underwriting and Credit Policies,"
Jim Walter Homes does not obtain independent third-party appraisals or title
insurance in connection with the origination of accounts. Any losses resulting
from the inadequacy of the property or failures of title, to the extent that
such losses exceed the overcollateralization described above under "--Limited
Overcollateralization," will be borne by the holders of the Notes.
 
                                 THE DEPOSITOR
 
    The Depositor was established in 1958 to purchase mortgage installment notes
from Jim Walter Homes relating to homes constructed and sold by Jim Walter Homes
and its predecessor and to service such installment notes. Jim Walter Homes
currently is the eighth largest builder of single-family detached
 
                                       16
<PAGE>
housing in the nation. Over 96% of the homes sold by Jim Walter Homes are
financed by Jim Walter Homes, which sells the related accounts to Mid-State. As
of the Cut-Off Date, the Depositor's mortgage portfolio (including mortgage
indebtedness sold to others and serviced by the Depositor) had an aggregate
Economic Balance of approximately $2.021 billion. Each of Jim Walter Homes and
the Depositor is an indirect wholly-owned subsidiary of Walter Industries. The
offices of the Depositor are located at 1500 North Dale Mabry Highway, Tampa,
Florida 33607.
 
    In December 1989, Walter Industries and 31 of its subsidiaries, including
the Depositor, each filed a voluntary petition for reorganization under Chapter
11 of the United States Bankruptcy Code with the Bankruptcy Court for the Middle
District of Florida, Tampa Division. In March 1995, Walter Industries and its
subsidiaries, including the Depositor, emerged from bankruptcy pursuant to an
Amended Joint Plan of Reorganization dated December 9, 1994 as modified on March
1, 1995. Pursuant to such plan, Walter Industries and its subsidiaries,
including the Depositor, have repaid substantially all of their unsecured claims
and senior and subordinated indebtedness subject to the Chapter 11 proceedings.
Since the Chapter 11 proceedings described above are completed, the Issuer does
not believe that such proceedings will have a material adverse effect on the
ongoing business, operations or financial condition of Jim Walter Homes or the
Depositor.
 
                                   THE ISSUER
 
ISSUER
 
    The Issuer has been created pursuant to the Trust Agreement between the
Depositor and the Owner Trustee. Under the terms of the Trust Agreement, the
Depositor has conveyed to the Owner Trustee a nominal amount of cash to
establish the Trust. In exchange, the Depositor has received certificates
evidencing beneficial ownership of the Trust created under such agreement. On
the Closing Date, the Issuer will purchase the Accounts from the Depositor with
the net proceeds from the sale of the Notes. The Issuer will pledge the Accounts
to the Indenture Trustee, for the benefit of the Noteholders, as security for
the Notes. See "USE OF PROCEEDS." Subject to certain restrictions, the Depositor
may sell or assign certificates of beneficial ownership in the Issuer to another
entity or entities.
 
    The Trust Agreement provides that the Issuer may not conduct any activities
other than those related to the issuance and sale of Notes, the purchase of the
Accounts, the financing of properties repossessed by the Issuer, the investment
of certain funds in Eligible Investments, as described under "SECURITY--
Mortgage Collateral--Investment of Funds", and such other limited activities as
may be required in connection with reports and payments to holders of the Notes
and the beneficial interest of the Trust. See "SECURITY--Mortgage
Collateral--Investment of Funds." Neither the Owner Trustee in its individual
capacity nor the holders of the beneficial interest of the Trust are liable for
payment of principal of or interest on the Notes and each holder of Notes will
be deemed to have released the Owner Trustee and each holder of the beneficial
interest of the Trust from any such liability. The Trust Agreement provides that
the Trust will terminate upon the earlier to occur of (i) the final sale or
disposition of the trust estate and the distribution of all proceeds thereof to
the owners or (ii) 21 years less one day following the death of the survivor of
certain individuals described in the Trust Agreement, but in no event later than
April 1, 2062.
 
    It is not contemplated that annual or other regular meetings of the
Noteholders will be held. The Indenture, however, permits Holders of a certain
percentage of principal amount of each Class of Notes to approve certain
amendments to the Indenture and, in certain circumstances, to declare the
principal of the Notes due and payable. See "THE INDENTURE--Modification of
Indenture" and "--Rights Upon Event of Default."
 
                                       17
<PAGE>
                                USE OF PROCEEDS
 
    The proceeds from the sale of the Notes will be used by the Issuer to
purchase the Accounts and to pay the expenses of the offering. The Depositor
will use a portion of the net proceeds from its sale of the Accounts to purchase
the Accounts from Mid-State Trust V and the remainder for general corporate
purposes. Mid-State Trust V is a Delaware business trust organized on February
27, 1995 for which Mid-State is the depositor. The Accounts have been owned and
will be owned by Mid-State Trust V until the Closing Date. The price the Issuer
pays for the Accounts will represent the net proceeds from the sale of the
Notes.
 
            DISCUSSION AND ANALYSIS OF ISSUER'S FINANCIAL CONDITION
 
EXPENSES
 
    Substantially all of the anticipated expenses of the Issuer will consist of
interest payments due on the Notes and amounts payable for the Issuer's
operating expenses (including, without limitation, amounts payable under the
Indenture, the Trust Agreement and the Servicing Agreement that may be payable
by the Trust). Payments on the Accounts are intended to be sufficient to make
timely payments of interest on the Notes and to retire the Notes not later than
the Maturity Date.
 
CAPITAL RESOURCES AND LIQUIDITY
 
    The primary sources of the Issuer's funds will be collections in respect of
the Accounts and reinvestment income therefrom. The Issuer is expected to have
sufficient liquidity and capital resources to make timely payments of interest
on the Notes and to retire the Notes not later than the Maturity Date. See
"DESCRIPTION OF THE NOTES--Interest and Principal Payments" and "SECURITY."
 
RESULTS OF OPERATIONS
 
    The Issuer's results of operations will depend primarily on the rate at
which payments are made on the Accounts, the level of income from reinvestment
of payments on the Accounts and the level of the Issuer's operating expenses.
 
IMPACT OF INFLATION AND CHANGING PRICES
 
    Inflation and increased prices may result in increases in the level of the
Issuer's operating expenses. However, such increases may be offset, in whole or
in part, by increases in income from reinvestment of payments on the Mortgage
Collateral. See "SECURITY."
 
                                  THE ACCOUNTS
 
HOMEBUILDING ACTIVITIES
 
    All of the Accounts were originated by Jim Walter Homes. Jim Walter Homes is
in the business of marketing and supervising the construction of standardized,
partially finished, detached, single-family residential homes. The homes are
sold directly to customers through approximately 109 branch offices, serving
approximately 24 states, primarily in the southern region of the United States.
A home is constructed on the customer's land only after a building contract has
been entered into and Jim Walter Homes is satisfied that the customer has clear
title to the land and that the site is suitable for building. Currently, Jim
Walter Homes offers over 30 models of homes in various stages of completion
ranging from a "shell" to a "90% completed" home. A shell is a home completed on
the outside with rough floors, partition studding and closet framing but without
interior walls, floor finishing, plumbing, electrical wiring and fixtures, doors
and cabinetry. A 90% completed home has a completed interior except for interior
paint, floor covering and utility hook-up.
 
                                       18
<PAGE>
    Jim Walter Homes is a contractor rather than a developer, does not own or
sell land to customers except in connection with resales of repossessed homes
and does not maintain its own construction crews. Local independent contractors
construct the homes using their own construction crews. Jim Walter Homes'
employees, however, supervise construction to ensure that it conforms to its
specifications. The following chart shows the sales volume of Jim Walter Homes
and the percent of homes sold in three stages of completion for fiscal years
1978 to 1996 and for the nine months ended February 28, 1997:
 
                            HOMEBUILDING ACTIVITIES
<TABLE>
<CAPTION>
                                                                   PERCENT OF
                                                                   UNIT SALES
                                                                  -------------
                                                          UNITS        VARIOUS 90%
                                                          SOLD    SHELL STAGES COMPLETE
                                                         -------  ---  ---  ---
<S>                                                      <C>      <C>  <C>  <C>
Nine Months Ended February 28, 1997....................    2,958  10%   1%  89%
 
<CAPTION>
 
     FISCAL YEAR ENDED MAY 31
- -------------------------------------------------------
<S>                                                      <C>      <C>  <C>  <C>
1996...................................................    3,760  18    4   78
1995...................................................    4,126  25    9   66
1994...................................................    4,331  23   10   67
1993...................................................    4,784  26   12   62
1992...................................................    5,305  29   13   58
1991...................................................    5,229  30   13   57
1990...................................................    5,213  30   11   59
1989...................................................    5,126  27    9   64
1988 (nine months).....................................    4,240  28    7   65
<CAPTION>
 
     FISCAL YEAR ENDED AUGUST 31
- -------------------------------------------------------
<S>                                                      <C>      <C>  <C>  <C>
1987...................................................    6,100  30   10   60
1986...................................................    6,403  28   12   60
1985...................................................    7,203  43   25   32
1984...................................................    7,809  37   25   38
1983...................................................    8,706  27   33   40
1982...................................................   10,267  26   34   40
1981...................................................    9,226  27   37   36
1980...................................................   10,095  27   36   37
1979...................................................    9,358  21   38   41
1978...................................................    8,952  20   38   42
</TABLE>
 
    Jim Walter Homes' business has tended to be countercyclical to national home
construction activity when interest rates are high. In times of high interest
rates and limited availability of mortgage funds that result in limited new home
construction, Jim Walter Homes' volume of home sales tends to increase due to
the favorable financing it offers. During the period from 1982 through 1997
mortgage rates have generally declined substantially, creating greater
competition for Jim Walter Homes.
 
                                       19
<PAGE>
UNDERWRITING AND CREDIT POLICIES
 
    Substantially all homes Jim Walter Homes sells are purchased with financing
it arranges. Generally, 100% of the purchase price is financed. To qualify for
financing a potential customer must provide information concerning his or her
monthly income and employment history as well as a legal description of and
evidence that the customer owns the land on which the home is to be built. A
customer's income and employment usually are verified through telephone
conversations with such customer's employer and by examining his or her pay
stubs, W2 forms or, if the customer is self-employed, income tax returns. An
applicant must have a minimum of one year's continuous employment or, if he or
she has changed jobs, the new job must be in the same field of work. Only a
small percentage of secondary income (second jobs or part-time work) is utilized
in qualifying applicants. Ownership of the land is verified by examining the
title record. In addition, Jim Walter Homes' credit department obtains a credit
report. If a favorable report is obtained and the required monthly payment does
not exceed 25% of the customer's monthly gross income, the application usually
is approved and a building or installment sale contract is executed, a title
report is ordered and frequently a survey of the property is made. Surveys are
performed by independent registered surveyors when, in the opinion of Jim Walter
Homes, additional information beyond examination of the title record is needed.
Such additional information is primarily concerned with verification of legal
description, ownership of land and existence of any encroachments. Jim Walter
Homes does not use a point or grade credit scoring system. Particular attention
is paid to the credit information for the most recent three to five years.
Attention is also given to the customer's total indebtedness and total other
monthly payments on a judgmental basis by the credit department. The customer's
credit standing is considered favorable if the employment history, income and
credit report meet the aforementioned criteria. The building and installment
sale contract is subject to (i) except in the State of Texas, executing a
promissory note which is secured by a first lien on the land and the home to be
built, (ii) executing a mortgage, deed of trust, mechanic's lien contract or
other security instrument, (iii) receiving a satisfactory title report, (iv)
inspecting the land to determine that it is suitable for building and (v)
obtaining required permits. Although the mortgages, deeds of trust and similar
security instruments constitute a first lien on the land and the home to be
built, such security instruments are not insured by the Federal Housing
Administration or guaranteed by the Department of Veterans Affairs or otherwise
insured or guaranteed.
 
    Jim Walter Homes does not obtain appraisals or title insurance. Although
consideration is given to the ratio of the amount financed to the estimated
value of the home and the land securing such amount, there is no explicit
appraisal-based loan-to-value test. However, there is a requirement that the
value of the lot on which the home is to be built, as estimated solely on the
basis of Jim Walter Homes' mortgage servicing division employees' experience and
knowledge, be at least equal to 10% of the cash selling price of the home.
Before occupying a new home, the customer must complete the utility and sewer
hook-ups, and any of the other components not purchased from Jim Walter Homes,
arrange for the building inspection and, if required, obtain a certificate of
occupancy. Upon construction of a new home to the agreed-upon percentage of
completion, Jim Walter Homes conveys the Account represented thereby, including
the underlying documents related thereto, to the Depositor in the ordinary
course of business.
 
    In April 1988 the Depositor sold accounts having an aggregate Economic
Balance of approximately $1.75 billion to Mid-State Trust II; in July 1992 the
Depositor sold accounts having an aggregate Economic Balance of approximately
$301 million to Mid-State Trust III; in March 1995 the Depositor sold accounts
having an aggregate Economic Balance of approximately $827 million to Mid-State
Trust IV. Each of Mid-State Trust II, Mid-State Trust III, and Mid-State Trust
IV securitized their accounts in registered public offerings under the federal
securities laws. As of the Cut-Off Date, there were 9,220 accounts (the "Trust V
Accounts") owned by Mid-State Trust V, with an aggregate Economic Balance of
approximately $462,287,289. The Trust V Accounts were sold by the Depositor to
Mid-State Trust V. Mid-State Trust V is party to a warehouse financing with
Enterprise Funding Corporation ("Enterprise") whereby Enterprise is obligated to
provide up to $500,000,000 of financing, from time to time (as of April 30,
1997, approximately $355,000,000 was outstanding), to Mid-State Trust V. The
operations of Enterprise are administered by an
 
                                       20
<PAGE>
affiliate of NationsBanc Capital Markets, Inc., one of the Underwriters. The
amounts outstanding under such facility are currently secured by the Trust V
Accounts. At the Closing Date, all of the Trust V Accounts will be released from
the warehouse facility and Mid-State Trust V will transfer such accounts to the
Depositor which accounts will, in turn, be sold to the Issuer and will
thereafter constitute the Accounts. The Enterprise warehouse facility will
continue to remain available to Mid-State Trust V after the transfer of Trust V
Accounts to the Depositor. The Issuer does not intend to enter into any
comparable warehouse financing facility.
 
    Each of Mid-State Trust II, Mid-State Trust III, Mid-State Trust IV and
Mid-State Trust V is a Delaware business trust for which Mid-State is the
depositor. The Depositor continues to service those accounts, and Jim Walter
Homes continues to act as subservicer. (The accounts owned by Mid-State Trust
II, Mid-State Trust III and Mid-State Trust IV are reflected in some of the
tables in this section but are not security for the Notes and will not benefit
the Noteholders in any way). As used herein, the term "account" includes
building and installment sale contracts, related mortgages, mechanic's lien
contracts and other security agreements and promissory notes originated by Jim
Walter Homes, including the accounts sold to Mid-State Trust II, Mid-State Trust
III, Mid-State Trust IV and Mid-State Trust V.
 
    The following table summarizes certain aggregate characteristics of the
portfolio of the accounts during the last 19 fiscal years. The amounts presented
are the gross receivable amounts which consist of the amount financed and the
total dollar amount of finance charges to be paid over the duration of the
related accounts ("Gross Receivable Amount"). Although account production has
declined in recent years, the table shows that the aggregate balance of the
portfolio and scheduled payments thereon have generally increased due to higher
average sales prices resulting from the sale of larger models and a greater
percentage of 90% complete homes sold. The table also shows that repossessions
increased during the early 1990's due to unfavorable economic conditions,
including the real estate market, but since 1992 have generally declined. The
information presented summarizes the aggregate characteristics of such accounts
at the times indicated and is not intended to reflect characteristics of the
Mortgage Collateral.
 
                                       21
<PAGE>
                        CERTAIN ACCOUNT CHARACTERISTICS
 
<TABLE>
<CAPTION>
                                             ACCOUNT          AGGREGATE
                                            PRODUCTION         ANNUAL                                      ACCOUNT
                                       --------------------   SCHEDULED                                     SALES        ENDING
                                          NEW      RESALES    PAYMENTS    REPOSSESSIONS  PREPAYMENTS    (REPURCHASES)    BALANCE
                                       ---------  ---------  -----------  -------------  ------------  ---------------  ---------
<S>                                    <C>        <C>        <C>          <C>            <C>           <C>              <C>
                                                                         (DOLLARS IN THOUSANDS)
Nine Months Ended
February 28, 1997....................    420,921    101,081     205,733     $  96,934     $  176,846         --         $4,250,741
  FISCAL YEAR ENDED MAY 31,
1996.................................    506,604    116,314     318,201       119,790        233,541         --         4,208,252
1995.................................    527,230    130,687     285,780       128,897        162,414         --         4,256,866
1994.................................    516,822    118,703     292,117       123,882        230,802         --         4,176,040
1993.................................    538,172    128,088     290,548       127,468        125,368        (11,810)    4,187,316
1992.................................    551,894    123,715     272,149       131,635         84,988         (7,981)    4,052,630
1991.................................    514,849    109,762     262,908       118,954         58,952         --         3,857,812
1990.................................    470,725    104,913     248,901       110,971         57,140        (10,616)    3,674,015
1989.................................    420,170    105,846     231,651       127,080         59,163         --         3,504,773
1988 (nine months)...................    329,526     67,433     168,430        88,553         39,984         --         3,396,651
  FISCAL YEAR ENDED AUGUST 31
1987.................................    461,181    100,104     210,058       121,110         64,382         --         3,296,659
1986.................................    473,599     90,215     194,142       102,951         49,058         --         3,130,924
1985.................................    522,706     76,093     176,449        84,018         35,602         --         2,913,261
1984.................................    545,715     69,817     165,105        76,496         33,113        136,738     2,610,531
1983.................................    591,928     65,443     148,352        69,212         25,109        156,631     2,406,451
1982.................................    669,757     46,656     148,373        45,552         18,879        214,759     2,148,384
1981.................................    501,329     42,974     136,242        39,841         28,101         --         1,859,534
1980.................................    428,515     32,999     115,047        34,585         28,657         --         1,519,415
1979.................................    341,512     31,043      97,405        34,296         39,342         --         1,236,190
1978.................................    282,170     30,868      95,843        33,592         45,727         --         1,034,678
</TABLE>
 
DESCRIPTION OF ACCOUNTS
 
    With respect to sales of new homes, each Account (other than those
originated in the State of Texas) is evidenced by a promissory note (each, a
"Promissory Note"), a building contract (each, a "Building Contract"), a related
mortgage and certain other security agreements and each Account originated in
the State of Texas is evidenced by a retail installment contract (each, a "Texas
Building Contract") and a mechanic's lien contract with power of sale (each, a
"Mechanic's Lien Contract"). With respect to sales of repossessed homes, each
Account (other than those originated in the State of Texas) is evidenced by a
Promissory Note, a retail installment sales contract (each, a "Sales Contract,"
and together with the Building Contracts, "Retail Contracts"), a related
mortgage and certain other security agreements and each Account originated in
the State of Texas is evidenced by a retail installment sales contract (each, a
"Texas Sales Contract," and together with the Texas Building Contracts, "Texas
Contracts") and a deed with vendor's lien together with a purchase money deed of
trust (collectively, each, a "Texas Resale Mortgage," and together with the
Mechanic's Lien Contracts, "Texas Mortgages"). Each Account is secured by a
first lien on a single-unit residential home and the real property on which such
home is situated.
 
    Each Promissory Note and Texas Contract obligates the homeowner to pay the
Gross Receivable Amount of the related Account. Each Promissory Note and Texas
Contract generally requires equal monthly payments in amounts sufficient to
amortize the Gross Receivable Amount over the term thereof. The terms of the
Promissory Notes and Texas Contracts generally range from 144 to 360 months. The
Promissory Notes do not have a stated interest rate and neither the Promissory
Notes nor the Texas Contracts divide the monthly payments into interest and
principal portions.
 
    Each Retail Contract and Texas Contract sets forth (i) the amount that is
being financed by the related customer (generally the purchase price of the
related home), (ii) the total finance charge that such
 
                                       22
<PAGE>
customer will incur through the maturity date of the Promissory Note or the
Texas Contract, as the case may be, and (iii) the annual percentage rate (the
"Effective Financing Rate") used to calculate the total finance charge. Upon a
prepayment in full by a customer or an acceleration of the amount owed by such
customer under the Promissory Note or the Texas Contract, as the case may be,
such customer will be entitled to receive a credit for any unearned finance
charge (i.e., that portion of the total finance charge which has not yet been
earned through the date of the prepayment or acceleration, calculated using
either the actuarial or rule of 78s method, whichever provides for a greater
recovery to the customer).
 
    The "Economic Balance" of an Account is the present value of the future
scheduled monthly payments due on the Account. Such present value is calculated
by discounting the remaining future scheduled monthly payments on an Account by
the Effective Financing Rate thereof. The "Effective Financing Rate" is
determined by calculating the discount rate which, when applied in a present
value calculation, results in the present value of all originally scheduled
monthly payments on such Account being equal to the original amount financed. In
effect, the Economic Balance of an Account is the amount of principal that can
be amortized by the installment payments due over the remaining term of the
Account at the Effective Financing Rate. The Economic Balance of any Account as
to which the related home has been repossessed and disposed of will be equal to
$0 and such Account will be removed from the lien of the Indenture. The Economic
Balance of any Account which is substituted (as described under "-- Recoveries"
below) for an Account described in the preceding sentence will be calculated as
described in this paragraph.
 
SERVICING
 
    Mid-State, as the Servicer, has serviced and expects to continue to service
all Accounts from Tampa, Florida. Although the Servicer does not escrow payments
for insurance premiums and real estate taxes, it monitors these payments by
customers. Under the terms of the Servicing Agreement, the Servicer will be
responsible for paying unpaid taxes and insurance premiums and recovering such
amounts from customers or, in certain circumstances, from liquidation proceeds.
See "THE SERVICING AGREEMENT-- Insurance; Taxes."
 
    Jim Walter Homes, pursuant to a subservicing agreement, has performed and
will continue to perform substantially all field servicing activities, which
include collecting or foreclosing on delinquent Accounts and reselling
repossessed homes. Mid-State currently intends to continue to use Jim Walter
Homes as a subservicer for such field servicing activities and to perform itself
the remaining servicing activities. Any subservicer engaged by Mid-State other
than Jim Walter Homes would be expected to have experience in servicing loans or
accounts similar to the Accounts and to have sufficient financial resources to
perform its duties. Each month the Servicer will send a delinquency list, which
includes all Accounts which are past due, to the branch and regional offices of
Jim Walter Homes. Representatives of Jim Walter Homes will contact the customer
in person, by phone or by mail. If an Account becomes more than three months
past due, generally, the customer surrenders the property or the Servicer
commences foreclosure proceedings. Mid-State's current policy is to continue to
show an Account as delinquent until it is brought current, the property is
surrendered or foreclosure proceedings are completed.
 
    In the ordinary course of its business, Mid-State keeps historical
delinquency, repossession and real estate owned information according to
separate portfolios of accounts within the total portfolio. Mid-State, however,
believes that the total portfolio information shows the average performance of
its accounts over time, rather than a performance that might be affected by the
relative seasoning of a separate portfolio. In the case of the delinquency and
repossession experience, information as of the Cut-Off Date is given below for
the Accounts separately. No assurance can be given, however, that the future
experience of the Accounts will be comparable to the historical information set
forth below.
 
    The following table summarizes the delinquency characteristics for all
accounts owned or serviced by Mid-State (including, without limitation, the
accounts owned by Mid-State Trust II, Mid-State Trust III,
 
                                       23
<PAGE>
Mid-State Trust IV and Mid-State Trust V) at the end of each of the past six
fiscal years and at February 28, 1997. As of each such date, the table presents
the number of delinquent accounts and the dollar amount (in millions) in Gross
Receivable Amounts.
<TABLE>
<CAPTION>
                                                               DELINQUENCIES AT MAY 31,
                     ------------------------------------------------------------------------------------------------------------
                             1991                  1992                  1993                  1994                  1995
                     --------------------  --------------------  --------------------  --------------------  --------------------
<S>                  <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Accounts/Gross
  Receivable
  Amount (Dollars
    in Millions)...     85,418  $   3,858     88,751  $   4,053     88,977  $   4,187     83,945  $   4,176     80,182  $   4,257
Delinquencies(1) as
  a Percent of
  Accounts/Gross
  Receivable
  Amount:
  31-60 Days.......       1.30%      1.04%      1.36%      1.07%      1.30%      0.96%      1.30%      1.09%      1.66%      1.59%
  61-90 Days.......       0.62       0.55       0.57       0.52       0.51       0.45       0.61       0.55       0.54       0.53
  91 Days or more..       4.32       3.04       4.47       3.31       3.99       3.12       4.16       3.23       4.22       3.17
                     ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
Total (31 days or
  more)............       6.24%      4.63%      6.40%      4.90%      5.80%      4.53%      6.07%      4.87%      6.42%      5.29%
                     ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
                     ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
 
<CAPTION>
                                              DELINQUENCIES
                                                    AT
                                                 FEBRUARY
                             1996                28, 1997
                     --------------------  --------------------
<S>                  <C>        <C>        <C>        <C>
Accounts/Gross
  Receivable
  Amount (Dollars
    in Millions)...     76,112  $   4,208     73,542  $   4,251
Delinquencies(1) as
  a Percent of
  Accounts/Gross
  Receivable
  Amount:
  31-60 Days.......       1.28%      1.10%      1.26%      1.08%
  61-90 Days.......       0.63       0.62       0.56       0.64
  91 Days or more..       4.10       3.14       3.74       3.08
                     ---------  ---------  ---------  ---------
Total (31 days or
  more)............       6.01%      4.86%      5.56%      4.80%
                     ---------  ---------  ---------  ---------
                     ---------  ---------  ---------  ---------
</TABLE>
 
- ------------------------
 
(1) Based on number of days elapsed since the contractual due date.
 
    As of the Cut-Off Date, the delinquency characteristics for the Accounts as
a percentage of total Accounts and as a percentage of Gross Receivable Amounts
of the Accounts, were, respectively, 0.98% and 0.92% for Accounts 31-60 days
past due, 0.55% and 0.63% for Accounts 61-90 days past due, 2.67% and 2.55% for
Accounts 91 days or more past due and 4.20% and 4.10% for all delinquent
Accounts.
 
REPOSSESSIONS
 
    Repossessed property is rehabilitated, if necessary, and resold. The
following table sets forth certain information concerning the repossession
experience of accounts in the Depositor's servicing portfolio (including,
without limitation, the accounts owned by Mid-State Trust II, Mid-State Trust
III, Mid-State Trust IV and Mid-State Trust V), for each of the past six fiscal
years.
 
                                 REPOSSESSIONS
 
<TABLE>
<CAPTION>
                                                                            FISCAL YEAR ENDED MAY 31,
                                                         ----------------------------------------------------------------
                                                           1991       1992       1993       1994       1995       1996
                                                         ---------  ---------  ---------  ---------  ---------  ---------
<S>                                                      <C>        <C>        <C>        <C>        <C>        <C>
Total accounts outstanding.............................     85,418     88,751     88,977     83,945     80,182     76,112
Accounts repossessed...................................      2,224      2,379      2,180      1,963      1,914      1,676
Accounts repossessed as a percent of total number of
  accounts.............................................        2.6%       2.7%       2.5%       2.3%       2.4%       2.2%
</TABLE>
 
    The Mortgage Collateral does not include any real estate which the Servicer
had repossessed as of the Cut-Off Date. As of the Cut-Off Date, Accounts with an
Economic Balance of $8,970,659, representing approximately 1.94% of the
Aggregate Economic Balance were in foreclosure. Additionally, as of the Cut-Off
Date, the obligors on Accounts with an Economic Balance of $17,011,143,
representing approximately 3.68% of the Aggregate Economic Balance, were in
bankruptcy or similar proceedings. Certain of these obligors nevertheless are
making payments on the Accounts. As of the Cut-Off Date, the obligors on
Accounts with an Economic Balance of $1,156,797, representing approximately
0.25% of the Aggregate Economic Balance, were not in foreclosure or bankruptcy,
but were over 120 days delinquent.
 
                                       24
<PAGE>
RECOVERIES
 
    Generally, repossessed homes are remarketed by field collection personnel of
Jim Walter Homes with assistance from its sales network for new homes.
Typically, the homes are resold with little or no rehabilitation of the
properties and, accordingly, cash expenditures are small. The majority of homes,
including the land on which such homes are located, are resold for a down
payment of generally less than $1,000 and a new account. All other repossessed
homes are sold for cash.
 
    The Subservicing Agreement will require Jim Walter Homes to continue to
perform remarketing services as it has in the past. In certain jurisdictions in
which repossessed homes may be located, local laws require that persons selling
real property be licensed real estate agents or brokers, unless such persons are
selling real estate which they (or their employers) own. The field collection
personnel of Jim Walter Homes are generally not licensed real estate agents or
brokers. It is therefore necessary, with respect to repossessed homes located in
such jurisdictions, for title to such repossessed homes to be taken, in whole or
in part, in the name of Jim Walter Homes (rather than in the name of the Issuer)
pending disposition. Upon disposition, the Trust will receive the cash proceeds,
if any, and the new Accounts originated, in connection with resales of
repossessed properties securing defaulted Accounts. In the event repossessed
property is sold at a loss, such loss will be reflected in the accounting
records of the Issuer. Depending on the age of the repossessed Account and other
factors, such as the condition and location of the related repossessed property,
the amount of a recovery (i.e., the amount of the new Account plus cash, if any)
as a percentage of the Economic Balance will vary. The number of homes held as
real estate owned is set forth in the following aging summary (which includes,
without limitation, the homes held as real estate owned by Mid-State Trust II,
Mid-State Trust III, Mid-State Trust IV and Mid-State Trust V) for the past six
fiscal years and the nine months ended February 28, 1997.
 
                               REAL ESTATE OWNED
 
<TABLE>
<CAPTION>
                                                                             MAY 31,
                                                 ----------------------------------------------------------------   FEBRUARY 28,
                                                   1991       1992       1993       1994       1995       1996          1997
                                                 ---------  ---------  ---------  ---------  ---------  ---------  ---------------
<S>                                              <C>        <C>        <C>        <C>        <C>        <C>        <C>
Real Estate Owned as a Percent of Accounts
  Outstanding
0-3 Months.....................................       0.11%      0.12%      0.06%      0.07%      0.05%      0.09%         0.12%
4-6 Months.....................................       0.04       0.03       0.01       0.01       0.01       0.02          0.02
More than 6 Months.............................       0.09       0.05       0.02       0.02       0.01       0.01          0.02
                                                       ---        ---        ---        ---        ---        ---           ---
      Total Real Estate Owned..................       0.24%      0.20%      0.09%      0.10%      0.07%      0.12%         0.16%
                                                       ---        ---        ---        ---        ---        ---           ---
                                                       ---        ---        ---        ---        ---        ---           ---
</TABLE>
 
TIME TO RECOVERY
 
    The elapsed time between the initial delinquency of an account and the date
the related home is resold can be divided into three stages: (i) delinquency as
to monthly payment period, (ii) repossession period and (iii) real estate owned
period. An account generally will be no more than three months delinquent before
the Servicer commences foreclosure proceedings. If the Servicer anticipates that
a payment will not be forthcoming, it may commence foreclosure proceedings when
an account has been delinquent as little as two months. The Servicer estimates
that approximately 25% of all repossessed homes are voluntarily surrendered
during the delinquency period and, accordingly, avoid the repossession period,
and it estimates that, although the time to recovery can vary considerably, the
average time following initial delinquency until recovery is approximately ten
months.
 
    Since no party is required to advance required payments on delinquent
Accounts, any such delinquencies that exist at the end of a Collection Period
immediately preceding any Payment Date will reduce the amount of Available Funds
for the related Payment Date. See "RISK FACTORS--Limited Assets of the
 
                                       25
<PAGE>
Issuer," "--Limited Overcollateralization," "--Risks of Subordination," and
"--Effect of Prepayments on Yield and Weighted Average Life."
 
                            THE MORTGAGE COLLATERAL
 
    The Mortgage Collateral which will secure the Notes consists of 9,220
Accounts, which comprise 12.5% of the accounts owned directly or indirectly by
the Depositor on the Cut-Off Date. The Mortgage Collateral had an aggregate
Economic Balance of approximately $462,287,289 as of the Cut-Off Date.
 
    Set forth below is a description of additional characteristics of the
Accounts as of the Cut-Off Date. Such information does not reflect changes that
may have occurred to the Accounts subsequent to the Cut-Off Date.
 
                    REMAINING YEARS TO MATURITY OF ACCOUNTS
                       COMPRISING THE MORTGAGE COLLATERAL
                                 8.50% ACCOUNTS
 
<TABLE>
<CAPTION>
                                       0-15           16-20          21-25           26-30           TOTAL
                                   -------------  -------------  --------------  --------------  --------------
<S>                                <C>            <C>            <C>             <C>             <C>
Number of Accounts...............             60            119           1,795           1,184           3,158
Average Economic Balance.........  $      52,754  $      56,218  $       48,899  $       73,517  $       58,478
Weighted Average Remaining Term
  (months)(1)....................            170            233             296             357             320
Weighted Average Effective
  Financing Rate.................           8.50%          8.50%           8.50%           8.50%           8.50%
Current Economic Balance.........  $   3,165,228  $   6,689,938  $   87,774,223  $   87,044,312  $  184,673,700
Original Economic Balance(2).....  $   3,191,765  $   6,733,290  $   88,120,075  $   87,211,940  $  185,257,070
</TABLE>
 
                                10.00% ACCOUNTS
 
<TABLE>
<CAPTION>
                                       0-15           16-20          21-25           26-30           TOTAL
                                   -------------  -------------  --------------  --------------  --------------
<S>                                <C>            <C>            <C>             <C>             <C>
Number of Accounts...............            482          1,085           3,529             966           6,062
Average Economic Balance.........  $      30,253  $      35,881  $       44,448  $       69,610  $       45,796
Weighted Average Remaining Term
  (months)(1)....................            154            220             281             343             281
Weighted Average Effective
  Financing Rate.................           9.98%         10.00%          10.00%          10.00%          10.00%
Current Economic Balance.........  $  14,581,826  $  38,931,072  $  156,857,543  $   67,243,148  $  277,613,589
Original Economic Balance(2).....  $  15,595,569  $  40,074,426  $  159,037,307  $   67,772,520  $  282,479,822
</TABLE>
 
- ------------------------
 
(1) The remaining term of an Account is based on the original term of the
    Account less the number of months elapsed between the first payment due date
    and the Cut-Off Date.
 
(2) The original Economic Balance for an Account is equal to the original Gross
    Receivable Amount less total original finance charges.
 
                                       26
<PAGE>
EFFECTIVE FINANCING RATE
 
    The Effective Financing Rates borne by 99.99% of the Accounts range from
8.49% to 10.00%. The weighted average Effective Financing Rate for the Accounts
as of the Cut-Off Date is 9.40%.
 
TOTAL ACCOUNTS COMPRISING THE MORTGAGE COLLATERAL
 
    As of the Cut-Off Date, 8,962 Accounts having an Economic Balance of
$452,747,773 are secured by homes representing new sales, and 258 Accounts
having an Economic Balance of $9,539,516 are secured by homes that have been
repossessed and resold.
 
    The following table sets forth at the Cut-Off Date the years of calculated
scheduled final payment for the Accounts comprising the Mortgage Collateral:
 
                     CALCULATED SCHEDULED FINAL PAYMENT(1)
 
<TABLE>
<CAPTION>
                                                                            NUMBER OF                 ECONOMIC
                                                                             ACCOUNTS                  BALANCE
                                                                      ----------------------  -------------------------
                                                                        NUMBER      PERCENT       AMOUNT       PERCENT
                                                                      -----------  ---------  --------------  ---------
<S>                                                                   <C>          <C>        <C>             <C>
Calendar Year of Calculated Scheduled Final Payment:
  1997-1998.........................................................           1        0.01% $        1,022      *
  1999-2000.........................................................           2        0.02          27,132       0.01%
  2001-2002.........................................................           2        0.02          30,632       0.01
  2003-2004.........................................................           8        0.09         108,140       0.02
  2005-2006.........................................................          37        0.40         842,506       0.18
  2007-2008.........................................................          98        1.06       3,064,490       0.66
  2009-2010.........................................................         201        2.18       6,831,456       1.48
  2011-2012.........................................................         244        2.65       8,069,070       1.75
  2013-2014.........................................................         209        2.27       7,448,267       1.61
  2015-2016.........................................................         828        8.98      32,261,439       6.98
  2017-2018.........................................................         415        4.50      16,004,845       3.46
  2019-2020.........................................................       2,189       23.74      97,536,409      21.10
  2021-2022.........................................................       2,836       30.76     135,774,421      29.37
  2023-2024.........................................................          51        0.55       2,734,771       0.59
  2025-2026.........................................................       1,598       17.33     114,095,142      24.68
  2027-2028.........................................................         501        5.43      37,457,547       8.10
                                                                           -----   ---------  --------------  ---------
    Total(2)........................................................       9,220      100.00% $  462,287,289     100.00%
                                                                           -----   ---------  --------------  ---------
                                                                           -----   ---------  --------------  ---------
  Weighted Average Period to Calculated Scheduled Final Payment: 24.7 years.
</TABLE>
 
- ------------------------
 
*   Indicates an amount greater than zero but less than 0.005% of the Aggregate
    Economic Balance.
 
(1) Calculated Scheduled Final Payment is determined by adding the original term
    of an Account to the first payment due date and subtracting one month.
 
(2) Percentages may not add to 100% due to rounding.
 
                                       27
<PAGE>
    The following three tables set forth the outstanding Economic Balance, the
original Economic Balance and the years of origination of the Accounts
comprising the Mortgage Collateral at the Cut-Off Date:
 
                          OUTSTANDING ECONOMIC BALANCE
 
<TABLE>
<CAPTION>
                                                                            NUMBER                 OUTSTANDING
                                                                         OF ACCOUNTS            ECONOMIC BALANCE
                                                                    ----------------------  -------------------------
<S>                                                                 <C>          <C>        <C>             <C>
                                                                      NUMBER      PERCENT       AMOUNT       PERCENT
                                                                    -----------  ---------  --------------  ---------
Outstanding Economic Balance:
  $10,000 and less................................................          12        0.13% $       74,840       0.02%
  $10,001 to $20,000..............................................         142        1.54       2,364,405       0.51
  $20,001 to $30,000..............................................         702        7.61      17,841,969       3.86
  $30,001 to $40,000..............................................       1,819       19.73      64,680,525      13.99
  $40,001 to $50,000..............................................       2,452       26.59     110,324,383      23.86
  $50,001 to $60,000..............................................       1,609       17.45      87,861,287      19.01
  above $60,000...................................................       2,484       26.94     179,139,880      38.75
                                                                         -----   ---------  --------------  ---------
    Total (1).....................................................       9,220      100.00% $  462,287,289     100.00%
                                                                         -----   ---------  --------------  ---------
                                                                         -----   ---------  --------------  ---------
</TABLE>
 
Average outstanding Economic Balance: $50,140.
 
- ------------------------
 
(1) Percentages may not add to 100% due to rounding.
 
                           ORIGINAL ECONOMIC BALANCE
 
<TABLE>
<CAPTION>
                                                                            NUMBER                  ORIGINAL
                                                                         OF ACCOUNTS            ECONOMIC BALANCE
                                                                    ----------------------  -------------------------
<S>                                                                 <C>          <C>        <C>             <C>
                                                                      NUMBER      PERCENT       AMOUNT       PERCENT
                                                                    -----------  ---------  --------------  ---------
Original Economic Balance(1):
  $10,000 and less................................................          11        0.12% $       76,447       0.02%
  $10,001 to $20,000..............................................         121        1.31       2,056,989       0.44
  $20,001 to $30,000..............................................         634        6.88      16,214,619       3.47
  $30,001 to $40,000..............................................       1,756       19.05      62,468,185      13.36
  $40,001 to $50,000..............................................       2,478       26.88     111,520,882      23.84
  $50,001 to $60,000..............................................       1,657       17.97      90,429,418      19.33
  above $60,000...................................................       2,563       27.80     184,970,352      39.55
                                                                         -----   ---------  --------------  ---------
      Total (2)(3)................................................       9,220      100.00% $  467,736,892     100.00%
                                                                         -----   ---------  --------------  ---------
                                                                         -----   ---------  --------------  ---------
</TABLE>
 
Average Original Economic Balance: $50,731.
 
- ------------------------
 
(1) With respect to 1,073 Accounts, representing 7.91% of the Aggregate Economic
    Balance as of the Cut-Off Date, the original Economic Balances stated above
    are as of the date the Economic Balances of such Accounts were reduced in
    connection with the settlement of the class action litigation in South
    Carolina in 1995 that is described under "RISK FACTORS--Consumer Protection
    Laws and Risk of Consumer Litigation."
 
(2) The original Economic Balance for an Account is equal to the original Gross
    Receivable Amount less total original finance charges.
 
(3) Percentages may not add to 100% due to rounding.
 
                                       28
<PAGE>
                              YEARS OF ORIGINATION
 
<TABLE>
<CAPTION>
                                                                                             AGGREGATE ECONOMIC
                                                                                                BALANCE AS OF
                                                                  NUMBER OF ACCOUNTS            CUT-OFF DATE
                                                                -----------------------  ---------------------------
YEAR OF ORIGINATION (1)                                           NUMBER      PERCENT        AMOUNT        PERCENT
- --------------------------------------------------------------  -----------  ----------  ---------------  ----------
<S>                                                             <C>          <C>         <C>              <C>
1990..........................................................         191         2.07% $     5,916,845        1.28%
1991..........................................................         238         2.58        7,567,069        1.64
1992..........................................................         281         3.05        9,425,307        2.04
1993..........................................................         217         2.35        7,825,591        1.69
1994..........................................................         190         2.06        7,090,405        1.53
1995..........................................................       2,953        32.03      142,824,172       30.90
1996..........................................................       3,540        38.39      188,774,791       40.83
1997..........................................................       1,610        17.46       92,863,109       20.09
                                                                     -----   ----------  ---------------  ----------
Total(2)......................................................       9,220       100.00% $   462,287,289      100.00%
                                                                     -----   ----------  ---------------  ----------
                                                                     -----   ----------  ---------------  ----------
</TABLE>
 
- ------------------------
 
(1) Calendar year in which the first payment on the Accounts became due.
 
(2) Percentages may not add to 100% due to rounding.
 
    The following table sets forth the geographical distribution of the Accounts
comprising the Mortgage Collateral by state at the Cut-Off Date.
 
                           GEOGRAPHICAL DISTRIBUTION
 
<TABLE>
<CAPTION>
                                                                                                     % OF AGGREGATE
                                                                                                        ECONOMIC
                                                                        % OF TOTAL     AGGREGATE         BALANCE
                                                            NUMBER OF    NUMBER OF      ECONOMIC         OF ALL
STATE                                                       ACCOUNTS     ACCOUNTS       BALANCE         ACCOUNTS
- ---------------------------------------------------------  -----------  -----------  --------------  ---------------
<S>                                                        <C>          <C>          <C>             <C>
Alabama..................................................         811         8.80%  $   40,873,897          8.84%
Arizona..................................................          79         0.86        4,969,992          1.08
Arkansas.................................................         342         3.71       16,666,493          3.61
Florida..................................................         696         7.55       38,855,896          8.41
Georgia..................................................         549         5.95       30,066,093          6.50
Illinois.................................................           7         0.08          353,696          0.08
Indiana..................................................          38         0.41        2,310,826          0.50
Kentucky.................................................         181         1.96        9,591,365          2.07
Louisiana................................................         514         5.57       26,720,047          5.78
Maryland.................................................           1         0.01           38,129          0.01
Mississippi..............................................       1,212        13.15       54,880,125         11.87
Missouri.................................................          60         0.65        3,143,821          0.68
New Mexico...............................................          47         0.51        3,185,885          0.69
North Carolina...........................................         498         5.40       29,739,191          6.43
Ohio.....................................................          61         0.66        3,474,068          0.75
Oklahoma.................................................         232         2.52       12,354,486          2.67
South Carolina...........................................       1,603        17.39       64,219,585         13.89
Tennessee................................................         335         3.63       18,012,064          3.90
Texas....................................................       1,545        16.76       78,912,268         17.07
Virginia.................................................         273         2.96       16,235,362          3.51
West Virginia............................................         136         1.48        7,684,000          1.66
                                                                -----   -----------  --------------        ------
Total(1).................................................       9,220       100.00%  $  462,287,289        100.00%
                                                                -----   -----------  --------------        ------
                                                                -----   -----------  --------------        ------
</TABLE>
 
- ------------------------
 
(1) Percentages may not add to 100% due to rounding.
 
                                       29
<PAGE>
                     CERTAIN LEGAL ASPECTS OF THE ACCOUNTS
                              AND RELATED MATTERS
 
CONSUMER PROTECTION LAWS
 
    Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon creditors providing mortgage financing.
These laws include, without limitation, the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Federal Reserve
Board's Regulations "B" and "Z" and the Uniform Consumer Credit Code (the
"UCCC"). These requirements can impose specific statutory liabilities upon
creditors who fail to comply with their provisions. In some cases, such
liabilities may affect the ability of an assignee (such as the Trust and the
Indenture Trustee) to enforce installment contracts and promissory notes such as
the Accounts.
 
    The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by the UCCC,
has the effect of subjecting not only a seller (and certain related creditors
and their assignees) in a consumer credit transaction but also any assignee of
the seller, to all claims and defenses which the customer could assert against
the seller. Because liability under the FTC Rule is limited to the amounts paid
by such customer under the contract, the holder of the contract may be unable to
collect any remaining balance due thereunder. The Accounts are subject to the
requirements of the FTC Rule. Accordingly, the Issuer, as holder of the Accounts
will be subject to any claims or defenses that the obligor of the related
Account may assert against Jim Walter Homes under the building or sale contract
related to such Account. If a customer successfully asserts any such claim or
defense, the value of such Account could be adversely affected.
 
    The installment contracts utilized by Jim Walter Homes contain provisions
obligating the obligor to pay late charges if payments are not made in a timely
manner. In certain cases, laws of certain states may specifically limit the
amount of late charges that may be collected or prohibit the imposition of late
charges. Late charges will be retained by the Servicer as additional servicing
compensation, and the inability of the Servicer to collect these amounts will
not affect payments to Noteholders.
 
MORTGAGES, DEEDS OF TRUST AND MECHANIC'S LIEN CONTRACTS
 
    The following discussion contains summaries of certain legal aspects of the
mortgages, deeds of trust, deeds to secure debt and mechanic's lien contracts
(collectively, "Security Instruments") which are general in nature. Because such
legal aspects are governed by applicable state law (which laws may differ
substantially) the summaries do not purport to be complete or to reflect the
laws of any particular state or to encompass the laws of all states in which the
security for the Accounts is situated. The summaries are qualified in their
entirety by reference to the applicable federal and state laws governing such
Accounts.
 
    The Security Instruments generally will be either mortgages or deeds of
trust depending upon the prevailing practice in the state in which the property
securing the related Account is located. A mortgage creates a lien upon the real
property encumbered by the mortgage. There are two parties to a mortgage, the
mortgagor, who is the obligor and homeowner, and the mortgagee, who provides
financing. Generally, the mortgagor delivers to the mortgagee a note and the
mortgage. The lien created by a mortgage is not prior to liens for real estate
taxes and assessments or to certain tax liens (see "--Anti-Deficiency
Legislation and Other Limitations on Creditors"), nor is it prior to certain
other liens which in most jurisdictions are given priority by statute. Priority
between mortgages depends on their terms and generally on the order in which
they are filed with a state or county recording office.
 
    Although a deed of trust is similar to a mortgage, a deed of trust formally
has three parties: the obligor-homeowner called the trustor (similar to a
mortgagor), a creditor (similar to a mortgagee) called the beneficiary, and a
third-party grantee called the trustee. Under a deed of trust, the obligor
grants the property, irrevocably until the debt is paid, in trust, generally
with a power of sale, to the trustee to secure
 
                                       30
<PAGE>
payment of the obligation. The deed of trust may, by state law, be subordinated
to real estate taxes and assessments and certain other liens which are given
priority by statute. It also may be subordinated to certain tax liens (see
"--Anti-Deficiency Legislation and Other Limitations on Creditors").
 
    In the State of Texas, indebtedness incurred for the purchase of real
property is typically secured by a deed of trust and indebtedness incurred for
the purpose of making improvements on real property is secured by a mechanic's
lien contract, both with power of sale. In all material respects, the mechanic's
lien contract has the same effect as a deed of trust.
 
FORECLOSURE AND OTHER REMEDIES
 
    The laws of foreclosure vary from state to state. Foreclosure of a mortgage
generally is accomplished by judicial action. The action is initiated by the
service of legal pleadings upon all parties having an interest in the real
property. Delays in completion of the foreclosure may occasionally result from
difficulties experienced in locating necessary party defendants. Judicial
foreclosure proceedings are often not contested by any of the parties defendant.
If a mortgagee's right of foreclosure is contested, the legal proceedings
necessary to resolve the issue can be time consuming. If the court finds for a
mortgagee, it generally issues a judgment of foreclosure and appoints a referee
or other court officer to conduct the sale of the property.
 
    Foreclosure of either a deed of trust or a mechanic's lien contract
generally is accomplished by a non-judicial trustee's sale under a specific
provision in the deed of trust which authorizes the trustee to sell the property
upon any default by the obligor under the terms of the deed of trust or the note
secured thereby. In some states, the trustee must record a notice of default and
send a copy to the obligor and to any person who has recorded a request for a
copy of notice of default and notice of sale. In addition, the trustee must
provide notice in some states to any other individual having an interest in the
real property, including any junior lienholder. In some states, the obligor has
the right to reinstate the obligation at any time following default until
shortly before the trustee's sale. In general, the obligor, or any other person
having a junior encumbrance on the real estate, may, during a reinstatement
period, cure the default by paying the entire amount in arrears plus the costs
and expenses incurred in enforcing the obligation. Generally, state law controls
the amount of foreclosure expenses and costs, including attorneys' fees, which
may be recovered by a creditor. If the deed of trust or mechanic's lien
contract, as the case may be, is not reinstated, a notice of sale must be posted
in a public place and, in most states, published for a specific period of time
in one or more newspapers. In addition, some state laws require that a copy of
the notice of sale be posted on the property and sent to all parties having an
interest in the real property.
 
    In the case of foreclosure under a mortgage, deed of trust or mechanic's
lien contract, the sale by the referee or other designated officer or by the
trustee is at a public sale. However, because of the difficulty a potential
buyer at the sale would have in determining the exact status of title and
because the physical condition of the property may have deteriorated during the
foreclosure proceedings, it is uncommon for a third party to purchase the
property at the foreclosure sale. Instead, it is common for the creditor, or an
affiliate of the creditor, to purchase the property from the trustee or referee
for an amount equal to the unpaid principal amount of note secured by the
mortgage, deed of trust or mechanic's lien contract, accrued and unpaid interest
and the costs and expenses of foreclosure. Thereafter, subject to the right of
the obligor in some states to remain in possession during the redemption period,
the creditor will assume the burdens of ownership, including obtaining insurance
and making such repairs at its own expense as are necessary to render the
property suitable for resale. Depending upon market conditions, the ultimate
proceeds of the sale of the property may not equal the creditor's investment in
the property.
 
RIGHTS OF REDEMPTION
 
    In some states, after the sale of real property pursuant to a deed of trust
or foreclosure of a mortgage, the obligor and foreclosed junior lienors are
given a statutory period in which to redeem the property from
 
                                       31
<PAGE>
the foreclosure sale. In some states, redemption may occur only upon payment of
the entire unpaid balance of the cash price, earned finance charges and costs
and expenses of foreclosure. In other states, redemption may be authorized if
the former customer pays only a portion of the sums due. The effect of a
statutory right of redemption is to diminish the ability of the creditor to sell
the foreclosed property. The right of redemption could defeat the title of any
purchaser from the creditor subsequent to foreclosure or sale under a deed of
trust. Consequently, the practical effect of the redemption right is to force
the creditor to retain the property and to pay the expenses of ownership until
the redemption period has run.
 
ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON CREDITORS
 
    Certain states have imposed statutory prohibitions which limit the remedies
of a beneficiary under a deed of trust or a mortgagee under a mortgage. In some
states, statutes limit the right of the beneficiary or mortgagee to obtain a
deficiency judgment against the obligor following foreclosure or sale under a
mortgage or a deed of trust. A deficiency judgment is a personal judgment
against the obligor equal in most cases to the difference between the net amount
realized upon the public sale of the real property and the amount due to the
creditor. In some states, statutes require the beneficiary or mortgagee to
exhaust the security afforded under a deed of trust or mortgage by foreclosure
in an attempt to satisfy the full debt before bringing a personal action against
the obligor. Finally, other statutory provisions limit any deficiency judgment
against the obligor following a judicial sale to the excess of the outstanding
debt over the fair market value of the property at the time of the sale. The
purpose of these statutes is generally to prevent a beneficiary or mortgagee
from obtaining a large deficiency judgment against the obligor as a result of
low or no bids at the judicial sale.
 
    Numerous other statutory provisions, including the federal bankruptcy laws
and state laws affording relief to debtors, may interfere with or affect the
ability of the secured mortgage creditor to realize upon collateral and/or
enforce a deficiency judgment. For example, under federal bankruptcy law,
virtually all actions (including foreclosure actions and deficiency judgment
proceedings) are automatically stayed upon the filing of a bankruptcy petition,
and often no mortgage payments are made during the course of the bankruptcy
proceeding. In a case under the bankruptcy laws, the secured creditor is
precluded from foreclosing without authorization from the bankruptcy court. In
addition, with respect to federal bankruptcy laws, a court with federal
bankruptcy jurisdiction may permit an obligor through his or her chapter 11 or
chapter 13 rehabilitative plan to cure a monetary default in respect of a
Security Instrument on such obligor's residence by paying arrearages within a
reasonable time period and reinstating the original Security Instrument payment
schedule even though the creditor accelerated the outstanding indebtedness and a
final judgment of foreclosure had been entered in state court (provided no sale
of the residence had yet occurred) prior to the filing of the obligor's
petition. Some courts with federal bankruptcy jurisdiction have approved plans,
based on the particular facts of the reorganization case, that enabled an
obligor to cure a payment default by paying arrearages over a number of years.
In addition, the laws of various states provide for moratoria on the payment of
principal of, and interest on, outstanding indebtedness by obligors meeting
certain qualifications.
 
    Courts with federal bankruptcy jurisdiction also have indicated that the
terms of a mortgage or a deed of trust secured by property not consisting solely
of the obligor's principal residence may be modified. These courts have
suggested that such modifications may include reducing the amount of each
monthly payment, reducing the rate of interest or finance charge, altering the
repayment schedule and reducing the creditor's security interest to the value of
the residence, thus rendering the creditor a general unsecured creditor for the
difference between the value of the residence and the outstanding balance of the
indebtedness. Some courts have permitted such modifications when the mortgage or
deed of trust is secured both by the obligor's principal residence and by
personal property.
 
    The Code provides priority to certain tax liens over the liens of a Security
Instrument. In addition, substantive requirements are imposed upon creditors in
connection with the origination of Security Instruments by numerous federal and
some state consumer protection laws. These laws include the federal
 
                                       32
<PAGE>
Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Credit Billing Act,
Fair Credit Reporting Act and related statutes. These federal laws and state
laws impose specific statutory liabilities upon creditors who originate Security
Instruments and who fail to comply with the provisions of such laws. In some
cases, this liability may affect assignees of the Security Instruments,
including the Issuer and the Indenture Trustee. See "--Consumer Protection Laws"
above.
 
    Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a homeowner under an Account who enters the military
service after the origination of such homeowner's Account (including a homeowner
who is a member of the National Guard or is in reserve status at the time of the
origination of the Account and is later called to active duty) may not be
charged interest above an annual rate of 6% during the period of such
homeowner's active duty status, unless a court orders otherwise upon application
of the lender. It is possible that similar actions could have an effect, for an
indeterminate period of time, on the ability of the Servicer to collect full
amounts of finance charges on certain of the Accounts. In addition, the Relief
Act imposes limitations which would impair the ability of the Servicer to
foreclose on an affected Account during the homeowner's period of active duty
status. Thus, in the event that such an Account goes into default, there may be
delays and losses occasioned by the inability to realize upon the related
Mortgaged Property in a timely fashion.
 
ENFORCEABILITY OF CERTAIN PROVISIONS
 
    Upon foreclosure, courts have imposed general equitable principles. These
equitable principles are generally designed to relieve the obligor from the
legal effect of his defaults under the mortgage or deed of trust. Examples of
judicial remedies that have been fashioned include judicial requirements that
the creditor undertake affirmative and extensive actions to determine the causes
for the obligor's default and the likelihood that the obligor will be able to
cure the default. In some cases, courts have substituted their judgment for the
creditors' judgment and have required that creditors reinstate mortgages or
deeds of trust or recast payment schedules in order to accommodate obligors who
are suffering from temporary financial disability. In other cases, courts have
limited the right of creditors to foreclose if the default under the mortgage
instrument is not a monetary default, such as when the obligor fails adequately
to maintain the property or the obligor executes a second mortgage or deed of
trust affecting the property.
 
ENVIRONMENTAL LEGISLATION
 
    Certain states impose a statutory lien for associated costs on property that
is the subject of a clean-up action by the state on account of hazardous wastes
or hazardous substances released or disposed of on the property. Such a lien
will generally have priority over all subsequent liens on the property and, in
certain of these states, will have priority over prior recorded liens including
the lien of a mortgage or deed of trust. In addition, under federal
environmental legislation and possibly under state law in a number of states, a
secured party which takes a deed in lieu of foreclosure or acquires a mortgaged
property at a foreclosure sale may, in certain limited circumstances, be liable
as an "owner or operator" for the costs of cleaning up a contaminated site.
Although such costs could be substantial, it is unclear whether they would be
imposed on a secured party (such as the Trust). In the event that title to a
Mortgaged Property securing an Account was acquired by the Issuer and cleanup
costs were incurred in respect of the Mortgaged Property, the Noteholders would
be adversely affected if such costs were required to be paid by the Issuer.
 
    However, recent amendments to federal environmental legislation provide for
a "secured creditor exemption" which defines and specifies the range of
permissible actions that may be undertaken by a secured party holding security
in a contaminated facility. In addition, under the amendments, a secured party
continues to be protected from liability as an "owner or operator" after
foreclosure as long as it seeks to divest itself of the facility at the earliest
practicable commercially reasonable time on commercially reasonable terms,
taking into account market conditions and legal and regulatory requirements. The
"secured creditor exemption," however, does not necessarily affect the potential
for liability in actions under other federal or state laws which may impose
liability on "owners or operators" but do not incorporate the "secured creditor
exemption."
 
                                       33
<PAGE>
                                    SECURITY
 
MORTGAGE COLLATERAL
 
    GENERAL.  The Notes will be secured by assignments to the Indenture Trustee
of Collateral consisting of (i) the Mortgage Collateral, (ii) the payments
received thereon after the Cut-Off Date, (iii) the net reinvestment income of
such payments and (iv) the Servicing Agreement and the Purchase and Sale
Agreement. See "DESCRIPTION OF THE NOTES--Interest and Principal Payments."
 
    ACCOUNTS.  In order to enable the Indenture Trustee to obtain a security
interest in the mortgage, deed of trust or other security instrument, as the
case may be, and other documents and instruments underlying each Account
comprising the Mortgage Collateral, upon receipt of such documents and
instruments from the Depositor after the issuance of the Notes, the Indenture
requires the Issuer to: (i) endorse each customer's promissory note in blank and
deliver such note to be held by the Indenture Trustee until such time as such
customer's Account is paid in full or becomes subject to foreclosure
proceedings; (ii) prepare assignments of mortgages, mechanic's lien contracts or
deeds of trust, as the case may be, in recordable form, which collaterally
assign the Issuer's interest in the mortgages, mechanic's lien contracts or
deeds of trust to the Indenture Trustee; and (iii) record such assignments in
the local real estate records where the real property is located. See "RISK
FACTORS--Grant of Security Interest in Mortgage Collateral--Risks of Defective
Security Interest."
 
    INSURANCE PROCEEDS.  The Issuer will assign to the Indenture Trustee, as
additional security for the Notes, all payments due under the standard hazard
insurance policies (the "Insurance Policies") insuring the relevant Mortgaged
Property with respect to each of the Accounts comprising the Mortgage
Collateral. Because the Insurance Policies will be underwritten by different
issuers and will cover Mortgaged Properties located in various states, such
policies will not contain identical terms and conditions. The most significant
terms thereof, however, generally will be determined by state law and generally
will be similar. Most such policies typically will not cover any physical damage
resulting from the following: war, governmental actions, floods, earth
movements, nuclear reaction, hazardous wastes or substances, and theft. The
foregoing list is indicative of certain kinds of uninsured risks and is not
all-inclusive. The terms of each Account comprising the Mortgage Collateral
require the customer to maintain an Insurance Policy covering the related
mortgaged property. The terms of the Servicing Agreement require the Servicer
either to cause such Insurance Policy to be maintained in full force and effect,
or to obtain an insurance policy against certain losses with respect to each
such Account. All proceeds of any Insurance Policy collected by the Servicer
(less amounts to be applied to the restoration or repair of the mortgaged
property) will be deposited in the Collection Account. Insurance proceeds
designated for repair or restoration of a Mortgaged Property will be deposited
in a servicing account established in accordance with the terms of the Servicing
Agreement. See "THE SERVICING AGREEMENT--Insurance; Taxes."
 
    At the time of entering into a Retail Contract or Texas Contract, Jim Walter
Homes offers each customer the opportunity to select Best Insurors, Inc.
("Best"), a licensed Florida insurance agency and a wholly-owned subsidiary of
Walter Industries, to provide the Insurance Policy required to be maintained by
such customer under the Retail Contract or Texas Contract. As of the Cut-Off
Date, 5,035 Accounts representing approximately 51% of the Aggregate Economic
Balance have Insurance Policies issued by Best.
 
    Any losses incurred with respect to Accounts comprising the Mortgage
Collateral due to uninsured risks (including earthquakes, mudflows and floods)
or insufficient hazard insurance proceeds will result in a loss which, to the
extent that the overcollateralization existing at the time of such loss is not
sufficient to cover such loss, will result in the reduction of the principal
balance of one or more Classes of Notes without a payment in respect of
principal thereon. See "RISK FACTORS--Risks of Subordination."
 
                                       34
<PAGE>
    INVESTMENT OF FUNDS.  Subject to certain limitations set forth in the
Indenture, prior to a default or an Event of Default under the Indenture, funds
in the Collection Account will be invested by the Indenture Trustee, as directed
by the Issuer, in certain eligible investments which may include, among other
investments, obligations of the United States or any agency thereof backed by
the full faith and credit of the United States, certain obligations issued or
fully guaranteed by the Federal Home Loan Mortgage Corporation ("Freddie Mac")
or the Federal National Mortgage Association ("Fannie Mae"), certificates of
deposit, time deposits and bankers' acceptances that are obligations of eligible
depository institutions, certain repurchase agreements entered into with
eligible depository institutions, commercial paper or other debt securities
issued by corporations meeting certain credit rating standards and other
investments acceptable to the Rating Agencies ("Eligible Investments"). If a
default or an Event of Default under the Indenture occurs and is continuing, the
Issuer shall no longer have the ability to direct the investment of funds in the
Collection Account. See "THE INDENTURE--Events of Default."
 
    Funds in the Collection Account may be invested only in Eligible Investments
so that all investments will mature no later than two Business Days prior to the
next Payment Date. Any income or other gain from Eligible Investments will be
credited to, and any loss resulting from such investments will be charged to,
the Collection Account.
 
COLLECTION ACCOUNT
 
    Prior to the Closing Date, the Collection Account will be established with,
and in the name of, the Indenture Trustee. On the Closing Date, the Issuer will
deposit cash in an amount equal to all payments (including prepayments) received
on the Accounts comprising the Mortgage Collateral since the Cut-Off Date and up
to the date that is five business days prior to the Closing Date. Thereafter,
all payments (including payments received since and including the date that is
five business days prior to the Closing Date) received in respect of the
Accounts will be deposited in the Collection Account on a weekly basis (which
will include the deposit on the last business day of each Collection Period), in
accordance with information provided by the Servicer. The Indenture Trustee will
transfer amounts in the Holding Account into the Collection Account. Prior to
any such deposit, payments received in respect of the Accounts will be held by
the Indenture Trustee in the Holding Account. See "THE SERVICING AGREEMENT--
Collection of Payments." The foregoing amounts deposited into the Collection
Account, together with the reinvestment income thereon and less Issuer Expenses,
will be available to make payments on the Notes.
 
   
CLASS A-4 RESERVE ACCOUNT
    
 
   
    Prior to the Closing Date, the Class A-4 Reserve Account will be established
with and in the name of the Indenture Trustee and will be assigned by the Issuer
to the Indenture Trustee as security for the Class A-4 Notes. On the Closing
Date, the Issuer will deposit into the Class A-4 Reserve Account cash in an
amount equal to $[          ]. If on any Payment Date, Available Funds, less
amounts thereof paid on the Class A-1, Class A-2 and Class A-3 Notes in respect
of interest, are insufficient to make full payment of the Interest Accrual
Amount of the Class A-4 Notes, the Indenture Trustee will withdraw the amount of
the deficiency from the Class A-4 Reserve Account (or the amount on deposit
therein, if less) and deposit such amount in the Collection Account for payment
to the Class A-4 Notes. No amount withdrawn from the Class A-4 Reserve Account
will be paid to holders of the Class A-1, Class A-2 or Class A-3 Notes. Any
amount so withdrawn from the Class A-4 Reserve Account (any such amount, a
"Class A-4 Reserve Withdrawal") will be reimbursed to such account on future
Payment Dates to the extent of the excess, if any, of Available Funds for such
future Payment Date over the sum of the Interest Accrual Amounts and
unreimbursed Class Interest Shortfalls on all Classes of Notes on such future
Payment Date. Other than any such reimbursement, no person will have any
obligation to deposit any amounts in the Class A-4 Reserve Account following the
Closing Date.
    
