Document:

REAFFIRMATION AGREEMENT, dated as of February 29, 2000 (this "Agreement"), among
CENTENNIAL CELLULAR CORP., a Delaware corporation  ("CCC"),  CENTENNIAL CELLULAR
OPERATING CO. LLC, a Delaware  corporation (the  "Borrower"),  CENTENNIAL PUERTO
RICO OPERATIONS CORP., as PR Borrower (the "PR Borrower"), each Guarantor listed
on the signature pages below (the "Subsidiary Guarantors", and collectively with
CCC, Borrower, PR Borrower and the other Guarantors,  the "Reaffirming Parties")
and BANK OF AMERICA,  N.A., as Administrative Agent (in such capacity,  together
with its  successors in such  capacity,  "Administrative  Agent") and as issuing
lender,  together  with its  successors  in such  capacity  (in  such  capacity,
"Issuing Lender").

WHEREAS the Reaffirming  Parties,  the Lenders,  Issuing Lender,  Co-Syndication
Agents (such term and each other  capitalized  term used but not defined  herein
having the meaning assigned in the Effectiveness  Agreement referred to below or
the Restated Credit Agreement referred to therein) and Administrative Agent have
entered  into the  Effectiveness  Agreement  dated as of the  date  hereof  (the
"Effectiveness Agreement");

WHEREAS the Reaffirming Parties are party to the Security Agreement,  the Issuer
Acknowledgments  delivered  thereunder,  the  Collateral  Assignment of Location
Agreements,  the Joinder  Agreement  and the  Century-ML  Consent and  Agreement
(collectively, the "Collateral Documents");

WHEREAS each Reaffirming Party expects to realize, or has realized,  substantial
direct and indirect  benefits as a result of Borrower  and PR Borrower  entering
into  the  Effectiveness  Agreement  and  as a  result  of the  Restated  Credit
Agreement and the Transactions; and

WHEREAS the execution and delivery of this Agreement is a condition precedent to
the  effectiveness  of the Restated Credit  Agreement and to the availability of
credit under the Restated Credit Agreement under Section 7 of the  Effectiveness
Agreement;

<PAGE>

NOW,  THEREFORE,  in  consideration of the foregoing,  to induce  Administrative
Agent,   each  Lender,   Issuing  Lender  and  each  Agent  to  enter  into  the
Effectiveness Agreement and the Restated Credit Agreement and for other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the parties hereto agree as follows:

                                    ARTICLE I

                     Reaffirmation/Amendment and Restatement

SECTION 1.01.  Reaffirmation.   Each   of   the   Reaffirming   Parties   hereby
(i) consents to the  Effectiveness  Agreement and the Restated Credit  Agreement
and hereby  confirms  its  respective  guarantees,  pledges,  grants of security
interests,  acknowledgments  and consents  under each  Collateral  Document,  as
applicable,   and  agrees  that   notwithstanding   the   effectiveness  of  the
Effectiveness  Agreement  and the Restated  Credit  Agreement  such  guarantees,
pledges,  grants of  security  interests,  acknowledgments  and  consents  shall
continue  to be in full force and effect and shall  accrue to the benefit of the
Lenders,  Issuing  Lender and Agents under the  Restated  Credit  Agreement  and
(ii) ratifies the Collateral Documents.

SECTION 1.02.  Amendment  and Restatement. On and after the effectiveness of the
Restated Credit Agreement, (i) each reference in each Collateral Document to the
"Credit Agreement",  "thereunder",  "thereof" or words of like import shall mean
and be a reference to the Restated  Credit  Agreement (as such  agreement may be
amended,  modified or  supplemented  and in effect from time to time),  (ii) the
definition  of any term defined in any  Collateral  Document by reference to the
terms  defined  in the  Credit  Agreement  shall be  amended  to be  defined  by
reference to the defined term in the Restated Credit Agreement,  as the same may
be  amended,  modified  or  supplemented  and in effect  from  time,  (iii) each
reference  to  "Pledgor" or  "Obligor"  in each Credit  Document  shall  include
Borrower,  PR Borrower and each Guarantor and (iv) the  Obligors will update the
information  required  on  the  schedules  and  attachments  to  the  Collateral
Documents to the extent applicable.

                                   ARTICLE II

                         Representations and Warranties

Each Reaffirming Party hereby represents and warrants, which representations and
warranties shall survive execution and delivery of this Agreement, as follows:

SECTION 2.01.  Authority;  Enforceability.  Such Reaffirming Party has the power
and authority to execute, deliver and carry out the terms and provisions of this
Agreement  and has  taken  all  necessary  action to  authorize  the  execution,
delivery and performance by it of this  Agreement.  Such  Reaffirming  Party has
duly executed and delivered this Agreement,  and this Agreement  constitutes its
legal, valid and binding  obligation,  enforceable against it in accordance with
its terms.

                                       2
<PAGE>

SECTION  2.02.  Loan  Documents.  The  representations  and  warranties  of such
Reaffirming  Party contained in each Credit Document are true and correct in all
material  respects on and as of the  Effectiveness  Date with the same effect as
though made on and as of such date,  except to the extent  such  representations
and warranties expressly relate to an earlier date.

                                   ARTICLE III

                                  Miscellaneous

SECTION 3.01. Notices. All notices and other  communications  hereunder shall be
made at the  addresses,  in the manner and with the effect  provided  in Section
12.02 of the Restated Credit Agreement.

SECTION 3.02.  Credit  Document.  This Agreement is a Credit  Document  executed
pursuant to the Restated Credit Agreement and shall (unless otherwise  expressly
indicated herein) be construed,  administered and applied in accordance with the
terms and provisions thereof.

SECTION 3.03. Section Captions.  Section captions used in this Agreement are for
convenience  of  reference  only and shall not affect the  construction  of this
Agreement.

SECTION 3.04.  Severability.  Wherever possible each provision of this Agreement
shall  be  interpreted  in  such  manner  as to be  effective  and  valid  under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such  provision  shall be  ineffective  to the extent of
such  prohibition  or  invalidity,  without  invalidating  the remainder of such
provision or the remaining provisions of this Agreement.

SECTION 3.05.  Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the parties  hereto and their  respective  successors and
assigns.

SECTION  3.06.  Counterparts.  This  Agreement  may be executed in any number of
counterparts and by the different parties hereto on separate counterparts,  each
of which when so executed  and  delivered  shall be an original but all of which
shall together  constitute one and the same  agreement.  Delivery of an executed
counterpart  of a signature  page of this  Agreement by  facsimile  transmission
shall be  effective  as  delivery  of a manually  executed  counterpart  of this
Agreement.

SECTION 3.07. No Novation. Neither this Agreement nor the execution, delivery or
effectiveness  of the  Effectiveness  Agreement or the Restated Credit Agreement
shall extinguish the obligations for the payment of money  outstanding under the
Credit  Agreement or the Restated  Credit  Agreement or discharge or release the
Lien or  priority  of any  Security  Document  or any other  security  therefor.
Nothing herein contained shall be construed as a substitution or novation of the
obligations  outstanding  under the  Credit  Agreement  or the  Restated  Credit
Agreement or instruments securing the same, which shall remain in full force and
effect,  except  to  any  extent  modified  hereby  or by  instruments  executed
concurrently  herewith.  Nothing  implied  in  this  Agreement  or in any  other
document contemplated hereby or thereby shall be construed as a release or other
discharge of any of Borrower,  PR Borrower or any other  Obligor from any of its
obligations  and  liabilities  as a "Borrower",  "PR  Borrower",  "Guarantor" or
"Obligor"  under the Credit  Agreement  or any  Security  Document.  Each of the
Credit  Agreement  and the  Security  Agreement  shall  remain in full force and
effect, until (as applicable) and except to any extent modified hereby or by the
Effectiveness Agreement or in connection herewith or therewith.

                                       3
<PAGE>

SECTION 3.08. Applicable Law. THIS REAFFIRMATION AGREEMENT SHALL BE GOVERNED BY,
AND  CONSTRUED IN  ACCORDANCE  WITH,  THE LAW OF THE STATE OF NEW YORK,  WITHOUT
REGARD OT THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.  EACH  REAFFIRMING  PARTY
AGREES AS SET FORTH IN SECTION 12.10 OF THE RESTATED CREDIT AGREEMENT AS IF SUCH
SECTION WERE SET FORTH IN FULL HEREIN.

                                       4
<PAGE>

IN WITNESS WHEREOF,  each  Reaffirming  Party and  Administrative  Agent for the
benefit of the  Lenders,  the  Issuing  Lender and the Agents  have  caused this
Agreement to be duly executed and delivered as of the date first above written.

CENTENNIAL CELLULAR OPERATING CO. LLC

By:
     Name:
     Title:

                                       5
<PAGE>

CENTENNIAL PUERTO RICO
      OPERATIONS CORP.

By:
     Name:
     Title:

                                       6
<PAGE>

GUARANTORS:

CENTENNIAL CELLULAR CORP.
ALEXANDRIA CELLULAR CORPORATION
BAUCE COMMUNICATIONS, INC.
BAUCE COMMUNICATIONS OF BEAUMONT, INC.
CENTENNIAL ASHE CELLULAR CORP.
CENTENNIAL BEAUREGARD HOLDING CORP.
CENTENNIAL BENTON HARBOR CELLULAR CORP.
CENTENNIAL BENTON HARBOR HOLDING CORP.
CENTENNIAL CALDWELL CELLULAR CORP.
CENTENNIAL CARIBBEAN HOLDING CORP.
CENTENNIAL CELLULAR TELEPHONE
     COMPANY OF DEL NORTE
CENTENNIAL CELLULAR TELEPHONE
     COMPANY OF LAWRENCE
CENTENNIAL CELLULAR TELEPHONE
     COMPANY OF MODOC
CENTENNIAL CELLULAR TELEPHONE
     COMPANY OF SACRAMENTO VALLEY
CENTENNIAL CELLULAR TELEPHONE
     COMPANY OF SAN FRANCISCO
CENTENNIAL CELLULAR WIRELESS
     HOLDING CORP.
CENTENNIAL CLAIBORNE CELLULAR CORP.
CENTENNIAL CLINTON CELLULAR CORP.
CENTENNIAL DESOTO CELLULAR CORP.
CENTENNIAL FLORIDA SWITCH CORP.
CENTENNIAL IBERIA HOLDING CORP.
CENTENNIAL JACKSON CELLULAR CORP.
CENTENNIAL LAFAYETTE CELLULAR CORP.
CENTENNIAL LAKE CHARLES CELLULAR CORP.
CENTENNIAL LOUISIANA HOLDING CORP.
CENTENNIAL MEGA COMM HOLDING CORP.
CENTENNIAL MICHIANA LICENSE COMPANY LLC
CENTENNIAL MICHIGAN RSA 6 CELLULAR CORP.
CENTENNIAL MICHIGAN RSA 7 CELLULAR CORP.
CENTENNIAL PUERTO RICO HOLDING CORP. I
CENTENNIAL PUERTO RICO HOLDING CORP. II
CENTENNIAL PUERTO RICO LICENSE CORP.
CENTENNIAL PUERTO RICO OPERATIONS CORP.
CENTENNIAL RANDOLPH HOLDING CORP.
CENTENNIAL SOUTHEAST LICENSE COMPANY LLC
CENTENNIAL SOUTHWEST LICENSE COMPANY LLC
CENTENNIAL WIRELESS PCS LICENSE CORP.
                                       7
<PAGE>

CENTURY BEAUMONT CELLULAR CORP.
CENTURY CHARLOTTESVILLE CELLULAR CORP.
CENTURY EL CENTRO CORP.
CENTURY ELKHART CELLULAR CORP.
CENTURY INDIANA CELLULAR CORP.
CENTURY LYNCHBURG CELLULAR CORP.
CENTURY MICHIANA CELLULAR CORP.
CENTURY MICHIGAN CELLULAR CORP.
CENTURY ROANOKE CELLULAR CORP. (DE)
CENTURY ROANOKE CELLULAR CORP. (VA)
CENTURY SOUTH BEND CELLULAR CORP.
CENTURY YUMA CELLULAR CORP.
CENTRUY YUMA PAGING CORP.
EL CENTRO CELLULAR CORP.
ELKHART METRONET, INC.
HENDRIX ELECTRONICS, INC.
HENDRIX RADIO COMMUNICATIONS, INC.
INTEGRATED SYSTEMS INC.
LAFAYETTE COMMUNICATIONS, INC.
MICHIANA METRONET, INC.
SOUTH BEND METRONET, INC.

Each as a Guarantor and Pledgor

By:
                                                 Name:
                                                 Title:

                                       8
<PAGE>

CENTENNIAL BEAUREGARD CELLULAR LLC,
    as a Guarantor and Pledgor

By:  CENTENNIAL BEAUREGARD HOLDING CORP.,
   a Managing Member

By:
                                                 Name:
                                                 Title:

                                       9
<PAGE>

CENTENNIAL CELLULAR TRI-STATE OPERATING PARTNERSHIP,
   as a Guarantor and Pledgor

By:  CENTENNIAL CLINTON CELLULAR CORP.,
as a General Partner

By:
                                                 Name:
                                                 Title:

CENTENNIAL HAMMOND CELLULAR LLC,
   as a Guarantor and Pledgor

 By:  CENTENNIAL BEAUREGARD HOLDING CORP.,
  a Managing Member

By:
                                                 Name:
                                                 Title:

CENTENNIAL MOREHOUSE CELLULAR LLC,
   as a Guarantor and Pledgor

By:  CENTENNIAL BEAUREGARD HOLDING CORP.,
   a Managing Member

By:
                                                 Name:
                                                 Title:

                                       10
<PAGE>

CENTENNIAL RANDOLPH CELLULAR LLC,
   as a Guarantor and Pledgor

By:  CENTENNIAL RANDOLPH HOLDING CORP.,
   a Managing Member

By:
                                                 Name:
                                                 Title:

                                       11
<PAGE>

IBERIA CELLULAR TELEPHONE COMPANY LLC,
   as a Guarantor and Pledgor

By:  CENTENNIAL BEAUREGARD HOLDING CORP.,
   a Managing Member

By:
                                                 Name:
                                                 Title:

LAFAYETTE CELLULAR TELEPHONE COMPANY,
   as a Guarantor and Pledgor

By:
                                                 Name:
                                                 Title:

MEGA COMM LLC,
   as a Guarantor and Pledgor

By:  MEGA COMM HOLDING CORP.,
   a Managing Member

By:
                                                 Name:
                                                 Title:

BANK OF AMERICA,  N.A.,  individually  and as  Administrative  Agent and Issuing
Lender,

By:
                                                 Name:  Julie Schell
                                                 Title:

                                       12
<PAGE>

                                                                     EXHIBIT A

                           CENTENNIAL CELLULAR CORP.,
                                 as a Guarantor,

                                       and

                     CENTENNIAL CELLULAR OPERATING CO. LLC,
                                  as Borrower,
                                       and

                    CENTENNIAL PUERTO RICO OPERATIONS CORP.,
                                 as PR Borrower,

                                       and

                        THE OTHER GUARANTORS PARTY HERETO
                             ______________________

                                CREDIT AGREEMENT
                           Dated as of Januar 7, 1999
                 as Amended and Restated as of February 29, 2000
                             ______________________

                            THE CHASE MANHATTAN BANK,
                  as Co-Lead Arranger and Co-Syndication Agent,

                                       and

                              MERRILL LYNCH & CO.,
               MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
                  as Co-Lead Arranger and Co-Syndication Agent,

                                       and

                             BANK OF AMERICA, N.A.,
                      as Arranger and Administrative Agent,

                                       and

                            THE BANK OF NOVA SCOTIA,
                             as Documentation Agent,

                                       and

                            THE LENDERS PARTY HERETO

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

                                TABLE OF CONTENTS

This Table of Contents is not part of the  Agreement to which it is attached but
is inserted for convenience of reference only.

                                                                        Page

Section 1.    Definitions, Accounting Matters and Rules of
                Construction..............................................1

     1.01.    Certain Defined Terms.......................................1
     1.02.    Accounting Terms and Determinations........................34
     1.03.    Classes and Types of Loans.................................34
     1.04.    Rules of Construction......................................34

Section 2.    Commitments, Letters of Credit, Fees, Register, Prepayments
                and Replacement of Lenders...............................35

     2.01.    Loans......................................................35
     2.02.    Borrowings.................................................38
     2.03.    Letters of Credit..........................................38
     2.04.    Termination and Reductions of Commitments..................42
     2.05.    Fees.......................................................42
     2.06.    Lending Offices............................................43
     2.07.    Several Obligations of Lenders.............................43
     2.08.    Notes; Register............................................43
     2.09.    Optional Prepayments and Conversions or Continuations of
                Loans....................................................44
     2.10.    Mandatory Prepayments......................................45
     2.11.    Replacement of Lenders.....................................47

Section 3.    Payments of Principal and Interest.........................48

     3.01.    Repayment of Loans.........................................48
     3.02.    Interest...................................................49

Section 4.    Payments; Pro Rata Treatment; Computations; Etc............50

     4.01.    Payments...................................................50
     4.02.    Pro Rata Treatment.........................................51
     4.03.    Computations...............................................51
     4.04.    Minimum Amounts............................................51
     4.05.    Certain Notices............................................51
     4.06.    Non-Receipt of Funds by Administrative Agent...............52
     4.07.    Right of Setoff; Sharing of Payments; Etc..................53

Section 5.    Yield Protection, Etc......................................54

     5.01.    Additional Costs...........................................54
     5.02.    Limitation on Types of Loans...............................55
     5.03.    Illegality.................................................55
     5.04.    Treatment of Affected Loans................................55
     5.05.    Compensation...............................................56
     5.06.    Net Payments...............................................56

Section 6.    Guarantee..................................................58

     6.01.    The Guarantee..............................................58

                                       ii
<PAGE>
                                                                        Page

     6.02.    Obligations Unconditional..................................60
     6.03.    Reinstatement..............................................60
     6.04.    Subrogation; Subordination.................................60
     6.05.    Remedies...................................................60
     6.06.    Instrument for the Payment of Money........................60
     6.07.    Continuing Guarantee.......................................60
     6.08.    General Limitation on Guarantee Obligations................60

Section 7.    Conditions Precedent.......................................60

     7.01.    All Extensions of Credit...................................61
     7.02.    Determinations Under Section 7.............................62

Section 8.    Representations and Warranties.............................62

     8.01.    Corporate Existence........................................62
     8.02.    Financial Condition; Etc...................................62
     8.03.    Litigation.................................................63
     8.04.    No Breach; No Default......................................63
     8.05.    Action.....................................................63
     8.06.    Approvals..................................................64
     8.07.    [Omitted]..................................................64
     8.08.    ERISA......................................................64
     8.09.    Taxes......................................................64
     8.10.    Investment Company Act; Public Utility Holding Company Act;
                 Other Restrictions......................................65
     8.11.    Environmental Matters......................................65
     8.12.    Environmental Investigations...............................65
     8.13.    Use of Proceeds............................................66
     8.14.    Subsidiaries, Etc..........................................66
     8.15.    Properties.................................................66
     8.16.    Security Interest; Absence of Financing Statements; Etc....67
     8.17.    Licenses and Permits; Compliance with Laws.................67
     8.18.    True and Complete Disclosure...............................67
     8.19.    Solvency; Etc..............................................67
     8.20.    Contracts..................................................68
     8.21.    Labor Matters..............................................68
     8.22.    FCC Matters and Governmental Matters.......................68
     8.23.    Subordinated Notes.........................................69
     8.24.    Year 2000..................................................69

Section 9.    Covenants..................................................69

     9.01.    Financial Statements, Etc..................................69
     9.02.    Litigation, Etc............................................73
     9.03.    Existence; Compliance with Law; Payment of Taxes;
                Inspection Rights; Performance of Obligations; Etc.......74
     9.04.    Insurance..................................................74
     9.05.    Limitation on Lines of Business; Limitation on Activity of
                License Subsidiaries;Limitation on Management Agreements.74
     9.06.    Limitation on Fundamental Changes, Acquisitions or
                Dispositions.............................................78
     9.07.    Limitation on Liens and Negative Pledges...................83
     9.08.    Prohibition on Disqualified Capital Stock; Limitation on
                Indebtedness and Contingent Obligations..................83

                                      iii
<PAGE>

     9.09.    Limitation on Investments; Limitation on Creation of
                Subsidiaries.............................................86
     9.10.    Limitation on Dividend Payments............................87
     9.11.    Financial Covenants........................................89
     9.12.    Pledge or Mortgage of Additional Collateral................91
     9.13.    Security Interests; Further Assurances.....................92
     9.14.    Compliance with Environmental Laws.........................92
     9.15.    Limitation on Transactions with Affiliates.................93
     9.16.    Limitation on Accounting Changes; Limitation on Investment
                Company Status...........................................93
     9.17.    Limitation on Modifications of Certain Documents, Etc......93
     9.18.    Interest Rate Protection Agreements........................93
     9.19.    Limitation on Certain Restrictions Affecting Subsidiaries..93
     9.20.    Additional Obligors; Licenses To Be Held by License
                Subsidiaries.............................................94
     9.21.    Limitation on Activities of Parent.........................95
     9.22.    Limitation on Issuance or Dispositions of Equity Interests
                of Borrower and Subsidiaries.............................95
     9.23.    Limitation on Payments or Prepayments of Indebtedness or
                Modification of Debt Documents...........................95
     9.24.    Casualty and Condemnation..................................96
     9.25.    Limitation on Tax Sharing Arrangements.....................96
     9.26.    Limitation on Designation of Designated Senior
                Indebtedness.............................................96
     9.27.    No Contractual Bar.........................................96
     9.28.    Facilities Agreement.......................................96

Section 10.   Events of Default..........................................96

Section 11.   Agents.....................................................99

     11.01.   General Provisions.........................................99
     11.02.   Indemnification...........................................101
     11.03.   Consents Under Other Credit Documents.....................102
     11.04.   Collateral Sub-Agents.....................................102

Section 12    Miscellaneous.............................................102

     12.01.   Waiver....................................................102
     12.02.   Notices...................................................102
     12.03.   Expenses, Indemnification, Etc............................102
     12.04.   Amendments, Etc...........................................104
     12.05.   Successors and Assigns....................................106
     12.06.   Assignments and Participations............................107
     12.07.   Survival..................................................108
     12.08.   Captions..................................................108
     12.09.   Counterparts; Interpretation; Effectiveness...............108
     12.10.   Governing Law; Submission to Jurisdiction; Waivers; Etc...109
     12.11.   Confidentiality...........................................109
     12.12.   Independence of Representations, Warranties and Covenants.110
     12.13.   Severability..............................................110
     12.14.   Acknowledgments...........................................110

Signatures..............................................................S-1

                                       iv
<PAGE>

ANNEX A  -          Commitments

SCHEDULE 1.01       -    Guarantors (for Obligations of Borrower)
SCHEDULE 8.02(b)    -    Certain Contingent Obligations
SCHEDULE 8.02(c)    -    Certain Financial Matters
SCHEDULE 8.03       -    Litigation
SCHEDULE 8.09       -    Tax Matters
SCHEDULE 8.11       -    Environmental Matters
SCHEDULE 8.14       -    Subsidiaries, Etc.
SCHEDULE 8.16       -    Security Interests
SCHEDULE 8.20       -    Certain Contracts
SCHEDULE 8.21       -    Labor Matters
SCHEDULE 8.22(b)    -    License Expiration Dates as of Effectiveness Date
SCHEDULE 9.07       -    Certain Existing Liens
SCHEDULE 9.08       -    Certain Indebtedness to Remain Outstanding
SCHEDULE 9.09       -    Investments
SCHEDULE 9.15       -    Existing Affiliate Agreements

EXHIBIT A-1         -    Form of Revolving Credit Note
EXHIBIT A-2         -    Form of Tranche A Term Loan Note
EXHIBIT A-3         -    Form of Tranche A-PR Term Loan Note
EXHIBIT A-4         -    Form of Tranche B-PR Term Loan Note
EXHIBIT A-5         -    Form of Tranche C-PR Term Loan Note
EXHIBIT A-6         -    Form of Swing Loan Note
EXHIBIT B           -    Form of Intercompany Note
EXHIBIT C-1         -    Form of Interest Rate Certificate
EXHIBIT C-2         -    Form of Solvency Certificate
EXHIBIT D           -    Form of Security Agreement
EXHIBIT E-1         -    Form of Opinion of Counsel to the Obligors
EXHIBIT E-2         -    Form of Opinion of Special FCC Counsel to the Obligors
EXHIBIT F           -    Form of Notice of Assignment
EXHIBIT G           -    Form of Notice of Borrowing
EXHIBIT H           -    Form of Notice of Conversion/Continuation
EXHIBIT I           -    Form of Joinder Agreement
EXHIBIT J           -    Form of Section 5.06 Certificate for Lenders
EXHIBIT K           -    Form of Collateral Assignment of Location Agreements
EXHIBIT L           -    Form of Assignment Agreement
EXHIBIT M           -    Form of Perfection Certificate

 v

<PAGE>

CREDIT  AGREEMENT  dated as of  January 7,  1999,  as amended and restated as of
February 29,  2000,  among CENTENNIAL  CELLULAR  OPERATING CO. LLC, as Borrower;
CENTENNIAL  PUERTO RICO OPERATIONS  CORP., as PR Borrower;  CENTENNIAL  CELLULAR
CORP., as a Guarantor;  the other Guarantors  party hereto;  each of the lenders
from time to time party hereto (individually,  a "Lender" and, collectively, the
"Lenders");  THE CHASE  MANHATTAN BANK, as co-lead  arranger and  co-syndication
agent  (in  such  capacity,  together  with  its  successors  in such  capacity,
"Chase");  MERRILL  LYNCH  & CO.  and  MERRILL  LYNCH,  PIERCE,  FENNER &  SMITH
INCORPORATED,  as co-lead arranger and  co-syndication  agent (in such capacity,
together with its successors in such capacity,  and Chase,  the  "Co-Syndication
Agents");  BANK OF AMERICA,  N.A., as arranger and administrative agent (in such
capacity,  together  with  its  successors  in  such  capacity,  "Administrative
Agent");  THE BANK OF NOVA SCOTIA,  as  documentation  agent (in such  capacity,
together with its successors in such capacity, "Documentation Agent").

     The parties hereto agree as follows:

     Section 1.   Definitions, Accounting Matters and Rules of Construction.

     1.01. Certain Defined Terms. As used herein, the following terms shall have
the following meanings:

     "ABR  Loans"  shall mean Loans that bear  interest  at rates based upon the
Alternate Base Rate.

     "Acquisition"  shall mean,  with respect to any  Person,any  transaction or
series of related transactions for the direct or indirect  (a)acquisition of all
or substantially  all of the Property of any other Person, or of any business or
division of any other Person,  (b) acquisition of in excess of 50% of the Equity
Interests of any other Person, or otherwise causing any other Person to become a
Subsidiary  of  such  Person,  or (c)  merger  or  consolidation  or  any  other
combination with any other Person.

     "Acquisition  Consideration" shall mean the purchase  consideration for any
Acquisition and all other payments made and liabilities  incurred by any Company
in exchange for, or as part of the purchase price for, any Acquisition,  whether
paid in cash or by  exchange  of Equity  Interests  (other than of Parent) or of
assets or otherwise and whether payable at or prior to the  consummation of such
Acquisition or deferred for payment at any future time,  whether or not any such
future payment is subject to the occurrence of any contingency, and includes any
and all  payments  and  liabilities  representing  the  purchase  price  and any
assumptions of Indebtedness.

     "Additional Collateral" see Section 9.12.

     "Additional Obligors" see Section 9.20.

     "Additional  Senior  Subordinated  Notes Documents" shall mean an indenture
governing the terms and conditions of the Additional Senior  Subordinated  Notes
and  all  other  documents  relating  thereto  (including  any  interest  escrow
agreement,  if  applicable)  and delivered to Agents,  as any such  agreement or
document may be amended and in effect from time to time in  accordance  with its
terms and this Agreement.

     "Additional Senior  Subordinated  Notes" shall mean any senior subordinated
notes of Borrower  or PR Borrower or any senior  notes of any direct or indirect
parent of Borrower or Centennial  Caribbean  Holding Corp. for gross proceeds of
up to $300.0 million,  including  without  duplication  the senior  subordinated
notes or  senior  notes (as the case may be)  issued  pursuant  to a  registered
exchange  offer  therefor,  which notes  shall in any event (i) have  covenants,
events  of  default,  redemption  and  repurchase  provisions  and  modification
provisions in the aggregate not  materially  less favorable to the Companies and
the Lenders than the  covenants,  events of default,  redemption  and repurchase
provisions and  modification  provisions of the Senior  Subordinated  Notes,  as
reasonably  determined by Borrower and PR Borrower,  (ii) mature after the Final
Maturity  Date  (or,  if  later,  the  final  maturity  date of any  Incremental
Facility),  (iii) be unsecured, and (iv) in the case of any such notes issued by
Borrower or PR Borrower have subordination  terms  substantially  similar to the
Senior Subordinated Notes.

<PAGE>

     "Adjusted  Net Income" shall mean,  for any period,  the  consolidated  net
income  (loss) for such period,  of Borrower and its  Consolidated  Subsidiaries
calculated  on a  consolidated  basis  in  accordance  with  GAAP,  adjusted  by
excluding  (to  the  extent  taken  into  account  in the  calculation  of  such
consolidated  net  income  (loss))  the  effect of (a) gains or losses  for such
period from Excluded Dispositions and Dispositions not in the ordinary course of
business,   and  the  tax  consequences   thereof,   (b) any   non-recurring  or
extraordinary items of income (other than the proceeds of business  interruption
insurance) or expense for such period and the tax consequences  thereof, (c) the
portion of net income (loss) of any Person  (other than a  Subsidiary)  in which
Borrower or any  Subsidiary has an ownership  interest,  except to the extent of
the  amount of cash  dividends  or other  cash  distributions  actually  paid to
Borrower or (subject to clause (e) below) any  Subsidiary  during such period to
the extent not in excess of such  Person's net income for such  period,  (d) the
net income (loss) of any Person  combined  with Borrower or any  Subsidiary on a
"pooling of  interests"  basis  attributable  to any period prior to the date of
combination,  (e) the net  income  of any  Subsidiary  to the  extent  that  the
declaration or payment of dividends or similar  distribution  by such Subsidiary
was not for the  relevant  period  permitted,  by  operation of the terms of its
charter or any agreement,  instrument, judgment, decree, order, statute, rule or
governmental  regulation applicable to such Subsidiary or its stockholders,  and
(f) any net gain from the  collection of proceeds of life insurance or "key man"
insurance  policies.  For the purpose of  determining  Adjusted Net Income,  the
value of handsets  reflected  on the  financial  statements  of Borrower and its
Consolidated  Subsidiaries  shall be amortized in  accordance  with the relevant
amortization policies of Borrower and its Consolidated Subsidiaries as in effect
on the Original Closing Date.

     "Administrative Agent" see the introduction hereto.

     "Administrative  Agent Fee Letter" shall mean a separate fee letter between
Administrative Agent and Parent.

     "Advance Date" see Section 4.06.

     "Affiliate" shall mean, with respect to any Person,  any other Person which
directly  or  indirectly  controls,  or is  under  common  control  with,  or is
controlled by, such Person.  As used in this definition,  "control"  (including,
with its correlative meanings,  "controlled by" and "under common control with")
shall mean possession,  directly or indirectly,  of power to direct or cause the
direction of management or policies  (whether through ownership of securities or
partnership   or  other   ownership   interests,   by  contract  or  otherwise).
Notwithstanding  the foregoing,  solely for purposes of Section 9.15, no Company
shall be deemed an Affiliate of any other Company.

     "Affiliate Transaction" see Section 9.15.

     "Agent" shall mean any of Administrative Agent,  Co-Syndication Agents, and
the Documentation Agent and "Agents" shall mean all of them collectively.

     "Agreement" shall mean this Credit Agreement, as amended from time to time.

     "Alternate  Base  Rate"  shall  mean for any day,  a rate per annum that is
equal to the higher of (i) the Federal Funds Rate, plus 0.50%, or (ii) the Prime
Rate.

     "Amortization Payment" shall mean each scheduled installment of payments on
the Term Loans as set forth in Section 3.01(b).

     "Applicable  Lending  Office" shall mean, for each Lender and for each Type
of Loan, the  "LendingOffice" of such Lender (or of an Affiliate of such Lender)
designated  for such type of Loan on the  signature  pages  hereof or such other
office of such  Lender (or of an  Affiliate  of such  Lender) as such Lender may
from time to time specify to Administrative  Agent and Borrower as the office by
which its Loans of such Type are to be made and maintained.

                                       2

<PAGE>

     "Applicable  Margin"  shall be,  for any Type and  Class of Loan,  when the
Total  Leverage Ratio at the end of the most recently ended fiscal quarter is as
set forth in the chart below,  the  percentage per annum set forth opposite such
Total  Leverage  Ratio in such chart for such Type and Class of Loan. Any change
in the Total Leverage  Ratio shall be effective to adjust the Applicable  Margin
as of  the  date  of  receipt  by  Administrative  Agent  of the  Interest  Rate
Certificate most recently  delivered  pursuant to Section  9.01(e).  If Borrower
fails to deliver the financial  statements or Interest Rate  Certificate  within
the times specified in Sections  9.01(a),  (b) and (e), the Total Leverage Ratio
shall be deemed to be greater than or equal to 7.5:1.0 until  Borrower  delivers
such Interest Rate Certificate and financial statements.

