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                                                                  Exhibit 10.(b)

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                        COMMERCIAL MORTGAGE LOAN PURCHASE

                            AND WARRANTIES AGREEMENT


                     PEOPLE'S PREFERRED CAPITAL CORPORATION
                                    PURCHASER


                           PEOPLE'S BANK OF CALIFORNIA
                                     SELLER


                           DATED AS OF OCTOBER 3, 1997

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                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----

SECTION 1.    Definitions................................................   1
SECTION 2.    Agreement to Purchase Initial Portfolio....................   9
SECTION 3.    Subsequent Purchases.......................................  10
SECTION 4.    Payment of Purchase Price..................................  10
SECTION 5.    Examination of Mortgage Files..............................  10
SECTION 6.    Conveyance from Seller to Purchaser........................  11
    SUBSECTION 6.01   Possession of Servicing Files......................  11
    SUBSECTION 6.02   Books and Records..................................  11
    SUBSECTION 6.03   Delivery of Custodian's File.......................  11
SECTION 7.    Servicing of the Mortgage Loans............................  12
SECTION 8.    Representations, Warranties and Covenants of the
              Seller; Remedies for Breach................................  13
    SUBSECTION 8.01   Representations and Warranties Regarding the Seller  13
    SUBSECTION 8.02   Representations and Warranties Regarding
              Individual Mortgage Loans..................................  15
    SUBSECTION 8.03   Remedies for Breach of Representations and
              Warranties.................................................  25
SECTION 9.    Closing....................................................  27
SECTION 10.   Closing Documents..........................................  28
SECTION 11.   Costs......................................................  29
SECTION 12.   Merger or Consolidation of the Seller......................  29
SECTION 13.   Mandatory Delivery; Grant of Security Interest.............  29
SECTION 14.   Notices....................................................  30
SECTION 15.   Severability Clause........................................  31
SECTION 16.   Counterparts...............................................  31
SECTION 17.   Governing Law..............................................  31
SECTION 18.   Intention of the Parties...................................  31
SECTION 19.   Successors and Assigns; Assignment of Purchase Agreement...  31
SECTION 20.   Waivers....................................................  32
SECTION 21.   Entire Agreement, Amendment................................  32
SECTION 22.   General Interpretive Principles............................  32
SECTION 23.   Reproduction of Documents..................................  33
SECTION 24.   Further Agreements.........................................  33
SECTION 25.   Recordation of Assignments of Mortgage.....................  33


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                                    EXHIBITS

EXHIBIT A     Contents of Each Mortgage File
EXHIBIT B     Commercial Mortgage Servicing Agreement
EXHIBIT C     Form of Seller's Officer's Certificate
EXHIBIT D     Form of Opinion of Counsel to the Seller
EXHIBIT E     Notice of Sale and Release of Collateral
EXHIBIT F     Form of Security Release Certification
EXHIBIT G     Form of Assignment and Assumption Agreement
EXHIBIT H     Initial Portfolio Mortgage Loan Schedule
EXHIBIT I     Form of Commitment Letter


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                        COMMERCIAL MORTGAGE LOAN PURCHASE
                            AND WARRANTIES AGREEMENT

      This COMMERCIAL MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT (the
"Agreement"), dated as of October 3, 1997, by and between People's Preferred
Capital Corporation, a Maryland corporation, having an office at 5900 Wilshire
Boulevard, Los Angeles, California 90036 (the "Purchaser") and People's Bank of
California, a federal stock savings bank organized under the laws of the United
States, having an office at 5900 Wilshire Boulevard, Los Angeles, California
90036 (the "Seller").

                              W I T N E S S E T H:

      WHEREAS, the Seller desires to sell to the Purchaser, and the Purchaser
desires to purchase from the Seller, from time to time, certain conventional
commercial mortgage loans (the "Mortgage Loans") on a servicing retained basis
as described herein, and which shall be delivered as whole loans;

      WHEREAS, each Mortgage Loan is secured by a mortgage, deed of trust or
other security instrument creating a first lien on a commercial property
indicated on the Mortgage Loan Schedule; and

      WHEREAS, the Purchaser and the Seller wish to prescribe the manner of the
conveyance, servicing and control of the Mortgage Loans.

      NOW, THEREFORE, in consideration of the promises and mutual agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Purchaser and the Seller agree
as follows:

SECTION 1. DEFINITIONS.

      For purposes of this Agreement and any Commitment Letter (as defined
herein) the following capitalized terms shall have the respective meanings set
forth below. Other capitalized terms used in this Agreement and not defined
herein shall have the respective meanings set forth in the Commercial Servicing
Agreement attached as Exhibit B hereto.

      "Accepted Servicing Practices" means, with respect to any Mortgage Loan,
those mortgage servicing practices of prudent mortgage lending institutions
which service mortgage loans of the same type as such Mortgage Loan in the
jurisdiction where the related Mortgaged Property is located.

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


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voting securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

      "Agreement" means this Commercial Mortgage Loan Purchase and Warranties
Agreement and all amendments hereof and supplements hereto.

      "ALTA" means The American Land Title Association or any successor thereto.

      "Ancillary Income" means all late charges, assumption fees, escrow account
benefits, reinstatement fees, and similar types of fees arising from or in
connection with any Mortgage, to the extent not otherwise payable to the
Mortgagor under applicable law or pursuant to the terms of the related Mortgage
Note.

      "Appraised Value" means the value of the Mortgaged Property set forth in
an appraisal made in connection with the origination of the related Mortgage
Loan as the value of the Mortgaged Property or such later appraisal, if
applicable.

      "Assignment and Assumption Agreement" has the meaning set forth in Section
19.

      "Assignment of Mortgage" means an assignment of the Mortgage delivered in
blank, notice of transfer or equivalent instrument in recordable form,
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect the sale of the Mortgage to the Purchaser.

      "Business Day" means any day other than (i) a Saturday or Sunday, or (ii)
a day on which banking and savings and loan institutions, in the State of
California or the state in which the Seller's servicing operations are located,
are authorized or obligated by law or executive order to be closed.

      "Classified" is used herein generally to describe a Mortgage Loan which is
deemed substandard, doubtful or loss with respect to collectibility.

      "Closing Date" means the Initial Closing Date and any other date on which
the parties hereto shall agree to close a sale of Mortgage Loans hereunder as
set forth in a duly executed Commitment Letter.

      "Code" means Internal Revenue Code of 1986, as amended.

      "Commercial Servicing Agreement" means the agreement, attached as Exhibit
B hereto, to be entered into by the Purchaser and the Seller, as servicer,
providing for the Seller to service the Mortgage Loans as specified by the
Commercial Servicing Agreement.


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      "Commitment Letter" means a letter agreement executed by the Purchaser and
the Seller providing for the purchase and sale of Mortgage Loans and
substantially in the form of Exhibit I hereto.

      "Condemnation Proceeds" means all awards or settlements in respect of a
Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation, to the extent not
required to be released to a Mortgagor in accordance with the terms of the
related Mortgage Loan Documents.

      "Custodial Account" means the separate trust account created and
maintained pursuant to the Commercial Servicing Agreement.

      "Cut-off Date" means the Initial Cut-off Date and any other date as of
which the principal balance of Mortgage Loans will be determined for purposes of
calculating the Purchase Price for the purchase and sale of Mortgage Loans,
which date shall be set forth in the related Commitment Letter.

      "Deleted Mortgage Loan" means a Mortgage Loan that is repurchased or
replaced with a Qualified Substitute Mortgage Loan by the Seller in accordance
with the terms of this Agreement.

      "Due Date" means the day of the month on which the Monthly Payment is due
on a Mortgage Loan, exclusive of any days of grace.

      "Escrow Account" means the separate account created and maintained
pursuant to the Commercial Servicing Agreement with respect to each Mortgage
Loan, as specified in the Commercial Servicing Agreement.

      "Escrow Payments" means, with respect to any Mortgage Loan, any payments
required to be escrowed by the Mortgagor with the mortgagee pursuant to the
Mortgage or any other document (whether referred to as escrow, impound or
otherwise), including without limitation the amounts constituting ground rents,
taxes, assessments, water rates, sewer rents, municipal charges, mortgage
insurance premiums, fire and hazard insurance premiums.

      "Independent Directors" means the members of the Board of Directors of the
Purchaser who are not current employees or officers of the Purchaser or current
employees, officers or directors of the Seller or any affiliate of the Seller.
In addition, any members of the Board of Directors of the Purchaser elected by
holders of the preferred stock of the Purchaser, including the Series A
Preferred Shares, will be deemed to be "Independent Directors" for purposes of
approving actions requiring the approval of a majority of the Independent
Directors.

      "Initial Closing Date" means October 3, 1997, or such other date as the
parties hereto may mutually agree.


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      "Initial Cut-off Date" means September 22, 1997.

      "Initial Portfolio Mortgage Loan Schedule" means the schedule of Mortgage
Loans to be purchased by the Purchaser on the Initial Closing Date, attached
hereto as Exhibit H.

      "Initial Portfolio Purchase Price" means the amount set forth in Section 2
of this Agreement.

      "Insurance Proceeds" means, with respect to each Mortgage Loan, proceeds
of insurance policies insuring the Mortgage Loan or the related Mortgaged
Property.

      "Interest Rate Adjustment Date" means, with respect to each Variable Rate
Mortgage Loan, the date, specified in the related Mortgage Note, on which the
Mortgage Interest Rate is adjusted.

      "Liquidation Proceeds" means cash received in connection with the
liquidation of a defaulted Mortgage Loan, whether through the sale or assignment
of such Mortgage Loan, trustee's sale, foreclosure sale or otherwise, or the
sale of the related Mortgaged Property if the Mortgaged Property is acquired in
satisfaction of the Mortgage Loan.

      "Loan-to-Value Ratio" or "LTV" means, with respect to any Mortgage Loan,
the ratio (expressed as a percentage) of the original principal amount of the
Mortgage Loan to the lesser of (a) the Appraised Value of the Mortgaged Property
at origination and (b) if the Mortgage Loan was made to finance the acquisition
of the related Mortgaged Property, the purchase price of the Mortgaged Property.

      "Monthly Payment" means the scheduled monthly payment of principal and
interest on a Mortgage Loan.

      "Mortgage" means the mortgage, deed of trust or other instrument securing
a Mortgage Note, including any riders, addendums, assumptions, modifications or
extensions thereto, which creates a first lien on an unsubordinated estate in
fee simple in real property securing the Mortgage Note; except that with respect
to real property located in jurisdictions in which the use of leasehold estates
for commercial properties is a widely accepted practice, the mortgage, deed of
trust or other instrument securing the Mortgage Note may secure and create a
first lien upon a leasehold estate of the Mortgagor.

      "Mortgage File" means the items pertaining to a particular Mortgage Loan
referred to in Exhibit A annexed hereto, and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.

      "Mortgage Interest Rate" means the annual rate of interest borne on a
Mortgage Note, which, in the case of a Variable Rate Mortgage Loan, shall be
adjusted from time to time, with respect to each Mortgage Loan.


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      "Mortgage Loan" means an individual Mortgage Loan which is the subject of
this Agreement, each Mortgage Loan originally sold and subject to this Agreement
being identified on Exhibit H attached hereto, and each Mortgage Loan sold
pursuant to a Commitment Letter being identified on the applicable Mortgage Loan
Schedule, and each of which Mortgage Loan includes without limitation the
Mortgage File, the Monthly Payments, Principal Prepayments, Liquidation
Proceeds, Condemnation Proceeds, Insurance Proceeds, and all other rights,
benefits, proceeds and obligations arising from or in connection with such
Mortgage Loan, excluding replaced or repurchased mortgage loans.

      "Mortgage Loan Documents" means, with respect to each Mortgage Loan, the
following documents pertaining to such Mortgage Loan:

      a.    The original Mortgage Note (or, with respect to the Mortgage Loans
            listed on Schedule I to Exhibit A hereto, a lost note affidavit,
            executed by an officer of the Seller, with a copy of the original
            note attached thereto) bearing all intervening endorsements,
            endorsed "Pay to the order of ( IN BLANK ) without recourse" and
            signed in the name of the Seller by an authorized officer. To the
            extent that there is no room on the face of the Mortgage Notes for
            endorsements, the endorsement may be contained on an allonge, if
            state law so allows. If the Mortgage Loan was acquired by the Seller
            in a merger, the endorsement must be by "[Seller], successor by
            merger to [name of predecessor]". If the Mortgage Loan was acquired
            or originated by the Seller while doing business under another name,
            the endorsement must be by "[Seller], formerly known as [previous
            name]"; and

      b.    The original Assignment of Mortgage for each Mortgage Loan or a
            blanket assignment for all of the Mortgage Loans in form and
            substance acceptable for recording endorsed and signed in the name
            of the Seller. If the Mortgage Loan was acquired by the Seller in a
            merger, the Assignment of Mortgage must be made by "[Seller],
            successor by merger to [name of predecessor]". If the Mortgage Loan
            was acquired or originated by the Seller while doing business under
            another name, the Assignment of Mortgage must be by "[Seller],
            formerly known as [previous name]".

      c.    The original of any guarantee executed in connection with the
            Mortgage Note.

      d.    The original Mortgage, with evidence of recording thereon. If in
            connection with any Mortgage Loan, the Seller cannot deliver or
            cause to be delivered the original Mortgage with evidence of
            recording thereon on or prior to the Closing Date because of a delay
            caused by the public recording office where such Mortgage has been
            delivered for recordation, a photocopy of such Mortgage certified by
            the Seller to be true and correct will be delivered; if such
            Mortgage has been lost or if such public recording office retains
            the original recorded Mortgage, the Seller shall deliver or cause to
            be delivered to the Purchaser, a photocopy of such Mortgage,


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            certified by such public recording office to be a true and complete
            copy of the original recorded Mortgage.

      e.    The originals of all assumption, modification, consolidation or
            extension agreements, if any, with evidence of recording thereon if
            such agreements have been recorded, or certified copies of such
            documents if the originals are unavailable.

      f.    Originals of all intervening Assignments of the Mortgage with
            evidence of recording thereon, or if any such intervening assignment
            has not been returned from the applicable recording office, a
            photocopy of each such assignment certified by the Seller to be true
            and correct will be delivered, or if such assignment has been lost
            or if such public recording office retains the original recorded
            assignments of mortgage, the Seller shall deliver or cause to be
            delivered to the Purchaser, a photocopy of such intervening
            assignment, certified by such public recording office to be a true
            and complete copy of the original recorded intervening assignment.

      g.    The original mortgagee policy of title insurance or, in the event
            such original title policy is unavailable, a certified true copy of
            the related policy binder or commitment for title certified to be
            true and complete by the title insurance company; provided that the
            original mortgagee policy of title insurance shall be delivered
            promptly after receipt by the Seller thereof but in no event later
            than one hundred twenty (120) days from and after the Closing Date.

      h.    Any other security agreement, chattel mortgage or equivalent
            executed in connection with the Mortgage.