 
   
    On each Payment Date, any excess of the amount on deposit in the Class A-4
Reserve Account (following the Available Funds Allocation and any required
withdrawals from the Class A-4 Reserve
    
 
                                       35
<PAGE>
   
Account in respect of shortfalls in Available Funds) over the Maximum Reserve
Amount, will be withdrawn therefrom by the Indenture Trustee and remitted to the
Issuer free of the lien of the Indenture. The "Maximum Reserve Amount" on any
Payment Date will equal the greater of (i) one year of interest on the Class A-4
Outstanding Principal Balance following payments on the Notes and allocations of
losses on such Payment Date and (ii) one half of the amount initially deposited
in the Class A-4 Reserve Account. On the Payment Date on which the Class A-4
Outstanding Principal Balance has been reduced to zero, all amounts on deposit
in the Class A-4 Reserve Account will be remitted to the Issuer free of the lien
of the Indenture.
    
 
   
    Funds in the Class A-4 Reserve Account may be invested only in Eligible
Investments. Such Eligible Investments must mature such that at any point in
time: (i) an amount up to three month's interest on the Class A-4 Outstanding
Principal Balance as of the immediately-preceding Payment Date must mature no
later than two Business Days prior to the next Payment Date; (ii) the excess of
such Eligible Investments up to an amount equal to three month's interest on the
Class A-4 Outstanding Principal Balance as of the immediately-preceding Payment
Date must mature no later than two Business Days prior to the second succeeding
Payment Date; (iii) the excess of such Eligible Investments up to an amount
equal to three month's interest on the Class A-4 Outstanding Principal Balance
as of the immediately preceding Payment Date must mature no later than two
Business Days prior to the third succeeding Payment Date; and (iv) the excess of
such Eligible Investments must mature no later than two Business Days prior to
the fourth succeeding Payment Date. Any income or other gain from Eligible
Investments will be paid to the Issuer on each Payment Date prior to any Class
A-4 Reserve Withdrawals on such date.
    
 
CERTAIN CONTRACTUAL RIGHTS
 
    The Issuer will assign to the Indenture Trustee as security for the Notes
all of its right, title and interest in, to and under the Purchase and Sale
Agreement and the Servicing Agreement and the rights to certain servicing
software. See "THE PURCHASE AND SALE AGREEMENT."
 
                            DESCRIPTION OF THE NOTES
 
    The following are summaries of the material provisions of the Notes. The
following summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, the Indenture.
 
AVAILABLE FUNDS
 
    "Available Funds" in respect of a Payment Date are funds equal to the sum of
(i) collections on the Accounts during the Collection Period immediately
preceding such Payment Date that are on deposit in the Collection Account as of
the close of business on the last business day of such Collection Period and
(ii) any net reinvestment income earned on funds described in clause (i) above,
during the Reinvestment Period. Available Funds will be net of Issuer Expenses
paid. "Issuer Expenses" are all of the Issuer's expenses (other than amounts due
on the Notes), including, without limitation, the fees and expenses of the Owner
Trustee, the Indenture Trustee and the fee of the Servicer. See "THE TRUST
AGREEMENT," THE INDENTURE--The Indenture Trustee" and "THE SERVICING
AGREEMENT--Servicing Fee." The "Remaining Available Funds" for a Payment Date
are the Available Funds for such Payment Date reduced by the amount of interest
due on the Notes on such Payment Date.
 
INTEREST AND PRINCIPAL PAYMENTS
 
    Interest on each Class of the Notes will be payable from Available Funds on
each Payment Date in an amount up to the Interest Accrual Amount of such Class.
The "Interest Accrual Amount" of any Class for any Payment Date is equal to
interest accrued on the Outstanding Principal Balance of such Class (after
giving effect to payments and allocations of losses on the preceding Payment
Date, if any) during the Interest Accrual Period ending on the day prior to the
Payment Date, at the Note Rate for such Class;
 
                                       36
<PAGE>
provided, however, that such amount shall not include interest due and payable
with respect to unreimbursed Realized Loss Amounts. The "Note Rate" of the Class
A-1, Class A-2, Class A-3 and Class A-4 Notes is [   ]%, [   ]%, [   ]% and
[   ]%, respectively. On or prior to the Maturity Date, an event which would
otherwise be an Event of Default under the Indenture will not be an Event of
Default (i) in respect of the Class A-2 Notes until the Class A-1 Notes have
been paid in full, (ii) in respect of the Class A-3 Notes until the Class A-1
Notes and Class A-2 Notes have been paid in full and (iii) in respect of the
Class A-4 Notes until the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes
have been paid in full.
 
    The "Class A-1 Outstanding Principal Balance" as of any Payment Date will
equal the Class A-1 Initial Principal Balance reduced by (i) all payments, if
any, made on the Class A-1 Notes in reduction of principal balance made on all
prior Payment Dates and (ii) all Class A-1 Realized Loss Amounts with respect to
prior Payment Dates. The "Class A-1 Initial Principal Balance" is equal to
$287,750,000.
 
    The "Class A-2 Outstanding Principal Balance" as of any Payment Date will
equal the Class A-2 Initial Principal Balance reduced by (i) all payments, if
any, made on the Class A-2 Notes in reduction of principal balance made on all
prior Payment Dates and (ii) all Class A-2 Realized Loss Amounts with respect to
prior Payment Dates. The "Class A-2 Initial Principal Balance" is equal to
$57,750,000.
 
    The "Class A-3 Outstanding Principal Balance" as of any Payment Date will
equal the Class A-3 Initial Principal Balance reduced by (i) all payments, if
any, made on the Class A-3 Notes in reduction of principal balance made on all
prior Payment Dates and (ii) all Class A-3 Realized Loss Amounts with respect to
prior Payment Dates. The "Class A-3 Initial Principal Balance" is equal to
$45,100,000.
 
    The "Class A-4 Outstanding Principal Balance" as of any Payment Date will
equal the Class A-4 Initial Principal Balance reduced by (i) all payments, if
any, made on the Class A-4 Notes in reduction of principal balance made on all
prior Payment Dates and (ii) all Class A-4 Realized Loss Amounts with respect to
prior Payment Dates. The "Class A-4 Initial Principal Balance" is equal to
$48,550,000.
 
    The Class A-1 Outstanding Principal Balance, the Class A-2 Outstanding
Principal Balance, the Class A-3 Outstanding Principal Balance and the Class A-4
Outstanding Principal Balance, are each referred to herein generally as an
"Outstanding Principal Balance." The "Aggregate Outstanding Principal Balance"
as of any Payment Date is equal to the sum of the Outstanding Principal Balances
as of such Payment Date.
 
    On any Payment Date, if Available Funds (less any interest paid to the prior
Classes of Notes, on such Payment Date) are less than the Interest Accrual
Amount for a Class of Notes, there will exist a shortfall in interest paid to
such Class of Notes; provided, however, that such amount shall not include
interest due and payable with respect to unreimbursed Realized Loss Amounts (as
to each Class of Notes, a "Class Interest Shortfall"). Class Interest Shortfalls
will be added to the amount of interest payable to the holders of such Class on
subsequent Payment Dates, subject to the availability of funds, and interest
will accrue on the amount of any Class Interest Shortfalls.
 
    Interest will be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
 
    On each Payment Date, interest and principal payments on the Notes will be
made from Available Funds in the following order of priority (the "Available
Funds Allocation"):
 
        FIRST, to the holders of the Class A-1 Notes, in an amount up to the
    Interest Accrual Amount thereof;
 
        SECOND, to the holders of the Class A-1 Notes, in an amount up to all
    unreimbursed Class Interest Shortfalls related thereto, together with
    accrued interest thereon;
 
        THIRD, to the holders of the Class A-2 Notes, in an amount up to the
    Interest Accrual Amount thereof;
 
                                       37
<PAGE>
        FOURTH, to the holders of the Class A-2 Notes, in an amount up to all
    unreimbursed Class Interest Shortfalls related thereto, together with
    accrued interest thereon;
 
        FIFTH, to the holders of the Class A-3 Notes, in an amount up to the
    Interest Accrual Amount thereof;
 
        SIXTH, to the holders of the Class A-3 Notes, in an amount up to all
    unreimbursed Class Interest Shortfalls related thereto, together with
    accrued interest thereon;
 
        SEVENTH, to the holders of the Class A-4 Notes, in an amount up to the
    Interest Accrual Amount thereof;
 
        EIGHTH, to the holders of the Class A-4 Notes, in an amount up to all
    unreimbursed Class Interest Shortfalls related thereto, together with
    accrued interest thereon;
 
   
        NINTH, to the Class A-4 Reserve Account, in any amount up to all
    unreimbursed Class A-4 Reserve Withdrawals;
    
 
   
        TENTH, to the holders of the Class A-1 Notes, in an amount up to the
    Class A-1 Optimal Principal Amount;
    
 
   
        ELEVENTH, to the holders of the Class A-1 Notes, accrued and unpaid
    interest at the related Note Rate on the amount of any unreimbursed Class
    A-1 Realized Loss Amounts previously allocated thereto (provided that any
    such amount will not be due and payable unless there exist Available Funds
    sufficient to pay such amount and all not prior amounts under this Available
    Funds Allocation);
    
 
   
        TWELFTH, to the holders of the Class A-1 Notes, in an amount up to the
    amount of any unreimbursed Class A-1 Realized Loss Amounts previously
    allocated thereto (provided that any such amount will not be due and payable
    unless there exist Available Funds sufficient to pay such amount and all
    prior amounts under this Available Funds Allocation);
    
 
   
        THIRTEENTH, to the holders of the Class A-2 Notes, in an amount up to
    the Class A-2 Optimal Principal Amount;
    
 
   
        FOURTEENTH, to the holders of the Class A-2 Notes, accrued and unpaid
    interest at the related Note Rate on the amount of any unreimbursed Class
    A-2 Realized Loss Amounts previously allocated thereto (provided that any
    such amount will not be due and payable unless there exist Available Funds
    sufficient to pay such amount and all prior amounts under this Available
    Funds Allocation);
    
 
   
        FIFTEENTH, to the holders of the Class A-2 Notes, in an amount up to the
    amount of any unreimbursed Class A-2 Realized Loss Amounts previously
    allocated thereto (provided that any such amount will not be due and payable
    unless there exist Available Funds sufficient to pay such amount and all
    prior amounts under this Available Funds Allocation);
    
 
   
        SIXTEENTH, to the holders of the Class A-3 Notes, in an amount up to the
    Class A-3 Optimal Principal Amount;
    
 
   
        SEVENTEENTH, to the holders of the Class A-3 Notes, accrued and unpaid
    interest at the related Note Rate on the amount of any unreimbursed Class
    A-3 Realized Loss Amounts previously allocated thereto (provided that any
    such amount will not be due and payable unless there exist Available Funds
    sufficient to pay such amount and all prior amounts under this Available
    Funds Allocation);
    
 
   
        EIGHTEENTH, to the holders of the Class A-3 Notes, in an amount up to
    the amount of any unreimbursed Class A-3 Realized Loss Amounts previously
    allocated thereto (provided that any such amount will not be due and payable
    unless there exist Available Funds sufficient to pay such amount and all
    prior amounts under this Available Funds Allocation);
    
 
                                       38
<PAGE>
   
        NINETEENTH, to the holders of the Class A-4 Notes, in an amount up to
    the Class A-4 Optimal Principal Amount;
    
 
   
        TWENTIETH, to the holders of the Class A-4 Notes, accrued and unpaid
    interest at the related Note Rate on the amount of any unreimbursed Class
    A-4 Realized Loss Amounts previously allocated thereto (provided that any
    such amount will not be due and payable unless there exist Available Funds
    sufficient to pay such amount and all prior amounts under this Available
    Funds Allocation);
    
 
   
        TWENTY-FIRST, to the holders of the Class A-4 Notes, in an amount up to
    the amount of any unreimbursed Class A-4 Realized Loss Amounts previously
    allocated thereto (provided that any such amount will not be due and payable
    unless there exist Available Funds sufficient to pay such amount and all
    prior amounts under this Available Funds Allocation).
    
 
   
        In addition to distributions of Available Funds thereto in accordance
    with the Available Funds Allocation, on each Payment Date the Indenture
    Trustee will pay any Class A-4 Reserve Withdrawal to the holders of the
    Class A-4 Notes.
    
 
    The "Class A-1 Optimal Principal Amount" on any Payment Date is equal to the
product of (i) the Optimal Principal Amount for such Payment Date and (ii) a
fraction, the numerator of which is the Class A-1 Outstanding Principal Balance
for such Payment Date and the denominator of which is the Aggregate Outstanding
Principal Balance for such Payment Date; such product not to exceed the Class
A-1 Outstanding Principal Balance.
 
    The "Class A-2 Optimal Principal Amount" on any Payment Date is equal to the
product of (i) the Optimal Principal Amount for such Payment Date and (ii) a
fraction, the numerator of which is the Class A-2 Outstanding Principal Balance
for such Payment Date and the denominator of which is the Aggregate Outstanding
Principal Balance for such Payment Date; such product not to exceed the Class
A-2 Outstanding Principal Balance.
 
    The "Class A-3 Optimal Principal Amount" on any Payment Date is equal to the
product of (i) the Optimal Principal Amount for such Payment Date and (ii) a
fraction, the numerator of which is the Class A-3 Outstanding Principal Balance
for such Payment Date and the denominator of which is the Aggregate Outstanding
Principal Balance for such Payment Date; such product not to exceed the Class
A-3 Outstanding Principal Balance.
 
    The "Class A-4 Optimal Principal Amount" on any Payment Date is equal to the
product of (i) the Optimal Principal Amount for such Payment Date and (ii) a
fraction, the numerator of which is the Class A-4 Outstanding Principal Balance
for such Payment Date and the denominator of which is the Aggregate Outstanding
Principal Balance for such Payment Date; such product not to exceed the Class
A-4 Outstanding Principal Balance.
 
    A "Class Optimal Principal Amount" is any of the Class A-1, Class A-2, Class
A-3 or Class A-4 Optimal Principal Amounts, as applicable.
 
    The "Optimal Principal Amount" is equal to (A) on any Payment Date (i) on or
prior to the Target Overcollateralization Date or (ii) after the Target
Overcollateralization Date and on which there exists an uncured Trigger Event,
the Remaining Available Funds; and (B) on any Payment Date after the Target
Overcollateralization Date on which there does not exist an uncured Trigger
Event, the amount which, when paid as principal on the Notes, will result in
achieving or maintaining the Target Overcollateralization Level. In no event
will the Optimal Principal Amount for any Payment Date exceed the Remaining
Available Funds for such Payment Date or the Aggregate Outstanding Principal
Balance of the Notes.
 
    An Event of Default may be cured only if the Indenture Trustee has not
accelerated the Notes.
 
    The "Target Overcollateralization Date" is the Payment Date occurring in
April 2000.
 
                                       39
<PAGE>
    The "Target Overcollateralization Level" as of any Payment Date, is the
level of overcollateralization that would exist if the Overcollateralization
Amount were equal to the greater of (i) the product of (x) the
Overcollateralization Percentage and (y) the Aggregate Economic Balance of the
Accounts as of the first day of the month preceding the month of such Payment
Date and (ii) the Minimum Target Overcollateralization Amount.
 
    The "Overcollateralization Amount" as of any Payment Date, is an amount
equal to (i) the Aggregate Economic Balance of the Accounts as of the first day
of the month preceding the month of such Payment Date, less (ii) the Aggregate
Outstanding Principal Balance and all unreimbursed Realized Loss Amounts, after
giving effect to payments, but prior to the allocation of losses thereon on such
Payment Date.
 
    The "Minimum Target Overcollateralization Amount" for any Payment Date, is
(a) an amount equal to the greater of (i) the product of (x) 10% and (y) the
Aggregate Economic Balance of the Accounts as of the first day of the month
preceding the month of such Payment Date and (ii) $16,180,055 or (b) in the
event that (i) Mid-State is no longer the Servicer, (ii) the cumulative losses
on the Accounts exceed 4.75%, 5.50%, 6.50%, 7.00% and 8.00% of the Aggregate
Economic Balance as of the Cut-Off Date, at the end of four, five, six, seven
and eight years after the Cut-Off Date, respectively, or exceed 8.00%
thereafter, or (iii) the average 60 day delinquency ratio test as defined in the
Indenture as of any Payment Date, exceeds 8.00%, and such event is continuing,
an amount equal to the greater of (x) the Aggregate Outstanding Principal
Balance of the Notes and (y) the Aggregate Economic Balance of the Accounts as
of the month preceeding the month of such Payment Date.
 
    The "Overcollateralization Percentage" will be a fraction, expressed as a
percentage, the numerator of which is equal to the excess of (i) the Aggregate
Economic Balance of the Accounts as of the first day of the month preceding the
month in which the Target Overcollateralization Date occurs over (ii) the
Aggregate Outstanding Principal Balance of all Classes of Notes and all
unreimbursed Realized Loss Amounts with respect to all Classes of Notes on the
Target Overcollateralization Date (following payments and allocations of losses
on the Target Overcollateralization Date) and the denominator of which is the
Aggregate Economic Balance of the Accounts as of the first day of the month
preceding the month in which the Target Overcollateralization Date occurs.
 
    Following the Target Overcollateralization Date, unless there exists an
uncured Trigger Event, the portion, if any, of the Available Funds remaining
after the Available Funds Allocation, will be released to the Issuer, free of
the lien of the Indenture, and will no longer be available to make payments on
the Notes. Such funds will then be distributed to the owner of the beneficial
interest in the Issuer, which will initially be Mid-State.
 
ALLOCATION OF LOSSES
 
    As of each Payment Date, the Indenture Trustee will calculate the Class A-1
Realized Loss Amount, the Class A-2 Realized Loss Amount, the Class A-3 Realized
Loss Amount and the Class A-4 Realized Loss Amount.
 
    The "Class A-1 Realized Loss Amount" for any Payment Date will be equal to
the excess of (i) the Class A-1 Outstanding Principal Balance as of such Payment
Date (after application of the Class A-1 Optimal Principal Amount, but prior to
the application of losses on such Payment Date) over (ii) the Aggregate Economic
Balance of the Accounts immediately following the Collection Period related to
such Payment Date, not to exceed the Class A-1 Outstanding Principal Balance.
 
    The "Class A-2 Realized Loss Amount" for any Payment Date will be equal to
the excess of (i) the sum of (a) the Class A-1 Outstanding Principal Balance as
of such Payment Date (after application of the Class A-1 Optimal Principal
Amount, but prior to the application of losses on such Payment Date) and (b) the
Class A-2 Outstanding Principal Balance as of such Payment Date (after
application of the Class A-2 Optimal Principal Amount, but prior to the
application of losses on such Payment Date) over (ii) the
 
                                       40
<PAGE>
Aggregate Economic Balance of the Accounts immediately following the Collection
Period related to such Payment Date, not to exceed the Class A-2 Outstanding
Principal Balance.
 
    The "Class A-3 Realized Loss Amount" for any Payment Date will be equal to
the excess of (i) the sum of (a) the Class A-1 Outstanding Principal Balance as
of such Payment Date (after application of the Class A-1 Optimal Principal
Amount, but prior to the application of losses on such Payment Date), (b) the
Class A-2 Outstanding Principal Balance as of such Payment Date (after
application of the Class A-2 Optimal Principal Amount, but prior to the
application of losses on such Payment Date) and (c) the Class A-3 Outstanding
Principal Balance as of such Payment Date (after application of the Class A-3
Optimal Principal Amount, but prior to the application of losses on such Payment
Date) over (ii) the Aggregate Economic Balance of the Accounts immediately
following the Collection Period related to such Payment Date, not to exceed the
Class A-3 Outstanding Principal Balance.
 
    The "Class A-4 Realized Loss Amount" for any Payment Date will be equal to
the excess of (i) the sum of (a) the Class A-1 Outstanding Principal Balance as
of such Payment Date (after application of the Class A-1 Optimal Principal
Amount, but prior to the application of losses on such Payment Date), (b) the
Class A-2 Outstanding Principal Balance as of such Payment Date (after
application of the Class A-2 Optimal Principal Amount but prior to the
application of losses on such Payment Date), (c) the Class A-3 Outstanding
Principal Amount, but prior to the application of losses on such Payment Date)
and (d) the Class A-4 Outstanding Principal Balance as of such Payment Date
(after application of the Class A-4 Optimal Principal Amount, but prior to the
application of losses on such Payment Date) over (ii) the Aggregate Economic
Balance of the Accounts immediately following the Collection Period related to
such Payment Date, not to exceed the Class A-4 Outstanding Principal Balance.
 
    The Class A-1 Realized Loss Amount, the Class A-2 Realized Loss Amount, the
Class A-3 Realized Loss Amount and the Class A-4 Realized Loss Amount are
referred to herein generally as the "Realized Loss Amounts."
 
    On each Payment Date, any Class A-1 Realized Loss Amount will be applied in
reduction of the Class A-1 Outstanding Principal Balance; any Class A-2 Realized
Loss Amount will be applied in reduction of the Class A-2 Outstanding Principal
Balance; any Class A-3 Realized Loss Amount will be applied in reduction of the
Class A-3 Outstanding Principal Balance; and any Class A-4 Realized Loss Amount
will be applied in reduction of the Class A-4 Outstanding Principal Balance; in
each case, until the Outstanding Principal Balance of such Class has been
reduced to zero.
 
    Any reimbursement of Realized Loss Amounts with respect to a Class of Notes
will not result in a reduction of the Outstanding Principal Balance of such
Class of Notes.
 
REDEMPTION OF THE NOTES
 
    All (but not less than all) of the outstanding Notes may be redeemed on any
Payment Date at the option of the Issuer, at 100% of the unpaid principal amount
of the Notes plus accrued interest, if, after giving effect to the payment of
principal to be made on such Payment Date absent such redemption, the aggregate
principal amount of each Class of Notes outstanding (prior to allocations of any
Realized Loss Amounts) is less than or equal to 10% of the original aggregate
principal amount of such Class of Notes.
 
WEIGHTED AVERAGE LIFE OF THE NOTES
 
    The following information is given solely to illustrate the effect of
prepayments in respect of the Accounts on the weighted average life of each
Class of Notes and is not a prediction of the prepayment rate, the repossession
rate or the effects of repossessions that might actually be experienced in
respect of the Accounts.
 
    The weighted average life of each Class of Notes refers to the average
amount of time that will elapse from the date of its issuance until each dollar
of principal of such Class of Notes will be repaid to the
 
                                       41
<PAGE>
investor. The weighted average life of the Notes will be influenced by, among
other factors, the rate at which collections are made on the Accounts. Payments
on the Accounts may be in the form of scheduled payments or prepayments (for
this purpose, the term "prepayments" includes prepayments in full and receipt of
proceeds from Insurance Policies that are not applied to the restoration of the
home). It is expected that, consistent with Mid-State's current servicing
procedures, repossessed homes will, in general, be sold in exchange for a new
Account together with a small amount of cash. Consequently, liquidations of
Accounts due to repossessions are not expected to generate much, if any, cash
proceeds.
 
    Because of the initial overcollateralization, the likelihood of prepayments
on the Accounts and the application of the Remaining Available Funds to pay
principal of the Notes in accordance with the Available Funds Allocation, it is
expected that each Class of Notes could be fully paid significantly earlier than
the Maturity Date. On the other hand, because no party is required to advance
delinquent payments on the accounts, there will be no cash flow in respect of
Accounts secured by repossessed properties until a new Account is generated upon
the sale, if any, of the related repossessed property; and such cash flow would
normally be in a lesser amount. There can be no assurance that any of the
foregoing events will occur or as to the timing of the occurrence of such
events.
 
   
    The weighted average life of each Class of Notes as computed herein and the
other information in the tables below assume that: (i) all of the Accounts
constitute eight fully-amortizing fixed-rate accounts: (a) one of which has the
characteristics as set forth under the column "0-15" in the table entitled
"Remaining Years to Maturity of Accounts Comprising the Mortgage Collateral -
8.50% Accounts" (the "8.50% Accounts Table") set forth under "THE MORTGAGE
COLLATERAL"; (b) one of which has the characteristics as set forth under the
column "16-20" in the 8.50% Accounts Table; (c) one of which has the
characteristics as set forth under the column "21-25" in the 8.50% Accounts
Table; (d) one of which has the characteristics as set forth under the column
"26-30" in the 8.50% Accounts Table; (e) one of which has the characteristics as
set forth under the column "0-15" in the table entitled "Remaining Years to
Maturity of Accounts Comprising the Mortgage Collateral - 10.00% Accounts (the
"10.00% Accounts Table") set forth under "THE MORTGAGE COLLATERAL"; (f) one of
which has the characteristics as set forth under the column "16-20" in the
10.00% Accounts Table; (g) one of which has the characteristics as set forth
under the column "21-25" in the 10.00% Accounts Table; and (h) one of which has
the characteristics as set forth under the column "26-30" in the 10.00% Accounts
Table; (ii) Issuer Expenses consist only of the servicing fees; the servicing
fees and losses total 1.15% of the current Aggregate Economic Balance; (iii) no
Event of Default under the Indenture occurs and no Trigger Event occurs; (iv)
there are no delinquent monthly payments; (v) the Issuer does not redeem the
Notes as provided under "Redemption of Notes" above; and (vi) the Notes are
issued on June 6, 1997 and the Class A-1, Class A-2, Class A-3, and Class A-4
Notes are assumed to bear interest at an interest rate equal to 7.46%, 7.61%,
7.80% and 8.09%, respectively. No representation is made that the Accounts will
not experience delinquencies or losses or that resales of repossessed houses
will not occur and new Accounts will not be generated.
    
 
    Prepayments on Accounts that are not due to repossessions are commonly
measured relative to a prepayment standard or model. The model used in this
Prospectus, the conditional prepayment rate ("CPR"), represents an assumed
annual rate of prepayments relative to the outstanding Economic Balance of the
Accounts at the beginning of an Interest Accrual Period. The CPR is expressed as
an annual rate, which is applied monthly as a percentage of the Accounts
outstanding at the beginning of each month reduced by scheduled payments due on
the Accounts. As used in the tables below, "3.5% CPR" assumes prepayments at an
annual rate of 3.5%; "4.5% CPR" assumes prepayments at an annual rate of 4.5%;
and so on.
 
    Since the tables below were prepared on the basis of the assumptions
specified above, there are discrepancies between the characteristics of the
actual Accounts and the characteristics of the Accounts assumed in preparing the
tables, and discrepancies between the actual Issuer Expenses and the Issuer
Expenses assumed in preparing the tables. Any such discrepancy may have an
effect upon the percentages of the remaining principal amount of each Class of
Notes outstanding and weighted average lives of such
 
                                       42
<PAGE>
Notes set forth in each table. In addition, since the actual Accounts have
characteristics which differ from those assumed in preparing the tables, the
payments of principal on each Class of Notes may be made earlier or later than
as indicated in the tables. The tables below were also prepared on the basis of
the assumptions that there are no delinquencies in respect of the Accounts. In
the actual servicing of the Accounts, it is expected that there will be
delinquencies, losses, resales of repossessed houses and new Accounts generated
that can vary from the assumptions used in the calculation of the tables on the
following pages. In general, repossessed houses will be sold for a new Account
with little or no cash downpayment, and there will be some period of time
between the repossession of the house and the origination of the new Account
(which may have a lower Economic Balance), during which period no collections
are received in respect of the repossessed house. Such discrepancies may have an
effect on the weighted average life of each Class of Notes and the percentages
of the remaining principal amount of such Notes set forth in each table.
 
    It is not likely that the Accounts will prepay at any constant level of CPR
to maturity or that all the Accounts will prepay at the same rate. In addition,
the diverse remaining terms to maturity of the Accounts (which include recently
originated Accounts) could produce slower or faster payments of principal than
indicated in the table at the various levels of CPR specified even if the
weighted average remaining term to scheduled maturity of the Accounts is 24.7
years.
 
    Investors are urged to make their investment decisions on a basis that
includes their determination as to anticipated repayment rates, repossession
rates and principal amounts of new Accounts assumed to be generated in respect
of repossessions under a variety of their own assumptions as to the matters set
forth above.
 
    There is no assurance that prepayments of the Accounts will conform to any
level of CPR set forth above in this section or any other level of CPR. The
rates of prepayments on the Accounts are influenced by a variety of economic,
geographic, social and other factors. In general, however, if prevailing
interest rates fall, and particularly if they fall significantly below the
Effective Financing Rates of the Accounts, the rate of repayment on such
Accounts is likely to increase. Conversely, if interest rates rise, and
particularly if they rise significantly above the Effective Financing Rates of
the Accounts, the rate of repayment would be expected to decrease. Other factors
affecting prepayment of Accounts include changes in the homeowner's housing
needs, job transfers, unemployment and the homeowner's net equity in the
properties. The CPR does not purport to be either an historical description of
the voluntary prepayment experience of the Accounts or a prediction of the
anticipated amount of prepayments of the Accounts.
 
    Based on the assumptions described above, the following tables indicate the
resulting weighted average life of each Class of Notes and set forth the
percentage of the original principal amount of each Class of Notes that would be
outstanding immediately prior to giving effect to the payment due on each of the
dates shown at the indicated percentages of CPR.
 
                                       43
<PAGE>
                   PERCENTAGE OF ORIGINAL PRINCIPAL AMOUNT OF
        THE CLASS A-1 NOTES OUTSTANDING AT THE RESPECTIVE LEVELS OF CPR
 
   
<TABLE>
<CAPTION>
PAYMENT DATE                                              3.5% CPR     4.5% CPR     5.5% CPR     6.5% CPR     7.5% CPR
- -------------------------------------------------------  -----------  -----------  -----------  -----------  -----------
<S>                                                      <C>          <C>          <C>          <C>          <C>
Closing Date...........................................        100%         100%         100%         100%         100%
4/1/98.................................................         94%          93%          92%          91%          90%
4/1/99.................................................         88%          86%          84%          82%          80%
4/1/00.................................................         82%          79%          76%          74%          71%
4/1/01.................................................         78%          74%          71%          68%          65%
4/1/02.................................................         73%          70%          66%          62%          59%
4/1/03.................................................         69%          65%          61%          57%          53%
4/1/04.................................................         65%          61%          56%          52%          48%
4/1/05.................................................         61%          56%          52%          47%          43%
4/1/06.................................................         57%          52%          47%          43%          39%
4/1/07.................................................         54%          48%          43%          39%          35%
4/1/08.................................................         50%          44%          39%          35%          31%
4/1/09.................................................         46%          40%          35%          31%          27%
4/1/10.................................................         42%          37%          32%          27%          23%
4/1/11.................................................         38%          33%          28%          24%          20%
4/1/12.................................................         35%          30%          25%          20%          17%
4/1/13.................................................         31%          26%          21%          17%          14%
4/1/14.................................................         27%          22%          18%          14%          11%
4/1/15.................................................         23%          19%          15%          12%           9%
4/1/16.................................................         20%          15%          12%           9%           7%
4/1/17.................................................         16%          12%           9%           7%           5%
4/1/18.................................................         13%           9%           7%           5%           3%
4/1/19.................................................          9%           6%           4%           3%           1%
4/1/20.................................................          6%           4%           2%           1%           0%
4/1/21.................................................          3%           1%            *           0%           0%
4/1/22.................................................          1%            *           0%           0%           0%
4/1/23.................................................           *           0%           0%           0%           0%
4/1/24.................................................          0%           0%           0%           0%           0%
Weighted Average Life
  (Years) (1)..........................................       11.25        10.27         9.40         8.62         7.94
Duration (Years) (2)...................................         6.5          6.1          5.7          5.3          5.0
Principal Payment Window
  (Months) (3).........................................         313          301          289          280          274
Expected Final Maturity................................      7/1/23       7/1/22       7/1/21      10/1/20       4/1/20
</TABLE>
    
 
- ------------------------
(1) The weighted average life of a Note is determined by (i) multiplying the
    amount of each principal payment by the number of years from the date of
    issuance to the related principal payment date, (ii) summing the results and
    (iii) dividing the sum by the total principal paid on the Note.
 
(2) Modified Duration assuming an example yield of 7.59%.
 
   
(3) The number of months from and including the first payment date to the month
    in which the final payment of principal would be made.
    
 
*   Indicates an amount greater than zero but less than 0.5% of the original
    principal amount.
 
   
    The Stated Maturity Date of the Class A-1 Notes is July 1, 2025 and the
weighted average life of the Class A-1 Notes is 15.78 years, in each case
assuming a prepayment speed of 0% CPR.
    
 
                                       44
<PAGE>
                   PERCENTAGE OF ORIGINAL PRINCIPAL AMOUNT OF
        THE CLASS A-2 NOTES OUTSTANDING AT THE RESPECTIVE LEVELS OF CPR
 
   
<TABLE>
<CAPTION>
PAYMENT DATE                                              3.5% CPR     4.5% CPR     5.5% CPR     6.5% CPR     7.5% CPR
- -------------------------------------------------------  -----------  -----------  -----------  -----------  -----------
<S>                                                      <C>          <C>          <C>          <C>          <C>
Closing Date...........................................        100%         100%         100%         100%         100%
4/1/98.................................................         94%          93%          92%          91%          90%
4/1/99.................................................         88%          86%          84%          82%          80%
4/1/00.................................................         82%          79%          76%          74%          71%
4/1/01.................................................         78%          74%          71%          68%          65%
4/1/02.................................................         73%          70%          66%          62%          59%
4/1/03.................................................         69%          65%          61%          57%          53%
4/1/04.................................................         65%          61%          56%          52%          48%
4/1/05.................................................         61%          56%          52%          47%          43%
4/1/06.................................................         57%          52%          47%          43%          39%
4/1/07.................................................         54%          48%          43%          39%          35%
4/1/08.................................................         50%          44%          39%          35%          31%
4/1/09.................................................         46%          40%          35%          31%          27%
4/1/10.................................................         42%          37%          32%          27%          23%
4/1/11.................................................         38%          33%          28%          24%          20%
4/1/12.................................................         35%          30%          25%          20%          17%
4/1/13.................................................         31%          26%          21%          17%          14%
4/1/14.................................................         27%          22%          18%          14%          11%
4/1/15.................................................         23%          19%          15%          12%           9%
4/1/16.................................................         20%          15%          12%           9%           7%
4/1/17.................................................         16%          12%           9%           7%           5%
4/1/18.................................................         13%           9%           7%           5%           3%
4/1/19.................................................          9%           6%           4%           3%           1%
4/1/20.................................................          6%           4%           2%           1%           0%
4/1/21.................................................          3%           1%            *           0%           0%
4/1/22.................................................          1%            *           0%           0%           0%
4/1/23.................................................           *           0%           0%           0%           0%
4/1/24.................................................          0%           0%           0%           0%           0%
Weighted Average Life
  (Years) (1)..........................................       11.25        10.27         9.40         8.62         7.94
Duration (Years) (2)...................................         6.4          6.0          5.6          5.3          5.0
Principal Payment Window
  (Months) (3).........................................         313          301          289          280          274
Expected Final Maturity................................      7/1/23       7/1/22       7/1/21      10/1/20       4/1/20
</TABLE>
    
 
- ------------------------
 
(1) The weighted average life of a Note is determined by (i) multiplying the
    amount of each principal payment by the number of years from the date of
    issuance to the related principal payment date, (ii) summing the results and
    (iii) dividing the sum by the total principal paid on the Note.
 
(2) Modified Duration assuming an example yield of 7.74%.
 
   
(3) The number of months from and including the first payment date to the month
    in which the final payment of principal would be made.
    
 
*   Indicates an amount greater than zero but less than 0.5% of the original
    principal amount.
 
   
    The Stated Maturity Date of the Class A-2 Notes is July 1, 2025 and the
weighted average life of the Class A-2 Notes is 15.78 years, in each case
assuming a prepayment speed of 0% CPR.
    
 
                                       45
<PAGE>
                   PERCENTAGE OF ORIGINAL PRINCIPAL AMOUNT OF
 
        THE CLASS A-3 NOTES OUTSTANDING AT THE RESPECTIVE LEVELS OF CPR
 
   
<TABLE>
<CAPTION>
PAYMENT DATE                                              3.5% CPR     4.5% CPR     5.5% CPR     6.5% CPR     7.5% CPR
- -------------------------------------------------------  -----------  -----------  -----------  -----------  -----------
<S>                                                      <C>          <C>          <C>          <C>          <C>
Closing Date...........................................        100%         100%         100%         100%         100%
4/1/98.................................................         94%          93%          92%          91%          90%
4/1/99.................................................         88%          86%          84%          82%          80%
4/1/00.................................................         82%          79%          76%          74%          71%
4/1/01.................................................         78%          74%          71%          68%          65%
4/1/02.................................................         73%          70%          66%          62%          59%
4/1/03.................................................         69%          65%          61%          57%          53%
4/1/04.................................................         65%          61%          56%          52%          48%
4/1/05.................................................         61%          56%          52%          47%          43%
4/1/06.................................................         57%          52%          47%          43%          39%
4/1/07.................................................         54%          48%          43%          39%          35%
4/1/08.................................................         50%          44%          39%          35%          31%
4/1/09.................................................         46%          40%          35%          31%          27%
4/1/10.................................................         42%          37%          32%          27%          23%
4/1/11.................................................         38%          33%          28%          24%          20%
4/1/12.................................................         35%          30%          25%          20%          17%
4/1/13.................................................         31%          26%          21%          17%          14%
4/1/14.................................................         27%          22%          18%          14%          11%
4/1/15.................................................         23%          19%          15%          12%           9%
4/1/16.................................................         20%          15%          12%           9%           7%
4/1/17.................................................         16%          12%           9%           7%           5%
4/1/18.................................................         13%           9%           7%           5%           3%
4/1/19.................................................          9%           6%           4%           3%           1%
4/1/20.................................................          6%           4%           2%           1%           0%
4/1/21.................................................          3%           1%            *           0%           0%
4/1/22.................................................          1%            *           0%           0%           0%
4/1/23.................................................           *           0%           0%           0%           0%
4/1/24.................................................          0%           0%           0%           0%           0%
Weighted Average Life
  (Years) (1)..........................................       11.25        10.27         9.40         8.62         7.94
Duration (Years) (2)...................................         6.3          5.9          5.6          5.2          4.9
Principal Payment Window
  (Months) (3).........................................         313          301          289          280          274
Expected Final Maturity................................      7/1/23       7/1/22       7/1/21      10/1/20       4/1/20
</TABLE>
    
 
- ------------------------
 
(1) The weighted average life of a Note is determined by (i) multiplying the
    amount of each principal payment by the number of years from the date of
    issuance to the related principal payment date, (ii) summing the results and
    (iii) dividing the sum by the total principal paid on the Note.
 
(2) Modified Duration assuming an example yield of 7.94%.
 
   
(3) The number of months from and including the first payment date to the month
    in which the final payment of principal would be made.
    
 
*   Indicates an amount greater than zero but less than 0.5% of the original
    principal amount.
 
   
    The Stated Maturity Date of the Class A-3 Notes is July 1, 2025 and the
weighted average life of the Class A-3 Notes is 15.78 years, in each case
assuming a prepayment speed of 0% CPR.
    
 
                                       46
<PAGE>
                   PERCENTAGE OF ORIGINAL PRINCIPAL AMOUNT OF
        THE CLASS A-4 NOTES OUTSTANDING AT THE RESPECTIVE LEVELS OF CPR
 
   
<TABLE>
<CAPTION>
PAYMENT DATE                                             3.5% CPR   4.5% CPR   5.5% CPR   6.5% CPR   7.5% CPR
- -------------------------------------------------------  ---------  ---------  ---------  ---------  ---------
<S>                                                      <C>        <C>        <C>        <C>        <C>
Closing Date...........................................       100%       100%       100%       100%       100%
4/1/98.................................................        94%        93%        92%        91%        90%
4/1/99.................................................        88%        86%        84%        82%        80%
4/1/00.................................................        82%        79%        76%        74%        71%
4/1/01.................................................        78%        74%        71%        68%        65%
4/1/02.................................................        73%        70%        66%        62%        59%
4/1/03.................................................        69%        65%        61%        57%        53%
4/1/04.................................................        65%        61%        56%        52%        48%
4/1/05.................................................        61%        56%        52%        47%        43%
4/1/06.................................................        57%        52%        47%        43%        39%
4/1/07.................................................        54%        48%        43%        39%        35%
4/1/08.................................................        50%        44%        39%        35%        31%
4/1/09.................................................        46%        40%        35%        31%        27%
4/1/10.................................................        42%        37%        32%        27%        23%
4/1/11.................................................        38%        33%        28%        24%        20%
4/1/12.................................................        35%        30%        25%        20%        17%
4/1/13.................................................        31%        26%        21%        17%        14%
4/1/14.................................................        27%        22%        18%        14%        11%
4/1/15.................................................        23%        19%        15%        12%         9%
4/1/16.................................................        20%        15%        12%         9%         7%
4/1/17.................................................        16%        12%         9%         7%         5%
4/1/18.................................................        13%         9%         7%         5%         3%
4/1/19.................................................         9%         6%         4%         3%         1%
4/1/20.................................................         6%         4%         2%         1%         0%
4/1/21.................................................         3%         1%          *         0%         0%
4/1/22.................................................         1%          *         0%         0%         0%
4/1/23.................................................          *         0%         0%         0%         0%
4/1/24.................................................         0%         0%         0%         0%         0%
Weighted Average Life
  (Years) (1)..........................................      11.25      10.27       9.40       8.62       7.94
Duration (Years) (2)...................................        6.2        5.8        5.5        5.2        4.9
Principal Payment Window
  (Months) (3).........................................        313        301        289        280        274
Expected Final Maturity................................     7/1/23     7/1/22     7/1/21    10/1/20     4/1/20
</TABLE>
    
 
- ------------------------
 
(1) The weighted average life of a Note is determined by (i) multiplying the
    amount of each principal payment by the number of years from the date of
    issuance to the related principal payment date, (ii) summing the results and
    (iii) dividing the sum by the total principal paid on the Note.
 
(2) Modified Duration assuming an example yield of 8.24%.
 
   
(3) The number of months from and including the first payment date to the month
    in which the final payment of principal would be made.
    
 
*   Indicates an amount greater than zero but less than 0.5% of the original
    principal amount.
 
   
    The Stated Maturity Date of the Class A-4 Notes is July 1, 2025 and the
weighted average life of the Class A-4 Notes is 15.78 years, in each case
assuming a prepayment speed of 0% CPR.
    
 
                                       47
<PAGE>
REGISTRATION OF NOTES
 
    The Notes will initially be registered in the name of Cede & Co. ("Cede"),
the nominee of the Depository Trust Company ("DTC"). DTC is a limited-purpose
trust company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the 1934 Act. DTC accepts securities for deposit
from its participating organizations ("Participants") and facilitates the
clearance and settlement of securities transactions between Participants in such
securities through electronic book-entry changes in accounts of Participants,
thereby eliminating the need for physical movement of Notes. Participants
include securities brokers and dealers, banks and trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("indirect participants").
 
    Note owners who are not Participants but desire to purchase, sell or
otherwise transfer ownership of the Notes may do so only through Participants
and indirect participants (unless and until Definitive Notes, as defined below,
are issued). In addition, Note owners will receive all payments of principal of
and interest on the Notes from the Indenture Trustee through DTC and
Participants. Note owners will not receive or be entitled to receive Notes
representing their respective interests in the Notes, except under the limited
circumstances described below.
 
    Unless and until Definitive Notes (as defined below) are issued, it is
anticipated that the only "Noteholder" of the Notes will be Cede, as nominee of
DTC. Note owners will not be Noteholders as that term is used in the Indenture.
Note owners are only permitted to exercise the rights of Noteholders indirectly
through Participants and DTC.
 
    While the Notes are outstanding (except under the circumstances described
below), under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Notes and is
required to receive and transmit payments of principal of, and interest on, the
Notes. Unless and until Definitive Notes are issued, Note owners who are not
Participants may transfer ownership of Notes only through Participants by
instructing such Participants to transfer Notes, by book-entry transfer, through
DTC for the account of the purchasers of such Notes, which account is maintained
with their respective Participants. Under the Rules and in accordance with DTC's
normal procedures, transfers of ownership of Notes will be executed through DTC
and the accounts of the respective Participants at DTC will be debited and
credited.
 
    The Notes will be issued in registered form to Note owners, or their
nominees, rather than to DTC (such Notes being referred to herein as "Definitive
Notes"), only if (i) DTC or the Issuer advises the Indenture Trustee in writing
that DTC is no longer willing or able to discharge properly its responsibilities
as nominee and depository with respect to the Notes and the Issuer or the
Trustee is unable to locate a qualified successor, (ii) the Issuer, at its sole
option elects to terminate the book-entry system through DTC, or (iii) after the
occurrence of an Event of Default, DTC, at the direction of Note owners having a
majority in percentage interests of the Note owners together, advises the
Indenture Trustee in writing that the continuation of a book-entry system
through DTC (or a successor thereto) to the exclusion of any physical notes
being issued to Note owners is no longer in the best interest of Note owners.
Upon issuance of Definitive Notes to Note owners, such Notes will be
transferable directly (and not exclusively on a book-entry basis) and registered
holders will deal directly with the Indenture Trustee with respect to transfers,
notices and payments.
 
    DTC has advised the Issuer and the Indenture Trustee that, unless and until
Definitive Notes are issued, DTC will take any action permitted to be taken by a
Noteholder under the Notes only at the direction of one or more Participants to
whose DTC account the Notes are credited. DTC has advised the
 
                                       48
<PAGE>
Issuer that DTC will take such action with respect to the Notes only at the
direction of and on behalf of the related Participants, with respect to such
Notes. DTC may take actions, at the direction of the related Participants, with
respect to some Notes which conflict with the actions taken with respect to
other Notes.
 
    Because DTC can only act on behalf of Participants, who in turn act on
behalf of indirect participants, the ability of a Note owner to pledge its Notes
to persons or entities that do not participate in the DTC system, or to
otherwise act with respect to such Notes, may be limited due to the lack of a
physical certificate for such Notes. In addition, under a book-entry format,
Note owners may experience delays in their receipt of payments, since payments
will be made by the Indenture Trustee, to Cede, as nominee for DTC.
 
    Neither the Issuer, the Depositor nor the Indenture Trustee will have any
responsibility for any aspect of the records relating to, or payments made on
account of, beneficial ownership interests of the Notes held by Cede, as nominee
for DTC, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests. In the event of the insolvency of DTC, a
Participant or an indirect participant in whose name Notes are registered, the
ability of the owners of such Notes to obtain timely payment and, if the limits
of applicable insurance coverage by the Securities Investor Protection
Corporation are exceeded or if such coverage is otherwise unavailable, ultimate
payment of amounts paid on such Notes may be impaired.
 
                        LEGAL INVESTMENT CONSIDERATIONS
 
    The Notes will not constitute "mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act of 1984, as amended. As a result,
the appropriate characterization of the Notes under various legal investment
restrictions, and thus the ability of investors subject to these restrictions to
purchase the Notes, is subject to significant interpretive uncertainties.
 
    No representation is made as to the proper characterization of any Class of
Notes for legal investment or other purposes, or as to the ability of particular
investors to purchase the Notes under applicable legal investment or other
restrictions. All institutions whose investment activities are subject to legal
investment laws and regulations, regulatory capital requirements or review by
regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the Notes constitute legal investments
for them or are subject to investment, capital or other restrictions.
 
                              ERISA CONSIDERATIONS
 
    The Issuer, the Depositor and Walter Industries, an affiliate of the
Depositor, may each be considered a "party in interest" within the meaning of
ERISA, or a "disqualified person" within the meaning of the Code, with respect
to many employee benefit plans or retirement arrangements which are subject to
ERISA or Section 4975 of the Code (collectively, the "Plans"). While Mid-State
has no present intention to transfer the beneficial interest in the Issuer to
any person other than an affiliate of Mid-State (including a trust beneficially
owned by Mid-State or an affiliate), any transferee of such beneficial interest
(including a transferee that is not such an affiliate) may be such a "party in
interest" or "disqualified person." Prohibited transactions within the meaning
of ERISA and the Code may arise if the Notes are acquired by a Plan with respect
to which Walter Industries is a service provider or other category of "party in
interest" or "disqualified person," unless such Notes are acquired pursuant to
an exemption for transactions effected on behalf of such Plan by a "qualified
professional asset manager" or pursuant to any other available exemption.
 
    A possible violation of the prohibited transaction rules also could occur if
a Plan purchased Notes pursuant to this offering if the Issuer, any Underwriter,
or any of their employees, affiliates or financial consultants (i) manage any
part of the Plan's investment portfolio on a discretionary basis, or (ii)
regularly provide advice pursuant to an agreement or understanding, written or
unwritten, with the individual, employer or trustee with discretion over the
assets of such Plan that such advice concerning investment
 
                                       49
<PAGE>
matters will be used as a primary basis for the Plan's investment decisions.
Accordingly, the Issuer, any Underwriter, Mid-State and their respective
affiliates will not, and no Plan should, allow the purchase of Notes with assets
of any Plan if the Issuer, any Underwriter, Mid-State or any of their respective
employees, affiliates or financial consultants provide with respect to the
assets to be used to acquire such Notes the management services or advice
described in the previous sentence.
 
    On November 13, 1986, the Department of Labor issued a final regulation
concerning the definition of what constitutes the assets of an ERISA-Covered
Plan (Reg. Section 2510.3-101, 51 Fed. Reg. 41262) (the "Final Regulation").
Under the Final Regulation, which became effective on March 13, 1987, the assets
and properties of corporations, trusts, and certain other entities in which a
Plan makes an equity investment could be deemed to be assets of the investing
plan in certain circumstances. Brown & Wood LLP, counsel for the Underwriters
and special counsel for the Issuer as to ERISA matters, is of the opinion that
the Notes will be considered debt instruments rather than equity interests of
the Issuer for ERISA purposes. Counsel's opinion on this issue is not binding on
the Department of Labor or a court reviewing such issue.
 
    If the underlying assets of the Trust (as opposed to the Notes alone) were
to be deemed to be "plan assets" under ERISA, (a) the prudence and other
fiduciary responsibility standards of Part 4 of Subtitle B of Title I of ERISA,
applicable to investments made by Plans and their fiduciaries, would extend to
investments made by the Trust; and (b) certain transactions in which the Trust
might seek to engage could constitute "prohibited transactions" under ERISA and
the Code.
 
    Any Plan fiduciary considering whether to purchase any Notes on behalf of a
Plan should consult with its counsel regarding the applicability of the
fiduciary responsibility and prohibited transaction provisions of ERISA and the
Code to such investment.
 
                                       50
<PAGE>
                    MATERIAL FEDERAL INCOME TAX CONSEQUENCES
 
    The following summary of certain of the anticipated material federal income
tax consequences of the purchase, ownership and disposition of the Notes is
based on the advice of Brown & Wood LLP, special federal income tax counsel to
the Issuer and counsel to the Underwriters, in reliance on laws, regulations,
rulings and decisions now in effect or (with respect to regulations) proposed,
all of which are subject to change either prospectively or retroactively. This
summary does not address the federal income tax consequences of an investment in
the Notes applicable to all categories of investors, some of which may be
subject to special rules. Prospective investors should consult their own tax
advisors regarding the federal, state, local and any other tax consequences to
them of the purchase, ownership and disposition of the Notes. Unless stated
otherwise, for purposes of the following summary, references to "Noteholder" and
"holder" mean the beneficial owner of a Note.
 
GENERAL
 
    Brown & Wood LLP, counsel for the Underwriters and special federal income
tax counsel to the Issuer, has advised the Issuer that in its opinion the Notes
will be treated for federal income tax purposes as indebtedness and not as an
ownership interest in the Accounts nor as an equity interest in the Issuer or a
separate association taxable as a corporation. Brown & Wood LLP has further
advised the Issuer that in its opinion, under current law, the Trust will not be
treated as a taxable mortgage pool ("TMP") as defined in Code Section 7701(i).
 
    Based on the foregoing, for federal income tax purposes, (i) Notes held by a
thrift institution taxed as a domestic building and loan association will not
constitute "loans . . . secured by an interest in real property" within the
meaning of Code Section 7701(a)(19)(C)(v); (ii) interest on Notes held by a real
estate investment trust will not be treated as "interest on obligations secured
by mortgages on real property or on interests in real property" within the
meaning of Code Section 856(c)(3)(B); (iii) Notes held by a real estate
investment trust will not constitute "real estate assets" or "Government
securities" within the meaning of Code Section 856(c)(5)(A); and (iv) Notes held
by a regulated investment company will not constitute "Government securities"
within the meaning of Code Section 851(b)(4)(A)(i).
 
ORIGINAL ISSUE DISCOUNT AND PREMIUM
 
    In the opinion of Brown & Wood LLP, the Notes may be issued with "original
issue discount" within the meaning of Section 1273(a) of the Code. Generally,
such original issue discount, if any, will equal the difference between the
"stated redemption price at maturity" of the Notes and their "issue price."
Holders of any Notes issued with original issue discount generally must include
such original issue discount in gross income for federal income tax purposes as
it accrues, in accordance with a constant interest method based on the
compounding of interest, in advance of receipt of the cash attributable to such
income.
 
    Based on Code Sections 1271 through 1273 and Section 1275, Treasury
Regulations under such Code Sections issued on January 27, 1994, as amended on
June 14, 1996 (the "OID Regulations") and certain provisions of the Tax Reform
Act of 1986 (the "1986 Act"), the Depositor anticipates that the amount of
original issue discount required to be included in a Noteholder's income in any
taxable year will be computed as described below. The OID Regulations require
that the amount and rate of accrual of original issue discount be calculated
based on a reasonable assumed prepayment rate for the collateral supporting a
debt instrument ("Prepayment Assumption") and prescribes a method for adjusting
the amount and rate of accrual of such discount where the actual prepayment rate
differs from the Prepayment Assumption. The Prepayment Assumption will include a
reasonable assumed prepayment rate for the Accounts. The OID Regulations provide
that the Prepayment Assumption be the prepayment assumption that is used in
determining the initial offering price of such Notes, and which is not an
unreasonable assumption. The Prepayment Assumption determined by the Depositor
for the purposes of determining the amount and rate of accrual of original issue
discount is set forth in this Prospectus. No representation
 
                                       51
<PAGE>
is made that the Accounts will prepay at the Prepayment Assumption or at any
other rate. The Prepayment Assumption used to price the Notes will be based in
part on an assumed level of cash recoveries on repossessed properties and also
on an assumed default rate on the Accounts. It is unclear under the 1986 Act and
the OID Regulations whether an assumption as to cash recoveries on repossessed
properties or an assumption as to a default rate on the Accounts will be
acceptable. Moreover, it is not clear whether an assumption as to the expected
timing of payments on an equity interest in a Trust is permissible. The
Depositor intends, however, to use such assumptions for purposes of computing
original issue discount on the Notes unless regulations are issued that prohibit
the use of such assumptions. There can be no assurance, however, that the
Internal Revenue Service (the "IRS") will agree with the positions taken by the
Depositor and any challenge by the IRS could result in holders being required to
include income in different amounts or at different times from those described
below.
 
    In general, each Note will be treated as a single installment obligation
issued with an amount of original issue discount equal to the excess of its
"stated redemption price at maturity" over its "issue price." The "issue price"
of the Notes is the price at which a substantial amount of the Notes are first
sold to the public (excluding bond houses, brokers, underwriters or wholesalers)
regardless of the price paid by subsequent buyers. Generally, the stated
redemption price at maturity of a Note is its stated principal amount. Under a
DE MINIMIS rule contained in the Code, original issue discount will be
considered to be zero, however, if it equals less than 0.25% of the stated
redemption price at maturity of a Note multiplied by its weighted average
maturity. Weighted average maturity is computed, for this purpose, as the sum of
the amounts determined by multiplying (i) the number of full years from the
issue date (rounding down for partial years) until each payment included in the
stated redemption price at maturity is scheduled to be made under the Prepayment
Assumption, by (ii) a fraction, the numerator of which is the amount of each
such payment and the denominator of which is the Note's stated redemption price
at maturity.
 
    Generally, a Noteholder must include in gross income in each taxable year,
the "daily portion," as determined below, of the original issue discount that
accrues on a Note for each day during the taxable year that the Noteholder holds
such Note, including the purchase date but excluding the disposition date. In
the case of an original holder of a Note, a calculation will be made of the
portion of the original issue discount that accrues during each successive
period (an "accrual period") that either begins or ends on the day in the
calendar year corresponding to a Payment Date and begins on the day after the
end of the immediately preceding accrual period (or on the issue date in the
case of the first accrual period). This will be done, in the case of each full
accrual period, by (a) adding (i) the present value at the end of the accrual
period (determined by using as a discount factor the original yield to maturity
of the Note as calculated under the Prepayment Assumption), and (ii) any
principal payments received during such accrual period and (b) subtracting from
the total the "adjusted issue price" of the Note at the beginning of such
accrual period. The "adjusted issue price" of a Note at the beginning of the
first accrual period is its issue price; the "adjusted issue price" of a Note at
the beginning of a subsequent accrual period is the "adjusted issue price" at
the beginning of the immediately preceding accrual period plus the amount of
original issue discount allocable to that accrual period and reduced by the
amount of any principal payment made at the end of or during that accrual
period. The original issue discount accrued during an accrual period will then
be divided by the number of days in the period to determine the daily portion of
original issue discount for each day in the accrual period. With respect to an
initial accrual period shorter than a full accrual period, the daily portions of
original issue discount must be determined according to an appropriate
allocation under a reasonable method set forth under the OID Regulations,
provided that such method is consistent with the method used to determine yield
on the Notes. The calculation of original issue discount as described above will
cause the accrual of original issue discount to either increase or decrease (but
never below zero) in a given accrual period to reflect the fact that prepayments
are occurring faster or slower than under the Prepayment Assumption.
 
    A subsequent purchaser of a Note issued with original issue discount who
purchases the Note at a cost less than the remaining stated redemption price at
maturity but more than its adjusted issue price (i.e., at
 
                                       52
<PAGE>
an "acquisition premium"), also will be required to include in gross income the
sum of the daily portions of original issue discount on the Note. In computing
the daily portions of original issue discount for such a purchaser, however, the
daily portion is reduced by the amount that would be the daily portion for such
day (computed in accordance with the rules set forth above) multiplied by a
fraction, the numerator of which is the amount, if any, by which the price paid
by such holder for that Note exceeds the following amount: (a) the sum of the
issue price plus the aggregate amount of original issue discount that would have
been includable in the gross income of an original Noteholder (who purchased the
Note at its issue price), (b) less any prior payments included in the stated
redemption price at maturity, and the denominator of which is the sum of the
daily portions for that Note for all days beginning on the date after the
purchase date and ending on the maturity date computed under the Prepayment
Assumption.
 
    A purchaser of a Note who purchases the Note at a cost greater than its
remaining stated redemption price at maturity will be considered to have
purchased the Note at a premium, and may elect to amortize such premium under a
constant yield method. The Code provides that amortizable bond premium will be
treated as an offset to interest income rather than as a deductible interest
expense.
 
    The OID Regulations permit a Noteholder to elect to accrue all interest,
discount (including DE MINIMIS market or original issue discount) and premium on
the Notes in income as interest, based on a constant yield method. If such an
election were to be made with respect to a Note with market discount, the
Noteholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Noteholder acquires during the year of the election or
thereafter. Similarly, a Noteholder that makes this election for a Note that is
acquired at a premium will be deemed to have made an election to amortize bond
premium with respect to all debt instruments having amortizable bond premium
that such Noteholder owns or acquires. The election to accrue interest, discount
and premium on a constant yield method with respect to a Note is irrevocable
without the consent of the IRS.
 
MARKET DISCOUNT
 
    In the opinion of Brown & Wood LLP, a purchaser of a Note also may be
subject to the market discount provisions of Code Sections 1276 through 1278.
Under these provisions and the rules set forth in the OID Regulations with
respect to original issue discount, "market discount" equals the excess, if any,
of (i) the Note's stated principal amount or, in the case of a Note with
original issue discount, the adjusted issue price (determined for this purpose
as if the purchaser had purchased such Note from an original holder) over (ii)
the price paid by the purchaser for such Note. Under a DE MINIMIS rule contained
in the Code, market discount with respect to a Note will be considered to be
zero if the amount allocable to the Note is less than 0.25% of the stated
redemption price at maturity of such Note multiplied by the number of complete
years to maturity of the Note remaining after the date of purchase. If market
discount on a Note is considered to be zero under this rule, the actual amount
of market discount must be allocated to the remaining principal payments on the
Note and gain equal to such allocated amount will be recognized when the
corresponding principal payment is made. Investors should consult their own
advisors regarding the application of the market discount rules and advisability
of making any of the elections allowed under Code Sections 1276 through 1278.
 
    The 1986 Act provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain on disposition of a market discount Note
acquired by the taxpayer after the date of enactment of the Act shall be treated
as ordinary income to the extent that it does not exceed the accrued market
discount at the time of such payment. The amount of accrued market discount for
purposes of determining the tax treatment of subsequent principal payments or
dispositions of the Note is to be reduced by the amount so treated as ordinary
income. This rule will not apply, however, if the Noteholder elects to include
market discount in income currently as it accrues on all market discount
obligations acquired by such Noteholder in the taxable year and thereafter.
 
                                       53
<PAGE>
    The 1986 Act also grants authority to the Treasury Department to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury, certain rules
described in the legislative history accompanying the 1986 Act will apply. Under
those rules, the holder of a market discount Note may elect to accrue market
discount either on the basis of a constant interest rate (taking into account
the Prepayment Assumption) or according to one of the following methods. For
Notes issued with original issue discount, the amount of market discount that
accrues during a period is equal to the product of (i) the total remaining
market discount, multiplied by (ii) a fraction, the numerator of which is the
original issue discount accruing during the period and the denominator of which
is the total remaining original issue discount at the beginning of the period.
For Notes issued without original issue discount, the amount of market discount
that accrues during a period is equal to the product of (i) the total remaining
market discount, multiplied by (ii) a fraction, the numerator of which is the
amount of stated interest paid during the accrual period and the denominator of
which is the total amount of stated interest remaining to be paid at the
beginning of the period. For purposes of calculating market discount under any
of the methods in the case of instruments (such as the Notes) which provide for
payments which may be accelerated by reason of prepayments of other obligations
securing such instruments, the Prepayment Assumption will apply. Regulations are
to provide similar rules for computing the accrual of amortizable note premium
on instruments payable in more than one principal installment.
 
    A holder of a Note who acquired such Note at a market discount also may be
required to defer, until the maturity date of such Note or its earlier
disposition in a taxable transaction, the deduction of a portion of the amount
of interest that the holder paid or accrued during the taxable year on
indebtedness incurred or maintained to purchase or carry the Note in excess of
the aggregate amount of interest (including original issue discount) includable
in such holder's gross income for the taxable year with respect to such Note.
The amount of such net interest expense deferred in a taxable year may not
exceed the amount of market discount accrued on the Note for the days during the
taxable year on which the holder held the Note and, in general, would be
deductible when such market discount is includable in income. The amount of any
remaining deferred deduction is to be taken into account in the taxable year in
which the Note matures or is disposed of in a taxable transaction. In the case
of a disposition in which gain or loss is not recognized, in whole or in part,
any remaining deferred deduction will be allowed to the extent gain is
recognized on the disposition. The deferral rule does not apply if the
Noteholder elects to include such market discount in income currently as it
accrues on all market discount obligations acquired by such Noteholder in that
taxable year and thereafter.
 
    Because the regulations described above have not been issued, it is
impossible to predict what effect those regulations might have on the tax
treatment of a Note purchased at a discount or premium in the secondary market.
 
SALE OR REDEMPTION OF NOTES
 
    In the opinion of Brown & Wood LLP, if a Note is sold or redeemed, the
seller will recognize gain or loss equal to the difference between the amount
realized on the sale or redemption and the seller's adjusted basis in the Note.
Such adjusted basis generally will equal the cost of the Note to the seller,
increased by any original issue discount and market discount included in the
seller's gross income with respect to the Note, and reduced by payments included
in the stated redemption price at maturity previously received by the seller and
by any amortized premium. Similarly, a holder who receives a payment which is
part of the stated redemption price at maturity of a Note will recognize gain
equal to the excess, if any, of the amount of the payment over such holder's
adjusted basis in the Note. A holder of a Note who receives a final payment
which is less than such holder's adjusted basis in the Note will generally
recognize a loss. In general, such gain or loss will be a capital gain or loss,
provided that the Note is held as a "capital asset" (generally, property held
for investment) within the meaning of Code Section 1221.
 
                                       54
<PAGE>
FOREIGN INVESTORS
 
    In the opinion of Brown & Wood LLP, generally, payments of interest
(including any payment with respect to accrued original issue discount) on the
Notes to a Noteholder who is a non-United States person ("foreign person") not
engaged in a trade or business within the United States, will not be subject to
Federal income or withholding tax if (i) such Noteholder does not actually or
constructively own 10 percent or more of the combined voting power of all
classes of equity in Mid-State or any parent corporation thereof, (ii) such
Noteholder is not a controlled foreign corporation (within the meaning of Code
Section 957) related to Mid-State or any parent corporation thereof and (iii)
such Noteholder complies with certain identification requirements (including
delivery of a statement, signed by the Noteholder under penalty of perjury,
certifying that such Noteholder is a foreign person and providing the name and
address of such Noteholder). As used herein, the term "foreign person" means a
person that is, for United States Federal income tax purposes, someone other
than (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or of any political subdivision thereof, (iii) an estate whose
income is subject to United States federal income tax regardless of its source
or (iv) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
fiduciaries have the authority to control all substantial decisions of the
trust.
 
    If a tax is withheld by the withholding agent, the Noteholder would be
entitled to a refund of such tax if such Noteholder can prove it is a foreign
person and it is not a 10 percent shareholder of Mid-State or any parent
corporation thereof, or a controlled foreign corporation related to Mid-State or
any parent corporation thereof. A Noteholder may be required to file a U.S.
Federal income tax return to obtain a refund. Foreign investors should consult
their tax advisors regarding the potential imposition of the 30 percent
withholding tax.
 