<TABLE>
<CAPTION>

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

<S>       <C>                  <C>          <C>          <C>             <C>         <C>           <C>
                                Revolving Loans,
                              Tranche A Term Loans       Tranche B-PR Term Loans     Tranche C-PR Term Loans
                              and Term A-PR Loans
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

          Total Leverage      LIBOR           ABR          LIBOR          ABR          LIBOR          ABR
  Tier         Ratio          MARGIN        MARGIN         MARGIN        MARGIN       MARGIN        MARGIN
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

    I     >7.5:1.0        3.00%          2.00%         3.250%         2.250%       3.500%        2.500%
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

   II     <7.5:1.0 but    2.750%         1.750%        3.250%         2.250%       3.500%        2.500%
          >7.0:1.0
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

   III    <7.0:1.0 but    2.500%         1.500%        3.000%         2.000%       3.250%        2.250%
          >6.0:1.0
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

   IV     <6.0:1.0 but    2.250%         1.250%        3.000%         2.000%       3.250%        2.250%
          >5.0:1.0
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

    V     <5.0:1.0 but    2.000%         1.000%        3.000%         2.000%       3.250%        2.250%
          >4.0:1.0
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

   VI     <4.0:1.0        1.750%         0.750%        3.000%         2.000%       3.250%        2.250%
---------------------------------------------------------------------------------------------------------------
</TABLE>

     "Applicable  Revolving  Credit Fee Percentage"  shall mean 0.50% per annum;
provided,  however,  that when the Total  Leverage  Ratio at the end of the most
recently  ended fiscal quarter is less than 5.0:1.0,  the  Applicable  Revolving
Credit Fee Percentage shall mean 0.375%.  Any change in the Total Leverage Ratio
shall be effective to adjust the Applicable  Revolving  Credit Fee Percentage as
of the date of receipt by Administrative  Agent of the Interest Rate Certificate
most  recently  delivered  pursuant to Section  9.01(e).  If  Borrower  fails to
deliver the financial  statements and Interest Rate Certificate within the times
specified  in Sections  9.01(a),  (b) and (e),  such ratio shall be deemed to be
greater than or equal to 5.0:1.0  until  Borrower  delivers  such  Interest Rate
Certificate and financial statements.

     "Approved  Fund" shall mean,  with  respect to any Lender that is a fund or
commingled investment vehicle that invests in loans, any other fund that invests
in loans and is managed or advised by the same investment advisor as such Lender
or by an Affiliate of such investment advisor.

     "Bankruptcy  Code" shall mean the United States Federal  Bankruptcy Code of
1978 and any analogous law of Puerto Rico.

     "Borrower"  shall mean  Centennial  Cellular  Operating Co. LLC, a Delaware
limited liability company.

     "Business  Day"  shall mean any day (a) on which  commercial  banks are not
authorized  or required to close in New York City and (b) if such day relates to
a borrowing  of, a payment or  prepayment  of  principal  of or  interest  on, a
Continuation  or Conversion of or into, or an Interest  Period for, a LIBOR Loan
or a notice by Borrower with respect to any such borrowing, payment, prepayment,
Continuation,  Conversion  or  Interest  Period,  that  is  also a day on  which
dealings in Dollar deposits are carried out in the London interbank market.

     "CAP System"  shall mean a system that provides  long-distance  carriers or
end-users with an alternative to the  traditional  local phone company for local
transmission of private line and transport and special access telecommunications
services  in Puerto  Rico,  the  Virgin  Islands  and other  Caribbean  nations.

                                       3
<PAGE>

     "Capital  Expenditures"  shall mean,  for any period any direct or indirect
(by way of acquisition  of securities of a Person or the  expenditure of cash or
the  incurrences  of  Indebtedness)  expenditures  in respect of the purchase or
other acquisition of fixed or capital assets,  excluding (i) normal  replacement
and  maintenance  programs  properly  charged  to current  operations,  (ii) any
expenditure  made with the Net  Available  Proceeds  of any Equity  Issuance  or
Disposition Event to the extent such Net Available  Proceeds are not required to
be  applied  to  the  prepayment  of  the  Loans  in  accordance   with  Section
2.10(a)(iv),  (iii) any  expenditure  made  with the  proceeds  of any  Excluded
Disposition, (iv) expenditures in an amount not to exceed the sum of (x) the Net
Available  Proceeds  of any  Casualty  Event to the  extent  such Net  Available
Proceeds  are not  required  to be  applied  to the  prepayment  of the Loans in
accordance  with  Section  2.10(a)(i)  and  (y)  the  amount  of any  applicable
insurance  deductibles  with respect to such  Casualty  Event to the extent such
amount is applied as set forth in clause  (w) of Section  2.10(a)(i)  within the
period specified therein,  (v) expenditures to effect Permitted  Acquisitions or
Investments under Section  9.09(A)(r),  and (vi) the purchase price of equipment
to the  extent  that the  consideration  therefor  consists  of used or  surplus
equipment  being traded in at such time or the proceeds of a concurrent  sale of
such used or surplus equipment.

     "Capital  Lease,"  as applied  to any  Person,  shall mean any lease of any
Property by that Person as lessee which, in conformity with GAAP, is required to
be classified  and accounted for as a capital lease on the balance sheet of that
Person.

     "Capital Lease  Obligations" shall mean, for any Person, all obligations of
such  Person  to pay rent or other  amounts  under a  Capital  Lease,  and,  for
purposes  of this  Agreement,  the  amount  of  such  obligations  shall  be the
capitalized amount thereof, determined in accordance with GAAP.

     "Casualty  Event" shall mean, with respect to any Property  (including Real
Property) of any Person,  any loss of title with respect to Real Property or any
loss of or damage to or  destruction  of, or any  condemnation  or other  taking
(including by any  Governmental  Authority)  of, such Property  (including  Real
Property) for which such Person or any of its  Subsidiaries  receives  insurance
proceeds or proceeds of a condemnation  award or other  compensation;  provided,
however, no such event shall constitute a Casualty Event if (x) such proceeds or
other compensation in respect thereof is less than $1.0 million and (y) all such
proceeds  and  other  compensation  in  respect  of all such  events  since  the
Effectiveness  Date is less than $10.0 million.  "Casualty  Event" shall include
but not be limited to any taking of any Mortgaged Real Property or Real Property
of any  Company or any part  thereof,  in or by  condemnation  or other  eminent
domain proceedings  pursuant to any law, general or special, or by reason of the
temporary  requisition of the use or occupancy of any Mortgaged Real Property or
Real Property of any Company or any part thereof, by any Governmental Authority,
civil or military.

     "CATV/SMATV"  shall mean any system  located in the United  States,  Puerto
Rico, the Virgin Islands or other Caribbean  nation that is a community  antenna
television system or satellite master antenna  television  system, as such terms
are commonly understood in the cable television industry.

     "Cellular  System"  shall mean a cellular  mobile  radio  telephone  system
constructed  and  operated  in an MSA or an RSA  (or any  successor  territorial
designation) pursuant to a License therefor issued by the FCC.

     "Century-ML"   shall  mean  Century-ML   Cable   Corporation,   a  Delaware
corporation.

     "Century ML Cable Venture" shall mean Century ML Cable Venture,  a New York
joint venture.

     "CERCLA" see Section 8.11.

                                       4
<PAGE>

     "Change of Control" shall mean any transaction or event (including, without
limitation,  an  issuance,  sale or  exchange of Equity  Interests,  a merger or
consolidation,  or a dissolution or liquidation)  occurring on or after the date
hereof (whether or not approved by the board of directors of Parent) as a direct
or indirect result of which (a) if such transaction or event occurs prior to the
consummation of an Initial Public Offering,  the Permitted Holders  collectively
fail to beneficially  own,  directly or indirectly,  Equity  Interests of Parent
representing at least 40% of the economic interests of all Equity Interests then
outstanding of Parent or the Permitted  Holders  collectively  cease to have the
ability to  appoint a  majority  of the board of  directors  of Parent;  (b) any
Person or any group (other than the Permitted  Holders)  shall (A)  beneficially
own (directly or indirectly) in the aggregate  Equity Interests of Parent having
35% or more of the aggregate  voting power of all Equity  Interests of Parent at
the  time  outstanding  if at  such  time  the  Permitted  Holders  collectively
beneficially  own Equity Interests having a lesser aggregate voting power of all
Equity  Interests  of  Parent at the time  outstanding  or (B) have the right or
power to appoint a majority  of the board of  directors  of Parent;  (c) if such
transaction  or  event  is an  Initial  Public  Offering  or  occurs  after  the
consummation of an Initial Public Offering, during any period of two consecutive
years  beginning  on  or  after  the  date  of  such  Initial  Public  Offering,
individuals  who at the  beginning  of such  period  constituted  the  board  of
directors of Parent  (together  with any new  directors  whose  election by such
board of  directors or whose  nomination  for  election by the  shareholders  of
Parent was  approved  by a vote of a majority  of the  directors  of Parent then
still in office who were either  directors  at the  beginning  of such period or
whose election or nomination for election was previously so approved)  cease for
any reason to constitute at least a majority of the board of directors of Parent
then in office; (d) any event or circumstance constituting a "change of control"
under the  Parent  Financing  Documents,  Senior  Subordinated  Notes  Financing
Documents or any other documentation evidencing or governing any Indebtedness of
any Company in a principal  amount in excess of $10.0 million  (other than under
the Credit  Documents) shall occur which results in an obligation of any Company
to prepay (by acceleration or otherwise), purchase, offer to purchase, redeem or
defease  all or a  portion  of such  Indebtedness;  or (e)  Parent  fails to own
beneficially  and of  record  100%  (on a fully  diluted  basis)  of the  Equity
Interests of Borrower. For purposes of this definition,  the terms "beneficially
own" and "group" shall have the respective meanings ascribed to them pursuant to
Section 13(d) of the Exchange Act, except that a Person or group shall be deemed
to "beneficially  own" all securities that such Person or group has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time.

     "Class" see Section 1.03.

     "Code"  shall mean the United  States  Internal  Revenue  Code of 1986,  as
amended.

     "Co-Syndication Agents" see the introduction hereto.

     "Collateral"  shall mean all of the Pledged  Collateral  and Mortgaged Real
Property.

     "Collateral Account" see Section 10(d) of the Security Agreement.

     "Collateral  Assignment of Location  Agreements"  shall mean the Collateral
Assignment of Location  Agreements  substantially in the form of Exhibit K among
the Obligors and Administrative  Agent, as the same may be amended in accordance
with  the  terms  thereof  and  hereof,  or  such  other  agreements  reasonably
acceptable  to  Administrative  Agent as  shall  be  necessary  to  comply  with
applicable  Requirements of Law and effective to assign to Administrative  Agent
(on behalf of the Creditors) the right, title and interest identified therein.

     "Commission"   shall  mean  the  United  States   Securities  and  Exchange
Commission.

     "Commitments" shall mean the Revolving Credit Commitments and the Term Loan
Commitments.

     "Communications  Act" shall mean the United  States  Communications  Act of
1934,  and  any  similar  or  successor  federal  statute,  and  the  rules  and
regulations  of the FCC  thereunder,  all as  amended  and as the same may be in
effect from time to time.

     "Communications  Regulatory  Authority"  shall mean the FCC, any State PUC,
the PRPSC, the PRTRB and any future federal,  state, Puerto Rican, Virgin Island
or Caribbean nation communication  regulatory  commission,  agency,  department,
board or authority.

                                       5
<PAGE>

     "Companies" shall mean the Obligors and their respective Subsidiaries;  and
"Company" shall mean any of them.

     "Consolidated  Interest  Expense" shall mean, for any period,  all interest
expense (including  original issue discount,  interest paid in kind,  commitment
fees,  letter of credit fees and the interest  component  of Capital  Leases but
excluding  any  up-front,  underwriting  or  commitment  fees in respect of this
Agreement  to the  extent  accrued  on or  prior to the  Effectiveness  Date) of
Borrower  and its  Consolidated  Subsidiaries  for  such  period  including  all
capitalized  interest  and the net  amounts  payable  under  all  Interest  Rate
Protection  Agreements,  net of interest income of Borrower and its Consolidated
Subsidiaries for such period.

     "Consolidated  Subsidiary"  shall mean, for any Person,  each Subsidiary of
such  Person  (whether  now  existing  or  hereafter  created or  acquired)  the
financial  statements of which shall be (or should have been)  consolidated with
the financial statements of such Person in accordance with GAAP.

     "Contingent  Obligation"  shall  mean,  as to any  Person,  any  direct  or
indirect  liability of such Person,  whether or not contingent,  with or without
recourse,  (a) with  respect to any  Indebtedness,  lease,  dividend,  letter of
credit or other  obligation (the "primary  obligations")  of another Person (the
"primary  obligor"),  including  any  obligation of such Person (i) to purchase,
repurchase  or  otherwise  acquire  such  primary  obligations  or any  security
therefor,  (ii) to advance or provide  funds for the payment or discharge of any
such primary obligation, or to maintain working capital or equity capital of the
primary  obligor or  otherwise  to  maintain  the net worth or  solvency  or any
balance  sheet  item,  level of income or  financial  condition  of the  primary
obligor,  (iii) to purchase  property,  securities or services primarily for the
purpose of assuring the owner of any such primary  obligation  of the ability of
the  primary  obligor  to make  payment  of  such  primary  obligation,  or (iv)
otherwise to assure or hold  harmless the holder of any such primary  obligation
against loss in respect thereof (each of (i)-(iv), a "Guaranty Obligation"); (b)
with respect to any Surety  Instrument  (other than any Letter of Credit) issued
for the account of such Person or as to which such  Person is  otherwise  liable
for  reimbursement  of drawings or  payments;  (c) to  purchase  any  materials,
supplies or other property from, or to obtain the services of, another Person if
the relevant  contract or other  related  document or  obligation  requires that
payment for such materials,  supplies or other  property,  or for such services,
shall be made  regardless  of whether  delivery of such  materials,  supplies or
other property is ever made or tendered,  or such services are ever performed or
tendered  if  such  obligation  is  intended  to  provide  the  equivalent  of a
guarantee; or (d) in respect of any Swap Contract;  provided,  however, that the
term  Contingent  Obligation  shall not include  endorsements of instruments for
deposit or collection or standard contractual  indemnities entered into, in each
case in the ordinary course of business. The amount of any Contingent Obligation
shall (x) in the case of a Guaranty Obligation, be deemed equal to the stated or
determinable  amount of the primary obligation in respect of which such Guaranty
Obligation  is  made  or,  if  not  stated  or if  indeterminable,  the  maximum
reasonably  anticipated  liability  in respect  thereof,  and (y) in the case of
other Contingent  Obligations,  be equal to the maximum  reasonably  anticipated
liability in respect thereof.

     "Continue,"  "Continuation" and "Continued" shall refer to the continuation
pursuant to Section  2.09 of a LIBOR Loan from one  Interest  Period to the next
Interest Period.

     "Contractual  Obligation" shall mean as to any Person, any provision of any
security issued by such Person or of any mortgage,  security  agreement,  pledge
agreement,  indenture,  credit agreement,  securities purchase  agreement,  debt
instrument,  contract,  agreement,  instrument or other undertaking  (including,
without limitation,  any undertaking made to the FCC or any other Communications
Regulatory  Authority)  to which such Person is a party or by which it or any of
its Property is bound or subject.

     "Convert,"  "Conversion"  and  "Converted"  shall  refer  to  a  conversion
pursuant to Section 2.09 of one Type of Loans into another Type of Loans,  which
may be  accompanied  by the transfer by a Lender (at its sole  discretion)  of a
Loan from one Applicable Lending Office to another.

     "Covered Taxes" see Section 5.06(a).

     "Credit Documents" shall mean this Agreement,  the Effectiveness Agreement,
the Notes, the Letter of Credit Documents and the Security Documents.

                                       6
<PAGE>

     "Creditor"  shall mean (i) any Agent,  (ii) the Issuing  Lender,  (iii) any
Lender,  and (iv) any party to a Swap  Contract  relating to the Loans if at the
date of  entering  into  such  Swap  Contract  such  Person  was a Lender  or an
Affiliate of a Lender.

     "Debt   Issuance"   shall  mean  the  incurrence  by  any  Company  of  any
Indebtedness  after the  Effectiveness  Date (other than as permitted by Section
9.08 as in effect from time to time).

     "Default"  shall mean any event or condition  that  constitutes an Event of
Default or that would become,  with notice or lapse of time or both, an Event of
Default.

     "Delivery  Date"  shall  mean the date  Borrower  shall  have  delivered  a
compliance  certificate  and financial  statements  in  accordance  with Section
9.01(a),  (b) and (c) in respect of the first fiscal  quarter  after the date of
depletion of the interest escrow in respect of the Senior Subordinated Notes.

     "Disposition"  shall  mean (i) any  conveyance,  sale,  lease,  assignment,
transfer or other  disposition  (including by way of merger or consolidation and
including any sale-leaseback transaction) of any Property (including receivables
and Equity  Interests of any Subsidiary of any Company or Minority  Interests of
any Company)  (whether  now owned or  hereafter  acquired) by any Company to any
Person other than Borrower or any  Subsidiary,  (ii) any issuance or sale by any
Subsidiary  of its Equity  Interests  to any Person  other than  Borrower or any
Subsidiary,  and (iii) any liquidating dividend or distribution  received by any
Company in respect of any Minority Interest,  excluding,  however,  in each case
any Excluded Disposition.

     "Disposition  Event" shall mean the receipt by any Company of cash proceeds
or cash distributions of any kind received in consideration for a Disposition of
Property other than Sold Minority Interests.

     "Disqualified  Capital Stock" shall mean,  with respect to any Person,  any
Equity  Interest  of such  Person  that,  by its  terms  (or by the terms of any
security into which it is convertible or for which it is exchangeable),  or upon
the happening of any event,  matures (excluding any maturity as the result of an
optional  redemption by the issuer thereof) or is mandatorily  redeemable (other
than solely for Qualified Capital Stock),  pursuant to a sinking fund obligation
or otherwise,  or is redeemable at the sole option of the holder  thereof (other
than solely for Qualified  Capital Stock) or  exchangeable  or convertible  into
debt  securities of the issuer thereof at the sole option of the holder thereof,
in whole or in part,  on or prior to the date  which is 90 days  after the Final
Maturity Date.

     "Dividend Payment" shall mean dividends (in cash,  Property or obligations)
on, or other  payments or  distributions  on account of, or the  irrevocable  or
nonrefundable  setting apart of money for a sinking or other analogous fund for,
or the  purchase,  redemption,  retirement or other  acquisition  of, any Equity
Interests or Equity Rights of any Company,  but excluding dividends paid through
the issuance of additional  shares of Qualified Capital Stock and any redemption
or exchange of any Qualified  Capital Stock of such Obligor through the issuance
of Qualified Capital Stock of such Obligor.

     "Documentation Agent" see the introduction hereto.

     "Dollars" and "$" shall mean lawful money of the United States of America.

     "Domestic  Subsidiary"  shall  mean any  Subsidiary  other  than a  Foreign
Subsidiary.

     "Effectiveness  Agreement" shall mean the Effectiveness  Agreement dated as
of February 29, 2000,  among  Borrower,  PR Borrower,  the  Guarantors,  certain
Lenders and the Agents.

     "Effectiveness  Date"  shall  have  the  meaning  given  such  term  in the
Effectiveness Agreement.

                                       7
<PAGE>

     "Eligible Person" shall mean (i) a commercial bank organized under the laws
of the United States,  or any state thereof,  and having a combined  capital and
surplus of at least $100.0  million;  (ii) a commercial bank organized under the
laws of any other  country  that is a member of the  Organization  for  Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus in a dollar equivalent amount
of at least $100.0 million; provided,  however, that such bank is acting through
a branch or agency  located in the country in which it is  organized  or another
country that is also a member of the OECD;  (iii) an insurance  company,  mutual
fund or other  entity  which is  regularly  engaged  in  making,  purchasing  or
investing in loans or securities;  or any other financial  institution organized
under the laws of the United States,  any state thereof,  any other country that
is a member of the OECD or a  political  subdivision  of any such  country  with
assets,  or assets under  management,  in a dollar equivalent amount of at least
$100.0 million; (iv) any Affiliate of a Lender; (v) any other entity (other than
a natural person) which is an "accredited  investor" (as defined in Regulation D
under the United States Securities Act of 1933, as amended) which extends credit
or buys loans as one of its businesses including,  but not limited to, insurance
companies,  mutual  funds  and  investment  funds;  and  (vi) any  other  entity
consented  to  by  each  of  Co-Syndication  Agents,  Administrative  Agent  and
Borrower.  With  respect to any Lender that is a fund or  commingled  investment
vehicle that invests in loans, any other fund or commingled  investment  vehicle
that invests in loans and is managed or advised by the same  investment  advisor
of such Lender or by an Affiliate of such investment advisor shall be treated as
a single Eligible Person.

     "Employee  Benefit Plan" shall mean an employee benefit plan (as defined in
Section 3(3) of ERISA) that is maintained or  contributed to by any ERISA Entity
or with respect to which Borrower or a Subsidiary could incur liability.

     "Environmental  Claim" shall mean, with respect to any Person,  any written
notice,  claim, demand or other communication  (collectively,  a "claim") by any
other Person  alleging such Person's  liability  for any costs,  cleanup  costs,
response or  corrective  action  costs,  damages to natural  resources  or other
Property, personal injuries, fines or penalties arising out of or resulting from
(i) the presence,  Release or threatened  Release into the  environment,  of any
Hazardous Material at any location, whether or not owned by such Person, or (ii)
any violation of any  Environmental  Law. The term  "Environmental  Claim" shall
include any claim by any Person seeking damages, contribution,  indemnification,
cost recovery,  compensation or injunctive relief resulting from the presence of
Hazardous  Materials  or  arising  from  alleged  injury  or threat of injury to
health, safety or the environment.

     "Environmental  Laws" shall mean any and all present and future  applicable
laws, rules or regulations of any Governmental  Authority,  any orders, decrees,
judgments or injunctions  and the common law in each case as now or hereafter in
effect,  relating to  pollution or  protection  of human  health,  safety or the
environment,  including  without  limitation,  ambient air, indoor air, soil, or
surface water,  ground water, land or subsurface  strata,  and natural resources
such as wetlands, flora or fauna, including,  without limitation, those relating
to Releases or threatened  Releases of Hazardous Materials into the environment,
or otherwise relating to the manufacture,  processing, generation, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials.

     "Equity  Interests"  shall mean,  with  respect to any Person,  any and all
shares,  interests,  participations or other equivalents,  including  membership
interests (however designated, whether voting or non-voting), of capital of such
Person,  including,  if such  Person  is a  partnership,  partnership  interests
(whether  general or  limited)  and any other  interest  or  participation  that
confers on a Person the right to receive a share of the  profits  and losses of,
or  distributions  of assets of, such  partnership,  whether  outstanding  on or
issued after the Effectiveness Date.

     "Equity  Issuance"  shall  mean any of (a) any  issuance  or sale after the
Effectiveness  Date by any  Company or any other  direct or  indirect  parent of
Borrower  (other  than  by  the  Permitted  Holders)  of  any  Equity  Interests
(including  any Equity  Interests  issued upon exercise of any Equity Rights) or
any Equity  Rights,  or (b) the receipt by any Company  after the  Effectiveness
Date  of any  capital  contribution  (whether  or not  evidenced  by any  Equity
Interest issued by the recipient of such contribution) other than from any other
Company,  excluding in each case (i) any issuance of common Equity  Interests of
Parent (or any other  direct or indirect  parent of  Borrower)  to the seller or
sellers in consideration for a Permitted  Acquisition or as permitted by Section
9.09(A)(r),  (ii) any  issuance or sale of Equity  Interests  in any  Subsidiary
(which,  for the  avoidance of doubt,  is treated as a  Disposition),  (iii) any
issuance or sale by Parent (or any other direct or indirect  parent of Borrower)
of Equity Interests of Parent to employees,  directors,  officers or consultants
pursuant to benefit or compensation  arrangements in an amount not to exceed 10%
of the outstanding  Equity  Interests of Parent,  (iv) any issuance of Qualified

                                       8
<PAGE>

Capital  Stock to the  extent  used as  contemplated  by the  proviso to Section
9.10(c)(iii),  (v)  any  issuance  of  Equity  Interests  by any  Subsidiary  to
directors or nominees if resulting in de minimis proceeds,  (vi) any issuance of
any common Equity Interests of Parent (or any other direct or indirect parent of
Borrower)  to (x) any of the  Permitted  Holders  or (y) at least one  Permitted
Holder and a group of private  investors  arranged by any Permitted  Holder,  in
each case the  proceeds  of which are  substantially  contemporaneously  used to
effect any Permitted  Acquisition and (vii) any issuance of Equity  Interests by
any Company to another Company as part of the Reorganization.

     "Equity  Rights" shall mean,  with respect to any Person,  any  outstanding
subscriptions,  options, warrants, commitments,  preemptive rights or agreements
of any kind  (including any  stockholders'  or voting trust  agreements) for the
issuance, sale, registration or voting of, or outstanding securities convertible
into, any additional  shares of Equity Interests of any class, or partnership or
other ownership interests of any type in, such Person.

     "ERISA" shall mean the United States  Employee  Retirement  Income Security
Act of 1974, as amended.

     "ERISA Entity" shall mean any member of an ERISA Group.

     "ERISA Event" shall mean (a) any "reportable  event," as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice  period is waived);  (b) the existence
with respect to any Plan of an "accumulated  funding  deficiency" (as defined in
Section  412 of the Code or Section 302 of ERISA),  whether or not  waived,  the
failure to make by its due date a required  installment  under Section 412(m) of
the  Code  with  respect  to any  Plan  or the  failure  to  make  any  required
contribution to a Multiemployer  Plan; (c) the filing pursuant to Section 412(d)
of the Code or  Section  303(d) of ERISA of an  application  for a waiver of the
minimum  funding  standard with respect to any Plan;  (d) the  incurrence by any
ERISA  Entity of any  liability  under  Title IV of ERISA  with  respect  to the
termination  of any Plan; (e) the receipt by any ERISA Entity from the PBGC or a
plan  administrator of any notice relating to an intention to terminate any Plan
or Plans or to appoint a trustee to administer  any Plan,  or the  occurrence of
any event or condition  which is reasonably  likely to constitute  grounds under
ERISA for the termination of or the appointment of a trustee to administer,  any
Plan;  (f) the  incurrence by any ERISA Entity of any liability  with respect to
the withdrawal or partial  withdrawal from any Plan or  Multiemployer  Plan; (g)
the  receipt  by  an  ERISA  Entity  of  any  notice,  or  the  receipt  by  any
Multiemployer  Plan  from  any  ERISA  Entity  of  any  notice,  concerning  the
imposition of Withdrawal  Liability or a determination that a Multiemployer Plan
is, or is expected to be, insolvent or in reorganization,  within the meaning of
Title IV of ERISA;  (h) the  making of any  amendment  to any Plan  which  could
result in the  imposition of a lien or the posting of a bond or other  security;
or (i) the occurrence of a nonexempt prohibited  transaction (within the meaning
of Section 4975 of the Code or Section 406 of ERISA) which is reasonably  likely
to result in liability to any Company.

     "ERISA Group" shall mean any Company and all members of a controlled  group
of corporations and all trades or businesses (whether or not incorporated) under
common  control  which,  together  with such  Company,  are  treated as a single
employer under Section 414 of the Code.

     "Event of Default" see Section 10.

     "Excess Cash Flow" shall mean for the relevant  period,  (A) the sum of (i)
Operating Cash Flow for such period  (calculated  for this  definition by adding
back the cash  portion of all  extraordinary  or  non-recurring  items of income
(other than from Dispositions and Excluded  Dispositions) to the extent excluded
in the  calculation  of Adjusted Net Income and by deducting the cash portion of
all  extraordinary or  non-recurring  items of expense to the extent excluded in
the  calculation  of  Adjusted  Net  Income);  (ii) any net  decrease in Working
Capital  during  such  period  (except to the extent  attributable  to assets or
Persons  subject to a Disposition  during such period);  and (iii) cash received
from the  proceeds  of any life  insurance  or "key man"  policies  during  such
period,  minus  (B) the sum of (i) cash  interest  expense  (including,  without
duplication,  cash  interest  expense under Swap  Contracts,  cash Capital Lease
expense and  commitment  fees and  interest  accruing  during such period on the
Senior  Subordinated  Notes and (if  issued by  Borrower  or any  Subsidiary  of
Borrower)  the  Additional  Senior  Subordinated  Notes)  of  Borrower  and  its

                                       9
<PAGE>

Consolidated  Subsidiaries for such period to the extent deducted in calculating
Adjusted Net Income;  (ii) the sum of all scheduled  principal  payments  (other
than pursuant to Section  2.10(a)(v))  on any  Indebtedness  (including  Capital
Leases  and  Term  Loans  pursuant  to  Section  3.01(b))  of  Borrower  and its
Consolidated  Subsidiaries  made during such  period from  internally  generated
funds,  all  voluntary  prepayments  of Term Loans made  during such period from
internally  generated funds and all  prepayments of Revolving  Credit Loans made
during such period from internally  generated funds to the extent accompanied by
a  permanent   reduction  in  Revolving   Credit   Commitments;   (iii)  Capital
Expenditures  made during such period by Borrower  and the  Subsidiaries  to the
extent funded from internally  generated funds; (iv) all withholding tax expense
incurred in connection with cross border  transactions and all cash income taxes
actually  paid by Borrower or any  Subsidiary  during such period and  dividends
paid during such period by Borrower  pursuant to Section  9.10(c)(ii);  (v) cash
dividends paid during such period by Borrower  pursuant to Section  9.10(c)(iii)
to the extent made with  internally  generated  funds;  (vi) cash dividends paid
during  such period by Borrower  pursuant  to Section  9.10(d);  (vii) cash paid
during such period for any  Acquisition or Investment  permitted by Section 9.06
or 9.09, in each case to the extent made from internally generated funds; (viii)
any net increases in Working  Capital  during such period  (except to the extent
attributable to assets or Persons subject to an Acquisition during such period);
(ix) solely to the extent not  reflected  in the  calculation  of  Adjusted  Net
Income, cash distributions required to be paid to the minority holders of Equity
Interests in any Consolidated Subsidiary of Borrower pursuant to the partnership
agreement   governing  such   Consolidated   Subsidiary  as  in  effect  on  the
Effectiveness  Date; and (x) monitoring and management fees actually paid to any
Permitted Holder during such period by Borrower as permitted by Section 9.15.

     "Exchange  Act" shall mean the United  States  Securities  Exchange  Act of
1934, as amended.

     "Exchange  Indenture"  shall  mean the  indenture  pursuant  to  which  the
Exchange Notes are issued.

     "Exchange Notes" see the definition of Senior Subordinated Notes.

     "Exchange Offer" see the definition of Senior Subordinated Notes.

     "Excluded  Dispositions"  shall mean (i) Dispositions for fair market value
resulting in no more than  $250,000 in aggregate  proceeds per  Disposition  (or
series of related Dispositions) and other Dispositions  resulting in up to $10.0
million in aggregate  proceeds in any fiscal year (which $10.0 million shall not
include   any  such   $250,000  or  less   Disposition   or  series  of  related
Dispositions); (ii) an exchange of equipment or inventory for other equipment or
inventory,  provided that the Company  effecting such exchange receives at least
substantially  equivalent  value in such exchange for the Property  disposed of;
(iii) any  transaction  permitted by Section 9.06 (other than clause (g), (p) or
(q) thereof), any Lien permitted by Section 9.07 and any Investment permitted by
Section  9.09;  (iv) any  issuance  of Equity  Interests  by any  Subsidiary  to
directors  or  nominees if  resulting  in de minimis  proceeds;  (v) the sale of
inventory in the ordinary course of business; and (vi) any return by any Company
of assets of All America Cables and Radio, Inc. and its affiliates to the seller
thereof pursuant to the purchase and sale agreements relating to the acquisition
of such assets or related Equity Interests.

     "Excluded Taxes" see Section 5.06(a).

     "Existing Affiliate Agreements" see Section 9.15.

     "Existing  Indentures"  shall mean each  Indenture  pursuant  to which each
tranche of the Existing Notes were issued.

     "Existing Notes" shall mean Parent's (i) $250.0 million aggregate principal
amount  of 8 7/8%  Senior  Notes  due  2001 and (ii)  $100.0  million  aggregate
principal amount of 10 1/8% Senior Notes due 2005.

     "FAA" shall mean the United States Federal Aviation Administration.

                                       10
<PAGE>

     "Facilities  Agreement"  shall mean the  Facilities  Agreement  dated as of
January 2, 1995 among PR Borrower,  Century ML Cable Venture and Century-ML,  as
the same shall be modified and  supplemented  and in effect from time to time in
accordance with its terms and this Agreement.

     "fair market value" shall mean,  with respect to any asset,  a price (after
taking into account any liabilities  relating to such assets),  as determined by
Borrower in good faith,  that is within a reasonable range of prices which could
be negotiated in an arm's-length free market  transaction,  for cash,  between a
willing  seller  and a willing  and able  buyer,  neither  of which is under any
compulsion to complete the transaction.

     "FCC" shall mean the United States Federal  Communications  Commission,  or
any other similar or successor  agency of the federal  government  administering
the Communications Act.

     "Federal  Funds Rate" shall mean,  for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve  System  arranged by Federal  funds brokers on such day, as published by
the Federal  Reserve Bank of New York on the Business Day next  succeeding  such
day;  provided,  however,  that  (a) if the day  for  which  such  rate is to be
determined  is not a Business  Day, the Federal Funds Rate for such day shall be
such  rate  on  such  transactions  on the  next  preceding  Business  Day as so
published  on the next  succeeding  Business  Day and (b) if such rate is not so
published  for any Business  Day, the Federal  Funds Rate for such  Business Day
shall be the average rate quoted to Administrative Agent on such Business Day on
such  transactions  by three federal funds  brokers of recognized  standing,  as
determined by Administrative Agent.

     "Final  Maturity  Date" shall mean  November  30, 2007.  If an  Incremental
Facility  shall be put in place with a later  maturity  date, the Final Maturity
Date shall be extended to the final maturity thereof.

     "Financial  Maintenance  Covenants"  shall mean the  covenants set forth in
Section 9.11(a) through (e).

     "Fixed Charge  Coverage  Ratio" shall mean, for any Test Date, the ratio of
(x) Operating Cash Flow for the four fiscal quarters ending on such Test Date to
(y) Fixed Charges for the four fiscal quarters ending on such Test Date.

     "Fixed  Charges"  shall mean, for any period,  the sum of (i)  Consolidated
Interest  Expense  for such  period to the extent paid or payable in cash during
such  period,   (ii)  the  sum  of  all  scheduled  principal  payments  on  any
Indebtedness of Borrower and its Consolidated  Subsidiaries (including,  without
duplication, any lease payments in respect of Capital Leases of Borrower and its
Consolidated  Subsidiaries  attributable to the principal  component thereof for
such period but  excluding  any  prepayment  of a type  contemplated  by Section
2.10),  (iii) all cash  income tax  expense  actually  paid to any  Governmental
Authority by Borrower and its  Consolidated  Subsidiaries for such period (other
than taxes related to Dispositions or Excluded  Dispositions not in the ordinary
course of  business),  (iv) all  dividends  paid by Borrower  during such period
pursuant to Section  9.10(c)(ii) or pursuant to Section  9.10(d) (other than for
taxes  related to  Dispositions  and Excluded  Dispositions  not in the ordinary
course of  business),  and (v)  Capital  Expenditures  during such period to the
extent made from internally generated funds.