      "Mortgage Loan Schedule" means (a) the Initial Portfolio Mortgage Loan
Schedule attached hereto as Exhibit H and (b) any schedule of Mortgage Loans in
similar form attached to and constituting part of a duly executed Commitment
Letter, in each case setting forth at least the following information with
respect to each Mortgage Loan: (1) the Seller's Mortgage Loan identifying
number; (2) the Mortgagor's name; (3) the street address of the Mortgaged
Property including the state; (4) the type of commercial property constituting
the Mortgaged Property; (5) the type of Mortgage Loan (i.e., whether the
Mortgage Loan bears interest at a fixed or variable rate); (6) the original
months to maturity or the remaining months to maturity from the applicable
Cut-off Date, in any case based on the original amortization schedule and, if
different, the maturity expressed in the same manner but based on the actual
amortization schedule; (7) the Loan-to-Value Ratio at origination; (8) the
Mortgage Interest Rate as of the applicable Cut-off Date; (9) the stated
maturity date; (10) the amount of the Monthly Payment as of the applicable
Cut-off Date; (11) the original principal amount of the Mortgage Loan; (12) the
principal balance of the Mortgage Loan as of the close of business on the
applicable Cut-off Date; (13) a code indicating the purpose of the loan (i.e.,
purchase and refinance); (14) the Interest Rate Adjustment Date with respect to
any Variable Rate Mortgage Loan, frequency of interest rate adjustments,
interest rate caps, floors and ceilings; (15) the Servicing Fee Rate; and (16)
with respect to any Variable Rate Mortgage Loan, the index and


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margin pursuant to which the Mortgage Interest Rate is determined. With respect
to the Mortgage Loans in the aggregate, the Mortgage Loan Schedule shall set
forth the following information, as of the applicable Cut-off Date: (1) the
number of Mortgage Loans; (2) the current aggregate outstanding principal
balance of the Mortgage Loans; (3) the weighted average interest rate; and (4)
the weighted average servicing fee.

      "Mortgage Note" means the note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage, including any amendment, modification or
addendum thereto.

      "Mortgaged Property" means the real property (or leasehold estate, if
applicable) securing repayment of the debt evidenced by a Mortgage Note.

      "Mortgagor" means the obligor on a Mortgage Note.

      "Non-accrual Status" refers to Mortgage Loans that are 90 days or more
past due in the payment of principal or interest.

      "Officers' Certificate" means a certificate signed by the Chairman of the
Board or the Vice Chairman of the Board or a President or a Vice President and
by the Treasurer or the Secretary or one of the Assistant Treasurers or
Assistant Secretaries of the Seller, and delivered to the Purchaser as required
by this Agreement.

      "Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Seller, reasonably acceptable to the Purchaser.

      "Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization, government or any agency or political subdivision
thereof.

      "Prime Rate" means the prime rate announced to be in effect from time to
time, as published as the average rate in The Wall Street Journal (Western
edition).

      "Principal Prepayment" means any payment or other recovery of principal on
a Mortgage Loan which is received in advance of its scheduled Due Date,
including any prepayment penalty or premium thereon and which is not accompanied
by an amount of interest representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment.

      "Purchase Price" means the price to be paid on the applicable Closing Date
by the Purchaser to the Seller in consideration for the Mortgage Loans to be
purchased by the Purchaser on such Closing Date (including, without limitation,
the Initial Portfolio Purchase Price to be paid by Purchaser at the Initial
Closing) as set forth in this Agreement or a duly executed Commitment Letter, as
the case may be.


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      "Purchaser" means People's Preferred Capital Corporation or its successor
in interest or assigns or any successor to the Purchaser under this Agreement as
herein provided.

      "Qualified Appraiser" means an appraiser who had no interest, direct or
indirect in the Mortgaged Property or in any loan made on the security thereof,
and whose compensation is not affected by the approval or disapproval of the
Mortgage Loan, and such appraiser and the appraisal made by such appraiser both
satisfy the requirements of Title XI of the Federal Institutions Reform,
Recovery, and Enforcement Act of 1989 and the regulations promulgated
thereunder, all as in effect on the date the Mortgage Property was appraised.

      "Qualified Insurer" means an insurance company duly qualified as such
under the laws of the states in which the Mortgaged Properties are located, duly
authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided, and in the two highest rating
categories by Best's with respect to hazard and flood insurance .

      "Qualified Substitute Mortgage Loan" means a mortgage loan eligible to be
substituted by the Seller for a Deleted Mortgage Loan which must, on the date of
such substitution, (i) have an outstanding principal balance, after deduction of
all payments collected as of the date of substitution (or in the case of a
substitution of more than one mortgage loan for a Deleted Mortgage Loan, an
aggregate principal balance), not in excess of the outstanding principal balance
of the Deleted Mortgage Loan (the amount of any shortfall will be deposited in
the Custodial Account by the Seller in the month of substitution); (ii) have a
Mortgage Interest Rate and a remaining term to maturity, each of which is as
reasonably comparable as possible to the Mortgage Interest Rate and remaining
term to maturity of the Deleted Mortgage Loan; (iii) be of the same type as the
Deleted Mortgage Loan; and (iv) comply with each representation and warranty
(respecting individual Mortgage Loans) set forth in Section 8.02 hereof.

      "Remittance Date" means the date specified in the Commercial Servicing
Agreement.

      "Repurchase Price" means, with respect to any Mortgage Loan, a price equal
to (i) the unpaid principal balance of such Mortgage Loan plus (ii) interest net
of servicing fees, on such unpaid principal balance of such Mortgage Loan at the
Mortgage Interest Rate from the last date through which interest has been paid
and distributed to the Purchaser to the date of repurchase, less amounts
received or advanced, if any, by the Seller in respect of such repurchased
Mortgage Loan.

      "Seller" means People's Bank of California, its successors in interest and
assigns.

      "Series A Preferred Shares" means the ___% Noncumulative Exchangeable
Preferred Stock, Series A, par value $0.01 per share, of the Purchaser.

      "Servicing Fee" means, with respect to each Mortgage Loan, subject to the
Commercial Servicing Agreement, the amount of the annual fee the Purchaser shall
pay to the Seller, which shall for a period of one full month be equal to
one-twelfth of the product of (a) the Servicing Fee Rate


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and (b) the outstanding principal balance of such Mortgage Loan. Such fee shall
be payable monthly, and shall be pro rated for any portion of a month during
which the Mortgage Loan is serviced by the Seller under the Servicing Agreement.
The obligation of the Purchaser to pay the Servicing Fee is limited to, and the
Servicing Fee is payable solely from, the interest portion (including recoveries
with respect to interest from Liquidation Proceeds, to the extent permitted by
this Agreement) of such Monthly Payment collected by the Seller, or as otherwise
provided under this Agreement. In addition to the Servicing Fee, the Seller
shall be entitled to retain all Ancillary Income.

      "Servicing Fee Rate" means, with respect to each Mortgage Loan, the rate
specified in the Mortgage Loan Schedule with respect to such Mortgage Loan.

      "Servicing File" means with respect to each Mortgage Loan, the file
retained by the Seller during the period in which the Seller is acting as
servicer pursuant to the Commercial Servicing Agreement consisting of originals
of all documents in the Mortgage File which are not delivered to the Purchaser
or its designee and copies of the Mortgage Loan Documents.

      "Stated Principal Balance" means as to each Mortgage Loan the unpaid
principal balance as of the applicable date of determination of such balance.

      "Variable Rate Mortgage Loan" means any individual Mortgage Loan purchased
pursuant to this Agreement the interest rate of which adjusts periodically based
on the index identified in the Mortgage Note.

SECTION 2. AGREEMENT TO PURCHASE INITIAL PORTFOLIO.

      The Seller hereby agrees to sell, transfer, assign, set over and convey to
the Purchaser on the Initial Closing Date, without recourse, but subject to the
terms of this Agreement, all right, title and interest of the Seller in and to
the Mortgage Loans set forth on the Initial Portfolio Mortgage Loan Schedule and
the related Mortgage Files and all rights and obligations arising under the
documents contained therein. Mortgage Loans on the Initial Portfolio Mortgage
Loan Schedule shall have an aggregate principal balance on the Initial Cut-off
Date in an amount no less than $__________.

      The Initial Portfolio Purchase Price payable by the Purchaser in
consideration for the Mortgage Loans listed on the Initial Portfolio Mortgage
Loan Schedule shall be equal to the actual aggregate unpaid principal balance of
the Mortgage Loans as of the Initial Cut-off Date as accepted by the Purchaser
on the Initial Closing Date plus interest accrued on such Mortgage Loans at the
weighted average Mortgage Interest Rate from the last interest paid to date for
each such Mortgage Loan to and including the day prior to the Initial Closing
Date.

SECTION 3. SUBSEQUENT PURCHASES.

      From time to time, by executing a Commitment Letter substantially in the
form of Exhibit I hereto, the Seller shall sell, transfer, assign, set over and
convey to the Purchaser, without recourse,


                                      9
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but subject to the terms of this Agreement, and the Purchaser will purchase, all
the right, title and interest of the Seller, as of the applicable Closing Date,
in and to the Mortgage Loans set forth in the Mortgage Loan Schedule attached to
such Commitment Letter, and the Purchaser shall pay to Seller the Purchase Price
set forth in such Commitment Letter on such Closing Date.

SECTION 4. PAYMENT OF PURCHASE PRICE.

      The estimated Purchase Price computed as of the Initial Cut-off Date and
other Cut-off Dates, as applicable, shall be paid on the applicable Closing Date
by wire transfer of immediately available funds. The difference, if any, between
such estimated Purchase Price and the actual Purchase Price computed as of the
applicable Closing Date shall be paid by Seller or Purchaser to the other, as
the case may be, no later than ten business days after the applicable Closing
Date.

      The Purchaser shall, with respect to any Mortgage Loan purchased hereunder
or pursuant to a duly executed Commitment Letter, be entitled to (l) all
principal due after the applicable Cut-off Date, (2) all other recoveries of
principal collected on or after the applicable Cut-off Date, and (3) all
payments of interest on the Mortgage Loans net of applicable Servicing Fees
collected on or after the applicable Cut-off Date. The outstanding principal
balance of each Mortgage Loan as of the applicable Cut-off Date is determined
after application of payments of principal collected on or before such Cut-off
Date, together with any unscheduled principal prepayments collected prior to
such Cut-off Date.

SECTION 5. EXAMINATION OF MORTGAGE FILES.

      Prior to the date hereof or the date of any duly executed Commitment
Letter, as the case may be, the Seller has or shall have (a) delivered to the
Purchaser or its designee in escrow, for examination with respect to each
Mortgage Loan to be purchased, the related Mortgage File, including a copy of
the Assignment of Mortgage, pertaining to each Mortgage Loan, or (b) made the
related Mortgage File available to the Purchaser for examination at the Seller's
offices or such other location as shall otherwise be agreed upon by the
Purchaser and the Seller. The fact that the Purchaser or its designee has
conducted or has failed to conduct any partial or complete examination of the
Mortgage Files shall not affect the Purchaser's (or any of its successor's)
rights to demand repurchase, substitution or other relief as provided herein.

SECTION 6. CONVEYANCE FROM SELLER TO PURCHASER.

      SUBSECTION 6.01. POSSESSION OF SERVICING FILES.

      The Servicing Files relating to any Mortgage Loans purchased by Purchaser
hereunder or pursuant to a duly executed Commitment Letter shall be retained by
the Seller in accordance with the terms of the Commercial Servicing Agreement
and, as provided therein, shall be appropriately identified in the Seller's
computer system and/or books and records, as appropriate, to clearly reflect the
sale of the related Mortgage Loan to the Purchaser.


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<PAGE>

      SUBSECTION 6.02. BOOKS AND RECORDS.

      Record title to each Mortgage Loan as of the applicable Closing Date shall
be in the name of the Seller or the Purchaser or one or more of its designees,
as the Purchaser shall select. Notwithstanding the foregoing, each Mortgage and
related Mortgage Note shall be possessed solely by the Purchaser or the
appropriate designee of the Purchaser, as the case may be. All rights arising
out of the Mortgage Loans including, but not limited to, all funds received by
the Seller after the applicable Cut-off Date on or in connection with a Mortgage
Loan shall be vested in the Purchaser or one or more of its designees; provided,
however, that all funds received on or in connection with a Mortgage Loan shall
be received and held by the Seller in trust for the benefit of the Purchaser or
its designee, as the case may be, as the owner of the Mortgage Loans pursuant to
the terms of this Agreement.

      The sale of each Mortgage Loan shall be reflected on the Seller's balance
sheet and other financial statements as a sale of assets by the Seller.

      SUBSECTION 6.03. DELIVERY OF MORTGAGE LOAN DOCUMENTS.

      On or prior to each Closing Date, the Seller shall deliver and release to
the Purchaser or its designee on the Closing Date the Mortgage Loan Documents
with respect to each Mortgage Loan sold to the Purchaser and set forth on the
Mortgage Loan Schedule, except as otherwise provided in the Commercial Servicing
Agreement.