BACKUP WITHHOLDING
 
    In the opinion of Brown & Wood LLP, federal income tax laws provide for
"backup withholding" of tax at a rate of 31% in certain circumstances on
"reportable payments," which include payments of principal, interest and
original issue discount (determined in any case as if the Noteholder were the
original holder of the Note), but not market discount, on a Note and of the
proceeds of the disposition of a Note. Persons subject to the requirement of
backup withholding include, in certain circumstances, the Depositor, the Issuer,
the paying agent of the Issuer, a person who collects a payment of interest or
original issue discount as a custodian or nominee on behalf of the Noteholder
and a "broker" (as defined in applicable Treasury regulations) through which the
Noteholder receives the proceeds of the retirement or other disposition of a
Note. Backup withholding applies only if the Noteholder, among other things, (1)
fails to furnish a social security number or other taxpayer identification
number to the person subject to the requirement of backup withholding, (2)
furnishes an incorrect taxpayer identification number to such person, (3) fails
to report properly interest or dividends or (4) under certain circumstances,
fails to provide to such person a certified statement, signed under penalty of
perjury, that the taxpayer identification number furnished is the correct number
and that such Noteholder is not subject to backup withholding.
 
    Backup withholding will not apply, however, with respect to certain payments
made to Noteholders, including payments to certain exempt recipients (such as
tax-exempt organizations) and to certain foreign persons (as discussed under
"Foreign Investors" above). Noteholders should consult their tax advisors
regarding their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption.
 
    The amount of any "reportable payments" made by the Issuer during each
calendar year and the amount of tax withheld, if any, with respect to payments
on the Notes will be reported to the Noteholders and to the IRS.
 
                                       55
<PAGE>
TAXABLE MORTGAGE POOLS
 
    Under Code section 7701(i), an entity substantially all the assets of which
consist of mortgage loans and which does not elect REMIC status may be
classified as a taxable mortgage pool only if it is "the obligor under debt
obligations with two or more maturities." On August 4, 1995 the IRS issued
Treasury regulations under Section 7701(i) (the "TMP Regulations"). Because the
Notes will pay principal PRO RATA in the absence of losses on the Accounts and
will have the same Maturity Dates, the Trust will not be classified as a TMP.
 
                                 THE INDENTURE
 
    The following summaries describe the material provisions of the Indenture
not described elsewhere in this Prospectus. The summaries do not purport to be
complete and are qualified in their entirety by reference to the provisions of
the Indenture. Where particular provisions or terms used in the Indenture are
referred to, the actual provisions (including definitions of terms) are
incorporated by reference as part of such summaries. The Notes will be secured
under the Indenture.
 
NEGATIVE COVENANTS
 
    The Issuer will not, among other things, engage in any business or activity
other than in connection with, or relating to, the issuance of Notes and the
purchase of the Accounts or the preservation of the Trust and the release of
assets therefrom pursuant to the Indenture and the Trust Agreement. See "THE
ISSUER."
 
REVIEW OF ACCOUNT DOCUMENTS
 
    Within 90 days after the Closing Date, the Indenture Trustee will review the
Mortgage Collateral documents with respect to each Account that is part of the
Mortgage Collateral to determine that all documents required to be delivered
have been delivered, that they have been executed as required and that they
relate to the Accounts listed on the Schedule of Accounts attached to the
Indenture. Upon discovery that any Mortgage Collateral document is missing or
defective in a materially adverse manner, the Indenture Trustee will notify the
Servicer and the Issuer.
 
    Within 90 days of the earlier of discovery by or notice to the Issuer that
any Mortgage Collateral document is missing or defective and such omission or
defect materially and adversely affects the interest of the Noteholders in an
Account, the Issuer is required to use its best efforts to cure such omission or
defect. If such omission or defect is not or cannot be cured within such 90-day
period or, with the prior written consent of the Indenture Trustee, such longer
period as specified in such consent, the Issuer is required to either (i)
deposit in the Collection Account an amount equal to 100% of the current
Economic Balance of the affected Account, at which time such affected Account
will be released from the lien of the Indenture or (ii) remove such Account from
the lien of the Indenture and substitute one or more qualified substitute
accounts.
 
    In order to be a "qualified substitute account," an account must comply with
the representations and warranties described under "THE
INDENTURE--Representations and Warranties" below, and must have an Economic
Balance not not less than the Economic Balance of, and an Effective Financing
Rate not less than the Effective Financing Rate of, the Account for which it is
being substituted, all as more specifically set forth in the Indenture.
 
    The obligation of the Issuer to cure any such omission or defect or to
repurchase or substitute for the affected Account will be the sole remedy
available to the Indenture Trustee or Noteholders in respect of the related
omission or defect.
 
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<PAGE>
REPRESENTATIONS AND WARRANTIES
 
    In the Indenture the Issuer will make representations and warranties with
respect to each Account that constitutes part of the Mortgage Collateral to the
effect that as of the Closing Date:
 
        (a) the information set forth with respect to such Account in the
    Schedule of Accounts attached to the Indenture is true and correct as of the
    date as of which such information is given;
 
        (b) the related building or installment sale contract, as the case may
    be, has been duly executed by the parties thereto and the duties to be
    performed thereunder prior to the date the first payment in connection with
    such contract is due have been performed;
 
        (c) the Mortgage Collateral documents have been duly executed by the
    Account obligor and, to the extent required under local law for recordation
    or enforcement, properly acknowledged;
 
        (d) the mortgages have been properly recorded as required by law and
    such documents constitute a valid first priority lien upon and secure title
    to the property described therein, which in each case, is a single family
    detached dwelling, and such Mortgage Collateral documents are enforceable in
    accordance with their respective terms except as enforceability thereof may
    be limited by bankruptcy, insolvency, moratorium and other laws affecting
    creditors' rights generally and by general principles of equity (whether
    applied in a proceeding in law or at equity);
 
        (e) the Issuer is the sole owner of each Account that is part of the
    Mortgage Collateral and has good title to such Account and full right and
    authority to grant a lien or security interest on such Account to the
    Indenture Trustee and, upon delivery of the related Mortgage Collateral
    documents to the Indenture Trustee, the Indenture Trustee will have a valid
    and perfected lien or security interest in such Account;
 
        (f) all costs, fees, intangible, documentary, recording taxes and
    expenses incurred in making, closing and recording such Account and the
    related mortgage and in connection with the issuance of the Notes, have been
    paid;
 
        (g) no part of the property purporting to secure any such Account has
    been, or shall have been, released from the lien or security title of the
    related mortgage, deed of trust, mechanic's lien contract or other security
    agreement except for property securing Accounts which have prepaid in full
    between the Cut-Off Date and the date that is five business days prior to
    the Closing Date which amounts shall be deposited in the Collection Account
    on or before the Closing Date;
 
        (h) except to the extent permitted by the Servicing Agreement, no term
    or provision of any Account that is part of the Mortgage Collateral has been
    or will be altered, changed or modified in any way by the Servicer or the
    Issuer without the consent of the Indenture Trustee;
 
        (i)  Mid-State and the Issuer acquired title to the Accounts in good
    faith, for value and without notice of any adverse claim;
 
        (j) the promissory note or installment contract with respect to each
    Account evidences a homeowner's obligation to pay the Gross Receivable
    Amount of the related Account with fully amortizing level monthly payments
    and each bears a fixed finance charge rate. Each promissory note or
    installment contract has an original term to maturity not in excess of 30
    years; no less than 87% of the promissory notes or installment contracts
    with respect to each Account that have a balance greater than zero were
    originated from January 1995 through February 1997 with the exception of
    promissory notes or installment contracts which represent subsequent resales
    of repossessed houses that secured promissory notes or installment contracts
    originated during such period;
 
        (k) except as disclosed in the Indenture, there is no right of
    rescission, setoff, defense or counterclaim to the promissory note,
    installment contract, mortgage, mechanic's lien contract or other security
    agreement with respect to any Account, including both the obligation of the
    Account obligor
 
                                       57
<PAGE>
    to pay the unpaid balance of the cash price or finance charge on such
    promissory note or installment contract and the defense of usury;
    furthermore, neither the operation of any of the terms of the promissory
    note, installment contract, mortgage, mechanic's lien contract or other
    security agreement with respect to any Account nor the exercise of any right
    thereunder will render such promissory note, installment contract, mortgage,
    mechanic's lien contract or other security agreement unenforceable, in whole
    or in part, or subject such promissory note or mortgage to any right of
    rescission, setoff, counterclaim or defense, including the defense of usury,
    and no such right of rescission, setoff, counterclaim or defense has been
    asserted with respect thereto;
 
        (l) as of the Closing Date, there are no mechanics' liens or claims for
    work, labor or material (and to the best of the Issuer's knowledge, no
    rights or claims are outstanding that under law could give rise to such
    lien) affecting any mortgaged property which are or may be a lien prior to,
    or equal with, the lien of the mortgage, mechanic's lien contract or other
    security agreement thereon;
 
        (m) except as disclosed in the Indenture, the promissory note or
    installment contract with respect to each Account at origination complied in
    all material respects with applicable local, state and federal laws,
    including, without limitation, usury, equal credit opportunity,
    truth-in-lending and disclosure laws, and consummation of the transactions
    contemplated hereby will not involve the violation of any such laws;
 
        (n) as of the Closing Date, with respect to each deed of trust with
    respect to any Account, a trustee, duly qualified under applicable law to
    serve as such, is properly designated, serving and named in such deed of
    trust;
 
        (o) there has been no fraud, dishonesty, misrepresentation or negligence
    on the part of the originator or Account obligor in connection with the
    origination of the promissory note or installment contract with respect to
    any Account or in connection with the sale of the related Account; and
 
        (p) to the best knowledge of the Issuer, except for Mortgaged Properties
    for which insurance proceeds are available, each Mortgaged Property is free
    of damage which materially and adversely affects the value thereof.
 
    Within 90 days of the earlier of discovery by or notice to the Issuer of any
breach of a representation or warranty which materially and adversely affects
the interest of the Noteholders in an Account, the Issuer is required to use its
best efforts to cure such breach in all material respects. If such breach is not
or cannot be cured within such 90-day period or, with the prior written consent
of the Indenture Trustee, such longer period as specified in such consent, the
Issuer is required to either (i) deposit in the Collection Account an amount
equal to 100% of the current Economic Balance of the affected Account, at which
time such affected Account will be released from the lien of the Indenture or
(ii) remove such Account from the lien of the Indenture and substitute one or
more qualified substitute accounts.
 
    In order to be a "qualified substitute account," an account must comply with
the representations and warranties set forth above and must have an Economic
Balance not less than the Economic Balance of, and an Effective Financing Rate
not less than the Effective Financing Rate of, the Account for which it is being
substituted all as more specifically set forth in the Indenture.
 
    The obligation of the Issuer to cure any such breach or to repurchase or
substitute for the affected Account will be the sole remedy available to the
Trustee or Noteholders in respect of the related breach.
 
MODIFICATION OF INDENTURE
 
    With the consent of the holders of Notes evidencing not less than 50% of the
Voting Rights of each Class of Notes adversely affected, the Indenture Trustee
and the Issuer may execute a supplemental indenture to add provisions to, or
change in any manner or eliminate provisions of, the Indenture or modify (except
as provided below) in any manner the rights of the holders of the Notes.
 
                                       58
<PAGE>
    Without the consent of the holders of each outstanding Note affected
thereby, no supplemental indenture shall (a) change the Maturity Date, or the
Payment Date for any installment of interest on, any Note or reduce the
principal amount thereof, the interest rate thereon or the redemption price with
respect thereto, or change the earliest date on which any Note may be redeemed
or any place of payment where, or the coin or currency in which, any Note or any
interest thereon is payable or impair the right to institute suit for the
enforcement of certain provisions of the Indenture regarding payment, (b) reduce
the percentage of the Voting Rights, the consent of the holders of which is
required for any supplemental indenture, or the consent of the holders of which
is required for any waiver of compliance with certain provisions of the
Indenture, or of certain defaults thereunder and their consequences as provided
for in the Indenture, (c) modify the provisions of the Indenture relating to the
sale of property subject to the lien under the Indenture or specifying the
circumstances under which such a supplemental indenture may not change the
provisions of the Indenture without the consent of the holders of each
outstanding Note affected thereby, as applicable, (d) modify or alter the
provisions of the Indenture regarding the voting of Notes held by the Issuer or
an affiliate of the Issuer, (e) permit the creation of any lien ranking prior to
or on a parity with the lien of the Indenture with respect to any part of the
property subject to the lien under the Indenture or terminate the lien of the
Indenture on any property at any time subject thereto or deprive the holder of
any Note of the security afforded by the lien of the Indenture or (f) modify any
of the provisions of the Indenture in such manner as to affect the calculation
of the principal and interest payable on any Note.
 
VOTING
 
    The voting rights assigned to each Class of Notes (the "Voting Rights") will
be a fraction, expressed as a percentage, the numerator of which is equal to the
aggregate outstanding principal amount of such Class of Notes and the
denominator of which is equal to the aggregate outstanding principal amount of
all Classes of Notes.
 
EVENTS OF DEFAULT
 
   
    An Event of Default with respect to the Notes is defined in the Indenture as
one or more of the following events: (i) a default in the payment of any amount
due under the Notes by the Maturity Date; (ii) a failure to apply funds in the
Collection Account in accordance with the Indenture and such failure continues
for a period of two days; (iii) a default in the payment when due of any
interest on any Class of Notes and the expiration of a 30-day grace period
(provided that neither the reimbursement of any Realized Loss Amounts nor
interest on any Realized Loss Amounts in respect of any Class of Notes will be
deemed due unless there exist Available Funds sufficient to pay such amount and
all prior amounts under the Available Funds Allocation); (iv) the failure to pay
the Outstanding Principal Balance of each Class of Notes on the Maturity Date;
(v) a default in the observance of certain negative covenants in the Indenture;
(vi) a default in the observance of any other covenant in the Indenture and the
continuation of any such default for a period of thirty days after notice to the
Issuer by the Indenture Trustee or to the Issuer and the Indenture Trustee by
the holders of Notes entitled to at least 40% of the Voting Rights, such written
notice specifying the Event of Default and stating that such notice is a "Notice
of Default;" or (vii) certain events of bankruptcy or insolvency with respect to
the Issuer. Notwithstanding the foregoing, prior to the Maturity Date, any of
the events described in the preceding sentence will not be an Event of Default
(i) in respect of the Class A-2 Notes until the Class A-1 Notes have been paid
in full, (ii) in respect of the Class A-3 Notes until the Class A-1 Notes and
Class A-2 Notes have been paid in full and (iii) in respect of the Class A-4
Notes until the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes have been
paid in full.
    
 
RIGHTS UPON EVENT OF DEFAULT
 
    The Indenture provides that the Indenture Trustee may exercise remedies on
behalf of the Noteholders only if an Event of Default has occurred and is
continuing. The Indenture Trustee shall proceed, in its own name, subject to the
Indenture, to protect and enforce its rights and the rights of the Noteholders
by
 
                                       59
<PAGE>
such remedies provided for in the Indenture as the Indenture Trustee shall deem
most effectual to protect and enforce such rights.
 
   
    Prior to the Maturity Date, upon the occurrence of an Event of Default, the
Indenture Trustee or the holders entitled to at least 66 2/3% of the Voting
Rights of the Class of Notes with the lowest numerical Class designation then
outstanding may declare the principal of the Notes to be immediately due and
payable; provided, however, that such Class of Notes or the Indenture Trustee
may make such declaration only if the Event of Default affects, and in the case
of a default in the payment of the Notes such payment default relates to, the
Class of Notes with the lowest numerical Class designation then outstanding.
Upon such declaration, the Indenture Trustee may, or at the direction of the
holders entitled to at least 66 2/3% of the Voting Rights of the Class of Notes
with the lowest numerical Class designation then outstanding shall, pursue one
or more remedies subject to, and in accordance with the terms of the Indenture,
including without limitation, selling the Accounts at one or more public or
private sales. Notwithstanding the acceleration of the maturity of the Notes,
the Indenture Trustee shall refrain from selling the Accounts and continue to
apply all amounts received on the Accounts to payments due on the Notes in
accordance with their terms if, among other conditions specified in the
Indenture, (i) the Indenture Trustee determines that anticipated collections on
the Accounts would be sufficient to pay the Class of Notes with the lowest
numerical Class designation then outstanding and (ii) the Indenture Trustee has
not been otherwise directed by the holders of all the Notes. On or prior to the
Maturity Date, a Class of Notes which does not have the lowest numerical Class
designation then outstanding will not have any right to direct the Indenture
Trustee to pursue any remedies or actions under the Indenture.
    
 
   
    On or after the Maturity Date, if an Event of Default occurs or shall have
occurred, the Indenture Trustee shall declare the principal of the Notes to be
immediately due and payable. Upon such declaration, the Indenture Trustee may,
or at the direction or with the consent of the holders entitled to at least a
majority of the aggregate Voting Rights of all Classes of Notes voting together
as a single Class shall, pursue one or more remedies subject to and in
accordance with the terms of the Indenture, including without limitation selling
the Accounts at one or more public or private sales. Notwithstanding the
acceleration of the maturity of the Notes, the Indenture Trustee shall refrain
from selling the Accounts and continue to apply all amounts received on the
Accounts to payments due on the Notes in accordance with their terms if, among
other conditions specified in the Indenture, (i) the Indenture Trustee
determines that anticipated collections on the Accounts would be sufficient to
pay all the Classes of Notes then outstanding and (ii) the Indenture Trustee has
not been otherwise directed by the holders of all the Notes.
    
 
    Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default shall occur and be continuing, the
Indenture Trustee shall be under no obligation to exercise any of the rights or
powers under the Indenture at the request or direction of any of the holders of
Notes, unless such holders have offered to the Indenture Trustee security or
indemnity satisfactory to it against loss, liability or expense incurred in
compliance with such request. Subject to such provisions for indemnification and
certain limitations contained in the Indenture, the holders of a majority in
principal amount of the then outstanding Notes (or in the case of any action
described in the immediately preceding two paragraphs, the holders of Notes
otherwise required to take such action) shall have the right to direct the time,
method and place of conducting any proceeding or any remedy available to the
Indenture Trustee or exercising any trust or power conferred on the Indenture
Trustee, and the holders of a majority in principal amount of the Notes then
outstanding may, in certain cases, waive any default with respect thereto,
except a default in the payment of principal or interest or a default in respect
of a covenant or provision of the Indenture that cannot be modified without the
waiver or consent of the holder of each outstanding Note affected thereby. See
"DESCRIPTION OF THE NOTES--Registration of the Notes."
 
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<PAGE>
TRIGGER EVENTS
 
    A "Trigger Event" under the Indenture includes the occurrence of any of the
following events:
 
            (i) the Issuer fails to make a payment due under the Indenture and
                such failure continues for two business days;
 
            (ii) the Servicer fails to make a required payment or deposit due
                 under the Servicing Agreement and such failure continues for
                 four business days;
 
           (iii) an Event of Default (as defined in the Servicing Agreement)
                 occurring by reason of (i) the Servicer's failure to perform
                 any covenants or agreements of the Servicer contained in the
                 Servicing Agreement; (ii) certain events of insolvency in
                 respect of the Servicer; or (iii) any representation or
                 warranty made by the Servicer pursuant to the Servicing
                 Agreement proves to be incorrect;
 
            (iv) a breach of any covenant of the Servicer in the Servicing
                 Agreement which may have a materially adverse effect on the
                 Servicer or its performance under the Servicing Agreement that
                 is not cured within 60 days after the Servicer becomes aware
                 thereof or after notice thereof from any Person;
 
            (v) any representation or warranty by Mid-State in the Purchase and
                Sale Agreement, or any representation or warranty by the Issuer
                in the Indenture, is incorrect and such breach may have a
                materially adverse effect on the Issuer or the Noteholders and
                is not cured, or the related Account is not substituted for or
                repurchased by Mid-State and in either case released from the
                lien of the Indenture, within 90 days after notice thereof from
                the Indenture Trustee;
 
            (vi) certain events of insolvency in respect of the Issuer;
 
           (vii) the Purchase and Sale Agreement, the Servicing Agreement or the
                 Indenture ceases to be in full force and effect or;
 
          (viii) the lien of the Indenture ceases to be effective or ceases to
                 be of a first priority.
 
LIMITATIONS ON SUITS
 
   
    No holder of any Note will have the right to institute any proceedings,
judicial or otherwise, with respect to the Indenture, or for the appointment of
a receiver or trustee, or for any other remedy under the Indenture, unless (a)
such holder previously has given to the Indenture Trustee written notice of a
continuing Event of Default, (b) the holders of Notes entitled to not less than
40% of the Voting Rights (or in the case of a declaration of the Notes to be
immediately due and payable, sale, foreclosure, or other action with respect to
the Accounts, the required holders of Notes as set forth in the Indenture and
described herein under "THE INDENTURE --Rights Upon Events of Default") have
made written request of the Indenture Trustee to institute such proceedings in
its own name as Indenture Trustee and have offered the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request, (c) the Indenture Trustee has for 60 days after
its receipt of such notice neglected or refused to institute any such proceeding
and (d) no direction inconsistent with such written request has been given to
the Indenture Trustee during such 60-day period by the holders of a majority in
principal amount of the then outstanding Notes.
    
 
REPORTS TO NOTEHOLDERS
 
    On each Payment Date the Indenture Trustee is required to deliver to the
Noteholders a written report setting forth the amount of the quarterly payment
which represents principal and the amount which represents interest (in each
case on a per individual Note basis), and the remaining outstanding principal
amount of an individual Note after giving effect to the payment of principal
made on such Payment Date.
 
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<PAGE>
ISSUER'S ANNUAL COMPLIANCE STATEMENT
 
    The Issuer will be required to file annually with the Indenture Trustee a
written statement as to the fulfillment of its obligations under the Indenture.
 
SATISFACTION AND DISCHARGE OF INDENTURE
 
    The Indenture will be discharged in respect of the Accounts upon the
delivery to the Indenture Trustee for cancellation of all the Notes or, with
certain limitations, upon deposit with the Indenture Trustee of funds sufficient
for the payment in full of all the Notes.
 
THE INDENTURE TRUSTEE
 
   
    As of the date of the Indenture, the Indenture Trustee will be First Union
National Bank of Florida, a national banking association. It is expected that,
on or about June 5, 1997, First Union National Bank of Florida and First Union
National Bank of Georgia will be merged with and into First Union National Bank
of North Carolina, with First Union National Bank of North Carolina being the
survivor of such merger, and that, in connection with the consummation of such
merger, the name of such survivor will be changed from First Union National Bank
of North Carolina to "First Union National Bank."
    
 
                            THE SERVICING AGREEMENT
 
GENERAL
 
    The Accounts will be serviced by the Servicer under the Servicing Agreement
between the Servicer and the Issuer, which will be assigned to the Indenture
Trustee as additional security for the Notes. The following summaries describe
the material provisions of the Servicing Agreement. The summaries do not purport
to be complete and are subject to, and qualified in their entirety by reference
to, the provisions of the Servicing Agreement and the Indenture, and where
particular provisions or terms used in the Servicing Agreement or the Indenture
are referred to, the actual provisions (including definitions of terms) are
incorporated by reference as part of such summaries. The offices of the Servicer
are located at 1500 North Dale Mabry Highway, Tampa, Florida 33607. The
Servicer, as Depositor, will be the settlor and initially the sole beneficiary
of the Issuer. The Servicer will perform the services described below and set
forth in the Servicing Agreement.
 
COLLECTION OF PAYMENTS
 
    The Servicer will service the Accounts and will provide certain accounting
and reporting services with respect to the Accounts. The Servicer will be
obligated to service the Accounts generally in accordance with certain specific
standards set forth in the Servicing Agreement and otherwise in accordance with
reasonable and prudent servicing standards that are employed by a prudent
servicer with respect to the servicing of accounts held in its own portfolio and
in accordance with the Servicer's past practices. Although the Servicer will be
responsible for servicing the Accounts, the Servicer will enter into a
subservicing agreement with Jim Walter Homes pursuant to which Jim Walter Homes
will perform certain day-to-day servicing functions, such as following up on
delinquent accounts and initiating foreclosure proceedings, in accordance with
the standards and provisions of the Servicing Agreement.
 
    Generally, all payments received on the Mortgage Collateral will be
deposited on a daily basis in a holding account (the "Holding Account")
established with and in the name of First Union National Bank of Florida, as
custodian for itself as the Indenture Trustee, prior to the Closing Date. The
Servicer will transfer the payments attributable to the Mortgage Collateral, net
of the applicable servicing fee and other permitted deductions, into the
Collection Account.
 
    The Servicer will perform certain monitoring and reporting functions for the
Indenture Trustee, including the preparation and delivery of monthly reports to
the Indenture Trustee covering the current payments and prepayments in full
received with respect to the Accounts and reports covering defaulted Accounts.
 
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<PAGE>
SERVICING FEE
 
    The servicing fee will be calculated and paid monthly based upon the number
of Accounts being serviced as of the end of the preceding month. No such fee
will be paid, however, on Accounts that have resulted in repossession. The
servicing fee will be calculated at $25 per Account outstanding per month. The
servicing fee will be paid to the Servicer out of the Holding Account upon
submission of a withdrawal request in accordance with the Servicing Agreement.
In addition to the servicing fee, the Servicer will receive all assumption fees,
late payment charges, interest on taxes and insurance paid on behalf of the
Accounts and similar charges, to the extent such fees and expenses are collected
from obligors.
 
    Out of its servicing fee, the Servicer is obligated to pay normal expenses
and disbursements incurred in connection with servicing the Accounts, including
the fees and disbursements of its independent accountants and expenses incurred
in connection with reports to the Indenture Trustee. Fees and expenses incurred
in connection with realization upon defaulted Accounts are reimbursable from the
Holding Account.
 
INSURANCE; TAXES
 
    The Servicer will not be required to maintain escrow accounts for collection
of taxes or premiums on Insurance Policies on the Accounts. The terms of each
Account require the obligor to maintain a standard Insurance Policy covering the
property underlying such Account. The standard Insurance Policy is generally in
the form of the fire insurance policy with extended coverage that is customary
in the state in which the Mortgaged Property is located. Such standard forms
vary from state to state but generally cover damage by fire, lightning and
windstorm, subject to certain conditions and exclusions. Other causes of damage
(including without limitation floods and earth movements) are not covered. The
Servicing Agreement requires the Servicer to cause such a policy to be
maintained in full force and effect or to maintain a blanket insurance policy
insuring against hazard and certain other losses with respect to each such
Account. The Servicer or Jim Walter Homes, as subservicer, will be required to
monitor the customer's payment of insurance and taxes. If such payments are not
made, the Servicer will be required to make such payments and will not be
reimbursed for such payments except to the extent such amounts are collected
from the obligor, from a subservicer or to the extent recoverable as liquidation
expenses.
 
    If the Servicer obtains an Insurance Policy on behalf of an obligor, it
normally does so through an insurance agency that is an affiliate of the
Servicer, and the reinsurer, if any, of such Insurance Policy is an affiliate of
the Servicer.
 
REALIZATION UPON DEFAULTED ACCOUNTS
 
    The Servicer will foreclose upon or otherwise comparably convert the
ownership of the property securing any Account that comes into default and as to
which no satisfactory arrangements can be made for collection of delinquent
amounts. In connection with such foreclosure or other conversion, the Servicer
will follow such practices and procedures specified in the Servicing Agreement
as are consistent with its customary servicing procedures. In this regard, the
Servicer may sell the property at a foreclosure or a trustee's sale. Generally,
however, it is expected that the property will be resold primarily in exchange
for a new account and such account will be an Account securing the Notes.
 
    If any property securing a defaulted Account is damaged and the proceeds, if
any, from the related Insurance Policy maintained by the customer or from any
temporary insurance policy obtained by the Servicer are insufficient to restore
the damaged property completely, the Servicer will not be required to expend its
own funds to restore the damaged property unless it determines (i) that such
restoration is likely to increase the liquidation proceeds of the related
Account and (ii) that it will recover such expenses through liquidation or
insurance proceeds.
 
RESIGNATION
 
    The Servicer may not resign from its obligations and duties under the
Servicing Agreement unless it determines that its duties thereunder are no
longer permissible by reason of a change in applicable law. No such resignation
will be effective until a successor servicer has assumed the Servicer's
obligations and
 
                                       63
<PAGE>
duties under the Servicing Agreement. Such a successor servicer must be
satisfactory to the Issuer and the Indenture Trustee in the exercise of their
reasonable discretion. The Servicer may, however, enter into subservicing
agreements with any person similar to the one to be entered into with Jim Walter
Homes to perform any of its obligations under the Servicing Agreement, but the
Servicer will remain fully liable for performance of all obligations under the
Servicing Agreement.
 
ANNUAL ACCOUNTANTS' REPORT
 
    The Servicer is required to cause a firm of independent certified public
accountants to furnish to the Issuer and the Indenture Trustee, on or before 120
days after the end of each of its fiscal years beginning with the fiscal year
ending May 31, 1998, a statement to the effect that such firm (a) has examined
the Servicer's financial statements for the preceding fiscal year in accordance
with generally accepted auditing standards and has issued an opinion thereon,
and (b) has examined certain documents and records relating to the servicing of
the Accounts during the preceding fiscal year in accordance with the Uniform
Single Audit Program for Mortgage Bankers, and has found no material exceptions
relating to the Accounts or has set forth such exceptions.
 
EVENTS OF DEFAULT
 
    Events of Default under the Servicing Agreement will include: (a) any
failure to deposit into the Holding Account any required payment within two
Business Days after it is required to be deposited; (b) any failure by the
Servicer duly to observe or perform any other of its covenants or agreements in
the Servicing Agreement which continues unremedied for 30 days after the giving
of written notice of such failure by the Indenture Trustee or the holders of
Notes representing a majority in principal amount of the then outstanding Notes;
(c) certain events of bankruptcy, insolvency, receivership or reorganization of
the Servicer, any subservicer or any affiliate of either; (d) any
representation, warranty or statement of the Servicer made in the Servicing
Agreement or any other certificate delivered in connection with the issuance of
the Notes being materially incorrect as of the time such representation,
warranty or statement was made, which defect has not been cured within 30 days
after the Servicer received notice of the defect; and (e) any failure of the
Servicer to deliver to the Indenture Trustee a weekly report covering transfers
from the Holding Account to the Collection Account in the absence of force
majeure.
 
RIGHTS UPON EVENT OF DEFAULT
 
    So long as an Event of Default under the Servicing Agreement remains
unremedied, the Issuer or the Indenture Trustee (in each case subject to the
provisions of the Indenture) or, with the consent of the Indenture Trustee,
holders of Notes entitled to more than 50% of the Voting Rights of each Class of
Notes may terminate all of the rights and obligations of the Servicer under the
Servicing Agreement. Upon such termination, the Issuer will be obligated to
obtain a substitute servicer satisfactory to the Indenture Trustee. If the
Issuer fails to appoint a servicer satisfactory to the Indenture Trustee, the
Indenture Trustee may appoint or petition, in a court of competent jurisdiction,
for the appointment of a servicer to act as successor to the Servicer under the
Servicing Agreement. Pending the appointment of a successor Servicer, the
Indenture Trustee will be obligated to act as Servicer. (If First Union National
Bank of Florida, as Indenture Trustee, were to become Servicer, it is expected
to engage an affiliate as subservicer.) The Indenture Trustee and such successor
may agree upon the servicing compensation to be paid, which in no event may be
greater than the compensation to the Servicer under the Servicing Agreement. No
termination of the Servicer shall be effective until the new servicer enters
into a servicing agreement with the Issuer and the Indenture Trustee.
 
TERMINATION AND REPLACEMENT OF SERVICER
 
    If a Trigger Event occurs, the Indenture Trustee will have the option to,
but is not obligated to: (i) terminate the rights of the Servicer under the
Servicing Agreement and appoint a new Servicer thereunder; (ii) compel the
transfer of the software used by the Servicer to service the Accounts; (iii)
direct the homeowners under the Accounts to make payments directly to the
successor Servicer; and/or (iv) avail itself of any other remedies under the
Servicing Agreement or the Indenture. In addition, the occurrence
 
                                       64
<PAGE>
of a Trigger Event would affect the application of Remaining Available Funds to
the payment of principal of the Notes under the Indenture as described under
"DESCRIPTION OF THE NOTES--Interest and Principal Payments."
 
AMENDMENTS
 
    The Servicing Agreement may be amended by the Issuer and Mid-State with the
consent of the Indenture Trustee and the holders of Notes entitled to more than
50% of the Voting Rights of each Class of affected Notes, for the purpose of
adding any provisions to, or modifying or eliminating any provisions of, the
Servicing Agreement. However, amendments affecting amounts to be deposited in
the Holding Account or the Collection Account, altering the priorities with
which any allocation of funds shall be made under the Servicing Agreement,
creating liens on the collateral securing the payment of principal and interest
on the Notes or modifying certain specified provisions of the Servicing
Agreement may be approved only with the consent of the Indenture Trustee and all
holders of the Notes. The Servicing Agreement may also be amended without the
consent of the Indenture Trustee or any Noteholder if such amendment does not
adversely affect in any material respect the interests of any Noteholder.
 
                              THE TRUST AGREEMENT
 
    Under the terms of the Trust Agreement, the Depositor will have conveyed to
the Owner Trustee a nominal amount of cash to establish the Trust, which will
act as Issuer. In exchange, the Depositor will have received certificates
evidencing beneficial ownership of the Issuer created under such agreement.
Subject to certain restrictions, the Depositor may sell or assign certificates
of beneficial ownership of the Issuer to another entity or entities.
 
    The Trust Agreement will provide that the Owner Trustee will be obligated to
(i) execute and deliver the Indenture, the Notes, the Servicing Agreement, the
Purchase and Sale Agreement and all other documents, agreements and instruments
related thereto, (ii) acquire the Collateral and to pledge the Collateral as
security for the Notes, (iii) issue the Notes pursuant to the Indenture and (iv)
take whatever action shall be required to be taken by the Owner Trustee by, and
subject to, the terms of the Trust Agreement. The Trust Agreement will provide
that the Issuer may not conduct any activities other than those related to the
issuance and sale of Notes, the investment of certain funds in Eligible
Investments, as defined in the Indenture, and such other limited activities as
may be required in connection with reports and payments to holders of the Notes
and the beneficial interest of the Trust. Neither the Owner Trustee in its
individual capacity nor the holders of the beneficial interest of the Trust (the
"Owners") are liable for payment of principal of or interest on the Notes and
each holder of Notes will be deemed to have released the Owner Trustee and the
Owners from any such liability. Upon the payment in full of all outstanding
Notes and the satisfaction and discharge of the Indenture, the Owner Trustee
will succeed to all the rights of the Indenture Trustee, and the Owners will
succeed to all the rights of the Noteholders, under the Servicing Agreement,
except as otherwise provided therein.
 
    The Trust Agreement will provide that the Owner Trustee does not have the
power to commence a voluntary proceeding in bankruptcy with respect to the Trust
until at least 367 days after payment in full of all the Notes and the Owners
shall not direct the Owner Trustee to take any action that would violate such
provision.
 
    The Trust Agreement will provide that the Owner Trustee is entitled to an
annual fee equal to $5,000.
 
    The Trust Agreement may, at the unanimous written request of the Owners, be
supplemented and amended by a written instrument signed by the Owner Trustee and
the Owners, with the written consent of the Indenture Trustee.
 
    The Trust Agreement will provide that the Trust will terminate upon the
earlier to occur of (i) the final sale or disposition of the trust estate and
the distribution of all proceeds thereof to the Owners or (ii) 21 years less one
day following the death of the survivor of certain individuals described in the
Trust Agreement, but in no event later than April 1, 2062.
 
                                       65
<PAGE>
                        THE PURCHASE AND SALE AGREEMENT
 
    The Depositor will sell and assign to the Issuer all its right, title and
interest in the Mortgage Collateral pursuant to the Purchase and Sale Agreement.
Simultaneously, the Issuer will collaterally assign the Mortgage Collateral to
the Indenture Trustee as security for the Notes pursuant to the Indenture.
 
    The Depositor will represent and warrant to the Issuer, with respect to the
Accounts sold pursuant to the Purchase and Sale Agreement, that as of the date
of execution thereof: (i) the related building or installment sale contract, as
the case may be, has been duly executed by the parties thereto and the duties to
be performed thereunder prior to the date the first payment in connection with
such contract is due shall have been performed by both parties thereto; (ii) the
promissory note shall have been duly executed by the customer with respect
thereto and, to the extent required under local law for recordation or
enforcement, the mortgage, mechanic's lien contract or other security agreement
has been duly executed and properly acknowledged; (iii) the Mortgage Collateral
documents, other than the assignments thereof, shall have been properly recorded
as required by law; (iv) the mortgage, deed of trust, mechanic's contract or
other security agreement shall constitute a valid first-priority lien upon and
secure title to the property described therein, and such mortgage, deed of
trust, mechanic's lien contract or other security agreement and the promissory
note or installment sale contract secured thereby shall be fully enforceable in
accordance with their respective terms; (v) all costs, fees, intangible and
documentary recording taxes and expenses incurred in making, closing, and
recording each Account shall have been paid; and (vi) no part of the mortgaged
property securing any promissory note or installment sale contract shall have
been released from the lien or security title of the mortgage, deed of trust,
mechanic's lien contract or other security agreement securing such promissory
note or installment sale contract except for Account notes which have been
prepaid in full since the Cut-Off Date, which amounts will be deposited in the
Collection Account.
 
    Within 90 days of the earlier of discovery by or notice to the Depositor of
any breach of a representation or warranty which materially and adversely
affects the interests of the Issuer in an Account, the Depositor is required to
use its best efforts to cure such breach in all material respects. If such
breach is not or cannot be cured within such 90-day period or, with the prior
written consent of the Indenture Trustee, such longer period as specified in
such consent, the Depositor is required to either (i) repurchase such Account
from the Issuer for an amount equal to 100% of the current Economic Balance of
the affected Account or (ii) substitute for such affected Account one or more
qualified substitute accounts.
 
    In order to be a "qualified substitute account," an account must comply with
the representations and warranties set forth above and must have an Economic
Balance not less than the Economic Balance of, and an Effective Financing Rate
not less than the Effective Financing Rate of, the Account for which it is being
substituted, all as more specifically set forth in the Purchase and Sale
Agreement.
 
    The obligation of the Depositor to cure any such breach or to repurchase or
substitute for the affected Account will be the sole remedy available to the
Issuer in respect of the related breach.
 
                                       66
<PAGE>
                              PLAN OF DISTRIBUTION
 
    The Depositor, as sole beneficial owner of the Issuer, and Walter Industries
have entered into an Underwriting Agreement with Lehman Brothers Inc., as
representative of the several underwriters named therein (Lehman Brothers Inc.,
collectively with the other underwriters, the "Underwriters"). Subject to the
terms and conditions of the Underwriting Agreement, the Depositor has agreed to
cause the Issuer to sell to the Underwriters, and the Underwriters have agreed
to purchase, the respective principal amount of each Class of Notes set forth
opposite their names below.
 
<TABLE>
<CAPTION>
                                                       PRINCIPAL       PRINCIPAL      PRINCIPAL      PRINCIPAL
                                                       AMOUNT OF       AMOUNT OF      AMOUNT OF      AMOUNT OF
                                                       CLASS A-1       CLASS A-2      CLASS A-3      CLASS A-4
UNDERWRITERS                                             NOTES           NOTES          NOTES          NOTES
- ---------------------------------------------------  --------------  -------------  -------------  -------------
<S>                                                  <C>             <C>            <C>            <C>
 
Lehman Brothers Inc................................
 
Donaldson, Lufkin & Jenrette Securities
  Corporation......................................
 
Merrill Lynch, Pierce, Fenner & Smith
  Incorporated.....................................
 
NationsBanc Capital Markets, Inc...................
 
Salomon Brothers Inc...............................
                                                     --------------  -------------  -------------  -------------
 
      Total........................................  $  287,750,000  $  57,750,000  $  45,100,000  $  48,550,000
                                                     --------------  -------------  -------------  -------------
                                                     --------------  -------------  -------------  -------------
</TABLE>
 
    Under the terms of the Underwriting Agreement, the Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
Notes, if any of the Notes are purchased.
 
    The Underwriters have advised the Depositor and the Issuer that they propose
to offer the Notes to the public at the prices set forth on the cover page
hereof, and to certain dealers at such prices less a concession not in excess of
[  %], [  %], [  %] and [  %] of the Class A-1 Notes, Class A-2 Notes, Class A-3
Notes and Class A-4 Notes, respectively. The Underwriters may allow and such
dealers may reallow a concession to certain other dealers not in excess of
[  %], [  %], [  %] and [  %] of the Class A-1 Notes, Class A-2 Notes, Class A-3
Notes and Class A-4 Notes, respectively. After the initial public offering, the
public offering prices and such concessions may be changed.
 
    During and after the offering, the Underwriters may purchase and sell Notes
in the open market. These transactions may include overallotment and stabilizing
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Notes, which may be higher than the price that might
otherwise prevail in the open market. These transactions may be effected in the
over-the-counter market or otherwise, and these activities, if commenced, may be
discontinued at any time.
 
    Lehman Brothers Inc. ("Lehman Brothers") owns approximately 14.3% of the
common stock of Walter Industries. Lehman Brothers has the right to have two
representatives on the board of directors of Walter Industries, and currently
two employees of Lehman Brothers are directors on such board.
 
    This Prospectus may be used by Lehman Brothers Inc., to the extent required,
in connection with market making transactions in the Notes. Lehman Brothers Inc.
may act as principal or agent in such transactions.
 
    The Depositor and Walter Industries have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments the Underwriters
may be required to make in respect thereof. The Issuer has been informed that in
the
 
                                       67
<PAGE>
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
 
                                 LEGAL MATTERS
 
    Certain legal matters will be passed upon for the Owner Trustee in its
individual capacity by Richards, Layton & Finger, Wilmington, Delaware; for the
Depositor by Cadwalader, Wickersham & Taft, New York, New York; for the
Indenture Trustee by Morris, James, Hitchens and Williams, Wilmington, Delaware;
for the Issuer by Cadwalader, Wickersham & Taft, New York, New York, as to the
validity of the Notes and the enforceability of the Indenture under New York
law; by Richards, Layton & Finger, Wilmington, Delaware, as to matters of
Delaware law; by Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., Tampa,
Florida, as to matters of Florida law; by Brown & Wood LLP, New York, New York,
as to matters referred to under "MATERIAL FEDERAL INCOME TAX CONSEQUENCES" and
as to certain ERISA matters referred to under "ERISA CONSIDERATIONS" and for the
Underwriters by Brown & Wood LLP.
 
                             FINANCIAL INFORMATION
 
    As of the date of this Prospectus, the Issuer has been formed and the
Depositor has made a $100.00 capital contribution to the Issuer. See "THE
ISSUER." Because financial information concerning the Issuer would not be
meaningful, no financial information regarding the Issuer is provided.
 
                                  NOTE RATINGS
 
    It is a condition of issuance that the Class A-1 Notes be rated "Aaa" by
Moody's and "AAA" by Standard & Poor's; the Class A-2 Notes be rated at least
"Aa2" by Moody's and "AA+" by Standard & Poor's; the Class A-3 Notes be rated at
least "A2" by Moody's and "AA" by Standard & Poor's; and the Class A-4 Notes be
rated at least "Baa2" by Moody's and "BBB" by Standard & Poor's. Such ratings
will reflect only the views of Moody's and Standard & Poor's. The rating of each
Class of Notes by Standard & Poor's addresses the likelihood of timely payment
of interest and the ultimate payment of principal on the Notes. The rating of
each Class of Notes by Moody's addresses the likelihood of the ultimate payment
of principal and interest on the Notes. When rating securities, Moody's and
Standard & Poor's consider the transaction in its entirety and rely on factors
in addition to the amount and performance of the collateral securing the debt.
An explanation of the significance of such ratings may be obtained from Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10004, telephone
(212) 553-0300 and Standard & Poor's Ratings Services, 25 Broadway, New York,
New York 10017, telephone (212) 208-8000. There is no assurance that such
ratings will continue for any period of time or that they will not be revised or
withdrawn entirely by either of such rating agencies if, in its judgment,
circumstances so warrant. A revision, withdrawal or qualification of either of
such ratings may have an adverse effect on the market price of the Notes. A
security rating is not a recommendation to buy, sell or hold securities.
 
                                       68
<PAGE>
                        INDEX TO PRINCIPAL DEFINED TERMS
 
   
<TABLE>
<CAPTION>
DEFINED TERMS                                             PAGE
- -------------------------------------------------------  ------
<S>                                                      <C>
A
account................................................      21
Accounts...............................................       1
accrual period.........................................      52
Aggregate Economic Balance.............................      13
Aggregate Outstanding Principal Balance................      37
Available Funds........................................       5
Available Funds Allocation.............................      37
B
Best...................................................      34
Building Contract......................................      22
C
Cede...................................................       3
Class..................................................       1
Class A-1 Initial Principal Balance....................      37
Class A-1 Optimal Principal Amount.....................      39
Class A-1 Outstanding Principal Balance................      37
Class A-1 Realized Loss Amount.........................      40
Class A-2 Initial Principal Balance....................      37
Class A-2 Optimal Principal Amount.....................      39
Class A-2 Outstanding Principal Balance................      37
Class A-2 Realized Loss Amount.........................      40
Class A-3 Initial Principal Balance....................      37
Class A-3 Optimal Principal Amount.....................      39
Class A-3 Outstanding Principal Balance................      37
Class A-3 Realized Loss Amount.........................      40
Class A-4 Initial Principal Balance....................      37
Class A-4 Optimal Principal Amount.....................      39
Class A-4 Outstanding Principal Balance................      37
Class A-4 Realized Loss Amount.........................      41
Class A-4 Reserve Account..............................       8
Class A-4 Reserve Withdrawal...........................      35
Class Optimal Principal Amount.........................      39
Class Interest Shortfall...............................      37
Closing Date...........................................       4
Code...................................................      10
Collateral.............................................       7
Collection Account.....................................       7
Collection Period......................................       5
Commission.............................................       2
CPR....................................................      42
Cut-Off Date...........................................       1
D
Definitive Notes.......................................      48
Depositor..............................................       1
DTC....................................................       3
</TABLE>
    
 
                                       69
<PAGE>
   
<TABLE>
<CAPTION>
DEFINED TERMS                                             PAGE
- -------------------------------------------------------  ------
<S>                                                      <C>
E
Economic Balance.......................................      23
EDGAR..................................................       2
Effective Financing Rate...............................      23
8.50% Accounts Table...................................      42
Eligible Investments...................................      35
Enterprise.............................................      20
ERISA..................................................      10
Event of Default.......................................      59
Exchange Act...........................................       3
F
Fannie Mae.............................................      35
Final Regulation.......................................      50
foreign person.........................................      55
FTC Rule...............................................      30
Freddie Mac............................................      35
G
Gross Receivable Amount................................      21
H
Holding Account........................................      62
I
Indenture..............................................       4
Indenture Trustee......................................       4
indirect participants..................................      48
Insurance Policies.....................................      34
Interest Accrual Amount................................      36
Interest Accrual Period................................       1
IRS....................................................      52
Issuer.................................................       1
Issuer Expenses........................................      35
J
Jim Walter Homes.......................................       7
L
Lehman Brothers........................................      67
Local Counsel..........................................      16
M
Maturity Date..........................................       4
Maximum Reserve Amount.................................       8
Mechanic's Lien Contract...............................      22
Mid-State..............................................       1
Minimum Target Overcollateralization Amount............      40
Moody's................................................       1
Mortgage Collateral....................................       1
Mortgaged Property.....................................       9
N
</TABLE>
    
 
   
                                       70
    
<PAGE>
   
<TABLE>
<CAPTION>
DEFINED TERMS                                             PAGE
- -------------------------------------------------------  ------
<S>                                                      <C>
1986 ACT...............................................      51
 
Note Rate..............................................       5
Noteholder.............................................      51
Notes..................................................       1
Notice of Default......................................      59
O
OID Regulations........................................      51
Optimal Principal Amount...............................      39
Outstanding Principal Balance..........................      37
Overcollateralization Amount...........................      39
Overcollateralization Percentage.......................      40
Owner Trustee..........................................       4
Owners.................................................      65
P
Participants...........................................      48
Payment Date...........................................       1
Plans..................................................      10
Prepayment Assumption..................................      51
prepayments............................................      41
Promissory Note........................................      22
Purchase and Sale Agreement............................       9
R
Realized Loss Amounts..................................      41
Record Date............................................       5
Reinvestment Period....................................       5
Relief Act.............................................      33
Remaining Available Funds..............................      13
Retail Contracts.......................................      22
Rules..................................................      48
S
Sales Contract.........................................      22
Security Instruments...................................      30
Servicer...............................................       1
Servicing Agreement....................................       7
South Carolina Code....................................      15
Standard & Poor's......................................       1
Subordinated Class.....................................       5
Subservicing Agreement.................................       7
T
Target Overcollateralization Date......................      39
Target Overcollateralization Level.....................      39
10.00% Accounts Table..................................      42
Texas Building Contract................................      22
Texas Contracts........................................      22
Texas Mortgages........................................      22
Texas Resale Mortgage..................................      22
Texas Sales Contract...................................      22
</TABLE>
    
 
   
                                       71
    
<PAGE>
   
<TABLE>
<CAPTION>
DEFINED TERMS                                             PAGE
- -------------------------------------------------------  ------
<S>                                                      <C>
TMP....................................................      51
TMP Regulations........................................      56
Trigger Event..........................................      61
Trust..................................................       1
Trust Agreement........................................       4
Trust V Accounts.......................................      20
U
UCCC...................................................      30
Underwriters...........................................       1
V
Voting Rights..........................................      59
W
Walter Industries......................................       4
</TABLE>
    
 
                                       72
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
    NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED HEREBY NOR AN OFFER OF SUCH
SECURITIES TO ANY PERSON IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER
WOULD BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY
THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
                            ------------------------
 
                               TABLE OF CONTENTS
 
   
<TABLE>
<CAPTION>
                                                    PAGE
                                                  ---------
<S>                                               <C>
Available Information...........................          2
Reports to Noteholders..........................          3
Summary of Terms................................          4
Risk Factors....................................         12
The Depositor...................................         16
The Issuer......................................         17
Use of Proceeds.................................         18
Discussion and Analysis of Issuer's Financial
  Condition.....................................         18
The Accounts....................................         18
The Mortgage Collateral.........................         26
Certain Legal Aspects of the Accounts and
  Related Matters...............................         30
Security........................................         34
Description of the Notes........................         36
Legal Investment Considerations.................         49
ERISA Considerations............................         49
Material Federal Income Tax Consequences........         51
The Indenture...................................         56
The Servicing Agreement.........................         62
The Trust Agreement.............................         65
The Purchase and Sale Agreement.................         66
Plan of Distribution............................         67
Legal Matters...................................         68
Financial Information...........................         68
Note Ratings....................................         68
Index to Principal Defined Terms................         69
</TABLE>
    
 
                            ------------------------
 
    UNTIL 90 DAYS AFTER THE DATE HEREOF, ALL DEALERS EFFECTING TRANSACTIONS IN
THE NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
 
                                  $439,150,000
                               MID-STATE TRUST VI
                               $287,750,000 [  ]%
                         ASSET-BACKED NOTES, CLASS A-1
                               $57,750,000 [  ]%
                         ASSET-BACKED NOTES, CLASS A-2
                               $45,100,000 [  ]%
                         ASSET-BACKED NOTES, CLASS A-3
                               $48,550,000 [  ]%
                         ASSET-BACKED NOTES, CLASS A-4
 
                            ------------------------
 
                             MID-STATE HOMES, INC.
                                    SERVICER
 
                               ------------------
 
   
                                   PROSPECTUS
                                 JUNE   , 1997
    
 
                               ------------------
 
                                LEHMAN BROTHERS
                          DONALDSON, LUFKIN & JENRETTE
                             SECURITIES CORPORATION
 
                              MERRILL LYNCH & CO.
                              NATIONSBANC CAPITAL
                                 MARKETS, INC.
                              SALOMON BROTHERS INC
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
                                    PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
 
    Set forth below are the fees and expenses (other than underwriting discounts
and commissions to be incurred with the issuance and distribution of the
shares).
 
<TABLE>
<S>                                                              <C>
SEC Filing Fee.................................................  $  133,076
Indenture Trustee's Fees.......................................      38,751
Owner Trustee's Fees...........................................       9,000
Legal Fees and Expenses........................................     507,500*
Accounting Fees and Expenses...................................     150,000*
Blue Sky and Legal Investment Fees and Expenses................      10,000*
Printing Fees and Expenses.....................................      80,000*
Rating Agency Fees and Expenses................................     210,000*
Miscellaneous..................................................      10,673*
                                                                 ----------
    Total......................................................  $1,149,000*
                                                                 ----------
                                                                 ----------
</TABLE>
 
- ------------------------
 
*   Estimated.
 
ITEM 31. SALES OF SPECIAL PARTIES.
 
    Not Applicable.
 
ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES.
 
    Pursuant to the terms of the Trust Agreement the Issuer will issue and sell
to the Depositor, on or prior to the date of initial issuance of the Notes and
in exchange for the Depositor's covenant to pay for the Issuer's organizational
expenses, a certificate of beneficial interest representing a 100% beneficial
interest in the Issuer, in a transaction exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2) of the Securities Act of 1933.
 
ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
    The By-laws of Walter Industries, Inc. ("Walter Industries"), a Delaware
corporation and indirect owner of all of the issued and outstanding shares of
the capital stock of the Depositor, provide that, to the fullest extent
permitted by Delaware law, Walter Industries will indemnify any current or
former director or officer of Walter Industries and may, at the discretion of
the board of directors, indemnify any current or former employee or agent of
Walter Industries, against certain liabilities, including liabilities incurred
by reason of the fact that such person is or was serving, at the request of
Walter Industries, as a director, officer, partner, trustee, employee or agent
of another corporation or partnership, joint venture, trust or other enterprise.
To the extent that directors and officers of the Depositor serve or have
previously served as directors, officers, employees or agents of Walter
Industries, they are eligible for indemnification by Walter Industries against
liabilities in respect of actions taken in their capacities as directors or
officers of the Depositor.
 
    The directors and officers of the Depositor are covered by a directors' and
officers' liability insurance policy maintained by Walter Industries for the
benefit of all of its subsidiaries.
 
ITEM 34. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.
 
    Not Applicable.
 
                                      II-1
<PAGE>
ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS.
 
    (a) Financial Statements filed in the Prospectus: not applicable.
 
    (b) Exhibits
 
   
<TABLE>
<C>        <S>
       1.  Form of Underwriting Agreement*
      3.1  Form of Trust Agreement*
      4.1  Form of Indenture (including forms of Notes)
      5.1  Opinion of Counsel to the Issuer as to the legality of the Notes
      8.1  Opinion of Special Federal Income Tax Counsel to the Issuer as to federal income tax
           matters*
     10.1  Form of Servicing Agreement
     10.2  Form of Purchase and Sale Agreement*
     23.1  Consents of Counsel and Special Federal Income Tax Counsel to Issuer (included in
           exhibits 5.1 and 8.1)
      24.  Power of Attorney*
     25.1  Statement of Eligibility and Qualification on Form T-1 of First Union National Bank of
           Florida, as Trustee, under the Trust VI Indenture relating to the Trust VI Notes*
</TABLE>
    
 
- ------------------------
 
*   Previously filed.
 
ITEM 36. UNDERTAKINGS.
 
    The undersigned registrant hereby undertakes:
 
        (1) For purposes of determining any liability under the Securities Act
    of 1933, the information omitted from the form of prospectus filed as part
    of this registration statement in reliance upon Rule 430A and contained in a
    form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
    or 497(h) under the Act shall be deemed to be part of this registration
    statement as of the time it was declared effective.
 
        (2) For the purpose of determining any liability under the Act, each
    post-effective amendment that contains a form of prospectus shall be deemed
    to be a new registration statement relating to the securities offered
    therein, and the offering of such securities at that time shall be deemed to
    be the initial bona fide offering thereof.
 
    Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Depositor pursuant to the provisions contained in Florida law, the Depositor's
Certificate of Incorporation and By-Laws or otherwise, the Depositor has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the reimbursement by the Depositor of expenses
incurred or paid by a director, officer or controlling person of the Depositor
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Depositor will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in such Act and will be governed by the final adjudication
of such issue.
 
                                      II-2
<PAGE>
                                   SIGNATURES
 
   
    Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-11 and has duly caused this Pre-Effective
Amendment No. 4 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Tampa, Florida on May 23, 1997.
    
 
   
                                MID-STATE HOMES, INC.
 
                                as depositor for and on behalf of Mid-State
                                Trust VI
 
                                By:             /s/ DEAN M. FJELSTUL
                                     -----------------------------------------
                                               Name: Dean M. Fjelstul
                                               Title: VICE PRESIDENT
 
    
 
                                      II-3
<PAGE>
   
    Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 4 to Form S-11 Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
    
 
   
          SIGNATURE                       TITLE                    DATE
- ------------------------------  --------------------------  -------------------
 
    */s/ KENNETH E. HYATT       President, Principal
- ------------------------------    Executive Officer and        May 23, 1997
       Kenneth E. Hyatt           Director
 
     */s/ RICHARD E. ALMY
- ------------------------------  Director                       May 23, 1997
       Richard E. Almy
 
     /s/ DEAN M. FJELSTUL       Vice President, Principal
- ------------------------------    Financial Officer and        May 23, 1997
       Dean M. Fjelstul           Director
 
  */s/ JOSEPH H. KELLY, JR.
- ------------------------------  Controller (Principal          May 23, 1997
     Joseph H. Kelly, Jr.         Accounting Officer)
 
    
 
<TABLE>
<S>        <C>                                         <C>
*By:                  /s/ DEAN M. FJELSTUL
             --------------------------------------
                        Dean M. Fjelstul
                      Attorney-in-fact(1)
</TABLE>
 
- ------------------------
 
(1) Dean M. Fjelstul, by signing his name hereto, does sign the document on
    behalf of the person indicated above pursuant to a power of attorney duly
    executed by such person and filed with the Securities and Exchange
    Commission.
 
                                      II-4
<PAGE>
                                 EXHIBIT INDEX
 
   
<TABLE>
<S>        <C>        <C>
1.                --  Form of Underwriting Agreement*
2.                --  Form of Trust Agreement*
4.1               --  Form of Indenture (including forms of Notes)
5.1               --  Opinion of Counsel to the Issuer as to the legality of the Notes
8.1               --  Opinion of Special Federal Income tax Counsel to the Issuer as to federal income tax
                      matters*
10.1              --  Form of Servicing Agreement
10.2              --  Form of Purchase and Sale Agreement*
23.1              --  Consents of Counsel and Special Counsel to Issuer (included in exhibits 5 and 8)
24.               --  Power of Attorney*
25.1              --  Statement of Eligibility and Qualification on Form T-1 of First Union National Bank
                      of Florida, as Trustee, under the Indenture relating to the Notes*
</TABLE>
    
 
- ------------------------
 
   
*   Previously Filed.
    
 
                                      II-5

<PAGE>







        =============================================================


                             MID-STATE TRUST VI,
                                          
                                   Issuer
                                          
                                     and


                    FIRST UNION NATIONAL BANK OF FLORIDA

                                          
                                   Trustee


                                  INDENTURE




                           Dated as of May 1, 1997
                                          
                                 Relating to

         $287,750,000 [    ]% Asset Backed Notes, Class A-1
         $57,750,000 [    ]% Asset Backed Notes, Class A-2
         $45,100,000 [    ]% Asset Backed Notes, Class A-3
         $48,550,000 [    ]% Asset Backed Notes, Class A-4



        =============================================================
 
<PAGE>


                                  TABLE OF CONTENTS
 
                                                                          PAGE
                                                                          ----


PRELIMINARY STATEMENT      . . . . . . . . . . . . . . . . . . . . . . . .   1

GRANTING CLAUSES           . . . . . . . . . . . . . . . . . . . . . . . .   1

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

    SECTION 1.01      General Definitions. . . . . . . . . . . . . . . . . I-1

ARTICLE II            THE NOTES. . . . . . . . . . . . . . . . . . . . . .II-1

    SECTION 2.01      Forms Generally. . . . . . . . . . . . . . . . . . .II-1
    SECTION 2.02      Forms of Notes and Certificate 
                      of Authentication. . . . . . . . . . . . . . . . . .II-1
    SECTION 2.03      Notes; General Provisions with 
                      Respect to Principal and Interest 
                      Payments; Allocation of Realized 
                      Loss Amounts.. . . . . . . . . . . . . . . . . . . .II-1
    SECTION 2.04      Denominations. . . . . . . . . . . . . . . . . . . .II-3
    SECTION 2.05      Execution, Authentication, Delivery 
                      and Dating . . . . . . . . . . . . . . . . . . . . .II-3
    SECTION 2.06      Temporary Notes. . . . . . . . . . . . . . . . . . .II-3
    SECTION 2.07      Registration, Registration of 
                      Transfer and Exchange. . . . . . . . . . . . . . . .II-4
    SECTION 2.08      Mutilated, Destroyed, Lost or 
                      Stolen Notes . . . . . . . . . . . . . . . . . . . .II-6
    SECTION 2.09      Payments of Principal and Interest . . . . . . . . .II-7
    SECTION 2.10      Persons Deemed Owners. . . . . . . . . . . . . . . .II-9
    SECTION 2.11      Cancellation . . . . . . . . . . . . . . . . . . . II-10
    SECTION 2.12      Authentication and Delivery of Notes . . . . . . . II-10

ARTICLE III           COVENANTS; REPRESENTATIONS AND WARRANTIES. . . . . III-1

    SECTION 3.01      Payment of Notes . . . . . . . . . . . . . . . . . III-1
    SECTION 3.02      Maintenance of Office or Agency. . . . . . . . . . III-1
    SECTION 3.03      Money for Note Payments to Be Held 
                      in Trust . . . . . . . . . . . . . . . . . . . . . III-1
    SECTION 3.04      Existence of Issuer. . . . . . . . . . . . . . . . III-4
    SECTION 3.05      Protection of Trust Estate . . . . . . . . . . . . III-4
    SECTION 3.06      Opinions as to Trust Estate. . . . . . . . . . . . III-5


                                      i
<PAGE>

                              TABLE OF CONTENTS (CONT'D)

                                                                          Page
                                                                          ----

    SECTION 3.07      Performance of Obligations; Servicing 
                      Agreement. . . . . . . . . . . . . . . . . . . . . III-5
    SECTION 3.08      Negative Covenants . . . . . . . . . . . . . . . . III-7
    SECTION 3.09      Annual Statement as to Compliance. . . . . . . . . III-8
    SECTION 3.10      Recording of Assignments . . . . . . . . . . . . . III-8
    SECTION 3.11      Representations and Warranties 
                      Concerning the Accounts. . . . . . . . . . . . . . III-9
    SECTION 3.12      Trustee's Review of Account Documents. . . . . . .III-12
    SECTION 3.13      Trust Estate; Account Documents. . . . . . . . . .III-15
    SECTION 3.14      Amendments to Servicing Agreement. . . . . . . . .III-16
    SECTION 3.15      Servicer as Agent and Bailee 
                      of Trustee . . . . . . . . . . . . . . . . . . . .III-16
    SECTION 3.16      Investment Company Act . . . . . . . . . . . . . .III-16
    SECTION 3.17      Business Activity. . . . . . . . . . . . . . . . .III-17
    SECTION 3.18      Liability of Owner Trustee . . . . . . . . . . . .III-17
    SECTION 3.19      Exculpation of the Trustee . . . . . . . . . . . .III-18

ARTICLE IV            SATISFACTION AND DISCHARGE . . . . . . . . . . . . .IV-1

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

ARTICLE V             DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . . V-1

    SECTION 5.01      Event of Default . . . . . . . . . . . . . . . . . . V-1
    SECTION 5.02      Acceleration of Maturity; Rescission 
                      and Annulment. . . . . . . . . . . . . . . . . . . . V-2
    SECTION 5.03      Collection of Indebtedness and Suits 
                      for Enforcement by Trustee . . . . . . . . . . . . . V-4
    SECTION 5.04      Remedies . . . . . . . . . . . . . . . . . . . . . . V-6
    SECTION 5.05      Preservation of Trust Estate . . . . . . . . . . . . V-6
    SECTION 5.06      Trustee May File Proofs of Claim . . . . . . . . . . V-8
    SECTION 5.07      Trustee May Enforce Claims Without 
                      Possession of Notes. . . . . . . . . . . . . . . . .V-10
    SECTION 5.08      Application of Money Collected . . . . . . . . . . .V-10
    SECTION 5.09      Limitation on Suits. . . . . . . . . . . . . . . . .V-12
    SECTION 5.10      Unconditional Rights of Noteholders 
                      to Receive Principal and Interest. . . . . . . . . .V-13


                                     ii
<PAGE>

                         TABLE OF CONTENTS (CONT'D)

                                                                          Page
                                                                          ----

    SECTION 5.11      Restoration of Rights and Remedies . . . . . . . . .V-13
    SECTION 5.12      Rights and Remedies Cumulative . . . . . . . . . . .V-14
    SECTION 5.13      Delay or Omission Not Waiver . . . . . . . . . . . .V-14
    SECTION 5.14      Control by the Noteholders . . . . . . . . . . . . .V-14
    SECTION 5.15      Waiver of Past Defaults. . . . . . . . . . . . . . .V-15
    SECTION 5.16      Undertaking for Costs. . . . . . . . . . . . . . . .V-15
    SECTION 5.17      Waiver of Stay or Extension Laws . . . . . . . . . .V-16
    SECTION 5.18      Sale of Trust Estate . . . . . . . . . . . . . . . .V-16
    SECTION 5.19      Action on Notes. . . . . . . . . . . . . . . . . . .V-18

ARTICLE VI            THE TRUSTEE. . . . . . . . . . . . . . . . . . . . .VI-1

    SECTION 6.01      Duties of Trustee. . . . . . . . . . . . . . . . . .VI-1
    SECTION 6.02      Notice of Default. . . . . . . . . . . . . . . . . .VI-2
    SECTION 6.03      Rights of Trustee. . . . . . . . . . . . . . . . . .VI-3
    SECTION 6.04      Not Responsible for Recitals or 
                      Issuance of Notes. . . . . . . . . . . . . . . . . .VI-3
    SECTION 6.05      May Hold Notes . . . . . . . . . . . . . . . . . . .VI-4
    SECTION 6.06      Money Held in Trust. . . . . . . . . . . . . . . . .VI-4
    SECTION 6.07      Compensation and Reimbursement . . . . . . . . . . .VI-4
    SECTION 6.08      Eligibility; Disqualification. . . . . . . . . . . .VI-5
    SECTION 6.09      Trustee's Capital and Surplus. . . . . . . . . . . .VI-5
    SECTION 6.10      Resignation and Removal; Appointment 
                      of Successor . . . . . . . . . . . . . . . . . . . .VI-6
    SECTION 6.11      Acceptance of Appointment by Successor . . . . . . .VI-7
    SECTION 6.12      Merger; Conversion, Consolidation 
                      or Succession to Business of Trustee . . . . . . . .VI-7
    SECTION 6.13      Preferential Collection of Claims 
                      Against Issuer . . . . . . . . . . . . . . . . . . .VI-8
    SECTION 6.14      Co-trustees and Separate Trustees. . . . . . . . . .VI-8
    SECTION 6.15      Authenticating Agents. . . . . . . . . . . . . . . VI-10

ARTICLE VII           NOTEHOLDERS' LISTS AND REPORTS . . . . . . . . . . VII-1

    SECTION 7.01      Issuer to Furnish Trustee Names and 
                      Addresses of Noteholders . . . . . . . . . . . . . VII-1
    SECTION 7.02      Preservation of Information; 
                      Communications to Noteholders. . . . . . . . . . . VII-1
    SECTION 7.03      Reports by Trustee . . . . . . . . . . . . . . . . VII-1


                                     iii
<PAGE>

                         TABLE OF CONTENTS (CONT'D)

                                                                          Page
                                                                          ----


    SECTION 7.04      Reports by Issuer. . . . . . . . . . . . . . . . . VII-2

ARTICLE VIII          ACCOUNTS, PAYMENTS OF INTEREST AND 
                      PRINCIPAL, AND RELEASES. . . . . . . . . . . . . .VIII-1
    SECTION 8.01      Collection of Moneys . . . . . . . . . . . . . . .VIII-1
    SECTION 8.02      Collection Account . . . . . . . . . . . . . . . .VIII-1
    SECTION 8.03      General Provisions Regarding the 
                      Collection Account . . . . . . . . . . . . . . . .VIII-5
    SECTION 8.04      Reports by Trustee to Noteholders. . . . . . . . .VIII-7
    SECTION 8.05      Reports by Trustee . . . . . . . . . . . . . . . .VIII-7
    SECTION 8.06      Reports by Independent Accountants . . . . . . . .VIII-8
    SECTION 8.07      Reports by the Servicer. . . . . . . . . . . . . .VIII-8

ARTICLE IX            SUPPLEMENTAL INDENTURES. . . . . . . . . . . . . . .IX-1

    SECTION 9.01      Supplemental Indentures without 
                      Consent of Noteholders . . . . . . . . . . . . . . .IX-1
    SECTION 9.02      Supplemental Indentures with Consent 
                      of Noteholders . . . . . . . . . . . . . . . . . . .IX-1
    SECTION 9.03      Execution of Supplemental Indentures . . . . . . . .IX-3
    SECTION 9.04      Effect of Supplemental Indentures. . . . . . . . . .IX-3
    SECTION 9.05      Conformity with Trust Indenture Act. . . . . . . . .IX-4
    SECTION 9.06.     Reference in Notes to Supplemental 
                      Indentures . . . . . . . . . . . . . . . . . . . . .IX-4

ARTICLE X             REDEMPTION OF NOTES. . . . . . . . . . . . . . . . . X-1

    SECTION 10.01     Optional Redemption of Notes . . . . . . . . . . . . X-1
    SECTION 10.02     Form of Redemption Notice. . . . . . . . . . . . . . X-1
    SECTION 10.03     Notes Payable on Redemption Date . . . . . . . . . . X-2

ARTICLE XI            MISCELLANEOUS. . . . . . . . . . . . . . . . . . . .XI-1

    SECTION 11.01     Compliance Certificates and Opinions . . . . . . . .XI-1
    SECTION 11.02     Form of Documents Delivered to Trustee . . . . . . .XI-1
    SECTION 11.03     Acts of Noteholders. . . . . . . . . . . . . . . . .XI-3
    SECTION 11.04     Notices, etc., to Trustee and Issuer.. . . . . . . .XI-3
    SECTION 11.05     Notices and Reports to Noteholders; 
                      Waiver of Notices. . . . . . . . . . . . . . . . . .XI-4


                                     iv
<PAGE>

                         TABLE OF CONTENTS (CONT'D)

                                                                          Page
                                                                          ----


    SECTION 11.06     Rules by Trustee and Agents. . . . . . . . . . . . .XI-5
    SECTION 11.07     Conflict with Trust Indenture Act. . . . . . . . . .XI-5
    SECTION 11.08     Effect of Headings and Table of 
                      Contents . . . . . . . . . . . . . . . . . . . . . .XI-5
    SECTION 11.09     Successors and Assigns . . . . . . . . . . . . . . .XI-5
    SECTION 11.10     Separability . . . . . . . . . . . . . . . . . . . .XI-5
    SECTION 11.11     Benefits of Indenture. . . . . . . . . . . . . . . .XI-6
    SECTION 11.12     Legal Holidays . . . . . . . . . . . . . . . . . . .XI-6
    SECTION 11.13     Governing Law. . . . . . . . . . . . . . . . . . . .XI-6
    SECTION 11.14     Counterparts . . . . . . . . . . . . . . . . . . . .XI-6
    SECTION 11.15     Recording of Indenture . . . . . . . . . . . . . . .XI-6
    SECTION 11.16     Issuer Obligations . . . . . . . . . . . . . . . . .XI-6
    SECTION 11.17     Inspection . . . . . . . . . . . . . . . . . . . . .XI-7


 

                                      v
<PAGE>

     INDENTURE, dated as of May 1, 1997 (herein, as amended or supplemented 
from time to time as permitted hereby, called this "Indenture"), between 
MID-STATE TRUST VI (the "Issuer"), a Delaware business trust and FIRST UNION 
NATIONAL BANK OF Florida, a national banking association, as trustee (herein, 
together with its permitted successors in the trusts hereunder, called the 
"Trustee").