     "Foreign  Plan" shall mean any  employee  benefit  plan,  program,  policy,
arrangement or agreement  maintained or contributed to by, or entered into with,
any Company with respect to employees  employed outside the United States (other
than individual employment agreements).

     "Foreign Subsidiary" shall mean any direct or indirect Subsidiary organized
outside of the United  States as defined in Section  7701(a)(9)  of the Code (or
any successor provision).

     "Funding Date" shall mean the date of the making of any extension of credit
hereunder (including the Original Closing Date and the Effectiveness Date).

                                       11
<PAGE>

     "GAAP" shall mean generally accepted accounting  principles set forth as of
the  relevant  date  in  the  opinions  and  pronouncements  of  the  Accounting
Principles Board of the American  Institute of Certified Public  Accountants and
statements and  pronouncements of the Financial  Accounting  Standards Board (or
agencies with similar  functions of comparable  stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
date of determination.

     "Governmental Authority" shall mean any government or political subdivision
of the United  States,  Puerto Rico,  the Virgin Islands or any other country or
any agency,  authority,  board, bureau, central bank, commission,  department or
instrumentality thereof or therein,  including,  without limitation,  any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic, or
any  entity  exercising   executive,   legislative,   judicial,   regulatory  or
administrative  functions  of or  pertaining  to such  government  or  political
subdivision.

     "Guarantee" shall mean the guarantee of each Guarantor  pursuant to Section
6.

     "Guaranteed Obligations" see Section 6.01.

     "Guarantors"  shall mean Parent,  Borrower,  PR Borrower,  each  Subsidiary
(other than any Foreign  Subsidiary) listed on Schedule 1.01 and each direct and
indirect  Subsidiary  (other than any Foreign  Subsidiary)  that  guarantees the
payment of the Obligations of Borrower pursuant to Section 9.20.

     "Guaranty Obligation" see the definition of Contingent Obligation.

     "Hazardous  Material"  shall  mean  any  pollutant,   contaminant,   toxic,
hazardous or extremely hazardous  substance,  constituent or waste, or any other
constituent,  waste, material, compound or substance subject to regulation under
any Environmental Law including, without limitation,  petroleum or any petroleum
product, including crude oil or any fraction thereof, polychlorinated biphenyls,
urea-formaldehyde insulation and asbestos.

     "in the ordinary  course of business"  shall mean in the ordinary course of
business of Borrower and the Subsidiaries.

     "Incremental  Facility" see Section 2.01(f). There is no commitment for all
or any part of any Incremental  Facility as of the Effectiveness Date. No Lender
shall have any obligation  for any part of any  Incremental  Facility  unless it
shall have expressly consented thereto in writing.

     "incur" shall mean, with respect to any Indebtedness or other obligation of
any Person,  to create,  issue,  incur  (including  by  conversion,  exchange or
otherwise),  assume,  guarantee  or otherwise  become  liable in respect of such
Indebtedness or other obligation or the recording,  as required pursuant to GAAP
or otherwise,  of any such Indebtedness or other obligation on the balance sheet
of such Person (and "incurrence," "incurred" and "incurring" shall have meanings
correlative  to  the  foregoing).  Indebtedness  of  any  Person  or  any of its
Subsidiaries  existing at the time such  Person  becomes a Company (or is merged
into or consolidates  with any Company),  whether or not such  Indebtedness  was
incurred in connection  with,  or in  contemplation  of, such Person  becoming a
Company (or being merged into or consolidated with any Company), shall be deemed
incurred  at the time any such  Person  becomes  a  Company  or  merges  into or
consolidates  with  any  Company.  Neither  the  accrual  of  interest,  nor the
accretion of accreted value, shall be deemed to be an incurrence.

     "Indebtedness"  shall mean, for any Person,  without  duplication,  (a) all
indebtedness  for borrowed  money of such Person;  (b) all  obligations  issued,
undertaken or assumed by such Person as the deferred  purchase price of Property
or  services  (other  than  trade  payables  and  accrued  expenses);   (c)  all
non-contingent  reimbursement or payment obligations of such Person with respect
to Surety  Instruments that are not reimbursed  within three Business Days (such
as, for example, unpaid reimbursement  obligations in respect of a drawing under
a letter of credit);  (d) all  obligations  of such Person  evidenced  by notes,
bonds,  debentures or similar  instruments,  including  obligations so evidenced
incurred in connection with the  acquisition of Property or businesses;  (e) all
indebtedness  of such Person  created or arising under any  conditional  sale or

                                       12
<PAGE>

other title retention agreement,  or incurred as financing,  in either case with
respect to Property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such Property (other than operating leases)); (f) all
Capital Lease Obligations of such Person;  (g) all indebtedness of other Persons
referred to in clauses (a) through (f) above secured by (or for which the holder
of such  indebtedness  has an existing  right,  contingent or  otherwise,  to be
secured  by) any Lien upon or in  Property  (including  accounts  and  contracts
rights)  owned by such Person,  whether or not such Person has assumed or become
liable  for the  payment  of such  indebtedness  (provided  that the  amount  of
indebtedness  shall be deemed to be  limited  to the fair  market  value of such
Property if such Person has not assumed or become liable for the payment of such
indebtedness);  and (h) all  Guaranty  Obligations  of such Person in respect of
indebtedness  or  obligations  of others of the kinds referred to in clauses (a)
through (g) above. Indebtedness shall not include accounts extended by suppliers
in the ordinary  course of business in connection with the purchase of goods and
services or customary  indemnity  obligations  incurred in  connection  with the
Disposition  of  Property.  The  Indebtedness  of any Person  shall  include any
Indebtedness of any partnership in which such Person is the general partner.

     "Indemnitee" see Section 12.03(b).

     "Information Memorandum" shall mean the Confidential Information Memorandum
dated  February 2000  distributed  in  connection  with the  syndication  of the
Commitments and Loans.

     "Initial Public Offering" shall mean a primary underwritten public offering
of the common stock of Parent at any time after the  Effectiveness  Date,  other
than any public  offering or sale pursuant to a  registration  statement on Form
S-8 or a comparable form.

     "Insolvency  Proceeding"  shall mean,  with respect to any Person,  (a) any
case, action or proceeding with respect to such Person before any court or by or
before any other  Governmental  Authority  relating to  bankruptcy,  insolvency,
reorganization,    liquidation,   receivership,    dissolution,   sequestration,
conservatorship,  winding-up or relief of debtors (or the convening of a meeting
or the passing of a resolution for or with a view to any of the  foregoing),  or
(b) any  assignment  for the benefit of creditors,  composition,  marshalling of
assets for creditors,  or other similar  arrangement in respect of such Person's
creditors generally or any substantial portion of its creditors.

     "Intercompany  Note" shall mean a promissory note substantially in the form
of Exhibit B.

     "Interest  Coverage  Ratio" shall mean, for any Test Date, the ratio of (x)
Operating Cash Flow for the four fiscal quarters ending on such Test Date to (y)
Consolidated  Interest  Expense for the four fiscal quarters ending on such Test
Date to the extent thereof paid or payable in cash during such period; provided,
however,  that (1) prior to the Senior  Subordinated Notes Interest Trigger Date
(or, with respect to the Additional Senior  Subordinated  Notes, such later date
when  the  interest  escrow,  if  any,  in  respect  of  the  Additional  Senior
Subordinated  Notes has been  depleted),  Consolidated  Interest  Expense  shall
exclude interest  accruing on the Senior  Subordinated  Notes and the Additional
Senior Subordinated Notes (if issued by Borrower or any Subsidiary of Borrower),
(2) if the  Additional  Senior  Subordinated  Notes are  issued by any direct or
indirect parent of Borrower, Consolidated Interest Expense shall, for any period
ending after the Senior Subordinated Notes Interest Trigger Date (or, such later
date when the interest  escrow in respect  thereof,  if any, has been depleted),
include  cash  interest  accruing  during such period on the  Additional  Senior
Subordinated  Notes and (3) for any period  ending  after the Parent  Refinanced
Notes Interest  Trigger Date,  Consolidated  Interest Expense shall include cash
interest accruing during such period on the Parent Refinanced Notes.

     "Interest  Period" shall mean,  with respect to any LIBOR Loan, each period
commencing on the date such LIBOR Loan is made or Converted  from an ABR Loan or
the last day of the next  preceding  Interest  Period  for such  LIBOR  Loan and
(subject to the requirements of Sections 2.01(a),  2.01(b), 2.01(c), 2.01(d) and
2.09) ending on the numerically corresponding day in the first, second, third or
sixth  calendar  month  thereafter,  as Borrower  or PR  Borrower  may select as
provided in Section 4.05, except that each Interest Period that commences on the
last  Business  Day of a  calendar  month (or on any day for  which  there is no
numerically  corresponding  day in the  appropriate  subsequent  calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding  the  foregoing:  (i) if any Interest  Period for any  Revolving

                                       13
<PAGE>

Credit  Loan  would  otherwise  end  after  the  Revolving   Credit   Commitment
Termination  Date,  such  Interest  Period  shall  end on the  Revolving  Credit
Commitment  Termination  Date;  (ii) no  Interest  Period  for any Term Loan may
commence before and end after any Principal Payment Date,  unless,  after giving
effect thereto, the aggregate principal amount of the Term Loans having Interest
Periods  that end after such  Principal  Payment  Date shall be equal to or less
than  the  aggregate  principal  amount  of  the  Term  Loans  scheduled  to  be
outstanding after giving effect to the payments of principal required to be made
on such Principal  Payment Date; (iii) each Interest Period that would otherwise
end on a day  that  is not a  Business  Day  shall  end on the  next  succeeding
Business  Day  (or,  if such  next  succeeding  Business  Day  falls in the next
succeeding  calendar  month,  on the  next  preceding  Business  Day);  and (iv)
notwithstanding  clauses (i) and (ii) above,  no  Interest  Period  shall have a
duration of less than one month and, if the  Interest  Period for any LIBOR Loan
would otherwise be a shorter period,  such Loan shall not be available hereunder
as a LIBOR Loan for such period.

     "Interest   Rate   Certificate"   shall  mean  an   Officers'   Certificate
substantially in the form of Exhibit C-1, delivered pursuant to Section 9.01(e),
demonstrating  in reasonable  detail the calculation of the Total Leverage Ratio
as of any Test Date.

     "Interest  Rate  Protection  Agreement"  shall  mean,  for any  Person,  an
interest rate swap, cap or collar agreement or similar  arrangement between such
Person and one or more  financial  institutions  providing  for the  transfer or
mitigation of interest risks either generally or under specific contingencies.

     "internally  generated  funds"  shall  mean  funds not  generated  from the
proceeds of any Loan, Debt Issuance,  Equity  Issuance,  Disposition,  insurance
recovery or Indebtedness (in each case without regard to the exclusions from the
definition  thereof  (other than sales of inventory  in the  ordinary  course of
business)), as reasonably determined by Borrower.

     "Investment" shall mean, for any Person:  (a) the acquisition  (whether for
cash, Property, services or securities or otherwise) of Equity Interests, bonds,
notes, debentures or other securities of any other Person; (b) the making of any
deposit with, or advance, loan or other extension of credit to, any other Person
(including   the  purchase  of  Property  from  another  Person  subject  to  an
understanding or agreement,  contingent or otherwise, to resell such Property to
such Person);  (c) any capital contribution to (by means of any transfer of cash
or other  Property  to others or any payment  for  Property or services  for the
account or use of others) any other Person; and (d) the entering into, or direct
or indirect incurrence,  of any Guaranty Obligation with respect to Indebtedness
or other liability of any other Person.

     "Investor  Affiliates"  shall  mean (i)  each  Affiliate  of any  Principal
Investor that is not an operating  company or controlled by an operating company
and each general partner of each Principal Investor and Affiliate of a Principal
Investor and (ii) any other Person that holds Equity  Interests in Parent if any
Principal  Investor or Investor  Affiliate  described in clause (i) above has at
the  time of  determination  the  power  to vote  (or  cause  to be voted at its
discretion),  pursuant to contract,  irrevocable proxy or otherwise,  the shares
held by such other Person.

     "Investors" shall mean the Principal Investors and the Investor Affiliates.

     "Issuing Lender" shall mean Bank of America, N.A. or any of its Affiliates,
or such other Lender or Lenders selected by Administrative  Agent and reasonably
satisfactory to Borrower, as the issuer of Letters of Credit under Section 2.03,
together with its successors and assigns in such capacity.

     "Joinder  Agreement"  shall mean a Joinder  Agreement  substantially in the
form of Exhibit I.

     "Lease"  shall  mean any lease,  sublease,  franchise  agreement,  license,
occupancy or concession agreement.

     "LEC System" shall mean a system providing local telephone  services within
a local exchange in Puerto Rico, the Virgin Islands and other Caribbean nations.

     "Lender" and "Lenders" see the introduction to this Agreement.

                                       14

<PAGE>

     "Letter of Credit" see Section 2.03.

     "Letter of Credit  Documents"  shall  mean,  with  respect to any Letter of
Credit,  collectively,  any other agreements,  instruments,  guarantees or other
documents  (whether  general in application or applicable only to such Letter of
Credit) governing or providing for (a) the rights and obligations of the parties
concerned or at risk with respect to such Letter of Credit or (b) any collateral
security  for any of such  obligations,  each as the  same may be  modified  and
supplemented and in effect from time to time.

     "Letter of Credit  Interest" shall mean, for each Revolving  Credit Lender,
such Lender's participation interest (or, in the case of the Issuing Lender, the
Issuing  Lender's  retained  interest) in the Issuing  Lender's  liability under
Letters  of Credit  and such  Lender's  rights and  interests  in  Reimbursement
Obligations  and fees,  interest and other amounts  payable in  connection  with
Letters of Credit and Reimbursement Obligations.

     "Letter of Credit Liability" shall mean, without  duplication,  at any time
and in respect of any Letter of Credit,  the sum of (a) the undrawn  face amount
of such Letter of Credit,  plus (b) the aggregate unpaid principal amount of all
Reimbursement Obligations of Borrower at such time due and payable in respect of
all drawings made under such Letter of Credit.

     "LIBOR  Base  Rate"  shall  mean,  with  respect  to any LIBOR Loan for any
Interest Period therefor,  the rate per annum determined by Administrative Agent
to be the arithmetic  mean (rounded to the nearest 1/100th of 1%) of the offered
rates for deposits in Dollars with a term  comparable  to such  Interest  Period
that  appears on the Dow Jones  Page 3750 (as  defined  below) at  approximately
11:00 a.m., London,  England time, on the second full Business Day preceding the
first day of such Interest Period; provided,  however, that (i) if no comparable
term  for an  Interest  Period  is  available,  the  LIBOR  Base  Rate  shall be
determined  using the  weighted  average of the offered  rates for the two terms
most nearly corresponding to such Interest Period and (ii) if there shall at any
time no longer exist a Dow Jones Page 3750,  "LIBOR Base Rate" shall mean,  with
respect  to each day during  each  Interest  Period  pertaining  to LIBOR  Loans
comprising part of the same  Borrowing,  the rate per annum equal to the rate at
which Administrative Agent is offered deposits in Dollars at approximately 11:00
a.m.,  London,  England  time,  two Business Days prior to the first day of such
Interest Period in the London  interbank market for delivery on the first day of
such Interest  Period for the number of days comprised  therein and in an amount
comparable  to its  portion of the  amount of such LIBOR Loan to be  outstanding
during  such  Interest  Period.  "Dow Jones Page  3750"  shall mean the  display
designated as Page 3750 on the Dow Jones (or such other page as may replace such
page on such  service for the purpose of  displaying  the rates at which  Dollar
deposits are offered by leading banks in the London interbank deposit market).

     "LIBOR  Loans" shall mean Loans that bear  interest at rates based on rates
referred to in the definition of "LIBOR Rate" in this Section 1.01.

     "LIBOR  Rate"  shall  mean,  for any  LIBOR  Loan for any  Interest  Period
therefor, a rate per annum (rounded upwards, if necessary,  to the nearest 1/100
of 1%) determined by Administrative Agent to be equal to the LIBOR Base Rate for
such Loan for such Interest  Period  divided by 1 minus the Reserve  Requirement
(if any) for such Loan for such Interest Period.

     "Licenses" see Section 8.22(a).

     "License  Subsidiary"  shall mean any  Subsidiary  of Borrower  that (i) is
organized  in a state  within the  United  States  (or the  appropriate  foreign
jurisdiction  in the  case of a  License  Subsidiary  whose  only  licenses  are
licenses granted by Governmental  Authorities  outside the United States),  (ii)
has no assets other than  Licenses of the  Companies and de minimis other assets
and  conducts no activity  except  holding such  Licenses and matters  ancillary
thereto  and  de  minimis  other   activities,   (iii)  has  no  liabilities  or
obligations,  including  Contingent  Obligations,  other than the  Guarantee and
liabilities strictly related to its corporate existence incurred in the ordinary
course  (except  de  minimis  trade  credit or the like)  and de  minimis  other
obligations,  and  (iv)  has no  Liens on any  License,  except,  to the  extent
permitted by the FCC or the relevant foreign Governmental Authority, Liens under
the  Security  Documents  in favor of  Administrative  Agent  on  behalf  of the
Creditors.

                                       15
<PAGE>

     "Lien"  shall mean,  with  respect to any  Property,  any  mortgage,  lien,
pledge, charge,  security interest or encumbrance of any kind, any other type of
preferential  arrangement  in  respect of such  Property  having the effect of a
security  interest or any filing  consented  to by any Company of any  financing
statement  under the UCC or any other  similar  notice of Lien under any similar
notice or recording  statute of any Governmental  Authority  consented to by any
Company,  including any easement,  right-of-way or other encumbrance on title to
Real Property,  and any agreement to give any of the foregoing.  For purposes of
the  Credit  Documents,  a Person  shall be deemed to own  subject to a Lien any
Property  that it has  acquired or holds  subject to the interest of a vendor or
lessor  under any  conditional  sale  agreement,  capital  lease or other  title
retention agreement (other than an operating lease) relating to such Property.

     "Loans" shall mean the Revolving Credit Loans, the Swing Loans and the Term
Loans.

     "Losses"  of  any  Person  shall  mean  the  losses,  liabilities,   claims
(including  those  based  upon  negligence,  strict or  absolute  liability  and
liability  in  tort),  damages,  reasonable  expenses,  obligations,  penalties,
actions, judgments, encumbrances, liens, penalties, fines, suits, reasonable and
documented costs or disbursements  of any kind or nature  whatsoever  (including
reasonable  fees and  expenses  of counsel  in  connection  with any  Proceeding
commenced  or  threatened  in  writing,  whether  or not  such  Person  shall be
designated a party thereto) at any time (including  following the payment of the
Obligations) incurred by, imposed on or asserted against such Person.

     "Majority  Lenders"  shall mean Lenders  holding at least a majority of the
sum of (without  duplication) (a) the aggregate  principal amount of outstanding
Loans (other than Swing Loans),  plus (b) the aggregate  amount of all Letter of
Credit  Liabilities,   plus  (c)  the  aggregate   Unutilized  Revolving  Credit
Commitments then in effect,  plus (d) in the case of the Swing Loan Lender only,
the aggregate amount of Swing Loans then outstanding.

     "Majority  Revolving  Credit Lenders" shall mean Lenders holding at least a
majority of the sum of (without  duplication) (a) the aggregate principal amount
of  outstanding  Revolving  Credit Loans,  plus (b) the aggregate  amount of all
Letter of Credit Liabilities, plus (c) the aggregate Unutilized Revolving Credit
Commitments then in effect,  plus (d) in the case of the Swing Loan Lender only,
the aggregate amount of Swing Loans then outstanding.

     "Majority Term Lenders"  shall mean Lenders  holding at least a majority of
the aggregate principal amount of outstanding Term Loans.

     "Majority  Tranche A Term Loan Lenders" shall mean Lenders holding at least
a majority  of the  aggregate  principal  amount of  outstanding  Tranche A Term
Loans.

     "Majority  Tranche A-PR Term Loan  Lenders"  shall mean Lenders  holding at
least a majority of the aggregate  principal amount of outstanding  Tranche A-PR
Term Loans.

     "Majority  Tranche B-PR Term Loan  Lenders"  shall mean Lenders  holding at
least a majority of the aggregate  principal amount of outstanding  Tranche B-PR
Term Loans.

     "Majority  Tranche C-PR Term Loan  Lenders"  shall mean Lenders  holding at
least a majority of the aggregate  principal amount of outstanding  Tranche C-PR
Term Loans.

     "Margin Stock" shall mean margin stock within the meaning of Regulations T,
U and X.

     "Marketing Agreement" shall mean a material operating or material marketing
agreement  between  any  Obligor  and  any  other  party   (including,   without
limitation, any such agreement with Century-ML).

     "Material  Adverse  Change"  shall  mean,  with  respect to any  Person,  a
material  adverse  change,  or any condition or event that has resulted or could
reasonably be expected to result in a material adverse change,  in the financial
condition,  business,  assets or results of operations of such Person,  together
with its Subsidiaries  taken as a whole.  Unless otherwise  indicated,  Material
Adverse Change refers to Borrower.

                                       16

<PAGE>

     "Material Adverse Effect" shall mean, any of (a) a material adverse effect,
or any  condition or event that has resulted or could  reasonably be expected to
result in a material  adverse  effect,  on the business,  assets,  or results of
operations or financial  condition of Borrower,  together with the  Subsidiaries
taken as a whole,  (b) a material  adverse effect on the ability of the Obligors
to  consummate in a timely  manner the  Transactions  or to perform any of their
material  obligations under any Credit Document or (c) a material adverse effect
on the legality,  binding effect or enforceability of any Credit Document or any
of the  material  rights  and  remedies  of the  Lenders,  the  Issuing  Lender,
Co-Syndication  Agents or any  Agent  thereunder.  In  determining  whether  the
occurrence of any individual event or the existence of any individual  condition
would,  or the  failure  of any  individual  event to  occur  or any  individual
condition to exist would, have a Material Adverse Effect,  notwithstanding  that
the  occurrence of such  individual  event or the  existence of such  individual
condition  does not,  or the failure to occur of such  individual  event or such
individual  condition to exist does not, of itself have such effect,  a Material
Adverse Effect shall be deemed to have occurred if the cumulative effect of such
event or condition or failure of event or condition  and all other then existing
events or conditions  and failures or event or conditions  would have a Material
Adverse Effect.

     "Merger" shall mean the merger on the Original  Closing Date with Parent as
the survivor pursuant to the Merger Agreement.

     "Merger  Agreement" shall mean the Agreement and Plan of Merger dated as of
July 2, 1998 of Parent,  as amended on  November  29, 1998 and as amended and in
effect in accordance with its terms and this Agreement.

     "Minority  Interest"  shall  mean an  Investment  (other  than a  Permitted
Investment) in any Person that is not a Subsidiary.

     "Minority  Interest  Basket" shall mean, at any time, the excess of (A) the
aggregate  amount of cash  dividends  or other cash  distributions  received  by
Borrower  since the Original  Closing Date and on or prior to such time from the
Minority   Interests   listed  on  Schedule  8.14  (or  Minority   Interests  of
substantially  equivalent  value  received  in  exchange  for any such  Minority
Interests),  net of all capital  contributions  or taxes  required to be paid in
respect thereof over (B) the sum of (i) the aggregate  amount (but not to exceed
$10.0  million for any fiscal year) of all  Investments  made after the Original
Closing Date and outstanding as of such time in Minority  Interests  pursuant to
Section 9.09(A)(m) or (u) and (ii) the aggregate amount of all dividends paid as
of such time since the Original Closing Date pursuant to Section 9.10(c)(iv).

     "MLCC" shall mean Merrill Lynch Capital Corporation.

     "MLPF&S" shall mean Merrill Lynch, Pierce, Fenner & Smith Incorporated.

     "Mortgage"  shall  mean an  agreement,  including,  but not  limited  to, a
mortgage, deed of trust or any other document, creating and evidencing a Lien on
a  Mortgaged  Real  Property,  which shall be in form and  substance  reasonably
satisfactory  to  Administrative  Agent,  with such schedules and including such
provisions as shall be necessary to conform such document to applicable or local
law or as shall be  customary  under  local law,  as the same may at any time be
amended in accordance with the terms thereof and hereof.

     "Mortgaged  Real  Property"  shall mean each Real  Property,  if any, which
shall be  subject  to a  Mortgage  delivered  after the  Original  Closing  Date
pursuant to Section 9.12.

     "MSA"  shall  mean  any  "metropolitan  statistical  area" as  defined  and
modified  by the  FCC  for  the  purpose  of  licensing  public  cellular  radio
telecommunications service systems.

     "Multiemployer Plan" shall mean at any time a multiemployer plan within the
meaning  of  Section  4001(a)(3)  of ERISA (i) to which any  member of the ERISA
Group is then making or accruing an  obligation to make  contributions,  (ii) to
which any member of the ERISA  Group has within  the  preceding  five plan years
made contributions, including for these purposes any Person which ceased to be a
member of the ERISA Group during such five year period, or (iii) with respect to
which any Company is reasonably likely to incur liability.

                                       17
<PAGE>

     "NAIC" shall mean the National Association of Insurance Commissioners.

     "Net Available Proceeds" shall mean:

     (i) in the case of any Disposition  Event,  the amount of Net Cash Payments
  received by any Company in connection with such Disposition Event;

     (ii) in the  case of any  Casualty  Event,  the  aggregate  amount  of cash
  proceeds of insurance,  condemnation  awards and other compensation  received
  by any  Company  in  respect of such  Casualty  Event net of (A) fees and
  expenses incurred by such Company in connection with recovery thereof,  (B)
  repayments of Indebtedness (other than Indebtedness hereunder) to the extent
  secured by a Lien on such Property that is permitted  hereunder or under the
  applicable  Security Document,  (C) any taxes (including  income,  transfer,
  stamp,  duty,  customs, withholding  and any other  taxes)  paid or payable by
  any Company in respect of the amount so recovered (after application of all
  credits and other offsets) and (D) amounts  drawn under the Revolving  Credit
  Facility that are applied to the replacement,  restoration  or repair of the
  Property  subject to such  Casualty Event; and

     (iii)  in the  case  of any  Equity  Issuance  or any  Debt  Issuance,  the
  aggregate  amount of all cash received by any Company in respect  thereof net
  of all investment banking fees, discounts and commissions,  legal fees,
  consulting fees,  accountants' fees,  underwriting discounts and commissions
  and other fees and expenses, actually incurred in connection therewith.

     "Net Cash Payments" shall mean, with respect to any Disposition  Event, the
aggregate amount of all cash payments  (including any cash payments  received by
way  of  deferred  payment  of  principal  pursuant  to a  note  or  installment
receivable or purchase price adjustment receivable or otherwise, but only as and
when received) received by any Company directly or indirectly in connection with
such Disposition Event;  provided,  however, that Net Cash Payments shall be net
(without  duplication)  of (i) the amount of all fees and  expenses  paid by any
Company in connection with such Disposition Event (the "Relevant  Disposition");
(ii) any taxes (including income,  transfer,  stamp, duty, customs,  withholding
and any other  taxes) paid or estimated to be payable by any Company as a result
of the  Relevant  Disposition  (after  application  of  all  credits  and  other
offsets);  (iii) any  repayments by any Company of  Indebtedness  other than the
Obligations to the extent that (a) such Indebtedness is secured by a Lien on the
Property  that is the  subject of the  Relevant  Disposition  that is  permitted
hereunder or under the  applicable  Security  Document and (b) the transferee of
(or holder of a Lien on) such Property requires that such Indebtedness be repaid
as a condition to the purchase or sale of such Property;  (iv) amounts  required
to be paid to any Person (other than any Company)  owning a beneficial  interest
in the assets subject to such Relevant Disposition;  and (v) appropriate amounts
to be provided by any Company,  as a reserve,  in accordance with GAAP,  against
any liabilities  associated  with such Relevant  Disposition and retained by any
Company after such Relevant Disposition,  including, without limitation, pension
and  other   post-employment   benefit   liabilities,   liabilities  related  to
environmental  matters and  liabilities  under any  indemnification  obligations
associated  with such  Relevant  Disposition,  all as  reflected in an Officers'
Certificate delivered to Administrative Agent.

     "New Lenders" see Section 2.01(f).

     "Non-Qualified Subsidiary" shall mean any Subsidiary other than a Qualified
Subsidiary.

     "Non-U.S. Lender" see Section 5.06(b).

     "Notes" shall mean the Revolving  Credit Notes, the Term Loan Notes and the
Swing Loan Notes.

     "Notice  of  Assignment"  shall  mean a notice of  assignment  pursuant  to
Section 12.06 substantially in the form of Exhibit F.

                                       18
<PAGE>

     "Notice of Borrowing" shall mean a notice of borrowing substantially in the
form of Exhibit G.

     "Obligations"  shall mean all amounts,  direct or indirect,  contingent  or
absolute, of every type or description,  and at any time existing,  owing to any
Creditor  or  any  of  its  Related  Parties  or  their  respective  successors,
transferees  or  assignees  pursuant to the terms of any Credit  Document or any
Swap  Contract or secured by any of the Security  Documents,  whether or not the
right of such Person to payment in respect of such  obligations  and liabilities
is reduced to judgment, liquidated,  unliquidated,  fixed, contingent,  matured,
unmatured,  disputed,  undisputed,  legal,  equitable,  secured or unsecured and
whether or not such claim is  discharged,  stayed or  otherwise  affected by any
bankruptcy case or insolvency or liquidation proceeding.

     "Obligors" shall mean Borrower, PR Borrower and the Guarantors.

     "Officers'  Certificate"  shall  mean,  as  applied to any  corporation,  a
certificate  executed on behalf of such corporation by its Chairman of the Board
(if an officer) or its Chief  Executive  Officer or its  President or one of its
Vice Presidents (or an equivalent  officer) and by its Chief Financial  Officer,
Vice  President-Finance  or its  Treasurer  (or an  equivalent  officer)  or any
Assistant Treasurer in their official (and not individual) capacities; provided,
however,  that every Officers' Certificate with respect to the compliance with a
condition  precedent to the making of any Loan or the taking of any other action
hereunder  shall include (i) a statement that the officers making or giving such
Officers'  Certificate  have read such  condition and any  definitions  or other
provisions contained in this Agreement relating thereto, and (ii) a statement as
to whether,  in the opinion of the signers,  such  condition  has been  complied
with.

     "Operating  Cash  Flow"  shall  mean,  for any  period,  the  sum  (without
duplication)  of the amounts for such period of Adjusted  Net Income,  plus,  in
each case to the extent  deducted in calculating  such Adjusted Net Income,  (1)
income tax expense,  (2)  withholding  tax expense  incurred in connection  with
cross border  transactions,  (3)  consolidated  interest  expense  (including in
respect  of the Senior  Subordinated  Notes and (if  issued by  Borrower  or any
Subsidiary  of  Borrower)  the  Additional  Senior   Subordinated   Notes),  (4)
depreciation  and  amortization  expense,  (5) other  non-cash items of expense,
other  than to the extent  requiring  an  accrual  or  reserve  for future  cash
expenses,  and (6) monitoring and management fees actually paid to any Permitted
Holder as permitted by Section 9.15 all as  determined on a  consolidated  basis
for Borrower and its Consolidated Subsidiaries,  and minus (1) cash dividends or
other  distributions  paid by Borrower to Parent pursuant to Section  9.10(c)(i)
and (2) distributions received from all Minority Interests during such period to
the extent included in calculating such Adjusted Net Income. Operating Cash Flow
shall be calculated  on a pro forma basis and otherwise in accordance  with GAAP
to give  effect to any  Acquisition  or  Disposition  of any System  consummated
during the  fiscal  period of  Borrower  ended on such Test Date as if each such
Acquisition  had been  effected  on the first day of such  period and as if each
such  Disposition had been consummated on the day prior to the first day of such
period; provided that any such pro forma calculation may include adjustments for
the pro forma  effect of (a) any cost  savings  accounted  for on an  annualized
basis as a result  of an  Acquisition  by  Borrower  or any of its  Consolidated
Subsidiaries  which,  in the good faith judgment of Borrower (as evidenced by an
Officers' Certificate delivered to Administrative  Agent), will be eliminated or
realized within one year after the date of such  transaction  (provided that any
such cost savings are  calculated in accordance  with  Regulation  S-X under the
Securities Act of 1933, as amended) or (b) any direct quantifiable  savings from
the conversion of roaming  expense which Borrower will obtain within one year of
the transaction in the good faith judgment of Borrower from the Acquisition of a
third party which prior to such  Acquisition had a contract with Borrower or any
of its  Consolidated  Subsidiaries  for roaming  services.  For  purposes of the
foregoing  sentence,  when  calculating  Operating  Cash Flow for any  Person or
business,  Operating Cash Flow and all defined terms used herein (or in any such
defined term) shall be deemed to refer to such Person or business.

     "Option" see Section 2.09.

     "Organic  Document" shall mean,  relative to any Person, its certificate of
incorporation,  its by-laws,  its  partnership  agreement,  its  memorandum  and
articles of association,  share designations or similar  organization  documents
and  all  shareholder   agreements,   voting  trusts  and  similar  arrangements
applicable to any of its authorized shares of Equity Interests.

                                       19
<PAGE>

     "Original Closing Date" shall mean January 7, 1999.

     "Other Taxes" see Section 5.06(c).

     "Parent" shall mean  Centennial  Cellular  Corp. (to be renamed  Centennial
Communications Corp. on February 29, 2000).

     "Parent Financing" shall mean (x) the purchase by the Investors from Parent
for cash not later than the time of  consummation of the Merger of common equity
in an  aggregate  amount not less than $400.0  million and (y) the  issuance and
sale of the Parent Subordinated Notes.

     "Parent  Financing  Documents"  shall mean (x) the Merger Agreement and (y)
the  Parent  Subordinated  Notes and the  Securities  Purchase  Agreement  dated
December 29, 1998 between Parent,  WCAS Capital Partners III, L.P. and the other
purchasers  named therein pursuant to which the Parent  Subordinated  Notes were
issued and all other  documents  relating  thereto and delivered to Agents on or
prior to the Original  Closing  Date,  as any such  agreement or document may be
amended  and in effect from time to time in  accordance  with its terms and this
Agreement.