      The Seller shall forward to the Purchaser or its designee original
documents evidencing an assumption, modification, consolidation, conversion or
extension of any Mortgage Loan entered into in accordance with the Commercial
Servicing Agreement within thirty (30) days of their execution, provided,
however, that the Seller shall provide the Purchaser or its designee with a
certified true copy of any such document submitted for recordation within thirty
(30) days of its execution, and shall promptly provide the original of any
document submitted for recordation or a copy of such document certified by the
appropriate public recording office to be a true and complete copy of the
original within ninety (90) days of its submission for recordation (provided,
that with respect to assignments of the Mortgages reflecting the assignment from
the Seller to the Purchaser, one final assignment shall be executed by Seller in
blanket non-recordable form, and no other forms of assignment of such Mortgages
shall be executed or recorded unless and until the Purchaser shall request
execution of individual Assignments of Mortgages pursuant to and in accordance
with Section 25 hereof).

      In the event that such original or copy of any document submitted for
recordation to the appropriate public recording office is not so delivered to
the Purchaser or its designee within 90 days following the submission for
recordation, and in the event that the Seller does not cure such failure within
30 days of discovery or receipt of written notification of such failure from the
Purchaser, the related Mortgage Loan shall, upon the request of the Purchaser,
be repurchased by the Seller at the price and in the manner specified in
Subsection 8.03. The foregoing repurchase obligation shall not


                                      11
<PAGE>

apply in the event that the Seller cannot deliver, or cause to be delivered,
such original or copy of any document submitted for recordation to the
appropriate public recording office within the specified period due to a delay
caused by the recording office in the applicable jurisdiction; provided that the
Seller shall instead deliver, or cause to be delivered, a recording receipt of
such recording office or, if such recording receipt is not available, an
officer's certificate of a servicing officer of the Seller, confirming that such
documents have been accepted for recording. Notwithstanding anything herein to
the contrary, under the circumstances described in the preceding sentence, the
Seller shall continue to make all reasonable efforts to obtain the original of
any document submitted for recordation to the appropriate public recording
office.

      The Seller shall pay all initial recording fees, if any, for the
Assignments of Mortgage and any other fees or costs in transferring all original
documents to the Purchaser or its designee. The Purchaser or its designee shall
be responsible for recording the Assignments of Mortgage and shall be reimbursed
by the Seller for the reasonable costs associated therewith pursuant to the
preceding sentence.

SECTION 7. SERVICING OF THE MORTGAGE LOANS.

      The Mortgage Loans have been sold by the Seller to the Purchaser on a
servicing retained basis.

      The Seller will service the Mortgage Loans pursuant to and in accordance
with the terms and conditions contained in the Commercial Servicing Agreement.
The Purchaser and the Seller shall execute the Commercial Servicing Agreement on
or before the Initial Closing Date in the form attached hereto as Exhibit B.

      Pursuant to the Commercial Servicing Agreement, the Seller shall begin
servicing the Mortgage Loans on behalf of the Purchaser and shall be entitled to
the Servicing Fee and any Ancillary Income with respect to such Mortgage Loans
from the Closing Date with respect to the sale and purchase thereof until the
termination of the Commercial Servicing Agreement with respect to any of the
Mortgage Loans as set forth in the Commercial Servicing Agreement. The Seller
shall conduct such servicing in accordance with the terms of the Commercial
Servicing Agreement.

SECTION 8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER REMEDIES FOR
           BREACH.

      SUBSECTION 8.01. REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER.

      The Seller represents, warrants and covenants to the Purchaser that as of
the date hereof and as of the Closing Date:


                                      12
<PAGE>

      (a)   DUE ORGANIZATION AND AUTHORITY; ENFORCEABILITY. The Seller is a
            stock savings bank duly organized, validly existing and in good
            standing under the laws of the United States and has all licenses
            necessary to carry on its business as now being conducted and is
            licensed, qualified and in good standing in each state wherein it
            owns or leases any material properties or where a Mortgaged Property
            is located, if the laws of such state require licensing or
            qualification in order to conduct business of the type conducted by
            the Seller, and in any event the Seller is in compliance with the
            laws of any such state to the extent necessary to ensure the
            enforceability of the related Mortgage Loan in accordance with the
            terms of this Agreement; the Seller has the full corporate power,
            authority and legal right to hold, transfer and convey the Mortgage
            Loans and to execute and deliver this Agreement and to perform its
            obligations hereunder; the execution, delivery and performance of
            this Agreement (including all instruments of transfer to be
            delivered pursuant to this Agreement) by the Seller and the
            consummation of the transactions contemplated hereby have been duly
            and validly authorized; this Agreement and all agreements
            contemplated hereby have been duly executed and delivered and
            constitute the valid, legal, binding and enforceable obligations of
            the Seller subject to bankruptcy laws and other similar laws of
            general application affecting rights of creditors and subject to the
            application of the rules of equity, including those respecting the
            availability of specific performance, none of which will materially
            interfere with the realization of the benefits provided thereunder,
            regardless of whether such enforcement is sought in a proceeding in
            equity or at law; and all requisite corporate action has been taken
            by the Seller to make this Agreement and all agreements contemplated
            hereby valid and binding upon the Seller in accordance with their
            terms;

      (b)   ORDINARY COURSE OF BUSINESS. The consummation of the transactions
            contemplated by this Agreement are in the ordinary course of
            business of the Seller, and the transfer, assignment and conveyance
            of the Mortgage Notes and the Mortgages by the Seller pursuant to
            this Agreement are not subject to the bulk transfer or any similar
            statutory provisions in effect in any applicable jurisdiction;

      (c)   NO CONFLICTS. Neither the execution and delivery of this Agreement,
            the sale of the Mortgage Loans to the Purchaser, the consummation of
            the transactions contemplated hereby, nor the fulfillment of or
            compliance with the terms and conditions of this Agreement, will
            conflict with or result in a breach of any of the terms, conditions
            or provisions of the Seller's charter or bylaws or any legal
            restriction or any agreement or instrument to which the Seller is
            now a party or by which it is bound, or constitute a default or
            result in an acceleration under any of the foregoing, or result in
            the violation of any law, rule, regulation, order, judgment or
            decree to which the Seller or its property is subject, or result in
            the creation or imposition of any lien, charge or encumbrance that
            would have an adverse effect upon any of its properties pursuant to
            the terms of any mortgage, contract, deed of trust or other
            instrument, or impair the ability of the Purchaser to realize on the


                                      13
<PAGE>

            Mortgage Loans, impair the value of the Mortgage Loans, impair the
            ability of the Purchaser to realize the full amount of any mortgage
            insurance benefits accruing pursuant to this Agreement or impair the
            ability of the Seller to perform its obligations hereunder;

      (d)   ABILITY TO PERFORM: SOLVENCY. The Seller does not believe, nor does
            it have any reason or cause to believe, that it cannot perform each
            and every covenant contained in this Agreement. The Seller is
            solvent and the sale of the Mortgage Loans will not cause the Seller
            to become insolvent. The sale of the Mortgage Loans is not
            undertaken with the intent to hinder, delay or defraud any of the
            Seller's creditors;

      (e)   NO LITIGATION PENDING. There is no action, suit, proceeding or
            investigation pending or threatened against the Seller, before any
            court, administrative agency or other tribunal asserting the
            invalidity of this Agreement or the Commercial Servicing Agreement,
            seeking to prevent the consummation of any of the transactions
            contemplated by this Agreement or the Commercial Servicing Agreement
            or which, either in any one instance or in the aggregate, could
            result in any material adverse change in the business, operations,
            financial condition, properties or assets of the Seller, or in any
            material impairment of the right or ability of the Seller to carry
            on its business substantially as now conducted, or in any material
            liability on the part of the Seller, or which would draw into
            question the validity of this Agreement or the Commercial Servicing
            Agreement or any Mortgage Loan or of any action taken or to be taken
            in connection with the obligations of the Seller contemplated
            herein, or which would be likely to impair materially the ability of
            the Seller to perform under the terms of this Agreement or the
            Commercial Servicing Agreement;

      (f)   NO CONSENT REQUIRED. No consent, approval, authorization or order
            of, or registration or filing with, or notice to any court or
            governmental agency or body is required for the execution, delivery
            and performance by the Seller of or compliance by the Seller with
            this Agreement or the Mortgage Loans, the delivery of a portion of
            the Mortgage Files to the Purchaser or its designee or the sale of
            the Mortgage Loans or the consummation of the transactions
            contemplated by this Agreement, or if required, such approval has
            been obtained prior to the Closing Date;

      (g)   SELECTION PROCESS. The Mortgage Loans were selected from among the
            outstanding commercial mortgage loans in the Seller's portfolio as
            of the applicable Closing Date as to which the representations and
            warranties set forth in Subsection 8.02 could be made and such
            selection was not made in a manner so as to affect adversely the
            interests of the Purchaser;

      (h)   INITIAL PORTFOLIO. The aggregate characteristics of the Mortgage
            Loans are as set forth under the heading " Business and
            Strategy--Description of Initial Portfolio"


                                      14
<PAGE>

            in the Prospectus relating to the Series A Preferred Shares of the
            Purchaser dated September 30, 1997;

      (i)   NO UNTRUE INFORMATION. Neither this Agreement nor any information,
            statement, tape, diskette, report, form, or other document furnished
            or to be furnished pursuant to this Agreement or in connection with
            the transactions contemplated hereby contains or will contain any
            untrue statement of a material fact or omits or will omit to state a
            material fact necessary to make the statements contained herein or
            therein not misleading; and

      (j)   NO BROKERS. The Seller has not dealt with any broker, investment
            banker, agent or other person that may be entitled to any commission
            or compensation in connection with the sale of the Mortgage Loans.

      SUBSECTION 8.02. REPRESENTATIONS AND WARRANTIES REGARDING INDIVIDUAL
                       MORTGAGE LOANS.

      The Seller hereby represents and warrants to the Purchaser that, as to
each Mortgage Loan, as of the applicable Closing Date for such Mortgage Loans
(or as of such other date as may be specified below), that:

      (a)   MORTGAGE LOANS AS DESCRIBED. The information set forth in the
            Mortgage Loan Schedule is complete, true and correct in all material
            respects as of the date indicated thereon;

      (b)   PAYMENTS CURRENT; STATUS. All payments required to be made up to,
            but not including, the applicable Cut-off Date for the Mortgage Loan
            under the terms of the Mortgage Note have been made and credited. No
            payment required under the Mortgage Loan is delinquent nor has any
            payment under the Mortgage Loan been 30 days or more delinquent more
            than once within the period falling twelve (12) months prior to the
            applicable Cut-off Date. The Mortgage Loan is not, and has not been
            at any time in the preceding twelve months, (i) Classified, (ii) in
            Non-accrual Status or (iii) renegotiated due to the financial
            deterioration of the Mortgagor;

      (c)   NO OUTSTANDING CHARGES. There are no defaults in complying with the
            terms of the Mortgage, and all taxes, governmental assessments,
            insurance premiums, water, sewer and municipal charges, leasehold
            payments or ground rents which previously became due and owing have
            been paid, or an escrow of funds or payment plan has been
            established in an amount sufficient to pay for every such item which
            remains unpaid and which has been assessed but is not yet due and
            payable. The Seller has not advanced funds, or induced, solicited or
            knowingly received any advance of funds by a party other than the
            Mortgagor, directly or indirectly, for the payment of any amount
            required under the Mortgage Loan, except for interest accruing from


                                      15
<PAGE>

            the date of the Mortgage Note or date of disbursement of the
            Mortgage Loan proceeds, whichever is earlier, to the day which
            precedes by one month the Due Date of the first installment of
            principal and interest;

      (d)   ORIGINAL TERMS UNMODIFIED. The terms of the Mortgage Note and
            Mortgage have not been impaired, waived, altered or modified in any
            respect, from the date of origination except as contained in the
            Mortgage Loan Documents and the terms of which are reflected in the
            Mortgage Loan Schedule, if applicable. The substance of any such
            waiver, alteration or modification has been approved by the title
            insurer, if any, to the extent required by the policy, and its terms
            are reflected on the Mortgage Loan Schedule, if applicable. No
            Mortgagor has been released, in whole or in part, except in
            connection with an assumption agreement, which assumption agreement
            is part of the Mortgage Loan File delivered to the Purchaser or its
            designee and the terms of which are reflected in the Mortgage Loan
            Schedule;

      (e)   NO DEFENSES. The Mortgage Loan is not subject to any right of
            rescission, set-off, counterclaim or defense, including without
            limitation the defense of usury, nor will the operation of any of
            the terms of the Mortgage Note or the Mortgage, or the exercise of
            any right thereunder, render either the Mortgage Note or the
            Mortgage unenforceable, in whole or in part and no such right of
            rescission, set-off, counterclaim or defense has been asserted with
            respect thereto, and no Mortgagor is now or was, at the time of
            origination of the related Mortgage Loan, a debtor in any state or
            Federal bankruptcy or insolvency proceeding;

      (f)   HAZARD INSURANCE. Pursuant to the terms of the Mortgage, all
            buildings or other improvements upon the Mortgaged Property are
            insured by a generally acceptable insurer against loss by fire,
            hazards of extended coverage. If required by the Flood Disaster
            Protection Act of 1973, as amended, the Mortgage Loan is covered by
            a flood insurance policy, meeting the requirements of the Federal
            Insurance Administration, as well as all additional requirements set
            forth in the Commercial Servicing Agreement attached hereto as
            Exhibit B. All individual insurance policies contain a standard
            mortgagee clause naming the Seller and its successors and assigns as
            mortgagee, and all premiums thereon have been paid. The Mortgage
            obligates the Mortgagor thereunder to maintain the hazard insurance
            policy at the Mortgagor's cost and expense, and on the Mortgagor's
            failure to do so, authorizes the holder of the Mortgage to obtain
            and maintain such insurance at such Mortgagor's cost and expense,
            and to seek reimbursement therefor from the Mortgagor. Where
            required by state law or regulation, the Mortgagor has been given an
            opportunity to choose the carrier of the required hazard insurance.
            To the best knowledge of the Seller, the hazard insurance policy is
            the valid and binding obligation of the insurer, is in full force
            and effect, and will be in full force and effect and inure to the
            benefit of the Purchaser upon the consummation of the transactions
            contemplated by this Agreement. No action, inaction or event has