                            PRELIMINARY STATEMENT

     The Issuer is a business trust created by a Trust Agreement dated March 1,
1997 between Wilmington Trust Company (in its capacity as Trustee thereunder,
the "Owner Trustee"), and Mid-State Homes, Inc., as Grantor.  The Issuer will
act at all times through the Owner Trustee.  The Issuer has duly authorized the
execution and delivery of this Indenture to provide for the issuance of its [   
]% Asset Backed Notes, Class A-1 (the "Class A-1 Notes"), [   ]% Asset Backed
Notes, Class A-2 (the "Class A-2 Notes"),   [   ]%, Asset Backed Notes, Class
A-3 (the "Class A-3 Notes") and [   ]% Asset Backed Notes, Class A-4 (the "Class
A-4 Notes", and together with the Class A-1 Notes, Class A-2 Notes and Class A-3
Notes, the "Notes") issuable as provided in this Indenture.  All covenants and
agreements made by the Issuer herein are for the benefit and security of the
Holders of the Notes and for the benefit and security of the Trustee, in its
individual capacity, to the extent of its interest.  The Issuer is entering into
this Indenture, and the Trustee is accepting the trusts created hereby, for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.

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


                              GRANTING CLAUSES

     The Issuer hereby Grants to the Trustee, for the exclusive benefit of the
Holders of the Notes, all of the Issuer's right, title and interest in and to
(a) the Accounts listed in the Schedule of Accounts delivered to the Trustee
pursuant to this Indenture and property acquired in respect thereof, including
the 


<PAGE>


related Account Documents and all Monthly Payments that have not been received
prior to the Cut-Off Date hereof regardless of the Due Date for such Monthly
Payment, (b) the Servicing Agreement (including the right to compel performance
by the Subservicer), (c) the Purchase and Sale Agreement, (d) all cash,
instruments or other property held or required to be deposited in the Collection
Account and the Holding Account, including all investments made with funds in
the Collection Account and the Holding Account and all income from investments
made with funds in the Collection Account and the Holding Account and (e) all
proceeds in any way derived from any of the foregoing, including all proceeds of
the conversion, voluntary or involuntary, of any of the foregoing into cash or
other assets, including, without limitation, all new Accounts originated in
connection with the sale of property acquired in respect of Accounts, all
insurance proceeds and condemnation awards.  Additionally, the Issuer hereby 
Grants to the Trustee, for the exclusive benefit of the Holders of the Class 
A-4 Notes, all of the Issuer's right, title and interest in and to all cash, 
instruments or other property held or required to be deposited in the Class 
A-4 Reserve Account, including all investments made with funds in the Class 
A-4 Reserve Account and all income from investments made with funds in the 
Class A-4 Reserve Account and all proceeds in any way derived from any of the 
foregoing. Such Grants are made, however, in trust to secure the Notes 
equally and ratably without priority or discrimination, except as provided in 
this Indenture, between any Note and any other Note by reason of difference 
in time of issuance or otherwise, and to secure (i) the payment of all 
amounts due on the Notes in accordance with their terms, (ii) the payment of 
all other sums payable under this Indenture and (iii) compliance with the 
provisions of this Indenture, all as provided in this Indenture.  (All terms 
used in the foregoing Granting Clauses that are defined in Section 1.01 are 
used with the meanings given in said Section.)


     The Trustee acknowledges such Grant, accepts the trusts hereunder in
accordance with the provisions of this Indenture and agrees to perform the
duties herein required to the end that the interests of the Holders of the Notes
may be adequately and effectively protected.
 

                                      2

<PAGE>

                                 DEFINITIONS

     SECTION 1.01.  GENERAL DEFINITIONS.

     Except as otherwise specified or as the context may otherwise require, the
following terms have the respective meanings set forth below for all purposes of
this Indenture, and the definitions of such terms are applicable to the singular
as well as to the plural forms of such terms and to the masculine as well as to
the feminine and neuter genders of such terms.  The term "including" shall mean
"including without limitation".  All other terms used herein that are defined in
the Trust Indenture Act (as hereinafter defined), either directly or by
reference herein, have the meanings assigned to them therein.

     "ACCOUNT":  (i) a building contract or installment sale contract together
with the related Account Note and Mortgage and (ii) any new Account with a
related Account Note and Mortgage entered into in connection with the
liquidation of the items specified in (i) and the sale of property acquired in
respect thereof.  The term "Outstanding Accounts" as of any date means the
Accounts other than those which, as of or prior to such date as indicated in any
report of the Servicer delivered to the Trustee pursuant to Section 3.01 of the
Servicing Agreement, have been the subject of a Full Prepayment or as to which
the Servicer has determined that no further amounts can be recovered.

     "ACCOUNT DOCUMENTS":  With respect to each Account (i) the building or
installment sale contract relating to such Account, (ii) the Account Note,
endorsed to the order of the Issuer, without recourse, and endorsed by the
Issuer in blank or to the order of the Trustee, without recourse, (iii) the
original of the recorded Mortgage and the originals of all other documents, if
any, securing said Account Note, (iv) unrecorded Assignments in recordable form
to the Trustee, together with originals or certified copies (to the extent
provided below) of any recorded assignment(s) from the originator of such
Account to the Grantor and from the Grantor to the Issuer, (v) the originals of
any assumption agreement, written assurance or substitution agreement required
to be delivered to the Trustee pursuant to Section 2.10 of the Servicing
Agreement, (vi) all insurance policies, 


                                     I-1

<PAGE>

including without limitation fire and extended hazard insurance policies,
related to the Accounts, naming the Issuer, the Trustee, the Servicer or the
Subservicer as the loss payee of such policies, and (vii) any and all other
documents or instruments in the possession of the Grantor relating to the
Accounts, which evidence, or were created in connection with the origination of,
or necessary for the administration of the Accounts, including without
limitation any credit reports, copies of deeds, completion certificates, title
search reports and loan applications; if the original copy of any document
described in clause (iii), (iv) or (v) has been retained by the recording office
in which such document was recorded, then a copy thereof certified as true and
correct by a duly authorized representative of such recording office shall be
included as part of the Account Documents for the related Account. 
Notwithstanding any provision contained herein, the Trustee shall have no duty
to review, maintain custody of or take any action with respect to the documents
set forth in clauses (vi) and (vii) above.

     "ACCOUNT NOTE":  The original note, building or installment sale contract
or other evidence of indebtedness executed by an Obligor that evidences the
indebtedness of such Obligor under an Account.

     "ACCOUNT NUMBER":  With respect to any Account, the number assigned to such
Account by the Issuer.

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

     "ACCRUAL DATE":  The date upon which interest begins accruing on the Notes,
which date is April 1, 1997.

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

     "AFFILIATE":  With respect to any Person, any other Person controlling or
controlled by or under common control with such specified Person.  For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or 


                                     I-2

<PAGE>

indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

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



     "AGGREGATE ECONOMIC BALANCE":  With respect to the Accounts, the aggregate
of the Economic Balances of all such Accounts at the time of determination.

     "AGGREGATE OUTSTANDING PRINCIPAL BALANCE":  As of any Payment Date, an
amount equal to the sum of the Outstanding Principal Balances as of such Payment
Date.

     "ASSIGNMENTS":  Collectively, (i) the original instrument of assignment of
such Mortgage, Account Note and other documents made by the Grantor to the
Issuer and (ii) the original instrument of assignment of such Mortgage, Account
Note and other documents made by the Issuer to the Trustee (which in either case
may to the extent permitted by the laws of the state in which the related
Mortgaged Property is located be a blanket instrument of assignment covering
other Mortgages and Account Notes as well and which may also, to the extent
permitted by the laws of the state in which the related Mortgaged Property is
located, be an instrument of assignment running directly from the mortgagee of
record under the related Mortgage to the Trustee).

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

     "AUTHORIZED OFFICER":  In the case of the Owner Trustee, the President, any
Vice-President, Financial Services Officer or Trust Officer or any other officer
of the Owner Trustee who is authorized to act for the Owner Trustee in respect
of the Issuer.

     "AVAILABLE FUNDS":  With respect to any Payment Date, the sum of (i) the
amount of collections on the Accounts on deposit in the Collection Account at
the close of business on the last Business Day of the related Due Period, plus
(ii) net 


                                     I-3

<PAGE>

reinvestment income earned on funds in the Collection Account from the date two
Business Days prior to the preceding Payment Date to the date two Business Days
prior to such Payment Date.  Available Funds will be net of any Issuer Expenses.


     "AVAILABLE FUNDS ALLOCATION":  The allocation of Available Funds pursuant
to Section 8.02(c) hereof.


     "BANK":  Wilmington Trust Company, a Delaware banking corporation, in its
individual capacity and not as Owner Trustee pursuant to the Trust Agreement, or
any successor in its individual capacity.

     "BUSINESS DAY":  Any day that is not a Saturday, Sunday or other day on
which commercial banking institutions in the City of New York or in the city in
which the Corporate Trust Office is located are authorized or obligated by law
or executive order to be closed.

     "CLASS"  Any one of the classes of Notes issued pursuant to this Indenture.

     "CLASS A-1 INITIAL PRINCIPAL BALANCE":  $287,750,000.


     "CLASS A-1 OPTIMAL PRINCIPAL AMOUNT": On any Payment Date, an amount equal
to the product of (i) the Optimal Principal Amount for such Payment Date and
(ii) a fraction, the numerator of which is the Class A-1 Outstanding Principal
Balance for such Payment Date and the denominator of which is the Aggregate
Outstanding Principal Balance for such Payment Date; such amount not to exceed
the Class A-1 Outstanding Principal Balance. 


     "CLASS A-1 OUTSTANDING PRINCIPAL BALANCE":  As of any Payment Date, the
Class A-1 Initial Principal Balance reduced by (i) all payments, if any, made on
the Class A-1 Notes in reduction of principal balance made on all prior Payment
Dates and (ii) all Class A-1 Realized Loss Amounts with respect to prior Payment
Dates.



                                     I-4

<PAGE>


     "CLASS A-1 REALIZED LOSS AMOUNT":  With respect to any Payment Date, an
amount equal to the excess of (i) the Class A-1 Outstanding Principal Balance as
of such Payment Date (after application of the Class A-1 Optimal Principal
Amount, but prior to the application of losses on such Payment Date) over (ii)
the Aggregate Economic Balance of the Accounts immediately following the Due
Period related to such Payment Date, not to exceed the Class A-1 Outstanding
Principal Balance.


     "CLASS A-2 INITIAL PRINCIPAL BALANCE":  $57,750,000


     "CLASS A-2 OPTIMAL PRINCIPAL AMOUNT":  On any Payment Date, an amount equal
to the product of (i) the Optimal Principal Amount for such Payment Date and
(ii) a fraction, the numerator of which is the Class A-2 Outstanding Principal
Balance for such Payment Date and the denominator of which is the Aggregate
Outstanding Principal Balance for such Payment Date; such amount not to exceed
the Class A-2 Outstanding Principal Balance.


     "CLASS A-2 OUTSTANDING PRINCIPAL BALANCE":  As of any Payment Date, the
Class A-2 Initial Principal Balance reduced by (i) all payments, if any, made on
the Class A-2 Notes in reduction of principal balance made on all prior Payment
Dates and (ii) all Class A-2 Realized Loss Amounts with respect to prior Payment
Dates.


     "CLASS A-2 REALIZED LOSS AMOUNT":  With respect to any Payment Date, an
amount equal to the excess of (i) the sum of (a) the Class A-1 Outstanding
Principal Balance as of such Payment Date (after application of the Class A-1
Optimal Principal Amount, but prior to the application of losses on such Payment
Date) and (b) the Class A-2 Outstanding Principal Balance as of such Payment
Date (after application of the Class A-2 Optimal Principal Amount, but prior to
the application of losses on such Payment Date) over (ii) the Aggregate Economic
Balance of the Accounts immediately following the Due Period related to such
Payment Date, not to exceed the Class A-2 Outstanding Principal Balance.

     "CLASS A-3 INITIAL PRINCIPAL BALANCE":  $45,100,000.

     "CLASS A-3 OPTIMAL PRINCIPAL AMOUNT":  On any Payment Date, an amount equal
to the product of (i) the Optimal Principal Amount for such Payment Date and
(ii) a fraction, the numerator of which is the Class A-3 Outstanding Principal
Balance for such 



                                     I-5

<PAGE>


Payment Date and the denominator of which is the Aggregate Outstanding Principal
Balance for such Payment Date; such amount not to exceed the Class A-3
Outstanding Principal Balance.


     "CLASS A-3 OUTSTANDING PRINCIPAL BALANCE":  As of any Payment Date, the
Class A-3 Initial Principal Balance reduced by (i) all payments, if any, made on
the Class A-3 Notes in reduction of principal balance made on all prior Payment
Dates and (ii) all Class A-3 Realized Loss Amounts with respect to prior Payment
Dates.


     "CLASS A-3 REALIZED LOSS AMOUNT":  With respect to any Payment Date, an
amount equal to the excess of (i) the sum of (a) the Class A-1 Outstanding
Principal Balance as of such Payment Date (after application of the Class A-1
Optimal Principal Amount, but prior to the application of losses on such Payment
Date), (b) the Class A-2 Outstanding Principal Balance as of such Payment Date
(after application of the Class A-2 Optimal Principal Amount, but prior to the
application of losses on such Payment Date) and (c) the Class A-3 Outstanding
Principal Balance as of such Payment Date (after application of the Class A-3
Optimal Principal Amount, but prior to the application of losses on such Payment
Date) over (ii) the Aggregate Economic Balance of the Accounts immediately
following the Due Period related to such Payment Date, not to exceed the 
Class A-3 Outstanding Principal Balance.


     "CLASS A-4 INITIAL PRINCIPAL BALANCE":  $48,550,000


     "CLASS A-4 MAXIMUM RESERVE AMOUNT":  On any Payment Date, an amount equal
to the greater of (i) one year of interest on the Class A-4 Outstanding
Principal Balance following payments on the Notes and allocations of losses on
such Payment Date and (ii) one half of the Class A-4 Reserve Initial Deposit.



     "CLASS A-4 OPTIMAL PRINCIPAL AMOUNT":  On any Payment Date, an amount equal
to the product of (i) the Optimal Principal Amount for such Payment Date and
(ii) a fraction, the numerator of which is the Class A-4 Outstanding Principal
Balance for such Payment Date and the denominator of which is the Aggregate
Outstanding Principal Balance for such Payment Date; such amount not to exceed
the Class A-4 Outstanding Principal Balance.


     "CLASS A-4 OUTSTANDING PRINCIPAL BALANCE":  As of any Payment Date, the
Class A-4 Initial Principal Balance reduced by (i) all payments, if any, made on
the Class A-4 Notes in reduction of principal balance made on all prior Payment
Dates and (ii) all Class A-4 Realized Loss Amounts with respect to prior Payment
Dates.



                                     I-6

<PAGE>

     "CLASS A-4 REALIZED LOSS AMOUNT":  With respect to any Payment Date, an
amount equal to the excess of (i) the sum of (a) the Class A-1 Outstanding
Principal Balance as of such Payment Date (after application of the Class A-1
Optimal Principal Amount, but prior to the application of losses on such Payment
Date), (b) the Class A-2 Outstanding Principal Balance as of such Payment Date
(after application of the Class A-2 Optimal Principal Amount, but prior to the
application of losses on such Payment Date), (c) the Class A-3 Outstanding
Principal Balance as of such Payment Date (after application of the Class A-3
Optimal Principal Amount, but prior to the application of losses on such Payment
Date) and (d) the Class A-4 Outstanding Principal Balance as of such Payment
Date (after application of the Class A-4 Optimal Principal Amount, but prior to
the application of losses on such Payment Date) over (ii) the Aggregate Economic
Balance of the Accounts immediately following the Due Period related to such
Payment Date, not to exceed the Class A-4 Outstanding Principal Balance.


     "CLASS A-4 RESERVE ACCOUNT":  The trust account created and maintained
pursuant to Section 8.03.

     "CLASS A-4 RESERVE INITIAL DEPOSIT":  $[   ]

     "CLASS A-4 WITHDRAWAL AMOUNT":  Any amount withdrawn from the Class A-4
Reserve Account.

     "CLASS INTEREST SHORTFALL":  With respect to a Class of Notes on any 
Payment Date, an amount equal to the excess, if any, of the Interest Accrual 
Amount for such Class of Notes over Available Funds (less any interest paid 
on such Payment Date on each Class of Notes senior to such Class of Notes); 
provided, however, that such amount shall not include interest due and 
payable with respect to unreimbursed Realized Loss Amounts.

     "CLASS OPTIMAL PRINCIPAL AMOUNT":  Any of the Class A-1 Optimal 
Principal Amount, the Class A-2 Optimal Principal Amount, the Class A-3 
Optimal Principal Amount and the Class A-4 Optimal Principal Amount, as 
applicable.

     "CLOSING DATE":  The date on which the Notes are first executed,
authenticated and delivered pursuant to Section 2.12.

     "COLLATERAL DEFICIENCY AMOUNT":  With respect to a Payment Date, the
amount, if any, by which the Aggregate Outstanding Principal Balance of the
Notes (after giving effect to the principal payment, if any, funded out of
Remaining Available Funds on such Payment Date) exceeds the Aggregate Economic
Balance of the Accounts as of the first day of the month preceding the month of
such Payment Date.




                                     I-7

<PAGE>

     "COLLECTION ACCOUNT":  The trust account or accounts created and maintained
pursuant to Section 8.02.

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

     "CORPORATE TRUST OFFICE":  The designated corporate trust office of the 
Trustee located at 200 South Biscayne Blvd., 14th Floor (FL 6065), Miami, 
Florida 33131 or at such other address as the Trustee may designate 
from time to time by notice to the Noteholders and the Issuer, or the 
principal corporate trust office of any successor Trustee.

     "CUMULATIVE ACTUAL NET ECONOMIC LOSSES":  With respect to any Payment Date,
the cumulative excess as of the end of the related Due Period of (A) the
Economic Balance of all Accounts that have been repossessed or that have been
charged off, written off or otherwise reduced, in whole or in part, without any
repossession over (B) the Net Liquidation Proceeds, if any, of such Accounts,
any new Account that is part of such Net Liquidation Proceeds being valued for
this purpose at its Economic Balance, and the remaining Outstanding Economic
Balance of any Account that has been charged-off, written-off or reduced for any
reason, in part but not in whole.

     "CUT-OFF DATE":  February 28, 1997.

     "DEBT SERVICE REQUIREMENT DETERMINATION DATE":  The date prior to each
Payment Date as of which the Trustee is required to compute the amount due and
payable on the Notes on such Payment Date; such date is the fifth Business Day
prior to a Payment Date.

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

     "DEFECTIVE ACCOUNT": The meaning specified in Section 3.11(b) and Section
3.12(b).



                                     I-8

<PAGE>

     "DELETED ACCOUNT": The meaning specified in Section 3.11(b) and Section
3.12(b).


     "DELINQUENCY RATIO":  The ratio (expressed as a percentage), computed for
any Payment Date of (i) the average Aggregate Economic Balance of Accounts for
the related Due Period for which the Monthly Payment thereon remains unpaid for
60 days or more after the Due Date thereof to (ii) the average Aggregate
Economic Balance for such Due Period.


     "DUE DATE":  With respect to any Account, the date each month on which the
Monthly Payment is payable.

     "DUE PERIOD":  With respect to a Payment Date, the three-month period
beginning immediately following the end of the preceding Due Period (or, in the
case of the Due Period which is applicable to the first Payment Date, beginning
on the day after the Cut-Off Date) and ending at the close of business on the
last Business Day in the second month prior to the month in which such Payment
Date occurs.

     "ECONOMIC BALANCE":  With respect to any Account, the present value of all
remaining Monthly Payments from the date of determination discounted monthly at
a rate equal to the Effective Financing Rate; PROVIDED, HOWEVER, that Accounts
with any of the following characteristics on the Cut-Off Date shall be deemed to
have an Economic Balance of zero:

          (i)  the sum of all Monthly Payments and all other amounts due under
     such Account is $200 or less.

         (ii)  an Economic Balance determined in the manner provided above of
     zero or less than zero.

        (iii)  an Effective Financing Rate of below 8% per annum or above 10.25%
     per annum.

         (iv)  a total number of Monthly Payments greater than 360.

          (v)  secured by Mortgaged Properties that are not located in Alabama,
     Arizona, Arkansas, Florida, Georgia, Illinois, Indiana, Kansas, 
     Kentucky, Louisiana, Maryland, 


                                     I-9

<PAGE>

     Mississippi, Missouri, New Mexico, North Carolina, Ohio, Oklahoma,
     Pennsylvania, South Carolina, Tennessee, Texas, Virginia or West Virginia.

     "EFFECTIVE FINANCING RATE":  A discount rate which, when applied in a
present value calculation with respect to any Account using monthly compounding,
results in the present value of all originally scheduled Monthly Payments on
such Account being equal to the amount financed stated on the related building
or installment sale contract or other applicable instrument prior to any Monthly
Payments having been made on such Account.


     "ELIGIBLE ACCOUNT" (a) A segregated account or accounts maintained with a
depository institution or trust company whose long-term unsecured debt
obligations are rated at least "A" by S&P and at least "A1" by Moody's at the
time of any deposit therein or whose short-term unsecured debt obligations are
rated at least A-1 by S&P and at least P-1 by Moody's (or, if such obligations
are, at the time of such deposit, not rated by both S&P and Moody's, then such 
rating shall be from any of S&P or Moody's) or (b) a segregated trust account 
or accounts maintained with a federal or state chartered depository 
institution subject to regulations regarding fiduciary funds on deposit 
substantially similar to 12 C.F.R. Section 9.10(b).


     "ELIGIBLE INVESTMENTS":  Any one or more of the following obligations or
securities:

          (a)  (i)  direct obligations of, and obligations fully guaranteed as
     to timely payment by, the United States of America or any agency or
     instrumentality of the United States of America, the obligations of which
     are backed by the full faith and credit of the United States of America and
     (ii) direct obligations of, and obligations guaranteed as to timely payment
     by, Federal National Mortgage Association or Federal Home Loan Mortgage
     Corporation only if, at the time of investment, they are assigned the
     Highest Credit Rating by the Rating Agencies;

          (b)    demand and time deposits in, certificates of deposit of, or
     banker's acceptances issued by any depository institution or trust company
     incorporated under the laws of the United States of America (including the
     Trustee or any 


                                    I-10

<PAGE>

     agent of the Trustee acting in their respective commercial capacities) or
     any State and subject to supervision and examination by federal and/or
     State banking authorities; provided that (1) the commercial paper and/or
     the debt obligations of such depository institution (or, in the case of the
     principal depository institution in a holding company system, the
     commercial paper or debt obligations of such holding company) at the time
     of such investment or contractual commitment providing for such investment
     is assigned the Highest Credit Rating by the Rating Agencies or (2) the
     long-term debt securities of such depository institutions are rated "AAA"
     and "Aa2" or better by S&P and Moody's respectively;

          (c)    repurchase obligations pursuant to a written agreement with
     respect to (i) any security described in clause (a) above or (ii) any other
     security issued or guaranteed by an agency or instrumentality of the United
     States of America, in either case entered into with an entity whose debt
     obligations are assigned the Highest Credit Rating by the Rating Agencies
     (including, if applicable, the Trustee or any agent of the Trustee acting
     in their respective commercial capacities) and in each case where the
     Trustee has taken delivery of such security;

          (d)    securities bearing interest or sold at a discount issued by any
     corporation incorporated under the laws of the United States of America or
     any State whose debt obligations are assigned the Highest Credit Rating by
     the Rating Agencies at the time of such investment or contractual
     commitment providing for such investment; PROVIDED, HOWEVER, that
     securities issued by any particular corporation will not be Eligible
     Investments to the extent that such an investment therein will cause the
     then outstanding principal amount of securities issued by such corporation
     and held as part of the Trust Estate for the Notes to exceed 10% of the
     Trust Estate for the Notes;

          (e)    commercial paper (including both non-interest-bearing discount
     obligations and interest-bearing obligations payable on demand or on a
     specified date not more than one year after the date of issuance thereof)
     which 


                                    I-11

<PAGE>

     have been assigned the Highest Credit Rating by the Rating Agencies at the
     time of such investment;

          (f)    certificates or receipts representing ownership interests in
     future interest or principal payments on obligations described in clause
     (a) above which are held by a custodian on behalf of the holders of such
     certificates or receipts;

          (g)    any other demand or time deposit, obligation, security or
     investment provided that the Issuer shall have given prior written notice
     of such other investment to the Rating Agencies, and the Trustee shall have
     received written confirmation from each of the Rating Agencies that no
     reduction, withdrawal or qualification in the rating on the Notes by either
     such Rating Agency will result from the addition of such Eligible
     Investment; and

          (h)    Eurodollar denominated certificates of deposit or time deposits
     issued by a foreign depository institution or a depository institution
     organized under the laws of the United States or any state thereof so long
     as at the time of such investment or contractual commitment providing for
     such investment (1) the commercial paper or other short-term debt
     obligations of such depository institution (or, in the case of a depository
     institution which is the principal subsidiary of a holding company, the
     commercial paper or other short-term debt obligations of such holding
     company) have the Highest Credit Ratings available from the Rating
     Agencies; or (2) the long-term debt securities of such depository
     institution are rated "AAA" and "Aa2" or better by S&P and Moody's,
     respectively.

     "ELIGIBLE MONEYS":  Any moneys on deposit in trust with the Trustee for the
benefit of the Noteholders with respect to which the Trustee has received an
unqualified opinion of counsel nationally recognized as expert in bankruptcy
acceptable to the Trustee that payment of such amounts to the Noteholders would
not constitute avoidable preferences under Section 547 of the United States
Bankruptcy Code or similar state laws with avoidable preference provisions in
the event of the filing of a petition for relief under the United States
Bankruptcy Code or similar state laws with avoidable preference provisions by or
against the 


                                    I-12

<PAGE>

Issuer or any borrower or the person from whom the money is received, if other
than the Issuer or the borrower.

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

     "FINAL SCHEDULED PAYMENT DATE":  The Payment Date on July 1, ____.

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

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

     "FULL PREPAYMENT":  Payment to the Servicer, whether by the Obligor or
through Insurance Proceeds, of an amount with respect to an Account such that
the full amount due with respect to such Account has been paid.

     "GRANT":  To mortgage, pledge, assign and grant a security interest in.  A
Grant of an Account and the related Account Documents, an Eligible Investment, a
Servicing Agreement or any other instrument shall include all rights, powers and
options (but none of the obligations) of the Granting party thereunder,
including without limitation the immediate and continuing right to claim,
collect, receive and receipt for payments in respect of the Account or Eligible
Investment, insurance proceeds, condemnation awards, purchase prices and all
other moneys payable thereunder and all proceeds thereof, to give and receive
notices and other communications, to make waivers or other agreements, to
exercise all rights and options, to bring Proceedings in the name of the
Granting party or otherwise, and generally to do and receive anything which the
Granting party is or may be entitled to do or receive thereunder or with respect
thereto.

     "GRANTOR":  Mid-State Homes, Inc., a Florida corporation, in its 
capacity as grantor of the Trust, and as otherwise defined in the Trust 
Agreement.

                                    I-13

<PAGE>

     "HAZARD INSURANCE POLICY":  With respect to each Account, the policy of
fire and extended coverage insurance required to be maintained for the related
Mortgaged Property, as provided in Section 2.13 of the Servicing Agreement, and
which, as provided in said Section 2.13, may be a blanket mortgage impairment
policy maintained by the Servicer in accordance with the terms and conditions of
said Section 2.13.

     "HAZARD INSURER":  The named insurer in any Hazard Insurance Policy.

     "HIGHEST CREDIT RATING":  With respect to Moody's, P-1 or Aaa and with
respect to S&P, A1+ or AAA.

     "HOLDING ACCOUNT":  The account created and maintained pursuant to the
Holding Account Agreement.

     "HOLDING ACCOUNT AGREEMENT":  The Holding Account Agreement dated as of May
1, 1997 among First Union National Bank of Florida, as custodian for the
Trustee, the Servicer and the Issuer.

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

     "INDEPENDENT":  When used with respect to any specified Person means such a
Person who (1) is in fact independent of the Issuer, any Affiliate of the
Issuer, any other obligor upon the Notes and any Affiliate of any such other
obligor, (2) does not have any direct financial interest or any material
indirect financial interest in the Issuer or in any such other obligor or in an
Affiliate of the Issuer or such other obligor, and (3) is not connected with the
Issuer, any Affiliate of the Issuer, any 


                                    I-14

<PAGE>

such other obligor or any Affiliate of any such other obligor as an officer,
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions.  Whenever it is herein provided that any Independent Person's
opinion or certificate shall be furnished to the Trustee, such Person shall be
appointed by an Issuer Order and approved by the Trustee in the exercise of
reasonable care and such opinion or certificate shall state that the signer has
read this definition and that the signer is Independent within the meaning
thereof.

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

     "INSURANCE PROCEEDS":  Amounts paid by a Hazard Insurer with respect to a
particular Mortgaged Property pursuant to any related Hazard Insurance Policy or
paid by any other insurer with respect to a particular Mortgaged Property
pursuant to any other related insurance policy.

     "INSURED EXPENSES":  Expenses incurred by the Servicer in connection with
an Account under which the mortgagor is in default which are covered by any
related Hazard Insurance Policy and are paid by the Hazard Insurer under any
such policy.

     "INTEREST ACCRUAL AMOUNT":  As to any Class of Notes for any Payment Date,
an amount equal to the interest accrued on the Outstanding Principal Balance of
such Class of Notes (after giving effect to payments and allocations of losses
on the preceding Payment Date) during the Interest Accrual Period ending on the
day prior to the Payment Date at the applicable Note Interest Rate for such
Class of Notes; provided, however, that such amount shall not include interest
due and payable with respect to unreimbursed Realized Loss Amounts.

     "INTEREST ACCRUAL PERIOD":  The three-month period ending on the day prior
to such Payment Date.

     "INTEREST PAYMENT DATE":  Each January 1, April 1, July 1 and October 1
commencing July 1, 1997.



                                    I-15

<PAGE>

     "ISSUER":  Mid-State Trust VI, a Delaware business trust created pursuant
to the Trust Agreement, until a successor Person shall have become the Issuer
pursuant to the applicable provisions of this Indenture, and thereafter "Issuer"
shall mean such successor Person.


     "ISSUER EXPENSES":  All operating expenses of the Issuer (exclusive of
interest on the Notes, but including the fees and expenses of the Owner Trustee,
the Trustee (including, without limitation, amounts to which the Trustee is
entitled under Section 5.04), the Successor Servicer and the Servicing Fee).


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

     "LIQUIDATION EXPENSES":  Expenses incurred by the Servicer in connection
with the liquidation of any Account which is in default and the sale of any
property acquired in respect thereof which are not recoverable as Insured
Expenses and are otherwise reimbursable to the Servicer in accordance with
Sections 2.07(c), 2.11 and 2.15 of the Servicing Agreement.

     "LIQUIDATION PROCEEDS":  Cash and new Account Notes with related security
instruments received by the Servicer (before reimbursement of the Servicer for
Liquidation Expenses) in connection with the liquidation of any Account which is
in default and the sale of any property acquired in respect thereof, whether as
Insurance Proceeds or through trustee's sale, foreclosure sale or otherwise.

     "MATURITY":  With respect to the Notes, the date on which the entire unpaid
principal amount of the Notes becomes due and payable as therein or herein
provided, whether at the date specified therefor in the Notes or by declaration
of acceleration, call for redemption or otherwise.

     "MATURITY DATE":  With respect to any Account, the date on which the last
payment of principal of such Account shall be due and payable.

     "MINIMUM TARGET OVERCOLLATERALIZATION AMOUNT":  For any Payment Date, (a)
an amount equal to the greater of (i) the 


                                    I-16

<PAGE>

product of (x) 10% and (y) the Aggregate Economic Balance of the Accounts as of
the first day of the month preceding the month of such Payment Date and (ii)
$16,180,055 or (b) in the event that (i) Mid-State Homes, Inc. is no longer the
Servicer, (ii) the cumulative losses on the Accounts exceed 4.75%, 5.50%, 6.50%,
7.00% and 8.00% of the Aggregate Economic Balance as of the Cut-Off Date, at the
end of four, five, six, seven and eight years after the Cut-Off Date,
respectively, or exceed 8.00% thereafter or (iii) the Delinquency Ratio as of
any Payment Date exceeds 8.00% and continues, an amount equal to the greater of
(a) the Aggregate Outstanding Principal Balance and (b) the Aggregate Economic
Balance of the Accounts as of the month preceding the month of such Payment
Date.

     "MONTH OF CLOSING":  The month in which the Closing Date occurs.

     "MONTHLY CUT-OFF DATE":  As defined in the Servicing Agreement.

     "MONTHLY PAYMENT":  With respect to any Account, the scheduled monthly
payment payable to the holder of such Account in accordance with the terms of
the related Account Note.

     "MOODY'S":  Moody's Investors Service, Inc. and its successors.

     "MORTGAGE":  With respect to an Account, the original mortgage, deed of
trust, mechanic's lien contract or other security instrument executed by an
Obligor which creates a lien on real property and improvements thereon securing
an Account Note, or any Trust Mortgage.

     "MORTGAGED PROPERTY":  The real property and improvements thereon that are
subject to a Mortgage.

     "NET LIQUIDATION PROCEEDS":  With respect to any Account, the amount
derived by subtracting from the Liquidation Proceeds of such Account the related
Liquidation Expenses.

     "NOTE INTEREST RATE":  With respect to each Class, the annual rate at which
interest accrues on such Class of Notes, as specified in such Class of Notes and
in Section 2.03.



                                    I-17

<PAGE>

     "NOTE REGISTER" and "NOTE REGISTRAR":  As defined in Section 2.07.

     "NOTES":  Any notes authorized by, and authenticated and delivered under,
this Indenture.

     "NOTEHOLDER" or "HOLDER":  The Person in whose name a Note is registered in
the Note Register.

     "OBLIGOR":  Each Person who is indebted under an Account Note or who has
acquired real property subject to the Mortgage securing an Account Note.

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

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

     "OPTIMAL PRINCIPAL AMOUNT":  An amount equal to (A) on any Payment Date (i)
on or prior to the Target Overcollateralization Date or (ii) after the Target
Overcollateralization Date and on which there exists an uncured Trigger Event,
the Remaining Available Funds; and (B) on any Payment Date after the Target
Overcollateralization Date on which there does not exist an uncured Trigger
Event, the amount which, when paid as principal on the Notes, will result in
achieving or maintaining the Target Overcollateralization Level; provided that
in no event will the Optimal Principal Amount for any Payment Date exceed the
Remaining Available Funds for such Payment Date or the Aggregate Outstanding
Principal Balance.

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

          (i)  Notes theretofore cancelled by the Note Registrar or delivered to
     the Note Registrar for cancellation;

         (ii)  Notes or portions thereof for whose payment or redemption money
     (complying with Section 4.01) in the 


                                    I-18

<PAGE>

     necessary amount has been theretofore deposited with the Trustee or any
     Paying Agent (other than the Issuer) in trust for the Holders of such
     Notes; PROVIDED, HOWEVER, that if such Notes are to be redeemed, notice of
     such redemption has been duly given pursuant to this Indenture or provision
     therefor, satisfactory to the Trustee, has been made; and

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


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


     "OUTSTANDING PRINCIPAL BALANCE":  Any of the Class A-1 Outstanding
Principal Balance, Class A-2 Outstanding Principal Balance, Class A-3
Outstanding Principal Balance and Class A-4 Outstanding Principal Balance.

     "OVERCOLLATERALIZATION AMOUNT":  With respect to a Payment Date, the amount
equal to (a) the Aggregate Economic Balance of the Accounts on the first day of
the month preceding the month of such Payment Date less (b) the sum of the
Aggregate Outstanding Principal Balance and all unreimbursed Realized Loss
Amounts, in each case after giving effect to the payments made but prior to the
allocation of losses thereon on such Payment Date.



                                    I-19

<PAGE>

     "OVERCOLLATERALIZATION PERCENTAGE":  A fraction expressed as a percentage
the numerator of which is equal to the excess of (i) the Aggregate  Economic
Balance of the Accounts as of the first day of the month preceding the month in
which the Target Overcollateralization Date occurs over (ii) the Aggregate
Outstanding Principal Balance of all Classes of Notes and all unreimbursed
Realized Loss Amounts with respect to all Classes of Notes on the Target
Overcollateralization Date (after giving effect to payments and allocations of
losses on the Target Overcollateralization Date) and the denominator of which is
the Aggregate Economic Balance of the Accounts as of the first day of the month
preceding the month in which the Target Overcollateralization Date occurs.

     "OWNER TRUSTEE":  Wilmington Trust Company, acting not in its individual
capacity but solely as owner trustee with respect to the Issuer, or such
successor person as shall become owner trustee pursuant to applicable provisions
of this Indenture and shall be owner trustee under, or become owner trustee
pursuant to applicable provisions of the Trust Agreement.

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

     "PAYMENT DATE":  Any date which is an Interest Payment Date or Principal
Payment Date for the Notes.


     "PAYMENT DATE STATEMENT":  As defined in Section 2.09(d).


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

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


                                    I-20

<PAGE>

deemed to evidence the same debt as the lost, destroyed or stolen Note.

     "PRINCIPAL PAYMENT DATE":  One of the fixed dates on which an installment
of principal is due and payable on the Notes; such dates are each January 1,
April 1, July 1 and October 1 beginning July 1, 1997.

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


     "PURCHASE AND SALE AGREEMENT":  The Purchase and Sale Agreement, dated the
Closing Date, between Mid-State Homes, Inc. and Mid-State Trust VI which
provides for, among other things, the purchase by Mid-State Trust VI of all
interest of Mid-State Homes, Inc. in the Accounts.

     "QUALIFIED SUBSTITUTE ACCOUNT" means an account substituted by the Issuer
for a Deleted Account which must, on the date of such substitution, (i) have an
outstanding Economic Balance, after deduction of all scheduled payments due in
the month of substitution, not less than the Economic Balance of the Deleted
Account (the amount of any shortfall will be deposited into the Collection
Account by the Issuer, pursuant to Section 3.11(b), for distribution to
Noteholders in the month following the month of substitution), (ii) have an
Effective Financing Rate not less than the Effective Financing Rate of the
Deleted Account, (iii) comply with each representation and warranty set forth in
Section 3.11(a), (iv) generally be of like quality and type as the Deleted
Account and (v) have an original term to maturity which shall not exceed June
1, 2031.  In the event that either one account is substituted for more than one
Deleted Account, or more than one account is substituted for one or more Deleted
Accounts, then the amount described in clause (i) hereof shall be determined on
the basis of aggregate Economic Balances.


     "RATING AGENCIES":  Each of S&P and Moody's.

     "REALIZED LOSS AMOUNT":  Any of the Class A-1 Realized Loss Amount, Class
A-2 Realized Loss Amount, Class A-3 Realized Loss Amount and Class A-4 Realized
Loss Amount, as applicable.



                                    I-21

<PAGE>

     "RECORD DATE":  With respect to any Payment Date, the date on which the
Persons entitled to receive any payment of principal of or interest on any Notes
(or notice of a payment in full of principal) due and payable on such Payment
Date are determined; such date shall be the 15th day of the month preceding the
month of such Payment Date.

     "REDEMPTION DATE":  Any Principal Payment Date on which Notes are to be
redeemed at the option of the Issuer pursuant to Article X.


     "REDEMPTION PRICE":  With respect to any Note to be redeemed pursuant to
Article X hereof, an amount equal to 100% of the Outstanding Principal Balance
of the Note to be so redeemed (prior to allocations of any Realized Loss
Amounts), together with interest on such amount at the applicable Note Interest
Rate from the latest date to which interest has been paid to the applicable
Redemption Date.

     "REMAINING AVAILABLE FUNDS":  With respect to any Payment Date, an amount
(which shall not be less than zero) equal to (i) the Available Funds for such
Payment Date reduced by (ii) the amount of interest due and payable on the
unpaid principal Balance of the Notes on such Payment Date (excluding interest
on any Realized Loss Amounts).


     "REMITTANCE":  With respect to any one or more Accounts for any particular
date or period, the net amount with respect to collections or receipts on such
Account or Accounts for such date or period that is required to be remitted by
the Servicer to the Trustee for deposit in the Collection Account.

     "REMITTANCE DATE":  The first Business Day of each week, beginning with the
week after the Closing Date and the first Business Day following the end of each
Due Period.

     "RESPONSIBLE OFFICER":  With respect to the Trustee, the chairman or
vice-chairman of the board of directors, the chairman or vice-chairman of the
executive committee of the board of directors, the president, any vice
president, any assistant vice president, the secretary, any assistant secretary,
the treasurer, any assistant treasurer, the cashier, any trust officer or
assistant trust officer, the controller, any assistant controller or 


                                    I-22

<PAGE>

any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.

     "S&P":  Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., its successors and their assigns.

     "SALE":  As defined in Section 5.18.

     "SCHEDULE OF ACCOUNTS":  Collectively, the list of Accounts being Granted
to the Trustee as part of the Trust Estate on the Closing Date appearing on a
magnetic tape delivered to the Trustee on the Closing Date which list shall set
forth the following information as of the Cut-Off Date with respect to each such
Account in numbered columns:

          COLUMN NUMBER            INFORMATION
               1              Account Number
               2              Zip Code
               3              First Payment Date
               4              Total number of payments
                                to be made
               5              Monthly Payment
               6              Original amount of the note 
               7              Total finance charge over the
                                term of the note 
               8              Paid-through date
               9              Status code 
              10              Resale or original 
              11              Amount of late charges due 
              12              Date of last payment received
              13              Account balance 
              14              Taxes due 
              15              Insurance due 
              16              Late charges due 
              17              Other charges due 
              18              Rebate method

     "SERVICER":  Mid-State Homes, Inc., a Florida corporation, as 
servicer under the Servicing Agreement, and its permitted 

                                    I-23

<PAGE>

successors and assigns thereunder, including any successor servicer appointed
pursuant to Section 3.07(d).

     "SERVICER REPORTING DATE":  The date each month on which the Servicer is
required pursuant to Section 3.01 of the Servicing Agreement to report to the
Issuer, the Successor Servicer, the Accountants and the Trustee information
concerning the Accounts, including all collections on the Accounts received by
it during the related Remittance Period (as defined in the Servicing Agreement),
which date shall be the 20th day of each month following such Remittance Period
or, if such day is not a Business Day, the next preceding Business Day.

     "SERVICING ACCOUNT":  As defined in Section 2.08(b) of the Servicing
Agreement.


     "SERVICING AGREEMENT":  The Servicing Agreement, dated as of May 1, 1997,
among the Issuer, the Servicer and the Trustee, providing, among other things,
for the servicing of the Accounts, as said agreement may be amended or
supplemented from time to time as permitted hereby and thereby.  Such term shall
also include any servicing agreement entered into with a successor servicer
pursuant to Section 3.07(d) hereof.


     "SERVICING DEFAULT":  Any default by the Servicer under the Servicing
Agreement that is an "Event of Default" under the Servicing Agreement, as
specified in Section 5.01 thereof.

     "SERVICING FEE":  With respect to any Account, other than an Account with
respect to which (i) the related Mortgaged Property has been repossessed or (ii)
the related Economic Balance is zero pursuant to the proviso of the definition
of "Economic Balance", the fee payable to the Servicer under the Servicing
Agreement, which fee shall be $300 annually, payable in equal monthly
installments.

     "SERVICING OFFICER":  Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Accounts whose name
appears on a list of servicing officers furnished to the Issuer and the Trustee
by the Servicer, as such list may be amended or supplemented from time to time.



                                    I-24

<PAGE>


     "STANDBY SERVICING AGREEMENT":  The Standby Servicing Agreement dated as of
May 1, 1997 by and among the Servicer, the Issuer and the Successor Servicer.


     "STATED MATURITY DATE":  July 1, 2025

     "SUB-SERVICER":  As defined in the Servicing Agreement.

     "SUCCESSOR SERVICER":  The Person appointed, or required to act as,
Successor Servicer pursuant to Section 3.07 hereof.

     "TARGET OVERCOLLATERALIZATION DATE":  The Payment Date occurring in April
2000.

     "TARGET OVERCOLLATERALIZATION LEVEL":  As of any Payment Date, the level of
overcollateralization that would exist if the Overcollateralization Amount were
equal to the greater of (i) the product of (x) the Overcollateralization
Percentage and (y) the Aggregate Economic Balance of the Accounts as of the
first day of the month preceding the month of such Payment Date and (ii) the
Minimum Target Overcollateralization Amount.

     "TRIGGER EVENT":  Any one of the following events:

          (a)  the Issuer fails to make a payment due hereunder and such failure
               continues for two Business Days;

          (b)  the Servicer fails to make a required payment or deposit due
               under the Servicing Agreement and such failure continues for four
               Business Days;

          (c)  An Event of Default (as defined in the Servicing Agreement)
               occurs under Section 5.01(a)(iii), (iv), (v), (vi) or (vii) of
               the Servicing Agreement;

          (d)  a breach of any covenant of the Servicer in the Servicing
               Agreement which may have a materially adverse effect on the
               Servicer or its performance under the Servicing Agreement is not
               cured within 60 days after the Servicer becomes aware thereof or
               after notice thereof from any Person;



                                    I-25

<PAGE>

          (e)  any representation or warranty by Mid-State Homes, Inc. in the
               Purchase and Sale Agreement, or any representation or warranty by
               the Issuer herein, is incorrect and such breach may have a
               material adverse effect on the Issuer or the Noteholders and is
               not cured or the related Account is not substituted for or
               repurchased by Mid-State Homes, Inc. and in either case released
               from the lien of this Indenture, within 90 days after notice
               thereof from the Trustee;

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

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



                                    I-26

<PAGE>


          (h)  the Purchase and Sale Agreement, the Servicing Agreement or this
               Indenture ceases to be in full force and effect; or


          (i)  the lien of the Indenture ceases to be effective or ceases to be
     of a first priority.

     "TRUST":  The trust established by the Trust Agreement.

     "TRUST AGREEMENT":  The trust agreement, dated as of March 1, 1997 between
the Bank and the Grantor.

     "TRUST ESTATE":  All money, instruments and other property subject or
intended to be subject to the lien of this Indenture for the benefit of the
Holders of the Notes as of any particular time (including all property and
interests Granted to the Trustee in the Granting Clauses of this Indenture),
including all proceeds thereof, and all right, title and interest of the Trustee
in, to and under the Servicing Agreement and all money and property received by
the Trustee pursuant thereto in respect of the Accounts.

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

     "TRUST MORTGAGE":  Any mortgage, deed of trust or similar security
instrument from the Issuer to the Trustee encumbering a Mortgaged Property owned
by the Issuer whether as part of an Account transferred on the Closing Date or
pursuant to a foreclosure or repossession of Mortgaged Property.

     "TRUSTEE":  First Union National Bank of Florida, a national banking 
association, until a successor Person shall have become the Trustee pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Person.

     "VICE PRESIDENT":  With respect to the Trustee, any vice president, whether
or not designated by a number or a word or words added before or after the title
"vice president".


                                    I-27

<PAGE>


     "VOTING RIGHTS":  With respect to a Class of Notes, a fraction, expressed
as a percentage, the numerator of which is equal to the Aggregate Outstanding
Principal Balance of such Class of Notes and the denominator of which is equal
to the Aggregate Outstanding Principal Balance of all Classes of Notes.


 


                                    I-28

<PAGE>

                                 ARTICLE II

                                  THE NOTES

     SECTION 2.01.  FORMS GENERALLY.

     The Notes and the Trustee's certificate of authentication shall be in
substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange on which the Notes
may be listed, or as may, consistently herewith, be determined by the officers
executing such 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 on the face of the Notes.

     The definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the officers executing such Notes, as
evidenced by their execution thereof.

     SECTION 2.02.  FORMS OF NOTES AND CERTIFICATE OF AUTHENTICATION.

     (a)    The form of the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes shall be as set forth respectively as Exhibits A,
B, C and D hereto.

     SECTION 2.03.    NOTES; GENERAL PROVISIONS WITH RESPECT TO PRINCIPAL AND
INTEREST PAYMENTS; ALLOCATION OF REALIZED LOSS AMOUNTS.

     (a)    The aggregate principal amount of Notes that may be authenticated
and delivered under the Indenture is limited to      $439,150,000, except for
Notes authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Notes pursuant to Sections 2.06, 2.07, 2.08
or 9.06 of this Indenture.


                                    II-1

<PAGE>

     The Notes shall be divided into four Classes having designations, original
principal amounts, Note Interest Rates and Maturity Dates as follows:


                       Initial
                      Principal         Note Interest      Stated
Designation           Balance                Rate       Maturity Date
- -----------          ----------         -------------   -------------

Class A-1 Notes     $287,750,000           [     ]      July 1, 2025
Class A-2 Notes      $57,750,000           [     ]      July 1, 2025
Class A-3 Notes      $45,100,000           [     ]      July 1, 2025
Class A-4 Notes      $48,550,000           [     ]      July 1, 2025


     The principal of each Note shall be payable in installments ending no later
than the Maturity of the final installment of the principal thereof unless the
unpaid principal of such Note becomes due and payable at an earlier date by
declaration of acceleration or call for redemption or otherwise.

     Interest on the Notes of each Class shall be payable on each Interest
Payment Date in the amount of the sum of (i) the Interest Accrual Amount for
such Class of Notes and (ii) all Class Interest Shortfalls for such Class of
Notes that have not previously been paid, together with accrued interest on such
Class Interest Shortfalls at the related Note Interest Rate to the extent
permitted by law.  All payments made with respect to any Note shall be applied
first to the interest then due and payable on the current principal amount
outstanding on such Note and then to the principal thereof.  All computations of
interest accrued on any Note shall be made as if each year consisted of twelve
months of thirty days each.

     On each Payment Date, any Class A-1 Realized Loss Amount will be applied in
reduction of the Class A-1 Outstanding Principal Balance; any Class A-2 Realized
Loss Amount will be applied in reduction of the Class A-2 Outstanding Principal
Balance; any Class A-3 Realized Loss Amount will be applied in reduction of the
Class A-3 Outstanding Principal Balance; and any Class A-4 Realized Loss Amount
will be applied in reduction of the Class A-4 Outstanding Principal Balance; in
each case, until the Outstanding Principal Balance of such Class has been
reduced to zero.

                                    II-2

<PAGE>


     All payments of principal of and interest on any Note shall be made in the
manner specified in Section 2.09 and in the amounts prescribed in Section 5.08
or 8.02(c), as the case may be.


     Notwithstanding any of the foregoing provisions with respect to payments of
principal of and interest on the Notes, if the Notes have become or been
declared due and payable following an Event of Default and such acceleration of
maturity and its consequences have not been rescinded and annulled and the
provisions of Section 5.05(a) are not applicable, then payments of principal of
and interest on the Notes shall be made in accordance with Section 5.08.

     All Notes of the same Class shall be identical in all respects except for
the denominations, Note numbers and dates thereof.  All Notes of the same class
issued under this Indenture shall be in all respects equally and ratably
entitled to the benefits hereof without preference, priority or distinction on
account of the actual time or times of authentication and delivery, all in
accordance with the terms and provisions of this Indenture. 

     SECTION 2.04.  DENOMINATIONS.

     The Notes shall be issuable only as registered Notes in minimum
denominations of $1,000.

     SECTION 2.05.  EXECUTION, AUTHENTICATION, DELIVERY AND DATING.

     The Notes shall be executed on behalf of the Issuer by its Authorized
Officer.  The signature of any of these officers on the Notes may be manual or
facsimile.

     Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers 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.


                                    II-3

<PAGE>

     The Notes which are authenticated and delivered by the Trustee to or upon
the order of the Issuer on the Closing Date shall be dated the Accrual Date. 
All other Notes which are authenticated after the Closing Date for any other
purpose hereunder shall be dated the date of their authentication.

     The Notes may be authenticated by the Trustee either at the Corporate Trust
Office or at the Trustee's office or agency in the Borough of Manhattan, City
and State of New York.

     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 in the related exhibit
hereto executed by the Trustee or by any Authenticating Agent by the manual
signature of one of its authorized officers, employees or 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.

     SECTION 2.06   TEMPORARY NOTES.

     Pending the preparation of definitive Notes, the Issuer may execute, and
upon Issuer Order the Trustee shall authenticate and deliver, temporary Notes
which are printed, lithographed, type-written, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Notes in lieu of which they may be so issued and with such 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 definitive Notes,
the temporary Notes shall be exchangeable for definitive Notes upon surrender of
the temporary Notes at the office or agency of the Issuer to be maintained as
provided in Section 3.02, without charge to the Holder.  Upon surrender or
cancellation of any one or more temporary Notes, the Issuer shall execute and
the Trustee shall authenticate and deliver and exchange therefor a like
principal amount of definitive Notes of authorized denominations.  Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as definitive Notes.


                                    II-4

<PAGE>

     SECTION 2.07   REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.

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

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

     Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02, the Issuer
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Notes of any
authorized denominations, and of the same Class and a like aggregate principal
amount.

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


                                    II-5

<PAGE>

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

     Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed, by the Holder
thereof or his attorney duly authorized in writing.

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

     The Notes will initially be represented by certificated Notes registered in
the name of Cede & Co., as nominee of the Depository Trust Company ("DTC").  No
person acquiring a beneficial interest in a Note will be entitled to receive a
certificated Note, except as described in the next paragraph of this Section
2.07.

     The Notes will be issued to and registered in the Note Register in the name
of a person acquiring a beneficial interest in such Notes only if (i) the
Trustee receives a written notice from the Issuer that DTC is no longer willing
or able to discharge properly its responsibilities as depository with respect to
the Notes and the Issuer is unable to locate a qualified successor or (ii) the
Issuer, at its option, elects to terminate the book-entry system through DTC. 
Upon the occurrence of either event described in clauses (i) and (ii) above, the
Trustee shall notify DTC of the occurrence of either such event.  Upon surrender
by DTC of the certificated Notes and satisfaction of the conditions set forth in
this Section 2.07 of the Indenture for the registration of transfer and receipt
by the Trustee of a list of the names and addresses of the beneficial owners of
the Notes in whose name the Notes are to be registered, new Notes shall be
delivered pursuant to this Section 2.07.


                                    II-6

<PAGE>

     SECTION 2.08   MUTILATED, DESTROYED, LOST OR STOLEN NOTES.

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

     Upon the issuance of any new Note under this Section, the Issuer may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other reasonable expenses
(including the fees and expenses of the Trustee) connected therewith.

     Except to the extent provided in the first paragraph of this Section 2.08,
every new Note issued pursuant to this Section in lieu of any destroyed, lost or
stolen Note shall constitute an original additional contractual obligation of
the Issuer, whether or not the destroyed, lost or stolen Note shall be at any
time 

                                    II-7

<PAGE>

enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately, to the extent provided herein, with any
and all other Notes duly issued hereunder.

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

     SECTION 2.09.  PAYMENTS OF PRINCIPAL AND INTEREST.


     (a)    Any installment of interest or principal payable on any Note which
is punctually paid or duly provided for by the Issuer on the applicable Payment
Date shall be paid to the Person in whose name such Note (or one or more
Predecessor Notes) is registered at the close of business on the Record Date for
such Payment Date by check mailed to such Person's address as it appears in the
Note Register on such Record Date, except that with respect to a Note registered
in the name of the nominee of a clearing agency (initially, such nominee to be
Cede & Co.) payments will be made by wire transfer in immediately available
funds to the account designated by such nominee in writing at least two Business
Days prior to such Payment Date and except for the final installment of
principal payable with respect to such Note (or the Redemption Price for any
Note called for redemption), which shall be payable as provided in subsection
(b) of this Section 2.09.  

     (b)    All reductions in the principal amount of a Note (or one or more
Predecessor Notes) effected by means of an allocation of the Realized Loss
Amount or by payments of installments of principal made on any Payment Date
shall be binding upon all Holders of such Note and of any Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof,
whether or not such payment is noted on such Note.  The final installment of
principal of each Note (including the Redemption Price of any Note called for
redemption pursuant to Section 10.01) shall be payable only upon presentation
and surrender thereof on or after the Payment Date or Redemption Date therefor
at the Corporate Trust Office or at the office or agency of the Issuer
maintained by it for such purpose set forth in Section 3.02.



                                    II-8

<PAGE>

     Whenever, on the basis of Remittances on the Accounts received and expected
to be received during the related Due Periods or on the related Payment Date, as
applicable, the Issuer expects that the entire remaining unpaid principal amount
of the Notes will become due and payable on the next Principal Payment Date, it
shall, no later than ten days prior to such Principal Payment Date, mail or
cause to be mailed to each Person in whose name a Note to be so retired is
registered at the close of business on the Record Date that would otherwise be
applicable to such Principal Payment Date a notice to the effect that:

           (i)   the Issuer expects that funds sufficient to pay such final
     installment will be available in the Collection Account on such Principal
     Payment Date, and

          (ii)   if such funds are available, (A) such final installment will be
     payable on such Payment Date, but only upon presentation and surrender of
     such Note at the Corporate Trust Office or at the office or agency of the
     Issuer maintained for such purpose pursuant to Section 3.02 (the addresses
     of which shall be set forth in such notice), and (B) no interest shall
     accrue on such Note after such Principal Payment Date.

Notices in connection with redemptions of Notes shall contain the information
set forth in, and be mailed in accordance with, Section 10.02.

     (c)    Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to unpaid principal and
interest that were carried by such other Note.  Any checks mailed pursuant to
subsection (a) of this Section 2.09 and returned undelivered shall be held in
accordance with Section 3.03.

     (d)    Not later than each Debt Service Requirement Determination Date, the
Trustee shall prepare and deliver to the Issuer a statement with respect to the
following Payment Date (a "Payment Date Statement") setting forth:

          (i)      the amount of Issuer Expenses paid or due to be paid in
     respect of the related Due Period;


                                    II-9

<PAGE>

          (ii)     the amount of the Available Funds for such Payment Date;

          (iii)    the amount of interest then due and payable on the Notes
     then Outstanding (stated separately as to each Class);

          (iv)     the Optimal Principal Amount for each Class;

          (v)      whether the Available Funds for such Payment Date will be
     sufficient to pay on such Payment Date all amounts specified in clause
     (iii) and, if not, the percentages of such amount which may be paid in
     accordance with the priorities set forth in Section 8.02(c) from the
     amounts expected to be available in the Collection Account;

          (vi)     the Class Interest Shortfall (stated separately as to each
     Class);

          (vii)    the Collateral Deficiency Amount, if any;

          (viii)   the amounts included in such statement pursuant to clauses
     (iii) and (iv), expressed in each case per Individual Note, to be paid on
     such Payment Date;


          (ix)     the amount, if any, to be released to the Issuer pursuant to
     clause TWENTY-FIRST of Section 8.02(c);

          (x)      the total Realized Loss Amount and amount allocated to each
     Class of Notes and interest thereon;


          (xi)     the unpaid principal amount of each Class of Notes which
     will remain after giving effect to the payments 


                                    II-10

<PAGE>

     to be made on such Payment Date expressed both on an aggregate basis and
     per Individual Note;

          (xii)    the Cumulative Actual Net Economic Losses as of the end of
     the related Due Period; 

          (xiii)   the Economic Balance as of the end of the related Due Period
     of Accounts with respect to which there is a material breach of any
     representation or warranty made in Section 3.11 or as to which there is a
     material defect in the related Account Documents in accordance with Section
     3.12(b); 


          (xiv)    the Minimum Target Overcollateralization Amount;

          (xv)  cumulative unreimbursed Realized Loss Amounts; and

          (xvi) the Servicing Fee to be paid on such Payment Date.


     Each Payment Date Statement shall be delivered by the Trustee to the
Issuer, each designee of the Issuer specified in writing to the Trustee, Lehman
Brothers Inc., S&P, the firm of Independent Accountants appointed by the Issuer
pursuant to Section 8.07(a) and, upon request, to the beneficial owners of the
Notes.

     SECTION 2.10  PERSONS DEEMED OWNERS.