     "Parent  Refinanced  Notes" shall mean the senior notes of Parent issued to
refinance  the  Parent  Subordinated  Notes for net  proceeds  (in excess of the
amount of interest in escrow pursuant to any interest escrow agreement  relating
thereto),  of not more than an aggregate principal amount sufficient to repay in
full all then outstanding Parent  Subordinated  Notes  Obligations,  which notes
shall in any  event  (i) have  covenants,  events  of  default,  redemption  and
repurchase   provisions  and  modification   provisions  in  the  aggregate  not
materially  less  favorable  to  Parent,  Borrower  and  the  Lenders  than  the
covenants,   events  of  default,   redemption  and  repurchase  provisions  and
modification provisions of the Senior Subordinated Notes, (ii) mature no earlier
than six months after the maturity date for the Senior Subordinated Notes, (iii)
be unsecured  and (iv)  require no cash  interest  payments  (other than from an
interest escrow substantially  similar to the Senior Subordinated Notes Interest
Escrow  Agreement,  so long  as it will be  sufficient  to fund  the  first  ten
scheduled  semi-annual  interest payments thereof) for at least five years after
the issue date thereof.

     "Parent  Refinanced Notes Documents" shall mean an indenture  governing the
terms and  conditions  of the Parent  Refinanced  Notes and all other  documents
relating thereto  (including any interest escrow  agreement,  if applicable) and
delivered  to Agents,  as any such  agreement  or document may be amended and in
effect from time to time in accordance with its terms and this Agreement.

     "Parent  Refinanced  Notes Interest Trigger Date" shall mean the earlier of
(x)  the  tenth  scheduled  semi-annual  interest  payment  date  on the  Parent
Refinanced  Notes  after the issue  date  thereof or (y) the first date on which
interest is required to be paid on any Permitted Refinancing only in cash on the
Parent  Refinanced  Notes (or any one or more  refinancings  thereof) other than
from an interest escrow arrangement funded at the date of issuance thereof.

     "Parent  Subordinated  Notes" shall mean the Senior  Subordinated Notes due
2009 of Parent in an aggregate  amount of $180.0 million issued  pursuant to the
Parent Financing Documents.

     "Parent  Subordinated  Notes  Obligations"  shall mean the  obligations  of
Parent  under the  Parent  Subordinated  Notes  (including  any notes  issued to
holders thereof in lieu of cash interest  payments in accordance with the Parent
Financing Documents) and the Parent Financing Documents.

     "Participant" see Section 12.06(c).

     "Payment Date" shall mean any Principal Payment Date and each date on which
interest is due and payable on any Loan.

     "Payor" see Section 4.06.

     "PBGC" shall mean the United States Pension Benefit Guaranty Corporation or
any successor thereto.

                                       20
<PAGE>

     "PCS System" shall mean a wireless  telecommunications  system  licensed by
the FCC  under  47  C.F.R.  Part 24 for  operation  in the "B"  frequency  block
(1.865/1.880  GHz and 1.945/1.960 GHz) (or by the equivalent  foreign  authority
for equivalent  operation in a foreign  jurisdiction) to provide any or all of a
family of digital,  wireless  mobile or portable and fixed radio  communications
services to  individuals  and  businesses in Puerto Rico, the Virgin Islands and
other Caribbean nations.

     "Permits" see Section 8.17.

     "Permitted  Acquisition" shall mean any Acquisition  effected in compliance
with Section 9.06(h), (i), (n) or (o).

     "Permitted Holders" means the Principal Investors,  the Investor Affiliates
and the Permitted Transferees.

     "Permitted  Investments" shall mean, for any Person: (a) direct obligations
of the United  States of  America,  or of any  agency  thereof,  or  obligations
guaranteed as to principal  and interest by the United States of America,  or by
any agency thereof, in either case maturing not more than one year from the date
of  acquisition  thereof by such  Person;  (b) time  deposits,  certificates  of
deposit or bankers'  acceptances  (including  eurodollar deposits) issued by any
bank or trust company  organized  under the laws of the United States of America
or any state thereof and having  capital,  surplus and  undivided  profits of at
least $500.0  million and a deposit rating of investment  grade;  (c) commercial
paper rated A-1 or better by Standard & Poor's  Corporation  or P-1 or better by
Moody's Investors Service, Inc.,  respectively,  maturing not more than 180 days
from the date of acquisition thereof by such Person; (d) repurchase  obligations
with a term of not more  than 30 days for  underlying  securities  of the  types
described   in  clause  (a)  above   entered   into  with  a  bank  meeting  the
qualifications  described in clause (b) above; (e) securities with maturities of
six months or less from the date of  acquisition  issued or fully  guaranteed by
any state,  commonwealth or territory of the United States of America, or by any
political  subdivision  or  taxing  authority  thereof,  and rated at least A by
Standard & Poor's  Corporation or A by Moody's Investors  Service,  Inc.; or (f)
money market mutual funds that invest primarily in the foregoing items.

     "Permitted Liens" see Section 9.07.

     "Permitted  Refinancing"  shall mean,  with respect to any  Indebtedness or
Contingent Obligation, any refinancing thereof,  provided,  however, that (w) no
Default or Event of Default shall have occurred and be continuing or would arise
therefrom,  (x) any such refinancing  Indebtedness shall (I) not be on financial
and other terms that are materially  more onerous (as determined by Borrower and
Co-Syndication  Agents) in the  aggregate  to any Company or  Creditor  than the
Indebtedness or Contingent Obligation being refinanced),  (II) not have a stated
maturity or  weighted  average  life that is shorter  than the  Indebtedness  or
Contingent Obligation being refinanced,  (III) if the Indebtedness or Contingent
Obligation  being refinanced is subordinated by its terms or by the terms of any
agreement or instrument relating to such Indebtedness or Contingent  Obligation,
be at least as subordinate to the Obligations as the  Indebtedness or Contingent
Obligation  being  refinanced  (and unsecured if the refinanced  Indebtedness is
unsecured), and (IV) be in a principal amount that does not exceed the principal
amount so refinanced,  plus accrued interest,  plus the lesser of (1) the stated
amount of any premium or other payment  required to be paid in  connection  with
such  refinancing  pursuant  to the  terms  of the  Indebtedness  or  Contingent
Obligation  being  refinanced  and (2) the amount of  premium  or other  payment
actually paid at such time to refinance the Indebtedness,  plus, in either case,
the amount of fees and  reasonable  expenses  of any  Obligor or any  Subsidiary
incurred in connection with such  refinancing,  and (y) the sole obligor on such
refinancing  Indebtedness  or  Contingent  Obligation  shall  be  Parent  or the
original obligor on such Indebtedness or Contingent Obligation being refinanced;
provided,  however,  that (I) any  guarantor of the  Indebtedness  or Contingent
Obligation  being  refinanced  shall be permitted to guarantee  the  refinancing
Indebtedness  and (II) any Obligor  shall be  permitted  to  guarantee  any such
refinancing of any other Obligor.

     "Permitted Transferee" shall mean, with respect to any individual, (i) such
individual's  spouse  or  children  (natural  or  adopted),  any  trust for such
individual's  benefit or the  benefit of such  individual's  spouse or  children
(natural or adopted),  or any corporation or partnership in which the direct and

                                       21
<PAGE>

beneficial  owner  of all  of  the  equity  interest  is  such  Person  or  such
individual's  spouse  or  children  (natural  or  adopted)  or any trust for the
benefit  of such  persons;  or (ii)  the  heirs,  executors,  administrators  or
personal  representatives upon the death of such person or upon the incompetency
or disability of such person for purposes of the  protection  and  management of
such individual's assets.

     "Person"  shall  mean  any  individual,   corporation,  company,  voluntary
association,  partnership,  joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).

     "Plan" shall mean at any time an employee  pension benefit plan (other than
a  Multiemployer  Plan)  which is covered by Title IV of ERISA or subject to the
minimum funding  standards under Section 412 of the Code or Section 302 of ERISA
and is  maintained  or  contributed  to by any member of the ERISA Group or with
respect to which any Company is reasonably likely to incur liability.

     "Pledged  Collateral"  shall  mean all  Property  pledged  pursuant  to the
Security Agreement.

     "PR  Borrower"  shall mean  Centennial  Puerto  Rico  Operations  Corp.,  a
Delaware corporation.

     "PR Systems" shall mean, collectively, the PCS Systems, the CAP Systems and
the LEC Systems of PR Borrower and its Subsidiaries.

     "Prepayment  Designation Basket" shall mean, at any time, the excess of (A)
$75,000,000 over (B) the aggregate amount of prepayments of the Term Loans as to
which Borrower and/or PR Borrower has relied upon Section  2.09(c)(i) or Section
2.10(b)(i)(A)  since the  Effectiveness  Date to designate the Class of Loan and
the order of application to scheduled Amortization Payments of such prepayment.

     "Prime  Rate" shall mean for any day, a rate per annum that is equal to the
prime rate of interest  established by  Administrative  Agent from time to time,
changing when and as said  corporate  base rate  changes.  The prime rate is not
necessarily the lowest rate charged by Administrative Agent to its customers.

     "Principal  Investors" shall mean WCAS and Blackstone  Capital Partners III
Merchant Banking Fund L.P. and Blackstone Offshore Capital Partners III L.P.

     "Principal Office" shall mean the principal office of Administrative Agent,
located on the date hereof at 901 Main Street, 14th Floor,  Dallas,  Texas 75202
Attention:  Agency  Services  or  such  other  office  as may be  designated  by
Administrative Agent.

     "Principal  Payment Date" shall mean,  with respect to any Term Loan,  each
Quarterly Date or other date set forth on Schedule 3.01(b) on which a payment of
principal is due with respect to such Term Loan.

     "Prior  Liens" shall mean Liens which,  pursuant to the  provisions  of any
Security Document, are or may be superior to the Lien of such Security Document.

     "Proceeding" shall mean any claim,  counterclaim,  action,  judgment, suit,
hearing, governmental investigation,  arbitration or proceeding, including by or
before any Governmental Authority and whether judicial or administrative.

     "Pro Forma Capitalization Table" see Section 8.02(d).

     "Pro Forma Date" see Section 8.02(d).

     "Pro Forma Debt  Service"  shall mean,  for any period,  the sum of (i) the
reasonably  anticipated  Consolidated  Interest  Expense  of  Borrower  and  its
Consolidated  Subsidiaries  for such  period  to the  extent  to be paid in cash
during  such  period  and  assuming  prevailing  interest  rates  at the time of
calculation,  and (ii) the combined sum of all scheduled  principal  payments on
any Indebtedness (including,  without duplication, the Loans and Capital Leases)
of Borrower and its  Consolidated  Subsidiaries  during such  period;  provided,

                                       22
<PAGE>

however, that such Consolidated Interest Expense shall (1) include only interest
that will accrue after the Senior  Subordinated Notes Interest Trigger Date (or,
with respect to the Additional Senior  Subordinated  Notes, such later date when
the interest escrow in respect thereof,  if any, is depleted) during such period
on the Senior Subordinated Notes and (if issued by Borrower or any Subsidiary of
Borrower)  the  Additional  Senior  Subordinated  Notes,  (2)  include,  if  the
Additional Senior Subordinated Notes are issued by any direct or indirect parent
of Borrower,  for any period ending after the Senior Subordinated Notes Interest
Trigger Date (or such later date when the interest escrow in respect thereof, if
any,  has been  depleted),  cash  interest  accruing  during  such period on the
Additional Senior  Subordinated  Notes, and (3) include interest that accrues on
the Parent  Refinanced Notes after the Parent  Refinanced Notes Interest Trigger
Date during such period.

     "Pro Forma Debt Service  Coverage Ratio" shall mean, for any Test Date, the
ratio of Operating  Cash Flow for the four fiscal  quarters  ending on such Test
Date  to Pro  Forma  Debt  Service  for the  four  fiscal  quarters  immediately
following such Test Date.

     "Property"  shall mean any right,  title or  interest  in or to property or
assets of any kind  whatsoever,  whether  real,  personal  or mixed and  whether
tangible  or  intangible  and  including  Equity  Interests  or other  ownership
interests of any Person.

     "PRPSC" shall mean the Puerto Rico Public Service Commission.

     "PRTRB" shall mean the  Telecommunications  Regulatory Board of Puerto Rico
created by Act No. 213 of the Legislature of Puerto Rico approved  September 12,
1996, or any successor thereto.

     "Puerto Rico" shall mean the Commonwealth of Puerto Rico.

     "Qualified  Capital Stock" shall mean with respect to any Person any Equity
Interests of such Person which is not Disqualified Capital Stock.

     "Qualified  Subsidiary"  shall  mean  PR  Borrower  and  any  Wholly  Owned
Subsidiary  of  Borrower  that is a  Guarantor  and  (other  than in the case of
License  Subsidiaries)  has not in  reliance  on the last  sentence  of  Section
9.20(A) refrained from providing any Collateral otherwise required thereby.

     "Quarter"  shall mean each three month period ending on February 28 (or 29,
as the case may be), May 31, August 31 and November 30.

     "Quarterly  Dates" shall mean the last Business Day of each Quarter in each
year, commencing with the last Business Day of February 1999.

     "Real  Property"  shall mean all right,  title and  interest of any Company
(including, without limitation, any leasehold estate) in and to a parcel of real
property  owned or operated by any Company,  whether by lease,  license or other
use agreement,  together with, in each case, all  improvements  and  appurtenant
fixtures,  equipment, personal property, easements and other property and rights
incidental to the ownership, lease or operation thereof or thereon.

     "Reaffirmation  Agreement" shall mean the Reaffirmation  Agreement dated as
of  February  29,  2000,  among  Borrower,  PR  Borrower,   the  Guarantors  and
Administrative Agent.

     "redeem" shall mean redeem, repurchase, repay, defease or otherwise acquire
or retire for value; and "redemption" and "redeemed" have correlative meanings.

     "refinance"  shall  mean  refinance,  renew,  extend,  replace,  defease or
refund,  in whole or in part,  including  successively;  and  "refinancing"  and
"refinanced" have correlative meanings.

     "Register" see Section 2.08.

                                       23
<PAGE>

     "Regulation D" shall mean Regulation D (12 C.F.R. Part 204) of the Board of
Governors of the United States Federal Reserve System.

     "Regulations T, U and X" shall mean, respectively,  Regulation T (12 C.F.R.
Part 220),  Regulation U (12 C.F.R.  Part 221) and Regulation X (12 C.F.R.  Part
224) of the Board of Governors of the United States  Federal  Reserve System (or
any successor),  as the same may be modified and supplemented and in effect from
time to time.

     "Regulatory  Change"  shall mean,  with  respect to any Lender,  any change
after  the date  hereof  in  United  States  Federal,  state or  foreign  law or
regulations  (including  Regulation D) or the adoption or making after such date
of any  interpretation,  directive  or request  applying  to a class of banks or
other  financial  institutions  including  such Lender of or under any  Federal,
state or foreign law or regulations  (whether or not having the force of law and
whether or not failure to comply  therewith  would be  unlawful) by any court or
governmental or monetary  authority or any other  regulatory  agency with proper
authority,  including  non-governmental  agencies  or bodies,  charged  with the
interpretation or administration thereof or by the NAIC.

     "Reimbursement  Obligations"  shall mean, at any time,  the  obligations of
Borrower  then  outstanding,  or that may  thereafter  arise in  respect  of all
Letters of Credit then  outstanding,  to  reimburse  amounts paid by the Issuing
Lender in respect of any drawings under a Letter of Credit.

     "Related Parties" see Section 11.01.

     "Release"  shall  mean any  release,  spill,  emission,  leaking,  pumping,
injection, deposit, disposal,  discharge,  dispersal, leaching or migration into
the environment.

     "Reorganization"   shall   mean  the   transactions   consummated   on  the
Effectiveness Date under Section 6 of the Effectiveness Agreement.

     "Replaced Lender" see Section 2.11.

     "Replacement Lender" see Section 2.11.

     "Required Payment" see Section 4.06.

     "Requirement  of Law"  shall  mean as to any  Person,  the  Certificate  of
Incorporation and By-Laws or other organizational or governing documents of such
Person,  and  any  law,  treaty,  rule  or  regulation  or  determination  of an
arbitrator or a court or other Governmental  Authority,  in each case applicable
to or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.

     "Reserve  Requirement"  shall mean,  for any Interest  Period for any LIBOR
Loan,  the average  maximum  rate at which  reserves  (including  any  marginal,
supplemental  or emergency  reserves) are required to be maintained  during such
Interest Period under  Regulation D by member banks of the United States Federal
Reserve  System in New York City with  deposits  exceeding  one billion  Dollars
against "Eurocurrency liabilities" (as such term is used in Regulation D).

     "Responsible  Officer" shall mean the chief  executive  officer of Borrower
and the  president of Borrower (if not the chief  executive  officer)  and, with
respect to financial matters, the chief financial officer of Borrower.

     "Revolving Credit Commitment" shall mean, for each Revolving Credit Lender,
the  obligation  of such Lender to make  Revolving  Credit Loans in an aggregate
principal  amount at any one time outstanding up to but not exceeding the amount
set  opposite  the name of such  Lender on  Schedule  6(a) to the  Effectiveness
Agreement under the caption  "Revolving  Credit  Commitment" (as the same may be
reduced from time to time  pursuant to Section 2.04 or 2.10 or changed  pursuant
to Section  12.06(b)).  The initial aggregate  principal amount of the Revolving
Credit Commitments is $250.0 million.

                                       24
<PAGE>

     "Revolving  Credit  Commitment  Percentage" shall mean, with respect to any
Revolving  Credit  Lender,  the ratio of (a) the amount of the Revolving  Credit
Commitment  of such Lender to (b) the aggregate  amount of the Revolving  Credit
Commitments of all of the Lenders.

     "Revolving  Credit  Commitment  Termination  Date" shall mean  November 30,
2006.  If the Revolving  Credit  Commitments  are increased  pursuant to Section
2.01(f),  the Revolving Credit Commitment  Termination Date with respect to such
increased  portion  may be extended  by the  Lenders  agreeing  to provide  such
increase beyond the date specified in the preceding sentence.

     "Revolving  Credit  Commitments"  shall  mean  the  aggregate  sum  of  the
Revolving Credit Commitments of all Revolving Credit Lenders.

     "Revolving  Credit Facility" shall mean the credit facility  comprising the
Revolving Credit Commitment of all of the Revolving Credit Lenders.

     "Revolving  Credit Lenders" shall mean (a) on the date hereof,  the Lenders
having  Revolving  Credit  Commitments  as set  forth  on  Schedule  6(a) to the
Effectiveness  Agreement  and (b)  thereafter,  the  Lenders  from  time to time
holding  Revolving  Credit Loans and Revolving Credit  Commitments  after giving
effect to any assignments thereof permitted by Section 12.06(b).

     "Revolving Credit Loans" see Section 2.01(a).

     "Revolving  Credit Notes" shall mean the  promissory  notes provided for by
Section  2.08(a) and all promissory  notes delivered in substitution or exchange
therefor,  in each case as the same shall be modified  and  supplemented  and in
effect from time to time.

     "RSA" shall mean any "rural  service  area" as defined and  modified by the
FCC for the  purpose  of  licensing  public  cellular  radio  telecommunications
service systems.

     "Sale and Leaseback  Transaction"  shall mean any arrangement,  directly or
indirectly, with any Person whereby it shall sell or transfer any property, real
or  personal,  used or useful in its  business,  whether now owned or  hereafter
acquired,  and thereafter rent or lease such property or other property which it
intends to use for  substantially  the same  purpose or purposes as the property
being sold or transferred.

     "Security  Agreement" shall mean a Security Agreement  substantially in the
form of Exhibit D among the Obligors and  Administrative  Agent, as the same may
be  amended  in  accordance  with the terms  thereof  and  hereof or such  other
agreements  reasonably  acceptable to Administrative Agent as shall be necessary
to  comply  with  applicable  Requirements  of Law and  effective  to  grant  to
Administrative  Agent (on behalf of the  Creditors) a perfected  first  priority
security interest in the Pledged Collateral covered thereby.

     "Security Documents" shall mean the Reaffirmation  Agreement,  the Security
Agreement,  the  Mortgages  (if any),  the  Collateral  Assignment  of  Location
Agreements  and each other  security  document or pledge  agreement  required by
applicable  local  law to  grant a valid,  perfected  security  interest  in any
Property acquired or developed pursuant to a Permitted Acquisition to the extent
required by Section 9.12 or 9.20, and all UCC or other  financing  statements or
instruments of perfection required by this Agreement,  the Security Agreement or
any Mortgage to be filed with respect to the security  interests in Property and
fixtures  created  pursuant to the  Security  Agreement  or any Mortgage and any
other  document  or  instrument   utilized  to  pledge  as  collateral  for  the
Obligations any Property of whatever kind or nature.

     "Senior  Debt"  shall  mean,  at  any  date,  (i)  Total  Debt  other  than
Subordinated Debt plus (ii) cash held pursuant to the Senior  Subordinated Notes
Interest Escrow Agreement.

     "Senior  Leverage  Ratio" shall mean,  for any Test Date,  the ratio of (x)
Senior  Debt at such Test Date to (y)  Operating  Cash Flow for the four  fiscal
quarters ending on such Test Date.

                                       25
<PAGE>

     "Senior  Subordinated  Notes"  shall mean the 10 3/4%  Senior  Subordinated
Notes due 2008 of Borrower in an aggregate  principal  amount of $370.0  million
issued pursuant to the Senior Subordinated Notes Financing Documents,  including
the senior  subordinated  notes issued  pursuant to a registered  exchange offer
(the  "Exchange  Offer")  therefor  made  pursuant  to the  registration  rights
agreement  entered into in connection  with the issuance  thereof on the date of
issuance thereof (the "Exchange Notes").

     "Senior  Subordinated  Notes Financing" shall mean the issuance and sale of
the Senior  Subordinated  Notes for gross  proceeds  (in excess of the amount of
interest in escrow  pursuant to the Senior  Subordinated  Notes Interest  Escrow
Agreement) of not less than $310.0 million.

     "Senior  Subordinated  Notes  Financing  Documents"  shall  mean the Senior
Subordinated  Notes  Indenture,  the Senior  Subordinated  Notes Interest Escrow
Agreement and all other documents  relating thereto and delivered to Agents,  as
any such agreement or document may be amended and in effect from time to time in
accordance with its terms and this Agreement.

     "Senior  Subordinated  Notes  Indenture"  shall  mean the  Indenture  dated
December 14, 1998 pursuant to which the Senior  Subordinated Notes were (and the
Exchange Notes will be) issued.

     "Senior  Subordinated  Notes  Interest  Escrow  Agreement"  shall mean that
certain  Pledge Escrow and  Assignment  Agreement  dated as of December 14, 1998
between  Borrower and The Chase  Manhattan  Bank, as trustee,  pursuant to which
proceeds from the Senior  Subordinated  Notes sufficient to fund the first three
scheduled  semi-annual  interest payments will be held in escrow for the benefit
of the holders of the Senior Subordinated Notes.

     "Senior Subordinated Notes Interest Trigger Date" shall mean the earlier of
(x)  the  third  scheduled  semi-annual  interest  payment  date  on the  Senior
Subordinated  Notes  after the  Original  Closing  Date or (y) the first date on
which  cash  interest  is  payable on any  Permitted  Refinancing  of the Senior
Subordinated Notes (or any one or more refinancings  thereof) other than from an
interest escrow arrangement on terms substantially identical to the terms of the
Senior Subordinated Notes Interest Escrow Agreement as in effect on the Original
Closing Date.

     "SMR System"  shall mean a  specialized  mobile radio system  consisting of
two-way radio service operating in the 800-900 megahertz band.

     "Sold Minority Interests" see Section 9.10(c)(v).

     "Solvent" and "Solvency"  shall mean, for any Person on a particular  date,
that on such date (a) the fair value of the  Property  of such Person is greater
than the total amount of liabilities,  including, without limitation, contingent
liabilities, of such Person, (b) the present fair salable value of the assets of
such  Person  is not less  than the  amount  that  will be  required  to pay the
probable  liability  of such  Person on its debts as they  become  absolute  and
matured,  (c) such Person does not intend to, and does not believe that it will,
incur debts and  liabilities  beyond such Person's  ability to pay as such debts
and  liabilities  mature,  (d) such  Person is not  engaged in a  business  or a
transaction,  and is not about to engage in a  business  or a  transaction,  for
which such Person's Property would constitute an unreasonably  small capital and
(e) such Person is able to pay its debts as they become due and payable.

     "Specified Wireless System Information" shall mean, for each fiscal quarter
or fiscal  year,  as the case may be, (i) the  number of  Cellular  System,  PCS
System,  SMR  System,  LEC  System,  CAP System,  CATV/SMATV  and paging  system
subscribers  at the  beginning  of such  period,  (ii) the  number  of gross new
Cellular System, PCS System, SMR System, LEC System, CAP System,  CATV/SMATV and
paging systems  subscribers added and deactivated  Cellular System,  PCS System,
SMR System,  LEC System,  CAP System,  CATV/SMATV and paging system  subscribers
lost during such period,  (iii) the number of Cellular System,  PCS System,  SMR
System, LEC System, CAP System,  CATV/SMATV and paging system subscribers at the
end of such period,  (iv) Net Pops,  (v) monthly  churn (as such term is used in
the cellular  telecommunications  industry),  and (vi) roaming  revenues for the
applicable period as a percentage of total revenue for the same period.

                                       26
<PAGE>

     "State PUC" shall mean any state  public  utility  commission  or any other
state commission, agency, department, board or authority with responsibility for
regulating intrastate and local telecommunications services.

     "Statutes" see Section 8.22(e).

     "Subordinated  Debt"  shall  mean  Indebtedness  of  any  Company  that  is
contractually subordinated in right of payment to any other Indebtedness of such
Company.  No Indebtedness shall be subordinate to any other Indebtedness  solely
by virtue of such other  Indebtedness  being secured and such  Indebtedness  not
being secured by the same collateral.

     "Subsidiary"  shall  mean,  with  respect to any Person,  any  corporation,
partnership  or other entity of which at least a majority of the  securities  or
other ownership  interests  having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons  performing  similar
functions of such  corporation,  partnership  or other entity  (irrespective  of
whether or not at the time securities or other ownership  interests of any other
class or classes of such corporation,  partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time  directly or  indirectly  owned or controlled by such Person or one or more
Subsidiaries  of such Person or by such Person and one or more  Subsidiaries  of
such Person.  Unless the context clearly requires  otherwise,  all references to
any Subsidiary shall mean a Subsidiary of Borrower.

     "Supermajority  Lenders" shall mean Lenders holding at least  two-thirds of
the  sum  of  (without  duplication)  (a)  the  aggregate  principal  amount  of
outstanding Loans (other than Swing Loans), plus (b) the aggregate amount of all
Letter of Credit Liabilities, plus (c) the aggregate unused amount of Unutilized
Revolving Credit  Commitments then in effect,  plus (d) in the case of the Swing
Loan Lender only, the aggregate amount of the Swing Loans then outstanding.

     "Supermajority Lenders of the Affected Class" shall mean Lenders holding at
least two-thirds of the sum of the aggregate amount of the outstanding  Loans of
the   applicable   tranche  of  Term  Loans  which  would  be  affected  by  any
modification,  supplement or waiver contemplated by clause (f) to the proviso to
Section 12.04(i).

     "Supplemental  Indentures" shall mean (i) the Third Supplemental  Indenture
dated as of January 7, 1999, to the applicable Existing  Indenture,  dated as of
November 15, 1993 and the First Supplemental Indenture, dated as of November 15,
1993,  between  Parent and Bank of  Montreal  Trust  Company and (ii) the Fourth
Supplemental Indenture,  dated as of January 7, 1999, to the applicable Existing
Indenture,  dated as of November 13, 1993 and the Second Supplemental Indenture,
dated as of May 11, 1995 between Parent and Bank of Montreal Trust Company.

     "Surety  Instruments"  shall mean all letters of credit (including  standby
and commercial), bankers' acceptances, bank guarantees, surety bonds and similar
instruments.

     "Survey"  shall  mean a survey  of any  Mortgaged  Real  Property  (and all
improvements  thereon):  (i)  prepared  by a surveyor  or  engineer  licensed to
perform  surveys in the state,  province or country  where such  Mortgaged  Real
Property  is  located,  (ii)  dated  (or  redated)  a  date  acceptable  to  the
Administrative Agent, (iii) certified by the surveyor (in a manner acceptable to
Administrative Agent) to Administrative Agent and (iv) complying in all respects
with Requirements of Law.

     "Swap Contract" shall mean any agreement entered into (as a bona fide hedge
and not for  speculative  purposes)  (including  any  master  agreement  and any
agreement,  whether or not in writing,  relating to any single transaction) that
is an  interest  rate  swap  agreement,  basis  swap,  forward  rate  agreement,
commodity swap,  commodity option,  equity or equity index swap or option,  bond
option,  interest rate option,  foreign exchange agreement,  rate cap, collar or
floor agreement,  currency swap agreement,  cross-currency  rate swap agreement,
swaption,  currency option or any other similar agreement  (including any option
to enter into any of the  foregoing)  and is designed  to protect  the  Obligors
against  fluctuations  in interest  rates,  currency  exchange rates, or similar
risks (including any Interest Rate Protection Agreement entered into pursuant to
Section 9.18).

                                       27
<PAGE>

     "Swing Loan Commitment"  shall mean the obligation of the Swing Loan Lender
to make or continue Swing Loans hereunder in an aggregate principal amount up to
but not  exceeding  $30.0  million,  as the same may be  reduced  or  terminated
pursuant  to Section  2.04 or 2.10 or Section 10, it being  understood  that the
Swing Loan  Commitment is part of the Revolving  Credit  Commitment of the Swing
Loan Lender, rather than a separate, independent commitment.

     "Swing Loan Lender" shall mean Bank of America, N.A. and its successors and
assigns in such capacity.

     "Swing Loan  Maturity  Date"  shall mean the  Revolving  Credit  Commitment
Termination Date.

     "Swing Loan Notes" shall mean the promissory  notes made by Borrower and PR
Borrower evidencing the Swing Loans, in the form of Exhibit A-5.

     "Swing Loans" see Section 2.01(g).

     "Systems" shall mean CAP Systems, CATV/SMATV Systems, Cellular Systems, LEC
Systems, PCS Systems, SMR Systems, long distance systems and paging systems.

     "Tax Returns" see Section 8.09.

     "Taxes"  shall  mean any and all taxes,  imposts,  duties,  charges,  fees,
levies or other charges or assessments  of whatever  nature,  including  income,
gross receipts,  excise, real or personal property, sales,  withholding,  social
security,  retirement,  unemployment,  occupation,  use, service,  license,  net
worth, payroll,  franchise, and transfer and recording,  imposed by the Internal
Revenue Service or any taxing authority (whether domestic or foreign,  including
any federal, state, U.S. possession,  county, local or foreign government or any
subdivision  or  taxing  agency  thereof),   whether  computed  on  a  separate,
consolidated,  unitary,  combined or any other basis, including interest, fines,
penalties or additions to tax  attributable  to or imposed on or with respect to
any such taxes, charges, fees, levies or other assessments.

     "Term Loan Commitments" shall mean the Tranche A Term Loan Commitments, the
Tranche A-PR Term Loan  Commitments,  the Tranche B-PR Term Loan Commitments and
the Tranche C-PR Term Loan Commitments, collectively.

     "Term Loan Facilities" shall mean the credit facilities comprising the Term
Loan Commitments of all of the Term Loan Lenders.

     "Term Loan Lenders" shall mean the Tranche A Term Loan Lenders, the Tranche
A-PR Term Loan Lenders,  the Tranche B-PR Term Loan Lenders and the Tranche C-PR
Term Loan Lenders, collectively.

     "Term Loan Notes"  shall mean the  Tranche A Term Loan  Notes,  the Tranche
A-PR Term Loan Notes, the Tranche B-PR Term Loan Notes and the Tranche C-PR Term
Loan Notes, collectively.

     "Term  Loan  Tranches"  shall  mean the Term  Loans  outstanding  under the
Tranche A Term Loans,  the Tranche A-PR Term Loans,  the Tranche B-PR Term Loans
and the Tranche C-PR Term Loans,  collectively,  and "Term Loan  Tranche"  shall
mean any of them.

     "Term  Loans"  shall mean the Tranche A Term Loans,  the Tranche  A-PR Term
Loans,   the  Tranche   B-PR  Term  Loans  and  the  Tranche  C-PR  Term  Loans,
collectively.

     "Test Date" shall mean, for any Financial  Maintenance  Covenant,  the last
day of each fiscal quarter of Borrower  included  within any period set forth in
the table for such Financial Maintenance Covenant. Compliance with the Financial
Maintenance  Covenants  shall be tested,  as of each Test  Date,  on the date on
which  financial  statements  pursuant to Section  9.01(a) or (b) have been,  or
should have been, delivered for the applicable fiscal period.

                                       28
<PAGE>

     "Title Company" shall mean First American Title  Insurance  Company or such
other  title   insurance  or  abstract   company  as  shall  be   designated  by
Administrative Agent.

     "Total Debt" shall mean, at any date, the aggregate  amount of Indebtedness
of Borrower and its  Consolidated  Subsidiaries  as of such date determined on a
consolidated  basis in accordance  with GAAP,  net of (A) up to $30.0 million in
cash held by Borrower or any Qualified  Subsidiary not in the Collateral Account
and (B) all cash held in the Collateral  Account at such date that resulted from
any  Disposition of any System of Borrower or any  Subsidiary,  and (C) prior to
the Senior Subordinated Notes Interest Trigger Date, net of the cash held in the
Senior Subordinated Notes Interest Escrow Agreement.

     "Total  Leverage Ratio" shall mean, for any Test Date, the ratio of (x) the
sum (without  duplication)  of (1) Total Debt at such Test Date, plus (2) if the
Additional  Senior  Subordinated  Notes were  issued by any  direct or  indirect
parent of Borrower and if such date is on or after the Senior Subordinated Notes
Interest  Trigger  Date (or such later date as the  interest  escrow  account in
respect  thereof,  if any,  is  depleted),  the  aggregate  principal  amount of
Additional Senior  Subordinated  Notes outstanding on such date, plus (3) if any
Disposition  has been  effected of any  Minority  Interest set forth on Schedule
8.14 and the Net Available Proceeds therefrom have not as of such Test Date been
applied to the  prepayment of the Loans,  an aggregate  principal  amount of the
Parent  Subordinated  Notes equal to the amount of such Net  Available  Proceeds
(not to exceed the aggregate  principal amount of the Parent  Subordinated Notes
then  outstanding),  plus (4) if the Parent  Refinanced  Notes are issued and if
such date is on or after the Parent  Refinanced Notes Interest Trigger Date, the
aggregate  principal amount of Parent Refinanced Notes outstanding on such date,
plus (5) any  Indebtedness  issued under Section  9.08(k) to (y) Operating  Cash
Flow for the four fiscal quarters ending on such Test Date.