                                      16
<PAGE>

            occurred and no state of facts exists or has existed that has
            resulted or could result in the exclusion from, denial of, or
            defense to coverage under any hazard insurance policy (including,
            without limitation, any exclusions, denials or defenses which would
            limit or reduce the availability of the timely payment of the full
            amount of the loss otherwise due thereunder to the insured) whether
            arising out of actions, representations, errors, omissions,
            negligence, or fraud of the Seller, the related Mortgagor or any
            party involved in the application for such coverage, including the
            appraisal, plans and specifications and other exhibits or documents
            submitted therewith to the insurer under such insurance policy, or
            for any other reason under such coverage, but not including the
            failure of such insurer to pay by reason of such insurer's breach of
            such insurance policy or such insurer's financial inability to pay.
            The Seller has not engaged in, and has no knowledge of the
            Mortgagor's having engaged in, any act or omission which would
            impair the coverage of any such policy, the benefits of the
            endorsement provided for herein, or the validity and binding effect
            of either including, without limitation, no unlawful fee,
            commission, kickback or other unlawful compensation or value of any
            kind has been or will be received, retained or realized by any
            attorney, firm or other person or entity, and no such unlawful items
            have been received, retained or realized by the Seller;

      (g)   COMPLIANCE WITH APPLICABLE LAWS. Any and all requirements of any
            federal, state or local law applicable to the Mortgage Loan have
            been complied with in all material respects, the consummation of the
            transactions contemplated hereby will not involve the violation of
            any such laws or regulations, and the Seller shall maintain in its
            possession, available for the Purchaser's inspection, and shall
            deliver to the Purchaser upon demand, evidence of compliance with
            all such requirements;

      (h)   NO SATISFACTION OF MORTGAGE. The Mortgage has not been satisfied,
            canceled, subordinated or rescinded, in whole or in part, and the
            Mortgaged Property has not been released from the lien of the
            Mortgage, in whole or in part, nor has any instrument been executed
            that would effect any such release, cancellation, subordination or
            rescission. Neither the Seller, the Servicer nor any other Person
            has waived the performance by the Mortgagor of any action, if the
            Mortgagor's failure to perform such action would cause the Mortgage
            Loan to be in default, nor has the Seller, the Servicer nor any
            other Person waived any default resulting from any action or
            inaction by the Mortgagor;

      (i)   LOCATION AND TYPE OF MORTGAGED PROPERTY. The Mortgaged Property is
            located in the state identified in the Mortgage Loan Schedule and
            consists of a real property improved by a commercial or multi-family
            (greater than four residential units) facility erected thereon.

      (j)   VALID FIRST LIEN. The Mortgage is a valid, subsisting, enforceable
            and perfected first lien on the Mortgaged Property, including all
            buildings, improvements and fixtures


                                      17
<PAGE>

            on the Mortgaged Property and/or all installations and mechanical,
            electrical, plumbing, heating and air conditioning systems located
            in or annexed to such buildings, and all additions, alterations and
            replacements made at any time with respect to the foregoing as set
            forth in each Mortgage. The lien of the Mortgage is subject only to:

            (1)   the lien of current real property taxes and assessments not
                  yet due and payable;

            (2)   covenants, conditions and restrictions, rights of way,
                  easements and other matters of the public record as of the
                  date of recording acceptable to prudent mortgage lending
                  institutions generally and specifically referred to in the
                  lender's title insurance policy delivered to the originator of
                  the Mortgage Loan and (a) specifically referred to or
                  otherwise considered in the appraisal made for the originator
                  of the Mortgage Loan or (b) which do not adversely affect the
                  Appraised Value of the Mortgaged Property set forth in such
                  appraisal; and

            (3)   other matters to which like properties are commonly subject
                  which do not materially interfere with the benefits of the
                  security intended to be provided by the Mortgage or the use,
                  enjoyment, value or marketability of the related Mortgaged
                  Property.

            Any security agreement, chattel mortgage or equivalent document
            related to and delivered in connection with the Mortgage Loan
            establishes and creates a valid, subsisting, enforceable and
            perfected first lien and first priority security interest on the
            property described therein and the Seller has full right to sell and
            assign the same to the Purchaser. The Mortgaged Property was not, as
            of the date of origination of the Mortgage Loan, subject to a
            mortgage, deed of trust, deed to secure debt or other security
            instrument creating a lien subordinate to the lien of the Mortgage
            (except any such subordinate loan which was created in connection
            with the origination of the related Mortgage Loan details of which
            are contained in the related Mortgage File);

      (k)   VALIDITY OF MORTGAGE DOCUMENTS. The Mortgage Note and the Mortgage
            and any other agreement executed and delivered by a Mortgagor in
            connection with a Mortgage Loan are genuine, and each is the legal,
            valid and binding obligation of the maker thereof enforceable in
            accordance with its terms. To the best knowledge of the Seller, all
            parties to the Mortgage Note, the Mortgage and any other such
            related agreement had legal capacity to enter into the Mortgage Loan
            and to execute and deliver the Mortgage Note, the Mortgage and any
            such agreement, and the Mortgage Note, the Mortgage and any other
            such related agreement have been duly and properly executed by such
            parties. To the best knowledge of the Seller, no


                                      18
<PAGE>

            fraud, error, omission, misrepresentation, negligence or similar
            occurrence with respect to a Mortgage Loan has taken place on the
            part of any Person, including without limitation, the Mortgagor, any
            appraiser, any builder or developer, or any other party involved in
            the origination of the Mortgage Loan;

      (l)   FULL DISBURSEMENT OF PROCEEDS. The Mortgage Loan has been closed and
            the proceeds of the Mortgage Loan have been fully disbursed and
            there is no requirement for future advances thereunder, and any and
            all requirements as to completion of any on-site or off-site
            improvement and as to disbursements of any escrow funds therefor
            have been complied with. All costs, fees and expenses incurred in
            making or closing the Mortgage Loan and the recording of the
            Mortgage were paid, and the Mortgagor is not entitled to any refund
            of any amounts paid or due under the Mortgage Note or Mortgage;

      (m)   OWNERSHIP. The Seller or its Affiliate is the sole owner of record
            and holder of the Mortgage Loan and the indebtedness evidenced by
            each Mortgage Note, except for the assignments of mortgage which
            have been sent for recording, and upon recordation the Purchaser
            will be the sole owner of record and holder of each Mortgage and the
            indebtedness evidenced by each Mortgage Note, and upon the sale of
            the Mortgage Loans to the Purchaser, the Seller will retain the
            Mortgage Files or any part thereof with respect thereto not
            delivered to the Purchaser or its designee in trust only for the
            purpose of servicing and supervising the servicing of each Mortgage
            Loan. The Mortgage Loan is not assigned or pledged, and the Seller
            has good, indefeasible and marketable title thereto, and has full
            right to transfer and sell the Mortgage Loan to the Purchaser free
            and clear of any encumbrance, equity, participation interest, lien,
            pledge, charge, claim or security interest, and has full right and
            authority subject to no interest or participation of, or agreement
            with, any other party, to sell and assign each Mortgage Loan
            pursuant to this Agreement and following the sale of each Mortgage
            Loan, the Purchaser will own such Mortgage Loan free and clear of
            any encumbrance, equity, participation interest, lien, pledge,
            charge, claim or security interest except as created by Purchaser.
            The Seller intends to relinquish all rights to possess, control and
            monitor the Mortgage Loan, except indirectly for purposes of
            servicing the Mortgage Loan as set forth in the Commercial Servicing
            Agreement. After the Closing Date, the Seller will have no right to
            modify or alter the terms of the sale of the Mortgage Loan and the
            Seller will have no obligation or right to repurchase the Mortgage
            Loan or substitute another Mortgage Loan, except as provided in this
            Agreement;

      (n)   DOING BUSINESS. All parties which have had any interest in the
            Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise,
            are (or, during the period in which they held and disposed of such
            interest, were) (1) in compliance with any and all applicable
            licensing requirements of the laws of the state wherein the
            Mortgaged Property is located, and (2) either (i) organized under
            the laws of such state, or (ii)


                                      19
<PAGE>

            qualified to do business in such state, or (iii) a federal savings
            and loan association, a savings bank or a national bank having a
            principal office in such state, or (3) not doing business in such
            state;

      (o)   LTV. The original LTV of each Mortgage Loan was not more than 80%;

      (p)   TITLE INSURANCE. The Mortgage Loan is covered by an ALTA lender's
            title insurance policy or other form of policy or insurance and each
            such title insurance policy is issued by a title insurer qualified
            to do business in the jurisdiction where the Mortgaged Property is
            located, insuring the Seller, its successors and assigns, as to the
            first priority lien of the Mortgage in the original principal amount
            of the Mortgage Loan, subject only to the exceptions contained in
            clauses (1), (2) and (3) of paragraph (j) of this Subsection 8.02,
            and against any loss by reason of the invalidity or unenforceability
            of the lien resulting from the provisions of the Mortgage providing
            for adjustment to the Mortgage Interest Rate and Monthly Payment.
            Where required by state law or regulation, the Mortgagor has been
            given the opportunity to choose the carrier of the required mortgage
            title insurance. Additionally, such lender's title insurance policy
            affirmatively insures ingress and egress, and against encroachments
            by or upon the Mortgaged Property or any interest therein. The
            Seller, its successor and assigns, are the sole insurers of such
            lender's title insurance policy, and such lender's title insurance
            policy is valid and remains in full force and effect and will be in
            force and effect upon the consummation of the transactions
            contemplated by this Agreement. No claims have been made under such
            lender's title insurance policy and, neither the Seller nor, to the
            best knowledge of Seller, any other prior holder of the related
            Mortgage has done, by act or omission, anything which would impair
            the coverage of such lender's title insurance policy, including
            without limitation, no unlawful fee, commission, kickback or other
            unlawful compensation or value of any kind has been or will be
            received, retained or realized by any attorney, firm or other person
            or entity, and no such unlawful items have been received, retained
            or realized by the Seller;

      (q)   NO DEFAULTS. There is no default, breach, violation or event which
            would permit acceleration existing under the Mortgage or the
            Mortgage Note and no event which, with the passage of time or with
            notice and the expiration of any grace or cure period, would
            constitute a default, breach, violation or event which would permit
            acceleration, and neither the Seller nor its predecessors have
            waived any default, breach, violation or event which would permit
            acceleration;

      (r)   NO MECHANICS' LIENS. With respect to each Mortgage Loan, to the best
            knowledge of the Seller, there are no mechanics' or similar liens or
            claims which have been filed for work, labor or material (and no
            rights are outstanding that under law could


                                      20
<PAGE>

            give rise to such liens) affecting the Mortgaged Property which are
            or may be liens prior to, or equal or coordinate with, the lien of
            the related Mortgage;

      (s)   LOCATION OF IMPROVEMENTS; NO ENCROACHMENTS. With respect to each
            Mortgage Loan, to the best knowledge of the Seller, all improvements
            which were considered in determining the Appraised Value of the
            Mortgaged Property lay wholly within the boundaries and building
            restriction lines of the Mortgaged Property, and no improvements on
            adjoining properties encroach upon the Mortgaged Property. To the
            best knowledge of Seller, no improvement located on or being part of
            the Mortgaged Property is in violation of any applicable zoning law
            or regulation;

      (t)   ORIGINATION; PAYMENT TERMS. The Mortgage Loan was originated by a
            savings and loan association, a savings bank, a commercial bank,
            credit union, insurance company or similar institution which is
            supervised and examined by a federal or state authority. To the best
            knowledge of the Seller, the documents, instruments and agreements
            submitted for loan underwriting were not falsified and contain no
            untrue statement of material fact or omit to state a material fact
            required to be stated therein or necessary to make the information
            and statements therein not misleading. Principal payments on the
            Mortgage Loan commenced no more than sixty (60) days after funds
            were disbursed in connection with the Mortgage Loan. The Mortgage
            Interest Rate for each Mortgage Loan are as set forth on the
            applicable Mortgage Loan Schedule. The Mortgage Note is payable each
            month in equal monthly installments of principal and interest, which
            installments of interest are subject to change if the Mortgage Loan
            is an Variable Rate Mortgage Loan due to the adjustments to the
            Mortgage Interest Rate on each Interest Rate Adjustment Date, with
            interest calculated and payable in arrears, sufficient to amortize
            the Mortgage Loan fully by the stated maturity date, over an
            original term of not more than thirty years from commencement of
            amortization.