     Prior to due presentment for registration of transfer of any Note, the
Issuer, the Trustee, any Agent and any other agent of the Issuer or the Trustee
may treat the Person in whose name any Note is registered as the absolute owner
of such Note for all purposes whatsoever, whether or not such Note is overdue,
and neither the Issuer, the Trustee, any Agent nor any other agent of the Issuer
or the Trustee shall be affected by notice to the contrary.

     SECTION 2.11.  CANCELLATION.

     All Notes surrendered for payment, registration of transfer, exchange or
redemption shall, if surrendered to any Person other 

                                    II-11

<PAGE>

than the Trustee, be delivered to the Trustee, and such Notes, together with all
such Notes so surrendered directly to the Trustee, shall be promptly cancelled
by it.  The Issuer may at any time deliver to the Trustee for cancellation any
Note 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 Trustee.  No Notes shall be authenticated in lieu of or in
exchange for any Notes cancelled as provided in this Section, except as
expressly permitted by this Indenture.  All cancelled Notes held by the Trustee
shall be held by the Trustee in accordance with its standard retention policy,
unless the Issuer shall direct by an Issuer Order that they be destroyed or
returned to it.

     SECTION 2.12.  AUTHENTICATION AND DELIVERY OF NOTES.

     The Notes may be executed by the Issuer and delivered to the Trustee for
authentication, and thereupon the same shall be authenticated and delivered by
the Trustee, upon Issuer Request and upon receipt by the Trustee of the
following items required to be delivered to the Trustee in connection with the
initial authentication and delivery of the Notes on the Closing Date:

          (a)     an Issuer Order authorizing the authentication and delivery
     of the Notes;

          (b)     an Officers' Certificate of the Issuer, complying with the
     requirements of Section 11.01, stating that:

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


                                    II-12

<PAGE>

          (ii)     the Issuer is the owner of and has good title to each
     Account, has not assigned any interest or participation in any such Account
     (or, if any such interest or participation has been assigned, it has been
     released) and has the right to Grant each such Account to the Trustee, and
     no other Person has any lien on, security interest in or other rights to
     any such Account;

          (iii)    the Issuer has Granted to the Trustee all of its right,
     title, and interest in each Account Granted to the Trustee by it to secure
     the Notes;

          (iv)     the information set forth in the Schedule of Accounts to
     this Indenture is correct;

          (v)      attached thereto are true and correct copies of letters
     signed by the Rating Agencies confirming that the Class A-1 Notes have been
     rated AAA by S&P and Aaa by Moody's, the Class A-2 Notes have been rated at
     least AA by S&P and Aa2 by Moody's, the Class A-3 Notes have been rated at
     least A by S&P and A2 by Moody's and the Class A-4 Notes have been rated at
     least BBB by S&P and Baa2 by Moody's; and

          (vi)     each of the Accounts satisfies the requirements of
     subsection (c) below;


          (c)     all of the Accounts and all Account Documents (except that
     (A) in lieu of delivering the Account Documents for any Account which has
     been the subject of a Full Prepayment received by the Servicer after the
     Cut-Off Date but no later than five Business Days prior to the Closing
     Date, the Issuer may deliver, or cause to be delivered, as indicated in the
     Officers' Certificate from the Servicer delivered pursuant to subsection
     (e) of this Section 2.12, the cash proceeds of such Full Prepayment, (B) in
     lieu of delivering the Account Documents for any Account with respect to
     which foreclosure proceedings have been commenced and such Account
     Documents are required in connection with the prosecution of such
     proceedings, the Issuer may deliver a trust receipt pursuant to Section
     3.13(c) of this Indenture and (C) the Trustee's review of such Account
     Documents pursuant to Section 3.12 need not be completed until 90 days
     following the Closing Date), which Accounts:



                                    II-13

<PAGE>


          shall have an aggregate Economic Balance at least equal to
     $462,287,289 as of the Cut-Off Date, and


          shall satisfy each of the representations and warranties with
     respect to such Accounts set forth in Section 3.11 of this Indenture;

          (d)     an executed counterpart of the Servicing Agreement and an 
     executed counterpart of the Standby Servicing Agreement;

          (e)     an Officer's Certificate from the Servicer, dated as of
     the Closing Date, certifying that all Monthly Payments (net of the
     Servicing Fee) on the Accounts due after the Cut-Off Date and received
     more than five Business Days prior to the Closing Date plus the
     proceeds of each Full Prepayment of any such Account (including any
     related payment of interest) received by the Servicer after the
     Cut-Off Date but more than five Business Days prior to the Closing
     Date have been remitted to the Trustee for deposit in the Collection
     Account in accordance with Section 2.08 of the Servicing Agreement and
     setting forth the aggregate amount so remitted representing a Full
     Prepayment received by the Servicer after the Cut-Off Date but more
     than five Business Days prior to the Closing Date;

          (f)    a letter, addressed to the Trustee and complying with the
     requirements of Section 11.01, of a firm of Independent Accountants of
     recognized national reputation to the effect that:

                 (1) they have performed the following procedures (which need
          not constitute an examination in accordance with generally accepted
          auditing standards):

                         (A) they have randomly selected a sample of the
                 Accounts, and compared the Account number, the total number of
                 Monthly Payments to be made under the Account during its term,
                 the total finance charge over the term of the related Account
                 Note, Monthly Payment, amount financed and the original
                 principal balance set forth in the related Account Documents
                 to the corresponding item in the Schedule of Accounts;


                                    II-14

<PAGE>

                         (B) they recalculated the Economic Balance for each
                 Account and compared the Economic Balance calculated by the
                 Issuer to the Economic Balances calculated by them for each
                 Account and compared the aggregate Economic Balance for all
                 Accounts calculated by them to the aggregate initial principal
                 amount of the Notes proposed to be authenticated and
                 delivered;

                 (2) based upon the above-specified procedures, such firm has
          determined that:

                         (A) they are 95% confident that the particular
                 attributes of the Accounts tested by them as described in
                 paragraph (1)(A) above will not vary from the corresponding
                 information set forth on the Schedule of Accounts for more
                 than 
                 3% of all of the Accounts;

                         (B) the Economic Balance calculated by the Issuer for
                 the Accounts does not exceed the Economic Balance for the
                 Accounts as calculated by them in accordance with the
                 definition of the term "Economic Balance" and the aggregate of
                 the Economic Balances calculated by them for all Accounts is
                 not less than [    ]% of the aggregate initial principal
                 amount of the Notes proposed to be authenticated and
                 delivered;

          (g)     cash in the amount equal to the amount, if any, required
     to be remitted to the Trustee pursuant to Section 2.08 of the
     Servicing Agreement (as indicated by the Officers' Certificate from
     the Servicer delivered pursuant to subsection (e) of this Section
     2.12) and deposited in the Collection Account and held by the Trustee
     and applied in accordance with Section 8.02;

          (h)     an executed copy of the Purchase and Sale Agreement;

          (i)     an executed copy of the Trust Agreement;


          (j)     an executed copy of the Holding Account Agreement; 


                                    II-15

<PAGE>


          (k)     a copy of the fidelity bond required pursuant to Section
     4.05 of the Servicing Agreement; and

          (l)     an Opinion of Counsel in the form required by the
     underwriting agreement among Mid-State Homes, Inc., Walter Industries,
     Inc. and Lehman Brothers Inc., as representative of the several
     underwriters named therein.




                                    II-16

<PAGE>

                                 SECTION III

                  COVENANTS; REPRESENTATIONS AND WARRANTIES

     SECTION 3.01.  PAYMENT OF NOTES.

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

     SECTION 3.02.  MAINTENANCE OF OFFICE OR AGENCY.

     The Issuer will maintain in the Borough of Manhattan, the City of New 
York, the State of New York and in the city where the Corporate Trust Office 
is located an office or agency where Notes may be presented or surrendered 
for payment or may be surrendered for registration of transfer or exchange, 
and where notices and demands to or upon the Issuer in respect of the Notes 
and this Indenture may be served.  The Issuer will give prompt written notice 
to the Trustee of the location and any change in the location of such office 
or agency.  Until written notice of any change in the location of such office 
or agency is delivered to the Trustee or if at any time the Issuer shall fail 
to maintain any such required office or agency or shall fail to furnish the 
Trustee with the address thereof, Notes may be so presented or surrendered, 
and such notices and demands may be made or served, at the office of First 
Union National Bank of North Carolina, 40 Broad Street, 5th Floor - Suite 
550, New York, New York 10004, and at the Corporate Trust Office.

     The Issuer may also from time to time designate one or more other 
offices or agencies (in or outside the City of New York or the city where the 
Corporate Trust Office is located) where the Notes may be presented or 
surrendered for any or all such purposes and where notices and demands may be 
served and may from time to time rescind such designations; PROVIDED, 
HOWEVER, that (i) no such designation or rescission shall in any manner 
relieve the Issuer of its obligation to maintain an office or agency in the 
City of New York, for the purposes set forth in the preceding paragraph and 
(ii) any designation of an office or agency for payment of Notes shall be 
subject to Section 3.03.  The Issuer will give prompt written notice to the 
Trustee of any such 

                                    III-1

<PAGE>

designation or rescission and of any change in the location of any such other
office or agency.

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

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

     If the Issuer shall have a Paying Agent that is not also the Note
Registrar, it shall furnish, or cause the Note Registrar to furnish no later
than the fifth Business Day after each Record Date, a list, in such form as such
Paying Agent may reasonably require, of the names and addresses of the Holders
of Notes and of the number of Individual Notes held by each such Holder.

     Whenever the Issuer shall have a Paying Agent other than the Trustee, it
will, on or before the Business Day next preceding each Payment Date, direct the
Trustee to deposit with such Paying Agent an aggregate sum sufficient to pay all
amounts then becoming due (to the extent funds are then available for such
purpose in the Collection Account), such sum to be held in trust for the benefit
of the Persons entitled thereto.  Any moneys deposited with a Paying Agent in
excess of an amount sufficient to pay the amounts then becoming due on the Notes
with respect to which such deposit was made shall, upon Issuer Order, be paid
over by such Paying Agent to the Trustee for application in accordance with
Article VIII.


     Any Paying Agent other than the Trustee shall be appointed by Issuer Order,
and the Trustee is hereby appointed, and the Trustee hereby accepts such
appointment, as initial Paying Agent.  The Issuer shall not appoint any Paying
Agent which is not, at the time of such appointment, a depository institution or
trust company.  The Issuer will cause each Paying Agent other than the Trustee
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee (and if the 


                                    III-2

<PAGE>

Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:

          (1)     allocate all sums received for payment to the Holders of
     Notes on each Payment Date among such Holders in the proportion specified
     in the Payment Date Statement, to the extent permitted by applicable law;

          (2)     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;

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

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

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

          (6)     comply with all requirements of the Internal Revenue Code of
     1986, as amended (or any successor or amendatory statutes), and all
     regulations thereunder, 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; PROVIDED, HOWEVER, that with respect to withholding and
     reporting requirements applicable to original issue discount (if any) on
     the Notes, the Issuer has provided the calculations pertaining thereto to
     the Trustee.


                                    III-3

<PAGE>

     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 Order direct
any Paying Agent, if other than the Trustee, to pay to the Trustee all sums held
in trust by such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by such Paying Agent; and upon
such payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such money.

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

                                    III-4

<PAGE>

     SECTION 3.04.  EXISTENCE OF ISSUER.

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

     SECTION 3.05.  PROTECTION OF TRUST ESTATE.

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

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

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

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

           (iv) enforce any of the Account Documents,

            (v) preserve and defend title to the Trust Estate and the rights of
     the Trustee and of the Noteholders in the Account Documents and the other
     property held as part of the Trust Estate against the claims of all persons
     and parties, or

           (vi) pay all taxes or assessments levied or assessed upon the Trust
     Estate when due.


                                    III-5

<PAGE>

     The Issuer hereby designates the Trustee its agent and attorney-in-fact to
execute any financing statement, continuation statement or other instrument
required pursuant to this Section 3.05; PROVIDED, HOWEVER, that such designation
shall not be deemed to create a duty in the Trustee to monitor the compliance of
the Issuer with the foregoing covenants and PROVIDED, FURTHER, that the duty of
the Trustee to execute any instrument required pursuant to this Section 3.05
shall arise only if the Trustee has knowledge of any failure of the Issuer to
comply with provisions of this Section 3.05.  The Issuer shall execute a power
of attorney coupled with an interest which shall be irrevocable, and the Issuer
hereby ratifies and confirms all that the Trustee may do by virtue thereof.


     (b)   Except as otherwise provided herein and in the Servicing Agreement,
the Trustee shall not remove any portion of the Trust Estate that consists of
money or is evidenced by an instrument, certificate or other writing from the
jurisdiction in which it was held at the date of the most recent Opinion of
Independent Counsel delivered pursuant to Section 3.06 (or from the jurisdiction
in which it was held as described in the Opinion of Counsel delivered at the
Closing Date pursuant to Section 2.12(l), if no Opinion of Independent Counsel
has yet been delivered pursuant to Section 3.06) unless the Trustee shall have
first received an Opinion of Independent 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 3.06.  OPINIONS AS TO TRUST ESTATE.

     On or before May 15 in each calendar year, beginning in 1998, the Issuer
shall furnish to the Trustee an Opinion of Independent Counsel either stating
that, in the opinion of such counsel, such action has been taken as is necessary
to perfect and to maintain the lien and security interest created by this
Indenture with respect to the Trust Estate and reciting the details of such
action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest.  Such Opinion of Counsel
shall also address any other matter reasonably requested by the Trustee with
respect to the Trust Estate and describe all such action, if any, that will, in
the opinion of such counsel, be required to be taken to 

                                    III-6

<PAGE>

maintain the lien and security interest of this Indenture with respect to the
Trust Estate until May 15 in the following calendar year.  The Issuer shall be
required to take whatever action set forth in the Opinion of Independent Counsel
to perfect or maintain the lien and security interest in the Trust Estate
created by this Indenture.  

     SECTION 3.07.  PERFORMANCE OF OBLIGATIONS; SERVICING AGREEMENT.

     (a)   The Issuer will punctually perform and observe all of its obligations
and agreements contained in the Servicing Agreement.

     (b)   The Issuer will not take any action or permit any action to be taken
by others which would release any Person from any of such Person's covenants or
obligations under any of the Account Documents or under any instrument included
in the Trust Estate, or which would result in the amendment, hypothecation,
subordination, termination or discharge of, or impair the validity or
effectiveness of, any of the Account Documents, or any such instrument, except
for such actions that are expressly provided for in the Servicing Agreement.

     (c)   If the Issuer shall have knowledge of the occurrence a Servicing
Default, the Issuer shall promptly notify the Trustee thereof, and shall specify
in such notice the action, if any, the Issuer is taking in respect of such
Servicing Default.  If any Servicing Default arises from the failure of the
Servicer to perform any of its duties or obligations under the Servicing
Agreement with respect to the Accounts, the Issuer may remedy such failure,
provided that if any Servicing Default arises from the failure by the Servicer
to comply with requirements imposed upon it under Section 2.12 of the Servicing
Agreement regarding advances for taxes, assessments and other charges against
the Mortgaged Property or under Section 2.13 of the Servicing Agreement with
respect to hazard insurance for the Mortgaged Properties securing the Mortgage
Loans, the Issuer shall promptly pay such taxes, assessments or other charges or
such premiums or obtain substitute insurance coverage meeting the requirements
of said Section 2.13.  So long as any Servicing Default shall be continuing, the
Trustee may, and upon the direction of the Holders of Notes entitled to more
than 50% of the Voting Rights 

                                    III-7

<PAGE>

the Trustee shall, terminate all of the rights and powers of the Servicer under
the Servicing Agreement pursuant to Section 5.01 of the Servicing Agreement or
take any other action with respect to such Servicing Default as is permitted
under said Section 5.01.  Unless granted or permitted by the Holders of Notes to
the extent provided above, the Issuer may not waive any such Servicing Default
or terminate the rights and powers of the Servicer under the Servicing
Agreement.


     (d)    Upon any termination of the Servicer's rights and powers pursuant to
Section 5.01 of the Servicing Agreement, the Trustee shall appoint, or shall
petition a court of competent jurisdiction to appoint, a successor servicer or
upon the occurrence of a Trigger Event, the Trustee may appoint such successor
servicer (the "Successor Servicer").  The Trustee may appoint itself Successor
Servicer.  Pending the appointment of a Successor Servicer as provided above,
the Trustee shall be the Successor Servicer (subject to and in accordance with
the Standby Servicing Agreement).  Upon any termination of the Servicer's rights
and powers pursuant to Section 5.01 of the Servicing Agreement or upon the
occurrence of a Trigger Event, all rights, powers, duties and responsibilities
of the Servicer with respect to the Accounts shall vest in and be assumed by the
Successor Servicer, and the Successor Servicer shall be the successor in all
respects to the Servicer in its capacity as servicer with respect to the
Accounts under the Servicing Agreement.  Upon any such termination, the
Successor Servicer, or if the Trustee so elects upon a Trigger Event, the
Trustee, is hereby authorized to mail a notice to each Obligor directing each
such Obligor to mail all Monthly Payments to the Successor Servicer or its agent
at the address specified in such notice.  In connection with any such
appointment, the Trustee may make such arrangements for the compensation of such
successor as it and such successor shall agree, and the Issuer shall enter into
an agreement with such successor for the servicing of the Accounts, such
agreement to be substantially similar to the Servicing Agreement or otherwise
acceptable to the Trustee; provided that any such compensation of the Successor
Servicer shall not be in excess of [   ]% of the Servicing Fee payable to the
Servicer under the Servicing Agreement.


     (e)   The Issuer may enter into contracts with other Persons for the
performance of the Issuer's obligations hereunder, and 

                                    III-8

<PAGE>

performance of such obligations by such Persons shall be deemed to be
performance of such obligations by the Issuer.

     SECTION 3.08.  NEGATIVE COVENANTS.

     The Issuer will not:

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

          (ii)    obtain or carry insurance relating to the Accounts separate
     from that required by the Servicing Agreement, unless the Trustee shall
     have the same rights with respect thereto as it has with respect to the
     insurance required by the Servicing Agreement;

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

          (iv)    engage in any business or activity other than in connection
     with, or relating to, the issuance of the Notes or the preservation of the
     Trust Estate and the release of assets therefrom pursuant to this Indenture
     and the Trust Agreement;

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

          (vi)    (1) 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 under this Indenture,
     except as may be expressly permitted hereby, (2) permit any lien, charge,
     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 (3) except as permitted hereby, permit the lien of
     this Indenture not to constitute a valid 

                                    III-9

<PAGE>

     and perfected first priority security interest in the Trust Estate; 

          (vii)   cause or permit any Affiliate to petition or otherwise invoke
     the process of any court or government authority for the purpose of
     commencing or sustaining a case against the Issuer under any Federal or
     state bankruptcy, insolvency or similar law or appointing a receiver,
     liquidator, assignee, trustee, custodian, sequester or other similar
     official of the Issuer or any substantial part of its property, or ordering
     the winding up or liquidation of the affairs of the Issuer; or

          (viii)  amend the Trust Agreement without the consent of the Trustee.

     SECTION 3.09.  ANNUAL STATEMENT AS TO COMPLIANCE.

     On or before 120 days after the first anniversary of the Closing Date and
each subsequent anniversary date of the Closing Date, the Issuer shall deliver
to the Trustee a written statement, signed by two Authorized Officers, stating,
as to each signer thereof, that

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

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

     SECTION 3.10.  RECORDING OF ASSIGNMENTS.

     The Issuer shall use reasonable best efforts to record substantially all
Assignments and Trust Mortgages within 21 days of the Closing Date and in any
event all Assignments and Trust Mortgages shall be duly recorded not later than
90 days after the date of the Grant of the related Account.


                                   III-10

<PAGE>

     SECTION 3.11.  REPRESENTATIONS AND WARRANTIES CONCERNING THE ACCOUNTS.

     (a)   The Issuer represents and warrants to the Trustee, with respect to
each Account, that as of the Closing Date (and the Issuer shall be deemed to
have made such representations and warranties at the time of the transfer
thereof to the Trustee with respect to each new Account originated in connection
with the sale of property acquired in respect of an Account):

          (i)     the information set forth with respect to such Account in the
     Schedule of Accounts attached hereto is true and correct as of the date as
     of which such information is given;

          (ii)    the related building or installment sale contract, as the
     case may be, has been duly executed by the parties thereto and the duties
     to be performed thereunder prior to the date the first payment in
     connection with such contract is due have been performed;

          (iii)   the Account Documents have been duly executed by the related
     Obligor and the Mortgage has been duly executed by the Obligor and, to the
     extent required under local law for recordation or enforcement, properly
     acknowledged;

          (iv)    the Mortgage has been properly recorded as required by law. 
     The Mortgage constitutes a valid first priority lien upon and secure title
     to the real property and improvements thereon described therein, which
     include a single family detached dwelling, and such Mortgage and the
     Account Note secured thereby are fully enforceable in accordance with their
     terms except as enforceability thereof may be limited by bankruptcy,
     insolvency, moratorium and other laws affecting creditors' rights generally
     and by general principles of equity (whether applied in a proceeding in law
     or at equity);

          (v)     the Issuer is the sole owner of each Account and has good
     title to such Account and full right and authority to transfer such Account
     and to Grant such Account to the Trustee and, upon delivery of the related
     Account Documents 

                                   III-11

<PAGE>

     to the Trustee, the Trustee will have a valid and perfected lien or
     security interest in such Account; 

          (vi)    all costs, fees, intangible, documentary and recording taxes
     and expenses incurred in making, closing, and recording each Account and in
     connection with the issuance of the Notes have been paid;

          (vii)   no part of the Mortgaged Property purporting to secure any
     Account Note has been, or shall have been, released from the lien or
     security title of the Mortgage securing such Account Note except for
     Mortgaged Property securing Account Notes which have been prepaid in full
     between the Cut-Off Date and the Closing Date, the amount of such
     prepayments received more than five days prior to the Closing Date to be
     deposited in the Collection Account on or before the Closing Date;

          (viii)  except to the extent permitted by the Servicing Agreement, no
     term or provision of any Account has been or will be altered, changed or
     modified in any way by the Servicer or the Issuer without the consent of
     the Trustee;

          (ix)    the Grantor and the Issuer acquired title to the Accounts in
     good faith, for value and without notice of any adverse claim;


          (x)     the Account Notes evidence accounts bearing a fixed finance
     charge rate and fully amortizing level monthly payments.  Each Account Note
     has an original term to maturity not in excess of 30 years.  No less than
     87% of the Account Notes with respect to Accounts that have an Economic
     Balance greater than zero were originated from January 1995 through
     February 1997, with the exception of Account Notes which represent
     subsequent resales of repossessed houses that secured Account Notes
     originated during such period.


          (xi)     as of the Closing Date, there is no right of rescission,
     setoff, defense or counterclaim to any Account Note or Mortgage, including
     both the obligation of the Obligor to pay the unpaid cash price or finance
     charge on such Account Note and the defense of usury; furthermore, neither
     the operation of any of the terms of the Account 

                                   III-12

<PAGE>

     Note and the Mortgage nor the exercise of any right thereunder will render
     the Account Note or the Mortgage unenforceable, in whole or in part, or
     subject such Account Note or Mortgage to any right of rescission, setoff,
     counterclaim or defense, including the defense of usury, and no such right
     of rescission, setoff, counterclaim or defense has been asserted with
     respect thereto;

          (xii)   there are no mechanics' liens or claims for work, labor or
     material (and to the best of the Issuer's knowledge, no rights or claims
     are outstanding that under law could give rise to such lien) affecting any
     Mortgaged Property which are or may be a lien prior to, or equal with, the
     lien of such Mortgage;

         (xiii)   each Account Note at origination complied in all material
     respects with applicable local, state and federal laws, including, without
     limitation, usury, equal credit opportunity, real estate settlement
     procedures, truth-in-lending and disclosure laws, and consummation of the
     transactions contemplated by the Purchase and Sale Agreement and hereby
     will not involve the violation of any such laws;

          (xiv)   with respect to each Mortgage constituting a deed of trust, a
     trustee, duly qualified under applicable law to serve as such, is properly
     designated, serving and named in such Mortgage;

          (xv)    there has been no fraud, dishonesty, misrepresentation or
     negligence on the part of the originator in connection with the origination
     of any Account Note or in connection with the sale of the related Account;
     and


          (xvi)   to the best knowledge of the Issuer, except Mortgaged
     Properties for which Insurance Proceeds are available, each Mortgaged
     Property is free of damage which materially and adversely affects the value
     thereof.


     (b)  If any of the representations, warranties or covenants with respect to
any Account set forth in this Section 3.11 are found to be incorrect as of the
time made in any respect which materially and adversely affects the interest of
the Trustee or 

                                   III-13

<PAGE>

the Noteholders in the Account, the Issuer or the Servicer shall notify the
Trustee immediately after obtaining knowledge thereof, and the Issuer shall use
its best efforts to eliminate or otherwise cure the circumstances or conditions
in respect of which such representation, warranty or covenant was incorrect as
of the time made within 90 days of such notice to the Trustee.  If such breach
is not or cannot be cured within such 90-day period or, with the prior written
consent of a Responsible Officer of the Trustee, such longer period as specified
in such consent, the Issuer shall either (i) deposit in the Collection Account
an amount equal to 100% of the then current Economic Balance of the affected
Account (a "Defective Account"), at which time the Defective Account shall be
released from the lien of the Indenture or (ii) remove such Account from the
Trust Estate and substitute one or more Qualified Substitute Accounts (in which
case the removed Account shall become a "Deleted Account").  The Issuer shall
promptly reimburse the Servicer and the Trustee for any reasonable expenses
(including without limitation reasonable attorney's fees) incurred by the
Servicer and the Trustee, respectively, in respect of any such breach.

     As to any Deleted Account for which the Issuer substitutes a Qualified
Substitute Account or Qualified Substitute Accounts, the Issuer shall effect
such substitution by delivery to the Trustee for such Qualified Substitute
Account or Qualified Substitute Accounts the Account Note and such other Account
Documents related thereto, with the Account Note endorsed to the order of the
Issuer, without recourse, and endorsed by the Issuer in blank or to the order of
the Trustee, without recourse.  Monthly Payments due with respect to Qualified
Substitute Accounts in the month of substitution are not part of the Trust
Estate and will be retained by the Issuer.  Available Funds will include the
Monthly Payment due on any Deleted Account in the month of substitution, and the
Issuer shall deposit such amount in the Collection Account if received by it
subsequent to the month of substitution.  The Issuer shall be entitled to
receive all amounts due subsequent to the month of substitution in respect of
such Deleted Account.  The Issuer shall give or cause to be given written notice
to the Trustee and the Rating Agencies that such substitution has taken place. 
Upon such substitution, such Qualified Substitute Account or Qualified
Substitute Accounts shall be subject to the terms of this Indenture in all
respects, and the Issuer shall be deemed to have made with 

                                   III-14

<PAGE>

respect to such Qualified Substitute Account or Qualified Substitute Accounts,
as of the date of substitution, the representations and warranties set forth in
this Section 3.11. The Trustee shall at the direction of the Issuer immediately
effect the release of the lien of this Indenture with respect to such Deleted
Account, the form of the instruments effecting such release being specified in
such direction.

     For any month in which the Issuer substitutes one or more Qualified
Substitute Accounts for one or more Deleted Accounts, the Issuer will determine
the amount (if any) by which the aggregate outstanding Economic Balance of all
such Qualified Substitute Accounts as of the date of substitution is less than
the aggregate outstanding Economic Balance of all such Deleted Accounts.  On the
date of such substitution, the Issuer will deposit from its own funds into the
Collection Account an amount equal to the amount of such shortfall, if any,
without reimbursement therefor.

     It is understood and agreed that the obligations of the Issuer set forth in
this Section 3.11(b) to cure, substitute for or deposit funds in the Collection
Account in connection with an Account constitute the sole remedies available to
the Noteholders or to the Trustee on their behalf respecting a breach of the
representations and warranties set forth in Section 3.11(a).

     SECTION 3.12.  TRUSTEE'S REVIEW OF ACCOUNT DOCUMENTS.

     (a)   The Trustee agrees, for the benefit of the holders of the Notes, to
review within 90 days after the Closing Date, the Account Documents delivered to
it on or prior to the Closing Date in connection with the Grant of the Accounts
listed on the Schedule of Accounts as security for the Notes.  Such review shall
be limited to a determination that all documents referred to in the definition
of the term Account Documents have been delivered with respect to each such
Account (other than the documents related to (i) any Account so listed which has
been subject to a Full Prepayment, the proceeds of which have been deposited in
the Collection Account in lieu of delivery of the applicable Account Documents
and (ii) any Account with respect to which the related Mortgaged Property was
foreclosed, repossessed or otherwise converted subsequent to the Cut-Off Date
and prior to the Closing Date or with respect to which foreclosure 

                                   III-15

<PAGE>

proceedings have been commenced and the related Account Documents are required
in connection with the prosecution of such foreclosure proceedings and the
Issuer has delivered a trust receipt called for by Section 3.13(c)), that all
such documents have been executed, and that all such documents relate to the
Accounts listed on the Schedule of Accounts; PROVIDED, HOWEVER, that with
respect to the review made of the Accounts in connection with the Closing Date,
assumption or substitution agreements shall not be considered Account
Documents.  In performing such review, the Trustee may rely upon the purported
genuineness and due execution of any such document and on the purported
genuineness of any signature thereon.

     (b) If any Account Document is defective in any material respect which may
materially and adversely affect the value of the related Account, the priority
of the related Mortgage or the interest of the Trustee or the Noteholders in
such Account or if any document required to be delivered to the Trustee has not
been delivered or if any documents so delivered does not relate to an Account
listed on the Schedule of Accounts, the Trustee shall notify the Issuer and the
Servicer immediately after obtaining knowledge thereof.  Within 90 days of the
earlier of discovery by or notice to the Issuer that any Account Document is
missing or defective and such omission or defect materially and adversely
affects the interest of the Noteholders in an Account, the Issuer is required to
use its best efforts to cure such omission or defect.  If such omission or
defect is not or cannot be cured within such 90-day period or, with the prior
written consent of a Responsible Officer of the Trustee, such longer period as
specified in such consent, the Issuer shall either (i) deposit in the Collection
Account an amount equal to 100% of the then current Economic Balance of the
affected Account (a "Defective Account"), at which time the Defective Account
shall be released from the lien of the Indenture or (ii) remove such Account
from the Trust Estate and substitute one or more Qualified Substitute Accounts
(in which case the removed Account shall become a "Deleted Account").  The
Issuer shall promptly reimburse the Servicer and the Trustee for any reasonable
expenses (including without limitation reasonable attorney's fees) incurred by
the Servicer and the Trustee, respectively, in respect of any such defect or
omission; PROVIDED, HOWEVER, except for the review by the Trustee pursuant to
Section 3.12(a), the foregoing shall not impose an obligation on the Trustee to
discover defects in the 

                                   III-16

<PAGE>

Account Documents or to ascertain the priority of the related Mortgage. 

     As to any Deleted Account for which the Issuer substitutes a Qualified
Substitute Account or Qualified Substitute Accounts, the Issuer shall effect
such substitution by delivery to the Trustee for such Qualified Substitute
Account or Qualified Substitute Accounts the Account Note and such other Account
Documents related thereto, with the Account Note endorsed to the order of the
Issuer, without recourse, and endorsed by the Issuer in blank or to the order of
the Trustee, without recourse.  Monthly Payments due with respect to Qualified
Substitute Accounts in the month of substitution are not part of the Trust
Estate and will be retained by the Issuer.  Available Funds will include the
Monthly Payment due on any Deleted Account in the month of substitution, and the
Issuer shall deposit such amount in the Collection Account if received by it
subsequent to the month of substitution.  The Issuer shall be entitled to
receive all amounts due subsequent to the month of substitution in respect of
such Deleted Account.  The Issuer shall give or cause to be given written notice
to the Trustee and the Rating Agencies that such substitution has taken place. 
Upon such substitution, such Qualified Substitute Account or Qualified
Substitute Accounts shall be subject to the terms of this Indenture in all
respects, and the Issuer shall be deemed to have made with respect to such
Qualified Substitute Account or Qualified Substitute Accounts, as of the date of
substitution, the representations and warranties set forth in Section 3.11. The
Trustee shall at the direction of the Issuer immediately effect the release of
the lien of this Indenture with respect to such Deleted Account, the form of the
instruments effecting such release being specified in such direction.

     For any month in which the Issuer substitutes one or more Qualified
Substitute Accounts for one or more Deleted Accounts, the Issuer will determine
the amount (if any) by which the aggregate outstanding Economic Balance of all
such Qualified Substitute Accounts as of the date of substitution is less than
the aggregate outstanding Economic Balance of all such Deleted Accounts.  On the
date of such substitution, the Issuer will deposit from its own funds into the
Collection Account an amount equal to the amount of such shortfall, if any,
without reimbursement therefor.


                                   III-17

<PAGE>

     It is understood and agreed that the obligations of the Issuer set forth in
this Section 3.12(b) to cure, substitute for or deposit funds in the Collection
Account in connection with an Account constitute the sole remedies available to
the Noteholders or to the Trustee on their behalf respecting an omission or
defect set forth in Section 3.12(a).



     SECTION 3.13.  TRUST ESTATE; ACCOUNT DOCUMENTS.

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

     (b)   In order to facilitate the servicing of the Accounts by the Servicer,
the Servicer is hereby authorized in the name and on behalf of the Trustee and
the Issuer, to execute assumption agreements, substitution agreements, and
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and other comparable instruments with respect to the Accounts and
with respect to the Mortgaged Properties subject to the Mortgages (and the
Trustee shall execute any such documents on request of the Servicer), subject to
the obligations of the Servicer under the Servicing Agreement.  If from time to
time the Servicer shall deliver to the Trustee copies of any written assurance,
assumption agreement or substitution agreement or other similar agreement
pursuant to Section 2.10 of the Servicing Agreement, the Trustee shall check
that each of such documents purports to be an original executed copy and, if so,
shall file such documents with the related Account Documents.  If any such
documents submitted by the Servicer do not meet the above qualifications, such
documents shall promptly be returned by the Trustee to the Servicer, with a
direction to the Servicer to forward the correct documentation.


                                   III-18

<PAGE>


     (c) Upon Issuer Request accompanied by an Officers' Certificate of the
Servicer pursuant to Section 2.15 of the Servicing Agreement to the effect that
an Account has been the subject of a Full Prepayment or that all Liquidation
Proceeds which have been determined by the Servicer in its reasonable judgment
to be finally recoverable, have been recovered and upon deposit to the Holding
Account of such final Monthly Payment, an amount that satisfies the definition
of Full Prepayment with respect to such Account or, if applicable, Liquidation
Proceeds, the Trustee shall promptly release the related Account Documents to or
upon the order of the Issuer, along with such documents as the Servicer or the
Obligor may request to evidence satisfaction and discharge of such Account.  If
from time to time and as appropriate for the servicing or foreclosure of any
Account, the Servicer requests the Trustee to release the related Account
Documents and delivers to the Trustee a trust receipt reasonably satisfactory to
the Trustee and signed by a Servicing Officer, the Trustee shall release the
related Account Documents to the Servicer.  If such Account shall be liquidated
and the Trustee receives a certificate from the Servicer as provided above,
then, upon request of the Issuer, the Trustee shall release the trust receipt to
or upon the order of the Issuer.


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

     SECTION 3.14.  AMENDMENTS TO SERVICING AGREEMENT.

     The Trustee may enter into any amendment or supplement to the Servicing
Agreement only in accordance with Section 7.02 of the Servicing Agreement;
PROVIDED, HOWEVER, at any time, the Trustee may, without the consent of the
Noteholders, enter into an amendment to the Servicing Agreement modifying the
repossession, foreclosure and liquidation procedures if such modifications are
likely to minimize payments in connection with any filing or recording required
in any jurisdiction where any Mortgaged Properties are located.  The Trustee
may, in its discretion, decline to enter into or consent to any such supplement
or amendment if its own rights, duties or immunities shall be adversely
affected.


                                   III-19

<PAGE>

     SECTION 3.15.  SERVICER AS AGENT AND BAILEE OF TRUSTEE.

     In order to facilitate the servicing of the Accounts by the Servicer, the
Servicer shall retain, in accordance with the provisions of the Servicing
Agreement and this Indenture, the moneys to be deposited in each Servicing
Account.  Solely for purposes of perfection under Section 9-305 of the Uniform
Commercial Code of the state in which such property is held by the Servicer, the
Trustee hereby acknowledges that the Servicer is acting as agent and bailee of
the Trustee in holding such moneys pursuant to Section 2.09 of the Servicing
Agreement, as well as its agent and bailee in holding any Account Documents
released to the Servicer pursuant to Section 3.13(c), 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 2.09 of the Servicing Agreement, the Trustee,
as a secured party, will be deemed to have possession of such Account Documents,
such moneys and such other items for purposes of Section 9-305 of the Uniform
Commercial Code of the state in which such property is held by the Servicer.

     SECTION 3.16.  INVESTMENT COMPANY ACT.

     The Issuer shall not become an "investment company" as 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 3.16 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 3.17.  BUSINESS ACTIVITY.

     (a)   The Issuer shall furnish to the Trustee copies of the form of each
proposed amendment to the Trust Agreement at least 60 days prior to the proposed
date of adoption of any such proposed amendment.


                                   III-20

<PAGE>

     (b)   The Issuer will at all times hold itself out to the public, including
creditors of any entity owning more than a 50% undivided interest in the Issuer
(hereinafter referred to as a "Majority Owner" of the Issuer), under the
Issuer's own name and as a separate and distinct entity from Walter Industries,
Inc.  or any of its Affiliates.

     (c)   The Issuer will at all times be responsible for the payment of all
its obligations and indebtedness, will at all times maintain a business office,
records, books of account, and funds separate from its Majority Owner and will
observe all customary formalities of independent existence.

     (d)   To the extent such compliance involves questions of law, the Issuer
shall be deemed in compliance with the requirements of any provision of this
Section 3.17 if it is acting in accordance with an Opinion of Counsel as to such
requirements.

     SECTION 3.18.  LIABILITY OF OWNER TRUSTEE.

     It is expressly understood and agreed by the parties hereto that (a) this
Indenture is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as Owner Trustee under the Trust
Agreement, in the exercise of the powers and authority conferred and vested in
it as the Owner Trustee, (b) each of the representations, undertakings and
agreements herein made on the part of the Issuer is made and intended not as
personal representations, undertakings and agreements by Wilmington Trust
Company but is made and intended for the purpose for binding only the Trust
Estate, (c) nothing herein contained shall be construed as creating any
liability on Wilmington Trust Company, individually or personally, to perform
any covenant either expressed or implied contained herein, all such liability,
if any, being expressly waived by the Trustee and the Noteholders and by any
Person claiming by, through or under the Trustee and the Noteholders and (d)
under no circumstances shall Wilmington Trust Company be personally liable for
the payment of any indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Issuer under this Indenture.

     SECTION 3.19.  EXCULPATION OF THE TRUSTEE.


                                   III-21

<PAGE>

     By entering into this Indenture and agreeing to perform the duties of the
Trustee as set forth herein, the Trustee makes no implied or express
representation or warranty to the Noteholders with respect to the sufficiency or
the adequacy in any respect whatsoever of the terms of this Indenture and the
documents executed in connection herewith.  Under no circumstances shall the
Trustee have any liability of any kind whatsoever for the failure of any
Noteholder adequately to review and evaluate to the full satisfaction of such
Noteholder the terms and provisions of this Indenture, the Notes, the Servicing
Agreement, the Sub-Servicing Agreement, and the other documents executed in
connection with this Indenture.  The Trustee shall in no way be liable for the
decision of any Noteholder to purchase any Notes.
 

                                   III-22

<PAGE>

                                 ARTICLE IV

                         SATISFACTION AND DISCHARGE

     SECTION 4.01.  SATISFACTION AND DISCHARGE OF INDENTURE.

     (a)   Whenever the following conditions shall have been satisfied:

     (1) either

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

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

                   (i) have become due and payable, or

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

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

     and the Issuer, in the case of clauses (i), (ii) or (iii) above, has
     deposited or caused to be deposited with the Trustee, in trust for such
     purpose, an amount of cash (which cash, in the case of clauses (ii) and
     (iii) above must constitute Eligible Moneys) sufficient to pay and
     discharge the entire indebtedness on such Notes not theretofore delivered
     to the Trustee for cancellation, for principal and interest to the Maturity
     of their entire unpaid principal amount or the applicable Redemption Date,
     as the case may be;


                                    IV-1

<PAGE>

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

          (3) the Issuer has delivered to the Trustee an Officers' Certificate
     and an Opinion of Counsel each stating that all conditions precedent herein
     provided for the satisfaction and discharge of this Indenture have been
     complied with and covering such other matters as the Trustee may reasonably
     request;

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

     (b)   Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Issuer to the Trustee under Section 6.07, the obligations of
the Trustee to the Issuer and to the Holders of Notes under Section 3.03, the
obligations of the Trustee to the Holders of Notes under Section 4.02 and the
provisions of Article II with respect to lost, stolen, destroyed or mutilated
Notes, registration of transfers of Notes, and rights to receive payments of
principal of and interest on the Notes shall survive and the provisions of
Section 5.06 as they relate to clause (a) of Section 5.06 shall continue for one
year after such satisfaction and discharge.

     SECTION 4.02.  APPLICATION OF TRUST MONEY.

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


                                    IV-2

<PAGE>

                                  ARTICLE V

                            DEFAULTS AND REMEDIES

     SECTION 5.01.  EVENT OF DEFAULT.

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


          (1)     (i) there shall occur a default in the payment of any amount
     due under the Notes by the Maturity Date or (ii) there shall occur a
     failure to apply funds in the Collection Account in accordance with 
     Section 8.02(c) and such failure shall continue for a period of two days 
     or (iii) there shall occur a default in the payment when due of interest 
     on any Class of Notes and such default shall continue for a period of 30 
     days (provided that neither the reimbursement of any Realized Loss Amounts 
     nor interest on any Realized Loss Amounts in respect of any Class of
     Notes will be deemed due unless there exist Available Funds sufficient to
     pay such amount and all prior amounts under the Available Funds Allocation)
     or (iv) there shall occur a failure to pay the Outstanding Principal 
     Balance of each Class of Notes on the Maturity Date.


          (2)     the Issuer shall breach or default in the due observance of
     any one or more of the covenants set forth in Section 3.08;

          (3)     the Issuer shall breach, or default in the due observance or
     performance of, any other of its other covenants in this Indenture, such
     Default shall continue for a period of 30 days after there shall have been
     given, by registered or certified mail, to the Issuer by the Trustee or to
     the Issuer and the Trustee by the Holders of Notes entitled to at least 40%
     of the Voting Rights, a written notice specifying such Default and
     requiring it to be remedied and stating that such notice is a "Notice of
     Default" hereunder;

          (4)     there shall occur the entry of a decree or order for relief
     by a court having jurisdiction in respect of the Issuer in an involuntary
     case under the federal bankruptcy laws, as now or hereafter in effect, or
     any other present or future federal or state bankruptcy, insolvency or
     similar law, or appointing a receiver, liquidator, assignee, 

                                     V-1

<PAGE>

     trustee, custodian, sequestrator or other similar official of the Issuer or
     of any substantial part of its property, or ordering the winding up or
     liquidation of the affairs of the Issuer and the continuance of any such
     decree or order unstayed and in effect for a period of 60 consecutive days;
     or

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

     Notwithstanding the foregoing, on or prior to the Maturity Date, any of
the events described in this Section 5.01 will not be an Event of Default (i)
in respect of the Class A-2 Notes until the Class A-1 Notes have been paid in
full, (ii) in respect of the Class A-3 Notes until the Class A-1 Notes and
Class A-2 Notes have been paid in full and (iii) in respect of the Class A-4
Notes until the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes have been
paid in full. 

     SECTION 5.02.  ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.


     Prior to the Maturity Date, upon the occurrence of an Event of Default, 
the Trustee or the Holders entitled to at least 66 2/3% of the Voting Rights 
of the Class of Notes with the lowest numerical Class designation then
Outstanding may declare the principal of the Notes to be immediately due and
payable by a notice in writing to the Issuer (and to the Trustee if given by
such Noteholders); provided, however, that such Class of Notes or the Trustee
may make such declaration only if the Event of Default affects, and in the case
of a default in the payment of the Notes such payment default relates to, the
Class of Notes with the lowest numerical Class designation then Outstanding. 


                                     V-2

<PAGE>


Upon such declaration, the Trustee may, or at the direction of the Holders
entitled to at least 66 2/3% of the Class of Notes with the lowest numerical
Class designation then Outstanding shall, pursue one or more remedies subject
to, and in accordance with the terms of this Indenture, including without
limitation, selling the Accounts at one or more public or private sales. 
Notwithstanding the acceleration of the maturity of the Notes, the Trustee shall
refrain from selling the Accounts and continue to apply all amounts received on
the Accounts to payments due on the Notes in accordance with their terms if (i)
the Trustee determines that anticipated collections on the Accounts would be
sufficient to pay the Class of Notes with the lowest numerical Class
designation then Outstanding and (ii) the Trustee has not been otherwise
directed by the Holders of all the Notes.  On or prior to the Maturity Date, a
Class of Notes which does not have the lowest numerical Class designation then
Outstanding will not have any right to direct the Trustee to pursue any remedies
or actions hereunder.


      On or after the Maturity Date, if an Event of Default occurs or shall
have occurred, the Trustee shall declare the principal of the Notes to be 
immediately due and payable by a notice in writing to the Issuer.  Upon such 
declaration, the Trustee may, or at the direction of the Holders entitled to 
at least a majority of the Voting Rights of all Classes of Notes shall pursue 
one or more remedies subject to, and in accordance with the terms hereof, 
including without limitation, selling the Accounts at one or more public or 
private sales. Notwithstanding the acceleration of the maturity of the Notes, 
the Trustee shall refrain from selling the Accounts and continue to apply all 
amounts received on the Accounts to payments due on the Notes in accordance 
with their terms if (i) the Trustee determines that anticipated collections on 
the Accounts would be sufficient to pay all the Classes of Notes then 
Outstanding.

                                     V-3

<PAGE>


and (ii) the Trustee has not been otherwise directed by the holders of all 
the Notes.


     Notwithstanding the foregoing, the Trustee may not declare the Notes to be
due and payable pursuant to this Section 5.02 as a result of an Event of Default
arising solely from the Issuer's failure to perform any of its agreements set
forth in Section 6.07.


     At any time after such a declaration of acceleration of Maturity of the
Notes has been made and before a judgment or decree for payment of the money due
has been obtained by the Trustee as hereinafter in this Article provided, the
Holders of such Class of Notes entitled to the Voting Rights specified above, by
written notice to the Issuer and the Trustee, may rescind and annul such
declaration and its consequences if


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

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

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

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

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

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


                                     V-4

<PAGE>

     The Issuer covenants that if an Event of Default shall occur and be
continuing, the Issuer will pay to the Trustee for the benefit of the Holders of
the Notes:


          (1) (A) if the Notes have not been declared due and payable, the whole
     amount then due and payable on the Notes in respect of principal, including
     Realized Loss Amounts; or

                 (B) if the Notes have been declared due and payable and such
     declaration and its consequences have not been rescinded and annulled, the
     principal balance of all Outstanding Notes;

          (2) (A) if the Notes have not been declared due and payable, the whole
     amount then due and payable on the Notes in respect of interest, including
     interest on any overdue installments of principal at the applicable Note
     Interest Rate, and, to the extent payment of such interest on interest
     shall be legally enforceable, interest on any overdue installments of
     interest at the applicable Note Interest Rate and interest due and payable
     with respect to unreimbursed Realized Loss Amounts; or

                 (B) if the Notes have been declared due and payable and such
     declaration and its consequences have not been rescinded and annulled, (i)
     with respect to the period prior to the date of such declaration, accrued
     interest to the date of such declaration, at the applicable Note Interest
     Rate, on the Outstanding Principal Balance of each Note and interest to the
     date of such declaration at the applicable Note Interest Rate, on any
     installment of interest on each Note that was not paid when due, but only
     to the extent that payment of such interest on interest shall be legally
     enforceable and interest to the date of such declaration at the applicable
     Note Interest Rate, on any previously unreimbursed Realized Loss Amounts
     and (ii) with respect to the period from and including the date of such
     declaration, interest to the date such payment is made, at the applicable
     Note Interest Rate, on the Outstanding Principal Balance of each Note and
     on any installment of interest on such Note that was not paid when due, but
     only to the extent that payment of such interest on interest 


                                     V-5

<PAGE>


     shall be legally enforceable and on any previously unreimbursed Realized
     Loss Amounts; and


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


     If the Issuer fails to pay such amounts forthwith upon such demand, or in
any event if an Event of Default under clause (2) of Section 5.01 shall have
occurred, the Trustee, in its own name and as trustee of an express trust, may
institute a Proceeding for the collection of the sums so due and unpaid, and may
prosecute such Proceeding to judgment or final decree, and may enforce the same
against the Issuer or any other obligor upon the Notes and collect the moneys
adjudged or decreed to be payable in the manner provided by law; provided,
however, in the case of a default under Section 5.01 on the Class A-2 Notes, the
Trustee shall not institute such Proceeding unless the Outstanding Principal
Balance of the Class A-1 Notes has been reduced to zero; in the case of a
default under Section 5.01 on the Class A-3 Notes, the Trustee shall not
institute such Proceeding unless the Outstanding Principal Balance of the Class
A-1 and Class A-2 Notes have been reduced to zero; in the case of a default
under Section 5.01 on the Class A-4 Notes, the Trustee shall not institute such
Proceeding unless the Outstanding Principal Balance of the Class A-1, Class A-2
and Class A-3 Notes have been reduced to zero.


     If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Noteholders by such appropriate Proceedings as the 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 enforce any other proper remedy,
including, without limitation, instituting a Proceeding prior to any declaration
of acceleration of the Maturity of the Notes for the collection of all amounts
then due and unpaid on the Notes, prosecuting such Proceeding to final judgment
or decree, enforcing the same against the Trust Estate and collecting out of the
property, wherever situated, of the Issuer the moneys 

                                     V-6

<PAGE>


adjudged or decreed to be payable in the manner provided by law, PROVIDED,
HOWEVER, that neither the Trustee nor any owner of any equity interest in the
Issuer, nor any of their respective partners, beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for any
amounts payable under the Notes or this Indenture.


     SECTION 5.04.  REMEDIES.


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


          (a)     institute Proceedings for the collection of all amounts then
     payable on the Notes, or under this Indenture in respect of Notes, whether
     such amounts have become due and payable by declaration of acceleration or
     otherwise and all amounts payable under the Servicing Agreement, enforce
     any judgment obtained, and collect from the Issuer moneys adjudged due;

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

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

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

          (e)     exercise any remedies of a secured party under the Uniform
     Commercial Code and take any other appropriate action to protect and
     enforce the rights and remedies of the Trustee or the Holders of the Notes
     hereunder.

     In the event the Trustee takes any of the foregoing actions to protect the
Noteholder's rights or interests under the Indenture, the Trustee shall be
indemnified from the Trust Estate against any loss, liability or expense arising
out of or in connection with any such actions.


                                     V-7

<PAGE>


     SECTION 5.05.  PRESERVATION OF TRUST ESTATE.

     (a)   If the Notes have been declared due and payable following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Trustee shall apply all Remittances and other amounts receivable
with respect to the Trust Estate, first, to the Issuer Expenses that consists of
the fees of the Owner Trustee and the Trustee and the Servicing Fee and then to
the payment of the principal of and interest on the Notes as and when such
principal and interest would have become due pursuant to the terms hereof and of
the Notes and to such other purposes as are specified in this Indenture, with
all such Remittances and other amounts being applied as if there had not been a
declaration of acceleration of the Maturity of the Notes, provided that:

          (i)     the Trustee shall have determined that the Remittances and
     other amounts receivable with respect to the Trust Estate are sufficient to
     provide the funds required to pay the principal of and interest on such
     Classes of Notes specified in Section 5.02 hereof as and when such
     principal and interest would have become due pursuant to the terms hereof
     and of the Notes if there had not been a declaration of acceleration of the
     Maturity of the Notes;

          (ii)    all the Holders of the Notes shall not have directed the
     Trustee to sell the Trust Estate securing such Notes;


          (iii)   there shall have been delivered to the Trustee an Opinion of
     Counsel to the effect that notwithstanding the acceleration of the Maturity
     of the Notes, but after giving effect to the provisions of this Section
     5.05:

                 (A) in accordance with the provisions of this Section 5.05,
          the Issuer is legally obligated to make payments of principal of and
          interest on the Notes and perform its obligations hereunder in the
          same manner and amounts as it was legally obligated to make such
          payments prior to the acceleration of the Maturity of the Notes; and


                                     V-8

<PAGE>

                 (B) such obligation is legally enforceable under applicable
          law, subject to bankruptcy, reorganization, insolvency and other laws
          affecting the enforcement of creditors' rights generally and to
          general principles of equity (regardless whether such enforceability
          is considered in a proceeding in equity or at law);


          (iv)    unless the Trust Estate has already been acquired by the
     Trustee in a Sale conducted pursuant to Section 5.18 or the lien of this
     Indenture has been otherwise foreclosed and all rights of the Issuer in the
     Trust Estate have been terminated by such foreclosure, the Issuer shall not
     have exercised the Issuer's rights, if any, under applicable law to compel
     the Sale of the Trust Estate; and

          (v)    if the Trustee shall have acquired the entire Trust Estate by
     purchasing it at any public or private Sale conducted pursuant to Section
     5.18, or the lien of this Indenture shall have been otherwise foreclosed
     and all rights of the Issuer in the Trust Estate have been terminated by
     such foreclosure, there shall have been delivered to the Trustee an Opinion
     of Counsel to the effect that:


                 (A) the Trust Estate will not as a result of such action be
          deemed an association taxable as a corporation under the Internal
          Revenue Code of 1986 (or any successor federal income tax statute) and

                 (B) notwithstanding the acquisition of the Trust Estate by the
          Trustee, the rights, powers and duties of the Trustee with respect to
          the Trust Estate (or the proceeds thereof) and the Noteholders and the
          rights of the Noteholders shall continue to be governed by the terms
          of this Indenture.

     (b)   The Trustee may in its sole discretion rely upon an opinion of an
Independent investment banking firm of national reputation as to the feasibility
of any action proposed to be taken in accordance with subsection (a) of this
Section 5.05 and as to the sufficiency of the Remittances and other amounts
receivable with respect to the Trust Estate to make the required payments of
principal of and interest on the Notes, which opinion 

                                     V-9

<PAGE>

shall be conclusive evidence as to such feasibility or sufficiency.  Such an
opinion may, but need not, be obtained by the Trustee in its sole discretion or
may be delivered to the Trustee by an Independent investment banking firm of
national reputation engaged by the Issuer to prepare and deliver such opinion.


     (c)   Pending determination by the Trustee as to whether the criteria set
forth in subsection (a) of this Section 5.05 are satisfied, all Remittances and
other amounts receivable with respect to the Trust Estate shall be applied first
to payment of Issuer Expenses that consists of the fees of the Owner Trustee and
the Trustee and the Servicing Fee and then pursuant to Section 8.02(c) to the
payment of the principal of and interest on the Notes as and when such principal
and interest would have become due pursuant to the terms hereof and of the Notes
if there had not been a declaration of acceleration of the Maturity of the
Notes.  The Trustee shall make its determination whether the criteria set forth
in subsection (a) of this Section 5.05 can be satisfied as promptly as
practicable following any declaration of acceleration of the Maturity of the
Notes.


     (d)   If the Trustee determines that the criteria set forth in subsection
(a) of this Section 5.05 are not or cannot be satisfied, then all amounts
collected by the Trustee pursuant to this Section 5.05 or otherwise shall be
applied in accordance with Section 5.08.

     SECTION 5.06.  TRUSTEE MAY FILE PROOFS OF CLAIM.


     (a)   The Trustee shall promptly notify the Noteholders of (i) the
commencement of any of the events or proceedings (individually, an "Insolvency
Proceeding") described in Section 5.01(5) or (6) hereof with respect to the
Issuer and (ii) the making of any claim in connection with any Insolvency
Proceeding seeking the avoidance as a preferential transfer (a "Preference
Claim") of any payment of principal of, or interest on, the Notes.  The
obligation of the Trustee to notify the Noteholders of any Insolvency Proceeding
or Preference Claims is expressly limited to such matters of which the Trustee
has actual knowledge.  The Trustee, on its behalf and on behalf of the Holders,
may, at any time during the continuation of an Insolvency Proceeding, direct all
matters relating to such 


                                    V-10

<PAGE>


Insolvency Proceeding, including, without limitation, (i) all matters relating
to any Preference Claim, (ii) the direction of any appeal of any order relating
to any Preference Claim and (iii) the posting of any surety, supersedeas or
performance bond pending any such appeal.  


     (b)   In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, composition or other judicial
Proceeding relative to the Issuer or any other obligor upon any of the Notes or
the property of the Issuer or of such other obligor or their creditors, the
Trustee (irrespective of whether the Notes shall then be due and payable as
therein expressed or by declaration or otherwise) shall be entitled and
empowered, by intervention in such Proceeding or otherwise, to

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

          (ii)    collect and receive any moneys or other property payable or
     deliverable on any such claims and to distribute the same,

and any receiver, assignee, trustee, liquidator, or sequestrator (or other
similar official) in any such Proceeding is hereby authorized by each Noteholder
to make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Noteholders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.07.

     Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment, or composition affecting any of the
Notes or the 

                                    V-11

<PAGE>

rights of any Holder thereof, or to authorize the Trustee to vote in respect of
the claim of any Noteholder in any such Proceeding.

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


     All rights of action and claims under this Indenture or any of the Notes
may be prosecuted and enforced by the Trustee without the possession of any of
the Notes or the production thereof in any Proceeding relating thereto, and any
such Proceeding instituted by the Trustee in accordance with Section 5.03 shall
be brought in its own name as trustee of an express trust, and any recovery of
judgment shall be for the benefit of the Holders of the Notes in the priority
specified herein.  Any surplus shall be available, in accordance with Section
5.08, for the payment of the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.


     SECTION 5.08.  APPLICATION OF MONEY COLLECTED.

     If the Notes have been declared due and payable following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, any money collected by the Trustee with respect to the Notes pursuant
to this Article or otherwise and any moneys which may then be held or thereafter
received by the Trustee as security for the Notes shall (unless such money is
being applied in accordance with Section 5.05(a)) be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the
distribution of the entire amount due on account of principal of and interest on
any Notes, upon presentation and surrender thereof:


          FIRST: To the payment of Issuer Expenses that consists of the fees of
     the Owner Trustee and the Trustee and the Servicing Fee;


          SECOND: To the holders of the Class A-1 Notes, in an amount up to the
     Interest Accrual Amount thereof;

          THIRD: To the holders of the Class A-1 Notes, in an amount up to all
     unreimbursed Class Interest Shortfalls 

                                    V-12

<PAGE>

     related thereto, together with accrued interest thereon;

          FOURTH: To the holders of the Class A-2 Notes, in an amount up to the
     Interest Accrual Amount thereof ;

          FIFTH: To the holders of the Class A-2 Notes, in an amount up to all
     unreimbursed Class Interest Shortfalls related thereto, together with
     accrued interest thereon;

          SIXTH: To the holders of the Class A-3 Notes, in an amount up to the
     Interest Accrual Amount thereof;

          SEVENTH: To the holders of the Class A-3 Notes, in an amount up to all
     unreimbursed Class Interest Shortfalls related thereto, together with
     accrued interest thereon;

          EIGHTH: To the holders of the Class A-4 Notes, in an amount up to the
     Interest Accrual Amount thereof;

          NINTH: To the holders of the Class A-4 Notes, in an amount up to all
     unreimbursed Class Interest Shortfalls related thereto, together with
     accrued interest thereon;

          TENTH: To the holders of the Class A-1 Notes, in an amount up to the
     aggregate Class A-1 Outstanding Principal Balance of the Class A-1 Notes,
     based upon their respective Class A-1 Outstanding Principal Balances,
     ratably, without preference or priority of any kind;

          ELEVENTH: To the holders of the Class A-1 Notes, accrued and unpaid
     interest at the related Note Interest Rate on the amount of any
     unreimbursed Class A-1 Realized Loss Amounts previously allocated to the
     Class A-1 Notes (provided that any such amount will not be due and 
     payable unless there exist Available Funds sufficient to pay such amount
     and all prior amounts under this Available Funds Allocation);

          TWELFTH: To the holders of the Class A-1 Notes, in an amount up to the
     amount of any unreimbursed Class A-1 Realized Loss Amounts previously
     allocated thereto (provided that any such amount will not be due and 
     payable unless there exist Available Funds sufficient to pay such amount
     and all prior amounts under this Available Funds Allocation);


                                    V-13

<PAGE>


          THIRTEENTH: To the holders of the Class A-2 Notes, in an amount up to
     the aggregate Class A-2 Outstanding Principal Balance of the Class A-2
     Notes, based upon their respective Class A-2 Outstanding Principal
     Balances, ratably, without preference or priority of any kind;


          FOURTEENTH: To the holders of the Class A-2 Notes, accrued and unpaid
     interest at the related Note Interest Rate on the amount of any
     unreimbursed Class A-2 Realized Loss Amounts previously allocated to the
     Class A-2 Notes (provided that any such amount will not be due and 
     payable unless there exist Available Funds sufficient to pay such amount
     and all prior amounts under this Available Funds Allocation);

          FIFTEENTH: To the holders of the Class A-2 Notes, in an amount up to
     the amount of any unreimbursed Class A-2 Realized Loss Amounts previously
     allocated thereto (provided that any such amount will not be due and 
     payable unless there exist Available Funds sufficient to pay such amount
     and all prior amounts under this Available Funds Allocation);


          SIXTEENTH: To the holders of the Class A-3 Notes, in an amount up to
     the aggregate Class A-3 Outstanding Principal Balance of the Class A-3
     Notes, based upon their respective Class A-3 Outstanding Principal
     Balances, ratably, without preference or priority of any kind;


          SEVENTEENTH: To the holders of the Class A-3 Notes, accrued and unpaid
     interest at the related Note Interest Rate on the amount of any
     unreimbursed Class A-3 Realized Loss Amounts previously allocated to the
     Class A-3 Notes (provided that any such amount will not be due and 
     payable unless there exist Available Funds sufficient to pay such amount
     and all prior amounts under this Available Funds Allocation);

          EIGHTEENTH: To the holders of the Class A-3 Notes, in an amount up to
     the amount of any unreimbursed Class A-3 Realized Loss Amounts previously
     allocated thereto (provided that any such amount will not be due and 
     payable unless there exist Available Funds sufficient to pay such amount
     and all prior amounts under this Available Funds Allocation);

          NINETEENTH: To the holders of the Class A-4 Notes, in an amount up to
     the aggregate Class A-4 Outstanding Principal Balance of the Class A-4
     Notes, based upon their respective Class A-4 Outstanding Principal
     Balances, ratably, without preference or priority of any kind;


          TWENTIETH: To the holders of the Class A-4 Notes, accrued and unpaid
     interest at the related Note Interest 

                                    V-14

<PAGE>

     Rate on the amount of any unreimbursed Class A-4 Realized Loss Amounts
     previously allocated to the Class A-4 Notes (provided that any such amount
     will not be due and payable unless there exist Available Funds 
     sufficient to pay such amount and all prior amounts under this Available
     Funds Allocation);

          TWENTY-FIRST: To the holders of the Class A-4 Notes, in an amount
     up to the amount of any unreimbursed Class A-4 Realized Loss Amounts
     previously allocated thereto (provided that any such amount will not be
     due and payable unless there exist Available Funds sufficient
     to pay such amount and all prior amounts under this Available Funds
     Allocation);

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

     SECTION 5.09.  LIMITATION ON SUITS.

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

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


          (2) the Holders of Notes entitled to at least 40% of the Voting Rights
     (in the case of a declaration that the Notes are immediately due and
     payable, a sale, foreclosure or other action with respect to the Accounts,
     the required holders of Notes as set forth in Section 5.02 hereof) shall
     have made written request to the Trustee to institute Proceedings in
     respect of such Event of Default in its own name as Trustee hereunder;


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

          (4) the Trustee for 60 days after its receipt of such notice, request
     and offer of indemnity has failed to institute any such Proceeding; and

          (5) no direction inconsistent with such written request has been given
     to the Trustee during such 60-day period by the Holders of Notes entitled
     to more than 50% of the Voting Rights;


                                    V-15

<PAGE>


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


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


     The Holder of any Note shall have the right, to the extent permitted 
by applicable law, which right is absolute and unconditional except to the 
extent restricted by applicable law, to receive payment of each installment 
of interest when due and payable on such Note on the respective Payment Dates 
of such installments of interest and to receive payment of each installment 
of principal of such Note when due (or in the case of any Note called for 
redemption, on the date fixed for such redemption) and to institute suit for 
the enforcement of any such payment, and except as otherwise set forth in 
this Indenture, such right shall not be impaired without the consent of such 
Holder. 


     SECTION 5.11.  RESTORATION OF RIGHTS AND REMEDIES.

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

     SECTION 5.12.  RIGHTS AND REMEDIES CUMULATIVE.

     No right or remedy herein conferred upon or reserved to the Trustee or to
the Noteholders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the 


                                    V-16

<PAGE>

extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise.  The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.

     SECTION 5.13.  DELAY OR OMISSION NOT WAIVER.

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

     SECTION 5.14.  CONTROL BY THE NOTEHOLDERS.


     The Holders of Notes entitled to 50% of the Voting Rights (in the case of a
declaration that the Notes are immediately due and payable, a sale, foreclosure
or other action with respect to the Accounts, the required holders of Notes as
set forth in Section 5.02 hereof), shall have the right to direct the time,
method and place of conducting any Proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee; provided that


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


          (2) any direction to the Trustee to undertake a Sale of the Trust
     Estate shall be by the Holders of Notes entitled to the percentage of the
     Voting Rights specified in Section 5.18(b)(1) or (2), whichever is
     applicable,


          (3) if the conditions to retention of the Trust Estate set forth in
     Section 5.05(a) have been satisfied, then any direction by less than all of
     the Noteholders to the Trustee to undertake a Sale of the Trust Estate
     shall be of no force and effect, and



                                    V-17

<PAGE>

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


     Notwithstanding anything herein to the contrary, any direction to the
Trustee to declare the Notes due and payable shall be made by those Classes of
Notes as specified in Section 5.02 hereof.