     "Tranche A Term Loan  Commitment"  shall mean, for each Tranche A Term Loan
Lender,  the  obligation  of such  Lender  to make a  Tranche A Term Loan on the
Original  Closing  Date in an  amount up to but not  exceeding  the  amount  set
opposite  the name of such Lender on Annex A under the  caption  "Tranche A Term
Loan  Commitment"  (as the  same may  have  been  changed  pursuant  to  Section
12.06(b)).

     "Tranche  A Term Loan  Commitments"  shall  mean the  aggregate  sum of the
Tranche A Term Loan Commitment of all the Lenders.

     "Tranche  A Term Loan  Lenders"  shall mean the  Lenders  from time to time
holding  Tranche A Term Loans after  giving  effect to any  assignments  thereof
permitted by Section 12.06(b).

     "Tranche A Term Loan Notes" shall mean the promissory notes provided for by
Section  2.08(a)(ii)  and all  promissory  notes  delivered in  substitution  or
exchange  therefor,  in each case as the same shall be modified and supplemented
and in effect from time to time.

     "Tranche  A Term  Loans"  shall  mean the  loans  provided  for by  Section
2.01(b),  which may be ABR Loans  and/or  LIBOR  Loans.  The  initial  aggregate
principal amount of the Tranche A Term Loans on the Effectiveness Date is $325.0
million.

     "Tranche A-PR Term Loan  Commitment"  shall mean, for each initial  Tranche
A-PR Term Loan Lender, the obligation of such Lender to make a Tranche A-PR Term
Loan on the  Original  Closing  Date in an  amount up to but not  exceeding  the
amount  set  opposite  the  name of such  Lender  on Annex A under  the  caption
"Tranche A-PR Term Loan  Commitment" (as the same may have been changed pursuant
to Section 12.06(b)).

     "Tranche  A-PR Term Loan  Commitments"  shall mean the aggregate sum of the
Tranche A-PR Term Loan Commitment of all the Lenders.

     "Tranche A-PR Term Loan  Lenders"  shall mean the Lenders from time to time
holding Tranche A-PR Term Loans after giving effect to any  assignments  thereof
permitted by Section 12.06(b).

                                       29
<PAGE>

     "Tranche A-PR Term Loan Notes" shall mean the promissory notes provided for
by Section  2.08(a)(iii)  and all promissory  notes delivered in substitution or
exchange  therefor,  in each case as the same shall be modified and supplemented
and in effect from time to time.

     "Tranche  A-PR Term  Loans"  shall mean the loans  provided  for by Section
2.01(b),  which may be ABR Loans  and/or  LIBOR  Loans.  The  initial  aggregate
principal  amount of the Tranche  A-PR Term Loans on the  Effectiveness  Date is
$125.0 million.

     "Tranche B-PR Term Loan Commitment"  shall mean, for each Tranche B-PR Term
Loan Lender,  the  obligation of such Lender to make a Tranche B-PR Term Loan on
the  Effectiveness  Date in an amount up to but not  exceeding  the  amount  set
opposite the name of such Lender on Schedule 6(a) to the Effectiveness Agreement
under the caption "Tranche B-PR Term Loan Commitment".

     "Tranche  B-PR Term Loan  Commitments"  shall mean the aggregate sum of the
Tranche B-PR Term Loan Commitments of all the Lenders.

     "Tranche B-PR Term Loan Lenders" shall mean (a) on the Effectiveness  Date,
the Lenders having Tranche B-PR Term Loan  Commitments  under the  Effectiveness
Agreement,  and (b)  thereafter,  the Lenders from time to time holding  Tranche
B-PR Term Loans after  giving  effect to any  assignments  thereof  permitted by
Section 12.06(b).

     "Tranche B-PR Term Loan Notes" shall mean the promissory notes provided for
by Section  2.08(a)(vii)  and all promissory  notes delivered in substitution or
exchange  therefor,  in each case as the same shall be modified and supplemented
and in effect from time to time.

     "Tranche  B-PR Term  Loans"  shall mean the loans  provided  for by Section
2.01(c),  which may be ABR Loans  and/or  LIBOR  Loans.  The  initial  aggregate
principal  amount of the Tranche  B-PR Term Loans on the  Effectiveness  Date is
$322,187,500.

     "Tranche C-PR Term Loan Commitment"  shall mean, for each Tranche C-PR Term
Loan Lender,  the  obligation of such Lender to make a Tranche C-PR Term Loan on
the  Effectiveness  Date in an amount up to but not  exceeding  the  amount  set
opposite the name of such Lender on Schedule 6(a) to the Effectiveness Agreement
under the caption "Tranche C-PR Term Loan Commitment".

     "Tranche  C-PR Term Loan  Commitments"  shall mean the aggregate sum of the
Tranche C-PR Term Loan Commitment of all the Lenders.

     "Tranche C-PR Term Loan Lenders" shall mean (a) on the Effectiveness  Date,
the Lenders having Tranche C-PR Term Loan  Commitments  under the  Effectiveness
Agreement,  and (b)  thereafter,  the Lenders from time to time holding  Tranche
C-PR Term Loans after  giving  effect to any  assignments  thereof  permitted by
Section 12.06(b).

     "Tranche C-PR Term Loan Notes" shall mean the promissory notes provided for
by Section  2.08(a)(v) and all promissory  notes  delivered in  substitution  or
exchange  therefor,  in each case as the same shall be modified and supplemented
and in effect from time to time.

     "Tranche  C-PR Term  Loans"  shall mean the loans  provided  for by Section
2.01(d),  which may be ABR Loans  and/or  LIBOR  Loans.  The  initial  aggregate
principal  amount of the Tranche  C-PR Term Loans on the  Effectiveness  Date is
$222,187,500.

     "Transaction  Documents"  shall  mean  this  Agreement,  the  Effectiveness
Agreement,  the Reaffirmation  Agreement and all documents related thereto or to
the  Reorganization and all exhibits,  appendices,  schedules and annexes to any
thereof.

     "Transactions"  shall mean the  Reorganization and the borrowings and other
credit transactions contemplated hereunder on the Effectiveness Date.

     "Type" see Section 1.03.

                                       30
<PAGE>

     "UCC" shall mean the Uniform Commercial Code as in effect in the applicable
state, Puerto Rico or other jurisdiction.

     "Unutilized  Revolving  Credit  Commitment"  shall mean,  for any Revolving
Credit  Lender,  at any time,  the  excess  of such  Lender's  Revolving  Credit
Commitment at such time over the sum of (i) the aggregate  outstanding principal
amount of  Revolving  Credit  Loans  made by such  Lender,  (ii)  such  Lender's
Revolving  Credit  Commitment  Percentage of the  aggregate  amount of Letter of
Credit  Liabilities at such time and (iii) with respect to the Swing Loan Lender
only, the aggregate principal amount of Swing Loans then outstanding.

     "Virgin Islands" shall mean the United States Virgin Islands.

     "WCAS" shall mean Welsh, Carson, Anderson & Stowe VIII, L.P.

     "Wholly  Owned  Subsidiary"  shall mean,  with  respect to any Person,  any
corporation,  partnership  or other entity of which all of the Equity  Interests
(other  than,  in the case of a  corporation,  directors'  qualifying  shares or
nominee shares required under  applicable law) are directly or indirectly  owned
or  controlled by such Person or one or more Wholly Owned  Subsidiaries  of such
Person or by such  Person  and one or more  Wholly  Owned  Subsidiaries  of such
Person.  Unless the context clearly  requires  otherwise,  all references to any
Wholly Owned Subsidiary shall mean a Wholly Owned Subsidiary of Borrower.

     "Withdrawal  Liability"  shall mean liability to a Multiemployer  Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part 1 of Subtitle E of Title IV of ERISA.

     "Working  Capital"  shall mean an amount  determined  for  Borrower and the
Consolidated  Subsidiaries  equal to the sum of all current  assets  (other than
cash and Permitted  Investments) less the sum of all current  liabilities (other
than the current portion of long-term Indebtedness).

     1.02. Accounting Terms and Determinations.  Except as otherwise provided in
this  Agreement,  all  computations  and  determinations  as  to  accounting  or
financial matters  (including  financial  covenants) shall be made in accordance
with GAAP consistently applied for all applicable periods, and all accounting or
financial  terms shall have the  meanings  ascribed  to such terms by GAAP.  All
financial  statements  to be  delivered  pursuant  to this  Agreement  shall  be
prepared in accordance with GAAP.

     1.03.  Classes and Types of Loans.  Loans  hereunder are  distinguished  by
"Class" and by "Type". The "Class" of a Loan (or of a Commitment to make a Loan)
refers to whether such Loan is a Revolving  Credit Loan,  Swing Loan,  Tranche A
Term Loan,  Tranche A-PR Term Loan,  Tranche B-PR Term Loan or Tranche C-PR Term
Loan, each of which  constitutes a Class. The "Type" of a Loan refers to whether
such  Loan is an ABR Loan or a LIBOR  Loan,  each of which  constitutes  a Type.
Loans may be identified by both Class and Type.

     1.04.  Rules of  Construction.  (a) In this Agreement and each other Credit
Document,  unless the context clearly  requires  otherwise (or such other Credit
Document clearly provides  otherwise),  references to (i) the plural include the
singular,  the singular include the plural and the part include the whole;  (ii)
Persons  include their  respective  permitted  successors and assigns or, in the
case of governmental  Persons,  Persons  succeeding to the relevant functions of
such Persons; (iii) agreements (including this Agreement),  promissory notes and
other contractual  instruments include subsequent amendments,  assignments,  and
other modifications thereto, but only to the extent such amendments, assignments
or other modifications thereto are not prohibited by their terms or the terms of
any  Credit  Document;   (iv)  statutes  and  related  regulations  include  any
amendments of the same and any successor statutes and regulations;  and (v) time
shall be a reference to New York City time. Where any provision herein refers to
action  to be taken by any  Person,  or which  such  Person is  prohibited  from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.

                                       31
<PAGE>

     (b) In this  Agreement and each other Credit  Document,  unless the context
clearly  requires  otherwise  (or such other Credit  Document  clearly  provides
otherwise),   (i)  "amend"  shall  mean  "amend,  restate,  amend  and  restate,
supplement or modify";  and "amended,"  "amending," and  "amendment"  shall have
meanings  correlative  to the foregoing;  (ii) in the  computation of periods of
time from a specified date to a later  specified  date,  "from" shall mean "from
and including";  "to" and "until" shall mean "to but  excluding";  and "through"
shall mean "to and  including";  (iii) "hereof,"  "herein" and "hereunder"  (and
similar  terms) in this  Agreement  or any other Credit  Document  refer to this
Agreement or such other Credit Document,  as the case may be, as a whole and not
to any  particular  provision of this  Agreement or such other Credit  Document;
(iv) "including" (and similar terms) shall mean "including  without  limitation"
(and  similarly  for  similar  terms);   (v)  "or"  has  the  inclusive  meaning
represented by the phrase "and/or";  (vi)  "satisfactory  to" any Creditor shall
mean in form,  scope and substance and on terms and conditions  satisfactory  to
such Creditor;  (vii) references to "the date hereof" shall mean the date of the
amendment and restatement  hereof first set forth above;  and (viii) "asset" and
"Property"  shall have the same meaning and effect and refer to all tangible and
intangible  assets and property,  whether  real,  personal or mixed and of every
type and description.

     (c) In this Agreement  unless the context clearly requires  otherwise,  any
reference  to (i) an Annex,  Exhibit  or  Schedule  is to an Annex,  Exhibit  or
Schedule, as the case may be, attached to this Agreement and constituting a part
hereof,  and (ii) a Section or other  subdivision  is to a Section or such other
subdivision of this Agreement.

     (d)  References  herein  to  the  taking  of  any  action  hereunder  of an
administrative  nature by Borrower  shall be deemed to include a reference to PR
Borrower  taking  such action or  Borrower  taking such action on PR  Borrower's
behalf or PR Borrower  taking such action on Borrower's  behalf,  as the context
may require,  and the Administrative Agent is expressly authorized to accept any
such  action  taken by Borrower or PR Borrower on its own behalf or on behalf of
the other as having the same effect as if taken by the other.

     Section  2.   Commitments,   Letters   of  Credit,   Fees,   Register,
                   Prepayments, and Replacement of Lenders.

     2.01.  Loans.

     (a) Revolving Credit Loans.  Each Revolving Credit Lender severally agrees,
on the terms and conditions of this  Agreement,  to make revolving  credit loans
(the "Revolving Credit Loans") to Borrower and PR Borrower in Dollars during the
period  from and  including  the  Effectiveness  Date to but not  including  the
Revolving Credit Commitment Termination Date in an aggregate principal amount at
any one time  outstanding  not  exceeding  the  amount of the  Revolving  Credit
Commitment  of such  Lender as in effect from time to time;  provided,  however,
that in no event  shall the sum of the  aggregate  principal  amount of (without
duplication)  all Revolving  Credit Loans then  outstanding,  plus the aggregate
principal amount of Swing Loans then  outstanding,  plus the aggregate amount of
all Letter of Credit  Liabilities at any time exceed the aggregate amount of the
Revolving Credit Commitments as in effect at such time. Subject to the terms and
conditions of this Agreement, during such period Borrower or PR Borrower, as the
case may be, may borrow,  repay and reborrow the amount of the Revolving  Credit
Commitments  by means of ABR  Loans and LIBOR  Loans and may  Convert  Revolving
Credit  Loans of one Type  into  Revolving  Credit  Loans  of  another  Type (as
provided in Section  2.09) or  Continue  Revolving  Credit  Loans of one Type as
Revolving Credit Loans of the same Type (as provided in Section 2.09).

     (b) (1) Tranche A Term Loans.  Each initial Tranche A Term Loan Lender made
a term loan to Borrower in Dollars on the Original  Closing Date in an aggregate
principal  amount  equal to the Tranche A Term Loan  Commitment  of such Lender.
Subject to the terms and  conditions  of this  Agreement,  Borrower  may Convert
Tranche A Term Loans of one Type into  Tranche A Term Loans of another  Type (as
provided  in  Section  2.09) or  Continue  Tranche  A Term  Loans of one Type as
Tranche A Term Loans of the same Type (as provided in Section 2.09).

     Tranche A Term Loans that are repaid or prepaid may not be reborrowed.

     (2) Tranche  A-PR Term Loans.  Each  initial  Tranche A-PR Term Loan Lender
made a term loan to PR Borrower in Dollars on the  Original  Closing  Date in an
aggregate  principal  amount equal to the Tranche A-PR Term Loan  Commitment  of

                                       32
<PAGE>

such Lender. Subject to the terms and conditions of this Agreement,  PR Borrower
may Convert  Tranche A-PR Term Loans of one Type into Tranche A-PR Term Loans of
another Type (as provided in Section  2.09) or Continue  Tranche A-PR Term Loans
of one Type as Tranche  A-PR Term Loans of the same Type (as provided in Section
2.09).

     Tranche A-PR Term Loans that are repaid or prepaid may not be reborrowed.

     (c) Tranche  B-PR Term Loans.  Each  initial  Tranche B-PR Term Loan Lender
made a term loan to PR  Borrower  in  Dollars  on the  Effectiveness  Date in an
aggregate  amount equal to such  Lender's  Tranche B-PR Term Loan  Commitment to
finance the  Transactions  and to pay related fees and expenses or in connection
with the  prepayment by Borrower of all the Tranche B Term Loans  outstanding to
it under Section 6(a) of the Effectiveness  Agreement.  Subject to the terms and
conditions of this Agreement, PR Borrower may Convert Tranche B-PR Term Loans of
one Type into  Tranche  B-PR Term Loans of another  Type (as provided in Section
2.09) or Continue  Tranche  B-PR Loans of one Type as Tranche B-PR Term Loans of
the same Type (as provided in Section 2.09).

     Tranche B-PR Term Loans that are repaid or prepaid may not be reborrowed.

     (d) Tranche  C-PR Term Loans.  Each  initial  Tranche C-PR Term Loan Lender
made a term loan to PR  Borrower  in  Dollars  on the  Effectiveness  Date in an
aggregate  principal  amount  equal to such  Lender's  Tranche  C-PR  Term  Loan
Commitment  in connection  with the  prepayment by Borrower of all the Tranche C
Term Loans outstanding to it under Section 6(b) of the Effectiveness  Agreement.
Subject to the terms and  conditions  of this  Agreement,  Borrower  may Convert
Tranche C-PR Term Loans of one Type into Tranche C-PR Term Loans of another Type
(as provided in Section 2.09) or Continue Tranche C-PR Term Loans of one Type as
Tranche C-PR Term Loans of the same Type (as provided in Section 2.09).

     Tranche C-PR Term Loans that are repaid or prepaid may not be reborrowed.

     (e) Limit on LIBOR Loans. No more than seven separate  Interest  Periods in
respect of LIBOR Loans of any Class may be outstanding at any one time.

     (f)  Incremental  Facilities.  After the date that is six months  after the
Effectiveness  Date,  Borrower  may  request  that any of the Lenders (or to the
extent that the existing  Lenders have not agreed  within 20 days to provide any
Incremental   Facility  herein,  new  Lenders  ("New  Lenders")   acceptable  to
Co-Syndication Agents) agree to provide Commitments to make extensions of credit
hereunder by up to $150.0  million,  which  amount shall be allocated  among the
Revolving  Credit  Facility and the Term Loan Facilities or one or more new term
loan facilities in amounts and with maturities  (including any extended maturity
(in the sole  discretion  of Agents) for such portion  thereof  allocated to the
Revolving  Credit  Facility)  acceptable to Agents in their sole  discretion and
having terms and  provisions no more onerous than those  contained in the Credit
Documents;  provided,  however,  that such Incremental Facility shall not become
effective unless at the time of the  effectiveness of such Incremental  Facility
no Default or Event of Default  shall have  occurred and be  continuing or would
arise  therefrom  (any such  increase or new credit  facility,  an  "Incremental
Facility"). No Agent or Lender shall have any obligation or liability whatsoever
to any  Company  or any  other  Person  with  respect  to  the  approval  of any
Incremental  Facility or for any refusal to approve,  negotiate  or consider any
such  proposal  or for  any act or  omission  related  thereto.  Notwithstanding
Section 12.04,  Borrower, PR Borrower,  Co-Syndication Agents and Administrative
Agent may make conforming and other necessary changes to the Credit Documents in
order to integrate any Incremental Facility into the Credit Documents (including
to secure such Incremental Facility).

     (g) Swing Loans.  Subject to the terms and  conditions  of this  Agreement,
upon  request of Borrower or PR Borrower,  the Swing Loan Lender  agrees to make
one or more Swing  Loans to Borrower  and/or PR Borrower  from time to time from
and  including the  Effectiveness  Date to but excluding the Swing Loan Maturity
Date, up to but not  exceeding the amount of the Swing Loan Lender's  Swing Loan
Commitment  as then in effect.  (Such  Swing Loans  referred to in this  Section
2.01(g) now or  hereafter  made by the Swing Loan  Lender to Borrower  and/or PR
Borrower  from and including and after the  Effectiveness  Date are  hereinafter
collectively  called the "Swing  Loans.") Prior to the Swing Loan Maturity Date,
Borrower and/or PR Borrower may borrow, repay and reborrow Swing Loans up to the

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Swing Loan Commitment in accordance with the terms of this Agreement.  The Swing
Loan Lender  shall not make any Swing Loans on or after the Swing Loan  Maturity
Date. Notwithstanding anything to the contrary contained in this Section 2.01(g)
or elsewhere in this  Agreement,  the Swing Loan Lender shall not be  obligated,
pursuant to this Section 2.01(g) or otherwise,  to make any Swing Loan to or for
the account of Borrower  and/or PR  Borrower,  and  Borrower  and or PR Borrower
shall not be entitled to borrow,  pursuant to this  Section  2.01(g),  if, after
giving full effect to the requested Swing Loan, the aggregate outstanding amount
of Revolving Credit Loans, plus the aggregate outstanding amount of Swing Loans,
plus the aggregate  outstanding  Letter of Credit  Liabilities  would exceed the
aggregate amount of the Revolving Credit  Commitments as in effect at such time.
Notwithstanding  anything  herein or elsewhere to the contrary,  the Swing Loans
will be made and maintained  only as ABR Loans.  The Swing Loan Lender shall not
make any Swing Loan after receiving a written notice from Borrower,  PR Borrower
or the Majority  Revolving  Credit Lenders  stating that a Default exists and is
continuing  until such time as the Swing Loan Lender shall have received written
notice  of (i)  rescission  of all  such  notices  from  the  party  or  parties
originally  delivering  such  notice,  (ii) the  waiver of such  Default  by the
Majority Lenders, or (iii) Administrative  Agent's good faith determination that
such Default has ceased to exist.  Swing Loans shall be made in minimum  amounts
of $500,000 and integral multiples of $500,000 above such amount.

     Upon the  occurrence of a Default,  each  Revolving  Credit Lender shall be
deemed to have purchased (and each  Revolving  Credit Lender hereby  irrevocably
agrees  to  purchase  on a pro rata  basis  (based  upon each  Revolving  Credit
Lender's  Revolving  Credit  Commitment))  an irrevocable  participation  in all
outstanding Swing Loans, together with all accrued interest thereon, without any
further  action  by or on behalf of the Swing  Loan  Lender,  any other  Lender,
Borrower,  PR Borrower or any other Person.  Upon one Business Day's notice from
the Swing Loan Lender,  each other Revolving  Credit Lender shall deliver to the
Swing Loan Lender an amount equal to its respective  participation in such Swing
Loan  (as  determined  pursuant  to  the  immediately   preceding  sentence)  in
immediately  available  funds.  In order to evidence  such  participation,  each
Revolving  Credit Lender agrees to enter into a  participation  agreement at the
request of the Swing Loan Lender in form and substance satisfactory to the Swing
Loan Lender and the Revolving  Credit  Lender.  If any  Revolving  Credit Lender
fails to make  available  to the Swing Loan Lender the amount of such  Revolving
Credit  Lender's  participation  as provided in this  paragraph,  the Swing Loan
Lender  shall be entitled to recover  such amount on demand from such  Revolving
Credit  Lender,  together with interest  thereon at the Federal Funds Rate until
such amount is paid in full in  immediately  available  funds.  In the event the
Swing Loan Lender  receives a payment  from  Borrower,  PR Borrower or any other
Obligor of any  amount in which the  Revolving  Credit  Lenders  have  purchased
participations  as  provided  in this  paragraph,  the Swing Loan  Lender  shall
promptly  distribute to each Revolving  Credit Lender its pro rata share of such
payment.  Anything  contained  in this  Agreement  or  otherwise to the contrary
notwithstanding,  (A) each Revolving  Credit  Lender's  obligation to purchase a
participation in each unpaid Swing Loan shall be absolute and  unconditional and
shall not be affected by any circumstances,  including,  without limitation, (1)
any  setoff,  counterclaim,  recoupment,  defense  or  other  right  which  such
Revolving Credit Lender may now or hereafter have against the Swing Loan Lender,
Borrower,  PR Borrower or any other  Person for any reason  whatsoever,  (2) the
occurrence or continuation of a Default or an Event of Default, (3) any material
adverse change in the condition of Borrower, PR Borrower or any Subsidiary,  (4)
any breach or default of this Agreement or any of the Security  Documents by any
Person other than a material breach of the provisions of this Section 2.01(g) by
the  Swing  Loan  Lender  or (5) any  other  circumstance,  happening  or  event
whatsoever,  whether or not similar to any of the  foregoing,  and (B) the Swing
Loan  Lender  shall  not have any  obligation  to make  any  Swing  Loans if (1)
Borrower or PR Borrower, as applicable, fails for whatever reason to satisfy any
of the  conditions  precedent  set forth in  Section  7.02 or (2) any  Revolving
Credit  Lender fails for whatever  reason to comply with its  obligations  under
this Section 2.01(g).

     2.02.  Borrowings.  Borrower or PR Borrower, as the case may be, shall give
Administrative  Agent notice of each borrowing  hereunder as provided in Section
4.05. The form of such notice of borrowing shall be substantially in the form of
Exhibit G. Not later  than  12:00 noon New York City time on the date  specified
for each borrowing hereunder, each Lender shall make available the amount of the
Loan or  Loans  to be made by it on such  date to  Administrative  Agent,  at an
account specified by Administrative Agent maintained at the Principal Office, in
immediately  available  funds,  for the account of Borrower or PR  Borrower,  as
applicable.  Each  borrowing  of  Revolving  Credit  Loans shall be made by each
Revolving  Credit  Lender  pro rata  based  on such  Lender's  Revolving  Credit

                                       34
<PAGE>

Commitment  Percentage.  The amounts so received by Administrative  Agent shall,
subject to the terms and  conditions  of this  Agreement,  be made  available to
Borrower or PR Borrower,  as applicable,  by depositing the same, in immediately
available  funds,  in an account of  Borrower  or PR  Borrower,  as  applicable,
maintained  with  Administrative  Agent at the  Principal  Office  designated by
Borrower or PR Borrower, as applicable.

     2.03.  Letters of Credit.  Subject to the terms and conditions  hereof, the
Revolving Credit Commitments may be utilized,  upon the request of Borrower,  in
addition to the  Revolving  Credit Loans  provided for by Section  2.01(a),  for
standby and commercial documentary letters of credit (herein collectively called
"Letters of Credit") issued by the Issuing Lender for the account of Borrower or
any  Subsidiary  which  is  an  Obligor  (provided,  that  Borrower  shall  be a
co-applicant  (and jointly and severally  liable) with respect to each Letter of
Credit issued for the account of any such Subsidiary);  provided,  however, that
in no event shall (i) the aggregate amount of all Letter of Credit  Liabilities,
plus  the  aggregate  principal  amount  of  the  Revolving  Credit  Loans  then
outstanding, plus the aggregate principal amount of Swing Loans then outstanding
exceed at any time the Revolving  Credit  Commitments as in effect at such time,
(ii) the sum of the aggregate  principal  amount of Revolving  Credit Loans then
outstanding  made by any Revolving  Credit  Lender,  plus such Lender's pro rata
share (based on the Revolving  Credit  Commitments)  of the aggregate  principal
amount of Swing Loans then outstanding, plus such Lender's pro rata share (based
on the Revolving  Credit  Commitments) of the aggregate  amount of all Letter of
Credit Liabilities exceed such Lender's Revolving Credit Commitment as in effect
at such time,  (iii) the  outstanding  aggregate  amount of all Letter of Credit
Liabilities  exceed $75.0 million,  (iv) the face amount of any Letter of Credit
be less than $500,000,  (v) the  expiration  date of any Letter of Credit extend
beyond the earlier of (x) the fifth Business Day preceding the Revolving  Credit
Commitment Termination Date and (y) the date twelve months following the date of
such  issuance for standby  Letters of Credit or 180 days after the date of such
issuance  for  commercial  documentary  Letters of Credit,  unless the  Majority
Revolving  Credit  Lenders have  approved such expiry date in writing (but never
beyond  the  fifth  Business  Day  prior  to  the  Revolving  Credit  Commitment
Termination Date);  provided,  however, that any standby Letter of Credit may be
automatically  extendible  for  periods of up to one year (but never  beyond the
fifth Business Day preceding the Revolving Credit  Commitment  Termination Date)
so long as such Letter of Credit  provides  that the Issuing  Lender  retains an
option  satisfactory  to the Issuing  Lender to terminate  such Letter of Credit
prior to each  extension  date,  or (vi) the Issuing  Lender issue any Letter of
Credit after it has  received  notice from  Borrower or the  Majority  Revolving
Credit  Lenders  stating  that a Default  exists  until such time as the Issuing
Lender shall have received  written notice of (x) rescission of such notice from
the Majority Revolving Credit Lenders,  (y) waiver of such Default in accordance
with this Agreement or (z) Administrative  Agent's good faith determination that
such Default has ceased to exist.  The  following  additional  provisions  shall
apply to Letters of Credit:

     (a) Borrower shall give Administrative  Agent at least three Business Days'
irrevocable prior notice (effective upon receipt) pursuant to a Letter of Credit
application  satisfactory to the Issuing Lender specifying the date (which shall
be no later than thirty days preceding the Revolving  Credit  Termination  Date)
each Letter of Credit is to be issued and  describing in  reasonable  detail the
proposed  terms of such Letter of Credit  (including  the  beneficiary  thereof)
(including  whether such Letter of Credit is to be a commercial Letter of Credit
or a standby Letter of Credit). Upon receipt of any such notice,  Administrative
Agent  shall  advise the Issuing  Lender of the  contents  thereof.  Each Lender
hereby  authorizes  the Issuing  Lender to issue,  and  perform its  obligations
under,  Letters of Credit.  Letters of Credit shall be issued in accordance with
the customary procedures of the Issuing Lender, which may include an application
for  Letters of  Credit.  The  Issuing  Lender may refuse to issue any Letter of
Credit the contents of which are not reasonably  satisfactory to it. If there is
any  conflict  between the  procedures  required by the Issuing  Lender and this
Agreement, this Agreement shall govern.

     (b) On each day during  the  period  commencing  with the  issuance  by the
Issuing  Lender of any Letter of Credit and until  such  Letter of Credit  shall
have  expired  or been  terminated,  the  Revolving  Credit  Commitment  of each
Revolving  Credit Lender shall be deemed to be utilized for all purposes  hereof
in an amount equal to such Lender's  Revolving Credit  Commitment  Percentage of
the then undrawn  face amount of such Letter of Credit.  Each  Revolving  Credit
Lender  (other than the Issuing  Lender)  agrees that,  upon the issuance of any
Letter of Credit hereunder,  it shall  automatically  acquire a participation in
the Issuing Lender's liability under such Letter of Credit in an amount equal to
such Lender's Revolving Credit Commitment Percentage of such liability, and each

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<PAGE>

Revolving   Credit  Lender  (other  than  the  Issuing   Lender)  thereby  shall
absolutely,  unconditionally  and irrevocably assume, as primary obligor and not
as surety, and shall be  unconditionally  obligated to the Issuing Lender to pay
and  discharge  when due, its  Revolving  Credit  Commitment  Percentage  of the
Issuing Lender's liability under such Letter of Credit. The Issuing Lender shall
be  deemed  to hold a Letter  of  Credit  Liability  in an  amount  equal to its
retained  interest in the related  Letter of Credit after giving  effect to such
acquisition  by the Revolving  Credit  Lenders other than the Issuing  Lender of
their participation interests.

     (c) Upon the  making of any  payment  to the  beneficiary  of any Letter of
Credit,   the  Issuing   Lender  shall   promptly   notify   Borrower   (through
Administrative  Agent) of the amount paid by the Issuing  Lender and the date on
which  payment was made to such  beneficiary.  Borrower  hereby  unconditionally
agrees to pay and reimburse  the Issuing  Lender for the amount of payment under
such Letter of Credit, together with interest thereon at the Alternate Base Rate
plus the Applicable  Margin  applicable to Revolving  Credit Loans from the date
payment was made to such  beneficiary  to the date on which  payment is due, not
later than the next Business Day after the date on which Borrower  receives such
notice from the Issuing  Lender (or the second  Business Day  thereafter if such
notice is received on a date that is not a Business  Day or after 11:00 a.m. New
York City time on a Business  Day).  Any such payment due from  Borrower and not
paid on the  required  date shall bear  interest at rates  specified  in Section
3.02(b).

     (d)  Forthwith  upon its  receipt of a notice  referred to in clause (c) of
this  Section  2.03,  Borrower  shall advise the Issuing  Lender  whether or not
Borrower  intends to borrow hereunder to finance its obligation to reimburse the
Issuing Lender for the amount of the related demand for payment and, if it does,
submit a notice of such borrowing as provided in Section 4.05. In the event that
Borrower  fails to so  advise  Administrative  Agent,  or if  Borrower  fails to
reimburse  the Issuing  Lender for a demand for payment under a Letter of Credit
by the next  Business  Day after the date of such notice,  Administrative  Agent
shall  give each  Revolving  Credit  Lender  prompt  notice of the amount of the
demand  for  payment,  specifying  such  Lender's  Revolving  Credit  Commitment
Percentage of the amount of the related demand for payment.

     (e) Each Revolving  Credit Lender (other than the Issuing Lender) shall pay
to  Administrative  Agent for  account of the  Issuing  Lender at the  Principal
Office  in  Dollars  and in  immediately  available  funds,  the  amount of such
Lender's Revolving Credit Commitment Percentage of any payment under a Letter of
Credit  upon not less  than one  Business  Day's  notice by the  Issuing  Lender
(through  Administrative  Agent) to such Revolving Credit Lender requesting such
payment and specifying such amount. Subject to the proviso to the last paragraph
of this Section 2.03,  each such Revolving  Credit  Lender's  obligation to make
such  payments to  Administrative  Agent for the  account of the Issuing  Lender
under this clause (e), and the Issuing Lender's right to receive the same, shall
be absolute  and  unconditional  and shall not be  affected by any  circumstance
whatsoever,  including (i) the failure of any other  Revolving  Credit Lender to
make its payment under this clause (e), (ii) the financial condition of Borrower
or the  existence of any Default or (iii) the  termination  of the  Commitments.
Each such  payment to the  Issuing  Lender  shall be made  without  any  offset,
abatement, withholding or reduction whatsoever.

     (f) Upon the making of each  payment by a  Revolving  Credit  Lender to the
Issuing Lender  pursuant to clause (e) above in respect of any Letter of Credit,
such Lender shall,  automatically  and without any further action on the part of
Administrative  Agent,  the  Issuing  Lender  or  such  Lender,  acquire  (i)  a
participation in an amount equal to such payment in the Reimbursement Obligation
owing to the Issuing Lender by Borrower hereunder and under the Letter of Credit
Documents  relating  to such  Letter of  Credit  and (ii) a  participation  in a
percentage equal to such Lender's Revolving Credit Commitment  Percentage in any
interest or other amounts payable by Borrower hereunder and under such Letter of
Credit Documents in respect of such  Reimbursement  Obligation.  Upon receipt by
the Issuing Lender from or for the account of Borrower of any payment in respect
of any Reimbursement Obligation or any such interest or other amounts (including
by way of setoff or  application  of proceeds of any  collateral  security)  the
Issuing  Lender shall  promptly pay to  Administrative  Agent for the account of
each Revolving  Credit Lender which has satisfied its  obligations  under clause
(e) above, such Revolving Credit Lender's Revolving Credit Commitment Percentage
of such payment,  each such payment by the Issuing Lender to be made in the same

                                       36
<PAGE>

money  and  funds in which  received  by the  Issuing  Lender.  In the event any
payment  received  by the  Issuing  Lender and so paid to the  Revolving  Credit
Lenders  hereunder  is  rescinded  or must  otherwise be returned by the Issuing
Lender,  each  Revolving  Credit Lender  shall,  upon the request of the Issuing
Lender  (through  Administrative  Agent),  repay to the Issuing Lender  (through
Administrative  Agent)  the amount of such  payment  paid to such  Lender,  with
interest at the rate specified in clause (i) of this Section 2.03.