      (u)   CUSTOMARY PROVISIONS. The Mortgage contains customary and
            enforceable provisions such as to render the rights and remedies of
            the holder thereof adequate for the realization against the
            Mortgaged Property of the benefits of the security provided thereby,
            including, (i) in the case of a Mortgage designated as a deed of
            trust, by trustee's sale, and (ii) otherwise by judicial
            foreclosure. For Mortgage Loans secured by Mortgage Property in
            California, there is no homestead or other exemption available to a
            Mortgagor which would interfere with the right to sell the Mortgaged
            Property at a trustee's sale or the right to foreclose the Mortgage,
            subject to applicable federal and state laws and judicial precedent
            with respect to bankruptcy and right of redemption or similar law;

      (v)   CONFORMANCE WITH UNDERWRITING STANDARDS. The Mortgage Loan was
            underwritten in accordance with the underwriting standards of the
            Seller or one of its predecessors in interest in effect at the time
            the Mortgage Loan was originated. The


                                      21
<PAGE>

            Mortgage Note and Mortgage are on forms acceptable to the Purchaser,
            in the Purchaser's sole discretion, as evidenced by the Purchaser's
            purchase of the related Mortgage Loans, and, the Seller has not made
            any representations to a Mortgagor that are inconsistent with the
            Mortgage and the Mortgage Note;

      (w)   OCCUPANCY OF THE MORTGAGED PROPERTY. As of the Closing Date, to the
            best of Seller's knowledge, the Mortgaged Property is lawfully
            occupied under applicable law. To the best knowledge of Seller, all
            inspections, licenses and certificates required to be made or issued
            with respect to all occupied portions of the Mortgaged Property and,
            with respect to the use and occupancy of the same, including but not
            limited to certificates of occupancy and fire underwriting
            certificates, have been made or obtained from the appropriate
            authorities;

      (x)   NO ADDITIONAL COLLATERAL. The Mortgage Note is not and has not been
            secured by any collateral except the lien of the corresponding
            Mortgage and the security interest of any applicable security
            agreement or chattel mortgage referred to in clause (j) above;

      (y)   DEEDS OF TRUST. In the event the Mortgage constitutes a deed of
            trust, a trustee, authorized and duly qualified under applicable law
            to serve as such, has been properly designated and currently so
            serves and is named in the Mortgage, and no fees or expenses are or
            will become payable by the Purchaser to the trustee under the deed
            of trust, except in connection with a trustee's sale after default
            by the Mortgagor;

      (z)   VALUE AND MARKETABILITY. The Seller has no actual knowledge of any
            circumstances or conditions with respect to the Mortgage, the
            Mortgaged Property, the Mortgagor, the Mortgage File or the
            Mortgagor's credit standing that can reasonably be expected to cause
            the Mortgage Loan to become delinquent, or adversely affect the
            value or marketability of the Mortgage Loan;

      (aa)  DELIVERY OF MORTGAGE DOCUMENTS. The Mortgage Note, the Mortgage, the
            Assignment of Mortgage and any other Mortgage Loan Documents for
            each Mortgage Loan have been delivered to the Purchaser or its
            designee. The Seller is in possession of a complete, true and
            accurate Mortgage File in compliance with Exhibit A hereto, except
            for such documents the originals of which have been delivered to the
            Purchaser or its designee;

      (bb)  [Reserved]

      (cc)  TRANSFER OF MORTGAGE LOANS. The Assignment of Mortgage or a blanket
            assignment for all of the Mortgage Loans is in recordable form and
            is acceptable for recording under the laws of the jurisdiction in
            which the Mortgaged Property is located;


                                      22
<PAGE>

      (dd)  ASSUMABILITY. Either (i) the Mortgage Loan Documents provide that a
            related Mortgage Loan may only be assumed if the party assuming such
            Mortgage Loan meets certain credit requirements stated in the
            Mortgage Loan Documents, or (ii) the Mortgage Note with respect to
            such Mortgage Loan contains a "due-on-sale" provision which prevents
            the assumption of the Mortgage Loan by a proposed transferee and
            accelerates the payment of the outstanding principal balance of such
            Mortgage Loan;

      (ee)  NO BUYDOWN PROVISIONS; NO GRADUATED PAYMENTS OR CONTINGENT
            INTERESTS. The Mortgage Loan does not contain provisions pursuant to
            which Monthly Payments are paid or partially paid with funds
            deposited in any separate account established by the Seller, the
            Mortgagor, or anyone on behalf of the Mortgagor, or paid by any
            source other than the Mortgagor nor does it contain any other
            similar provisions which may constitute a "buydown" provision. The
            Mortgage Loan is not a graduated payment mortgage loan and the
            Mortgage Loan does not have a shared appreciation or other
            contingent interest feature;

      (ff)  [Reserved]

      (gg)  MORTGAGED PROPERTY UNDAMAGED; NO CONDEMNATION PROCEEDINGS. There is
            no proceeding pending or, to the best knowledge of Seller,
            threatened for the total or partial condemnation of the Mortgaged
            Property. The Mortgaged Property is undamaged by waste, fire,
            earthquake or earth movement, windstorm, flood, tornado or other
            casualty so as to affect adversely the value of the Mortgaged
            Property as security for the Mortgage Loan or the use for which the
            premises were intended and each Mortgaged Property is in good
            repair;

      (hh)  COLLECTION PRACTICES; ESCROW DEPOSITS; INTEREST RATE ADJUSTMENTS.
            The origination and collection practices used by the Seller with
            respect to the Mortgage Loan have been in all material respects in
            compliance with Accepted Servicing Practices, applicable laws and
            regulations, and have been in all material respects legal and
            proper. With respect to escrow deposits and Escrow Payments, all
            such payments are in the possession of, or under the control of, the
            Seller and there exist no deficiencies in connection therewith for
            which customary arrangements for repayment thereof have not been
            made. All Escrow Payments have been collected in full compliance
            with state and federal law and the provisions of the related
            Mortgage Note and Mortgage. An escrow of funds is not prohibited by
            applicable law and has been established in an amount sufficient to
            pay for every item that remains unpaid and has been assessed but is
            not yet due and payable if required under the Mortgage Loan. No
            escrow deposits or Escrow Payments or other charges or payments due
            the Seller have been capitalized under the Mortgage or the Mortgage
            Note. All Mortgage Interest Rate adjustments to the Monthly Payment,
            if the Mortgage Loan is an Variable Rate Mortgage Loan, have been
            made in strict


                                      23
<PAGE>

            compliance with state and federal law and the terms of the related
            Mortgage and Mortgage Note on the related Interest Rate Adjustment
            Date. With respect to each Variable Rate Mortgage Loan, the Mortgage
            Interest Rate adjusts monthly, semi-annually or annually as set
            forth in the Mortgage Note. If, pursuant to the terms of the
            Mortgage Note, another index was selected for determining the
            Mortgage Interest Rate, the same index was used with respect to each
            Mortgage Note which required a new index to be selected, and such
            selection did not conflict with the terms of the related Mortgage
            Note. The Seller executed and delivered any and all notices required
            under applicable law and the terms of the related Mortgage Note and
            Mortgage regarding the Mortgage Interest Rate and the Monthly
            Payment adjustments. Any interest required to be paid pursuant to
            state, federal and local law has been properly paid and credited;

      (ii)  OTHER INSURANCE POLICIES. In connection with the placement of any
            hazard insurance, no commission, fee, or other compensation has been
            or will be received by the Seller or by any officer, director, or
            employee of the Seller or any designee of the Seller or any
            corporation in which the Seller or any officer, director, or
            employee had a financial interest at the time of placement of such
            insurance;

      (jj)  NO VIOLATION OF ENVIRONMENTAL LAWS. To the best knowledge of Seller,
            there is no pending action or proceeding directly involving the
            Mortgaged Property in which compliance with any environmental law,
            rule or regulation is an issue, there is no violation of any
            environmental law, rule or regulation with respect to the Mortgaged
            Property, and nothing further remains to be done to satisfy in full
            all requirements of each such law, rule or regulation constituting a
            prerequisite to use and enjoyment of said property;

      (kk)  [Reserved]

      (ll)  APPRAISAL. The Mortgage File contains an appraisal of the related
            Mortgaged Property signed prior to the approval of the Mortgage Loan
            by a Qualified Appraiser who had no interest, direct or indirect in
            the Mortgaged Property or in any loan made on the security thereof,
            and whose compensation is not affected by the approval or
            disapproval of the Mortgage Loan and, if applicable on the date the
            Mortgage Loan was originated, the appraisal and appraiser both
            satisfy the requirements of Title XI of the Federal Institutions
            Reform, Recovery, and Enforcement Act of 1989 and the regulations
            promulgated thereunder.

      (mm)  [Reserved]

      (nn)  [Reserved]

      (oo)  [Reserved]


                                      24
<PAGE>

      (pp)  [Reserved]

      (qq)  PRIOR SERVICING. Each Mortgage Loan has been serviced in all
            material respects in compliance with Accepted Servicing Practices;
            provided that, in the event of any breach of the representation and
            warranty set forth in this Subsection (qq), the Seller shall not be
            required to repurchase any such Mortgage Loan unless such breach
            had, and continues to have, a material and adverse effect on the
            value of the related Mortgage Loan or the interest of the Purchaser
            therein.

      SUBSECTION 8.03 REMEDIES FOR BREACH OF REPRESENTATIONS AND WARRANTIES.

      It is understood and agreed that the representations and warranties set
forth in Subsections 8.1 and 8.2 shall survive the sale of the Mortgage Loans to
the Purchaser and shall inure to the benefit of the Purchaser, notwithstanding
any restrictive or qualified endorsement on any Mortgage Note or Assignment of
Mortgage or the examination or failure to examine any Mortgage File. Upon
discovery by either the Seller or the Purchaser of a breach of any of the
foregoing representations and warranties which materially and adversely affects
the interests of the Purchaser in the related Mortgage Loan, the party
discovering such breach shall give prompt written notice to the other.

      The Seller, promptly after discovery of a breach of any such
representation or warranty, shall notify the Purchaser of such breach and the
details thereof. Within sixty (60) days of the earlier of (i) notice by the
Seller pursuant to the immediately preceding sentence or (ii) notice by the
Purchaser to the Seller of any breach of a representation or warranty with
respect to a Mortgage Loan, the Seller shall use its best efforts promptly to
cure such breach in all material respects. If such breach can ultimately be
cured but is not reasonably expected to be cured within the 60 day period,
Seller shall have such additional time as is reasonably determined by Purchaser
(not to exceed 120 days) to cure or correct such breach provided Seller has
commenced curing or correcting such breach and is diligently pursuing same. If
such breach cannot be or has not been cured, the Seller shall, upon the
expiration of the cure period described above, at the Purchaser's option and
subject to the provisions of this Subsection 8.3, repurchase such Mortgage Loan
at the Repurchase Price, unless the Seller elects to substitute a Qualified
Substitute Mortgage Loan for such Mortgage Loan pursuant to this Subsection 8.3.
The Seller may, at the Seller's option and provided that the Seller has a
Qualified Substitute Mortgage Loan, rather than repurchase the Mortgage Loan as
provided above, remove such Mortgage Loan (a "Deleted Mortgage Loan") and
substitute in its place a Qualified Substitute Mortgage Loan or Loans. If the
Seller has no Qualified Substitute Mortgage Loan, it shall repurchase the
deficient Mortgage Loan. Any repurchase of a Mortgage Loan or Mortgage Loans
pursuant to the foregoing provisions of this Subsection 8.3 shall be
accomplished by either (a) if the Commercial Servicing Agreement is in effect,
deposit in the Custodial Account of the amount of the Repurchase Price for
payment to the Purchaser on the next scheduled Remittance Date, after deducting
therefrom any amount received in respect of such repurchased Mortgage Loan or
Loans and being held in the Custodial Account for future distribution or (b) if
the Commercial Servicing Agreement is no longer in effect, by direct remittance
of the Repurchase Price to the Purchaser or its designee in accordance with the
Purchaser's instructions.


                                      25
<PAGE>

      At the time of repurchase or substitution, the Purchaser and the Seller
shall arrange for the reassignment of the Deleted Mortgage Loan to the Seller
and the delivery to the Seller of any documents held by the Purchaser or its
designee relating to the Deleted Mortgage Loan. In addition, upon any such
repurchase, all funds maintained in the Escrow Account with respect to such
Deleted Mortgage Loan shall be transferred to the Seller. In the event of a
repurchase or substitution, the Seller shall, simultaneously with such
reassignment, give written notice to the Purchaser that such repurchase or
substitution has taken place, amend the related Mortgage Loan Schedule to
reflect the withdrawal of the Deleted Mortgage Loan from this Agreement, and, in
the case of substitution, identify a Qualified Substitute Mortgage Loan and
amend the related Mortgage Loan Schedule to reflect the addition of such
Qualified Substitute Mortgage Loan to this Agreement. In connection with any
such substitution, the Seller shall be deemed to have made as to such Qualified
Substitute Mortgage Loan the representations and warranties set forth in this
Agreement except that all such representations and warranties set forth in this
Agreement shall be deemed made as of the date of such substitution. The Seller
shall effect such substitution by delivering to the Purchaser or its designee
for such Qualified Substitute Mortgage Loan the documents required by Subsection
6.3, with the Mortgage Note endorsed as required by Subsection 6.3. The Seller
shall deposit in the Custodial Account the Monthly Payment, or in the event that
the Commercial Servicing Agreement is no longer in effect, remit directly to the
Purchaser or its designee in accordance with the Purchaser's instructions the
Monthly Payment less the Servicing Fee collected, if any, on such Qualified
Substitute Mortgage Loan or Loans in the month following the date of such
substitution. Monthly Payments collected with respect to Qualified Substitute
Mortgage Loans in the month of substitution shall be retained by the Seller. For
the month of substitution, payments to the Purchaser shall include the Monthly
Payment collected on any Deleted Mortgage Loan in the month of substitution, and
the Seller shall thereafter be entitled to retain all amounts subsequently
received by the Seller in respect of such Deleted Mortgage Loan.

      For any month in which the Seller substitutes a Qualified Substitute
Mortgage Loan for a Deleted Mortgage Loan, the Seller shall determine the amount
(if any) by which the aggregate principal balance of all Qualified Substitute
Mortgage Loans as of the date of substitution is less than the aggregate Stated
Principal Balance of all Deleted Mortgage Loans (after application of principal
payments collected as of the date of substitution). The amount of such shortfall
shall be distributed by the Seller directly to the Purchaser or its designee in
accordance with the Purchaser's instructions within two (2) Business Days of
such substitution.

      In addition to such repurchase or substitution obligation, the Seller
shall indemnify the Purchaser and hold it harmless against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal fees and related
costs, judgments, and other costs and expenses (but excluding any consequential,
indirect damages, special, exemplary or punitive damages ("Special Damages"),
except for such Special Damages which Purchaser is required by law to pay to a
third party, resulting from any claim, demand, defense or assertion based on or
grounded upon, or resulting from, a breach of the Seller representations and
warranties contained in this Agreement. It is understood and agreed that the
obligations of the Seller set forth in this Subsection 8.3 to cure, substitute
for or repurchase a defective Mortgage Loan and to indemnify the Purchaser as
provided in this Subsection 8.3


                                      26
<PAGE>

constitute the sole remedies of the Purchaser respecting a breach of the
foregoing representations and warranties.

      Any cause of action against the Seller relating to or arising out of the
breach of any representations and warranties made in Subsections 8.1 and 8.2
shall accrue as to any Mortgage Loan upon (i) discovery of such breach by the
Purchaser or notice thereof by the Seller to the Purchaser, (ii) failure by the
Seller to cure such breach or repurchase such Mortgage Loan as specified above,
and (iii) demand upon the Seller by the Purchaser for compliance with this
Agreement.