     SECTION 5.15.  WAIVER OF PAST DEFAULTS.

     The Holders of such Class of Notes entitled to the Voting Rights specified
in Section 5.02 hereof may, on behalf of the Holders of all the Notes, waive any
past Default hereunder and its consequences, except a Default


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

          (2) in respect of a covenant or provision hereof which under Section
     9.02 cannot be modified or amended without the consent of the Holder of
     each Outstanding Note affected.

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

     SECTION 5.16.  UNDERTAKING FOR COSTS.

     All parties to this Indenture agree, and each Holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant 


                                    V-18

<PAGE>

in such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this Section shall
not apply to any suit instituted by the Trustee, to any suit instituted by any
Noteholder, or group of Noteholders, holding in the aggregate Notes representing
more than 10% of the Voting Rights, or to any suit instituted by any Noteholder
for the enforcement of the payment of any installment of interest on any Note on
or after the maturity thereof expressed in such Note or for the enforcement of
the payment of any installment of principal of any Note when due (or, in the
case of a Note called for redemption, on or after the applicable redemption
date) or for the enforcement of the payment of any installment of principal of
any Note when due as indicated in the Payment Date Statement prepared and
delivered by the Trustee pursuant to Section 2.09(e).

     SECTION 5.17.  WAIVER OF STAY OR EXTENSION LAWS.

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

     SECTION 5.18.  SALE OF TRUST ESTATE.


     (a)   The power to effect any sale 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 5.18.  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 shall have been paid.  To the fullest extent permitted by law,
the Trustee hereby expressly waives its right to any amount fixed by law as
compensation for any Sale.



                                    V-19

<PAGE>

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

          (1) the required Holders of Outstanding Notes specified in Section
     5.02 hereof consent to or direct the Trustee to make, such Sale, or

          (2) the Trustee determines, in its sole discretion, that the
     conditions for retention of the Trust Estate set forth in Section
     5.05(a)(i), (iii) or (iv) cannot be satisfied (in making any such
     determination, the Trustee may rely upon an opinion of an Independent
     investment banking firm obtained and delivered as provided in Section
     5.05(b) unless a contrary opinion is delivered by an Independent investment
     banking firm engaged by the Issuer pursuant to Section 5.05(b), in which
     event the Trustee shall not be protected in relying solely upon either such
     opinion but may nevertheless in its discretion make a determination as to
     whether the conditions for retention of the Trust Estate set forth in
     Section 5.05(a)(i) and (v) can or cannot be satisfied), and the required
     Holders of Notes specified in Section 5.02 hereof consent to such Sale.


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


     (c)   Unless the required Holders of Outstanding Notes specified under
Section 5.02 hereof have otherwise consented or directed the Trustee, at any
public Sale of all or any portion of the Trust Estate at which a minimum bid
equal to or greater than the entire amount which would be payable to the Holders
under the Notes, in full payment thereof in accordance with Section 5.08 on the
Payment Date next succeeding the date of such Sale has not been established by
the Trustee and no Person bids an amount equal to or greater than such amount,
the Trustee shall bid an amount at least $1.00 more than the highest other bid;
provided that the payment for such bid will be limited to the application of the
credit as set forth in Section 5.18(d)(2).


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



                                    V-20

<PAGE>

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

          (2) the 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, and, in
     lieu of paying cash therefor, may make settlement for the purchase price by
     crediting the gross Sale price against the sum of (A) the amount which
     would be distributable to the Holders of the Notes as a result of such Sale
     in accordance with Section 5.08 on the Payment Date next succeeding the
     date of such Sale and (B) the expenses of the Sale and of any Proceedings
     in connection therewith which are reimbursable to it, without being
     required to produce the Notes in order to complete any such Sale or in
     order for the net Sale price to be credited against such Notes, and any
     property so acquired by the Trustee shall be held and dealt with by it in
     accordance with the provisions of this Indenture;

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

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


                                    V-21

<PAGE>

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

     SECTION 5.19.  ACTION ON NOTES.

     The 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 Trustee or the Holders of Notes
shall be impaired by the recovery of any judgment by the Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion of
the Trust Estate.
 


                                    V-22

<PAGE>

                                 ARTICLE VI

                                 THE TRUSTEE

     SECTION 6.01.  DUTIES OF TRUSTEE.

     (a)   If an Event of Default known to the Trustee has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.

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

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

          (2)     In the absence of bad faith on its part, the Trustee may
     conclusively rely, as to the truth of the statements and the correctness of
     the opinions expressed therein, upon certificates or opinions furnished to
     the Trustee and conforming to the requirements of this Indenture.  The
     Trustee shall, however, examine such certificates and opinions to determine
     whether they conform to the requirements of this Indenture but need not
     verify the accuracy of the contents thereof or whether procedures specified
     by or pursuant to the provisions of this Indenture have been followed in
     the preparation thereof.

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

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

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


                                    VI-1

<PAGE>

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

     (d)   For all purposes under this Indenture, the Trustee shall not be
deemed to have notice of any Event of Default described in Section 5.01(1) or
5.01(3) through 5.01(6) or any Default described in Section 5.01(1) or 5.01(3)
through 5.01(6) unless a Responsible Officer assigned to and working in the
Trustee's corporate trust department has actual knowledge thereof or unless
written notice of any event which is in fact such an Event of Default or Default
is received by the Trustee at the Corporate Trust Office, and such notice
references the Notes, the Issuer, the Trust Estate or this Indenture.

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

     (f)   Every provision of this Indenture that in any way relates to the
Trustee is subject to the provisions of this Section.

     (g)   Notwithstanding any extinguishment of all right, title and interest
of the Issuer in and to the Trust Estate following an Event of Default and a
consequent declaration of acceleration of the Maturity of the Notes secured
thereby, whether such 


                                    VI-2

<PAGE>

extinguishment occurs through a Sale of the Trust Estate to another Person, the
acquisition of the Trust Estate by the Trustee or otherwise, the rights, powers
and duties of the Trustee with respect to the Trust Estate (or the proceeds
thereof) and the Holders of the Notes and the rights of such Noteholders shall
continue to be governed by the terms of this Indenture.

     SECTION 6.02.  NOTICE OF DEFAULT.

     Upon a Default becoming known to the Trustee, the Trustee shall, within 90
days after the occurrence of such Default becomes known to the Trustee, transmit
notice of such Default by mail to all Holders of Notes as to which such Default
has occurred and to S&P, unless such Default shall have been cured or waived;
PROVIDED, HOWEVER, that except in the case of a Default of the type described in
Section 5.01(2), the Trustee shall be protected in withholding such notice if
and so long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interests of the Holders
of the Notes; and PROVIDED, FURTHER, that in the case of any Default of the
character specified in Section 5.01(4) or 5.01(5) no such notice to Noteholders
shall be given until at least 30 days after the occurrence thereof.

     SECTION 6.03.  RIGHTS OF TRUSTEE.

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

     (b)   Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel; PROVIDED, HOWEVER, that the
Trustee may not, by relying on an Officer's Certificate or Opinion of Counsel,
refrain from making payments of principal or interest on the Notes or exercise
remedies pursuant to Article V.  The Trustee shall not be liable for any action
it takes or omits to take in good faith in reliance on the Certificate or
Opinion.


                                    VI-3

<PAGE>

     (c)   The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.

     (d)   The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers as provided herein.

     (e)   The Trustee shall not be liable for any action it takes or omits to
take in good faith pursuant to Section 5.14 hereof at the direction of Holders
of Notes entitled to more than 50% of the Voting Rights, after notice to the
Holders of the Notes of a Default under this Indenture.  

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

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

     SECTION 6.05.  MAY HOLD NOTES.

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

     SECTION 6.06.  MONEY HELD IN TRUST.

     Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by Section 8.04, by any other
provision of this Indenture or by law.  The Trustee shall be under no liability
for interest on any money 


                                    VI-4

<PAGE>

received by it hereunder except as otherwise agreed with the Issuer and except
to the extent of income or other gain on investments which are obligations of
the Trustee, in its commercial capacity, and income or other gain actually
received by the Trustee on investments which are obligations of others.

     SECTION 6.07.  COMPENSATION AND REIMBURSEMENT.

     The Issuer agrees

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

          (2)     except as otherwise expressly provided herein, to reimburse
     the Trustee upon its request for all reasonable expenses, disbursements and
     advances incurred or made by the Trustee in connection with the
     administration of the Trust Estate pursuant to the terms of this Indenture
     (including the reasonable compensation and the expenses and disbursements
     of its agents and counsel incurred in connection with litigation affecting
     the Trust Estate or the Trustee), except any such expense, disbursement or
     advance as may be attributable to its negligence or bad faith; and

          (3)     to indemnify the Trustee and its agents for, and to hold them
     harmless against, any loss, liability or expense incurred without
     negligence or bad faith on their part, arising out of, or in connection
     with, the acceptance or administration of this trust, including the costs
     and expenses of defending themselves against any claim in connection with
     the exercise or performance of any of their powers or duties hereunder,
     provided that:

                 (i)     with respect to any such claim, the Trustee shall have
          given the Issuer written notice thereof promptly after the Trustee
          shall have knowledge thereof;


                                    VI-5

<PAGE>

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

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

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

     SECTION 6.08.  ELIGIBILITY; DISQUALIFICATION.


     This Indenture shall always have a Trustee who satisfies the 
requirements of TIA Section  310(a)(1) and who is Independent of the Issuer 
and Servicer. The Trustee shall always have a combined capital and surplus as 
stated in Section 6.09.  The Trustee shall be subject to TIA Section 310(b).  
The Trustee shall have a place of business in the State of Florida.  
Any successor Trustee shall execute the Servicing Agreement and this 
Indenture. 


     SECTION 6.09.  TRUSTEE'S CAPITAL AND SURPLUS.

     The Trustee or any successor or substitute trustee shall at all times have
a combined capital and surplus of at least $50,000,000.  If the Trustee
publishes annual reports of condition of the type described in TIA Section
310(a)(2), its combined 



                                    VI-6

<PAGE>

capital and surplus for purposes of this Section 6.09 shall be as set forth in
the latest such report.



     SECTION 6.10.  RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.

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

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

     (c) The Trustee may be removed at any time for reasonable cause by Act of
the Holders of Notes entitled to more than 50% of the Voting Rights delivered to
the Trustee and to the Issuer.

     (d) If at any time:

          (1) the Trustee shall have a conflicting interest prohibited by
     Section 6.08 and shall fail to resign or eliminate such conflicting
     interest in accordance with Section 6.08 after written request therefor by
     the Issuer or by any Noteholder, or

          (2) the Trustee shall cease to be eligible under Section 6.09 or shall
     become incapable of acting or shall be adjudged a bankrupt or insolvent, or
     a receiver of the Trustee or of its property shall be appointed, or any
     public officer shall take charge or control of the Trustee or of its
     property or affairs for the purpose of rehabilitation, conservation or
     liquidation,



                                    VI-7

<PAGE>

then, in any such case, (i) the Issuer by an Issuer Order may remove the
Trustee, or (ii) subject to Section 5.16, any Noteholder who has been a bona
fide Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.

     (e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of the Trustee for any cause, the
Issuer by an Issuer Order shall promptly appoint a successor Trustee.  If within
one year after such resignation, removal or incapability or the occurrence of
such vacancy, a successor Trustee has not been appointed by the Issuer, then a
successor trustee shall be appointed by Act of the Holders of Notes entitled to
more than 50% of the Voting Rights delivered to the Issuer and the retiring
Trustee.  The successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor Trustee and supersede the
successor Trustee appointed by the Issuer.  If no successor Trustee shall have
been so appointed by the Issuer or Noteholders or the successor Trustee shall
not have accepted appointment in the manner hereinafter provided, any Noteholder
who has been a bona fide Holder of a Note for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.

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

     SECTION 6.11.  ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.

     Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Issuer and the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee.  


                                    VI-8

<PAGE>

Notwithstanding the foregoing, on request of the Issuer or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an Instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee, and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder subject nevertheless to its lien, if any, provided for in
Section 6.07.  Upon request of any such successor Trustee, the Issuer shall
execute and deliver any and all instruments for more fully and certainly vesting
in and confirming to such successor Trustee all such rights, powers and trusts.

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

     SECTION 6.12.  MERGER; CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS
OF TRUSTEE.

     Any entity into which the Trustee may be merged or converted or with which
it may be consolidated, or any entity resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any entity succeeding
to all or substantially all of the corporate trust business of the Trustee,
shall be the successor of the Trustee hereunder, provided such entity shall be
otherwise qualified and eligible under this Article, without the execution or
filing of any paper or any further act on the part of any of the parties
hereto.  In case any Notes have been authenticated, but not delivered, by the
Trustee then in office, any successor by merger, conversion or consolidation to
such authenticating Trustee may adopt such authentication and deliver the Notes
so authenticated with the same effect as if such successor Trustee had
authenticated such Notes.

     SECTION 6.13.  PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER.


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



                                    VI-9

<PAGE>

     SECTION 6.14.  CO-TRUSTEES AND SEPARATE TRUSTEES.

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

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

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

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

          (2) The rights, powers, duties and obligations hereby conferred or
     imposed upon the Trustee in respect of any property covered by such
     appointment shall be conferred or 


                                    VI-10

<PAGE>

     imposed upon and exercised or performed by the Trustee or by the Trustee
     and such co-trustee or separate trustee jointly, as shall be provided in
     the instrument appointing such co-trustee or separate trustee, except to
     the extent that under any law of any jurisdiction in which any particular
     act is to be performed, the Trustee shall be incompetent or unqualified to
     perform such act, in which event such rights, powers, duties and
     obligations shall be exercised and performed by such co-trustee or separate
     trustee.

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

          (4) No co-trustee or separate trustee hereunder shall be personally
     liable by reason of any act or omission of the Trustee, or any other such
     trustee hereunder, and the Trustee shall not be personally liable by reason
     of any act or omission of any co-trustee or other such separate trustee
     hereunder.

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


                                    VI-11

<PAGE>

     SECTION 6.15.  AUTHENTICATING AGENTS.

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

     Any Authenticating Agent shall also serve as Note Registrar or co-Note
Registrar as provided in Section 2.07.  Any Authenticating Agent appointed by
the Trustee pursuant to the terms of this Section 6.15 shall deliver to the
Trustee as a condition precedent to the effectiveness of such appointment an
instrument accepting the trusts, duties and responsibilities of Authenticating
Agent and of Note Registrar or co-Note Registrar and indemnifying the Trustee
for and holding the Trustee harmless against, any loss, liability or expense
(including reasonable attorneys' fees) incurred without negligence or bad faith
on its part, arising out of or in connection with the acceptance, administration
of the trust or exercise of authority by such Authenticating Agent, Note
Registrar or co-Note Registrar.

     Any entity into which any Authenticating Agent may be merged or converted
or with which it may be consolidated, or any entity resulting from any merger,
consolidation or conversion to which any Authenticating Agent shall be a party,
or any entity 


                                    VI-12

<PAGE>

succeeding to the corporate trust business of any Authenticating Agent, shall be
the successor of the Authenticating Agent hereunder, if such successor entity is
otherwise eligible under this Section, without the execution or filing of any
further act on the part of the parties hereto or the Authenticating Agent or
such successor corporation.

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

     The Issuer agrees to pay to any Authenticating Agent from time to time
reasonable compensation for its services.  The provisions of Sections 2.10, 6.04
and 6.05 shall be applicable to any Authenticating Agent.
 



                                    VI-13

<PAGE>

                                 ARTICLE VII

                       NOTEHOLDERS' LISTS AND REPORTS

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

     (a)   The Issuer will furnish or cause to be furnished to the Trustee (i)
semi-annually, not less than 45 days nor more than 60 days after the Record Date
for each April 1 and October 1 Payment Date, a list, in such form as the Trustee
may reasonably require, of the names and addresses of the Holders of Notes, and
(ii) at such other times, as the Trustee may request in writing, within 30 days
after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; PROVIDED, HOWEVER, that so long as the Trustee is the Note Registrar,
no such list shall be required to be furnished to the Trustee.

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

     SECTION 7.02.  PRESERVATION OF INFORMATION; COMMUNICATIONS TO NOTEHOLDERS.

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

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

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



                                    VII-1

<PAGE>

     SECTION 7.03.  REPORTS BY TRUSTEE.


     (a)   (i) Within 60 days after May 15 of each year (the "reporting date"),
commencing with the year after the issuance of the Notes, the Trustee shall mail
to all Holders (together with all other Persons to whom reports are to be
transmitted under TIA Section  313(c)) a brief report dated as of such reporting
date that complies with TIA Section  313(a); (ii) the Trustee shall also mail to
Holders any reports that are required by TIA Section  313(b)(2) with respect to
any advances made by the Trustee and (iii) the Trustee shall also mail to
Holders of Notes any reports required by TIA Section  313(a)(5) and Section
 313(b)(1) with respect to the release and substitution of any Accounts.  For
purposes of the information required to be included in any such reports pursuant
to TIA Section  313(a)(3), 313(b)(1) or 313(b)(2), the principal amount of
indenture securities outstanding on the date as of which such information is
provided shall be the Aggregate Outstanding Principal Balance at the date as of
which such information is presented.


     (b)   A copy of each report required under this Section 7.03 shall, at the
time of such transmission to Noteholders, be filed by the Trustee with the
Commission and with each securities exchange upon which the Notes are listed,
provided that the Issuer has previously notified the Trustee of such listing. 
The Issuer will notify the Trustee when the Notes are listed on any securities
exchange.

     SECTION 7.04.  REPORTS BY ISSUER.

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


                                    VII-2

<PAGE>

                                ARTICLE VIII

         ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES

     SECTION 8.01.  COLLECTION OF MONEYS.

     Except as otherwise expressly provided herein, the Trustee may demand
payment or delivery of, and shall receive and collect, directly and without
intervention or assistance of any fiscal agent or other intermediary all money
and other property payable to or receivable by the Trustee pursuant to this
Indenture.  The Trustee shall hold all such money and property received by it as
part of the Trust Estate, and shall apply it as provided in this Indenture. 
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under the Servicing Agreement, or
any Hazard Insurance Policy or any other related insurance policy, the Trustee
may, and upon the request of the Holders of Notes entitled to more than 50% of
the then Voting Rights, the Trustee shall, 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 to proceed thereafter as provided in Article V.

     SECTION 8.02.  COLLECTION ACCOUNT.

     (a)   Prior to the initial authentication and delivery of the Notes, the
Issuer shall open, at the Corporate Trust Office, a segregated trust account
(the "Collection Account") which such account shall be an Eligible Account.  All
payments to be made from time to time to the Holders of Notes out of funds in
the Collection Account pursuant to this Indenture shall be made by the Trustee
as the Paying Agent of the Issuer or, pursuant to Section 3.03, by any other
Paying Agent appointed by the Issuer.  All moneys deposited from time to time in
the Collection Account, including the deposits to be made by the Servicer in the
Collection Account pursuant to the Servicing Agreement, and all deposits therein
pursuant to this Indenture, and all investments made with such moneys including
all income or other gain from such investments shall be held by the Trustee as
part of the Trust Estate as herein provided.  So long as no Servicing Default


                                   VIII-1

<PAGE>

shall have occurred and be continuing, moneys in the Collection Account
representing collections on the Accounts erroneously deposited therein shall be
subject to withdrawals by the Servicer pursuant to Sections 2.07(c)(i) and 2.11
of the Servicing Agreement.

     (b)   So long as no Default or Event of Default shall have occurred and be
continuing, all or a portion of the Collection Account shall be invested and
reinvested by the Trustee at the Issuer's direction in one or more Eligible
Investments bearing interest or sold at discount.  No such investment shall
mature later than two Business Days prior to the next Payment Date (or on such
Payment Date, in the case of obligations referred to in clause (a)(i) of the
definition of Eligible Investments and in the case of Eligible Investments of
which the Trustee is the obligor, so long as at the time of such investment the
long-term unsecured debt securities of the Trustee are rated "AAA" and "Aaa" by
S&P and Moody's, respectively).  Notwithstanding the foregoing, any investment
(including repurchase agreements) on which the Trustee, in its commercial
capacity, is the obligor, may mature on a Payment Date if, under this Section
8.02, such investment could otherwise mature on the Business Day immediately
preceding such Payment Date.

     All income or other gains from investment of moneys deposited in the
Collection Account shall be deposited by the Trustee in the Collection Account
immediately upon receipt, and any loss resulting from such investment shall be
charged to the Collection Account.

     (c)   Unless the Notes have been declared due and payable pursuant to
Section 5.02 and moneys collected by the Trustee with respect to the Notes are
being applied in accordance with Section 5.08, the amount on deposit in the
Collection Account on any Payment Date shall, after payment of Issuer Expenses
in accordance with Subsection (d), be withdrawn from the Collection Account, in
the amounts required, for application as follows:

     On each Payment Date, interest and principal payments on the Notes will be
made from Available Funds in the following amounts and order of priority:


                                   VIII-2

<PAGE>

                 FIRST: To the holders of the Class A-1 Notes, in an amount up
          to the Interest Accrual Amount thereof;

                 SECOND: To the holders of the Class A-1 Notes, in an amount up
          to all unreimbursed Class Interest Shortfalls related thereto,
          together with accrued interest thereon;

                 THIRD: To the holders of the Class A-2 Notes, in an amount up
          to the Interest Accrual Amount thereof;

                 FOURTH: To the holders of the Class A-2 Notes, in an amount up
          to all unreimbursed Class Interest Shortfalls related thereto,
          together with accrued interest thereon;

                 FIFTH: To the holders of the Class A-3 Notes, in an amount up
          to the Interest Accrual Amount thereof;

                 SIXTH: To the holders of the Class A-3 Notes, in an amount up
          to all unreimbursed Class Interest Shortfalls related thereto,
          together with accrued interest thereon;

                 SEVENTH: To the holders of the Class A-4 Notes, in an amount
          up to the Interest Accrual Amount thereof;

                 EIGHTH: To the holders of the Class A-4 Notes, in an amount up
          to all unreimbursed Class Interest Shortfalls related thereto,
          together with accrued interest thereon;

                 NINTH: To the Class A-4 Reserve Account, in any amount up to
          all unreimbursed Class A-4 Reserve Withdrawals;

                 TENTH: To the holders of the Class A-1 Notes, in an amount up
          to the Class A-1 Optimal Principal Amount;

                 ELEVENTH: To the holders of the Class A-1 Notes, accrued and
          unpaid interest at the related Note Interest Rate on the amount of any
          unreimbursed Class A-1 Realized Loss Amounts previously allocated to
          the Class A-1 Notes (provided that any such amount will be payable
          only to the extent that there exist Available Funds sufficient to 
          pay such amount and all prior amounts under this Available Funds 
          Allocation);

                 TWELFTH: To the holders of the Class A-1 Notes, in an amount
          up to the amount of any unreimbursed Class 


                                   VIII-3

<PAGE>

          A-1 Realized Loss Amounts previously allocated thereto (provided that
          any such amount will not be due and payable unless there exist 
          Available Funds sufficient to pay such amount and all prior amounts 
          under this Available Funds Allocation);

                 THIRTEENTH: To the holders of the Class A-2 Notes, in an amount
          up to the Class A-2 Optimal Principal Amount;

                 FOURTEENTH: To the holders of the Class A-2 Notes, accrued and
          unpaid interest at the related Note Interest Rate on the amount of any
          unreimbursed Class A-2 Realized Loss Amounts previously allocated to
          the Class A-2 Notes (provided that any such amount will not be due 
          and payable unless there exist Available Funds sufficient to pay such 
          amount and all prior amounts under this Available Funds Allocation);

                 FIFTEENTH: To the holders of the Class A-2 Notes, in an
          amount up to the amount of any unreimbursed Class A-2 Realized Loss
          Amounts previously allocated thereto (provided that any such amount 
          will not be due and payable unless there exist Available Funds
          sufficient to pay such amount and all prior amounts under this 
          Available Funds Allocation;

                 SIXTEENTH: To the holders of the Class A-3 Notes, in an amount
          up to the Class A-3 Optimal Principal Amount;

                 SEVENTEENTH: To the holders of the Class A-3 Notes, accrued and
          unpaid interest at the related Note Interest Rate on the amount of
          any unreimbursed 

                                   VIII-4

<PAGE>


          Class A-3 Realized Loss Amounts previously allocated to the Class A-3
          Notes (provided that any such amount will not be due and payable 
          unless there exist Available Funds sufficient to pay such amount
          and all prior amounts under this Available Funds Allocation);

                 EIGHTEENTH: To the holders of the Class A-3 Notes, in an
          amount up to the amount of any unreimbursed Class A-3 Realized Loss
          Amounts previously allocated thereto (provided that any such amount
          will not be due and payable unless there exist Available Funds 
          sufficient to pay such amount and all prior amounts under this 
          Available Funds Allocation);

                 NINETEENTH: To the holders of the Class A-4 Notes, in an
          amount up to the Class A-4 Optimal Principal Amount;

                 TWENTIETH: To the holders of the Class A-4 Notes, accrued and
          unpaid interest at the related Note Interest Rate on the amount of any
          unreimbursed Class A-4 Realized Loss Amounts previously allocated to
          the Class A-4 Notes (provided that any such amount will not be due 
          and payable unless there exist Available Funds sufficient to pay
          such amount and all prior amounts under this Available Funds 
          Allocation);

                 TWENTY-FIRST: To the holders of the Class A-4 Notes, in an 
          amount up to the amount of any unreimbursed Class A-4 Realized Loss
          Amounts previously allocated thereto (provided that any such amount
          will not be due and payable unless there exist Available Funds
          sufficient to pay such amount and all prior amounts under this 
          Available Funds Allocation); and

                 TWENTY-SECOND, to the Issuer, free of the lien of this
          Indenture, an amount equal to the excess, if any, of (x) the Available
          Funds for such Payment Date over (y) the aggregate of the amounts
          applied pursuant to subclauses FIRST through TWENTY-FIRST in this 
          clause (ii) for such Payment Date,

each such amount being the amount thereof set forth in the Payment Date
Statement.  Any funds remaining in the Collection Account shall be invested in
accordance with Section 8.02(b).

     In addition to distributions of Available Funds thereto in accordance 
with the Available Funds Allocation, on each Payment Date the Trustee shall pay 
any Class A-4 Reserve Withdrawal to the Holders of the Class A-4 Notes.


     (d)   Funds on deposit in the Collection Account shall be withdrawn
therefrom and applied on each Payment Date to the payment of Issuer Expenses;
provided that (i) funds shall not be withdrawn from the Collection Account for
such purpose during the period from the end of each Due Period through the next
Payment Date if such withdrawal would result in the funds on deposit in the
Collection Account on such Payment Date being less than the 

                                   VIII-5

<PAGE>

Available Funds for such Payment Date as set forth in the related Payment Date
Statement and (ii) such Issuer Expenses, to the extent not paid on such Payment
Date because of clause (i), shall be paid as soon as possible after such Payment
Date.
 

                                   VIII-6

<PAGE>


     (e)   After the entire principal amount of and accrued and unpaid interest
on the Notes and any unreimbursed Realized Loss Amounts have been paid or
provided for as provided in Section 4.01, the cash balance, if any, then
remaining in the Collection Account shall be withdrawn from such Collection
Account by the Trustee, released from the lien of this Indenture and paid to the
Issuer.

     SECTION 8.03.  CLASS A-4 RESERVE ACCOUNT

     Prior to the initial authentication and delivery of the Notes, the 
Issuer shall open, at the Corporate Trust Office, a segregated trust account 
which shall be an Eligible Account (the "Class A-4 Reserve Account").  Prior 
to the initial authentication and delivery of Notes, the Issuer shall deposit 
the Class A-4 Reserve Initial Deposit into the Class A-4 Reserve Account.  If 
on any Payment Date, Available Funds, less amounts thereof distributed on the 
Class A-1, Class A-2 and Class A-3 Notes in respect of interest, are 
insufficient to make full payment of interest on the Class A-4 Notes, the 
Trustee will withdraw the amount of the deficiency from the Class A-4 Reserve 
Account (or the amount on deposit therein, if less) (the "Class A-4 Reserve 
Withdrawal Amount") and deposit such amount in the Collection Account for 
distribution to the Class A-4 Notes.  Any Class A-4 Reserve Withdrawal will 
be reimbursed  to such account on future Payment Dates to the extent of the 
excess, if any, of Available Funds for such future Payment Date.  Other than 
any such reimbursement, no Person will have any obligation to deposit any 
amounts in the Class A-4 Reserve Account following the Closing Date.

     So long as no Default, or Event of Default shall have occurred and be 
continuing, all or a portion of the Class A-4 Reserve Account shall be 
invested and reinvested by the Trustee at the Issuer's direction in one or 
more Eligible Investments bearing interest or sold at discount.  Such 
Eligible Investments must mature such that at any time:  (i) an amount up to 
three month's interest on the Class A-4 Outstanding Principal Balance as of 
the immediately preceding Payment Date;  (ii) the excess of such Eligible 
Investments up to an amount equal to three month's interest on the Class A-4 
Outstanding Principal Balance as of the immediately preceding Payment Date 
must mature no later than two Business Days prior to the second succeeding 
Payment Date;  (iii) the excess of Eligible Investments up to an amount equal 
to three month's interest on the Class A-4 Outstanding Principal Balance as 
of the immediately preceding Payment Date must mature no later than two 
Business Days prior to the third succeeding Payment Date;  and (iv) the 
excess of such Eligible Investments must mature no later than two Business 
Days prior to the fourth succeeding Payment Date.

     All income or other gains from investment of moneys deposited in the 
Class A-4 Reserve Account shall be deposited by the Trustee in the Class A-4 
Reserve Account immediately upon receipt, and any loss resulting from such 
investment shall be charged to the Class A-4 Reserve Account. Any income or
other gains from such investments shall be paid to the Issuer on each Payment
Date prior to any Class A-4 Reserve Withdrawals on such date.

     On each Payment Date any excess of the amount on deposit in the Class 
A-4 Reserve Account  (following the Available Funds Allocation and any 
required withdrawals from the Class A-4 Reserve Account in respect of 
shortfalls in Avaialble Funds) over the Class A-4 Maximum Reserve Amount will 
be withdrawn therefrom by the Trustee and remitted to the Issuer, free of the 
lien of this Indenture. On the Payment Date on which the Class A-4 Outstanding
Principal Balance has been reduced to zero, all amounts on deposit in the Class
A-4 Reserve Account will be remitted to the Issuer free of the lien of the
Indenture.

     SECTION 8.04.  GENERAL PROVISIONS REGARDING THE COLLECTION ACCOUNT.


     (a)   The Collection Account shall relate solely to the Notes and to the
Accounts, Eligible Investments and other property securing the Notes.  Funds and
other property in the Collection Account shall not be commingled with any other
moneys or property of the Issuer or any Affiliate thereof.

     (b)   The Issuer will not direct the Trustee to make any investment of any
funds in the Collection Account or to sell any investment held in the Collection
Account except under the following terms and conditions:

            (i) each such investment shall be made in the name of the Trustee
     (in its capacity as such) or in the name of a nominee of the Trustee (or,
     if, as indicated by an Opinion of Counsel delivered to the Trustee,
     applicable law provides for perfection of pledges of an investment not
     evidenced by a certificate or other instrument through registration of such
     pledge on books maintained by or on behalf of the issuer of such
     investment, such pledge may be so registered),

           (ii) the Trustee shall have sole control over such investment, the
     income thereon and the proceeds thereof,

          (iii) any certificate or other instrument evidencing such investment
     shall be delivered directly to the Trustee or its agent, and

           (iv) the proceeds of each sale of such an investment shall be
     remitted by the purchaser thereof directly to the Trustee for deposit in
     the Collection Account.


                                   VIII-7

<PAGE>

     (c)   If any amounts are needed for disbursement from the Collection
Account and sufficient uninvested funds are not available therein to make such
disbursement, in the absence of an Issuer Order for the liquidation of
investments held therein in an amount sufficient to provide the required funds,
the Trustee shall cause to be sold or otherwise converted to cash a sufficient
amount of the investments in the Collection Account.

     (d)   The Trustee shall not in any way be held liable by reason of any
insufficiency in the Collection Account except for its liability on investments
which are liabilities of the Trustee in its commercial capacity as an obligor of
any Eligible Investment.

     (e)   All investments of funds in the Collection Account and all sales of
investments held in the Collection Account shall, except as provided below, be
made by the Trustee in accordance with an Issuer Order; PROVIDED, HOWEVER, such
Issuer Order shall specify investment of such funds only in Eligible
Investments.  Subject to compliance with the requirements of Sections 8.02(b)
and 8.04(b), such Issuer Order may authorize the Trustee to make the specific
investments set forth therein, to make investments from time to time consistent
with the general instructions set forth therein, or to make specific investments
pursuant to written, telegraphic or telephonic instructions of the employees or
agents of the Issuer identified therein, in each case only in Eligible
Investments and in such amounts as such Issuer Order shall specify.

     In the event that:

            (i) the Issuer shall have failed to give investment directions to
     the Trustee by 10:30 a.m. Eastern Time on the Business Day prior to any day
     on which funds are due to be deposited in the Collection Account (whether
     with respect to Remittances or payments of principal of or interest on
     Eligible Investments) authorizing the Trustee to invest such funds,

           (ii) a Default or Event of Default shall have occurred and be
     continuing but the Notes shall not have been declared due and payable
     pursuant to Section 5.02, or if such Notes shall have been declared due and
     payable following an Event 

                                   VIII-8

<PAGE>

     of Default, amounts collected or receivable from the Trust Estate are being
     applied in accordance with Section 5.05, or

          (iii) an Event of Default shall have occurred and be continuing, the
     Notes shall have been declared due and payable pursuant to Section 5.02 and
     amounts collected or receivable from the Trust Estate are being applied in
     accordance with Section 5.08,

the Trustee shall invest and reinvest the funds then in the Collection Account
to the fullest extent practicable, in such manner as the Trustee shall from time
to time determine, but only in Eligible Investments described in paragraph (a)
of the definition thereof.  In determining the practicability of making any
investment required by this Section 8.04(e), the Trustee shall be entitled to
take into account the availability to it, in the normal course of its corporate
trust business, of investments of the required maturity and in the amounts
available to be invested.  All investments made pursuant to clause (i) above
shall mature on the next Business Day following the date of such investment, all
such investments made pursuant to clause (ii) above shall mature no later than
the maturity date therefor permitted by Section 8.02(b), and all investments
made pursuant to clause (iii) above shall mature no later than the first date
following the date of such investment on which the Trustee proposes to make a
distribution to Holders of Notes pursuant to Section 5.08.

     (f)   Subject to the restriction on the maturity of investments set forth
in Section 8.02(b) and notwithstanding subsection (e) above, the Issuer will
give appropriate and timely investment directions to the Trustee such that at
the close of business on not more than two Business Days in any one calendar
year not more than an aggregate of $25,000 of funds in the Collection Account
are not invested pursuant, directly or indirectly, to an Issuer Order in
Eligible Investments bearing interest or sold at a discount which mature on or
after the opening of business on the next Business Day.


     SECTION 8.05.  REPORTS BY TRUSTEE TO NOTEHOLDERS.


     On each Payment Date the Trustee shall deliver to the Noteholders a written
report based upon the Payment Date 

                                   VIII-9

<PAGE>


Statement for such Payment Date as reviewed by a firm of Independent Accountants
pursuant to Section 8.07(b) setting forth the amount of such payment which
represents principal and the amount which represents interest (in each case on a
per Individual Note basis), and the principal amount of an Individual Note after
giving effect to the payment of principal made on such Payment Date.


     SECTION 8.06.  REPORTS BY TRUSTEE.


     In addition to any statement required to be delivered or prepared by the
Trustee pursuant to Section 2.09, 8.02 or 10.01, the Trustee shall deliver to
the Issuer, the Servicer and the Independent Accountants appointed pursuant to
Section 8.07, within two Business Days after the request of the Issuer, or such
Independent Accountants, a written report setting forth the amount of the
Collection Account established hereunder and the identity of the investments
included therein.  Without limiting the generality of the foregoing, the Trustee
shall, upon the request of the Issuer, promptly transmit to the Issuer copies of
all accountings of, and information with respect to, Remittances furnished it by
the Servicer and shall promptly notify the Issuer if, on the fifth day after any
Remittance Date, any Remittance then due or any portion thereof has not been
received by the Trustee.


     SECTION 8.07.  REPORTS BY INDEPENDENT ACCOUNTANTS.

     (a)   At the Closing Date the Issuer shall appoint the firm of Independent
Accountants to prepare and deliver the certificate or opinion required to be
delivered under Section 2.12(e), and prior to the time any report or certificate
pursuant to Section 8.07(b) is required to be delivered, the Issuer will appoint
a firm of Independent Accountants as its Independent Accountants for purposes of
preparing and delivering the reports or certificates required by Section
8.07(b).  Upon any resignation by such firm the Issuer shall promptly appoint a
successor thereto that shall also be a firm of Independent Accountants of
recognized national reputation.  If the Issuer shall fail to appoint a successor
to a firm of Independent Accountants which has resigned within fifteen days
after such resignation, the Issuer shall promptly notify the Trustee of such
failure in writing.  If the Issuer shall not have appointed a successor within
ten days thereafter, the Trustee 


                                   VIII-10

<PAGE>


shall promptly appoint a successor firm of Independent Accountants of recognized
national reputation.  The fees of such successor shall be payable by the Issuer,
and any fees not so paid by the Issuer may be paid by the Trustee on behalf of
the Issuer, from amounts otherwise payable to the Issuer from the related
Collection Account pursuant to Section 8.02(e).

     (b)   If the Trustee shall fail to deliver to the Issuer any Payment Date
Statement by the due date therefor, the Issuer shall, at the opening of business
on the next Business Day after such due date, direct the firm of Independent
Accountants appointed pursuant to subsection (a) to prepare and deliver to the
Trustee such Payment Date Statement at the expense of the Trustee, no later than
2:00 p.m. on the Business Day following the day on which such direction was
given.  Any fees of such Independent Accountants not paid by the Issuer may be
paid by the Trustee, on behalf of the Issuer (unless such fees are for the
account of the Trustee), from amounts otherwise payable to the Issuer from the
Collection Account pursuant to Section 8.02(e).

     SECTION 8.08.  REPORTS BY THE SERVICER.  In the Servicing Agreement the
Servicer has agreed to deliver to the Trustee at the time specified therein the
information called for by Section 3.01(a) of the Servicing Agreement.



                                   VIII-11

<PAGE>

                                 ARTICLE IX

                           SUPPLEMENTAL INDENTURES

     SECTION 9.01.  SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.

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

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

          (2)   to evidence the succession of another Person to the Issuer,
     and the assumption by any such successor of the covenants of the Issuer
     herein and in the Notes contained:

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

          (4)   to cure any ambiguity, to correct or supplement any provision
     herein which may be defective or inconsistent with any other provision
     herein, or to make any other provisions with respect to matters or
     questions arising under this Indenture, which shall not be materially
     inconsistent with the other provisions of this Indenture, provided that
     such action shall not adversely affect in any material respect the
     interests of the Holders of the Notes; or

          (5)   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.


                                    IX-1

<PAGE>

     SECTION 9.02.  SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS.

     With the consent of the Holders of Notes entitled to at least 50% of the
Voting Rights, by Act of said Holders delivered to the Issuer and the Trustee,
the Issuer, when authorized by an Issuer Order, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions,
of this Indenture or of modifying in any manner the rights of the Holders of the
Notes under this Indenture; PROVIDED, HOWEVER, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby:

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

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

          (3)   modify any of the provisions of this Section 9.02, Section
     5.14 or Section 5.18(b) or 5.18(c), except to increase any percentage
     specified therein or to provide that certain other provisions of this
     Indenture cannot be modified or waived without the consent of the Holder of
     each Outstanding Note affected thereby;



                                    IX-2

<PAGE>

          (4)   modify or alter the provisions of the proviso to the
     definition of the term "Outstanding";

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

          (6)   modify any of the provisions of this Indenture in such manner
     as to affect the calculation of the principal or interest for any Payment
     Date on any Notes (including the calculation of any of the individual
     components of such Debt Service Requirement) or to affect the rights of the
     Holders of Notes to the benefits of any provisions contained herein for the
     mandatory payment of principal.

     The Trustee may in its discretion determine whether or not any Notes would
be affected by any supplemental indenture pursuant to this Section 9.02 or
Section 9.01(4) hereof and any such determination shall be conclusive upon the
Holders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder.  The Trustee shall not be liable for any such determination
made in good faith.

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

     Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section, the Issuer shall mail to the
Holders of the Notes to which such supplemental indenture relates a notice
setting forth in general terms the substance of such supplemental indenture. 
Any failure of the Issuer 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.



                                    IX-3

<PAGE>

     In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.01) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture.  The Trustee may, but shall not
(except to the extent required in the case of a supplemental indenture entered
into under Section 9.01(5)) be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.

     SECTION 9.04.  EFFECT OF SUPPLEMENTAL INDENTURES.

     Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes to which such supplemental indenture relates which have theretofore
been or thereafter are authenticated and delivered hereunder shall be bound
thereby.

     SECTION 9.05.  CONFORMITY WITH TRUST INDENTURE ACT.

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

     SECTION 9.06.  REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.

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

 

                                    IX-4

<PAGE>

                                  ARTICLE X

                             REDEMPTION OF NOTES

     SECTION 10.01.  OPTIONAL REDEMPTION OF NOTES.


     The Notes are subject to redemption in whole and not in part at the option
of the Issuer on any Payment Date at the Redemption Price therefor if before or
after giving effect to the payment of principal otherwise required to be made on
such Payment Date the Outstanding Principal Balance of each Class of Notes
outstanding (prior to allocations of any Realized Loss Amounts) equals 10% or
less of the initial principal amount of such Class of Notes.


     Payment on the Notes pursuant to any optional redemption may be made only
with Eligible Moneys.  If the Issuer elects to so redeem all Notes then
Outstanding, it shall, no later than 30 days prior to the Payment Date selected
for such redemption, deliver notice of such election to the Trustee, together
with an Issuer Order directing the Trustee to effect such redemption and the
Aggregate Redemption Price due on such Payment Date for deposit into the
Collection Account.  All such Notes shall be due and payable on such Payment
Date upon the giving of the notice thereof required by Section 10.02.

     SECTION 10.02.  FORM OF REDEMPTION NOTICE.

     Notices of redemptions of Notes shall be given by the Trustee in the name
and at the expense of the Issuer and shall be mailed no later than 10 days prior
to the Redemption Date to the Persons who were Holders of such Notes on the
Record Date that would otherwise be applicable to the Payment Date on which such
notes are to be redeemed.

     All notices of redemption shall state:

     (1) the Redemption Date,

     (2) the Redemption Price and

     (3) the place where such Notes are to be surrendered for payment of the
Redemption Price (which shall be the office or agency of the Issuer to be
maintained as provided in Section 


                                     X-1

<PAGE>

3.02) and that no interest shall accrue on such Note for any period after the
date fixed for redemption.

     Failure to give notice of redemption, or any defect therein, to any Holder
of any Note selected for redemption shall not impair or affect the validity of
the redemption of any other Note.

     SECTION 10.03.  NOTES PAYABLE ON REDEMPTION DATE.

     Notice of redemption having been given as provided in section 10.02, the
Notes so to be redeemed shall, on the applicable Redemption Date, become due and
payable at the Redemption Price and (unless the Issuer shall default in the
payment of the Redemption Price) no interest shall accrue on such Redemption
Price for any period after such Redemption Date.  Upon surrender of such Notes
for redemption in accordance with said notice such Notes shall be paid by or on
behalf of the Issuer at the Redemption Price.
 

                                     X-2

<PAGE>

                                 ARTICLE XI

                                MISCELLANEOUS

     SECTION 11.01.  COMPLIANCE CERTIFICATES AND OPINIONS.

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

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

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

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

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

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


                                    XI-1

<PAGE>

          (5)    if the signer of such certificate or opinion is required to
     be Independent, the statement required by the definition of the term
     "Independent".

     SECTION 11.02.  FORM OF DOCUMENTS DELIVERED TO TRUSTEE.

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

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

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


                                    XI-2

<PAGE>

     Wherever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, 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 Trustee's right to rely upon the truth and accuracy of any statement or
opinion contained in any such document as provided in Section 6.01(b)(2)

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

     SECTION 11.03.  ACTS OF 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 agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer.  Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments.  Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.01) conclusive in
favor of the Trustee and the Issuer, if made in the manner provided in this
Section.


                                    XI-3

<PAGE>

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

     (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 Holder of any Notes shall bind the Holder of every
Note issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, in respect of anything done, omitted or suffered to be done by
the Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Notes.

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

     (a)    Any request, demand, authorization, direction, notice, consent
waiver or Act of Noteholders or other documents provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with

          (1)    the Trustee by any Noteholder or by the Issuer shall be
     sufficient for every purpose hereunder if filed in writing and mailed by
     registered mail to the Trustee at One First Union Financial Center, 200
     South Biscayne Boulevard, Miami, Florida 33131, Attention: Corporate
     Trust Department with a copy sent to First Union Corporation, Legal 
     Division, One First Union Center, NC-0013 Charlotte, North Carolina 
     28288-0013, Attention: General Counsel, or

          (2)    the Issuer by the Trustee or by any Noteholder shall be
     sufficient for every purpose hereunder (except as provided in Section
     5.01(3) and (4)) if in writing and mailed, first-class postage-prepaid, to
     the Issuer addressed to it at c/o Wilmington Trust Company, as Owner
     Trustee, 


                                    XI-4

<PAGE>

     Corporate Financial Services Division, Rodney Square North, Wilmington,
     Delaware 19890, Attention: Corporate Trust Administration, or at any other
     address previously furnished in writing to the Trustee by the Issuer.

     (b)    Notices required under this Indenture to be sent to Noteholders with
respect to material amendments to the Indenture, the Trust Agreement or the
Servicing Agreement, satisfaction and discharge of the Indenture and any
reports, statements, or other notices required hereunder shall in addition be
sent to each Rating Agency; to Moody's at its address at 99 Church Street, New
York, New York 10007, and to S&P at its address at 25 Broadway, New York, New
York.

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

     Where this Indenture provides for notice to Noteholders of any event or the
mailing of any report to Noteholders, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class postage prepaid, to each Noteholder affected by such event or to
whom such report is required to be mailed, at the address of such Noteholder 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 or the mailing
of such report.  In any case where a notice or report to Noteholders is mailed
in the manner provided above, neither the failure to mail such notice or report,
nor any defect in any notice or report so mailed, to any particular Noteholder
shall affect the sufficiency of such notice or report with respect to other
Noteholders, and any notice or report which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given or provided.

     Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice. 
Waivers of notice by Noteholders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.


                                    XI-5

<PAGE>

     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 Trustee shall be deemed to be a
sufficient giving of such notice.

     SECTION 11.06.  RULES BY TRUSTEE AND AGENTS.

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

     SECTION 11.07.  CONFLICT WITH TRUST INDENTURE ACT.


     If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by, or which
is deemed to be included in this Indenture (an "incorporated provision") by
operation of, any of the provisions of TIA, such required provision or
incorporated provision shall control.


     SECTION 11.08.  EFFECT OF HEADINGS AND TABLE OF CONTENTS.

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

     SECTION 11.09.  SUCCESSORS AND ASSIGNS.

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

     SECTION 11.10.  SEPARABILITY.

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


                                    XI-6

<PAGE>

     SECTION 11.11.  BENEFITS OF INDENTURE.

     Nothing in this Indenture or in the Notes, expressed or implied, shall give
to any Person, other than the parties hereto and their successors hereunder, any
separate trustee or co-trustee appointed under Section 6.14 and the Noteholders
any benefit or any legal or equitable right, remedy or claim under this
Indenture.

     SECTION 11.12.  LEGAL HOLIDAYS.

     In any case where the date of any Payment Date, Redemption Date, or any
other date on which principal of or interest on any Note is proposed to be paid
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 nominal date of any such Payment Date, Redemption Date, or other date for
the payment of principal of or interest on any Note, and no interest shall
accrue for the period from and after any such nominal date, provided such
payment is made in full on such next Succeeding Business Day.

     SECTION 11.13.  GOVERNING LAW.

     This Indenture and each Note shall be construed in accordance with and
governed by the laws of the State of New York applicable to agreements made and
to be performed therein.

     SECTION 11.14.  COUNTERPARTS.

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

     SECTION 11.15.  RECORDING OF INDENTURE.

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


                                    XI-7

<PAGE>

     SECTION 11.16.  ISSUER OBLIGATIONS.

     No recourse may be taken, directly or indirectly, against (i) the Owner
Trustee in its individual capacity, (ii) any incorporator, subscriber to the
capital stock, stockholder, officer or director of the Owner Trustee or of any
predecessor or successor of the Owner Trustee in its individual capacity, (iii)
any holder of a beneficial interest in the Issuer, (iv) any partner,
beneficiary, agent, officer, director, employee, or successor or assign of a
holder of a beneficial interest in the Issuer, or (v) any incorporator,
subscriber to the capital stock, stockholder, officer, director or employee of
the Trustee or any predecessor or successor of the Trustee with respect to the
Issuer's obligations with respect to the Notes or the obligation of the Issuer
or the Trustee under this Indenture or any certificate or other writing
delivered in connection herewith or therewith.

     SECTION 11.17.  INSPECTION.

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

                                    XI-8

<PAGE>

     IN WITNESS WHEREOF, the Owner Trustee on behalf of the Issuer and the
Trustee have caused this Indenture to be duly executed by their respective
officers thereunto duly authorized and the seal of the Owner Trustee and of the
Trustee, duly attested, to be hereunto affixed, all as of the day and year first
above written

                         MID-STATE TRUST VI

                         By:  Wilmington Trust Company, 
                              not in its individual capacity,         
                                   but solely as Owner Trustee 
                              of Mid-State Trust VI


                         By
                              ---------------------------------
                              Authorized Officer



Attest:


- ----------------------------
Authorized Officer


                         FIRST UNION NATIONAL BANK OF FLORIDA,
                           as Trustee


                         By
                              ------------------------------
                              Authorized Officer
 

<PAGE>


STATE OF NEW YORK )
                  :  ss.:
COUNTY OF NEW YORK)


     On the ___ day of _____, ____ before me, a notary public in and for said
State, personally appeared __________________, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person who executed the
within instrument on behalf of one of the corporations therein named, and
acknowledged to me that such corporation executed it.

     IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.

    

                               -----------------------
                                  Notary Public







STATE OF NEW YORK )
                  :  ss.:
COUNTY OF NEW YORK)


     On the ___ day of _____, ____, before me, a notary public in and for said
State, personally appeared ____________, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person who executed the within
instrument on behalf of one of the corporations therein named, and acknowledged
to me that such national banking association executed it.

     IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.

                              ------------------------
                                   Notary Public
 
<PAGE>

                                                                       EXHIBIT A


UNLESS THIS CLASS A-1 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 CERTIFICATE
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.

PRINCIPAL OF THIS CLASS A-1 NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-1 NOTE
AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.  THE ACTUAL
OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-1 NOTE MAY BE ASCERTAINED ONLY BY
OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE TRUSTEE NAMED HEREIN.  THE
RIGHTS OF A HOLDER OF THIS CLASS A-1 NOTE ARE SUBJECT TO THE PROVISIONS OF THE
WITHIN-REFERENCED INDENTURE. 


                                         A-1

<PAGE>

                                  MID-STATE TRUST VI

                         _____% ASSET BACKED NOTE, CLASS A-1
                                  DUE: [        ]
                              ACCRUAL DATE: [        ]



$_________________________                    No.________________


     Mid-State Trust VI (the "Issuer"), a Delaware business trust governed by a
Trust Agreement dated as of April __, 1997 (the "Trust Agreement"), for value
received, hereby promises to pay to ________________ or registered assigns, the
principal sum of ________ Dollars in quarterly installments on January 1, April
1, July 1, and October 1 (the "Principal Payment Dates") in each year,
commencing on July 1, 1997 and ending on or before [      ] (the "Maturity" of
such final installment of principal) and to pay interest (computed on the basis
of a 360-day year of twelve 30-day months) on the unpaid principal amount of
this Class A-1 Note outstanding from time to time from [       ] (the "Accrual
Date"), or such later date to which interest has been paid, until the principal
amount of this Class A-1 Note is paid in full, at the rate of __________ percent
(_____%) per annum, such interest being payable quarterly on January 1, April 1,
July 1, and October 1 in each year, commencing on July 1, 1997 (the "Interest
Payment Dates").  Installments of principal of this Class A-1 Note are due and
payable in the amounts and on the dates described on the reverse hereof.

     The principal of, and interest on, this Class A-1 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 Class A-1 Note shall be applied first to interest
due and payable on this Class A-1 Note as provided above and then to the unpaid
principal of this Class A-1 Note.  Any installment of principal or interest
which is not paid when and as due shall bear interest at the rate of interest
borne by the principal of this Class A-1 Note from the date due to the date of
payment thereof, but only to the extent that the payment of such interest shall
be lawful and enforceable.



                                         A-2

<PAGE>

     Unless the certificate of authentication hereon has been executed by the
Trustee by manual signature, this Class A-1 Note shall not be entitled to any
benefit under the Indenture referred to below, or be valid or obligatory for any
purpose.
 


                                         A-3

<PAGE>

     IN WITNESS WHEREOF, Mid-State Trust VI has caused this instrument to be
duly executed by Wilmington Trust Company, not in its individual capacity but
solely as Owner Trustee under the Trust Agreement.


Dated:                             MID-STATE TRUST VI,
        ----------------
                                   By:  Wilmington Trust Company,     
                                   not in its individual capacity     
                                   but solely in its capacity as      
                                   Owner Trustee under the Trust      
                                   Agreement


                                   By
                                      ------------------------------
                                             [Title]




                                         A-4

<PAGE>

 
     This Class A-1 Note is one of a duly authorized issue of Notes of the 
Issuer, designated as its [    ]% Asset Backed Notes, Class A-1 (herein 
called the "Class A-1 Notes").  The Class A-1 Notes are issued and will be 
issued under an Indenture dated as of April __, 1997 (herein called the 
"Indenture"), between the Issuer and First Union National Bank of North 
Carolina, as Trustee (the "Trustee", which term includes any successor 
Trustee under the Indenture), to which Indenture and all indentures 
supplemental thereto reference is hereby made for a statement of the 
respective rights thereunder of the Issuer, the Trustee and the Holders of 
the Class A-1 Notes and the terms upon which the Class A-1 Notes are, and are 
to be, authenticated and delivered.  Also issued under the Indenture are the 
[   ]% Asset Backed Notes, Class A-2, [   ]% Asset Backed Notes, Class A-3 
and [   ]% Asset Backed Notes, Class A-4.  The Class A-1 Notes are secured by 
the collateral pledged as security therefor to the extent provided in the 
Indenture.  All terms used in this Class A-1 Note which are defined in the 
Indenture shall have the meanings assigned to them in the Indenture.


     An installment of principal shall be paid on the Class A-1 Notes on each
Principal Payment Date in the amount equal to the amount available to be paid
thereon pursuant to Section 8.02(c)(ii) of the Indenture on such Principal
Payment Date; provided that the unpaid principal amount of this Class A-1 Note
shall be due and payable on the Principal Payment Date in ________.  Each
payment of principal of the Class A-1 Notes shall be allocated among the Class
A-1 Notes in proportion to their then remaining unpaid principal amounts.  The
unpaid principal amount of this Class A-1 Note may be reduced by the allocation
to it (in accordance with Section 2.09 of the Indenture) of Class A-1 Realized
Loss Amounts without any corresponding payment.


     Payment of the then remaining unpaid principal amount of this Class A-1
Note on the Maturity of its final installment of principal or on such earlier
date as the Issuer shall be required to apply payments received with respect to
the collateral securing the Class A-1 Notes to payment of the then remaining
unpaid principal amount of this Class A-1 Note or to payment of the Redemption
Price payable on any date as of which this Class A-1 Note has been called for
redemption in full shall be made upon presentation of this Class A-1 Note to the
office or agency of the Issuer maintained for such purpose.  Payments of
interest 


                                         A-5

<PAGE>

on this Class A-1 Note due and payable on each Interest Payment Date, together
with any installment of principal of this Class A-1 Note due and payable on each
Interest Payment Date which is also a Principal Payment Date for this Class A-1
Note, shall be made by check mailed to the Person whose name appears as the
registered Holder of this Class A-1 Note (or one or more Predecessor Notes) in
the Note Register as of the Record Date preceding such Interest Payment Date,
except that with respect to a Class A-1 Note registered in the name of the
nominee of a clearing agency (initially, such nominee to be Cede & Co.) payments
will be made by wire transfer in immediately available funds to the account
designated by such nominee.


     Checks for amounts due on this Class A-1 Note shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Class A-1
Note be submitted for notation of payment and checks returned undelivered will
be held for payment to the Person entitled thereto, subject to the terms of the
Indenture, at the office or agency in the United States of America designated by
the Issuer for such purpose pursuant to the Indenture.  Any reduction in the
principal amount of this Class A-1 Note (or any one or more Predecessor Notes)
effected by any payments made on any Principal Payment Date or by any allocation
of a Class A-1 Realized Loss Amount shall be binding upon all Holders of this
Class A-1 Note and of any Class A-1 Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof, whether or not noted
hereon.


     If funds are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of this Class A-1
Note on a Principal Payment Date which is prior to the Maturity of the final
installment of principal hereof, then the Trustee, on behalf of the Issuer, will
notify the Person who was the registered Holder hereof on the 15th day of the
month prior to the month in which such Principal Payment Date occurs, by notice
mailed no later than ten days prior to such Principal Payment Date, and the
amount then due and payable shall, if sufficient funds therefor are available,
be payable only upon presentation of this Class A-1 Note to the office or agency
of the Issuer maintained for such purpose.



                                         A-6

<PAGE>

     If an Event of Default shall occur and be continuing with respect to the
Class A-1 Notes, the Class A-1 Notes may become or be declared due and payable
in the manner and with the effect provided in the Indenture.  Reference is
hereby made to Article V of the Indenture which sets forth certain events which
constitute Events of Default.  If any such acceleration of maturity occurs prior
to the Maturity of the final installment of principal of this Class A-1 Note,
the amount payable to the Holder of this Class A-1 Note will be equal to the
aggregate unpaid principal amount of this Class A-1 Note on the date this Class
A-1 Note becomes so due and payable, together with accrued interest on such
unpaid principal amount to the date of payment thereof.  The Indenture provides
that, notwithstanding the acceleration of the maturity of the Class A-1 Notes,
under certain circumstances specified therein all amounts collected as proceeds
of the collateral securing the Class A-1 Notes or otherwise shall continue to be
applied to payments of principal of and interest on the Class A-1 Notes as if
they had not been declared due and payable.  In such event, interest on the then
unpaid principal amount of all Class A-1 Notes and on any overdue installments
of interest on the Class A-1 Notes following the acceleration of the maturity of
the Class A-1 Notes shall accrue and be payable at the applicable Note Interest
Rate, but only to the extent that the payment thereof shall be lawful and
enforceable.


     The Class A-1 Notes are not prepayable or redeemable at the option or
direction of the Issuer except that all of the outstanding Notes may be called
for redemption in whole at the option of the Issuer on any Payment Date, if,
either before or after giving effect to the payment of principal otherwise
required to be made on such Payment Date, each Class of Notes shall be in an
aggregate Outstanding Principal Balance which is 10% or less of the original
principal amount of such Class of Notes, at 100% of the outstanding principal
amount thereof together with interest accrued and unpaid to the date set for
redemption.


     As provided in the Indenture the transfer of this Class A-1 Note may be
registered on the Note Register of the Issuer, upon surrender of this Class A-1
Note for registration of transfer at the office or agency designated by the
Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly 


                                         A-7

<PAGE>

executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Notes, of authorized denominations and in the same
aggregate initial principal amount will be issued to the designated transferee
or transferees.

     Prior to the due presentment for registration of transfer of this Class A-1
Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Class A-1 Note is registered (i) on any
Record Date, for purposes of making payments, and (ii) on any other date for any
other purpose, as the owner hereof, whether or not this Class A-1 Note be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by written notice to the contrary.

     The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Class A-1 Notes under the Indenture
at any time by the Issuer, and the Holders of Notes entitled to more than 50%
of the Voting Rights at the time Outstanding.  The Indenture also contains
provisions that permit the Holders of Notes entitled to more than 50% of the
Voting Rights, on behalf of the Holders of all the Notes, to waive compliance
by the Issuer with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences.  Any such consent or
waiver by the Holder, at the time of the giving thereof, of this Class A-1 Note
(or any one or more Predecessor Notes) shall be conclusive and binding upon
such Holder and upon all future holders of this Class A-1 Note and of any Class
A-1 Note issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof whether or not notation of such consent or waiver is made
upon this Class A-1 Note.

     The term "Issuer" as used in this Class A-1 Note includes any successor to
the Issuer under the Indenture.

     The Class A-1 Notes are issuable only in registered form in the
denominations provided in the Indenture and subject to certain limitations
therein set forth.  The Class A-1 Notes are exchangeable for a like aggregate
initial principal amount of Class A-1 Notes of different authorized
denominations, as requested by the Holder surrendering the same, pursuant to
the terms and conditions set forth in the Indenture.



                                         A-8

<PAGE>

     As provided in the Indenture, this Class A-1 Note and the Indenture shall
be construed in accordance with, and governed by, the laws of the State of New
York applicable to agreements made and to be performed therein.

     No reference herein to the Indenture and no provision of this Class A-1
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 Class A-1 Note at the times, place and rate, and in the coin or currency,
herein prescribed.

     Anything herein to the contrary notwithstanding, neither the Owner Trustee
in its individual capacity, any beneficial owner of the Issuer, the Trustee nor
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 and interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in, this Class A-1 Note or the Indenture, it being
expressly understood that said covenants, obligations and indemnifications have
been made by the Owner Trustee for the sole purpose of binding the respective
interests of the beneficial owners of the Issuer and the Owner Trustee in the
assets of the Issuer.  The Holder of this Class A-1 Note by the acceptance
hereof agrees that in the case of an Event of Default under the Indenture, the
Holder 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 the enforcement against, the assets of the
Issuer of any and all liabilities, obligations and undertakings contained in the
Indenture or in this Class A-1 Note.

     The Owner Trustee has executed this Class A-1 Note on behalf of the Issuer,
not in its individual capacity but solely as owner trustee under the Trust
Agreement and the Owner Trustee shall be liable hereunder only in respect of the
assets of the trust created by such Trust Agreement.

     The remedies of the Holder hereof as provided herein and in the Indenture,
shall be cumulative and concurrent and may be pursued solely against the assets
of the Trust created by the 


                                         A-9

<PAGE>

Trust Agreement pledged under the Indenture as security for the Class A-1
Notes.  No failure on the part of the holder in exercising any right or remedy
hereunder shall operate as a waiver or release thereof, nor shall any single or
partial exercise of any right or remedy preclude any further exercise thereof
or the exercise of any other right or remedy hereunder. 



                                         A-10

<PAGE>

                       TRUSTEE'S CERTIFICATE OF AUTHENTICATION

     This is one of the Class A-1 Notes referred to in the within-mentioned
Indenture.


                         First Union National Bank of North Carolina,
                              as Trustee

                         By 
                            -----------------------------
                              Authorized Signatory
 


                                         A-11

<PAGE>

                                                                      EXHIBIT B


UNLESS THIS CLASS A-2 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 CERTIFICATE
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.

PRINCIPAL OF THIS CLASS A-2 NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-2 NOTE
AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.  THE ACTUAL
OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-2 NOTE MAY BE ASCERTAINED ONLY BY
OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE TRUSTEE NAMED HEREIN.  THE
RIGHTS OF A HOLDER OF THIS CLASS A-2 NOTE ARE SUBJECT TO THE PROVISIONS OF THE
WITHIN-REFERENCED INDENTURE.

THE RIGHTS OF THE CLASS A-2 NOTEHOLDERS TO RECEIVE PAYMENTS IN RESPECT OF
PRINCIPAL AND INTEREST ON THE CLASS A-2 NOTES ARE SUBORDINATE TO THE RIGHTS OF
THE CLASS A-1 NOTEHOLDERS TO RECEIVE PAYMENTS OF PRINCIPAL AND INTEREST.
 


                                         B-1

<PAGE>

                                 MID-STATE TRUST VI
                                          
                              _____% ASSET BACKED NOTE
                                  DUE: [        ]
                              ACCRUAL DATE: [        ]



$_________________________                    No.________________


     Mid-State Trust VI (the "Issuer"), a Delaware business trust governed by a
Trust Agreement dated as of April __, 1997 (the "Trust Agreement"), for value
received, hereby promises to pay to ________________ or registered assigns, the
principal sum of ________ Dollars in quarterly installments on January 1, April
1, July 1, and October 1 (the "Principal Payment Dates") in each year,
commencing on July 1, 1997 and ending on or before [      ] (the "Maturity" of
such final installment of principal) and to pay interest (computed on the basis
of a 360-day year of twelve 30-day months) on the unpaid principal amount of
this Class A-2 Note outstanding from time to time from [       ] (the "Accrual
Date"), or such later date to which interest has been paid, until the principal
amount of this Class A-2 Note is paid in full, at the rate of __________
percent (_____%) per annum, such interest being payable quarterly on January 1,
April 1, July 1, and October 1 in each year, commencing on July 1, 1997 (the
"Interest Payment Dates").  Installments of principal of this Class A-2 Note
are due and payable in the amounts and on the dates described on the reverse
hereof.

     The principal of, and interest on, this Class A-2 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 Class A-2 Note shall be applied first to interest
due and payable on this Class A-2 Note as provided above and then to the unpaid
principal of this Class A-2 Note.  Any installment of principal or interest
which is not paid when and as due shall bear interest at the rate of interest
borne by the principal of this Class A-2 Note from the date due to the date of
payment thereof, but only to the extent that the payment of such interest shall
be lawful and enforceable.