     (g)  Borrower  shall pay to  Administrative  Agent for the  account  of the
Issuing Lender in respect of each Letter of Credit a letter of credit commission
in an amount  (not less than $500)  equal to (x) the rate per annum equal to the
Applicable Margin for Revolving Credit Loans that are LIBOR Loans in effect from
time to time,  multiplied by (y) the daily  average  undrawn face amount of such
Letter of Credit for the period from and  including the date of issuance of such
Letter  of  Credit  (i) in the case of a  Letter  of  Credit  which  expires  in
accordance with its terms, to and including such expiration date and (ii) in the
case of a Letter of  Credit  which is drawn in full or is  otherwise  terminated
other  than on the  stated  expiration  date of such  Letter of  Credit,  to but
excluding the date such Letter of Credit is drawn in full or is terminated, such
fee to be non-refundable and to be paid in arrears quarterly,  on each Quarterly
Date, and on the earlier of the Revolving Credit Commitment  Termination Date or
the date of the termination of the Revolving  Credit  Commitments or the date of
such  termination,  expiration  or the  Business Day  subsequent  to notice of a
drawing. The Issuing Lender shall pay to Administrative Agent for the account of
each Revolving Credit Lender (other than the Issuing Lender),  from time to time
at reasonable  intervals (but in any event at least quarterly),  but only to the
extent  actually  received  from  Borrower,  an  amount  equal to such  Lender's
Revolving  Credit  Commitment  Percentage  of all  letter of credit  commissions
referred to in the first  sentence of this  clause  (g). In  addition,  Borrower
shall pay to  Administrative  Agent for  account of the  Issuing  Lender only in
respect of each  Letter of Credit a letter of credit  issuance  fee in an amount
equal to 0.125% per annum  multiplied by the original face amount from the issue
date through the expiry date of such Letter of Credit (but in no event less than
$500 per Letter of Credit), such amount to be payable on the date of issuance of
such  Letter of Credit,  plus all  charges,  costs and  expenses  in the amounts
customarily   charged  by  the  Issuing   Lender  from  time  to  time  in  like
circumstances with respect to the issuance, amendment or transfer of each Letter
of Credit and drawings and other transactions relating thereto.

     (h) Promptly  following the end of each calendar month,  the Issuing Lender
shall deliver (through Administrative Agent) to each Revolving Credit Lender and
Borrower  a notice  describing  the  aggregate  amount of all  Letters of Credit
outstanding at the end of such month.  Upon the request of any Revolving  Credit
Lender from time to time, the Issuing Lender shall deliver any other information
reasonably  requested  by such Lender with respect to each Letter of Credit then
outstanding.

     (i) To the extent that any  Revolving  Credit Lender fails to pay an amount
required to be paid  pursuant to clause (e) or (f) of this  Section  2.03 on the
due date therefor, such Lender shall pay interest to the Issuing Lender (through
Administrative  Agent) on such  amount from and  including  such due date to but
excluding the date such payment is made (i) during the period from and including
such due date to but excluding the date three  Business  Days  thereafter,  at a
rate per annum equal to the Federal  Funds Rate (as in effect from time to time)
and (ii) thereafter,  at a rate per annum equal to the post-default  rate (as in
effect from time to time) pursuant to Section 3.02(b).

     (j) The issuance by the Issuing Lender of any modification or supplement to
any Letter of Credit hereunder that would extend the expiry date or increase the
face amount  thereof shall be subject to the same  conditions  applicable  under
this  Section  2.03  to the  issuance  of new  Letters  of  Credit,  and no such
modification  or  supplement  shall be issued  hereunder  unless  either (x) the
respective  Letter of Credit  affected  thereby  would have  complied  with such
conditions  had  it  originally  been  issued  hereunder  in  such  modified  or
supplemented  form or (y) the  Majority  Revolving  Credit  Lenders  shall  have
consented thereto.

     (k)  Notwithstanding  the foregoing,  the Issuing Lender shall not be under
any  obligation  to issue any Letter of Credit if at the time of such  issuance,
any order, judgment or decree of any Governmental  Authority or arbitrator shall
purport by its terms to enjoin or restrain the Issuing  Lender from issuing such

                                       37
<PAGE>

Letter of Credit or any  requirement  of law applicable to the Issuing Lender or
any  request  or  directive  (whether  or not  having the force of law) from any
Governmental  Authority  shall  prohibit  the  issuance  of  letters  of  credit
generally  or such  Letter of Credit in  particular  or shall  impose  upon such
Issuing Lender with respect to such Letter of Credit any  restriction or reserve
or  capital   requirement  (for  which  the  Issuing  Lender  is  not  otherwise
compensated)  not in effect  on the date  hereof.  At any time that the  Issuing
Lender shall not be under any obligation to issue Letters of Credit  pursuant to
this  paragraph (k), the Issuing Lender may be replaced by Borrower with another
Lender reasonably  acceptable to Administrative Agent upon notice to the Issuing
Lender and Administrative Agent. Upon any such replacement, Administrative Agent
shall notify the Lenders of any such  replacement  of the Issuing Lender and the
replacement Issuing Lender shall agree to be bound by the applicable  provisions
of this  Agreement.  At the time any such  replacement  shall become  effective,
Borrower  shall pay all unpaid  fees  accrued  for the  account of the  replaced
Issuing Lender pursuant to Section 2.03(g). From and after the effective date of
any such replacement, (i) the successor Issuing Lender shall have all the rights
and  obligations  of the Issuing  Lender  under this  Agreement  with respect to
Letters of Credit to be issued thereafter and (ii) references herein to the term
"Issuing  Lender" shall be deemed to refer to such  successor or to any previous
Issuing Lender,  or to such successor and all previous Issuing  Lenders,  as the
context shall require. After the replacement of an Issuing Lender hereunder, the
replaced  Issuing  Lender shall remain a party hereto and shall continue to have
all the rights and  obligations  of an Issuing  Lender under this Agreement with
respect to Letters of Credit issued by it prior to such  replacement,  but shall
not be required to issue additional Letters of Credit.

The  obligations  of  Borrower  under  this  Agreement  and any Letter of Credit
Document to reimburse the Issuing Lender for a drawing under a Letter of Credit,
and to repay  any  drawing  under a Letter of Credit  converted  into  Revolving
Credit Loans, shall be unconditional and irrevocable, and shall be paid strictly
in  accordance  with the terms of this  Agreement  and each such other Letter of
Credit Document under all circumstances,  including the following:  (i) any lack
of  validity  or  enforceability  of this  Agreement  or any  Letter  of  Credit
Document;  (ii) the existence of any claim, setoff,  defense or other right that
Borrower may have at any time against any  beneficiary  or any transferee of any
Letter  of  Credit  (or any  Person  for whom any such  beneficiary  or any such
transferee may be acting),  the Issuing  Lender or any other Person,  whether in
connection with this Agreement,  the transactions  contemplated hereby or by the
Letter  of Credit  Documents  or any  unrelated  transaction;  (iii) any  draft,
demand,  certificate  or other  document  presented  under any  Letter of Credit
proving to be forged, fraudulent,  invalid or insufficient in any respect or any
statement  therein  being untrue or  inaccurate  in any respect;  or any loss or
delay in the transmission or otherwise of any document required in order to make
a drawing  under any Letter of Credit;  or any defense based upon the failure of
any  drawing  under a Letter of Credit to  conform to the terms of the Letter of
Credit  or any  non-application  or  misapplication  by the  beneficiary  of the
proceeds  of  such  drawing;   or  (iv)  any  other  circumstance  or  happening
whatsoever,  whether or not similar to any of the foregoing, including any other
circumstance  that  might  otherwise  constitute  a defense  available  to, or a
discharge of, Borrower or a Guarantor;  provided, however, that neither Borrower
nor any  Revolving  Credit  Lender shall be  obligated to reimburse  the Issuing
Lender for any  wrongful  payment  finally  determined  by a court of  competent
jurisdiction  to have  been  made by the  Issuing  Lender as a result of acts or
omissions constituting willful misconduct or gross negligence on the part of the
Issuing  Lender.  To the  extent  that any  provision  of any  Letter  of Credit
Document  is  inconsistent  with  the  provisions  of  this  Section  2.03,  the
provisions of this Section 2.03 shall control.

     2.04.  Termination  and  Reductions of  Commitments.  (a) (i) The aggregate
amount  of  the  Revolving  Credit   Commitments   shall  be  automatically  and
permanently reduced to zero on the Revolving Credit Commitment Termination Date.

     (ii)  The  aggregate  amount  of  Revolving  Credit  Commitments  shall  be
permanently  reduced on the date any required  prepayments  described in Section
2.10(a) are required to be made in the amount specified in Section  2.10(b)(ii).
Each such  reduction  shall  apply pro rata to each  Revolving  Credit  Lender's
Revolving  Credit  Commitment.  Concurrently  with any such reduction,  Borrower
shall comply with Section 2.10(c).

     (iii) The aggregate  amount of the Tranche A Term Loan  Commitments and the
Tranche A-PR Term Loan  Commitments were reduced to zero on the Original Closing

                                       38
<PAGE>

Date.  The aggregate  amount of the Tranche B-PR Term Loan  Commitments  and the
Tranche C-PR Term Loan Commitments were automatically and permanently reduced to
zero immediately after the making of the Tranche B-PR Term Loans and the Tranche
C-PR Term Loans on the Effectiveness Date.

     (b) Borrower shall have the right at any time or from time to time (without
premium or penalty  except  breakage costs (if any)) (i) so long as no Revolving
Credit Loans or Letter of Credit  Liabilities will be outstanding as of the date
specified for  termination,  to terminate the Revolving  Credit  Commitments  in
their  entirety,  and (ii) to reduce  the  aggregate  amount  of the  Unutilized
Revolving Credit Commitments of all the Revolving Credit Lenders (which shall be
pro rata among such Lenders);  provided,  however,  that (x) Borrower shall give
notice of each such  termination  or reduction as provided in Section 4.05,  and
(y) each partial  reduction  shall be in an  aggregate  amount at least equal to
$5.0 million (or a larger  multiple of $1.0 million) or, if less,  the remaining
Unutilized Revolving Credit Commitments. Any such reduction by Borrower shall be
on behalf of Borrower and PR Borrower.

     (c) The Commitments once terminated or reduced may not be reinstated.

     2.05. Fees. (a) Borrower shall pay to Administrative  Agent for the account
of each Revolving  Credit Lender a commitment fee on the daily average amount of
such Lender's  Unutilized  Revolving Credit Commitment,  for the period from and
including  the  Effectiveness  Date to but not including the earlier of the date
such  Revolving  Credit  Commitment  is  terminated  and  the  Revolving  Credit
Commitment  Termination  Date,  at a rate  per  annum  equal  to the  Applicable
Revolving Credit Fee Percentage.  Any accrued  commitment fee under this Section
2.05(a) shall be payable in arrears on each Quarterly Date and on the earlier of
the date the  Revolving  Credit  Commitments  are  terminated  and the Revolving
Credit Commitment Termination Date.

     (b)  Borrower  shall pay to  Administrative  Agent for its own  account  an
annual administrative fee pursuant to the Administrative Agent Fee Letter.

     2.06. Lending Offices.  The Loans of each Type made by each Lender shall be
made and maintained at such Lender's Applicable Lending Office for Loans of such
Type.

     2.07. Several Obligations of Lenders. The failure of any Lender to make any
Loan to be made by it on the date specified therefor shall not relieve any other
Lender of its  obligation to make its Loan on such date,  but neither any Lender
nor  Administrative  Agent  shall be  responsible  for the  failure of any other
Lender to make a Loan to be made by such other Lender,  and no Lender shall have
any  obligation to  Administrative  Agent or any other Lender for the failure by
such Lender to make any Loan required to be made by such Lender.

     2.08. Notes;  Register. (a) (i) At the request of any Lender, the Revolving
Credit  Loans made by such  Lender may be  evidenced  by one or more  promissory
notes of Borrower  and PR  Borrower,  substantially  in the form of Exhibit A-1,
dated the  Original  Closing  Date or the  Effectiveness  Date,  as  applicable,
payable to such Lender and otherwise duly completed.

     (ii) At the request of any  Lender,  the Tranche A Term Loans made or to be
made  by  such  Lender  may be  evidenced  by one or more  promissory  notes  of
Borrower,  substantially  in the form of Exhibit A-2, dated the Original Closing
Date, payable to such Lender and otherwise duly completed.

     (iii) At the request of any Lender,  the Tranche A-PR Term Loans made or to
be made by such Lender may be  evidenced by one or more  promissory  notes of PR
Borrower,  substantially  in the form of Exhibit A-3, dated the Original Closing
Date, payable to such Lender and otherwise duly completed.

     (iv) At the request of any Lender,  the Tranche  B-PR Term Loans made or to
be made by such Lender may be  evidenced by one or more  promissory  notes of PR
Borrower,  substantially  in the form of Exhibit  A-4,  dated the  Effectiveness
Date, payable to such Lender and otherwise duly completed.

     (v) At the request of any Lender, the Tranche C-PR Term Loans made or to be
made by such  Lender  may be  evidenced  by one or more  promissory  notes of PR
Borrower,  substantially  in the form of Exhibit  A-5,  dated the  Effectiveness
Date, payable to such Lender and otherwise duly completed.

                                       39
<PAGE>

     (vi) At the  request  of the Swing  Loan  Lender,  the Swing  Loans made by
Administrative  Agent  shall be  evidenced  by one or more  promissory  notes of
Borrower and PR Borrower,  substantially  in the form of Exhibit A-6,  dated the
Closing Date, payable to the Swing Loan Lender and otherwise duly completed.

     (b) The date,  amount,  Type,  interest  rate and  duration of the Interest
Period  (if  applicable)  of each  Loan of each  Class  made by each  Lender  to
Borrower or PR Borrower  (as the case may be),  and each payment made on account
of the  principal  thereof,  shall be  recorded by such Lender on its books and,
prior to any transfer of any Note evidencing the Loans of such Class held by it,
endorsed  by  such  Lender  on  the  schedule  attached  to  such  Note  or  any
continuation thereof; provided, however, that the failure of such Lender to make
any such recordation or endorsement shall not affect the obligations of Borrower
or PR  Borrower  (as the case may be) to make a payment  when due of any  amount
owing hereunder or under such Note.

     (c) Borrower and PR Borrower hereby designate Administrative Agent to serve
as their agent, solely for purposes of this Section 2.08, to maintain a register
(the  "Register")  on which it will record the name and address of each  Lender,
the Commitment from time to time of each of the Lenders, the principal amount of
the Loans  made by each of the  Lenders  and each  repayment  in  respect of the
principal  amount  of the  Loans  of  each  Lender.  Failure  to make  any  such
recordation or any error in such recordation  shall not affect  Borrower's or PR
Borrower's  obligations  in respect of such Loans.  The entries in the  Register
shall be  conclusive,  in the  absence  of  manifest  error,  and  Borrower,  PR
Borrower,  Administrative  Agent and the Lenders  shall treat each Person  whose
name is  recorded  in the  Register  as the owner of a Loan or other  obligation
hereunder as the owner thereof for all purposes of this  Agreement and the other
Credit Documents, notwithstanding any notice to the contrary. The Register shall
be  available  for  inspection  by  Borrower,  PR  Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.

     2.09.  Optional  Prepayments  and  Conversions or  Continuations  of Loans.
Subject to Section 4.04, Borrower and PR Borrower shall have the right to prepay
Loans, or to Convert Loans of one Type into Loans of another Type or to Continue
Loans of one Type as Loans of the same Type, at any time or from time to time to
be applied as  specified  by  Borrower or PR  Borrower,  as  applicable,  and in
accordance with all the terms in this Section 2.09; provided, however, that: (a)
Borrower or PR Borrower,  as applicable,  shall give Administrative Agent notice
of each such prepayment,  Conversion or Continuation as provided in Section 4.05
(and, upon the date specified in any such notice of prepayment, the amount to be
prepaid shall become due and payable hereunder);  (b) if LIBOR Loans are prepaid
or  Converted  other than on the last day of an Interest  Period for such Loans,
Borrower or PR Borrower, as applicable,  shall at such time pay all expenses and
costs required by Section 5.05;  and (c)  prepayments of the Term Loans pursuant
to this  Section  2.09 shall be applied (i) at the sole  election  and option of
Borrower  or PR  Borrower,  as  applicable,  in an amount not to exceed the then
current  available  Prepayment  Designation  Basket in any manner among the Term
Loan Tranches and the remaining  Amortization Payments thereof as Borrower shall
designate in an Officers'  Certificate  delivered to  Administrative  Agent; and
(ii) unless applied in accordance with the foregoing  subclause,  pro rata among
the Term Loan Tranches based upon the remaining unpaid amounts thereof and as to
the remaining Amortization Payments of each such Term Loan Tranche in any manner
that  Borrower  shall  designate  in  an  Officers'   Certificate  delivered  to
Administrative  Agent. Each prepayment made pursuant to this Section 2.09 of the
Tranche  B-PR Term Loans or the Tranche  C-PR Term Loans made on or prior to the
third anniversary of the Original Closing Date shall be accompanied by a premium
payment in cash of 1% of the  aggregate  principal  amount of such Loan prepaid.
Any  prepayment  of the Tranche  B-PR Term Loans or the Tranche  C-PR Term Loans
made in connection with any refinancing of the Loans shall be deemed an optional
prepayment  under this Section 2.09 and not a mandatory  prepayment  of the Term
Loans under Section 2.10.

     Notwithstanding  the foregoing,  in the event that Borrower  elects (in its
sole  discretion)  to provide the option (the "Option") to any of the holders of
Tranche  B-PR Term Loans and Tranche  C-PR Term Loans to elect (in the  absolute
and  sole  discretion  of  such  holders)  not to  have  all or any  part of any
voluntary  prepayments  applied  to such  Lender's  Tranche  B-PR Term  Loans or
Tranche C-PR Term Loans,  as the case may be,  Borrower  shall  provide  written
notice of the Option with  respect to such  voluntary  prepayment  at least five
Business Days prior to such voluntary prepayment to Administrative Agent and all

                                       40
<PAGE>

holders of Tranche B-PR Term Loans and Tranche C-PR Term Loans.  Any such holder
may  elect  to  accept  such  Option  (in  whole  or in part) on or prior to the
Business Day prior to the date of such prepayment. Any such holder who shall not
have provided written acceptance thereof to Administrative  Agent on or prior to
the  Business Day prior to the date of such  prepayment  shall be deemed to have
declined  such  Option.  Any amount of such  voluntary  prepayment  so  declined
pursuant to the Option shall be applied (i) first,  pro rata between the Tranche
A Term  Loans and the  Tranche  A-PR Term  Loans  and,  as to any such Term Loan
Tranche,  to the  remaining  Amortization  Payments  thereof in any manner  that
Borrower shall designate in an Officers' Certificate delivered to Administrative
Agent;  and (ii)  second,  to the extent that no Tranche A Term Loans or Tranche
A-PR Term Loans are outstanding after giving effect to the application  required
by the previous clause (i), pro rata between Tranche B-PR Term Loans and Tranche
C-PR Term Loans (based upon the remaining unpaid  principal  amounts thereof) of
the holders  thereof who had not declined  prepayment,  and, as to any such Term
Loan Tranche,  to the remaining  Amortization  Payments thereunder in any manner
that  Borrower  shall  designate  in  an  Officers'   Certificate  delivered  to
Administrative Agent.

     Notwithstanding the foregoing, and without limiting the rights and remedies
of the Lenders  under  Section 10, in the event that any Event of Default  shall
have occurred and be continuing, Administrative Agent may (and at the request of
the Majority  Lenders  shall)  suspend the right of Borrower to Convert any Loan
into a LIBOR Loan,  or to Continue any Loan as a LIBOR Loan,  in which event all
Loans shall be Converted (on the last day(s) of the respective  Interest Periods
therefor) or Continued, as the case may be, as ABR Loans.

     Each notice of Conversion or  Continuation  shall be  substantially  in the
form of Exhibit H.

     2.10. Mandatory Prepayments. (a) Borrower shall prepay the Loans as follows
(each such  prepayment  to be effected in each case in the manner,  order and to
the extent specified in subsection (b) below of this Section 2.10):

     (i) Casualty Events. Within one Business Day after any Company receives any
Net Available Proceeds from any Casualty Event, in an aggregate principal amount
equal to 100% of such Net Available Proceeds; provided, however, that

          (w) if no Event of Default then exists or would arise  therefrom,  the
     Net  Available  Proceeds  thereof shall not be required to be so applied on
     such  date  to  the  extent  that   Borrower  has  delivered  an  Officers'
     Certificate to  Administrative  Agent on or prior to such date stating that
     such proceeds  shall be used to fund the  acquisition  or  construction  of
     Property  used,  usable or  useful  in the  business  of  Borrower  and the
     Subsidiaries or repair, replace or restore the Property in respect of which
     such Casualty  Event has occurred,  in each case within one year  following
     the date of the receipt of such Net Available Proceeds, and

          (x) if all or any portion of such Net Available  Proceeds not required
     to be applied to the prepayment of Loans pursuant to the preceding  proviso
     (w) is not so used  within one year  after the date of the  receipt of such
     Net Available Proceeds, such remaining portion shall be applied on the last
     day of such period as specified in Section 2.10(b).

     (ii) Equity  Issuance.  Except with respect to the first $125.0  million of
Net Available  Proceeds  received from Equity Issuances after the  Effectiveness
Date,  in an  aggregate  principal  amount  equal  to 50% of the  Net  Available
Proceeds of all Equity Issuances after the Effectiveness Date.

     (iii) Debt Issuance.  Upon any Debt Issuance after the Effectiveness  Date,
in an aggregate  principal amount equal to 100% of the Net Available Proceeds of
such Debt Issuance.

     (iv)  Disposition  Events.  Within one  Business  Day after  receipt by any
Company  of any  Net  Available  Proceeds  from  any  Disposition  Event,  in an
aggregate principal amount equal to 100% of the Net Available/Proceeds from such
Disposition Event; provided, however, that

          (x) the Net Available Proceeds from any Disposition Event permitted by
     Section 9.06(g), (p) or (q) shall not be required to be applied as provided
     herein on such date if (1) no Event of Default  then  exists or would arise

                                       41
<PAGE>

     therefrom,   and  (2)  Borrower   delivers  an  Officers'   Certificate  to
     Administrative  Agent  on or  prior  to such  date  stating  that  such Net
     Available  Proceeds shall be reinvested in Property usable or useful in the
     business  of  Borrower  or any  Subsidiary,  in each case  within  one year
     following the date of such Disposition  Event (which  certificate shall set
     forth the estimates of the proceeds to be so expended) (provided, that with
     respect  to any  Disposition  of or by a  Qualified  Subsidiary,  such  Net
     Available Proceeds may only be reinvested in an Obligor or shall be counted
     against and be subject to the applicable  limits set forth in Sections 9.06
     and 9.09), and

         (y) if all or any  portion of such Net  Available  Proceeds  which are
     permitted  to be  applied  to  reinvestment  pursuant  to the terms of this
     Section  2.10(a)(iv)  is not so used  within  such  one year  period,  such
     remaining  portion shall be applied on the last day of such period (or such
     earlier date as Borrower determines not to reinvest any portion thereof) as
     specified in Section 2.10(b) (it being  understood that the foregoing shall
     in no way affect the obligation of any Company to obtain the consent of the
     Majority  Lenders if  required  pursuant  to this  Agreement  to effect any
     Disposition).

          (v)  Excess  Cash  Flow.  Not later than 95 days after the end of each
     fiscal year of Borrower commencing with the fiscal year ended May 31, 2001,
     in an aggregate  principal  amount equal to (A) 75% of Excess Cash Flow for
     such  fiscal year when the Total  Leverage  Ratio at the end of such fiscal
     year is greater  than or equal to 6.0:1.0  (as  evidenced  in an  Officers'
     Certificate delivered to Administrative Agent and the Lenders), and (B) 50%
     of Excess Cash Flow for any such fiscal year when the Total  Leverage Ratio
     at the end of such fiscal year is less than  6.0:1.0  (as  evidenced  in an
     Officers' Certificate delivered to Administrative Agent and the Lenders).

     (b)  Application.  The  amount of any  required  prepayments  described  in
Section 2.10(a) shall be applied as follows:

          (i) first, the amount of the required  prepayment shall be applied (A)
     at the option of Borrower or PR Borrower,  as applicable,  in an amount not
     to exceed the then current available Prepayment  Designation Basket, in any
     manner among the Term Loan Tranches and the remaining Amortization Payments
     thereof as Borrower shall designate in an Officers'  Certificate  delivered
     to  Administrative  Agent;  and (B) unless  applied in accordance  with the
     foregoing  subclause (A), to the reduction of Amortization  Payments on the
     Term  Loans  required  by  Section  3.01(b)  pro rata  among  the Term Loan
     Tranches based upon the remaining  unpaid  amounts  thereof and pro rata to
     the remaining  Amortization Payments of such Term Loan Tranche based on the
     remaining  unpaid  amounts  thereof;  provided,  however  that any  amounts
     required to be applied to the payment of Loans  pursuant to this clause (B)
     from any prepayment made pursuant to Section 2.10(a)(v) shall be applied to
     the remaining Amortization Payments of each Term Loan Tranche in the direct
     order thereof.  Notwithstanding  the foregoing,  any holder of Tranche B-PR
     Term Loans or  Tranche  C-PR Term Loans at its sole  discretion  may,  with
     respect to any  mandatory  prepayment  to be applied as set forth in clause
     (B) above,  so long as any Tranche A Term Loans or Tranche  A-PR Term Loans
     are then  outstanding  (after  giving  effect  to the  application  of such
     required  prepayment  to the  Tranche A Term  Loans and  Tranche  A-PR Term
     Loans),  elect by written notice  provided to  Administrative  Agent not to
     have all or any  amount of any such  required  prepayments  applied to such
     holder's  Tranche B-PR Term Loans or Tranche  C-PR Term Loans,  as the case
     may be, in which case the aggregate amount so declined shall be applied pro
     rata  between the Tranche A Term Loans and the Tranche A-PR Term Loans and,
     as to any such Term Loan Tranche,  pro rata to the  remaining  Amortization
     Payments  thereof (or, in the case of prepayments  made pursuant to Section
     2.10(a)(v),  in the direct order thereof);  provided,  however, that to the
     extent that the aggregate  principal amount of the Tranche A Term Loans and
     Tranche A-PR Term Loans after giving effect to such mandatory prepayment is
     less than the  aggregate  amount so  declined by the holders of the Tranche
     B-PR Term Loans and Tranche C-PR Term Loans,  such amount so declined shall
     be allocated  between the declining  holders of the Tranche B-PR Term Loans
     and  Tranche  C-PR Term  Loans pro rata  based on the  remaining  aggregate
     amount of their amounts declined;

          (ii)  second,  after  such time as no Term Loans  remain  outstanding,
     Revolving Credit Commitments shall be permanently reduced (at the same time
     that the  prepayment of the Term Loans would have been made and assuming an

                                       42
<PAGE>

     unlimited  amount thereof then  outstanding) pro rata in an amount equal to
     the remaining  amount of any such required  prepayment that would have been
     applied  to the Term Loans  (assuming  an  unlimited  amount  thereof  then
     outstanding) and to the extent that, after giving effect to such reduction,
     the  aggregate  principal  amount  of  Revolving  Credit  Loans,  plus  the
     aggregate principal amount of Swing Loans, plus the aggregate amount of all
     Letter of Credit Liabilities would exceed the Revolving Credit Commitments,
     Borrower or PR Borrower shall, first,  prepay outstanding  Revolving Credit
     Loans and second,  prepay outstanding Swing Loans and, third, provide cover
     for Letter of Credit  Liabilities  as specified in Section  2.10(d),  in an
     aggregate amount equal to such excess; and

          (iii) third,  after  application  of  prepayments  in accordance  with
     clauses (i) and (ii) above,  Borrower or PR Borrower  shall be permitted to
     retain any such remaining excess.

     Notwithstanding  the  foregoing,  if the amount of any  prepayment of Loans
required  under  this  Section  2.10 shall be in excess of the amount of the ABR
Loans at the time outstanding, only the portion of the amount of such prepayment
as is equal to the amount of such  outstanding  ABR Loans  shall be  immediately
prepaid  and, at the  election of Borrower or PR  Borrower,  the balance of such
required  prepayment shall be either (i) deposited in the Collateral Account and
applied  to the  prepayment  of  LIBOR  Loans  on  the  last  day  of  the  then
next-expiring  Interest  Period  for LIBOR  Loans  (with all  interest  accruing
thereon  for the  account of Borrower or PR  Borrower,  as  applicable)  or (ii)
prepaid  immediately,  together  with any  amounts  owing to the  Lenders  under
Section  5.05.  Notwithstanding  any such  deposit  in the  Collateral  Account,
interest shall continue to accrue on such Loans until prepayment.

     (c) Revolving  Credit  Extension  Reductions.  Until the  Revolving  Credit
Commitment Termination Date, Borrower and PR Borrower, as applicable, shall from
time to time  immediately  prepay the Swing Loans and the Revolving Credit Loans
(and/or  provide cover for Letter of Credit  Liabilities as specified in Section
2.10(d))  in such  amounts  as  shall  be  necessary  so that at all  times  the
aggregate  outstanding  amount of the Revolving Credit Loans, plus the aggregate
outstanding  amount of Swing Loans,  plus the  aggregate  outstanding  Letter of
Credit  Liabilities  shall not exceed the  Revolving  Credit  Commitments  as in
effect at such time,  such  amount to be  applied,  first,  to the Swing  Loans,
second, to Revolving Credit Loans outstanding and, third, as cover for Letter of
Credit Liabilities outstanding as specified in Section 2.10(d).

     (d) Cover for Letter of Credit  Liabilities.  In the event that Borrower or
PR Borrower shall be required pursuant to this Section 2.10 to provide cover for
Letter  of  Credit  Liabilities,  Borrower  shall  effect  the same by paying to
Administrative  Agent  immediately  available  funds in an  amount  equal to the
required amount,  which funds shall be retained by  Administrative  Agent in the
Collateral Account (as provided in the Security Agreement as collateral security
in the first instance for the Letter of Credit  Liabilities)  until such time as
all Letters of Credit shall have been terminated and all of the Letter of Credit
Liabilities paid in full.

     2.11. Replacement of Lenders.  Borrower shall have the right, if no Default
then  exists,  to replace any Lender (the  "Replaced  Lender")  with one or more
other  Eligible  Persons   reasonably   acceptable  to   Co-Syndication   Agents
(collectively, the "Replacement Lender") if (x) such Lender is charging Borrower
increased  costs  pursuant  to  Section  5.01 or 5.06 in excess  of those  being
charged  generally  by the other  Lenders or such Lender  becomes  incapable  of
making LIBOR Loans as provided in Section 5.03 and/or (y) as provided in Section
12.04(ii),  such  Lender  refuses to consent  to  certain  proposed  amendments,
waivers or modifications with respect to this Agreement; provided, however, that
(i) at  the  time  of  any  replacement  pursuant  to  this  Section  2.11,  the
Replacement Lender shall enter into one or more assignment  agreements (and with
all fees payable pursuant to Section 12.06 to be paid by the Replacement Lender)
pursuant to which the  Replacement  Lender shall acquire all of the  Commitments
and  outstanding  Loans of, and in each case Letter of Credit  Interests by, the
Replaced  Lender and, in  connection  therewith,  shall pay to (x) the  Replaced
Lender,  an amount  equal to the sum of (A) the  principal  of, and all  accrued
interest on, all outstanding Loans of the Replaced Lender, (B) all Reimbursement
Obligations  owing to such  Replaced  Lender,  together  with  all  then  unpaid
interest with respect thereto at such time, and (C) all accrued, but theretofore
unpaid,  fees owing to the Replaced Lender pursuant to Section 2.05, and (y) the
Issuing  Lender an  amount  equal to such  Replaced  Lender's  Revolving  Credit
Commitment  Percentage  of any  Reimbursement  Obligations  (which  at such time

                                       43
<PAGE>

remains  a  Reimbursement   Obligation)  to  the  extent  such  amount  was  not
theretofore funded by such Replaced Lender, and (ii) all obligations of Borrower
and PR Borrower  owing to the  Replaced  Lender  (other than those  specifically
described in clause (i) above in respect of which the assignment  purchase price
has been, or is concurrently  being, paid, but including any amounts which would
be paid to a Lender  pursuant to Section  5.05 if  Borrower or PR Borrower  were
prepaying  a  LIBOR  Loan)  shall  be paid  in  full  to  such  Replaced  Lender
concurrently  with  such  replacement.  Upon  the  execution  of the  respective
assignment agreement, the payment of amounts referred to in clauses (i) and (ii)
above  and,  if  so  requested  by  the  Replacement  Lender,  delivery  to  the
Replacement  Lender of Notes executed by Borrower,  or PR Borrower,  as the case
may be, the Replacement  Lender shall become a Lender hereunder and the Replaced
Lender shall cease to  constitute a Lender  hereunder and be released of all its
obligations  as a Lender,  except  with  respect to  indemnification  provisions
applicable to the Replaced Lender under this  Agreement,  which shall survive as
to such Replaced Lender.

     Section 3. Payments of Principal and Interest.

     3.01. Repayment of Loans.

     (a)  Revolving  Credit and Swing  Loans.  Each of Borrower  and PR Borrower
hereby  promises to pay to  Administrative  Agent for the account of each Lender
the entire outstanding  principal amount of such Lender's Revolving Credit Loans
made to Borrower or PR Borrower,  as the case may be, and each Revolving  Credit
Loan shall mature, on the Revolving Credit Commitment Termination Date. Borrower
hereby  promises  to pay the  Swing  Loan  Lender  for its  account  the  entire
outstanding  principal  amount of the Swing  Loans,  and the Swing  Loans  shall
mature, on the Swing Loan Maturity Date.