SECTION 9. CLOSING.

      The closing for the purchase and sale of any Mortgage Loans shall take
place on (i) the Initial Closing Date with respect to the purchase and sale of
the Mortgage Loans set forth on the Initial Portfolio Mortgage Loan Schedule and
(ii) on the Closing Date set forth in a duly executed Commitment Letter with
respect to the purchase and sale of Mortgage Loans pursuant thereto. At the
Purchaser's option, any closing shall be either: by telephone, confirmed by
letter or wire as the parties shall agree, or conducted in person, at such place
as the parties shall agree.

      The closing for the purchase and sale of Mortgage Loans to be purchased on
any Closing Date shall be subject to each of the following conditions:

      (a)   all of the representations and warranties of the Seller under this
            Agreement shall be true and correct as of such Closing Date, no
            default shall have occurred and no event shall have occurred which,
            with notice or the passage of time or both, would constitute a
            default under this Agreement;

      (b)   the Purchaser shall have received, or the Purchaser's attorneys
            shall have received in escrow, all closing documents as specified in
            Section 10 of this Agreement, in such forms as are agreed upon and
            acceptable to the Purchaser, duly executed by all signatories other
            than the Purchaser as required pursuant to the terms hereof;

      (c)   the Seller shall have delivered and released to the Purchaser or its
            designee all Mortgage Loan Documents with respect to each Mortgage
            Loan not otherwise required under the Commercial Servicing Agreement
            to be in possession of, and actually in the possession of the Seller
            in its capacity as servicer; and

      (d)   all other terms and conditions of this Agreement shall have been
            complied with.

      Subject to the foregoing conditions, the Purchaser shall pay to the Seller
on the applicable Closing Date the applicable Purchase Price, plus accrued
interest pursuant to Section 4 of this Agreement, by wire transfer of
immediately available funds to the account designated by the Seller.


                                      27
<PAGE>

SECTION 10. CLOSING DOCUMENTS.

      The closing documents for the Mortgage Loans to be purchased on any
Closing Date shall consist of fully executed originals of the following
documents:

      1.    this Agreement (and on all subsequent Closing Dates, a Commitment
            Letter in the form of Exhibit I hereto);

      2.    on the Initial Closing Date only, the Commercial Servicing
            Agreement, dated as of the applicable Cut-off Date, in the form of
            Exhibit B hereto;

      3.    on the Initial Closing Date only, a Custodial Account Letter
            Agreement or a Custodial Account Certification, as applicable, as
            required under the Commercial Servicing Agreement;

      4.    on the Initial Closing Date only, an Escrow Account Letter Agreement
            or an Escrow Account Certification, as applicable, as required under
            the Commercial Servicing Agreement;

      5.    an Officer's Certificate, in the form of Exhibit C hereto, including
            all attachments thereto;

      6.    an Opinion of Counsel of the Seller (who may be an employee of the
            Seller), in the form of Exhibit D hereto;

      7.    a Security Release Certification, in the form of Exhibit F hereto
            executed by any person, as requested by the Purchaser, if any of the
            Mortgage Loans have at any time been subject to any security
            interest, pledge or hypothecation for the benefit of such person;
            and

      8.    a certificate or other evidence of merger or acquisition, if any of
            the Mortgage Loans being purchased were acquired by Seller by merger
            or acquisition.

      The Seller shall bear the risk of loss of any closing documents and
Mortgage Loan documents until such time as they are received by the Purchaser or
its attorneys or designees, as applicable.

SECTION 11. COSTS.

      The Purchaser shall pay any commissions due its salesmen and the legal
fees and expenses of its attorneys. All other costs and expenses incurred in
connection with the transfer and delivery of the Mortgage Loans including
recording fees, fees for recording Assignments of Mortgages, fees


                                      28
<PAGE>

for title policy endorsements and continuations and, if applicable, the Seller's
attorney's fees, shall be paid by the Seller.

SECTION 12. MERGER OR CONSOLIDATION OF THE SELLER.

      The Seller will keep in full effect its existence, rights and franchises
as a corporation under the laws of the state of its incorporation except as
permitted herein, and will obtain and preserve its qualification to do business
as a foreign corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of this Agreement,
or any of the Mortgage Loans and to perform its duties under this Agreement. In
the event Seller or any of its successors or assigns (i) consolidates with or
merges into any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii) transfers or
conveys all or substantially all of its properties and assets to any Person,
then, and in each such case, proper provision shall be made so that the
successors and assigns of Seller assume the obligations of Seller set forth in
this Agreement.

      Any Person into which the Seller may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Seller shall be a party, or any Person succeeding to the business of the Seller,
shall be the successor of the Seller hereunder, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding; provided, however, that the
successor or surviving Person shall have a tangible net worth of at least
$30,000,000.

SECTION 13. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST.

      The sale and delivery on any Closing Date of the Mortgage Loans described
on the applicable Mortgage Loan Schedule is mandatory from and after the date of
the execution of this Agreement or a Commitment Letter, as the case may be, it
being specifically understood and agreed that each Mortgage Loan is unique and
identifiable and that an award of money damages would be insufficient to
compensate the Purchaser for the losses and damages incurred by the Purchaser
(including damages to prospective purchasers of the Mortgage Loans) in the event
of the Seller's failure to deliver (i) each of the Mortgage Loans or (ii) one or
more Qualified Substitute Mortgage Loans or (iii) one or more Mortgage Loans
otherwise acceptable to the Purchaser on or before such Closing Date. The Seller
hereby grants to the Purchaser a lien on and a continuing security interest in
each Mortgage Loan set forth on the Initial Portfolio Mortgage Loan Schedule and
each document and instrument evidencing each such Mortgage Loan to secure the
performance by the Seller of its obligations under this Agreement, and the
Seller agrees that it shall hold such Mortgage Loans in custody for the
Purchaser subject to the Purchaser's (i) right to reject any Mortgage Loan (or
Qualified Substitute Mortgage Loan) under the terms of this Agreement and to
require another Mortgage Loan (or Qualified Substitute Mortgage Loan) to be
substituted therefor, and (ii) obligation to pay the Initial Purchase Price plus
accrued interest as set forth in Section 4 hereof for the Mortgage Loans. All
rights and remedies of the Purchaser under this Agreement are distinct from, and
cumulative with, any other rights or remedies under this Agreement or afforded
by law


                                      29
<PAGE>

or equity and all such rights and remedies may be exercised concurrently,
independently or successively.

SECTION 14. NOTICES.

      All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed, by registered or certified
mail, return receipt requested, or, if by other means, when received by the
other party at the address as follows:

      (i)     if to the Seller:

              People's Bank of California
              5900 Wilshire Boulevard
              Los Angeles, California 90036
              Attention:  Secretary

      (ii)    if to the Purchaser:

              People's Preferred Capital Corporation
              5900 Wilshire Boulevard
              Los Angeles, California 90036
              Attention:  Secretary

or such other address as may hereafter be furnished to the other party by like
notice. Any such demand, notice or communication hereunder shall be deemed to
have been received on the date delivered to or received at the premises of the
addressee (as evidenced, in the case of registered or certified mail, by the
date noted on the return receipt).

SECTION 15. SEVERABILITY CLAUSE.

      Any part, provision, representation or warranty of this Agreement which is
prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall be ineffective, as to such jurisdiction, to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof. If the invalidity of any
part, provision, representation or warranty of this Agreement shall deprive any
party of the economic benefit intended to be conferred by this Agreement, the
parties shall negotiate, in good faith, to develop a structure the economic
effect of which is nearly as possible the same as the economic effect of this
Agreement without regard to such invalidity.


                                       30
<PAGE>

SECTION 16. COUNTERPARTS.

      This Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all such
counterparts shall constitute one and the same instrument.

SECTION 17. GOVERNING LAW.

      This Agreement shall be deemed to have been made in the State of
California. The Agreement shall be construed in accordance with the laws of the
State of California and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with the substantive laws of the
State of California (without regard to conflicts of laws principles), except to
the extent preempted by Federal law.

SECTION 18. INTENTION OF THE PARTIES.

      It is the intention of the parties that the Purchaser is purchasing, and
the Seller is selling the Mortgage Loans and not a debt instrument of the Seller
or another security. Accordingly, the parties hereto each intend to treat the
transaction for Federal income tax purposes as a sale by the Seller, and a
purchase by the Purchaser, of the Mortgage Loans.

SECTION 19. SUCCESSORS AND ASSIGNS; ASSIGNMENT OF PURCHASE AGREEMENT.

      This Agreement shall bind and inure to the benefit of and be enforceable
by the Seller and the Purchaser and the respective permitted successors and
assigns of the Seller and the successors and assigns of the Purchaser. This
Agreement shall not be assigned, pledged or hypothecated by the Seller to a
third party without the consent of the Purchaser. Subject to any applicable
requirement in the Commercial Servicing Agreement, this Agreement may be
assigned, pledged or hypothecated by the Purchaser without the prior consent of
the Seller. If the Purchaser assigns all or any of its rights as Purchaser
hereunder, the assignee of the Purchaser will become the "Purchaser" hereunder
to the extent of such assignment, provided that at no time shall there be more
than fifteen (15) persons having the status of "Purchaser" hereunder. Any
assignment by the Purchaser shall be accompanied by the delivery and execution
of an Assignment and Assumption Agreement (the "Assignment and Assumption
Agreement") substantially in the form attached hereto as Exhibit G. Subject to
any applicable requirement in the Commercial Servicing Agreement, the Servicer
shall be required to remit all amounts required to be remitted to the Purchaser
hereunder to said assignee commencing with the first Remittance Date falling
after receipt of said copy of the related Assignment and Assumption Agreement
provided that the Seller receives said copy no later than three (3) Business
Days immediately prior to the first day of the month of the related Remittance
Date.


                                      31
<PAGE>

SECTION 20. WAIVERS.

      No term or provision of this Agreement may be waived or modified unless
such waiver or modification is in writing and signed by the party against whom
such waiver or modification is sought to be enforced.

SECTION 21. ENTIRE AGREEMENT; AMENDMENT.

      This Agreement (including the Schedules and Exhibits annexed hereto or
referred to herein) and any Commitment Letter duly executed by the parties
hereto contain the entire agreement between the parties with respect to the
transactions contemplated hereby and supersede all prior agreements, written or
oral, with respect thereto. No amendment, modification or alteration of the
terms or provisions of this Agreement shall be binding unless the same shall be
in writing and duly executed by the authorized representatives of the parties
hereto, provided, however, that as long as any Series A Preferred Shares remain
outstanding, no material amendment to or modification or alteration of this
Agreement may be entered into or approved by the Purchaser without the approval
of a majority of the Independent Directors.

SECTION 22. GENERAL INTERPRETIVE PRINCIPLES.

      For purposes of this Agreement, except as otherwise expressly provided or
unless the context otherwise requires:

      (a) the terms defined in this Agreement have the meanings assigned to them
in this Agreement and include the plural as well as the singular, and the use of
any gender herein shall be deemed to include the other gender;

      (b) accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles;

      (c) references herein to "Articles," "Sections," "Subsections,"
"Paragraphs," and other subdivisions without reference to a document are to
designated Articles, Sections, Subsections, Paragraphs and other subdivisions of
this Agreement;

      (d) reference to a Subsection without further reference to a Section is a
reference to such Subsection as contained in the same Section in which the
reference appears, and this rule shall also apply to Paragraphs and other
subdivisions;

      (e) the words "herein," "hereof," "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular provision;
and

      (f) the term "include" or "including" shall mean without limitation by
reason of enumeration.


                                      32
<PAGE>

SECTION 23. REPRODUCTION OF DOCUMENTS.

      This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents received by any party at any closing, and (c) financial
statements, certificates and other information previously or hereafter
furnished, may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process but solely for the
purposes set forth in this Agreement. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.

SECTION 24. FURTHER AGREEMENTS.

      The Seller and the Purchaser each agree to execute and deliver to the
other such reasonable and appropriate additional documents, instruments or
agreements as may be necessary or appropriate to effectuate the purposes of this
Agreement.

SECTION 25. RECORDATION OF ASSIGNMENTS OF MORTGAGE.

      The Seller shall execute a blanket assignment of the Mortgages underlying
each Mortgage Loan sold to the Purchaser pursuant to this Agreement or a duly
executed Commitment Letter. Upon the written request of Purchaser (whether due
to the proposed sale of any Mortgage Loan by Purchaser or otherwise), or to the
extent deemed necessary by the servicer in connection with servicing a Mortgage
Loan pursuant to the terms of the Commercial Servicing Agreement, the Seller
shall promptly prepare and execute individual Assignments of Mortgage to be
recorded in all appropriate public offices for real property records in all the
counties or other comparable jurisdictions in which any or all of the Mortgaged
Properties are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Purchaser or Purchaser's
designee, but in any event, at the Seller's expense for a single recordation
with respect to each Assignment of Mortgage.


                                      33
<PAGE>

      IN WITNESS WHEREOF, the parties have executed this Agreement under seal as
of the date and year first above written.