                                         B-2

<PAGE>

     Unless the certificate of authentication hereon has been executed by the
Trustee by manual signature, this Class A-2 Note shall not be entitled to any
benefit under the Indenture referred to below, or be valid or obligatory for any
purpose.
 


                                         B-3

<PAGE>

     IN WITNESS WHEREOF, Mid-State Trust VI has caused this instrument to be
duly executed by Wilmington Trust Company, not in its individual capacity but
solely as Owner Trustee under the Trust Agreement.


Dated:                             MID-STATE TRUST VI,
        --------------------
                                   By:  Wilmington Trust Company,     
                                   not in its individual capacity     
                                   but solely in its capacity as      
                                   Owner Trustee under the Trust      
                                   Agreement


                                   By
                                      ---------------------------
                                             [Title]
 


                                         B-4

<PAGE>

     This Class A-2 Note is one of a duly authorized issue of Notes of the 
Issuer, designated as its [    ]% Asset Backed Notes, Class A-2 (herein 
called the "Class A-2 Notes").  The Class A-2 Notes are issued and will be 
issued under an Indenture dated as of April __, 1997 (herein called the 
"Indenture"), between the Issuer and First Union National Bank of North 
Carolina, as Trustee (the "Trustee", which term includes any successor 
Trustee under the Indenture), to which Indenture and all indentures 
supplemental thereto reference is hereby made for a statement of the 
respective rights thereunder of the Issuer, the Trustee and the Holders of 
the Class A-2 Notes and the terms upon which the Class A-2 Notes are, and are 
to be, authenticated and delivered.  Also issued under the Indenture are the 
[   ]% Asset Backed Notes, Class A-1, [   ]% Asset Backed Notes, Class A-3 
and [   ]% Asset Backed Notes, Class A-4.  The Class A-2 Notes are secured by 
the collateral pledged as security therefor to the extent provided in the 
Indenture.  All terms used in this Class A-2 Note which are defined in the 
Indenture shall have the meanings assigned to them in the Indenture.


     An installment of principal shall be paid on the Class A-2 Notes on each
Principal Payment Date in the amount equal to the amount available to be paid
thereon pursuant to Section 8.02(c)(ii) of the Indenture on such Principal
Payment Date; provided that the unpaid principal amount of this Class A-2 Note
shall be due and payable on the Principal Payment Date in _____.  Each payment
of principal of the Class A-2 Notes shall be allocated among the Class A-2 Notes
in proportion to their then remaining unpaid principal amounts.  The unpaid
principal amount of this Class A-2 Note may be reduced by the allocation to it
(in accordance with Section 2.09 of the Indenture) of Class A-2 Realized Loss
Amounts without any corresponding payment. 


     The rights of the Class A-2 Noteholders to receive payments in respect of
principal and interest on the Class A-2 Notes are subordinate to the rights of
the Class A-1 Noteholders to receive payments of principal and interest.

     Payment of the then remaining unpaid principal amount of this Class A-2
Note on the Maturity of its final installment of principal or on such earlier
date as the Issuer shall be required to apply payments received with respect to
the collateral securing the Class A-2 Notes to payment of the then remaining


                                         B-5

<PAGE>

unpaid principal amount of this Class A-2 Note or to payment of the Redemption
Price payable on any date as of which this Class A-2 Note has been called for
redemption in full shall be made upon presentation of this Class A-2 Note to the
office or agency of the Issuer maintained for such purpose.  Payments of
interest on this Class A-2 Note due and payable on each Interest Payment Date,
together with any installment of principal of this Class A-2 Note due and
payable on each Interest Payment Date which is also a Principal Payment Date for
this Class A-2 Note, shall be made by check mailed to the Person whose name
appears as the registered Holder of this Class A-2 Note (or one or more
Predecessor Notes) in the Note Register as of the Record Date preceding such
Interest Payment Date, except that with respect to a Class A-2 Note registered
in the name of the nominee of a clearing agency (initially, such nominee to be
Cede & Co.) payments will be made by wire transfer in immediately available
funds to the account designated by such nominee.


     Checks for amounts due on this Class A-2 Note shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Class A-2
Note be submitted for notation of payment and checks returned undelivered will
be held for payment to the Person entitled thereto, subject to the terms of the
Indenture, at the office or agency in the United States of America designated by
the Issuer for such purpose pursuant to the Indenture.  Any reduction in the
principal amount of this Class A-2 Note (or any one or more Predecessor Notes)
effected by any payments made on any Principal Payment Date or by any allocation
of a Class A-2 Realized Loss Amount shall be binding upon all Holders of this
Class A-2 Note and of any Class A-2 Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof, whether or not noted
hereon.


     If funds are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of this Class A-2
Note on a Principal Payment Date which is prior to the Maturity of the final
installment of principal hereof, then the Trustee, on behalf of the Issuer, will
notify the Person who was the registered Holder hereof on the 15th day of the
month prior to the month in which such Principal Payment Date occurs, by notice
mailed no later than ten days 


                                         B-6

<PAGE>

prior to such Principal Payment Date, and the amount then due and payable shall,
if sufficient funds therefor are available, be payable only upon presentation of
this Class A-2 Note to the office or agency of the Issuer maintained for such
purpose.

     If an Event of Default shall occur and be continuing with respect to the
Class A-2 Notes, the Class A-2 Notes may become or be declared due and payable
in the manner and with the effect provided in the Indenture.  Reference is
hereby made to Article V of the Indenture which sets forth certain events which
constitute Events of Default.  If any such acceleration of maturity occurs prior
to the Maturity of the final installment of principal of this Class A-2 Note,
the amount payable to the Holder of this Class A-2 Note will be equal to the
aggregate unpaid principal amount of this Class A-2 Note on the date this Class
A-2 Note becomes so due and payable, together with accrued interest on such
unpaid principal amount to the date of payment thereof.  The Indenture provides
that, notwithstanding the acceleration of the maturity of the Class A-2 Notes,
under certain circumstances specified therein all amounts collected as proceeds
of the collateral securing the Class A-2 Notes or otherwise shall continue to be
applied to payments of principal of and interest on the Class A-2 Notes as if
they had not been declared due and payable.  In such event, interest on the then
unpaid principal amount of all Class A-2 Notes and on any overdue installments
of interest on the Class A-2 Notes following the acceleration of the maturity of
the Class A-2 Notes shall accrue and be payable at the applicable Note Interest
Rate, but only to the extent that the payment thereof shall be lawful and
enforceable.


     The Class A-2 Notes are not prepayable or redeemable at the option or
direction of the Issuer except that all of the outstanding Notes may be called
for redemption in whole at the option of the Issuer on any Payment Date, if,
either before or after giving effect to the payment of principal otherwise
required to be made on such Payment Date, each Class of Notes shall be in an
aggregate Outstanding Principal Balance which is 10% or less of the original
principal amount of such Class of Notes, at 100% of the outstanding principal
amount thereof together with interest accrued and unpaid to the date set for
redemption.




                                         B-7

<PAGE>

     As provided in the Indenture the transfer of this Class A-2 Note may be
registered on the Note Register of the Issuer, upon surrender of this Class A-2
Note for registration of transfer at the office or agency designated by the
Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes, of authorized denominations and in the same aggregate initial
principal amount will be issued to the designated transferee or transferees.

     Prior to the due presentment for registration of transfer of this Class A-2
Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Class A-2 Note is registered (i) on any
Record Date, for purposes of making payments, and (ii) on any other date for any
other purpose, as the owner hereof, whether or not this Class A-2 Note be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by written notice to the contrary.

     The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Class A-2 Notes under the Indenture
at any time by the Issuer, and the Holders of Notes entitled to more than 50% of
the Voting Rights at the time Outstanding.  The Indenture also contains
provisions that permit the Holders of Notes entitled to more than 50% of the
Voting Rights, on behalf of the Holders of all the Notes, to waive compliance by
the Issuer with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences.  Any such consent or waiver by the
Holder, at the time of the giving thereof, of this Class A-2 Note (or any one or
more Predecessor Notes) shall be conclusive and binding upon such Holder and
upon all future holders of this Class A-2 Note and of any Class A-2 Note issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent or waiver is made upon this Class
A-2 Note.

     The term "Issuer" as used in this Class A-2 Note includes any successor to
the Issuer under the Indenture.



                                         B-8

<PAGE>

     The Class A-2 Notes are issuable only in registered form in the
denominations provided in the Indenture and subject to certain limitations
therein set forth.  The Class A-2 Notes are exchangeable for a like aggregate
initial principal amount of Class A-2 Notes of different authorized
denominations, as requested by the Holder surrendering the same, pursuant to the
terms and conditions set forth in the Indenture.

     As provided in the Indenture, this Class A-2 Note and the Indenture shall
be construed in accordance with, and governed by, the laws of the State of New
York applicable to agreements made and to be performed therein.

     No reference herein to the Indenture and no provision of this Class A-2
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 Class A-2 Note at the times, place and rate, and in the coin or currency,
herein prescribed.

     Anything herein to the contrary notwithstanding, neither the Owner Trustee
in its individual capacity, any beneficial owner of the Issuer, the Trustee nor
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 and interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in, this Class A-2 Note or the Indenture, it being
expressly understood that said covenants, obligations and indemnifications have
been made by the Owner Trustee for the sole purpose of binding the respective
interests of the beneficial owners of the Issuer and the Owner Trustee in the
assets of the Issuer.  The Holder of this Class A-2 Note by the acceptance
hereof agrees that in the case of an Event of Default under the Indenture, the
Holder 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 the enforcement against, the assets of the
Issuer of any and all liabilities, obligations and undertakings contained in the
Indenture or in this Class A-2 Note.



                                         B-9

<PAGE>

     The Owner Trustee has executed this Class A-2 Note on behalf of the Issuer,
not in its individual capacity but solely as owner trustee under the Trust
Agreement and the Owner Trustee shall be liable hereunder only in respect of the
assets of the trust created by such Trust Agreement.

     The remedies of the Holder hereof as provided herein and in the Indenture,
shall be cumulative and concurrent and may be pursued solely against the assets
of the Trust created by the Trust Agreement pledged under the Indenture as
security for the Class A-2 Notes.  No failure on the part of the holder in
exercising any right or remedy hereunder shall operate as a waiver or release
thereof, nor shall any single or partial exercise of any right or remedy
preclude any further exercise thereof or the exercise of any other right or
remedy hereunder. 


                                         B-10

<PAGE>

                       TRUSTEE'S CERTIFICATE OF AUTHENTICATION

     This is one of the Class A-2 Notes referred to in the within-mentioned
Indenture.


                         First Union National Bank of North Carolina,
                              as Trustee

                         By
                            -------------------------------
                              Authorized Signatory
 


                                         B-11

<PAGE>

                                                                       EXHIBIT C


UNLESS THIS CLASS A-3 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 CERTIFICATE
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.

PRINCIPAL OF THIS CLASS A-3 NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-3 NOTE
AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.  THE ACTUAL
OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-3 NOTE MAY BE ASCERTAINED ONLY BY
OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE TRUSTEE NAMED HEREIN.  THE
RIGHTS OF A HOLDER OF THIS CLASS A-3 NOTE ARE SUBJECT TO THE PROVISIONS OF THE
WITHIN-REFERENCED INDENTURE.

THE RIGHTS OF THE CLASS A-3 NOTEHOLDERS TO RECEIVE PAYMENTS IN RESPECT OF
PRINCIPAL AND INTEREST ON THE CLASS A-3 NOTES ARE SUBORDINATE TO THE RIGHTS OF
THE CLASS A-1 NOTEHOLDERS AND CLASS A-2 NOTEHOLDERS TO RECEIVE PAYMENTS OF
PRINCIPAL AND INTEREST.
 


                                         C-1

<PAGE>

                                 MID-STATE TRUST VI
                                          
                              _____% ASSET BACKED NOTE
                                  DUE: [        ]
                              ACCRUAL DATE: [        ]


$_________________________                    No.________________


     Mid-State Trust VI (the "Issuer"), a Delaware business trust governed by a
Trust Agreement dated as of April __, 1997 (the "Trust Agreement"), for value
received, hereby promises to pay to ________________ or registered assigns, the
principal sum of ________ Dollars in quarterly installments on January 1, April
1, July 1, and October 1 (the "Principal Payment Dates") in each year,
commencing on July 1, 1997 and ending on or before [      ] (the "Maturity" of
such final installment of principal) and to pay interest (computed on the basis
of a 360-day year of twelve 30-day months) on the unpaid principal amount of
this Class A-3 Note outstanding from time to time from [       ] (the "Accrual
Date"), or such later date to which interest has been paid, until the principal
amount of this Class A-3 Note is paid in full, at the rate of __________ percent
(_____%) per annum, such interest being payable quarterly on January 1, April 1,
July 1, and October 1 in each year, commencing on July 1, 1997 (the "Interest
Payment Dates").  Installments of principal of this Class A-3 Note are due and
payable in the amounts and on the dates described on the reverse hereof.

     The principal of, and interest on, this Class A-3 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 Class A-3 Note shall be applied first to interest
due and payable on this Class A-3 Note as provided above and then to the unpaid
principal of this Class A-3 Note.  Any installment of principal or interest
which is not paid when and as due shall bear interest at the rate of interest
borne by the principal of this Class A-3 Note from the date due to the date of
payment thereof, but only to the extent that the payment of such interest shall
be lawful and enforceable.


                                         C-2

<PAGE>

     Unless the certificate of authentication hereon has been executed by the
Trustee by manual signature, this Class A-3 Note shall not be entitled to any
benefit under the Indenture referred to below, or be valid or obligatory for any
purpose.
 

                                         C-3

<PAGE>

     IN WITNESS WHEREOF, Mid-State Trust VI has caused this instrument to be
duly executed by Wilmington Trust Company, not in its individual capacity but
solely as Owner Trustee under the Trust Agreement.


Dated:                             MID-STATE TRUST VI,
       ---------------------
                                   By:  Wilmington Trust Company,     
                                   not in its individual capacity     
                                   but solely in its capacity as      
                                   Owner Trustee under the Trust      
                                   Agreement


                                   By
                                      ----------------------------
                                             [Title]

 

                                         C-4

<PAGE>

     This Class A-3 Note is one of a duly authorized issue of Notes of the 
Issuer, designated as its [    ]% Asset Backed Notes, Class A-3 (herein 
called the "Class A-3 Notes").  The Class A-3 Notes are issued and will be 
issued under an Indenture dated as of April __, 1997 (herein called the 
"Indenture"), between the Issuer and First Union National Bank of North 
Carolina, as Trustee (the "Trustee", which term includes any successor 
Trustee under the Indenture), to which Indenture and all indentures 
supplemental thereto reference is hereby made for a statement of the 
respective rights thereunder of the Issuer, the Trustee and the Holders of 
the Class A-3 Notes and the terms upon which the Class A-3 Notes are, and are 
to be, authenticated and delivered.  Also issued under the Indenture are the 
[   ]% Asset Backed Notes, Class A-1, [   ]% Asset Backed Notes, Class A-2 
and [   ]% Asset Backed Notes, Class A-4.  The Class A-3 Notes are secured by 
the collateral pledged as security therefor to the extent provided in the 
Indenture.  All terms used in this Class A-3 Note which are defined in the 
Indenture shall have the meanings assigned to them in the Indenture.


     An installment of principal shall be paid on the Class A-3 Notes on each
Principal Payment Date in the amount equal to the amount available to be paid
thereon pursuant to Section 8.02(c)(ii) of the Indenture on such Principal
Payment Date; provided that the unpaid principal amount of this Class A-3 Note
shall be due and payable on the Principal Payment Date in _______.  Each payment
of principal of the Class A-3 Notes shall be allocated among the Class A-3 Notes
in proportion to their then remaining unpaid principal amounts.  The unpaid
principal amount of this Class A-3 Note may be reduced by the allocation to it
(in accordance with Section 2.09 of the Indenture) of Class A-3 Realized Loss
Amounts without any corresponding payment.


     The rights of the Class A-3 Noteholders to receive payments in respect of
principal and interest on the Class A-3 Notes are subordinate to the rights of
the Class A-1 Noteholders and Class A-2 Noteholders to receive payments of
principal and interest.

     Payment of the then remaining unpaid principal amount of this Class A-3
Note on the Maturity of its final installment of principal or on such earlier
date as the Issuer shall be required to apply payments received with respect to
the collateral securing the Class A-3 Notes to payment of the then remaining

                                         C-5

<PAGE>

unpaid principal amount of this Class A-3 Note or to payment of the Redemption
Price payable on any date as of which this Class A-3 Note has been called for
redemption in full shall be made upon presentation of this Class A-3 Note to the
office or agency of the Issuer maintained for such purpose.  Payments of
interest on this Class A-3 Note due and payable on each Interest Payment Date,
together with any installment of principal of this Class A-3 Note due and
payable on each Interest Payment Date which is also a Principal Payment Date for
this Class A-3 Note, shall be made by check mailed to the Person whose name
appears as the registered Holder of this Class A-3 Note (or one or more
Predecessor Notes) in the Note Register as of the Record Date preceding such
Interest Payment Date, except that with respect to a Class A-3 Note registered
in the name of the nominee of a clearing agency (initially, such nominee to be
Cede & Co.) payments will be made by wire transfer in immediately available
funds to the account designated by such nominee.


     Checks for amounts due on this Class A-3 Note shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Class A-3
Note be submitted for notation of payment and checks returned undelivered will
be held for payment to the Person entitled thereto, subject to the terms of the
Indenture, at the office or agency in the United States of America designated by
the Issuer for such purpose pursuant to the Indenture.  Any reduction in the
principal amount of this Class A-3 Note (or any one or more Predecessor Notes)
effected by any payments made on any Principal Payment Date or by any allocation
of a Class A-3 Realized Loss Amount shall be binding upon all Holders of this
Class A-3 Note and of any Class A-3 Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof, whether or not noted
hereon.


     If funds are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of this Class A-3
Note on a Principal Payment Date which is prior to the Maturity of the final
installment of principal hereof, then the Trustee, on behalf of the Issuer, will
notify the Person who was the registered Holder hereof on the 15th day of the
month prior to the month in which such Principal Payment Date occurs, by notice
mailed no later than ten days 

                                         C-6

<PAGE>

prior to such Principal Payment Date, and the amount then due and payable shall,
if sufficient funds therefor are available, be payable only upon presentation of
this Class A-3 Note to the office or agency of the Issuer maintained for such
purpose.

     If an Event of Default shall occur and be continuing with respect to the
Class A-3 Notes, the Class A-3 Notes may become or be declared due and payable
in the manner and with the effect provided in the Indenture.  Reference is
hereby made to Article V of the Indenture which sets forth certain events which
constitute Events of Default.  If any such acceleration of maturity occurs prior
to the Maturity of the final installment of principal of this Class A-3 Note,
the amount payable to the Holder of this Class A-3 Note will be equal to the
aggregate unpaid principal amount of this Class A-3 Note on the date this Class
A-3 Note becomes so due and payable, together with accrued interest on such
unpaid principal amount to the date of payment thereof.  The Indenture provides
that, notwithstanding the acceleration of the maturity of the Class A-3 Notes,
under certain circumstances specified therein all amounts collected as proceeds
of the collateral securing the Class A-3 Notes or otherwise shall continue to be
applied to payments of principal of and interest on the Class A-3 Notes as if
they had not been declared due and payable.  In such event, interest on the then
unpaid principal amount of all Class A-3 Notes and on any overdue installments
of interest on the Class A-3 Notes following the acceleration of the maturity of
the Class A-3 Notes shall accrue and be payable at the applicable Note Interest
Rate, but only to the extent that the payment thereof shall be lawful and
enforceable.


     The Class A-3 Notes are not prepayable or redeemable at the option or
direction of the Issuer except that all of the outstanding Notes may be called
for redemption in whole at the option of the Issuer on any Payment Date, if,
either before or after giving effect to the payment of principal otherwise
required to be made on such Payment Date, each Class of Notes shall be in an
aggregate Outstanding Principal Balance which is 10% or less of the original
principal amount of such Class of Notes, at 100% of the outstanding principal
amount thereof together with interest accrued and unpaid to the date set for
redemption.



                                         C-7

<PAGE>

     As provided in the Indenture the transfer of this Class A-3 Note may be
registered on the Note Register of the Issuer, upon surrender of this Class A-3
Note for registration of transfer at the office or agency designated by the
Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes, of authorized denominations and in the same aggregate initial
principal amount will be issued to the designated transferee or transferees.

     Prior to the due presentment for registration of transfer of this Class A-3
Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Class A-3 Note is registered (i) on any
Record Date, for purposes of making payments, and (ii) on any other date for any
other purpose, as the owner hereof, whether or not this Class A-3 Note be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by written notice to the contrary.

     The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Class A-3 Notes under the Indenture
at any time by the Issuer, and the Holders of Notes entitled to more than 50% of
the Voting Rights at the time Outstanding.  The Indenture also contains
provisions that permit the Holders of Notes entitled to more than 50% of the
Voting Rights, on behalf of the Holders of all the Notes, to waive compliance by
the Issuer with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences.  Any such consent or waiver by the
Holder, at the time of the giving thereof, of this Class A-3 Note (or any one or
more Predecessor Notes) shall be conclusive and binding upon such Holder and
upon all future holders of this Class A-3 Note and of any Class A-3 Note issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent or waiver is made upon this Class
A-3 Note.

     The term "Issuer" as used in this Class A-3 Note includes any successor to
the Issuer under the Indenture.


                                         C-8

<PAGE>

     The Class A-3 Notes are issuable only in registered form in the
denominations provided in the Indenture and subject to certain limitations
therein set forth.  The Class A-3 Notes are exchangeable for a like aggregate
initial principal amount of Class A-3 Notes of different authorized
denominations, as requested by the Holder surrendering the same, pursuant to the
terms and conditions set forth in the Indenture.

     As provided in the Indenture, this Class A-3 Note and the Indenture shall
be construed in accordance with, and governed by, the laws of the State of New
York applicable to agreements made and to be performed therein.

     No reference herein to the Indenture and no provision of this Class A-3
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 Class A-3 Note at the times, place and rate, and in the coin or currency,
herein prescribed.

     Anything herein to the contrary notwithstanding, neither the Owner Trustee
in its individual capacity, any beneficial owner of the Issuer, the Trustee nor
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 and interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in, this Class A-3 Note or the Indenture, it being
expressly understood that said covenants, obligations and indemnifications have
been made by the Owner Trustee for the sole purpose of binding the respective
interests of the beneficial owners of the Issuer and the Owner Trustee in the
assets of the Issuer.  The Holder of this Class A-3 Note by the acceptance
hereof agrees that in the case of an Event of Default under the Indenture, the
Holder 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 the enforcement against, the assets of the
Issuer of any and all liabilities, obligations and undertakings contained in the
Indenture or in this Class A-3 Note.


                                         C-9

<PAGE>

     The Owner Trustee has executed this Class A-3 Note on behalf of the Issuer,
not in its individual capacity but solely as owner trustee under the Trust
Agreement and the Owner Trustee shall be liable hereunder only in respect of the
assets of the trust created by such Trust Agreement.

     The remedies of the Holder hereof as provided herein and in the Indenture,
shall be cumulative and concurrent and may be pursued solely against the assets
of the Trust created by the Trust Agreement pledged under the Indenture as
security for the Class A-3 Notes.  No failure on the part of the holder in
exercising any right or remedy hereunder shall operate as a waiver or release
thereof, nor shall any single or partial exercise of any right or remedy
preclude any further exercise thereof or the exercise of any other right or
remedy hereunder. 


                                         C-10

<PAGE>

                       TRUSTEE'S CERTIFICATE OF AUTHENTICATION

     This is one of the Class A-3 Notes referred to in the within-mentioned
Indenture.


                         First Union National Bank of North Carolina,
                              as Trustee

                         By
                            --------------------------
                              Authorized Signatory
 

                                         C-11

<PAGE>

                                                                       EXHIBIT D


UNLESS THIS CLASS A-4 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 CERTIFICATE
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.

PRINCIPAL OF THIS CLASS A-4 NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-4 NOTE
AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.  THE ACTUAL
OUTSTANDING PRINCIPAL AMOUNT OF THIS CLASS A-4 NOTE MAY BE ASCERTAINED ONLY BY
OBTAINING A WRITTEN CONFIRMATION THEREOF FROM THE TRUSTEE NAMED HEREIN.  THE
RIGHTS OF A HOLDER OF THIS CLASS A-4 NOTE ARE SUBJECT TO THE PROVISIONS OF THE
WITHIN-REFERENCED INDENTURE.

THE RIGHTS OF THE CLASS A-4 NOTEHOLDERS TO RECEIVE PAYMENTS IN RESPECT OF
PRINCIPAL AND INTEREST ON THE CLASS A-4 NOTES ARE SUBORDINATE TO THE RIGHTS OF
THE CLASS A-1 NOTEHOLDERS, CLASS A-2 NOTEHOLDERS AND CLASS A-3 NOTEHOLDERS TO
RECEIVE PAYMENTS OF PRINCIPAL AND INTEREST. 

                                         D-1

<PAGE>

                                 MID-STATE TRUST VI
                                          
                              _____% ASSET BACKED NOTE
                                  DUE: [        ]
                              ACCRUAL DATE: [        ]



$_________________________                    No.________________


     Mid-State Trust VI (the "Issuer"), a Delaware business trust governed by a
Trust Agreement dated as of April __, 1997 (the "Trust Agreement"), for value
received, hereby promises to pay to ________________ or registered assigns, the
principal sum of ________ Dollars in quarterly installments on January 1, April
1, July 1, and October 1 (the "Principal Payment Dates") in each year,
commencing on July 1, 1997 and ending on or before [      ] (the "Maturity" of
such final installment of principal) and to pay interest (computed on the basis
of a 360-day year of twelve 30-day months) on the unpaid principal amount of
this Class A-4 Note outstanding from time to time from [       ] (the "Accrual
Date"), or such later date to which interest has been paid, until the principal
amount of this Class A-4 Note is paid in full, at the rate of __________ percent
(_____%) per annum, such interest being payable quarterly on January 1, April 1,
July 1, and October 1 in each year, commencing on July 1, 1997 (the "Interest
Payment Dates").  Installments of principal of this Class A-4 Note are due and
payable in the amounts and on the dates described on the reverse hereof.

     The principal of, and interest on, this Class A-4 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 Class A-4 Note shall be applied first to interest
due and payable on this Class A-4 Note as provided above and then to the unpaid
principal of this Class A-4 Note.  Any installment of principal or interest
which is not paid when and as due shall bear interest at the rate of interest
borne by the principal of this Class A-4 Note from the date due to the date of
payment thereof, but only to the extent that the payment of such interest shall
be lawful and enforceable.


                                         D-2

<PAGE>

     Unless the certificate of authentication hereon has been executed by the
Trustee by manual signature, this Class A-4 Note shall not be entitled to any
benefit under the Indenture referred to below, or be valid or obligatory for any
purpose.
 

                                         D-3

<PAGE>

     IN WITNESS WHEREOF, Mid-State Trust VI has caused this instrument to be
duly executed by Wilmington Trust Company, not in its individual capacity but
solely as Owner Trustee under the Trust Agreement.


Dated:                             MID-STATE TRUST VI,
        ----------------------
                                   By:  Wilmington Trust Company,     
                                   not in its individual capacity     
                                   but solely in its capacity as      
                                   Owner Trustee under the Trust      
                                   Agreement


                                   By
                                      -----------------------------
                                             [Title]


 

                                         D-4

<PAGE>

     This Class A-4 Note is one of a duly authorized issue of Notes of the 
Issuer, designated as its [    ]% Asset Backed Notes, Class A-4 (herein 
called the "Class A-4 Notes").  The Class A-4 Notes are issued and will be 
issued under an Indenture dated as of April __, 1997 (herein called the 
"Indenture"), between the Issuer and First Union National Bank of North 
Carolina, as Trustee (the "Trustee", which term includes any successor 
Trustee under the Indenture), to which Indenture and all indentures 
supplemental thereto reference is hereby made for a statement of the 
respective rights thereunder of the Issuer, the Trustee and the Holders of 
the Class A-4 Notes and the terms upon which the Class A-4 Notes are, and are 
to be, authenticated and delivered.  Also issued under the Indenture are the 
[   ]% Asset Backed Notes, Class A-1, [   ]% Asset Backed Notes, A-2 and [   ]
% Asset Backed Notes, Class A-3.  The Class A-4 Notes are secured by the 
collateral pledged as security therefor to the extent provided in the 
Indenture.  All terms used in this Class A-4 Note which are defined in the 
Indenture shall have the meanings assigned to them in the Indenture.


     An installment of principal shall be paid on the Class A-4 Notes on each
Principal Payment Date in the amount equal to the amount available to be paid
thereon pursuant to Section 8.02(c)(ii) of the Indenture on such Principal
Payment Date; provided that the unpaid principal amount of this Class A-4 Note
shall be due and payable on the Principal Payment Date in _____.  Each payment
of principal of the Class A-4 Notes shall be allocated among the Class A-4 Notes
in proportion to their then remaining unpaid principal amounts.  The unpaid
principal amount of this Class A-4 Note may be reduced by the allocation to it
(in accordance with Section 2.09 of the Indenture) of Class A-4 Realized Loss
Amounts without any corresponding payment.


     The rights of the Class A-4 Noteholders to receive payments in respect of
principal and interest on the Class A-4 Notes are subordinate to the rights of
the Class A-1 Noteholders, Class A-2 Noteholders and Class A-3 Noteholders to
receive payments of principal and interest.

     Payment of the then remaining unpaid principal amount of this Class A-4
Note on the Maturity of its final installment of principal or on such earlier
date as the Issuer shall be required to apply payments received with respect to
the collateral 

                                         D-5

<PAGE>

securing the Class A-4 Notes to payment of the then remaining unpaid principal
amount of this Class A-4 Note or to payment of the Redemption Price payable on
any date as of which this Class A-4 Note has been called for redemption in full
shall be made upon presentation of this Class A-4 Note to the office or agency
of the Issuer maintained for such purpose.  Payments of interest on this Class
A-4 Note due and payable on each Interest Payment Date, together with any
installment of principal of this Class A-4 Note due and payable on each Interest
Payment Date which is also a Principal Payment Date for this Class A-4 Note,
shall be made by check mailed to the Person whose name appears as the registered
Holder of this Class A-4 Note (or one or more Predecessor Notes) in the Note
Register as of the Record Date preceding such Interest Payment Date, except that
with respect to a Class A-4 Note registered in the name of the nominee of a
clearing agency (initially, such nominee to be Cede & Co.) payments will be made
by wire transfer in immediately available funds to the account designated by
such nominee.


     Checks for amounts due on this Class A-4 Note shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Class A-4
Note be submitted for notation of payment and checks returned undelivered will
be held for payment to the Person entitled thereto, subject to the terms of the
Indenture, at the office or agency in the United States of America designated by
the Issuer for such purpose pursuant to the Indenture.  Any reduction in the
principal amount of this Class A-4 Note (or any one or more Predecessor Notes)
effected by any payments made on any Principal Payment Date or by any allocation
of a Class A-4 Realized Loss Amount shall be binding upon all Holders of this
Class A-4 Note and of any Class A-4 Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof, whether or not noted
hereon.


     If funds are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of this Class A-4
Note on a Principal Payment Date which is prior to the Maturity of the final
installment of principal hereof, then the Trustee, on behalf of the Issuer, will
notify the Person who was the registered Holder hereof on the 15th day of the
month prior to the month in which such Principal 

                                         D-6

<PAGE>

Payment Date occurs, by notice mailed no later than ten days prior to such
Principal Payment Date, and the amount then due and payable shall, if sufficient
funds therefor are available, be payable only upon presentation of this Class
A-4 Note to the office or agency of the Issuer maintained for such purpose.

     If an Event of Default shall occur and be continuing with respect to the
Class A-4 Notes, the Class A-4 Notes may become or be declared due and payable
in the manner and with the effect provided in the Indenture.  Reference is
hereby made to Article V of the Indenture which sets forth certain events which
constitute Events of Default.  If any such acceleration of maturity occurs prior
to the Maturity of the final installment of principal of this Class A-4 Note,
the amount payable to the Holder of this Class A-4 Note will be equal to the
aggregate unpaid principal amount of this Class A-4 Note on the date this Class
A-4 Note becomes so due and payable, together with accrued interest on such
unpaid principal amount to the date of payment thereof.  The Indenture provides
that, notwithstanding the acceleration of the maturity of the Class A-4 Notes,
under certain circumstances specified therein all amounts collected as proceeds
of the collateral securing the Class A-4 Notes or otherwise shall continue to be
applied to payments of principal of and interest on the Class A-4 Notes as if
they had not been declared due and payable.  In such event, interest on the then
unpaid principal amount of all Class A-4 Notes and on any overdue installments
of interest on the Class A-4 Notes following the acceleration of the maturity of
the Class A-4 Notes shall accrue and be payable at the applicable Note Interest
Rate, but only to the extent that the payment thereof shall be lawful and
enforceable.


     The Class A-4 Notes are not prepayable or redeemable at the option or
direction of the Issuer except that all of the outstanding Notes may be called
for redemption in whole at the option of the Issuer on any Payment Date, if,
either before or after giving effect to the payment of principal otherwise
required to be made on such Payment Date, each Class of Notes shall be in an
aggregate Outstanding Principal Balance which is 10% or less of the original
principal amount of such Class of Notes, at 100% of the outstanding principal
amount thereof together with interest accrued and unpaid to the date set for
redemption.



                                         D-7

<PAGE>

     As provided in the Indenture the transfer of this Class A-4 Note may be
registered on the Note Register of the Issuer, upon surrender of this Class A-4
Note for registration of transfer at the office or agency designated by the
Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes, of authorized denominations and in the same aggregate initial
principal amount will be issued to the designated transferee or transferees.

     Prior to the due presentment for registration of transfer of this Class A-4
Note, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this Class A-4 Note is registered (i) on any
Record Date, for purposes of making payments, and (ii) on any other date for any
other purpose, as the owner hereof, whether or not this Class A-4 Note be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by written notice to the contrary.

     The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Class A-4 Notes under the Indenture
at any time by the Issuer, and the Holders of Notes entitled to more than 50% of
the Voting Rights at the time Outstanding.  The Indenture also contains
provisions that permit the Holders of Notes entitled to more than 50% of the
Voting Rights, on behalf of the Holders of all the Notes, to waive compliance by
the Issuer with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences.  Any such consent or waiver by the
Holder, at the time of the giving thereof, of this Class A-4 Note (or any one or
more Predecessor Notes) shall be conclusive and binding upon such Holder and
upon all future holders of this Class A-4 Note and of any Class A-4 Note issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent or waiver is made upon this Class
A-4 Note.

     The term "Issuer" as used in this Class A-4 Note includes any successor to
the Issuer under the Indenture.


                                         D-8

<PAGE>

     The Class A-4 Notes are issuable only in registered form in the
denominations provided in the Indenture and subject to certain limitations
therein set forth.  The Class A-4 Notes are exchangeable for a like aggregate
initial principal amount of Class A-4 Notes of different authorized
denominations, as requested by the Holder surrendering the same, pursuant to the
terms and conditions set forth in the Indenture.

     As provided in the Indenture, this Class A-4 Note and the Indenture shall
be construed in accordance with, and governed by, the laws of the State of New
York applicable to agreements made and to be performed therein.

     No reference herein to the Indenture and no provision of this Class A-4
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 Class A-4 Note at the times, place and rate, and in the coin or currency,
herein prescribed.

     Anything herein to the contrary notwithstanding, neither the Owner Trustee
in its individual capacity, any beneficial owner of the Issuer, the Trustee nor
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 and interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in, this Class A-4 Note or the Indenture, it being
expressly understood that said covenants, obligations and indemnifications have
been made by the Owner Trustee for the sole purpose of binding the respective
interests of the beneficial owners of the Issuer and the Owner Trustee in the
assets of the Issuer.  The Holder of this Class A-4 Note by the acceptance
hereof agrees that in the case of an Event of Default under the Indenture, the
Holder 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 the enforcement against, the assets of the
Issuer of any and all liabilities, obligations and undertakings contained in the
Indenture or in this Class A-4 Note.


                                         D-9

<PAGE>

     The Owner Trustee has executed this Class A-4 Note on behalf of the Issuer,
not in its individual capacity but solely as owner trustee under the Trust
Agreement and the Owner Trustee shall be liable hereunder only in respect of the
assets of the trust created by such Trust Agreement.

     The remedies of the Holder hereof as provided herein and in the Indenture,
shall be cumulative and concurrent and may be pursued solely against the assets
of the Trust created by the Trust Agreement pledged under the Indenture as
security for the Class A-4 Notes.  No failure on the part of the holder in
exercising any right or remedy hereunder shall operate as a waiver or release
thereof, nor shall any single or partial exercise of any right or remedy
preclude any further exercise thereof or the exercise of any other right or
remedy hereunder.
 

                                         D-10

<PAGE>

                       TRUSTEE'S CERTIFICATE OF AUTHENTICATION

     This is one of the Class A-4 Notes referred to in the within-mentioned
Indenture.


                         First Union National Bank of North Carolina,
                              as Trustee

                         By
                            -------------------------------
                              Authorized Signatory




                                         D-11



 

<PAGE>
                                                                     EXHIBIT 5.1
 
   
                                          May 29, 1997
    
 
Mid-State Trust VI
c/o Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890
 
    Re: ASSET-BACKED NOTES
 
Gentlemen:
 
   
    We have acted as your counsel in connection with the Registration Statement
(No. 23667), as amended by Pre-Effective Amendment No. 1 thereto filed with the
Securities and Exchange Commission (the 'Commission') on May 1, 1997 and
Pre-Effective Amendment No. 2 thereto filed with the Commission on the date
hereof, pursuant to the Securities Act of 1933, as amended (as amended, the
'Registration Statement'). The Registration Statement covers the Asset-Backed
Notes ('Notes'), Class A-1, Class A-2, Class A-3 and Class A-4 to be sold by
Mid-State Trust VI (the 'Company'). The Notes will be issued pursuant to an
indenture (the 'Indenture') between the Company and First Union National Bank of
Florida, as trustee (the 'Trustee'). A form of Indenture is included as an
Exhibit to the Registration Statement. Capitalized terms used and not otherwise
defined herein have the respective meanings ascribed to such terms in the
Registration Statement.
    
 
    We have examined originals or copies certified or otherwise identified to
our satisfaction of such documents and records of the Company, and such public
documents and records as we have deemed necessary as a basis for the opinions
hereinafter expressed.
 
    Based on the foregoing, we are of the opinion that:
 
    1.  When the Indenture for the Notes has been duly and validly executed and
       delivered by the Company and the Trustee, the Indenture will constitute a
       valid and legally binding agreement of the Company, enforceable against
       the Company in accordance with its terms, subject to applicable
       bankruptcy, reorganization, insolvency, moratorium and other laws
       affecting the enforcement of rights of creditors generally and to general
       principles of equity and the discretion of the court (regardless of
       whether enforceability is considered in a proceeding in equity or at
       law); and
 
    2.  When the Indenture for the Notes has been duly and validly executed and
       delivered by the Company and the Trustee, and the Notes have been duly
       executed, authenticated, delivered and sold as contemplated in the
       Registration Statement, the Notes will be legally and validly issued,
       fully paid and nonassessable, and the holders of the Notes will be
       entitled to the benefits of the Indenture.
 
    We hereby consent to the filing of this letter as an Exhibit to the
Registration Statement and to the reference to this firm under the heading
'Legal Matters' in the Prospectus forming a part of the Registration Statement.
This consent is not to be construed as an admission that we are a person whose
consent is required to be filed with the Registration Statement under the
provisions of the Act.
 
                                          Very truly yours,
 
                                          /s/ CADWALADER, WICKERSHAM & TAFT



<PAGE>

                               SERVICING AGREEMENT

                             Dated as of May 1, 1997


                                      among


                               MID-STATE TRUST VI

                                     Issuer

                                       and

                             MID-STATE HOMES, INC.,

                                    Servicer

                                       and

                    FIRST UNION NATIONAL BANK OF FLORIDA,

                                     Trustee


                Relating to the Accounts Pledged to First Union
                            National Bank of Florida,
                        as Trustee, as Collateral for the
                Issuer's [   ]% Asset Backed Notes, Class A-1, [   ]%
                     Asset Backed Notes, Class A-2 [   ]%
                   Asset Backed Notes, Class A-3 and [   ]%
                          Asset Backed Notes, Class A-4
                  in the Aggregate Original Principal Amount
                              of $439,150,000

<PAGE>

                                Table of Contents

                                   ARTICLE ONE

                                   DEFINITIONS

      Section 1.01.  Defined Terms.........................................  1
      Section 1.02.  Terms Defined in the Indenture........................  3

                                   ARTICLE TWO

                   ADMINISTRATION AND SERVICING OF ACCOUNTS

      Section 2.01.  The Servicer to Act as Servicer.......................  3
      Section 2.02.  Sub-Servicing Agreements Between
                        Servicer and Sub-Servicer..........................  7
      Section 2.03.  Successor Sub-Servicers...............................  8
      Section 2.04.  Liability of the Servicer.............................  8
      Section 2.05.  No Contractual Relationship Between
                        Sub-Servicer and Trustee or Issuer.................  8
      Section 2.06.  Assumption of Sub-Servicing Agreement by
                        Successor Servicer.................................  9
      Section 2.07.  Collection of Account Payments;
                        Holding Account....................................  9
      Section 2.08.  Collection Account; Servicing Account................. 11
      Section 2.09.  Records and Servicing Account Moneys.................. 13
      Section 2.10.  Assumption Agreements................................. 14
      Section 2.11.  Permitted Withdrawals from the
                        Collection Account................................. 15
      Section 2.12.  Advances for Delinquent Taxes......................... 15
      Section 2.13.  Maintenance of Insurance; Collection
                        Thereunder......................................... 16
      Section 2.14.  Realization upon Defaulted Accounts................... 17
      Section 2.15.  Release of Accounts................................... 18
      Section 2.16.  Servicing Compensation................................ 19

                                  ARTICLE THREE

                         STATEMENTS, REPORTS AND NOTICES

      Section 3.01.  Reporting by the Servicer............................. 19
      Section 3.02.  Annual Certificate; Account Statement................. 20
      Section 3.03.  Annual Accountants' Reports........................... 20
      Section 3.04.  Notices............................................... 21

                                  ARTICLE FOUR

                                  THE SERVICER

      Section 4.01.  Representations and Warranties of the
                                     Servicer.............................. 21
      Section 4.02.  Merger or Consolidation of the Servicer............... 23


                                   i
<PAGE>

      Section 4.03.     Performance of Obligations......................... 23
      Section 4.04.     Servicer Not to Resign............................. 23
      Section 4.05.     Fidelity Bond...................................... 24

                                  ARTICLE FIVE

                                     DEFAULT

      Section 5.01.     Events of Default.................................. 24
      Section 5.02.     No Effect on Other Parties......................... 26
      Section 5.03.     Rights Cumulative.................................. 26

                                   ARTICLE SIX

                                  THE ACCOUNTS

      Section 6.01.     Representations and Warranties; Account
                        Documents.......................................... 27

                                  ARTICLE SEVEN

                            MISCELLANEOUS PROVISIONS

      Section 7.01.     Termination........................................ 28
      Section 7.02.     Amendment.......................................... 28
      Section 7.03.     Governing Law...................................... 29
      Section 7.04.     Notices............................................ 29
      Section 7.05.     Severability of Provisions......................... 30
      Section 7.06.     Inspection and Audit Rights........................ 30
      Section 7.07.     Binding Effect..................................... 30
      Section 7.08.     Article and Section Headings....................... 31
      Section 7.09.     The Owner Trustee.................................. 31
      Section 7.10.     Distribution of Servicing Procedures and
                        Standards.......................................... 31
      Section 7.11.     Property Address................................... 31
      Section 7.12.     Power of Attorney.................................. 31
      Section 7.13.     Rights Upon Discharge of Indenture................. 32


EXHIBITS

Exhibit A               Form of Standby Servicing Agreement................A-1
Exhibit B               Form of Servicer's Certificate.....................B-1
Exhibit C               Litigation.........................................C-1
Exhibit D               Historical Servicing Standards.....................D-1


                                       ii
<PAGE>


      THIS SERVICING AGREEMENT, dated as of May 1, 1997, among Mid-State 
Trust VI a Delaware business trust (such trust being herein called the 
,"Issuer"), Mid-State Homes, Inc., a Florida corporation (herein, together 
with its successors and assigns, called the "Servicer") and First Union 
National Bank of Florida, as Trustee under the Indenture referred to below.


                              PRELIMINARY STATEMENT


      The Issuer is a business trust created by a Trust Agreement dated as of 
March 1, 1997 between Wilmington Trust Company (in its capacity as Trustee 
thereunder, the "Owner Trustee") and Mid-State Homes, Inc., as Grantor. The 
Issuer will act at all times through the Owner Trustee. The Issuer has 
entered into an Indenture (the "Indenture"), dated as of the date of this 
Agreement, with First Union National Bank of Florida, as Trustee (the 
"Trustee"), pursuant to which the Issuer intends to issue its [ ]% Asset 
Backed Notes, Class A-1 (the "Class A-1 Notes"), [ ]% Asset Backed Notes, 
Class A-2 (the "Class A-2 Notes"), [ ]% Asset Backed Notes, Class A-3 (the 
"Class A-3 Notes") and [ ]% Asset Backed Notes, Class A-4 (the "Class A-4 
Notes" and together with the Class A-1 Notes, Class A-2 Notes and Class A-3 
Notes, the "Notes"). Pursuant to the Indenture, as security for the Notes, 
the Issuer is Granting to the Trustee a security interest in, among other 
things, certain Accounts, its rights under this Agreement, the Collection 
Account, the Holding Account and the Hazard Insurance Policies (as such terms 
are hereinafter defined).


      The parties desire to enter into this Agreement to provide, among other
things, for the servicing of the Accounts by the Servicer. The Servicer
acknowledges that, in order further to secure the Notes, the Issuer is Granting
to the Trustee a security interest in, among other things, its rights under this
Agreement, and the Servicer agrees that all covenants and agreements made by the
Servicer herein with respect to the Accounts shall also be for the benefit and
security of the Trustee and Holders of the Notes. For its services hereunder,
the Servicer will receive a Servicing Fee with respect to each Account serviced
hereunder as provided herein.

                                   ARTICLE ONE

                                   DEFINITIONS

      Section 1.01.  Defined Terms.

      Except as otherwise specified or as the context may otherwise require, the
following terms have the respective meanings set forth below for all purposes of
this Agreement, and the definitions of such terms are applicable to the singular
as
<PAGE>

well as to the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such terms:

      "Acquired Property": Property acquired by the Issuer by foreclosure, deed
in lieu of foreclosure, or otherwise in respect of a defaulted Account.

      "Agreement": This Servicing Agreement as originally executed and as
amended or supplemented from time to time in accordance with the terms hereof
and of the Indenture.

      "Bankruptcy Code": Title 11 of the United States Code.


      "Custodian": As defined in the Holding Account Agreement dated as of 
May 1, 1997 between the Servicer and First Union National Bank of North 
Carolina, as trustee.


      "Default": Any occurrence or circumstance that, with notice or lapse of
time or both, would be an Event of Default.

      "Event of Default": Any of the occurrences or circumstances enumerated in
Section 5.01.


      "Holding Account": A custodial account established by the Servicer 
pursuant to the Holding Account Agreement, dated as of May 1, 1997 in the 
name of the First Union National Bank of North Carolina, as Custodian for 
First Union National Bank of North Carolina as Trustee under the Indenture 
and the Servicer, maintained at a depositary institution (i) the deposits in 
which are fully insured by the Federal Deposit Insurance Corporation through 
either the Bank Insurance Fund or the Savings Association Insurance Fund and 
(ii) the commercial paper or other short term obligations of which (or, in 
the case of a depository institution which is the principal subsidiary of a 
holding company the commercial paper or other short-term debt obligations of 
such holding company) have a credit rating of at least A-1 and P-2 from S&P 
and Moody's, respectively.


      "Homes": Jim Walter Homes, Inc., a North Carolina corporation.


      "Indenture": The Indenture dated as of May 1, 1997 between the Issuer 
and First Union National Bank of North Carolina, as Trustee, as such 
Indenture may be amended or supplemented from time to time in accordance with 
its terms.


      "Monthly Cut-off Date": The last day of any Remittance Period.


      "Remittance Date": The first Business Day of each week (beginning 
April 1, 1997) and the first Business Day following the end of each Due Period.


                                      2
<PAGE>


      "Remittance Period": The period from the end of the preceding Remittance
Period (or from April 1, 1997 in the case of the first Remittance Period)
through the last Friday of the next month or, in the case of the last Remittance
Period of a Due Period, through the last day of the next month.


      "Reporting Date": With respect to any Remittance Period, the 20th day of
the month following such Remittance Period or if such day is not a Business Day
the next preceding Business Day.

      "Servicer Termination": As defined in Section 5.01.

      "Servicing Account":  As defined in Section 2.08(b).

      "Servicing Fee": As defined in Section 2.16.


      "Standby Servicing Agreement": The Standby Servicing Agreement dated as of
May 1, 1997 by and among the Servicer, the Issuer and the Successor Servicer 
in the form attached hereto as Exhibit A.


      "Sub-Servicer": As defined in Section 2.02.

      "Sub-Servicing Agreement": An agreement between the Servicer and a
Sub-Servicer as described in Section 2.02.

      "Successor Servicer": As defined in the Indenture.

      "Uninsured Cause": Any cause of damage to property subject to a Mortgage
such that the property cannot be completely restored out of the proceeds of the
Hazard Insurance Policies required to be maintained pursuant to Section 2.13.

      Section 1.02. Terms Defined in the Indenture.

      For purposes of this Agreement, all capitalized terms used herein that are
defined in the Indenture (other than terms defined in Section 1.01 of this
Agreement) shall have the respective meanings assigned to such terms in the
Indenture.


                                   ARTICLE TWO

                   ADMINISTRATION AND SERVICING OF ACCOUNTS

      Section 2.01.  The Servicer to Act as Servicer.

      The Servicer shall service and administer the Accounts, in accordance with
the express terms of this Agreement, applicable state and federal law, and with
the standards and procedures employed by a prudent servicer with respect to the
servicing of similar accounts held in its own portfolio and in accordance with
the Servicer's historical servicing standards set forth on


                                      3
<PAGE>


Exhibit D, and the Servicer shall have full power and authority, acting alone,
to do any and all things in connection with such servicing and administration
that it may deem necessary or desirable and, subject to the foregoing and the
provisions of the Indenture to execute and deliver in the Servicer's own name,
on behalf of the Issuer, any and all deeds, sale contracts, instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Accounts and with respect
to the Mortgaged Properties; provided, however, any Successor Servicer shall not
be bound by the Servicer's historical servicing standards.


      Notwithstanding the preceding paragraph, the Servicer shall at all times
follow the procedures set forth below:

                        1. The Servicer shall use its reasonable best efforts to
      contact, either by telephone, mail, in person, or in such other manner as
      the Servicer deems appropriate under the circumstances, each Obligor on
      any Account that is delinquent 30 days or more in any payments called for
      under the terms and provisions of the Accounts (including outstanding
      advances for taxes, insurance and other amounts) as of the most recent
      Monthly Cut-off Date, in order to ascertain the reason for the delinquency
      and the likelihood that the Account will become current. Thereafter, the
      Servicer shall diligently pursue collection efforts in order to bring the
      Account current with respect to all outstanding amounts (including
      outstanding taxes, insurance and other amounts) unless the Servicer in its
      good faith judgment believes it is most appropriate, under the
      circumstances, and not as a general matter, not to pursue the outstanding
      amounts for taxes, insurance and other amounts.

                        2. The Servicer shall use its reasonable best efforts to
      physically inspect or visit the Mortgaged Property securing any Account
      that is 60 or more days delinquent as of the most recent Monthly Cut-off
      Date, unless the Servicer otherwise determines to its reasonable
      satisfaction that the value of the Mortgaged Property securing such
      Account has not been materially impaired and that such property has not
      been abandoned.

                        3. The Servicer shall use its reasonable best efforts to
      diligently pursue, foreclose upon or otherwise comparably convert the
      ownership of properties securing an Account that continues in default
      (including default in payment of taxes and insurance) for more than 90
      days, unless the Servicer, in its best judgment, believes that the Account
      can be returned to current status within a reasonable period of time or,
      solely with respect to defaults due solely to default in payment of taxes
      and


                                      4
<PAGE>

      insurance and other amounts, unless the Servicer in its good faith
      judgment believes it is most appropriate, under the circumstances, and not
      as a general matter, not to pursue the outstanding amounts for taxes,
      insurance and other amounts.

                        4. With respect to Mortgaged Properties that are known
      by the Servicer to be abandoned or in foreclosure, or properties with
      respect to which title has been acquired, the Servicer shall take such
      action as it deems necessary in its good faith judgment and not in
      violation of law to protect such property from vandalism or damage by the
      elements.

                        5. The deed to any Acquired Property delivered as a
      result of any foreclosure or similar proceeding or deed in lieu thereof
      shall name the Issuer as grantee unless the Servicer deems it necessary to
      foreclose or otherwise comparably convert title to any Mortgaged Property
      in the name of a party other than the Issuer. In that event, the Servicer
      may designate such a party (which, except in the States of Ohio and
      Maryland, shall not be an Affiliate of the Grantor) to hold title to the
      Acquired Property. The party designated to hold such title shall sign a
      written acknowledgment that it is holding title on behalf of the Issuer
      and any such acknowledgement shall be delivered to the Trustee together
      with the deed to such Acquired Property.

                        6. Upon acquisition of an Acquired Property by the
      Issuer, the Servicer shall prepare a Trust Mortgage in form appropriate to
      the state in which such Acquired Property is located and furnish such
      Trust Mortgage to the Trustee within two Business Days of acquiring a deed
      in respect of such Acquired Property for execution by the Issuer and
      recordation in accordance with the terms of the Indenture. The Servicer or
      Sub-Servicer in order to facilitate the sale of the Acquired Property, at
      its option, may execute and record as agent and attorney in fact for the
      Issuer a deed granting to the Servicer or Sub-Servicer a ten percent
      interest in the Acquired Property as a tenant in common, which interest
      shall be subject to the Trust Mortgage. As consideration for that
      interest, the Servicer or Sub-Servicer shall convey and hereby agrees to
      convey to the Issuer all of its share of the proceeds of disposition of
      any such Acquired Property (including any interest in any new Account with
      respect to such Acquired Property). No other consideration shall be
      payable by the Servicer or SubServicer to the Issuer for that interest.

                        If an Acquired Property is resold in exchange for a new
      Account within two Business Days of acquisition of


                                      5
<PAGE>


      such Acquired Property, the mortgage or deed of trust executed by the
      Issuer need not be executed and delivered to the Trustee, provided the
      Account Documents for such new Account and all assignments and
      endorsements with respect to such new Account required by the Indenture
      are delivered to the Trustee within five Business Days of acquisition.


                        7. Upon the acquisition of an Acquired Property, the
      Servicer shall (i) deliver the deed or certificate of sale to the Trustee,
      (ii) advance all taxes and standard hazard insurance premiums relating to
      the Acquired Property, (iii) process any claims for redemption and
      otherwise comply with any redemption procedures required by law, (iv) use
      its reasonable best efforts to promptly sell or otherwise dispose of such
      Acquired Property at a price which in its best judgment represents
      reasonable value and remit the proceeds to the Trustee, and (v) if, in
      order to sell the property at what it reasonably determines to be the best
      price available, the Servicer deems it reasonably necessary for the Issuer
      to provide mortgage financing to the prospective buyer, the Servicer shall
      undertake, as agent for the Issuer, to apply substantially the same
      underwriting standards as the Servicer applies to similar transactions
      originated by it for its own account; provided however that the 
      Maturity Date of any such Account shall not exceed June 1, 2031.

                        8. If the Servicer deems it reasonably necessary to 
      convey an Acquired Property in exchange for a new Account, such new 
      Account may be originated on documents naming the Servicer or 
      Sub-Servicer as payee; provided, however, that the Maturity Date of any 
      such new Account shall not exceed June 1, 2031. The Sub-Servicer's or 
      Servicer's rights under any such documents shall be subject to its 
      obligation to convey proceeds of the disposition of Acquired Property.

                        In connection with the sale of an Acquired Property, any
      contract of sale or deed shall be executed by the Servicer or Sub-Servicer
      in its individual capacity and as agent and attorney in fact for the
      Issuer. The Servicer shall request release of the Trust Mortgage by the
      Trustee. Immediately upon consummation of the sale, the Servicer or
      Sub-Servicer shall assign all of its right, title and interest in the new
      Account to the Issuer and the Issuer shall assign all of its right, title
      and interest in the new Account to the Trustee. The Servicer shall record
      the release, the deed, the Mortgage, the assignment of the Servicer's or
      Sub-Servicer's interest to the Issuer and an assignment of the Mortgage by
      the Issuer to the Trustee immediately.

                        9.  The Servicer shall segregate and hold all funds 
      collected and received in connection with the rental


                                      6
<PAGE>

      or sale of any Acquired Property separate and apart from its own funds and
      general assets and shall deposit such moneys in the Holding Account in
      accordance with Section 2.07(b).

                        10. Except as expressly permitted by Section 2.10 or as
      otherwise provided in Exhibit D, the Servicer shall not alter, change or
      modify, or permit the alteration, change or modification of, any Account
      without the prior consent of the Trustee; provided, however, that the
      Servicer may charge-off or write-off Accounts when the Servicer determines
      in its best judgment that it is prudent to do so and that the costs and
      expenses of continued servicing of such Accounts (including foreclosure
      proceedings) exceeds the expected revenues therefrom, and such
      determination is evidenced by a certification signed by a duly authorized
      officer of the Servicer setting forth such conclusions and the basis
      therefor.

      Promptly after the execution and delivery of this Agreement, the Servicer
shall deliver to the Issuer and the Trustee a list of officers of the Servicer
involved in, or responsible for, the administration and servicing of the
Accounts, which list shall from time to time be updated by the Servicer after
each change in servicing officers.

      At all times while the Servicer is servicing the Accounts pursuant to this
Agreement, the Servicer shall employ field servicing personnel for each state in
which Mortgaged Properties are located who are assigned to service the related
outstanding Accounts of that state; provided, however, that if the Servicer does
not employ field servicing personnel in any such state or does not employ
sufficient field servicing personnel in any such state to service the related
outstanding Accounts of that state in accordance with the terms and provisions
of this Agreement, the Servicer shall enter into one or more Sub-Servicing
Agreements as described in Section 2.02 with a Sub-Servicer that employs field
servicing personnel or agents for that state providing for the servicing of the
effected outstanding Accounts of that state.

      Section 2.02.  Sub-Servicing Agreements Between Servicer and Sub-Servicer.

      The Servicer may enter into sub-servicing agreements (each a
"Sub-Servicing Agreement") with sub-servicers (each, a "Sub-Servicer") which may
include Homes, an affiliate of the Servicer, for the servicing and
administration of any or all of the Accounts. In the event that any such
Sub-Servicing Agreement exists, the Sub-Servicer will represent and warrant that
it is duly organized and existing under the applicable laws of the United States
or any state and is duly qualified and licensed to do business in each state in
which Mortgaged Property relating to


                                      7
<PAGE>

an Account to be serviced under such Sub-Servicing Agreement is located. The
requirements of the immediately preceding sentence of this Section 2.02 shall
not apply to any sub-servicing agreement entered into by the Successor Servicer
upon its assuming the rights, powers, duties and responsibilities of the
Servicer hereunder pursuant to Section 5.01 hereof. For purposes of this
Agreement (except as otherwise provided herein), the Servicer shall be deemed to
have received payments on Accounts referred to in Sections 2.07 and 2.15 when
the Sub-Servicer has received such payments. The Servicer and any Sub-Servicer
may enter into amendments of a Sub-Servicing Agreement; provided, however, that
any such amendments shall be consistent with and not violate the provisions of
this Agreement. Copies of all amendments shall promptly be sent as provided in
Section 7.04 hereof to the Trustee.

      Section 2.03.  Successor Sub-Servicers.

      The Servicer shall be entitled to terminate any Sub-Servicing Agreement
that may exist from time to time in accordance with the terms and conditions of
such Sub-Servicing Agreement and, except as hereinafter provided in this Section
2.03, without any limitation by virtue of this Agreement; provided, however,
that in the event of termination of any Sub-Servicing Agreement by the Servicer
or the Sub-Servicer the Servicer shall either act as primary servicer of the
related Accounts or enter into a Sub-Servicing Agreement in accordance with the
provisions of Section 2.02 with a successor Sub-Servicer.

      Section 2.04. Liability of the Servicer.

      Notwithstanding any Sub-Servicing Agreement, any of the provisions of this
Agreement relating to agreements or arrangements between the Servicer and a
Sub-Servicer or reference to actions taken through a Sub-Servicer or otherwise,
the Servicer shall remain primarily obligated and liable to the Issuer and the
Trustee for the servicing and administering of the Accounts in accordance with
the provisions of this Agreement without diminution of such obligation or
liability by virtue of such Sub-Servicing Agreement or arrangements or by virtue
of indemnification from the Sub-Servicer and to the same extent and under the
same terms and conditions as if the Servicer alone were servicing and
administering the Accounts. The Servicer shall be entitled to enter into any
agreement with a Sub-Servicer for indemnification of the Servicer by such
Sub-Servicer, and nothing contained in this Agreement shall be deemed to limit
or modify such indemnification.

      Section 2.05. No Contractual Relationship Between Sub-Servicer and
Trustee or Issuer.



                                      8
<PAGE>

      Any Sub-Servicing Agreement that may be entered into and any other
transactions or services relating to the Accounts involving a Sub-Servicer in
its capacity as such shall be deemed to be between the Sub-Servicer and the
Servicer alone and the Sub-Servicer shall have no claim against the Trustee or
the Issuer except to the extent set forth in Section 2.06 arising from any
Sub-Servicing Agreement; provided, however, that the Trustee and the Issuer may
upon the happening of a default thereunder enforce the Servicer's rights under
any Sub-Servicing Agreement as third party beneficiaries thereof.

      Section 2.06. Assumption of Sub-Servicing Agreement by Successor
Servicer.

      In the event the Servicer shall for any reason no longer be the Servicer
(including by reason of an Event of Default or Trigger Event), the Successor
Servicer may, at its election, assume all of the rights and obligations of the
Servicer under each Sub-Servicing Agreement that may have been entered into. The
Indenture provides that the Successor Servicer may, at its election, assume all
of the Servicer's interest therein and replace the Servicer as a party to the
Sub-Servicing Agreement to the same extent as if the Sub-Servicing Agreement had
been assigned to the assuming party, except that the Servicer shall not thereby
be relieved of any liability or obligation under the Sub-Servicing Agreement.

      The Servicer shall, upon request of the Trustee or the Successor Servicer
but at the expense of the Servicer, deliver to the Successor Servicer all
documents and records pursuant to Section 2.09 relating to the Sub-Servicing
Agreement and the Accounts then being serviced and an accounting of amounts
collected and held by it and otherwise use its best efforts to effect the
orderly and efficient transfer of the Sub-Servicing Agreement to the assuming
party.

      Section 2.07. Collection of Account Payments; Holding Account.

      (a) In accordance with the servicing standards set forth in Section 2.01,
the Servicer shall use its reasonable best efforts to cause each Obligor to make
all payments in respect of his or her Account to the Servicer and to collect all
payments (including amounts for taxes and insurance) called for under the terms
and provisions of the Accounts (other than any fees and charges the
collectibility of which is not legally enforceable). Consistent with the
foregoing, the Servicer may in its discretion (i) waive any late payment charge,
assumption fee, prepayment charge, or penalty interest in connection with the
prepayment of an Account and (ii) arrange a schedule for liquidation of
delinquent payments due on an Account, running for a period as the Servicer
reasonably believes prudent under the circumstances.


                                      9
<PAGE>

      (b) On or before the Closing Date the Servicer shall establish the Holding
Account and shall cause all payments received with respect to the Accounts to be
deposited in the Holding Account. The deposit of substantially all such amounts
shall be made as soon as reasonably practicable after such payment is actually
received by it but in no event later than one Business Day after receipt by the
Servicer, and in the case of all payments received by Sub-Servicers with respect
to the Accounts, such amounts shall be mailed as soon as reasonably practicable
to the Servicer but in no event later than two Business Days after collection by
the Sub-Servicer and deposited by the Servicer in the Holding Account as
described above. The Sub-Servicer shall not deposit any amounts received by it
in any deposit, trust, or similar account prior to remitting such amounts to the
Servicer. On each Remittance Date the Servicer shall submit to the Custodian,
with a copy to the Trustee, a report substantially in the form provided in the
Holding Account Agreement relating to funds deposited in the Holding Account
during the immediately preceding calendar week which specifies the amount of
such funds referred to in Section 2.08(a) to be transferred from the Holding
Account by the Custodian to the Collection Account.

      (c) The Servicer may, by written request delivered to the Custodian, with
a copy to the Trustee, receive funds from the Holding Account for the following
purposes:

            (i) to repay to the Servicer moneys in the Holding Account upon
      certification by the Servicer reasonably acceptable to the Trustee that
      such funds are not part of the Trust Estate;

            (ii) to clear the Holding Account pursuant to Section 7.01(a);

            (iii) to deposit Insurance Proceeds in the Servicing Account for
      application to restoration or repair of a Mortgaged Property in the
      future, to the extent such proceeds were deposited in the Holding Account;

            (iv) to pay the Servicer the Servicing Fee pursuant to Section 2.16;

            (v) to pay the Servicer amounts represented by any late payment
      charges, interest charged on advances of taxes and insurance premiums,
      assumption fees and other such additional charges and net income earned on
      investments of funds on deposit in the Holding Account as additional
      servicing compensation;

            (vi) to reimburse the Servicer for advances of taxes, insurance
      premiums and other amounts in accordance with


                                      10
<PAGE>

      Sections 2.12 and 2.13, respectively; provided, however, that with respect
      to advances of taxes and insurance premiums and other amounts made on the
      Accounts on or prior to the Cut-Off Date the extent of reimbursement for
      such advances shall be limited to the related amounts collected by the
      Servicer or, in the case of a liquidation, the amount by which the related
      Liquidation Proceeds, if any, for each such Account exceeds the sum of the
      Economic Balance of the related Account and the related Liquidation
      Expenses other than such advances;

            (vii) to reimburse the Servicer from the related Insurance Proceeds
      and Liquidation Proceeds with respect to a Mortgaged Property for any
      expenses incurred by it in good faith pursuant to Section 2.14 for
      restoration of such Mortgaged Property damaged by an Uninsured Cause;

            (viii) to reimburse the Servicer from the Holding Account for any
      unreimbursed usual and customary Liquidation Expenses subject to the
      limitations set forth in Sections 2.12 and 2.13 with respect to advances
      for taxes and insurance;

            (ix) to reimburse the Servicer for expenses reasonably incurred by
      the Servicer pursuant to Section 6.01; and

            (x) to reimburse the Servicer for reasonable and necessary expenses
      incurred in connection with the preservation and management of Acquired
      Properties.