     (b)  (1)  Tranche  A  Term  Loans.  Borrower  hereby  promises  to  pay  to
Administrative  Agent for the  account of the  Tranche A Term Loan  Lenders,  in
repayment of the principal of the Tranche A Term Loans, the amounts set forth on
the chart at the end of this  Section  3.01 on the dates set forth on such chart
(subject to  adjustment  for any  prepayments  required  by Section  2.10 to the
extent actually made).

     (2)  Tranche  A-PR  Term  Loans.  PR  Borrower  hereby  promises  to pay to
Administrative  Agent for the account of the Tranche A-PR Term Loan Lenders,  in
repayment of the principal of the Tranche A-PR Term Loans, the amounts set forth
on the  chart at the end of this  Section  3.01 on the  dates  set forth on such
chart (subject to adjustment for any prepayments required by Section 2.10 to the
extent actually made).

     (3)  Tranche  B-PR  Term  Loans.  PR  Borrower  hereby  promises  to pay to
Administrative  Agent for the account of the Tranche B-PR Term Loan Lenders,  in
repayment of the principal of the Tranche B-PR Term Loans, the amounts set forth
on the  chart at the end of this  Section  3.01 on the  dates  set forth on such
chart (subject to adjustment for any prepayments required by Section 2.10 to the
extent actually made).

     (4)  Tranche  C-PR  Term  Loans.  PR  Borrower  hereby  promises  to pay to
Administrative  Agent for the account of the Tranche C-PR Term Loan Lenders,  in
repayment of the principal of the Tranche C-PR Term Loans, the amounts set forth
on the  chart at the end of this  Section  3.01 on the  dates  set forth on such
chart (subject to adjustment for any prepayments required by Section 2.10 to the
extent actually made).

                                       44
<PAGE>

                              AMORTIZATION PAYMENTS
<TABLE>
<CAPTION>

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

<S>                        <C>                     <C>                  <C>                   <C>
                                                   TRANCHE
       DATE*               TRANCHE A                A-PR                TRANCHE B-PR          TRANCHE C-PR
                          TERM LOANS             TERM LOANS              TERM LOANS            TERM LOANS
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

May 2000                    $      0                $      0            $   812,500           $  562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

August 2000                        0                       0                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

November 2000                      0                       0                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

February 2001                      0                       0                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

May 2001                           0                       0                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

August 2001                        0                       0                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

November 2001                      0                       0                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

February 2002              8,125,000               3,125,000                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

May 2002                   8,125,000               3,125,000                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

August 2002                8,125,000               3,125,000                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

November 2002              8,125,000               3,125,000                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

February 2003             12,187,500               4,687,500                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

May 2003                  12,187,500               4,687,500                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

August 2003               12,187,500               4,687,500                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

November 2003             12,187,500               4,687,500                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

February 2004             16,250,000               6,250,000                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

May 2004                  16,250,000               6,250,000                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

August 2004               16,250,000               6,250,000                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

November 2004             16,250,000               6,250,000                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

February 2005             20,312,500               7,812,500                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

May 2005                  20,312,500               7,812,500                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

August 2005               20,312,500               7,812,500                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

November 2005             20,312,500               7,812,500                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

February 2006             24,375,000               9,375,000                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

May 2006                  24,375,000               9,375,000                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

August 2006               24,375,000               9,375,000                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

November 2006             24,375,000               9,375,000                812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

February 2007                                                               812,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

May 2007                                                                299,437,500              562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

August 2007                                                                                      562,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

November 2007                                                                                205,312,500
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

                        $325,000,000            $125,000,000           $322,187,500         $222,187,500
---------------------------------------------------------------------------------------------------------------
________________________
*Unless otherwise indicated, such date is the last Business Day of the specified month.
</TABLE>

     3.02. Interest. (a) Each of Borrower and PR Borrower hereby promises to pay
to  Administrative  Agent for the account of each Lender  interest on the unpaid
principal amount of each Loan made by such Lender to Borrower or PR Borrower, as
the case may be, for the period from and  including the date of such Loan to but
excluding  the date such Loan shall be paid in full at the  following  rates per
annum:

          (i) during  such  periods as such Loan is an ABR Loan,  the  Alternate
     Base Rate (as in effect from time to time), plus the Applicable Margin, and

          (ii)  during  such  periods  as such  Loan is a LIBOR  Loan,  for each
     Interest  Period  relating  thereto,  the LIBOR Rate for such Loan for such
     Interest Period, plus the Applicable Margin.

     (b) Overdue principal and, to the extent permitted by law, overdue interest
in respect of each Loan and other overdue  amounts owed by any Obligor under the
Credit  Documents  (including such interest  accruing before and after judgment)
shall bear interest at a rate per annum equal to (x) in the case of principal of
any  Loans,  the rate which is 2% in excess of the rate then borne by such Loans
and (y) in the case of interest or such other  amounts,  the rate which is 2% in
excess of the rate otherwise  applicable to ABR Loans which are Revolving Credit
Loans from time to time.  Interest which accrues under this  paragraph  shall be
payable on demand.

                                       45
<PAGE>

     (c)  Accrued  interest  on each Loan shall be payable (i) in the case of an
ABR Loan, quarterly on the Quarterly Dates, (ii) in the case of a LIBOR Loan, on
the last day of each Interest  Period  therefor and, if such Interest  Period is
longer than three months,  at three-month  intervals  following the first day of
such Interest  Period and (iii) in the case of any LIBOR Loan,  upon the payment
or prepayment  thereof or the  Conversion of such Loan to a Loan of another Type
(but only on the principal  amount so paid,  prepaid or Converted),  except that
interest  payable at the rate set forth in Section 3.02(b) shall be payable from
time to time on demand.  Promptly after the  determination  of any interest rate
provided  for  herein or any change  therein,  Administrative  Agent  shall give
notice thereof to the Lenders to which such interest is payable and to Borrower.

     Section 4. Payments; Pro Rata Treatment; Computations; Etc.

     4.01.  Payments.  (a) Except to the extent otherwise  provided herein,  all
payments of principal, interest,  Reimbursement Obligations and other amounts to
be made by Borrower and PR Borrower  under this  Agreement  and the Notes,  and,
except to the extent otherwise provided therein,  all payments to be made by the
Obligors  under  any  other  Credit  Document,  shall  be  made in  Dollars,  in
immediately  available funds,  without  deduction,  set-off or counterclaim,  to
Administrative  Agent at its  account at the  Principal  Office,  not later than
12:00 Noon New York City time on the date on which such payment shall become due
(each  such  payment  made after such time on such due date to be deemed to have
been made on the next succeeding Business Day).

     (b) Each of  Borrower  and PR  Borrower  shall,  at the time of making each
payment under this Agreement or any Note for the account of any Lender,  specify
(in  accordance  with Section 2.09 and 2.10, if  applicable)  to  Administrative
Agent  (which  shall so notify the  intended  recipient(s)  thereof) the Type of
Loans,  Reimbursement  Obligations  or other  amounts  payable by Borrower or PR
Borrower hereunder to which such payment is to be applied (and in the event that
Borrower  or PR  Borrower  fails to so  specify,  or if an Event of Default  has
occurred and is continuing,  Administrative Agent may distribute such payment to
the Lenders for  application to the  Obligations  under the Credit  Documents in
such  manner  as it or the  Majority  Lenders,  subject  to  Section  4.02,  may
determine to be appropriate).

     (c) Except to the extent  otherwise  provided  in the  second  sentence  of
Section  2.03(g),  each payment received by  Administrative  Agent or by Issuing
Lender (through  Administrative  Agent) under this Agreement or any Note for the
account of any Lender shall be paid by Administrative Agent or by Issuing Lender
(through  Administrative  Agent),  as the  case  may  be,  to  such  Lender,  in
immediately  available  funds,  (x) if the  payment  was  actually  received  by
Administrative Agent or by Issuing Lender (through Administrative Agent), as the
case may be,  prior to 12:00 Noon (New York City  time) on any day,  on such day
and (y) if the  payment was  actually  received  by  Administrative  Agent or by
Issuing Lender (through  Administrative  Agent), as the case may be, after 12:00
Noon (New York City time) on any day,  by 1:00 p.m.  (New York City time) on the
following  Business  Day (it being  understood  that to the extent that any such
payment  is not  made in full  by  Administrative  Agent  or by  Issuing  Lender
(through  Administrative  Agent), as the case may be, Administrative Agent shall
pay to such  Lender,  upon demand,  interest at the Federal  Funds Rate from the
date  such  amount  was  required  to be  paid to such  Lender  pursuant  to the
foregoing clauses until the date Administrative  Agent pays such Lender the full
amount).

     (d) If the due date of any payment  under this  Agreement or any Note would
otherwise  fall on a day that is not a Business Day, such date shall be extended
to the next  succeeding  Business  Day,  and  interest  shall be payable for any
principal so extended for the period of such extension.

     4.02. Pro Rata Treatment.  Except to the extent otherwise  provided herein:
(a) each borrowing of Loans of a particular Class from the Lenders under Section
2.01 shall be made from the relevant  Lenders,  each payment of  commitment  fee
under Section 2.05 in respect of Commitments of a particular Class shall be made
for account of the relevant  Lenders,  and each  termination or reduction of the
amount of the Commitments of a particular Class under Section 2.04 or 2.10 shall
be applied to the respective  Commitments of such Class of the relevant Lenders,
pro rata according to the amounts of their respective Commitments of such Class;
provided,  however, that Swing Loans shall be made only by, and interest thereon
shall be paid by  Borrower  only to,  the Swing  Loan  Lender  (subject  to such
Lender's  obligation in respect of any  participation  therein  purchased by the
other Revolving  Credit Lenders as provided in Section  2.01(g));  (b) except as
otherwise  provided in Section  5.04,  LIBOR Loans of any Class  having the same
Interest Period shall be allocated pro rata among the relevant Lenders according
to the amounts of their  respective  Revolving  Credit and Term Loan Commitments

                                       46
<PAGE>

(in the case of the making of Loans) or their  respective  Revolving  Credit and
Term Loans (in the case of Conversions  and  Continuations  of Loans);  (c) each
payment or  prepayment  of principal of Revolving  Credit Loans or Term Loans by
Borrower or PR Borrower  shall be made for the account of the  relevant  Lenders
pro rata in accordance with the respective unpaid outstanding  principal amounts
of the Loans of such class held by them;  and (d) each  payment of  interest  on
Revolving  Credit Loans and Term Loans by Borrower or PR Borrower  shall be made
for account of the relevant  Lenders pro rata in accordance  with the amounts of
interest on such Loans then due and payable to the respective Lenders.

     4.03. Computations.  Interest on LIBOR Loans, commitment fees and Letter of
Credit fees shall be computed on the basis of a year of 360 days and actual days
elapsed  (including  the first day but excluding the last day)  occurring in the
period  for  which  such  amounts  are  payable  and  interest  on ABR Loans and
Reimbursement Obligations shall be computed on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed  (including  the first day but
excluding  the last day)  occurring  in the period for which  such  amounts  are
payable.  Notwithstanding  the  foregoing,  for each day that the Alternate Base
Rate is calculated by reference to the Federal Funds Rate, interest on ABR Loans
and  Reimbursement  Obligations  shall be computed on the basis of a year of 360
days and actual days elapsed  (including  the first day but  excluding  the last
day).

     4.04.  Minimum Amounts.  Except for mandatory  prepayments made pursuant to
Section 2.10 and Conversions or prepayments  made pursuant to Section 5.04, each
borrowing,  Conversion  and  prepayment  of principal of Loans (other than Swing
Loans, for which the minimum amounts thereof are in Section 2.01(g)) shall be in
an amount at least  equal to $1.0  million  with  respect  to ABR Loans and $1.0
million  with  respect to LIBOR  Loans and in  multiples  of  $100,000 in excess
thereof  (borrowings,  Conversions  or prepayments of or into Loans of different
Types or, in the case of LIBOR Loans,  having different  Interest Periods at the
same  time  hereunder  to  be  deemed  separate   borrowings,   Conversions  and
prepayments  for  purposes  of the  foregoing,  one for  each  Type or  Interest
Period).  Anything  in  this  Agreement  to the  contrary  notwithstanding,  the
aggregate  principal amount of LIBOR Loans having the same Interest Period shall
be in an amount at least equal to $1.0  million and in  multiples of $100,000 in
excess thereof and, if any LIBOR Loans or portions thereof would otherwise be in
a lesser  principal amount for any period,  such Loans or portions,  as the case
may be, shall be ABR Loans during such period.

     4.05. Certain Notices. Notices by Borrower or PR Borrower to Administrative
Agent  of  terminations  or  reductions  of  the  Commitments,   of  borrowings,
Conversions,  Continuations and optional  prepayments of Loans and of Classes of
Loans,  of Types of Loans  and of the  duration  of  Interest  Periods  shall be
irrevocable and shall be effective only if received by  Administrative  Agent by
telephone  not later than 11:00 a.m.  New York City time  (promptly  followed by
written notice via  telecopier) on the number of Business Days prior to the date
of the relevant termination,  reduction, borrowing, Conversion,  Continuation or
prepayment or the first day of such Interest Period specified in the table below
(and not later  than 11:00 a.m.  New York City time on the  Business  Day of the
borrowing or prepayment in the case of Swing Loans).

<TABLE>
<CAPTION>

                                                NOTICE PERIODS

---------------------------------------------------------- --------------------------------------------------------
<S>                                                                     <C>

Notice                                                                  Number of Business Days Prior
---------------------------------------------------------- --------------------------------------------------------
---------------------------------------------------------- --------------------------------------------------------

Termination or reduction of Commitments                                               2
---------------------------------------------------------- --------------------------------------------------------
---------------------------------------------------------- --------------------------------------------------------

Borrowing or optional prepayment of, or Conversions
into, ABR Loans (other than Swing Loans)                                              1
---------------------------------------------------------- --------------------------------------------------------
---------------------------------------------------------- --------------------------------------------------------

Borrowing or optional prepayment of, Conversions into,
Continuations as, or duration of Interest Periods for,
LIBOR Loans                                                                           3
---------------------------------------------------------- --------------------------------------------------------
</TABLE>

                                       47
<PAGE>

     Each such notice of termination  or reduction  shall specify the amount and
the Class of the  Commitments  to be terminated or reduced.  Each such notice of
borrowing,  Conversion,  Continuation  or prepayment  shall specify the Class of
Loans to be borrowed, Converted, Continued or prepaid and the amount (subject to
Section  4.04) and Type of each Loan to be  borrowed,  Converted,  Continued  or
prepaid and the date of borrowing, Conversion, Continuation or prepayment (which
shall be a Business Day). Each such notice of the duration of an Interest Period
shall  specify  the  Loans  to  which  such   Interest   Period  is  to  relate.
Administrative  Agent shall promptly  notify the Lenders of the contents of each
such notice.  In the event that Borrower or PR Borrower fails to select the Type
of Loan, or the duration of any Interest  Period for any LIBOR Loan,  within the
time  period and  otherwise  as  provided in this  Section  4.05,  such Loan (if
outstanding as a LIBOR Loan) will be automatically Converted into an ABR Loan on
the  last  day  of the  then  current  Interest  Period  for  such  Loan  or (if
outstanding as an ABR Loan) will remain as, or (if not then outstanding) will be
made as, an ABR Loan.

     4.06.  Non-Receipt of Funds by Administrative  Agent. Unless Administrative
Agent shall have received written notice from a Lender,  Borrower or PR Borrower
(the  "Payor")  prior to the  date on which  the  Payor  is to make  payment  to
Administrative  Agent of (in the case of a Lender) the  proceeds of a Loan to be
made by such  Lender  hereunder  or a payment  to  Administrative  Agent for the
account of one or more of the  Lenders  hereunder  (such  payment  being  herein
called the "Required  Payment"),  which notice shall be effective  upon receipt,
that the Payor does not intend to make the  Required  Payment to  Administrative
Agent,  Administrative  Agent may assume that the Required Payment has been made
and may, in reliance upon such  assumption  (but shall not be required to), make
the amount thereof available to the intended  recipient(s) on such date; and, if
the Payor has not in fact made the Required Payment to Administrative Agent, the
recipient(s) of such payment shall, on demand, repay to Administrative Agent the
amount so made available  together with interest  thereon in respect of each day
during the period commencing on the date (the "Advance Date") such amount was so
made  available  by  Administrative  Agent until the date  Administrative  Agent
recovers  such amount at a rate per annum  equal to the  Federal  Funds Rate for
such day and, if such  recipient(s)  shall fail  promptly to make such  payment,
Administrative  Agent shall be entitled to recover such amount, on demand,  from
the Payor,  together  with  interest as aforesaid;  provided,  however,  that if
neither the  recipient(s)  nor the Payor shall  return the  Required  Payment to
Administrative  Agent  within  three  Business  Days of the date such demand was
made,  then,  retroactively  to the Advance Date, the Payor and the recipient(s)
shall each be  obligated  to pay  interest  on the  Required  Payment as follows
(without double recovery):

          (i) if the Required  Payment  shall  represent a payment to be made by
     Borrower  or PR  Borrower  to the  Lenders,  Borrower  or PR  Borrower,  as
     applicable,  and the recipient(s) shall each be obligated  retroactively to
     the Advance Date to pay interest in respect of the Required  Payment at the
     rate set forth in Section 3.02(b) (without duplication of the obligation of
     Borrower under Section 3.02 to pay interest on the Required  Payment at the
     rate set forth in Section 3.02(b)),  it being understood that the return by
     the recipient(s) of the Required Payment to Administrative  Agent shall not
     limit such  obligation  of Borrower or PR Borrower,  as  applicable,  under
     Section  3.02 to pay  interest at the rate set forth in Section  3.02(b) in
     respect of the Required Payment and

          (ii) if the Required Payment shall represent  proceeds of a Loan to be
     made by the Lenders to Borrower or PR Borrower,  the Payor,  Borrower or PR
     Borrower,  as  applicable,  shall each be  obligated  retroactively  to the
     Advance Date to pay interest in respect of the Required Payment pursuant to
     Section  3.02,  it being  understood  that the  return  by  Borrower  or PR
     Borrower,  as applicable,  of the Required Payment to Administrative  Agent
     shall not limit any claim  Borrower  or PR  Borrower  may have  against the
     Payor in respect of such Required Payment.

     4.07.  Right of  Setoff;  Sharing  of  Payments;  Etc.  (a) If any Event of
Default  shall have  occurred and be  continuing,  each Obligor  agrees that, in
addition to (and without  limitation  of) any right of setoff,  banker's lien or
counterclaim a Lender may otherwise have, each Lender shall be entitled,  at its
option  (to the  fullest  extent  permitted  by law),  to set off and  apply any
deposit  (general or special,  time or demand,  provisional or final),  or other
indebtedness, held by it for the credit or account of such Obligor at any of its
offices,  in Dollars  or in any other  currency,  against  any  principal  of or
interest on any of such Lender's Loans,  Reimbursement  Obligations or any other
amount payable to such Lender hereunder that is not paid when due (regardless of

                                       48
<PAGE>

whether  such deposit or other  indebtedness  is then due to such  Obligor),  in
which case it shall  promptly  notify  such  Obligor  and  Administrative  Agent
thereof; provided, however, that such Lender's failure to give such notice shall
not affect the validity thereof.

     (b) Each of the  Lenders  agrees  that,  if it should  receive  (other than
pursuant to Section 5) any amount hereunder  (whether by voluntary  payment,  by
realization  upon  security,  by the exercise of the right of setoff or banker's
lien, by counterclaim or cross action, by the enforcement of any right under the
Credit  Documents,  or  otherwise)  which is  applicable  to the  payment of the
principal of, or interest on, the Loans,  Reimbursement Obligations or fees, the
sum of which with respect to the related sum or sums  received by other  Lenders
is in a greater  proportion  than the total of such amounts then owed and due to
such Lender  bears to the total of such  amounts then owed and due to all of the
Lenders  immediately  prior to such  receipt,  then such Lender  receiving  such
excess  payment  shall  purchase for cash without  recourse or warranty from the
other Lenders an interest in the  Obligations of the respective  Obligor to such
Lenders in such amount as shall result in a proportional participation by all of
the Lenders in such  amount;  provided,  however,  that if all or any portion of
such excess amount is thereafter recovered from such Lender, such purchase shall
be rescinded and the purchase price restored to the extent of such recovery, but
without  interest.  Each of Borrower and PR Borrower  consents to the  foregoing
arrangements.

     (c) Each of Borrower and PR Borrower  agrees that any Lender so  purchasing
such  a  participation  may  exercise  all  rights  of  setoff,  banker's  lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender were a direct  holder of Loans or other amounts (as the case may be)
owing to such Lender in the amount of such participation.

     (d) Nothing  contained herein shall require any Lender to exercise any such
right or shall  affect  the right of any  Lender to  exercise,  and  retain  the
benefits of exercising, any such right with respect to any other Indebtedness or
obligation of any Obligor.  If, under any applicable  bankruptcy,  insolvency or
other  similar law, any Lender  receives a secured  claim in lieu of a setoff to
which this Section 4.07 applies,  such Lender shall, to the extent  practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the  rights of the  Lenders  entitled  under this  Section  4.07 to share in the
benefits of any recovery on such secured claim.

     Section 5. Yield Protection, Etc.

     5.01.  Additional  Costs. (a) If the adoption of, or any change in, in each
case after the date hereof,  any Requirement of Law or in the  interpretation or
application  thereof or  compliance  by any Lender with any request or directive
(whether  or not  having  the  force  of law)  from  any  central  bank or other
Governmental Authority or the NAIC made subsequent to the date hereof:

          (i) shall subject any Lender or Issuing  Lender to any tax of any kind
     whatsoever with respect to this  Agreement,  any Note, any Letter of Credit
     or any Lender's participation therein, any Letter of Credit Document or any
     Loan made by it or change the basis of  taxation of payments to such Lender
     in respect thereof by any Governmental  Authority (except for taxes covered
     by or expressly  excluded  from coverage by Section 5.06 and changes in the
     rate of tax on the  overall  net  income of such  Lender or its  Applicable
     Lending  Office,   or  any  affiliate  thereof  or  franchise  tax  by  any
     Governmental Authority);

          (ii) shall  impose,  modify or hold  applicable  any reserve,  special
     deposit,  compulsory  loan or similar  requirement  against assets held by,
     deposits or other liabilities in or for the account of, advances,  loans or
     other  extensions of credit by, or any other  acquisition  of funds by, any
     office of such Lender or Issuing Lender which is not otherwise  included in
     the determination of the LIBOR Rate hereunder; or

          (iii)  shall  impose  on such  Lender  or  Issuing  Lender  any  other
     condition (excluding taxes);

and the result of any of the foregoing is to increase the cost to such Lender or
Issuing  Lender,  by an amount  which such Lender or Issuing  Lender deems to be
material,  of making,  converting into, continuing or maintaining LIBOR Loans or
issuing or participating in Letters of Credit or to reduce any amount receivable
hereunder in respect thereof then, in any such case, Borrower shall promptly pay

                                       49
<PAGE>

such Lender or Issuing Lender,  upon its written demand,  any additional amounts
necessary to compensate such Lender or Issuing Lender for such increased cost or
reduced amount  receivable.  If any Lender or Issuing Lender becomes entitled to
claim any  additional  amounts  pursuant to this  subsection,  it shall promptly
notify Borrower,  through  Administrative Agent, of the event by reason of which
it has become so entitled.  A certificate as to any additional  amounts  setting
forth the calculation of such additional  amounts  pursuant to this Section 5.01
submitted by such Lender or Issuing  Lender,  through  Administrative  Agent, to
Borrower  shall be  conclusive  in the  absence of clearly  demonstrable  error.
Without limiting the survival of any other covenant hereunder, this Section 5.01
shall survive the termination of this Agreement and the payment of the Notes and
all other amounts payable hereunder.

     (b) In the event that any Lender or Issuing  Lender  shall have  determined
that  the  adoption  after  the date  hereof  of any law,  rule,  regulation  or
guideline  regarding  capital  adequacy  (or any  change  after the date  hereof
therein or in the  interpretation  or application  thereof) or compliance by any
Lender or Issuing Lender or any corporation  controlling  such Lender or Issuing
Lender with any request or directive  regarding capital adequacy (whether or not
having the force of law) from any central bank or Governmental  Authority or the
NAIC,  in each case,  made  subsequent  to the date  hereof  including,  without
limitation,  the issuance after the date hereof of any final rule, regulation or
guideline,  does or shall have the effect of reducing the rate of return on such
Lender's or Issuing Lender's or such  corporation's  capital as a consequence of
its  obligations  hereunder  or under any Letter of Credit to a level below that
which such Lender or Issuing Lender or such corporation  could have achieved but
for such adoption, change or compliance (taking into consideration such Lender's
or Issuing  Lender's  or such  corporation's  policies  with  respect to capital
adequacy) by an amount  deemed by such Lender or Issuing  Lender to be material,
then from time to time,  after  submission  by such Lender or Issuing  Lender to
Borrower (with a copy to  Administrative  Agent) of a written request  therefor,
Borrower  shall  promptly pay to such Lender or Issuing  Lender such  additional
amount or  amounts as will  compensate  such  Lender or Issuing  Lender for such
reduction.

     (c) PR Borrower shall reimburse Borrower for any amounts paid under Section
5.01  which  are  attributable  to  extensions  of  credit  made to PR  Borrower
hereunder.

     5.02.  Limitation  on Types  of  Loans.  Anything  herein  to the  contrary
notwithstanding, if, on or prior to the determination of any LIBOR Base Rate for
any Interest Period:

          (i)  Administrative  Agent determines,  which  determination  shall be
     conclusive,  absent manifest  error,  that quotations of interest rates for
     the relevant deposits referred to in the definition of "LIBOR Base Rate" in
     Section  1.01 are not being  provided  in the  relevant  amounts or for the
     relevant maturities for purposes of determining rates of interest for LIBOR
     Loans as provided herein; or

          (ii) if the related  Loans are Revolving  Credit  Loans,  the Majority
     Revolving Credit Lenders or, if the related Loans are Tranche A Term Loans,
     the  Majority  Tranche A Term Loan  Lenders  or, if the  related  Loans are
     Tranche A-PR Term Loans, the Majority Tranche A-PR Term Loan Lenders or, if
     the related  Loans are Tranche B-PR Term Loans,  the Majority  Tranche B-PR
     Term Loan Lenders or, if the related Loans are Tranche C-PR Term Loans, the
     Majority  Tranche C-PR Term Loan  Lenders  determine,  which  determination
     shall be conclusive, that the relevant rates of interest referred to in the
     definition of "LIBOR Base Rate" in Section 1.01 upon the basis of which the
     rate of  interest  for  LIBOR  Loans  for  such  Interest  Period  is to be
     determined  are not  likely  adequate  to cover the cost to the  applicable
     Lenders of making or maintaining LIBOR Loans for such Interest Period,

then  Administrative  Agent shall give  Borrower,  PR  Borrower  and each Lender
prompt notice  thereof,  and so long as such  condition  remains in effect,  the
affected  Lenders shall be under no obligation  to make  additional  LIBOR Loans
(but shall make their portion of any  additional  Borrowings  as ABR Loans),  to
Continue  LIBOR Loans or to Convert ABR Loans into LIBOR Loans and  Borrower and
PR Borrower shall, on the last day(s) of the then current Interest Period(s) for
the outstanding  LIBOR Loans,  either prepay such Loans of such affected Lenders
or Convert such Loans of such affected Lenders into ABR Loans in accordance with
Section 2.09.

     5.03. Illegality. Notwithstanding any other provision of this Agreement, in
the event that any change after the date hereof in any  Requirement of Law or in

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the interpretation or application  thereof shall make it unlawful for any Lender
or Issuing  Lender or its  Applicable  Lending Office to honor its obligation to
make or maintain LIBOR Loans or issue Letters of Credit  hereunder  (and, in the
sole opinion of such Lender or Issuing  Lender,  the  designation of a different
Applicable  Lending Office would either not avoid such  unlawfulness or would be
disadvantageous  to such Lender or Issuing Lender),  then such Lender or Issuing
Lender shall promptly  notify  Borrower and PR Borrower  thereof (with a copy to
Administrative  Agent) and such Lender's or Issuing Lender's  obligation to make
or Continue,  or to Convert  Loans of any other Type into,  LIBOR Loans or issue
Letters of Credit shall be  suspended  until such time as such Lender or Issuing
Lender may again make and  maintain  LIBOR Loans or issue  Letters of Credit (in
which case the provisions of Section 5.04 shall be applicable).

     5.04.  Treatment of Affected Loans. If the obligation of any Lender to make
LIBOR Loans or to Continue,  or to Convert ABR Loans into,  LIBOR Loans shall be
suspended  pursuant  to  Section  5.03,  such  Lender's  LIBOR  Loans  shall  be
automatically  Converted  into ABR Loans on the last day(s) of the then  current
Interest  Period(s) for such LIBOR Loans (or on such earlier date as such Lender
may specify to Borrower or PR Borrower with a copy to Administrative Agent as is
required  by law) and,  unless and until such  Lender  gives  notice as provided
below that the  circumstances  specified in Section 5.03 which gave rise to such
Conversion no longer exist:

          (i) to the  extent  that  such  Lender's  LIBOR  Loans  have  been  so
     Converted,  all payments and prepayments of principal which would otherwise
     be applied to such Lender's LIBOR Loans shall be applied instead to its ABR
     Loans; and

          (ii) all Loans  which would  otherwise  be made or  Continued  by such
     Lender as LIBOR Loans shall be made or  Continued  instead as ABR Loans and
     all ABR Loans of such Lender which would  otherwise be Converted into LIBOR
     Loans shall remain as ABR Loans.

If  such  Lender  gives  notice  to  Borrower  or PR  Borrower  with a  copy  to
Administrative Agent that the circumstances specified in Section 5.03 which gave
rise to the  Conversion  of such Lender's  LIBOR Loans  pursuant to this Section
5.04 no  longer  exist  (which  such  Lender  agrees  to do  promptly  upon such
circumstances ceasing to exist) at a time when LIBOR Loans are outstanding, such
Lender's ABR Loans shall be automatically  Converted, on the first day(s) of the
next  succeeding  Interest  Period(s) for such  outstanding  LIBOR Loans, to the
extent  necessary so that,  after giving effect  thereto,  all Loans held by the
Lenders  holding  LIBOR  Loans  and by such  Lender  are  held  pro  rata (as to
principal  amounts,  Types  and  Interest  Periods)  in  accordance  with  their
respective Commitments.

     5.05.  Compensation.  (a) Borrower and PR Borrower  agree to indemnify each
Lender and to hold each  Lender  harmless  from any loss or  expense  which such
Lender may  sustain or incur as a  consequence  of (1) default by Borrower or PR
Borrower in payment when due of the principal amount of or interest on any LIBOR
Loan,  (2)  default  by  Borrower  or PR  Borrower  in  making a  borrowing  of,
Conversion into or Continuation of LIBOR Loans after Borrower or PR Borrower has
given a notice  requesting  the same in accordance  with the  provisions of this
Agreement, (3) default by Borrower or PR Borrower in making any prepayment after
Borrower  or PR  Borrower  has given a notice  thereof  in  accordance  with the
provisions of this Agreement,  or (4) the making of a payment or a prepayment of
LIBOR  Loans  on a day  which is not the last  day of an  Interest  Period  with
respect thereto, including in each case, any such loss (including loss of margin
but not the Applicable Margin) or expense arising from the reemployment of funds
obtained by it or from fees  payable to terminate  the deposits  from which such
funds were obtained.

     (b) For the purpose of calculation of all amounts payable to a Lender under
this  Section  5.05 each  Lender  shall be deemed to have  actually  funded  its
relevant  LIBOR Loan through the purchase of a deposit  bearing  interest at the
LIBOR  Rate in an amount  equal to the  amount of the  LIBOR  Loan and  having a
maturity  comparable to the relevant Interest Period;  provided,  however,  that
each Lender may fund each of its LIBOR Loans in any manner it sees fit,  and the
foregoing  assumption  shall be  utilized  only for the  calculation  of amounts
payable under this subsection.  Any Lender requesting  compensation  pursuant to
this Section 5.05 will furnish to Administrative Agent, Borrower and PR Borrower
a  certificate  setting  forth  the basis and  amount of such  request  and such
certificate,  absent manifest error,  shall be conclusive.  Without limiting the
survival  of any other  covenant  hereunder,  this  covenant  shall  survive the
termination of this Agreement and the payment of the Notes and all other amounts
payable hereunder.

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<PAGE>

     5.06. Net Payments. (a) All payments made by any Obligor hereunder or under
any Note or any Guarantee  will be made without  setoff,  counterclaim  or other
defense.  Except as provided in Section 5.06(b),  all such payments will be made
free and clear of, and without  deduction  or  withholding  for,  any present or
future Taxes now or hereafter  imposed by any  Governmental  Authority or by any
political  subdivision  or taxing  authority  thereof or therein with respect to
such  payments (but  excluding any Excluded Tax) and all interest,  penalties or
similar  liabilities  with respect  thereto (all such Taxes (other than Excluded
Taxes) being referred to collectively as "Covered Taxes").  If any Covered Taxes
are so levied or imposed,  each Obligor  agrees on a joint and several  basis to
pay the full amount of such Covered Taxes, and such additional amounts as may be
necessary  so that every  payment of all amounts due under this  Agreement,  the
Guarantees or under any Note,  after  withholding or deduction for or on account
of any Covered Taxes, will not be less than the amount provided for herein or in
such Note.  If any amounts are payable in respect of Covered  Taxes  pursuant to
the preceding sentence,  each Obligor agrees,  notwithstanding the definition of
Excluded Taxes, to reimburse on a joint and several basis each Lender,  upon the
written request of such Lender,  (i) for Taxes imposed on or measured by the net
income or net profits of such Lender pursuant to the laws of the jurisdiction in
which such Lender is organized or in which the  principal  office or  Applicable
Lending  Office of such  Lender is  located  or under the laws of any  political
subdivision or taxing authority of any such jurisdiction by reason of the making
of payments in respect of Covered  Taxes  pursuant  to this  Section  (including
pursuant to this sentence) and (ii) for any  withholding of Taxes as such Lender
shall  determine  are payable by, or  withheld  from,  such Lender in respect of
amounts paid in respect of Covered Taxes to or on behalf of such Lender pursuant
to the preceding  sentence and in respect of any amounts paid to or on behalf of
such  Lender   pursuant  to  this   sentence.   Each  Obligor  will  furnish  to
Administrative  Agent  within 45 days after the date the  payment of any Covered
Taxes is due  pursuant to  applicable  law  certified  copies of tax receipts or
other  documentation  reasonably  satisfactory  to such Lender  evidencing  such
payment by such Obligor.  The Obligors agree to jointly and severally  indemnify
and hold  harmless  each  Lender,  and  reimburse  such  Lender upon its written
request,  for the amount of any  Covered  Taxes so levied or imposed and paid by
such Lender and any liability (including  penalties,  additions to tax, interest
and expenses) arising therefrom or with respect thereto.