                                    PEOPLE'S PREFERRED CAPITAL
                                    CORPORATION


                                    By:     /s/ J. MICHAEL HOLMES
                                            -------------------------
                                    Name:   J. MICHAEL HOLMES
                                    Title:  EXECUTIVE VICE PRESIDENT/
                                            CHIEF FINANCIAL OFFICER


                                    PEOPLE'S BANK OF CALIFORNIA


                                    By:     /s/ J. MICHAEL HOLMES
                                            -------------------------
                                    Name:   J. MICHAEL HOLMES
                                    Title:  EXECUTIVE VICE PRESIDENT/
                                            CHIEF FINANCIAL OFFICER


                                    By:     /s/ WILLIAM W. FLADER
                                            -------------------------
                                    Name:   WILLIAM W. FLADER
                                    Title:  EXECUTIVE VICE PRESIDENT


                                      34
<PAGE>

                                    EXHIBIT A

                         CONTENTS OF EACH MORTGAGE FILE

      With respect to each Mortgage Loan, the Mortgage File shall include each
of the following items (to the extent such items are applicable and exist within
the Seller's Mortgage File), which shall be available for inspection by the
Purchaser and any prospective Purchaser, and which shall be delivered to the
Purchaser or its designee pursuant to Section 6.03 of the Mortgage Loan Purchase
and Warranties Agreement to which this Exhibit is attached (the "Agreement"):

      1.    The original Mortgage Note (or, with respect to the Mortgage Loan
            listed on Schedule I hereto, a lost note affidavit, executed by an
            officer of the Seller, with a copy of the original note attached
            thereto) bearing all intervening endorsements, endorsed "Pay to the
            order of ____________ without recourse" (except as otherwise
            provided in the Agreement) and signed in the name of the Seller by
            an authorized officer. To the extent that there is no room on the
            face of the Mortgage Notes for endorsements, the endorsement may be
            contained on an allonge, if state law so allows. If the Mortgage
            Loan was acquired by the Seller in a merger, the endorsement must be
            by "[Seller], successor by merger to [name of predecessor]". If the
            Mortgage Loan was acquired or originated by the Seller while doing
            business under another name, the endorsement must be by "[Seller],
            formerly known as [previous name]".

      2.    The original of any guarantee executed in connection with the
            Mortgage Note.

      3.    The original Mortgage, with evidence of recording thereon. If in
            connection with any Mortgage Loan, the Seller cannot deliver or
            cause to be delivered the original Mortgage with evidence of
            recording thereon on or prior to the Closing Date because of a delay
            caused by the public recording office where such Mortgage has been
            delivered for recordation, a photocopy of such Mortgage certified by
            the Seller to be true and correct will be delivered; if such
            Mortgage has been lost or if such public recording office retains
            the original recorded Mortgage, the Seller shall deliver or cause to
            be delivered to the Purchaser, a photocopy of such Mortgage,
            certified by such public recording office to be a true and complete
            copy of the original recorded Mortgage.

      4.    The originals of all assumption, modification, consolidation or
            extension agreements, if any, with evidence of recording thereon or
            certified copies of such documents if the originals thereof are
            unavailable.

      5.    The original Assignment of Mortgage for each Mortgage Loan or a
            blanket assignment for all Mortgage Loans endorsed and signed in the
            name of the Seller by an authorized officer. If the Mortgage Loan
            was acquired by the Seller in a merger,


                                       A-1
<PAGE>

            the Assignment of Mortgage must be made by "[Seller], successor by
            merger to [name of predecessor]". If the Mortgage Loan was acquired
            or originated by the Seller while doing business under another name,
            the Assignment of Mortgage must be by "[Seller], formerly known as
            [previous name]".

      6.    Originals of all intervening assignments of the Mortgage with
            evidence of recording thereon if such intervening assignment has
            been recorded.

      7.    The original mortgagee policy of title insurance or, in the event
            such original title policy is unavailable, a certified true copy of
            the related policy binder or commitment for title certified to be
            true and complete by the title insurance company.

      8.    Any original security agreement, chattel mortgage or equivalent
            executed in connection with the Mortgage.

      9.    The original hazard insurance policy and, if required by law, flood
            insurance policy, in accordance with Section 8.02(f) of the
            Agreement.

      10.   Mortgage Loan closing statement.

      11.   Credit report on the Mortgagor.

      12.   All appraisal and inspection reports, if applicable.

      13.   Photograph of the Mortgaged Property.

      14.   To the extent applicable, copy of each instrument necessary to
            complete identification of any exception set forth in the exception
            schedule in the title policy, i.e., map or plat, restrictions,
            easements, sewer agreements, home association declarations, etc.

      15.   All required disclosure statements.

      16.   Sales contract, if any.

      17.   Tax receipts, insurance premium receipts, ledger sheets, insurance
            claim files, correspondence, current and historical computerized
            data files, and all other processing, underwriting and closing
            papers and records which are customarily contained in a mortgage
            loan file and which are required to document the Mortgage Loan or to
            service the Mortgage Loan.

      18.   Property operating statements in Seller's possession.


                                       A-2
<PAGE>

      19.   Corporate authorization documents and good standing certifications
            in Seller's possession.

      20.   Borrower and key principal financial statements in Seller's
            possession.


                                       A-3
<PAGE>

                                    EXHIBIT B


                                       B-1
<PAGE>

                                    EXHIBIT C

                     FORM OF SELLER'S OFFICER'S CERTIFICATE

      I, _____________, hereby certify that I am the duly elected Executive Vice
President of People's Bank of California, a federal savings bank organized under
the laws of the United States (the "Seller") and further as follows:

      1. Attached hereto as Exhibit 1 is a true, correct and complete copy of
the restated Federal Stock Charter of the Seller which is in full force and
effect on the date hereof and which has been in effect without amendment,
waiver, rescission or modification since

      2. Attached hereto as Exhibit 2 is a true, correct and complete copy of
the bylaws of the Seller which are in effect on the date hereof and which have
been in effect without amendment, waiver, rescission or modification since
_____________.

      3. Attached hereto as Exhibit 3 is an original certificate of good
standing of the Seller issued within ten days of the date hereof, and no event
has occurred since the date thereof which would impair such standing.

      4. Attached hereto as Exhibit 4 is a true, correct and complete copy of
the corporate resolutions of the Board of Directors or Committees thereof of the
Seller authorizing the Seller to execute and deliver each of the Commercial
Mortgage Loan Purchase and Warranties Agreement, dated as of __________, 1997,
by and between People's Preferred Capital Corporation (the "Purchaser") and the
Seller (the "Purchase Agreement"), the Commitment Letter, dated as of _______,
by and between the Purchaser and the Seller [if applicable] and to endorse the
mortgage notes and execute the assignments of mortgages by original or facsimile
signature, and such resolutions are in effect on the date hereof and have been
in effect without amendment, waiver, rescission or modification since

      5. Either (i) no consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Seller of or compliance by the Seller with the Purchase
Agreement [and the Commitment Letter], the sale of the mortgage loans or the
consummation of the transactions contemplated by the Purchase Agreement; or (ii)
any required consent, approval, authorization or order has been obtained by the
Seller.

      6. Neither the consummation of the transactions contemplated by, nor the
fulfillment of the terms of, the Purchase Agreement [or the Commitment Letter]
conflicts or will conflict with or results or will result in a breach of or
constitutes or will constitute a default under the charter or bylaws of the
Seller, the terms of any indenture or other agreement or instrument to which the
Seller is a party or by which it is bound or to which it is subject, or any
statute or order, rule, regulations, writ, injunction or decree of any court,
governmental authority or regulatory body to which the Seller is subject or by
which it is bound.


                                       C-1
<PAGE>

      7. To the best of my knowledge, there is no action, suit, proceeding or
investigation pending or threatened against the Seller which, in my judgment,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties or
assets of the Seller or in any material impairment of the right or ability of
the Seller to carry on its business substantially as now conducted or in any
material liability on the part of the Seller or which would draw into question
the validity of the Purchase Agreement [or the Commitment Letter] or the
mortgage loans or of any action taken or to be taken in connection with the
transactions contemplated hereby, or which would be likely to impair materially
the ability of the Seller to perform under the terms of the Purchase Agreement
[and the Commitment Letter].

      8. Each person listed on Exhibit 5 attached hereto who, as an officer or
representative of the Seller, signed the Purchase Agreement [and the Commitment
Letter] and any other document delivered prior to or on the date hereof in
connection with any purchase described in the Purchase Agreement was, at the
respective times of such signing and delivery, and is now, a duly elected or
appointed, qualified and acting officer or representative of the Seller, who
holds the office set forth opposite his or her name on Exhibit 5, and the
signatures of such persons appearing on such documents are their genuine
signatures.

      9. The Seller is duly authorized to engage in the transactions described
and contemplated in the Purchase Agreement [and the Commitment Letter].


                                       C-2
<PAGE>

      IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of
the Seller.


Dated:____________, 1997            By:_________________________________
                                    Name:  J. Michael Holmes
      [Seal]                        Title: Executive Vice President


I, William W. Flader, an Executive Vice President of People's Bank of
California, hereby certify that J. Michael Holmes is the duly elected, qualified
and acting Executive Vice President of the Seller and that the signature
appearing above is his genuine signature.

      IN WITNESS WHEREOF, I have hereunto signed my name.


Dated:____________, 1997            By:_________________________________
                                    Name:  William W. Flader
                                    Title: Executive Vice President


                                       C-3
<PAGE>

                                    EXHIBIT 5
                        TO SELLER'S OFFICER'S CERTIFICATE


          Name                       Title                   Signature
-------------------------   ------------------------  ------------------------


                                       C-4
<PAGE>

                                    EXHIBIT D

                    FORM OF OPINION OF COUNSEL TO THE SELLER
                             _________________, 1997

People's Preferred Capital Corporation
5900 Wilshire Boulevard
Los Angeles, California 90036

Dear Sirs:

      You have requested my opinion, as General Counsel to People's Bank of
California (the "Seller"), with respect to certain matters in connection with
the sale by the Seller of the Mortgage Loans pursuant to that certain Commercial
Mortgage Loan Purchase and Warranties Agreement by and between the Seller and
People's Preferred Capital Corporation (the "Purchaser"), dated as of
__________, 1997 (the "Purchase Agreement") which sale is in the form of whole
loans, delivered pursuant to the Purchase Agreement and serviced pursuant to a
Commercial Servicing Agreement, dated as of __________, 1997, by and between the
Seller and the Purchaser (the "Servicing Agreement"). Capitalized terms not
otherwise defined herein have the meanings set forth in the Purchase Agreement
and the Servicing Agreement.

      I have examined the following documents:

      1.    the Purchase Agreement and, if applicable, the Commitment Letter;

      2.    the Servicing Agreement;

      3.    the form of Assignment of Mortgage;

      4.    the form of endorsement of the Mortgage Notes; and

      5.    such other documents, records and papers as I have deemed necessary
            and relevant as a basis for this opinion.

      To the extent I have deemed necessary and proper, I have relied upon the
representations and warranties of the Seller contained in the Purchase
Agreement. I have assumed the authenticity of all documents submitted to me as
originals, the genuineness of all signatures, the legal capacity of natural
persons and the conformity to the originals of all documents.

      Based upon the foregoing, it is my opinion that:


                                       D-1
<PAGE>

      1.    The Seller is a federal savings bank duly organized, validly
            existing and in good standing under the laws of the United States
            and is qualified to transact business in, and is in good standing
            under, the laws of the United States.

      2.    The Seller has the power to engage in the transactions contemplated
            by the Purchase Agreement and, if applicable, the Commitment Letter,
            and all requisite power, authority and legal right to execute and
            deliver the Purchase Agreement and to perform and observe the terms
            and conditions of such agreements.

      3.    The Purchase Agreement has been duly authorized, executed and
            delivered by the Seller and is a legal, valid and binding agreement
            enforceable in accordance with its respective terms against the
            Seller, subject to bankruptcy laws and other similar laws of general
            application affecting rights of creditors and subject to the
            application of the rules of equity, including those respecting the
            availability of specific performance, none of which will materially
            interfere with the realization of the benefits provided thereunder
            or with the Purchaser's ownership of the Mortgage Loans.

      4.    The Seller has been duly authorized to allow certain specified
            officers to execute any and all documents by original signature in
            order to complete the transactions contemplated by the Purchase
            Agreement and by original or facsimile signature in order to execute
            the endorsements to the Mortgage Notes and the Assignments of
            Mortgages, and the original or facsimile signature of the officer of
            the Seller executing the endorsements to the Mortgage Notes and the
            Assignments of Mortgages represents the legal and valid signature of
            said officer of the Seller.

      5.    Either (i) no consent, approval, authorization or order of any court
            or governmental agency or body is required for the execution,
            delivery and performance by the Seller of or compliance by the
            Seller with the Purchase Agreement and the sale of the Mortgage
            Loans or the consummation of the transactions contemplated by the
            Purchase Agreement or (ii) any required consent, approval,
            authorization or order has been obtained by the Seller.

      6.    Neither the consummation of the transactions contemplated by, nor
            the fulfillment of the terms of, the Purchase Agreement conflicts or
            will conflict with or results or will result in a breach of or
            constitutes or will constitute a default under the charter or bylaws
            of the Seller, the terms of any indenture or other agreement or
            instrument to which the Seller is a party or by which it is bound or
            to which it is subject, or violates any statute or order, rule,
            regulations, writ, injunction or decree of any court, governmental
            authority or regulatory body to which the Seller is subject or by
            which it is bound.


                                       D-2
<PAGE>

      7.    There is no action, suit, proceeding or investigation pending or, to
            the best of my knowledge, threatened against the Seller which, in my
            judgment, either in any one instance or in the aggregate, may result
            in any material adverse change in the business, operations,
            financial condition, properties or assets of the Seller or in any
            material impairment of the right or ability of the Seller to carry
            on its business substantially as now conducted or in any material
            liability on the part of the Seller or which would draw into
            question the validity of the Purchase Agreement or the Mortgage
            Loans or of any action taken or to be taken in connection with the
            transactions contemplated thereby, or which would be likely to
            impair materially the ability of the Seller to perform under the
            terms of the Purchase Agreement.

      8.    The sale of each Mortgage Note and Mortgage as and in the manner
            contemplated by the Purchase Agreement is sufficient to fully
            transfer to the Purchaser all right, title and interest of the
            Seller thereto as noteholder and mortgagee.

      I am licensed to practice law in the State of California and express no
opinion as to the laws of any jurisdiction other than the State of California or
the federal banking laws of the United States; accordingly, my opinions extend
only to questions of law of such jurisdictions. I note that certain of the
agreements upon which I express an opinion herein are governed by the laws of a
jurisdiction other than the State of California. I have assumed with your
consent for the purposes of giving these opinions that the law of any state
other than the State of California which may be applied to such agreements is
substantially identical to the laws of the State of California. The opinions
expressed herein are subject to statutory, regulatory and case law developments
after the date hereof.

      This opinion is given to you for your sole benefit, and no other person or
entity is entitled to rely hereon.