      Section 2.08. Collection Account; Servicing Account.

      (a) On or before the Closing Date the Issuer shall open the Collection
Account as provided in Section 8.02 of the Indenture. On the Closing Date, the
Servicer shall on behalf of the Issuer remit to the Trustee for deposit in the
Collection Account all Monthly Payments and all prepayments (net of the
applicable Servicing Fee) collected on the Accounts after the Cut-off Date and
received by the Servicer not less than five Business Days before the Closing
Date. All funds collected in respect of the Accounts prior to the Closing Date
not deposited in the Collection Account pursuant to the preceding sentence on
the Closing Date shall be deposited in the Holding Account on the Closing Date
and transferred to the Collection Account on the first Remittance Date following
the Closing Date. Thereafter, the Servicer shall submit to the Custodian, with a
copy to the Trustee, the report required by Section 2.07(b) directing the
deposit into the Collection Account or, with respect to certain Insurance
Proceeds, the Servicing Account of all payments and collections in respect of
the Accounts then on deposit in the Holding Account (other than withdrawals
simultaneously requested pursuant to Section 2.07(c) and amounts in respect of
payments by


                                      11
<PAGE>

Obligors made by checks subsequently returned for insufficient funds or other
reason for non-payment) including the following:

            (i) all Obligor payments on account of principal, including Full
      Prepayments, of the Accounts;

            (ii) all Obligor payments on account of finance charges on the
      Accounts; and

            (iii) all net Insurance Proceeds (other than proceeds to be applied
      to the restoration or repair of the related Mortgaged Property which shall
      be deposited to the Servicing Account) and Net Liquidation Proceeds with
      respect to the Accounts.

The Servicer may request withdrawals from the Collection Account as permitted by
Section 2.11 hereof.

      (b) The Servicer shall open, at the Corporate Trust Office or at any other
financial institution the deposits of which are fully insured by the Federal
Deposit Insurance Corporation ("FDIC") (through either the Bank Insurance Fund
or the Savings Association Insurance Fund), one or more accounts (collectively,
the "Servicing Account"), which such accounts shall be Eligible Accounts,
designated as follows: "Mid-State Homes, Inc., as Servicer for Mid-State Trust
VI". There shall be deposited in the Servicing Account on the Closing Date all
Insurance Proceeds which are to be applied to the restoration or repair of the
related Mortgaged Property received after the Cut-off Date and still in the
custody of the Servicer on the Closing Date; thereafter all Insurance Proceeds
shall be deposited into the Servicing Account. If required by any applicable law
or regulation, Obligors' funds in a Servicing Account shall be segregated, and
the Servicer shall instruct the financial institution in which such account is
maintained accordingly. The Servicing Account shall be an interest bearing
account fully insured as to amounts deposited therein by the FDIC. In addition,
moneys in the Servicing Account may be invested as provided in Section 2.08(c).
The Servicer shall make withdrawals from a Servicing Account only (i) for the
purpose of applying proceeds of a Hazard Insurance Policy or other insurance
policy to the restoration or repair of a Mortgaged Property, to the extent such
proceeds were deposited in such Servicing Account; (ii) to the extent required
by applicable law or regulation or by the related Accounts and to the extent of
earnings on the Servicing Account then on deposit in the Servicing Account to
pay interest on funds in such Servicing Account to the Obligors entitled
thereto; (iii) to pay to the Obligors Insurance Proceeds required to be paid to
them pursuant to the terms of the related Account Note; (iv) to clear and
terminate such Servicing Account at the termination of this Agreement in
accordance with Section 7.01; (v) to pay to the Servicer net earnings on amounts
in the


                                      12
<PAGE>

Servicing Account to the extent permitted by Section 2.08(c) below; or (vi) to
transfer to the Holding Account any funds then on deposit in the Servicing
Account upon a determination by the Servicer that such funds will not be applied
in the manner described in (i) through (v) above.

      (c) Moneys in any Servicing Account from time to time may be invested and
reinvested by the Servicer, but only in one or more Eligible Investments and
obligations on which the Trustee in its commercial capacity is the obligor. All
net income or gain from such investment of moneys shall be paid to the Servicer
as it is earned and received, provided that all interest required to be paid to
Obligors shall be paid to them as required or shall be held for the Obligors
entitled thereto. If any loss results from such investments, the Servicer shall
promptly reimburse the Servicing Account for the amount of any such loss. The
maturity of such investments shall be such as not to conflict with the
requirements for disbursement of funds out of such Servicing Account. Whenever
any amounts invested as aforesaid shall be needed for disbursement from a
Servicing Account, the Servicer shall cause a sufficient amount of such
investments to be sold or otherwise converted to cash for such purpose.

      (d) Notwithstanding Section 2.08(c), all funds in the Servicing Account
are held by the Servicer as agent and bailee of the Trustee for the benefit of
the Trustee, the Noteholders and the Obligors.

      Section 2.09. Records and Servicing Account Moneys.


      (a) The Servicer agrees to act as agent and bailee of the Trustee in
holding any Account Documents released to the Servicer pursuant to Section
3.13(c) of the Indenture, and any other items constituting a part of the Trust
Estate that from time to time come into the possession of the Servicer. The
Servicer agrees, for the benefit of the Trustee and the Noteholders, to act as
such agent and bailee, and to hold and deal with such Accounts and such items,
as agent and bailee for the Trustee, in accordance with the provisions of this
Agreement and the Indenture.


      (b) The Servicer shall for a period of four years following termination of
this Agreement or from the time an Account is paid in full, with respect to such
Account, retain all data relating directly to or maintained in connection with
the servicing of the Accounts at the Servicer's principal service office in
Tampa, North Carolina, or at such other place where the servicing offices of the
Servicer are located, and shall give the Trustee access to all data at all
reasonable times, and, while an Event of Default shall be continuing, the
Servicer shall, on demand of the Trustee or the Successor Servicer, deliver to
the Trustee or the Successor Servicer, as the case may be, all data necessary
for


                                      13
<PAGE>

the servicing of the Accounts, provide the Trustee and the Successor Servicer
with the information called for by Section 2.07(b) concerning all moneys in the
Holding Account and deliver to the Trustee all moneys in each Servicing Account
and all other moneys collected by it from Obligors and not previously deposited
in the Holding Account or the Servicing Account. If the rights of the Servicer
shall have been terminated in accordance with Section 5.01 or if this Agreement
shall have been terminated pursuant to Section 7.01(b), the Servicer shall, upon
demand of the Trustee, the Successor Servicer or the Noteholders in the case of
Section 5.01, or of the successor to the rights of the Issuer in the case of
Section 7.01(b), deliver to the Successor Servicer all data necessary for the
servicing of the Accounts, provide the Trustee and the Successor Servicer with
the information called for by Section 2.07(b) concerning all moneys in the
Holding Account and deliver to the Trustee all moneys in each Servicing Account
and all other moneys collected by it from obligors and not previously deposited
in the Holding Account or the Servicing Account. In addition to delivering such
data and moneys the Servicer shall use its reasonable best efforts to effect the
orderly and efficient transfer of the servicing of the Accounts to the party
which will be assuming responsibility for such servicing.

      Section 2.10. Assumption Agreements.

      (a) When a Mortgaged Property has been or is about to be conveyed by the
Obligor, the Servicer is authorized to take or enter into an assumption
agreement or other similar agreement from or with the person to whom such
Mortgaged Property has been or is about to be conveyed, provided that (i) the
Account Rate on, Monthly Payment and balance of such Account shall not be
reduced, (ii) the term of the Account shall not be extended, (iii) there are
either no unreimbursed advances for taxes and insurance on such Account
following assumption or such advances are assumed and (iv) the Servicer shall
not agree to any other modification unless in the best judgment of the Servicer
such modification would not materially adversely affect the collectibility or
enforceability of the Accounts or the interests of the Noteholders. The Servicer
shall notify the Trustee that any such assumption agreement or similar agreement
has been completed by forwarding to the Trustee the original copy of such
assumption agreement or similar agreement for addition to the related Account
Documents. Any fee collected by the Servicer for entering into an assumption
agreement or similar agreement shall be retained by the Servicer as additional
servicing compensation. The Servicer shall use its reasonable best efforts to
enter into an assumption agreement or other similar agreement; however, if, in
connection with the conveyance of such Mortgaged Property, the continuation of
liability of the original Obligor shall be impracticable, or if, in the opinion
of the Servicer, the release of the liability of the original Obligor would not
substantially


                                      14
<PAGE>

impair the ability of the holder of the related Account to realize the full
repayment of such Account, the Servicer may release the original Obligor from
liability on such Account so long as the new Obligor meets the underwriting
standards which the Servicer is applying to similar transactions originated for
its own account. The Servicer shall notify the Trustee if the original Obligor
is released from liability on such Account.

      (b) The Servicer shall not be deemed to be in default, breach or any other
violation of its obligations under this Agreement by reason of any assumption of
an Account by operation of law or any assumption or transfer of property subject
to an Account which the Servicer may be restricted by law from preventing, for
any reason whatever.

      Section 2.11.  Permitted Withdrawals from the Collection Account.

      If at any time funds on deposit in the Holding Account are insufficient to
satisfy the Servicer withdrawal requests referred to in Section 2.07(c) hereof,
and so long as no Event of Default or Trigger Event shall have occurred and be
continuing, the Servicer may request withdrawal of such deficiency from the
Collection Account, and upon receipt of such written request, the Trustee shall
withdraw the amount of such deficiency from the Collection Account and make the
requested payments to the Servicer, provided that such payments shall not be
made within six Business Days of a Payment Date.

      Section 2.12. Advances for Delinquent Taxes.

      (a) If the Servicer shall have knowledge that real property taxes or other
taxes, charges or assessments relating to any Mortgaged Property have not been
paid when due, the Servicer shall make such payment prior to the time by which
failure to make such payment would give rise to a lien on the related Mortgaged
Property. Any costs so incurred by the Servicer shall be recoverable by the
Servicer as Liquidation Expenses pursuant to Section 2.07, or to the extent
recoverable from any Sub-Servicer servicing such Account, or from the related
Obligor or from other funds on deposit in the Holding Account to the extent that
the Servicer certifies that such advances are not otherwise recoverable due to
insufficient Net Liquidation Proceeds.

      (b) The Servicer shall indemnify the Issuer for any losses resulting from
a failure to make the payments referred to in Paragraph (a) above and the
Servicer shall deposit the amount of such loss in the Collection Account on the
next Remittance Date following the determination of such loss.

      Section 2.13. Maintenance of Insurance; Collection 


                                      15
<PAGE>

Thereunder.

      (a) Except as otherwise provided in subsection (b) of this Section 2.13,
the Servicer shall cause to be maintained with respect to each Mortgaged
Property and Acquired Property one or more Hazard Insurance Policies that
provide at least the same coverage as a standard form fire and extended coverage
insurance policy issued by a company regulated under applicable state law and
authorized by such state to issue such policies in the state in which the
Mortgaged Property or Acquired Property is located and in an amount that is not
less than an amount that would satisfy the definition of Full Prepayment with
respect to the related Account; provided, however, that the amount of coverage
provided by each Hazard Insurance Policy shall be sufficient to avoid the
application of any co-insurance clause contained therein. Any individual Hazard
Insurance Policies shall name the Servicer as additional loss payee and run to
the benefit of the Servicer's successors and assigns as their interests may
appear. Any amounts received under any such policies shall be transferred to or
deposited in the Holding Account or Servicing Account (or paid over to the
related Obligor if the Servicer reasonably does not deem it necessary to deposit
such amounts in the Servicing Account) pursuant to Sections 2.07 and 2.08. If
any Obligor is in default in the payment of such premiums, the Servicer shall
pay such premiums out of its own funds, and any costs so incurred by the
Servicer shall be recoverable by the Servicer to the extent such costs
constitute Liquidation Expenses pursuant to Section 2.14, or to the extent
recoverable from any Sub-Servicer servicing such Account, or from the related
Obligor or from other funds on deposit in the Holding Account to the extent that
the Servicer certifies that such advances are not otherwise recoverable due to
insufficient Net Liquidation Proceeds.

      (b) The Servicer may, in lieu of causing individual Hazard Insurance
Policies to be maintained with respect to each Mortgaged Property pursuant to
subsection (a) of this Section 2.13, and shall, to the extent that the related
Accounts do not require the Obligor to maintain a Hazard Insurance Policy with
respect to the related Mortgaged Property, maintain one or more blanket
insurance policies covering losses on the mortgagee's interest in the Accounts
resulting from the lack of or insufficiency of individual Hazard Insurance
Policies issued by a company regulated under applicable state law and authorized
by such state to issue such policies in the state in which the Mortgaged
Property is located and in an amount that is not less than an amount that would
satisfy the definition of Full Prepayment with respect to the related Account.
The Servicer shall pay the premium for such policy on the basis described
therein and shall pay any deductible amount with respect to claims under such
policy relating to the Accounts; provided, however, that such deductible cannot
exceed an amount that is customary under similar policies. If the insurer
thereunder


                                      16
<PAGE>

shall cease to be acceptable to the Servicer, the Servicer shall exercise its
best efforts to obtain from another insurer a replacement policy comparable to
such policy. All amounts collected by the Servicer under any such policy and
reimbursements by the Servicer of deductible amounts shall be deposited in the
Holding Account in accordance with Section 2.07.

      (c) The Servicer shall indemnify the Issuer for any losses resulting from
a failure to maintain insurance pursuant to this Section 2.13 and the Servicer
shall deposit the amount of such loss in the Collection Account on the next
Remittance Date following the determination of such loss.

      Section 2.14. Realization upon Defaulted Accounts.

      With respect to any defaulted Account, the Servicer shall use its
reasonable best efforts consistent with the servicing procedures as set forth in
Section 2.01 hereof, to foreclose upon or otherwise comparably convert (through
replevin, deed in lieu of foreclosure or otherwise) the ownership of properties
securing any Account that comes into and continues in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments
pursuant to Section 2.07. The Servicer shall prepare all documents necessary and
appropriate in connection with the realization upon defaulted Accounts. The
Servicer's obligations under this Section 2.14 are subject to the proviso that,
in the case of damage to Mortgaged Property from an Uninsured Cause, the
Servicer shall not be required to expend its own funds in restoring such
property unless it shall in good faith determine (i) that such restoration will
increase the proceeds of liquidation of the related Account, after reimbursement
to itself for such expenses, and (ii) that such expenses will be recoverable by
it either as Liquidation Expenses or as Insured Expenses. For purposes of clause
(ii) of the preceding sentence, if the Servicer is maintaining a blanket Hazard
Insurance Policy pursuant to Section 2.13(b), expenses shall be deemed
recoverable as Insured Expenses if they would have been recoverable under an
individual Hazard Insurance Policy maintained pursuant to Section 2.13(a). The
Servicer shall be responsible for all other costs and expenses incurred by it in
connection with any action taken in respect of a defaulted Account; provided,
however, that it shall be entitled to reimbursement of such costs and expenses
to the extent they constitute Liquidation Expenses, Insured Expenses or
reasonable and necessary expenses incurred in the preservation and the
management of Acquired Properties. All Liquidation Proceeds shall be deposited
in the Holding Account in accordance With Section 2.07(b) hereof.


                                      17
<PAGE>

      Section 2.15. Release of Accounts.

      In the case of a final Monthly Payment, Full Prepayment or liquidation of
any Account, the Servicer shall deliver to the Trustee and the Issuer an
Officers' Certificate (i) identifying the Account that was the subject of such
final payment, Full Prepayment or liquidation, (ii) stating with respect to a
Full Prepayment that all prepayment proceeds received in connection therewith
are in an amount necessary to effect a Full Prepayment (after taking into
account amounts representing reimbursement for advances by the Servicer for
taxes and insurance premiums) and have been deposited in the Holding Account,
(iii) stating with respect to a liquidation of an Account, that all Liquidation
Proceeds which have been determined by the Servicer in its reasonable judgment
to be finally recoverable have been received and the Net Liquidation Proceeds
have been deposited in the Holding Account, (iv) stating that with respect to a
final Monthly Payment, all amounts due under such Account have been paid (after
taking into account amounts representing reimbursement for advances by the
Servicer for taxes and insurance premiums) and such amounts have been deposited
in the Holding Account and (v) identifying such documents as the Servicer or the
Obligor may request to evidence satisfaction and discharge of such Account.

      In connection with any prepaid Account with respect to which the related
Mortgage is a deed of trust, the Servicer is authorized to procure from the
trustee under such deed of trust a deed of full reconveyance covering the
property encumbered by such deed of trust, which deed of reconveyance shall be
delivered by the Servicer to the person or persons entitled thereto, but no
expenses incurred in connection with such deed of reconveyance shall be payable
out of the proceeds received in respect of such Account.

      If from time to time and as appropriate for the servicing or foreclosure
of any Account the Servicer requests the Trustee to release the related Account
Documents and delivers to the Trustee a trust receipt reasonably satisfactory to
the Trustee and signed by a Servicing Officer, the Trustee shall release the
related Account Documents to the Servicer. Such trust receipt shall obligate the
Servicer to return the related Account Documents to the Trustee when the need
therefor by the Servicer no longer exists. If such Account shall be liquidated
and the Trustee receives a certificate from the Servicer as provided above,
then, upon request of the Issuer, the Trustee shall release the trust receipt to
or upon the order of the Issuer.


                                      18
<PAGE>

      Section 2.16.     Servicing Compensation.

      As compensation for the performance of its obligations under this
Agreement, the Servicer shall be entitled to a servicing fee (the "Servicing
Fee") for each Account that is not a repossessed or foreclosed Account at the
beginning of any month and that has an Economic Balance commencing on the
Cut-off Date and terminating on the first to occur of the maturity of such
Account or the date of Full Prepayment of such Account. The Servicing Fee with
respect to any Account is $25 per month. The Servicing Fee in respect of an
Account for a particular month shall be paid to the Servicer by the Custodian
from amounts held in the Holding Account upon submission to the Custodian of a
withdrawal request pursuant to Section 2.07(c). In addition to the Servicing
Fee, the Servicer shall be entitled to receive pursuant to this Section 2.16 as
additional servicing compensation all late payment charges, assumption fees,
interest on taxes, insurance premiums and similar charges paid in respect of the
Accounts and previously deposited in the Holding Account together with net
income earned on investments of funds on deposit in the Holding Account. The
Servicer shall pay all expenses and charges imposed on the Servicer hereunder,
including servicing fees, expenses and charges of any Sub-Servicers, out of its
servicing compensation or its own funds, and shall not be entitled to
reimbursement for such expenses and charges except as specifically provided for
herein.

                                  ARTICLE THREE

                         STATEMENTS, REPORTS AND NOTICES

      Section 3.01. Reporting by the Servicer.

      (a) On or before each Reporting Date, the Servicer shall render to the
Issuer, the Independent Accountant, the Trustee and Lehman Brothers Inc. a
certificate, as of the immediately preceding Monthly Cut-Off Date, certifying to
all funds collected by it through such Monthly Cut-off Date that it was required
to deposit in the Holding Account in respect of the preceding Remittance Period
and, except for amounts provided on a cumulative basis, that have not been
previously reflected on a prior certificate pursuant to this Section 3.01 and
reporting certain other information. Such certificate shall be substantially in
the form of Exhibit B hereto. Such certificate shall also be sent to Moody's
Investors Service, Inc., 99 Church Street, N.Y., N.Y. 10007 Attention: ABS
Monitoring Department and Standard & Poor's Ratings Service, 25 Broadway, N.Y.,
N.Y. 10004 Attention: Asset Backed Surveillance Group.

      (b) On or before each Reporting Date, the Servicer shall provide the
Issuer, with such information as of the immediately preceding Monthly Cut-off
Date as is necessary in


                                      19
<PAGE>

connection with the maintenance of the Issuer's financial records and
preparation of the Issuer's financial statements.

      (c) On or before each Reporting Date, the Servicer shall provide the
Successor Servicer with servicing tapes in a format compatible with the
Successor Servicer's computer systems and containing such data as the Successor
Servicer may reasonably request.

      Section 3.02. Annual Certificate; Account Statement.

      On or before 120 days after the end of the first fiscal year of the
Servicer that ends more than three months after the Closing Date and each fiscal
year thereafter, the Servicer shall deliver or cause to be delivered to the
Issuer and the Trustee an Officers' Certificate, dated as of the first Monthly
Cut-off Date following the end of the preceding fiscal year, to the effect that
a review of the activities of the Servicer during the period from the beginning
of the first Remittance Period (or the Closing Date in the case of the first
such Officers' Certificate required to be delivered) to the end of the last
Remittance Period during the preceding fiscal year has been made under the
supervision of the officers executing such Officers' Certificate with a view to
determining whether during such period the Servicer had performed and observed
all of its obligations under this Agreement. Such Certificate shall state to the
best of the Servicer's knowledge either (A) no Default by the Servicer under
this Agreement has occurred and is continuing, or (B) if such a Default has
occurred and is continuing, specifying such Default and the nature and status
thereof.

      Section 3.03. Annual Accountants' Reports.

      On or before 120 days after the end of the first fiscal year of the 
Servicer that ends more than three months after the Closing Date and each 
fiscal year thereafter, the Servicer shall deliver to the Issuer and the 
Trustee a report, prepared by a firm of Accountants of recognized national 
standing selected by the Servicer, to the effect that (i) they have examined 
the balance sheet of the Servicer as of the last day of said fiscal year and 
the related statements of income, retained earnings and changes in financial 
position for such fiscal year in accordance with generally accepted auditing 
standards and have issued an opinion thereon, specifying the date thereof and 
(ii) they have examined certain documents and records relating to the 
Accounts during the preceeding fiscal year in accordance with the 
requirements of the Uniform Single Audit Program for Mortgage Bankers 

                                      20
<PAGE>

and disclosed no exceptions that, in their opinion, were material, relating 
to such Accounts, or, if any such exceptions were disclosed thereby, setting 
forth such exceptions that, in their opinion, were material. If any of the 
Accounts are being serviced by a Sub-Servicer, the firm of Accountants 
preparing the report with respect to the servicing of such Accounts by the 
Servicer may rely, as to matters relating to the servicing of such Accounts, 
upon a comparable report (rendered with respect to the most recent fiscal 
year of such Sub-Servicer which ended at or prior to the end of the 
Servicer's fiscal year) of another firm of Accountants of recognized national 
standing with respect to such Sub-Servicer's servicing of such Accounts.

      Section 3.04. Notices.

      The Servicer shall, as promptly as practicable (i) following receipt by it
of notice thereof, notify the Trustee of the commencement of a class-action
litigation challenging the validity or enforceability of Accounts having an
aggregate Economic Balance totalling $1,000,000 or more or any individual claim
for damage with respect to the Accounts in excess of $250,000 and (ii) notify
the Trustee of any occurrence that materially and adversely affects the
Servicer's ability to service the Accounts.

                                  ARTICLE FOUR

                                  THE SERVICER

      Section 4.01. Representations and Warranties of the Servicer.

      The Servicer represents and warrants to the Issuer as follows:

      (a) The Servicer (i) is a corporation, validly existing and in good
standing under the laws of the State of its incorporation, (ii) has qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction where the character of its properties or the nature of its
activities makes such qualification necessary, and (iii) has full power,
authority and legal right to own its property, to carry on its business as
presently conducted, and to enter into and perform its obligations under this
Agreement.

      (b) The execution and delivery by the Servicer of this Agreement are
within the corporate power of the Servicer and have been duly authorized by all
necessary corporate action on the part of the Servicer. Neither the execution
and delivery of this Agreement, nor the consummation of the transactions herein


                                      21
<PAGE>

contemplated, nor compliance with the provisions hereof, will conflict with or
result in a breach of, or constitute a default under, any of the provisions of
any law, governmental rule, regulation, judgment, decree or order binding on the
Servicer or its properties or the charter or by-laws of the Servicer, or any of
the provisions of any indenture, mortgage, contract or other instrument to which
the Servicer is a party or by which it is bound or result in the creation or
imposition of any lien, charge or encumbrance upon any of its property pursuant
to the terms of any such indenture, mortgage, contract or other instrument (or
if such conflict with, breach of or default under any such indenture, mortgage,
contract or other instrument exists or will exist, any remedies in respect
thereof and in respect of any such related lien, charge or encumbrance have been
stayed under the Bankruptcy Code).

      (c) The execution, delivery and performance by the Servicer of this
Agreement and the consummation of the transactions contemplated hereby do not
require the consent or approval of, the giving of notice to, the registration
with, or the taking of any other action in respect of, any state, federal or
other governmental authority or agency, except as has been previously obtained
and are in effect.

      (d) This Agreement has been duly executed and delivered by the Servicer
and constitutes a legal, valid and binding instrument enforceable against the
Servicer in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.

      (e) Except as set forth in Exhibit C attached hereto, there are no
actions, suits or proceedings pending or, to the knowledge of the Servicer,
threatened or likely to be asserted against or affecting the Servicer, before or
by any court, administrative agency, arbitrator or governmental body with
respect to any of the transactions contemplated by this Agreement or the
Indenture, or which will, if determined adversely to the Servicer, materially
and adversely affect it or its business, assets, operations or condition,
financial or otherwise, or adversely affect the Servicer's ability to perform
its obligations under this Agreement. The Servicer is not in default with
respect to any order of any court, administrative agency, arbitrator or
governmental body so as to materially and adversely affect the transactions
contemplated by the above-mentioned documents.

      (f) The Servicer has obtained or made all necessary consents, approvals,
waivers and notifications of stockholders, creditors, lessors and other
nongovernmental persons, in each case, in connection with the execution,
delivery and performance of this Agreement.


                                      22
<PAGE>

      The foregoing representations and warranties shall be deemed to be made to
the Trustee, as assignee of the Issuer.

      Section 4.02. Merger or Consolidation of the Servicer.

      The Servicer will keep in full effect its existence, rights and 
franchises as a corporation under the laws of the State of North Carolina, 
and will obtain and preserve its qualification to do business in each 
jurisdiction in which such qualification is or shall be necessary to protect 
the validity and enforceability of this Agreement, the Indenture or any of 
the Accounts and to perform its duties under this Agreement.

      Any Person into which the Servicer may be merged or consolidated, or 
any entity resulting from any merger or consolidation to which the Servicer 
shall be a party, or any Person succeeding to the business of the Servicer 
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.

      Section 4.03. Performance of Obligations.

      (a) The Servicer shall punctually perform and observe all of its
obligations and agreements contained in this Agreement and shall take such
action as may be necessary to prevent the attachment on the Mortgaged Properties
of liens or levies superior to the lien of the Mortgages securing the Accounts
arising from actions by or claims against the Servicer.

      (b) The Servicer shall not take any action, or permit any action to be
taken by others, which would (i) materially and adversely affect the validity or
collectibility of the Accounts or (ii) excuse any person from any of its
covenants or obligations under any of the Accounts or under any other instrument
included in the Trust Estate, or (iii) result in the amendment, hypothecation,
subordination, termination or discharge of, or (iv) impair the validity or
effectiveness of, any of the Account Documents or any such instrument, except as
expressly provided herein and therein.

      Section 4.04. Servicer Not to Resign.

      (a) The Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that its duties hereunder are no longer
permissible under applicable law. Any such determination permitting the
resignation of the Servicer shall be evidenced by an Opinion of Counsel to such
effect delivered to the Trustee. No such resignation shall become effective
unless and until the Successor Servicer or another new servicer, qualified to
act as a mortgage servicer, enters into a servicing agreement with the Issuer
and


                                      23
<PAGE>

the Trustee in form and substance substantially similar to this Agreement.

      (b) The Servicer may not assign this Agreement or any of its rights,
powers, duties or obligations hereunder except as permitted under Section 4.02
hereof.

      (c) Except as provided in Section 4.04(a), the duties and obligations of
the Servicer under this Agreement shall continue until this Agreement shall have
been terminated as provided in Section 7.01, and shall survive the exercise by
the Issuer or the Trustee of any right or remedy under this Agreement, or the
enforcement by the Issuer, the Trustee or any Noteholder of any provision of the
Indenture, the Notes or this Agreement.

      Section 4.05. Fidelity Bond.

      On or before the Closing Date, the Servicer shall obtain and deliver to 
the Trustee and shall thereafter maintain in effect a fidelity bond (or a 
direct surety bond) in the amount of $1,500,000 (subject to a deductible of 
an amount not exceeding $[250,000.00]), issued by a surety company qualified 
to do business in the State of North Carolina and having an Alfred M. Best 
Company general policyholders rating of A or better and a financial rating of 
Class 15, or equivalent ratings by a generally recognized successor rating 
agency. Such bond shall name the Trustee as an additional insured and as a 
joint loss payee, shall provide for 30 days' prior notice of cancellation to 
the Trustee and shall otherwise be in form and substance reasonably 
satisfactory to the Trustee. Any successor to the Servicer appointed as 
servicer of the Accounts pursuant to Section 3.07(d) of the Indenture or 
Section 4.04(a) of this Agreement shall be obligated to obtain and maintain a 
fidelity bond to the same extent as the Servicer is obligated under this 
Section 4.05 or 28 under the then current FNMA or FHLMC guidelines and shall 
deliver a copy of such bond to the Trustee promptly after its appointment. 
The Servicer or any successor servicer shall deliver to the Trustee, within 
30 days prior to the expiration of any such bond, a renewal or replacement 
thereof.

                                  ARTICLE FIVE

                                     DEFAULT

      Section 5.01. Events of Default.

      (a) Any of the following acts or occurrences shall constitute an Event of
Default by the Servicer under this Agreement:



                                      24
<PAGE>

             (i) any failure by the Servicer to remit to the Trustee any amount
      required to be so remitted under the terms of this Agreement that
      continues unremedied for a period of two Business Days after the date upon
      which such amount was due to be so remitted; or

            (ii) failure to submit to the Trustee the report called for by
      Section 2.07(b) within 2 days following the related Remittance Date; or

           (iii) failure on the part of the Servicer duly to observe or perform
      in any material respect any other of the covenants or agreements on the
      part of the Servicer in this Agreement contained that continues unremedied
      for a period of 30 days after the date on which written notice of such
      failure, requiring the same to be remedied, shall have been given to the
      Servicer by the Trustee or to the Servicer and the Trustee by the holders
      of Notes representing at least a majority of the Voting Rights; or

            (iv) a decree or order of a court or agency or supervisory authority
      having jurisdiction in the premises pursuant to any bankruptcy or
      insolvency law or any other law relating to the relief of debtors, to the
      readjustment, composition or extension of indebtedness, to liquidation or
      to reorganization, or any formal or informal proceeding for the
      dissolution, liquidation or winding up of the affairs of, or for the
      settlement of claims against, the Servicer which is involuntary on the
      part of the Servicer is entered and is not discharged or stayed for a
      period of sixty (60) days;

             (v) the Servicer becomes insolvent, generally fails to pay its
      debts as they become due, has any receiver, trustee, liquidator,
      sequestrator or custodian of it or any of its property appointed (whether
      with or without its consent), makes any assignment for the benefit of
      creditors or commences any case or other proceeding pursuant to any
      bankruptcy or insolvency law or any other law relating to the relief of
      debtors, to the readjustment, composition or extension of indebtedness, to
      liquidation or to reorganization, or any formal or informal proceeding for
      the dissolution, liquidation or winding up of the affairs of, or for the
      settlement of claims against it; or

            (vi) any representation, warranty or statement of the Servicer made
      in this Agreement or any certificate, report or other writing delivered
      pursuant hereto shall prove to be incorrect in any material respect as of
      the time when the same shall have been made and, within 30 days after
      written notice thereof shall have been given to the Servicer by the
      Trustee or by the holders of Notes representing not less


                                      25
<PAGE>

      than a majority of the Voting Rights, the circumstance or condition in
      respect of which such representation, warranty or statement was incorrect
      shall not have been eliminated or otherwise cured.

      (b) If an Event of Default shall have occurred and be continuing, the
Issuer or the Trustee (in each case subject to the provisions of the Indenture),
or, the holders of Notes representing not less than a majority of the then
Voting Rights, may, by notice given to the Servicer (with a copy to the parties
not giving such notice), terminate all of the rights and powers of the Servicer
under this Agreement ("Servicer Termination"), including without limitation all
rights of the Servicer to receive the Servicing Fee. On and after the receipt of
such notice, all rights, powers, duties and responsibilities of the Servicer
under this Agreement, whether with respect to the Accounts, Holding Account,
Collection Account, Servicing Account, any Servicing Fee or otherwise, shall
vest in and be assumed by the Successor Servicer as provided in Section 3.07 of
the Indenture, and the Issuer and the Trustee are each hereby authorized and
empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact
or otherwise, all documents and other instruments (including any notices to
Obligors deemed necessary or advisable by the Trustee) and to do or accomplish
all other acts or things necessary or appropriate to effect such vesting and
assumption. The terminated Servicer shall cooperate promptly and in good faith
with the Successor Servicer to transfer the servicing records and other account
documents maintained by the terminated Servicer to the Successor Servicer in a
prompt and efficient manner. Except as otherwise expressly provided in the
Indenture, the Issuer shall not have any right to waive any Default or Event of
Default by the Servicer under this Agreement. In addition to any right of the
Trustee upon an Event of Default hereunder, the Trustee may take any action at
law or in equity that it deems appropriate to protect the interest of the
Holders of Notes.

      Section 5.02. No Effect on Other Parties.

      Upon any termination of the rights and powers of the Servicer from time to
time pursuant to Section 5.01 or upon any appointment of a successor to the
Servicer, all the rights, powers, duties and obligations of the Issuer under
this Agreement or under the Indenture shall remain unaffected by such
termination or appointment and shall remain in full force and effect thereafter,
except as otherwise expressly provided in this Agreement or in the Indenture.

      Section 5.03. Rights Cumulative.

      All rights and remedies from time to time conferred upon or reserved to
the Issuer, the Trustee or the Noteholders or to any


                                      26
<PAGE>

or all of the foregoing are cumulative, and none is intended to be exclusive of
another. No delay or omission in insisting upon the strict observance or
performance of any provision of this Agreement, or in exercising any right or
remedy, shall be construed as a waiver or relinquishment of such provision, nor
shall it impair such right or remedy. Every right and remedy may be exercised
from time to time and as often as deemed expedient.


                                   ARTICLE SIX

                                  THE ACCOUNTS

      Section 6.01. Representations and Warranties; Account Documents.


      The representations and warranties of the Issuer set forth in Section 3.11
of the Indenture with respect to each Account shall survive delivery of the
Account Documents to the Trustee and shall continue so long as such Account
remains outstanding. Upon discovery by the Issuer, the Trustee or the Servicer
that any of such representations or warranties was incorrect as of the time made
or that any of the Account Documents relating to any such Account has not been
properly executed by the Obligor or contains a material defect or has not been
received by the Trustee, the party making such discovery shall give prompt
notice to the other and to the Trustee (other than in cases where the Trustee
has given notice thereof). If any such defect, misrepresentation or omission
materially and adversely affects the interest of the holders of Notes, as
provided in Section 3.11(b) of the Indenture, the Servicer shall, after
discovery thereof or receipt of notice thereof, use its best efforts to cure the
defect or eliminate or otherwise cure the circumstances or condition in respect
of which such representation or warranty was incorrect as of the time made and
within 90 days of notice of such defect the Servicer shall notify the Trustee of
the action it has taken with respect thereto and the results thereof. If such
breach, omission or defect is not or cannot be cured within such 90-day period
or, with the prior written consent of a Responsible Officer of the Trustee if so
consented to under the Indenture, such longer period as specified in such
consent, the Servicer shall cause the Issuer to either (i) deposit into the
Collection Account an amount equal to 100% of the then current Economic Balance
of the affected Account, at which time the Defective Account shall be released
from the lien of the Indenture and reconveyed to the Grantor or (ii) remove such
Account from the Trust Estate and substitute one or more Qualified Substitute
Accounts. The Servicer shall be entitled to reimbursement for any reasonable and
necessary expenses incurred by it in the performance of its obligations under
this Section 6.01.



                                      27
<PAGE>

                                  ARTICLE SEVEN

                            MISCELLANEOUS PROVISIONS

      Section 7.01. Termination.

      (a) The respective duties and obligations of the Servicer and the Issuer
created by this Agreement shall terminate upon the final payment or other
liquidation of the last outstanding Account. Upon the termination of this
Agreement pursuant to this Section 7.01(a), the Servicer shall pay all moneys in
the Servicing Account to the persons entitled thereto, and shall direct the
Trustee to pay over to the Issuer or any other person entitled thereto all other
moneys held in the Holding Account.

      (b) Following an Event of Default under the Indenture and foreclosure upon
the Trust Estate pursuant thereto, the successor to the rights of the Issuer
(including, without limitation, the Trustee or any or all of the related
Noteholders) shall have the right to terminate this Agreement by notice to the
Servicer and the Issuer, within 90 days after the date such successor shall have
succeeded to such rights of the Issuer. Upon such termination, the Servicer
shall be entitled to receive only the accrued and unpaid Servicing Fee to the
date of such termination, any amounts it would have been permitted to receive
pursuant to Section 2.07 from the Holding Account or the Collection Account as
of the date of such termination.

      Section 7.02. Amendment.

      (a) This Agreement may be amended from time to time by the Issuer and the
Servicer in each case with the prior written consent of the Trustee, or any of
the Noteholders, provided that such action shall not adversely affect in any
material respect the interests of any Noteholder and the Trustee shall have
received an Opinion of Counsel to the effect that such amendment does not
adversely affect in any material respect the interest of the Noteholders (such
Opinion of Counsel may rely as to factual matters on representations of the
parties hereto or other persons appropriate therefor).

      (b) Notwithstanding paragraph (a) of this Section 7.02, this Agreement may
be amended in accordance with the proviso set forth in the first sentence of
Section 3.14 of the Indenture.

      (c) This Agreement may also be amended from time to time by the Issuer and
the Servicer, with the written consent of the Trustee and the Holders of Notes
representing more than 50% of the Voting Rights, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement; provided, however, that no such amendment shall, without the
consent of the Trustee and each holder of Outstanding


                                      28
<PAGE>

Notes, (i) adversely affect in any material respect the amount of, or the timing
of, payments received on the related Accounts which are required to be deposited
in the Holding Account and the Collection Account; (ii) alter the priorities
with which any allocation of funds shall be made under this Agreement; (iii)
permit the creation of any lien on the Trust Estate or any portion thereof or
deprive any such holder of the benefit of this Agreement with respect to the
Trust Estate or any portion thereof; or (iv) modify this Section 7.02 or Section
4.02, 4.03(b), 4.04 or 4.05.

      (d) Promptly after the execution of any amendment, the Servicer shall send
to the Trustee a conformed copy of each such amendment, but the failure to do so
will not impair or affect its validity.

      (e) It shall not be necessary for any consent of Noteholders under this
Section 7.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Noteholders shall be subject to such reasonable regulations
as the Trustee may prescribe.

      (f) Any amendment or modification effected contrary to the provisions of
this Section 7.02 shall be void.

      Section 7.03. Governing Law.

      This Agreement shall be construed in accordance with the laws of the 
State of North Carolina, and the obligations, rights and remedies of the 
parties hereunder shall be determined in accordance with such laws.

      Section 7.04. Notices.

      All demands, notices and communications hereunder shall be in writing 
and shall be delivered or mailed by registered or certified United States 
mail, postage prepaid, and addressed in each case as follows: (a) if to the 
Issuer, at Rodney Square North, Wilmington, Delaware, 19890 c/o Wilmington 
Trust Company, Attention: Corporate Trust Administration, (b) if to the 
Servicer, at 1500 North Dale Mabry Highway, Tampa, North Carolina, 33622, 
Attention: Edward A. Porter, (c) if to the Trustee, at One Southeast 
Financial Center, 200 South Biscayne Boulevard, Miami, North Carolina 33131, 
Attention: Corporate Trust Department, with a copy sent to First Union 
Corporation, Legal Division, One First Union Center, NC 0013, Charlotte, 
North Carolina 28288-0013, Attention: General Counsel and (d) if to any 
Noteholder, at the address of such holder as it appears in the Note Register. 
Any of the persons in subclauses (a) through (c) above may change its address 
for notices hereunder by giving

                                      29
<PAGE>

notice of such change to the other persons. Any change of address shown on a
Note Register shall, after the date of such change, be effective to change the
address for such Noteholder hereunder. All notices and demands shall be deemed
to have been given either at the time of the delivery thereof to any officer of
the person entitled to receive such notices and demands at the address of such
person for notices hereunder, or on the third day after the mailing thereof to
such address, as the case may be.

      Section 7.05. Severability of Provisions.

      If one or more of the provisions of this Agreement shall be for any reason
whatever held invalid or unenforceable, such provisions shall be deemed
severable from the remaining covenants, agreements and provisions of this
Agreement and such invalidity or unenforceability shall in no way affect the
validity or enforceability of such remaining provisions, the rights of any
parties hereto, or the rights of the Trustee or any Noteholders. To the extent
permitted by law, the parties hereto hereby waive any provision of law that
renders any provision of this Agreement invalid or unenforceable in any respect.

      Section 7.06. Inspection and Audit Rights.

      The Servicer agrees that, on reasonable prior notice, it will permit any
representative of the Trustee or the Issuer, during the Servicer's normal
business hours, to examine all the books of account, records, reports and other
papers of the Servicer relating to the Accounts, to make copies and extracts
therefrom to cause such books to be audited by Accountants selected by the
Trustee or the Issuer, as the case may be, and to discuss its affairs, finances
and accounts relating to the Accounts with its officers, employees and
Independent Accountants (and by this provision the Servicer hereby authorizes
said Independent Accountants to discuss with such representatives such affairs,
finances and accounts) all at such reasonable times and as often as may be
reasonably requested. Any expense incident to the exercise by the Trustee or the
Issuer of any right under this Section 7.06 shall be borne by the Trustee or the
Issuer, as the case may be, provided that if an audit is made during the
continuance of an Event of Default, the expense incident to such audit shall be
borne by the Servicer.

      Section 7.07. Binding Effect.

      The provisions of this Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto, and all
such provisions shall inure to the benefit of the Trustee, the Noteholders and
their successors and assigns.


                                      30
<PAGE>

      Section 7.08. Article and Section Headings.

      The article and section headings herein are for convenience of reference
only, and shall not limit or otherwise affect the meaning thereof.

      Section 7.09. The Owner Trustee.

      It is expressly understood and agreed by the parties hereto that (a) this
Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as Owner Trustee under the Trust
Agreement, in the exercise of the powers and authority conferred and vested in
it as the Owner Trustee, (b) each of the representations, undertakings and
agreements herein made on the part of the Issuer is made and intended not as
personal representations, undertakings and agreements by Wilmington Trust
Company but is made and intended for the purpose for binding only the Trust
Property, (c) nothing herein contained shall be construed as creating any
liability on Wilmington Trust Company, individually or personally, to perform
any covenant either expressed or implied contained herein, all such liability,
if any, being expressly waived by the Servicer, Trustee and by any Person
claiming by, through or under the Servicer and Trustee and (d) under no
circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Trustee or be liable for the
breach or failure of any obligation, representations, warranty or covenant made
or undertaken by the Issuer under this Agreement.

      Section 7.10. Distribution of Servicing Procedures and Standards.

      The Servicer agrees to distribute the procedures and standards set forth
herein to each of its field offices and to take all reasonable action to
instruct its field servicing personnel concerning their duties hereunder as soon
as practicable after execution hereof.

      Section 7.11. Property Address.

      Within nine months from the Closing Date the Servicer shall provide the
Trustee a magnetic tape showing, for each Account, the Account number, property
address and customer name.

      Section 7.12. Power of Attorney.

      The Issuer is authorized from time to time to deliver one or more powers
of attorney to the Servicer or Sub-Servicer that authorize the Servicer and/or
Sub-Servicer, as applicable, to act on behalf of the Issuer as contemplated by
this Agreement and any Sub-Servicing Agreement. The Issuer shall upon request of
any Successer Servicer deliver one or more powers of attorney to the


                                      31
<PAGE>

Successor Servicer or its designated agent for purposes contemplated by this
Agreement.

      Section 7.13. Rights Upon Discharge of Indenture. Upon the payment in full
of the Notes, the satisfaction and discharge of the Indenture, the Owner Trustee
will succeed to all rights of the Trustee hereunder and the Owners (as such term
is defined in the Trust Agreement) will succeed to all rights of the Noteholders
hereunder.

      IN WITNESS WHEREOF, the Owner Trustee on behalf of the Issuer, the
Servicer and the Trustee have caused this Agreement to be duly executed by their
respective officers thereunder duly authorized as of the day and year first
above written.

                                        ISSUER:                                
                                                                               
                                        MID-STATE TRUST VI                     
                                                                               
                                        By:   WILMINGTON TRUST COMPANY, not    
                                              in its individual capacity,      
                                              but solely as Owner Trustee of   
                                              Mid-State Trust VI               
                                                                               
                                        By:                                    
                                           ---------------------------------   
                                              Name:                            
                                              Title:                           
                                                                               
                                        SERVICER:                              
                                                                               
                                        MID-STATE HOMES, INC.                  
                                                                               
                                        By:                                    
                                           ---------------------------------   
                                              Name:                            
                                              Title:                           
                                                                               

                                        FIRST UNION NATIONAL BANK OF           
                                           FLORIDA, as Trustee          

                                        By:                                    
                                           ---------------------------------   
                                              Name:                            


<PAGE>                                  

                                    EXHIBIT A

                       FORM OF STANDBY SERVICING AGREEMENT

<PAGE>


                                   EXHIBIT B
                               MID-STATE TRUST VI
                             SERVICER'S CERTIFICATE


      _______________ and ________________ hereby certify that they are officers
of Mid-State Homes, Inc. (the "Servicer") holding their respective offices set
forth beneath their signatures and that they are duly authorized to execute this
Servicer's Certificate on behalf of the Servicer and further certify that with
respect to the preceding Remittance Period (________ to ________):

      (i) the Economic Balance of all Accounts as of the first day of the month
preceding each Payment Date;

      (ii) the total number of Outstanding Accounts as of the end of the
preceding Due Period is _____ and the aggregate funds collected on the Accounts
with respect to the preceding Remittance Period is $________ and the cumulative
amount for the related Due Period is $__________;

      (iii) (a) the aggregate amount of the Servicing Fee included in (i) above
is $________ based on the ________ Outstanding Accounts that have an Economic
Balance of more than zero as of the beginning of the preceding Remittance Period
and the cumulative amount for the related Due Period is $________;

            (b) the aggregate amount of reimbursement for advances for taxes and
insurance premiums and other advances included in (i) above is $________ and the
cumulative amount for the related Due Period is $__________;

            (c) the aggregate amount of late payment charges, prepayment
penalties and assumption fees included in (i) above is $___________ and the
cumulative amount for the related Due Period is $_________________;

            (d) the aggregate amount previously deposited in the Holding Account
in respect of payments by Obligors made by checks subsequently returned for
insufficient funds or other reason for non-payment is $_________ and the
cumulative amounts for the related Due Period is $_________;

      (iv) the amount in (i) for the preceding Remittance Period minus the total
of amounts in (ii) for the preceding Remittance Period is $___________ and the
cumulative amount in (i) for the related Due Period minus the total of the
cumulative amounts in (ii) for the related Due Period is $_____________;

      (v) (a) the aggregate amount withdrawn from the Holding Account as
reimbursement to the Servicer for expenses for the restoration of Mortgaged
Property damaged by an Uninsured Cause


                                      1
<PAGE>

and as reimbursement for usual and customary Liquidation Expenses is
$______________, [A schedule of the Account numbers for the related Account
shall be attached] and the cumulative amount for the related Due Period is
$___________;

            (b) the aggregate amount withdrawn from the Holding Account as
reimbursement for Insured Expenses is $________, [A schedule of the Account
numbers for the related Accounts, shall be attached] and the cumulative amount
for the related Due Period is $_________; and

            (c) the aggregate amount withdrawn from the Holding Account that is
not part of the Trust Estate is $_______ and the cumulative amount for the
related Due Period is $_______;

      (vi) the amount in (iv) minus the total of the amounts in (v) is $________
and the cumulative amount for the related Due Period is $________;

            (a) the portion of such amount that represents Net Insurance
Proceeds that do not constitute a Full Prepayment with respect to any Account is
$________ and the cumulative amount for the related Due Period is $_________;

            (b) the portion of such amount that represents Net Liquidation
Proceeds is $___________ and the cumulative amount for the related Due Period is
$_________;

            (c) the portion of such amount that represents Full Prepayments is
$_________ and the cumulative amount for the related Due Period is $_________;

      (vii) with respect to each Account that was the subject of a Full
Prepayment:

            Account Number          Full Prepayment Amount
            --------------          ----------------------

      (viii) the amount of Cumulative Prepayments is $______;

      (ix) the amount of Cumulative Actual Net Economic Losses is $___________;

            (a) the cumulative Economic Balance of all Accounts which have been
repossessed equals $_______; and

            (b) if applicable, the Economic Balance of those Accounts which are
delinquent over 120 days equals $_________; and


                                      2
<PAGE>

            (c) the amount of cumulative Net Liquidation Proceeds is
$_______________;

      (x) the Economic Balance of all Accounts with respect to which there is a
material breach of any representation or warranty made in Section 3.11 of the
Indenture or as to which there is a material defect in the related Account
Documents in accordance with Section 3.12(b) of the Indenture is $________.

      (xi) the amount that represents the cumulative amount since the Cut-Off
Date of the cash component of aggregate Net Liquidation Proceeds equals
$________;

      (xii) with respect to delinquent Accounts:


                                                            Account
      Period of                   Number of                 Balance
     Delinquency                  Accounts                     $
- ----------------------      ---------------------      -----------------


0-30 days

31-60 days

61-90 days

91 or more days
                            ---------------------      -----------------

     Total

      The percentage of Accounts on a gross receivables basis that are 90 days
or more delinquent (including Accounts in foreclosure and the balance of "real
estate owned" on a gross receivables basis) for the immediately preceding three
months is set forth on Schedule _ hereto.

      (xiii)  with respect to property acquired in respect of an
Account:


                                      3
<PAGE>

   Period of Time                                           Account
   as Real Estate                 Number of                 Balance
        Owned                     Accounts                     $
- ----------------------      ---------------------      -----------------



0-3 months

4-6 months

7-9 months

10-12 months

over 12 months
                            ---------------------      -----------------

     Total


      (xiv) delivered herewith, if previously requested, is a copy of a magnetic
tape file containing the Schedule of Accounts information and current mailing
address information for each Account and showing the paid-through status of each
Account;


      (xv) a list of Accounts which became the subject of an Assumption
Agreement;

      (xvi) with respect to the Servicing Account for the related Due Period:

            Beginning Balance             $

            Deposits

            Disbursements
                                           --------------------
            Ending Balance                $
                                           ====================

      (xvii) with respect to each Account that was the subject of a
Repossession:

            Account Number          Account Balance
            --------------          ---------------

      (xviii) with respect to each Account that was the subject of a Resale:

            Account Number          Account Balance
            --------------          ---------------

      (xix) the total number of Outstanding Accounts as of the end of the
previous Due Period was ____________;

      (xx) the aggregate number and gross receivable balance of all Accounts
that were set-up (i.e., rewritten) during the Remittance Period was $________
and $________, respectively;


                                      4
<PAGE>

      (xxi) the aggregate number and gross receivables balance of all Accounts
that were set-up (i.e., rewritten) during the Remittance Period and the prior
eleven (11) Remittance Periods was _________ and $________, respectively.

      The undersigned hereby certify that all amounts received from the Holding
Account during the preceding Remittance Period are authorized withdrawals
pursuant to Section 2.07(c) or 2.11 of the Servicing Agreement.

                                    Mid-State Homes, Inc.

                                    By:
                                       ---------------------------------------
                                    Name:
                                         -------------------------------------
                                    Title:
                                          ------------------------------------


                                    By:
                                       ---------------------------------------
                                    Name:
                                         -------------------------------------
                                    Title:
                                          ------------------------------------


                                      5
<PAGE>

State of New York  )
                   :     ss.
County of New York )

      Be it remembered that on this ____ day of _____________, 1997 A.D.
personally came before me, the undersigned, a Notary Public in and for said
State duly commissioned and sworn, ______________, of Wilmington Trust Company,
not in its individual capacity but solely as Owner Trustee under the Trust
Agreement, party to the within and foregoing instrument, known to me personally
to be such and the person who executed such instrument on behalf of such trust,
and acknowledged to me that such instrument was his own act and deed and the act
and deed of such trust, that the signature therein is his own proper
handwriting, that his act of executing and delivering such instrument was duly
authorized and that the facts stated therein are true. Given under my hand and
seal of office the day and year aforesaid.


[Seal]                                    ---------------------------------   
                                          Signature of Notary Public


MID-STATE TRUST VI

By:   WILMINGTON TRUST COMPANY,
      not in its individual capacity
      but solely as Owner Trustee
      of Mid-State Trust, VI

                                          By:
                                             ------------------------------


                                      6
<PAGE>

                                    EXHIBIT C

None.
<PAGE>

                                    EXHIBIT D

                         Historical Servicing Standards
<PAGE>

                              MID-STATE HOMES, INC.
                          1500 North Dale Mabry Highway
                              Tampa, North Carolina 33607


May 1, 1997


Servicing Procedures
Mid-State Homes, Inc.


      Reference is made to the Servicing Agreement (the "Servicing Agreement")
dated as of May 1, 1997, among the undersigned (the "Servicer"), Mid-State
Trust VI, a business trust established under the laws of the State of Delaware
(the "Trust") and First Union National Bank of North Carolina (the "Trustee")
entered into in connection with the issuance and sale by the Trust of its
Asset-Backed Notes (the "Notes") pursuant to the indenture dated as of 
May 1, 1997 (the "Indenture") between the Trust and the Trustee.


      Set forth below is a description of the servicing standards historically
employed by the Servicer referred to in Section 2.01 of the Servicing Agreement.

I. COLLECTION PROCEDURES

      The following procedures are those generally followed by the Servicer as
of April 30, 1997 in the collection, through its subservicing agent, Jim Walter
Homes, Inc. ("JWH"), of past-due Accounts. However, it should be noted that
since supervisory personnel and management exercise substantial discretionary
judgment in the collection effort, the procedures followed in the collection of
any particular past-due Account may deviate from those described below.
<PAGE>

      A. Accounts

      Lists of delinquent Accounts are produced each month, between the 7th and
11th of the month. Each delinquent Account is assigned to one of the three
following categories:

            1. "Field Accounts": Accounts in respect of which the outstanding
gross receivable mortgage balance, in each case, equals or exceeds $10,000 and
in respect of which the Obligor will, if a payment is not made during the course
of the then current month, be in arrears by at least two installment payments.
Field Account Obligors may also owe amounts advanced by the Servicer in respect
of insurance premiums, real property taxes or other amounts.

            2. "Low-Balance Accounts": Accounts in respect of which the
outstanding gross receivable mortgage balance, in each case, is less than
$10,000. Low-Balance Account Obligors may be:

                  (a) current on installment payments, but indebted for amounts
            advanced by the Servicer in respect of insurance premiums, real
            property taxes or other amounts;

                  (b) delinquent by one or more installment payments and
            indebted for amounts advanced by the Servicer in respect of
            insurance premiums, real property taxes or other amounts; or

                  (c) delinquent by two or more installment payments, in the
            event that no payment is made during the course of the then-current
            month, and owe no amounts with respect to insurance or taxes.

            3. "Off-Code Accounts": Accounts in respect of which the outstanding
gross receivable mortgage balance, in each case, equals or exceeds $10,000 and
in respect of which the Obligor either is current on installment payments or, in
the event that a


                                      2
<PAGE>

payment is not made during the course of the then-current month, will be in
arrears with respect to only one installment payment at the end of such month,
and is indebted to the Servicer for amounts advanced by the Servicer in respect
of insurance premiums, real property taxes or other amounts.

      B. Field Offices

            Field Accounts are serviced from JWH's Field Offices. JWH has
approximately 109 such Field Offices located in 17 different states.
Approximately one-third of the Field Offices have either two or three Field
Representatives, while the remainder have one Field Representative. Each Field
Representative services an average of 175 Accounts per month. Each Field
Representative is furnished monthly with the report of delinquent Field Accounts
respecting properties within his service area, and a copy of such list for each
Field Office within a region is furnished to the Regional and Assistant Regional
Supervisors. Lead Representatives receive copies for the Field Offices for which
they are directly responsible.

      Upon receipt of such list, each Field Representative seeks to make contact
with each delinquent Obligor either by telephone or in person, in order to make
payment arrangements with such Obligors. Field Representatives and their
respective Lead Representatives communicate not less frequently than every other
day to review each list of Field Accounts and to discuss progress and problems
in such Field Representative's collection efforts. All collection efforts of the
Field Representatives (whether by


                                      3
<PAGE>

phone or in person) are documented directly on the Field Representative's own
monthly delinquency report (cover sheets) with a cross reference to the Field
Representative's personal file or chase card.

      At least weekly, the Lead Representative reviews orally with the
respective Assistant Regional Supervisor and Regional Supervisor the results of
the field collection efforts for the previous week. Additionally, Lead
Representatives request, upon the recommendation of the Field Representative,
that the account be foreclosed or repossessed, request a deed in lieu of
foreclosure or refrain from foreclosing or repossessing an account which is two
or more installments in arrears. The final decision is made by the Regional
Supervisor.

      In the event an Obligor fails to adhere to the payment schedule arranged
with the Field Representative, the Field Representative will re-contact such
Obligor, usually by means of a visit to the Obligor's home. The Field
Representatives spend a significant portion of their time on the road making
face-to-face contact with delinquent Obligors. Not only does such visit seek to
impress upon the Obligor the urgency of coming to some successful arrangement,
but also affords the Field Representative the opportunity to make a cursory
inspection of the condition of the house and property, so that repair plans can
be made should reacquisition become necessary. The highest priority of
visitation is placed on the delinquent accounts with the largest balance.


                                      4
<PAGE>

      In some circumstances, a satisfactory payment schedule can be arranged
with the Obligor (see below "WORK-OUT POLICIES"). However, if it is felt that
the chances of arranging a successful repayment program satisfactory to the
Servicer are not good, after a final attempt by all or some of the Lead
Representatives, the Regional or Assistant Regional Supervisor, the Field
Account Obligor will either be requested to sign a deed in lieu of foreclosure
or will be advised that his Account has been or will be referred to an attorney
for the commencement of foreclosure proceedings (see below "FORECLOSURE
POLICIES").

      Field Representatives frequently receive monthly payments and other
repayments of outstanding advances directly from the Obligors. The Field
Representatives give the Obligor a receipt for such payment and mail the payment
to Tampa as soon as practicable. When the receipt book is used up it is
forwarded to the Regional Office for review and then forwarded to Tampa for
filing for a period of one year. Each day the Field Representatives take all
collections made or which have otherwise been received and mail such payments to
Tampa headquarters.

      C. Collection of Low-Balance Accounts and Off-Code Accounts

      Five Collection Managers at the central office of JWH in Tampa, North 
Carolina are primarily responsible for the collection of Low-Balance or 
Off-Code Accounts. Collection efforts begin immediately upon receipt of the 
monthly delinquency report and are confined to contacting Obligors by 
telephone and by mail. Since the majority of Obligors with respect to 
Accounts in these

                                      5
<PAGE>

categories have built up substantial equity in the relevant properties, it is
the experience of the Servicer that such Obligors can be persuaded to bring
their Account balance current with relative ease. Therefore, the bulk of the
collection effort expended by such Collection Managers is directed toward
collecting amounts advanced by the Servicer on such Obligor's behalf in respect
of insurance premiums and real property taxes. All Obligor contacts in the
collection effort are documented directly on the collector's terminal and stored
in the computer. Account Obligors incapable of paying all such amounts upon
demand are permitted to pay in installments pursuant to a repayment schedule
satisfactory to the Servicer.

      However, in the event that (i) a Low-Balance Account should fall into
arrears by three installment payments, (ii) an Off-Code Account with respect to
which installment payments are due on the 5th of each month should fall into
arrears by two installment payments or (iii) an Off-Code Account with respect to
which installment payments are due on the 20th of each month should fall into
arrears by one installment payment, then, in each case, such Account is referred
to the relevant Field Office to be treated as a Field Account, as described in
Section B above.

      Central Office Collection Managers review the collection status of all
their accounts with the Collection Supervisor at least every other day. When in
his judgment, the Collection Manager deems it appropriate, he will refer a
Low-Balance or Off-


                                      6
<PAGE>

Code account to the field for collection efforts by a Field Representative.

II. WORK-OUT POLICIES

      As a general rule, the Servicer will not permit an Account to remain two
installment payments in arrears. Whether or not the Obligor will be allowed to
arrange a repayment schedule rather than be required either to bring the Account
current or see foreclosure proceedings brought will depend upon the Servicer's
estimate of the likelihood of a successful work-out being accomplished.
Naturally, such an estimate is subjective to a certain degree.


      The factors considered in arriving at a decision whether or not to enter
into an arrangement with an Obligor include whether or not the Obligor has a
record of making previous payments in a timely fashion, the nature of the reason
for failure to remain current on mortgage payments, the likelihood of such
reason being cured or removed in the near future and the difficulty, if any,
anticipated in prosecuting an action for foreclosure.

      Generally, an acceptable work-out schedule of payments will require the
Obligor to pay either two installment payments, or a payment and a half, in the
immediately following month or months. On rare occasions, if an Obligor has a
good past payment record and experiences difficulty in making payment, which
difficulty, in the judgment of the relevant Representatives and Supervisors, is
likely to be cured or removed, the Account may be deemed


                                      7
<PAGE>

current and the delinquent payments added to the end of the original outstanding
balance of such Account.

      A successful work-out should result in a current Account within the space
of two or three months following agreement upon a repayment schedule.

III.  FORECLOSURE POLICIES

      A. Generally

      Accounts in respect of which foreclosure proceedings are to be 
commenced are assigned for foreclosure to Jim Walter Homes, Inc. ("JWH"). The 
actual foreclosure process consists of JWH delivering the necessary Account 
Documents to attorneys in the state in which the mortgaged property is 
located with direction to foreclose on the Account as quickly as possible. 
JWH also has counsel in Tampa, North Carolina to oversee the foreclosure 
activities of all local counsel.

      In any case in which an Obligor has agreed to surrender the mortgaged
property by deed in lieu of foreclosure, Mid-State performs a search of the
judgment records on file in the applicable county to determine whether the
property is subject to tax or other liens. If there are liens on record, other
than tax liens, Mid-State refuses the deed in lieu of foreclosure and, if
necessary, initiates foreclosure to acquire the property free of such liens.

      Accounts recommended for foreclosure are notified that JWH intends to
initiate foreclosure or repossession if payment is not made in 30 days. Provided
that JWH is the successful bidder at


                                      8
<PAGE>

the resulting judicial sale, the relevant JWH Field Representative will be
responsible for reselling the repossessed property. The average period elapsed
between repossession of a property by JWH and its resale is approximately 30
days.

      B.  Maintenance and Completion of Repossessed Homes

      Immediately upon becoming aware that a property has been
abandoned or vacated or following repossession of a property, the Field
Representative will arrange for basic clean-up of the yard and interior of the
house as necessary. Periodic inspections of the property are made during the
period between repossession and resale to ensure that the property does not
deteriorate significantly.

      The Field Representative will recommend needed repairs to the Regional
Supervisor. Generally speaking, repairs necessary to prevent any structural
deterioration will be made forthwith. Depending upon the magnitude of interior
repairs, such repairs may either be made at once or they may be made a part of
the negotiation of the price and terms of the resale contract. Likewise, in the
case of a house which was both sold and repossessed in an unfinished state, as a
rule no work will be done on the interior to bring it to a higher state of
completion except as part of a firm contact of resale.

      JWH generally does not maintain a Hazard Insurance Policy on each Acquired
Property; however, it does pay all property taxes, assessments and utility bills
for such properties and arranges for utilities to be connected or disconnected,
as appropriate,


                                      9
<PAGE>

and for the properties to be protected in winter months to avoid damage to
plumbing.

      C. Resale

      During the repossession and/or foreclosure process, the Field
Representative resale efforts are commenced. The Field Representative's resale
effort may take the form of canvassing the neighborhood, leaving information and
pictures at corner stores and factories or advertising in local newspapers.

      1. Resale Price

      Several points of reference are used in arriving at a resale price for a
repossessed home. First, the Servicer will provide the Field Representative with
a figure representing the Servicer's actual cash cost in the home multiplied by
a factor of 150%. This figure provides a baseline price below which the property
generally will not be sold. Sales for a price below such baseline price require
the permission of the Regional or Assistant Regional Supervisor. Second, the
Field Representative makes reference to the current price for a similar new
home. Finally, the Field Representative refers to the market price prevailing
for comparable homes in the area, discounting, if necessary, for the work left
to be done to bring the house to completion.

      2. Resale Credit Policies

      Prospective purchasers at resale are subject to the same credit review
procedures as purchasers of new homes. In lieu of the pledge of real property
received from new home buyers, a


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certain amount of equity in the property is provided in a resale by requiring
the purchaser at resale to make a down payment of between $500 and $1,000,
depending upon the creditworthiness of such purchaser.

                                          MID-STATE HOMES, INC.

                                          By:
                                             ---------------------------------
                                              Title:  Vice President


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