                              Very truly yours,


                              --------------------------------
                              Doreen J. Blauschild
                              General Counsel


                                       D-3
<PAGE>

                                    EXHIBIT E


                                                    ______________________, 1997


Federal Home Loan Bank of
San Francisco (the "Association")
600 California Street
San Francisco, California 94108

Attention:
          -------------------------
          -------------------------

      Re: Notice of Sale and Release of Collateral

Dear Sirs:

      This letter serves as notice that People's Bank of California, a banking
corporation, organized pursuant to the laws of the United States (the "Bank")
has committed to sell to People's Preferred Capital Corporation under a
Commercial Mortgage Loan Purchase and Warranties Agreement, dated as of
__________, 1997, certain mortgage loans owned by the Bank. The Bank warrants
that the mortgage loans to be sold to People's Preferred Capital Corporation are
in addition to and beyond any collateral required to secure advances made by the
Association to the Bank.

     The Bank acknowledges that the mortgage loans to be sold to People's
Preferred Capital Corporation shall not be used as additional or substitute
collateral for advances made by the Association. People's Preferred Capital
Corporation understands that the balance of the Bank's mortgage loan portfolio
may be used as collateral or additional collateral for advances made by the
Association, and confirms that it has no interest therein.


                                       E-1
<PAGE>

      Execution of this letter by the Association shall constitute a full and
complete release of any security interest, claim, or lien which the Association
may have against the mortgage loans to be sold to People's Preferred Capital
Corporation.

                                          Very truly yours,


                                          --------------------------------------
                                          By: __________________________________
                                          Name: ________________________________
                                          Title: _______________________________
                                          Date:_________________________________


Acknowledged and approved:

FEDERAL HOME LOAN BANK OF
SAN FRANCISCO

By: _________________________
Name: _______________________
Title: ______________________
Date:________________________


                                       E-2
<PAGE>

                                    EXHIBIT F

                     FORM OF SECURITY RELEASE CERTIFICATION

                         I. RELEASE OF SECURITY INTEREST

      The financial institution named below hereby relinquishes any and all
right, title and interest it may have in all Mortgage Loans to be purchased by
People's Preferred Capital Corporation from People's Bank of California pursuant
to that certain Commercial Mortgage Loan Purchase and Warranties Agreement,
dated as of __________, 1997, and certifies that all notes, mortgages,
assignments and other documents in its possession relating to such Mortgage
Loans have been delivered and released to People's Bank of California or its
designees, as of the date and time of the sale of such Mortgage Loans to
People's Preferred Capital Corporation.


Name and Address of Financial Institution

------------------------------------
               (name)

------------------------------------
             (Address)

By:_________________________________


                          II. CERTIFICATION OF RELEASE

      People's Bank of California hereby certifies to People's Preferred Capital
Corporation that, as of the date and time of the sale of the above-mentioned
Mortgage Loans to People's Preferred Capital Corporation, the security interests
in the Mortgage Loans released by the above-named financial institution comprise
all security interests relating to or affecting any and all such Mortgage Loans.
Peoples's Bank of California warrants that, as of such time, there are and will
be no other security interests affecting any or all of such Mortgage Loans.


                                          ----------------------------------
                                          By: _______________________________
                                          Title: ____________________________
                                          Date:______________________________


                                       F-1
<PAGE>

                                    EXHIBIT G

      FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT, dated _________, between
_______________________, a __________ corporation ("Assignor") and
_______________, a ________________ corporation ("Assignee"):

      For good and valuable consideration the receipt and sufficiency of which
hereby are acknowledged, and of the mutual covenants herein contained, the
parties hereto hereby agree as follows:

      1. The Assignor hereby grants, transfers and assigns to Assignee, as
purchaser, all of the right, title and interest of Assignor with respect to the
mortgage loans listed on Exhibit A attached hereto (the "Mortgage Loans"), and
with respect to such Mortgage Loans, in, to and under (a) that certain
Commercial Mortgage Loan Purchase and Warranties Agreement dated __________,
1997 by and between People's Bank of California (the "Seller") and People's
Preferred Capital Corporation (the "Purchaser") (the "Purchase Agreement"), and
(b) that certain Commercial Servicing Agreement dated as of _______, 1997, by
and between the Purchaser and the Seller ("Servicer") (the "Commercial Servicing
Agreement"; the Commercial Servicing Agreement and the Purchase Agreement are
collectively referred to as the "Agreements").

      2. The Assignor warrants and represents to, and covenants with, the
Assignee that:

            a.    The Assignor is the lawful owner of the Mortgage Loans with
                  the full right to transfer the Mortgage Loans free from any
                  and all claims and encumbrances whatsoever;

            b.    The Assignor has not received notice of, and has no knowledge
                  of, any offsets, counterclaims or other defenses available to
                  the Seller with respect to the Agreements or the Mortgage
                  Loans;

            c.    The Assignor has not waived or agreed to any waiver under, or
                  agreed to any amendment or other modification of, the
                  Agreements. The Assignor has no knowledge of, and has not
                  received notice of, any waivers under or amendments or other
                  modifications of, or assignments of rights or obligations
                  under, the Agreements; and

            d.    Neither the Assignor nor anyone acting on its behalf has
                  offered, transferred, pledged, sold or otherwise disposed of
                  the Mortgage Loans or any interest in the Mortgage Loans, or
                  solicited any offer to buy or accept a transfer, pledge or
                  other disposition of the Mortgage Loans, or any interest in
                  the Mortgage Loans or otherwise approached or negotiated with
                  respect to the Mortgage Loans, or any interest in the Mortgage
                  with any person in any manner, or made any general
                  solicitation by means of general advertising or in any other


                                       G-1
<PAGE>

                  manner, or taken any other action which would constitute a
                  distribution of the Mortgage Loans under the Securities Act of
                  1933, as amended (the "1933 Act") or which would render the
                  disposition of the Mortgage Loans a violation of Section 5 of
                  the 1933 Act or require registration pursuant thereto.

      3. The Assignee warrants and represents to, and covenants with, the
Assignor and the Seller pursuant to the Agreements that:

            a.    The Assignee is a corporation duly organized, validly existing
                  and in good standing under the laws of the jurisdiction of its
                  incorporation, and has all requisite corporate power and
                  authority to acquire, own and purchase the Mortgage Loans;

            b.    The Assignee has full corporate power and authority to
                  execute, deliver and perform under this Assignment and
                  Assumption Agreement, and to consummate the transactions set
                  forth herein. The execution, delivery and performance of the
                  Assignee of this Assignment and Assumption Agreement, and the
                  consummation by it of the transactions contemplated hereby,
                  have been duly authorized by all necessary corporate action of
                  the Assignee. This Assignment and Assumption Agreement has
                  been duly executed and delivered by the Assignee and
                  constitutes the valid and legally binding obligation of the
                  Assignee enforceable against the Assignee in accordance with
                  its respective terms;

            c.    To the best of Assignee's knowledge, no material consent,
                  approval, order or authorization of, or declaration, filing or
                  registration with, any governmental entity is required to be
                  obtained or made by the Assignee in connection with the
                  execution, delivery or performance by the Assignee of this
                  Assignment and Assumption Agreement, or the consummation by it
                  of the transactions contemplated hereby;

            d.    The Assignee agrees to be bound, as Purchaser, by all of the
                  terms, covenants and conditions of the Agreements, the
                  Mortgage Loans, and from and after the date hereof, the
                  Assignee assumes for the benefit of each of the Seller and the
                  Assignor all of the Assignor' s obligations as Purchaser
                  thereunder, including, without limitation, the limitation on
                  assignment set forth in Section 19 of the Purchase Agreement;

            e.    The Assignee understands that the Mortgage Loans have not been
                  registered under the 1933 Act or the securities laws of any
                  state;


                                       G-2
<PAGE>

            f.    The purchase price being paid by the Assignee for the Mortgage
                  Loans is in excess of $250,000 and will be paid by cash
                  remittance of the full purchase price within sixty (60) days
                  of the sale;

            g.    The Assignee is acquiring the Mortgage Loans for investment
                  for its own account only and not for any other person;

            h.    The Assignee considers itself a sophisticated institutional
                  investor having such knowledge and experience in financial and
                  business matters that it is capable of evaluating the merits
                  and risks of investment in the Mortgage Loans;

            I.    The Assignee has been furnished with all information regarding
                  the Mortgage Loans that it has requested from the Assignor or
                  the Seller;

            j.    Neither the Assignee nor anyone acting on its behalf has
                  offered, transferred, pledged, sold or otherwise disposed of
                  the Mortgage Loans or any interest in the Mortgage Loans, or
                  solicited any offer to buy or accept a transfer, pledge or
                  other disposition of the Mortgage Loans or any interest in the
                  Mortgage Loans, or otherwise approached or negotiated with
                  respect to the Mortgage Loans or any interest in the Mortgage
                  Loans with any person in any manner which would constitute a
                  distribution of the Mortgage Loans under the 1933 Act or which
                  would render the disposition of the Mortgage Loans a violation
                  of Section 5 of the 1933 Act or require registration pursuant
                  thereto, nor will it act, nor has it authorized or will it
                  authorize any person to act, in such manner with respect to
                  the Mortgage Loans; and

            k.    Either: (1) the Assignee is not an employee benefit plan
                  ("Plan") within the meaning of section 3(3) of the Employee
                  Retirement Income Security Act of 1974, as amended ("ERISA")
                  or a plan (also "Plan") within the meaning of section
                  4975(e)(1) of the Internal Revenue Code of 1986 ("Code"), and
                  the Assignee is not directly or indirectly purchasing the
                  Mortgage Loans on behalf of, investment manager of, as named
                  fiduciary of, as Trustee of, or with assets of, a Plan; or (2)
                  the Assignee's purchase of the Mortgage Loans will not result
                  in a prohibited transaction under section 406 of ERISA or
                  section 4975 of the Code.


                                       G-3
<PAGE>

      4. (a) The Assignee's address for purposes of all notices and
correspondence related to the Mortgage Loans and the Agreements is:

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

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

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

      The Assignee's wire instructions for purposes of all remittances and
payments related to the Mortgage Loans are:

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

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

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

      (b) The Assignor's address for purposes for all notices and correspondence
related to the Mortgage Loans and this Agreement is:

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

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

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

      5. This Agreement shall be construed in accordance with the substantive
laws of the State of California (without regard to conflicts of laws principles)
and the obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws, except to the extent preempted by
federal law.

      6. This Agreement shall inure to the benefit of the successors and assigns
of the parties hereto. This Agreement may not be assigned by the Assignee
without the express written consent of the Assignor. Any entity into which the
Assignor or Assignee may be merged or consolidated shall, without the
requirement for any further writing, be deemed the Assignor or Assignee,
respectively, hereunder.

      7. No term or provision of this Agreement may be waived or modified unless
such waiver or modification is in writing and signed by the party against whom
such waiver or modification is sought to be enforced.

      8. This Agreement shall survive the conveyance of the Mortgage Loans and
the assignment of the Agreements by the Assignor.


                                       G-4
<PAGE>

      9. Notwithstanding the assignment of the Agreements by either the Assignor
or Assignee, this Agreement shall not be deemed assigned by the Assignor or the
Assignee unless assigned by separate written instrument.

      10. For the purpose for facilitating the execution of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute and be one
and the same instrument.

      IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption
Agreement to be executed by their duly authorized officers as of the date first
above written.


---------------------------------         ---------------------------------
Assignor                                  Assignee

By: _____________________________         By: ______________________________

Its: ____________________________         Its: _____________________________

Taxpayer Identification                   Taxpayer Identification
No.: _______________                      No.: ________________


                                       G-5
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                                    EXHIBIT H

                    INITIAL PORTFOLIO MORTGAGE LOAN SCHEDULE


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                                    EXHIBIT I

                            FORM OF COMMITMENT LETTER

                                     [Date]


People's Bank of California
5900 Wilshire Boulevard
Los Angeles, California 90036

Ladies and Gentlemen:

      People's Preferred Capital Corporation, a Maryland corporation
("Purchaser"), hereby agrees to purchase from you ("Seller"), and you hereby
agree to sell, transfer, assign and convey to Purchaser, on ________________
(the "Closing Date"), all of your right, title and interest in and to those
commercial mortgage loans (the "Mortgage Loans") set forth on Schedule I (the
"Mortgage Loan Schedule") attached hereto, the related Mortgage Files and all
rights and obligations of Seller arising under the documents contained therein,
subject to the terms and conditions set forth in this Commitment Letter and in
that certain Commercial Mortgage Loan Purchase and Warranties Agreement, dated
as of ______________, 1997 (the "Purchase Agreement"), by and between Purchaser
and Seller.

      The Mortgage Loans shall have an aggregate principal balance on
____________ (the "Cutoff Date") of $_______, or such amount as Purchaser and
Seller shall agree upon as evidenced by the aggregate principal balance of the
Mortgage Loans accepted by Purchaser on the Closing Date. The purchase price
payable by Purchaser to Seller at the Closing in consideration for the Mortgage
Loans set forth on the Mortgage Loan Schedule shall be $_______ (the "Purchase
Price"), or such other amount as Purchaser and Seller shall agree upon as
evidenced by the aggregate principal balance of the Mortgage Loans accepted by
Purchaser on the Closing Date.


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            The purchase and sale of the Mortgage Loans contemplated hereby
      shall be consummated by Purchaser and Seller subject to and in accordance
      with the terms and conditions of the Purchase Agreement, including,
      without limitation, the representations and warranties of Seller contained
      in Section 8 thereof and the provisions relating to the purchase and sale
      of Mortgage Loans and delivery of related documents in connection
      therewith set forth in Sections 4, 5, 6, 9 and 10 thereof. Capitalized
      terms used but not defined herein shall have the meanings ascribed to such
      terms in the Purchase Agreement.

                                    Very truly yours,

                                    PEOPLE'S PREFERRED CAPITAL
                                    CORPORATION


                                    By: ________________________________
                                        Name:
                                        Title:


Agreed and accepted as of the day first written above:

PEOPLE'S BANK OF CALIFORNIA


By: ____________________________
    Name:
    Title:


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