     "Excluded  Taxes" shall mean other than as provided in the fourth  sentence
of the first  paragraph of this Section  5.06(a),  any Tax (other than any Other
Taxes) (i)  imposed on or  measured by the net income or net profits of a Lender
pursuant  to the  laws of the  jurisdiction  in  which  it is  organized  or the
jurisdiction in which the principal office or Applicable  Lending Office of such
Lender is located or any jurisdiction in which such Lender conducts  business or
any subdivision  thereof or therein and (ii) imposed on any Lender in the nature
of franchise  taxes or other  similar  taxes  imposed as a result of such Lender
doing business in a particular jurisdiction.

     (b) Each Lender that is not a United States person (as such term is defined
in Section  7701(a)(30) of the Code) (a "Non-U.S.  Lender") agrees to deliver to
Borrower  and  Administrative  Agent on or prior to the Closing  Date or, in the
case of a Lender  that is an assignee or  transferee  of an interest  under this
Agreement  pursuant to Section 12.06 (unless the respective Lender was already a
Lender hereunder immediately prior to such assignment or transfer),  on the date
of such  assignment  or transfer to such  Lender,  (i) two accurate and complete
original  signed  copies  of  Internal  Revenue  Service  Form  4224 or 1001 (or
successor forms) certifying to such Lender's entitlement to a complete exemption
from United  States  withholding  tax with  respect to payments to be made under
this Agreement and under any Note (or, with respect to any assignee  Lender,  at
least as  extensive  as the  assigning  Lender),  or (ii) if the Lender is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver
either Internal  Revenue Service Form 1001 or 4224 pursuant to clause (i) above,
(x) a certificate  substantially in the form of Exhibit J (any such certificate,
a "Section 5.06  Certificate") and (y) two accurate and complete original signed
copies of Internal  Revenue Service Form W-8 (or successor  form)  certifying to
such Lender's entitlement to a complete exemption from United States withholding
tax with respect to payments to be made under this  Agreement and under any Note
(or, with respect to any assignee Lender, at least as extensive as the assigning
Lender).  In  addition,  each  Lender  agrees  that from time to time  after the
Closing  Date,  when a lapse in time or  change  in  circumstances  renders  the
previous  certification  obsolete or inaccurate in any material respect, it will
deliver to Borrower  and  Administrative  Agent two new  accurate  and  complete

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<PAGE>

original  signed copies of Internal  Revenue  Service Form 4224 or 1001, or Form
W-8 and a Section 5.06 Certificate,  as the case may be, and such other forms as
may be required in order to confirm or establish the  entitlement of such Lender
to a continued exemption from or reduction in United States withholding tax with
respect to payments under this  Agreement and any Note, or it shall  immediately
notify  Borrower and  Administrative  Agent of its inability to deliver any such
Form or Certificate,  in which case such Lender shall not be required to deliver
any such form or  certificate  pursuant to this  Section  5.06(b) for so long as
such payments may be made from United States  withholding  tax.  Notwithstanding
the  foregoing,  no  Lender  shall be  required  to  deliver  any  such  form or
certificate  if a change in treaty,  law or regulation has occurred prior to the
date on which such  delivery  would  otherwise be required that renders any such
form  or  certificate  inapplicable  or  would  prevent  the  Lender  from  duly
completing and  delivering  any such form or certificate  with respect to it and
such Lender so advises  Borrower.  No Obligor shall be required to indemnify any
Non-U.S.  Lender,  or to pay any additional  amounts to any Non-U.S.  Lender, in
respect of any Covered  Taxes to the extent that (i) the  obligation to pay such
Covered Taxes would not have arisen but for a failure by such Non-U.S. Lender to
comply  with the  provisions  of this  Section  5.06(b) or (ii) if the  Internal
Revenue  Service  properly  determines  that  a  Lender  is a  "conduit  entity"
participating  in a  "conduit  financing  arrangement"  within  the  meaning  of
Treasury Regulation Section 1.881-3 and such additional amounts are in excess of
the amounts  that would  otherwise  have been payable had such Lender not been a
"conduit entity"  participating in a "conduit financing  arrangement" within the
meaning of Treasury Regulation Section 1.881-3.  Notwithstanding anything to the
contrary  contained in the preceding  sentence or elsewhere in this Section 5.06
and except as set forth in Section  12.06(b),  each of Borrower  and PR Borrower
agrees to pay additional  amounts and to indemnify each Lender in the manner set
forth in Section  5.06(a)  (without  regard to the identity of the  jurisdiction
requiring the deduction or  withholding)  in respect of any amounts  deducted or
withheld by it as described in the immediately preceding sentence as a result of
any changes  after the Original  Closing  Date in any  applicable  law,  treaty,
governmental  rule,  regulation,  guideline or order,  or in the  interpretation
thereof,  relating to the deducting or withholding of income or similar  Covered
Taxes.

     (c) In  addition,  Borrower  and PR  Borrower  agree to pay any  present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or under the Notes
or from the execution,  delivery or  registration  of, or otherwise with respect
to, this Agreement or the Notes (hereinafter referred to as "Other Taxes").

     (d) Any Lender  claiming any additional  amounts  payable  pursuant to this
Section  5.06  agrees  to use  (at the  Obligors'  expense)  reasonable  efforts
(consistent  with its internal policy and legal and regulatory  restrictions) to
change the  jurisdiction of its Applicable  Lending Office if the making of such
change  would avoid the need for,  or reduce the amount of, any such  additional
amounts that may  thereafter  accrue and would not, in the sole judgment of such
Lender, be otherwise disadvantageous to such Lender.

     Section 6. Guarantee.

     6.01. The Guarantee.  The Guarantors hereby jointly and severally guarantee
as a primary  obligor  and not as a surety to each  Lender,  Issuing  Lender and
Agent and their  respective  successors  and assigns the prompt  payment in full
when due (whether at stated  maturity,  by  acceleration  or  otherwise)  of the
principal of and interest  (including any interest,  fees, costs or charges that
would accrue but for the provisions of the Bankruptcy  Code after any bankruptcy
or  insolvency  petition  under the  Bankruptcy  Code) on the Loans  made by the
Lenders to, and the Notes held by each Lender of,  Borrower  and/or PR Borrower,
as applicable, and all other Obligations from time to time owing to the Lenders,
Issuing Lender or Agents by Borrower  and/or PR Borrower,  as applicable,  under
this  Agreement  and under the Notes and by any  Obligor  under any of the other
Credit  Documents,  and all  Obligations of the Obligors to any Creditor and all
Obligations owing to the Issuing Lender under the Letter of Credit Documents, in
each case strictly in accordance with the terms thereof (such  obligations being
herein collectively called the "Guaranteed Obligations").  The Guarantors hereby
jointly and severally agree that if Borrower and/or PR Borrower,  as applicable,
shall fail to pay in full when due (whether at stated maturity,  by acceleration
or otherwise) any of the Guaranteed  Obligations,  the Guarantors  will promptly
pay the same, without any demand or notice  whatsoever,  and that in the case of
any  extension  of  time  of  payment  or  renewal  of  any  of  the  Guaranteed

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<PAGE>

Obligations,  the  same  will be  promptly  paid in full  when due  (whether  at
extended maturity, by acceleration or otherwise) in accordance with the terms of
such extension or renewal.

     6.02.  Obligations  Unconditional.  The obligations of the Guarantors under
Section 6.01 are absolute,  irrevocable  and  unconditional,  joint and several,
irrespective of the value, genuineness,  validity,  regularity or enforceability
of the  obligations of Borrower  and/or PR Borrower,  as applicable,  under this
Agreement,  the Notes or any other agreement or instrument referred to herein or
therein,  or any substitution,  release or exchange of any other guarantee of or
security  for any of the  Guaranteed  Obligations,  and, to the  fullest  extent
permitted by applicable law,  irrespective of any other circumstance  whatsoever
that might otherwise  constitute a legal or equitable  discharge or defense of a
surety  or  Guarantor  (except  for  payment  in  full).  Without  limiting  the
generality of the foregoing, it is agreed that the occurrence of any one or more
of the  following  shall not alter or impair  the  liability  of the  Guarantors
hereunder which shall remain absolute,  irrevocable and unconditional  under any
and all circumstances as described above:

          (i)  at  any  time  or  from  time  to  time,  without  notice  to the
     Guarantors,  the time for any  performance of or compliance with any of the
     Guaranteed Obligations shall be extended, or such performance or compliance
     shall be waived;

          (ii)  any of the  acts  mentioned  in any of the  provisions  of  this
     Agreement  or the Notes or any other  agreement or  instrument  referred to
     herein or therein shall be done or omitted;

          (iii)  the  maturity  of any of the  Guaranteed  Obligations  shall be
     accelerated,  or any of the Guaranteed  Obligations shall be amended in any
     respect,  or any right under this Agreement,  the Notes or any other Credit
     Document or any other agreement or instrument referred to herein or therein
     shall be amended or waived in any respect or any other  guarantee of any of
     the Guaranteed  Obligations  or any security  therefor shall be released or
     exchanged in whole or in part or otherwise dealt with;

          (iv) any lien or  security  interest  granted  to, or in favor of, the
     Issuing Lender or any Lender or Agent as security for any of the Guaranteed
     Obligations shall fail to be perfected; or

          (v) the release of any other Guarantor.

     The Guarantors  hereby  expressly waive diligence,  presentment,  demand of
payment,  protest  and all  notices  whatsoever,  and any  requirement  that the
Issuing  Lender or any Agent or any  Lender or  Affiliate  thereof  exhaust  any
right,  power or remedy or  proceed  against  Borrower  and/or PR  Borrower,  as
applicable,  under  this  Agreement  or the  Notes  or any  other  agreement  or
instrument  referred to herein or therein, or against any other Person under any
other  guarantee of, or security  for, any of the  Guaranteed  Obligations.  The
Guarantors waive any and all notice of the creation, renewal, extension, waiver,
termination  or accrual of any of the  Guaranteed  Obligations  and notice of or
proof of reliance by the Issuing Lender,  any Lender or Affiliate thereof or any
Agent upon this  guarantee or acceptance of this  guarantee,  and the Guaranteed
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this guarantee, and all dealings between
Borrower and/or PR Borrower,  as applicable,  and the Issuing  Lender,  Lenders,
Affiliate  thereof and Agents shall  likewise be  conclusively  presumed to have
been had or consummated in reliance upon this guarantee. This guarantee shall be
construed as a continuing,  absolute, irrevocable and unconditional guarantee of
payment  without  regard to any right of offset with  respect to the  Guaranteed
Obligations  at any  time or  from  time to  time  held by the  Issuing  Lender,
Lenders,  Affiliate  thereof and Agents,  and the obligations and liabilities of
the Guarantors hereunder shall not be conditioned or contingent upon the pursuit
by the Issuing Lender, Lenders,  Affiliate thereof or Agents or any other Person
at any time of any right or remedy  against  Borrower  and/or  PR  Borrower,  as
applicable, or against any other Person which may be or become liable in respect
of all or any part of the  Guaranteed  Obligations  or  against  any  collateral
security or  guarantee  therefor or right of offset with respect  thereto.  This
guarantee  shall  remain in full force and  effect and be binding in  accordance
with and to the extent of its terms upon the  Guarantors  and the successors and
assigns  thereof,  and shall  inure to the  benefit  of the  Lenders,  and their
respective successors and assigns, notwithstanding that from time to time during
the term of this Agreement there may be no Guaranteed Obligations outstanding.

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<PAGE>

     6.03. Reinstatement. The obligations of the Guarantors under this Section 6
shall be  automatically  reinstated if and to the extent that for any reason any
payment  by or on behalf of  Borrower  and/or PR  Borrower,  as  applicable,  in
respect of the Guaranteed Obligations is rescinded or must be otherwise restored
by any holder of any of the Guaranteed  Obligations,  whether as a result of any
proceedings in bankruptcy or reorganization or otherwise. The Guarantors jointly
and severally agree that they will indemnify the Issuing Lender,  each Agent and
each Lender or Affiliate thereof on demand for all reasonable costs and expenses
(including  reasonable  fees of counsel)  incurred by the Issuing  Lender,  such
Agent or such Lender or Affiliate  thereof in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim  alleging  that such  payment  constituted  a  preference,  fraudulent
transfer or similar  payment  under any  bankruptcy,  insolvency or similar law,
other than any costs or  expenses  resulting  from the gross  negligence  or bad
faith of such Creditor.

     6.04. Subrogation;  Subordination.  Each Guarantor hereby agrees that until
the  indefeasible  payment and  satisfaction  in full in cash of all  Guaranteed
Obligations and the expiration and termination of the Commitments of the Lenders
under this Agreement it shall not exercise any right or remedy arising by reason
of  any  performance  by it  of  its  guarantee  in  Section  6.01,  whether  by
subrogation or otherwise,  against Borrower,  PR Borrower or any other Guarantor
of any of the  Guaranteed  Obligations or any security for any of the Guaranteed
Obligations.  The payment of any amounts due with respect to any indebtedness of
Borrower,  PR  Borrower or any other  Guarantor  now or  hereafter  owing to any
Guarantor by reason of any payment by such Guarantor under the Guarantee in this
Section 6 is hereby  subordinated to the prior  indefeasible  payment in full in
cash of the  Guaranteed  Obligations.  Each  Guarantor  agrees  that it will not
demand,  sue for or  otherwise  attempt  to  collect  any such  indebtedness  of
Borrower or PR Borrower to such Guarantor until the Obligations  shall have been
indefeasibly paid in full in cash. If,  notwithstanding  the foregoing sentence,
any  Guarantor  shall prior to the  indefeasible  payment in full in cash of the
Guaranteed  Obligations  collect,  enforce or receive  any amounts in respect of
such  indebtedness,  such amounts shall be  collected,  enforced and received by
such  Guarantor  as trustee for Agents,  the Issuing  Lender and the Lenders and
Affiliates  thereof and be paid over to  Administrative  Agent on account of the
Guaranteed  Obligations  without  affecting in any manner the  liability of such
Guarantor under the other provisions of the guaranty contained herein.

     6.05. Remedies. The Guarantors jointly and severally agree that, as between
the  Guarantors  and the Lenders,  the  obligations  of Borrower and PR Borrower
under this  Agreement  and the Notes may be  declared  to be  forthwith  due and
payable  as  provided  in  Section  10 (and  shall  be  deemed  to  have  become
automatically due and payable in the circumstances  provided in said Section 10)
for purposes of Section  6.01,  notwithstanding  any stay,  injunction  or other
prohibition  preventing  such  declaration  (or such  obligations  from becoming
automatically  due and payable) as against  Borrower or PR Borrower and that, in
the event of such declaration (or such  obligations  being deemed to have become
automatically due and payable), such obligations (whether or not due and payable
by  Borrower or PR  Borrower,  as  applicable)  shall  forthwith  become due and
payable by the Guarantors for purposes of Section 6.01.

     6.06.   Instrument  for  the  Payment  of  Money.   Each  Guarantor  hereby
acknowledges  that the guarantee in this Section 6 constitutes an instrument for
the payment of money,  and consents and agrees that any Lender or Agent,  at its
sole option,  in the event of a dispute by such  Guarantor in the payment of any
moneys due hereunder,  shall have the right to bring a  motion-action  under New
York CPLR Section 3213.

     6.07. Continuing Guarantee. The guarantee in this Section 6 is a continuing
guarantee, and shall apply to all Guaranteed Obligations whenever arising.

     6.08.  General  Limitation  on  Guarantee  Obligations.  In any  action  or
proceeding  involving any state corporate law, or any state,  Federal or foreign
bankruptcy,  insolvency,  reorganization  or other law  affecting  the rights of
creditors  generally,  if the  obligations  of any Guarantor  under Section 6.01
would  otherwise  be  held  or  determined  to be  void,  voidable,  invalid  or
unenforceable,  or subordinated to the claims of any other creditors, on account
of the amount of its liability  under Section 6.01,  then,  notwithstanding  any
other provision to the contrary, the amount of such liability shall, without any
further action by such Guarantor,  any Lender, any Agent or any other Person, be

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automatically  limited  and  reduced  to the  highest  amount  that is valid and
enforceable and not  subordinated to the claims of other creditors as determined
in such action or proceeding.

     Section 7. Conditions Precedent.

     7.01. All  Extensions of Credit.  The obligation of the Lenders to make any
Loan or otherwise extend any credit to Borrower or PR Borrower upon the occasion
of each  borrowing  or other  extension  of credit  (whether by making a Loan or
issuing a Letter of Credit)  hereunder  is subject to the  conditions  precedent
that:

          (i) No Default or Event of  Default;  Representations  and  Warranties
     True. Both immediately  prior to the making of such Loan or other extension
     of credit  and also  after  giving  pro  forma  effect  thereto  and to the
     intended use thereof:

               (a) no  Default or Event of Default  shall have  occurred  and be
          continuing; and

               (b) the  representations  and warranties  made by the Obligors in
          Section 8, and by each Obligor in each of the other  Credit  Documents
          to which it is a party,  shall be true and  complete  in all  material
          respects  on and as of the date of the  making  of such  Loan or other
          extension  of credit  with the same force and effect as if made on and
          as of such  date  (or,  if any  such  representation  or  warranty  is
          expressly  stated to have been made as of a specific  date, as of such
          specific date).

          (ii) No Legal Bar. The Loans and the use of proceeds thereof shall not
     contravene, violate or conflict with, nor involve any Lender in a violation
     of, any law, rule, injunction,  or regulation or determination of any court
     of law or other Governmental Authority.

          (iii) No Material  Adverse  Effect.  There shall not have occurred any
     Material Adverse Effect.

          (iv)  Indenture  Compliance.  Such Loan or other  extension  of credit
     shall be permitted  under the debt  incurrence test specified under each of
     the Senior  Subordinated  Notes Financing  Documents,  the Parent Financing
     Documents  and,  if  issued,  the  Additional  Senior   Subordinated  Notes
     Documents or there shall be another provision in such documents under which
     such Loan or other extension of credit is expressly permitted.

          (v) Notice of  Borrowing.  Administrative  Agent shall have received a
     Notice of Borrowing duly completed and complying with Section 4.05.

     Each Notice of  Borrowing or request for the issuance of a Letter of Credit
by Borrower or PR Borrower  (as the case may be)  hereunder  shall  constitute a
certification  by Borrower  to the effect set forth in clauses (i) through  (iv)
above as of the date of such borrowing or issuance.

     Each notice  submitted  by  Borrower  or PR  Borrower  (as the case may be)
hereunder for an extension of credit hereunder shall constitute a representation
and  warranty by Borrower or PR Borrower (as the case may be), as of the date of
such  notice and as of the  relevant  borrowing  date or date of  issuance  of a
Letter of Credit,  as applicable,  that the conditions in this Section 7.01 have
been satisfied or waived in accordance with the terms hereof.

     7.02.   Determinations   Under  Section  7.  For  purposes  of  determining
compliance  with the conditions  specified in Section 7.01, each Lender shall be
deemed to have  consented to,  approved or accepted or to be satisfied with each
document or other matter  required  thereunder to be consented to or approved by
or acceptable or satisfactory to the Lenders unless an officer of Administrative
Agent responsible for the transactions contemplated by this Agreement shall have
received  notice from such Lender prior to the date that Borrower or PR Borrower
(as the case may be), by notice to the Lenders,  designates as the proposed date
of the extension of credit, specifying its objection thereto.

     Section 8.  Representations  and  Warranties.  Each Obligor  represents and
warrants  to the  Creditors  that at and as of each  Funding  Date (in each case

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<PAGE>

immediately  before and immediately  after giving effect to the  transactions to
occur on such date  (including,  with  respect to the  Effectiveness  Date,  the
Transactions)):

     8.01. Corporate Existence. Each Company: (a) is a corporation, partnership,
limited liability  company or other entity duly organized,  validly existing and
in good standing under the laws of the jurisdiction of its organization; (b) has
all requisite  corporate or other power and authority,  and has all governmental
licenses,  authorizations,  consents and approvals necessary to own its Property
and carry on its  business as now being  conducted;  and (c) is  qualified to do
business and is in good standing in all jurisdictions in which the nature of the
business conducted by it makes such qualification  necessary and, in the case of
clauses  (a),  (b) and (c)  where the  failure  thereof  individually  or in the
aggregate is reasonably likely to have a Material Adverse Effect.

     8.02.  Financial  Condition;  Etc. (a) Borrower has heretofore delivered to
the  Lenders  (A) the  audited  consolidated  balance  sheets of Parent  and its
Subsidiaries  as of May 31, 1997, May 31, 1998 and May 31, 1999, and the related
statements of earnings,  changes in stockholders'  equity and cash flows for the
fiscal years ended on those dates,  together with reports  thereon by Deloitte &
Touche LLP,  certified public  accountants,  and (B) the unaudited  consolidated
balance sheet of Parent and its  Subsidiaries  as of November 30, 1999,  and the
related  statements  of earnings  and cash flows for the fiscal  period ended on
November 30, 1999. All of said financial statements,  including in each case the
related  schedules  and notes,  are true,  complete  and  correct  and have been
prepared in accordance  with GAAP  consistently  applied and present  fairly the
financial  position of Parent and its Subsidiaries as of the respective dates of
said  balance  sheets and the  results of their  operations  for the  respective
periods  covered  thereby,  subject  (in the  case  of  interim  statements)  to
period-end audit adjustments.

     (b) Except as set forth in Schedule 8.02(b) or in the financial  statements
or other  information  referred to in Section 8.02(a),  as of the  Effectiveness
Date,  there are no material  liabilities of any Company of any kind required to
be set forth on a balance sheet or in the notes  thereto  prepared in accordance
with GAAP, whether accrued, contingent,  absolute,  determined,  determinable or
otherwise, and there is no existing condition, situation or set of circumstances
which is reasonably likely to result in such a liability, other than:

          (i) liabilities  disclosed or provided for in the Schedules hereto and
     the  reports  filed  by  Parent  with  the  Commission  filed  prior to the
     Effectiveness Date;

          (ii)   liabilities   incurred  in  the  ordinary  course  of  business
     consistent  with past practice  since May 31, 1999,  which in the aggregate
     are not reasonably likely to have a Material Adverse Effect; and

          (iii)   liabilities   under  this  Agreement,   the  Parent  Financing
     Documents, the Senior Subordinated Notes Financing Documents or liabilities
     incurred in  connection  with the  transactions  contemplated  or permitted
     hereby.

     (c) Since May 31, 1999 there has been no Material Adverse Change.

     (d) The pro  forma  capitalization  table of  Parent  and its  Consolidated
Subsidiaries  (the "Pro Forma  Capitalization  Table"),  certified  by the chief
financial  officer of Parent and Borrower,  copies of which have been heretofore
furnished  to  each  Lender,  is the  capitalization  table  of  Parent  and its
Consolidated  Subsidiaries as of the date of the latest available  balance sheet
of Parent prior to the  Effectiveness  Date (the "Pro Forma Date"),  adjusted to
give effect (as if such events had occurred on such date) to the Transactions to
occur on the  Effectiveness  Date and the  application  of the  proceeds  of all
Indebtedness  to be incurred on such date.  The Pro Forma  Capitalization  Table
accurately  reflects in all material respects all adjustments  necessary to give
effect to the Transactions,  was prepared based on good faith  assumptions,  and
presents fairly in all material  respects on a pro forma basis the  consolidated
capitalization  of Parent and its Consolidated  Subsidiaries as at the Pro Forma
Date, adjusted as described above.

     8.03.  Litigation.  Except as set forth in the reports filed by Parent with
the  Commission  prior to the  date  hereof  or in  Schedule  8.03,  there is no
Proceeding  pending  against,  or to the knowledge of any Obligor  threatened in
writing  against or affecting,  any Company or any of its respective  Properties

                                       57
<PAGE>

before any  Governmental  Authority  that have a reasonable  likelihood of being
adversely  determined  and that,  if  determined  or resolved  adversely to such
Company in accordance with the plaintiff's demands, is reasonably likely to have
a Material Adverse Effect.

     8.04.  No Breach;  No  Default.  (a) None of the  execution,  delivery  and
performance  by any Obligor of any Credit  Document or  Transaction  Document to
which it is a party nor the consummation of the transactions  herein and therein
contemplated  (including the Transactions) will (i) conflict with or result in a
breach of, or require any consent  (which has not been  obtained  and is in full
force and effect) under,  any Organic  Document of any Company or any applicable
Requirement of Law or any order, writ,  injunction or decree of any Governmental
Authority  binding on any Company,  or any term or provision of any  Contractual
Obligation of any Company or (ii)  constitute  (with due notice or lapse of time
or both) a default under any such Contractual Obligation, or (iii) result in the
creation or imposition of any Lien (except for the Liens created pursuant to the
Security  Documents)  upon any Property of any Company  pursuant to the terms of
any such  Contractual  Obligation,  except with respect to each of the foregoing
which is not reasonably likely to have a Material Adverse Effect or which is not
reasonably likely to subject any Agent, Lender or Issuing Lender to any material
risk of damages or liability to third parties.

     (b) No Company is in default  under or with respect to any order,  award or
decree of any Governmental Authority or arbitrator binding upon it or any of its
Property in any respect  which is reasonably  likely to have a Material  Adverse
Effect.

     (c) No Default or Event of Default has occurred and is continuing.

     8.05. Action. Each Company has all necessary corporate power, authority and
legal right to execute,  deliver and perform its  obligations  under each Credit
Document and  Transaction  Document to which it is a party and to consummate the
transactions  herein and  therein  contemplated;  the  execution,  delivery  and
performance by each Company of each Credit Document and Transaction  Document to
which it is a party and the consummation of the transactions  herein and therein
contemplated have been duly authorized by all necessary  corporate action on its
part;  and this  Agreement  has been duly and validly  executed and delivered by
each  Obligor  and  constitutes,  and each of the  Notes  and the  other  Credit
Documents to which it is a party when executed and delivered by such Obligor (in
the case of the Notes, for value) will constitute,  its legal, valid and binding
obligation,  enforceable  against  each  Obligor in  accordance  with its terms,
except as such  enforceability  may be  limited by (a)  bankruptcy,  insolvency,
fraudulent  conveyance,  reorganization,  moratorium  or similar laws of general
applicability  from  time  to  time  in  effect  affecting  the  enforcement  of
creditors' rights and remedies and (b) the application of general  principles of
equity (regardless of whether such  enforceability is considered in a proceeding
in equity or at law).

     8.06.  Approvals.  No  authorizations,  approvals  or  consents  of, and no
filings or  registrations  with,  any  Governmental  Authority or any securities
exchange are necessary for the execution, delivery or performance by any Company
of the Credit Documents and the Transaction  Documents to which it is a party or
for the  legality,  validity  or  enforceability  hereof or  thereof  or for the
consummation of the  transactions  herein and therein  contemplated,  except for
filings and recordings in respect of the Liens created  pursuant to the Security
Documents  and except for  consents,  authorizations  and filings that have been
obtained  or made and are in full  force and  effect or the  failure of which to
obtain is not reasonably likely to have a Material Adverse Effect.

     8.07. [Omitted]

     8.08. ERISA. No ERISA Event has occurred or is reasonably expected to occur
that,  when taken together with all other such ERISA Events for which  liability
is reasonably  expected to occur,  could be reasonably likely to have a Material
Adverse Effect. The present value of all accumulated  benefit obligations of all
underfunded  Plans (based on the  assumptions  used for purposes of Statement of
Financial  Accounting  Standards  No.  87) did  not,  as of the date of the most
recent financial statements  reflecting such amounts,  exceed by more than $10.0
million the fair market value of the assets of all such underfunded  Plans. Each
member of the ERISA Group is in  compliance  in all material  respects  with the
presently  applicable  provisions  of ERISA  and the Code with  respect  to each
Employee  Benefit Plan.  Using actuarial  assumptions  and  computation  methods

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<PAGE>

consistent  with  subpart 1 of  subtitle E of Title IV of ERISA,  the  aggregate
liabilities of any of each ERISA Entity to all Multiemployer  Plans in the event
of a complete  withdrawal  therefrom,  as of the close of the most recent fiscal
year of each such Multiemployer Plan, would not reasonably be expected to result
in a Material Adverse Effect.

     Each  Foreign  Plan has  been  maintained  in  compliance  in all  material
respects  with its terms  and with the  requirements  of any and all  applicable
laws,  statutes,  rules  regulations and orders and has been  maintained,  where
required, in good standing with applicable regulatory  authorities.  Neither the
Borrower nor any Subsidiary have incurred any material  obligation in connection
with the  termination of or withdrawal  from any Foreign Plan. The present value
of the accrued  benefit  liabilities  (whether or not vested) under each Foreign
Plan which is funded, determined as of the end of the most recently ended fiscal
year of Borrower or  Subsidiary on the basis of actuarial  assumptions,  each of
which is reasonable,  did not materially  exceed the current value of the assets
of such  Foreign  Plan,  and for each  Foreign  Plan  which is not  funded,  the
obligations of such Foreign Plan are properly accrued.

     8.09.  Taxes.  Except as set forth in the balance sheet of Parent as of May
31,  1999,  included  in the Form  10-K for the  fiscal  year  ended  such  date
(including the notes  thereto) or except as is not  reasonably  likely to have a
Material  Adverse  Effect,  (i) all tax returns,  statements,  reports and forms
(including  estimated  Tax  or  information  returns)  (collectively,  the  "Tax
Returns") required to be filed with any taxing authority by, or with respect to,
each Company have been filed in accordance  with all applicable  laws; (ii) each
Company has timely paid or made  provision for payment of all Taxes shown as due
and  payable  on Tax  Returns  that have been so filed,  and,  as of the time of
filing,  each  Tax  Return  correctly  reflected  the  facts  regarding  income,
business, assets,  operations,  activities and the status of each Company (other
than  Taxes  which  are being  contested  in good  faith and for which  adequate
reserves are  reflected on such balance sheet or on other  financial  statements
subsequently  delivered hereunder) and (iii) each Company has made provision for
all Taxes payable by such Company for which no Tax Return has yet been filed.

     Except as set forth on Schedule 8.09, (i) as of the Effectiveness  Date, no
extension of a statute of  limitations  relating to material  Taxes is in effect
with  respect  to any  Company;  (ii) no  Company  has ever  been a member of an
affiliated group of corporations  within the meaning of Section 1504 of the Code
other than an affiliated  group of  corporations  of which Parent was the common
parent; and (iii) except as permitted by Section 9.25, there are no material tax
sharing   agreements   or  similar   arrangements   (including   tax   indemnity
arrangements) with respect to or involving any Company.

     8.10.  Investment  Company Act;  Public Utility  Holding Company Act; Other
Restrictions.  No Company is an "investment  company", or a company "controlled"
by an "investment  company",  within the meaning of the United States Investment
Company  Act of 1940,  as  amended.  No Company is a  "holding  company",  or an
"affiliate"  of a "holding  company"  or a  "subsidiary  company"  of a "holding
company", within the meaning of the United States Public Utility Holding Company
Act of 1935, as amended.  No Obligor is subject to  regulation  under any law or
regulation which limits its ability to incur Indebtedness, other than Regulation
X of the Board of Governors of the Federal Reserve System.

     8.11.  Environmental  Matters.  Except as  disclosed  in Schedule  8.11 and
except as would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect:  (i) each Company is in compliance with and
in the last five  years  has been in  compliance  with,  and is not  subject  to
liability  under,  any  Environmental  Laws  applicable  to it and  there are no
Environmental  Laws,  including such Laws which have been formally  proposed for
public  comment,  which  would  reasonably  be  expected  to result in  material
expenditures by any Company,  and no such Environmental Laws would reasonably be
expected to interfere  in any material way with current or projected  operations
of any  Company;  (ii) no Company  has  received  notice that it or any of their
respective  predecessors  in  interest  has  been  identified  as a  potentially
responsible party under the United States Comprehensive  Environmental Response,
Compensation  and Liability Act of 1980, as amended  ("CERCLA"),  or any similar
law of any Governmental Authority,  nor has any Company received notice that any
Hazardous  Materials that it or any of its respective  predecessors  in interest
has used, generated,  stored, treated,  handled,  transported or disposed of, or
arranged for disposal or treatment  of, have been found at any site at which any
Person  is  conducting   or  plans  to  conduct  any  action   pursuant  to  any
Environmental Law, and no Company,  or to the knowledge of the Obligors,  any of
their  respective  predecessors  in interest,  has disposed of, arranged for the

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<PAGE>

disposal or treatment of, or otherwise released Hazardous  Materials at any site
at which  any  Person  is  conducting  or  plans to  conduct  any  action  under
Environmental Law; (iii) no properties now or formerly owned, leased or operated
by any Company or, to the  knowledge  of any  Obligor,  any of their  respective
predecessors in interest, are (x) listed or proposed for listing on the National
Priorities  List under CERCLA or (y) listed on the  Comprehensive  Environmental
Response,   Compensation  and  Liability  Information  System  List  promulgated
pursuant  to CERCLA or (z)  included  on any  similar  lists  maintained  by any
Governmental  Authority;  (iv) there are no past or present events,  conditions,
activities,  practices  or actions,  or any  agreements,  judgments,  decrees or
orders by which any  Company is bound,  which  would  reasonably  be expected to
prevent any  Company's  compliance  with any  Environmental  Law, or which would
reasonably  be expected to give rise to any  liability of any Company  under any
Environmental Law, including, without limitation,  liability under CERCLA or any
similar state or foreign laws; (v) no Lien has been asserted or recorded,  or to
the  knowledge of the obligors,  threatened,  under any  Environmental  Law with
respect to any asset, facility, inventory or property currently owned, leased or
operated by any Company;  (vi) there are no underground storage tanks or related
piping at any property owned,  operated or leased by any Company;  (vii) no such
tanks or related  piping has been  removed from such  properties;  and (viii) no
Company is subject to any  Proceeding  alleging the  violation  of, or liability
under,  any  Environmental  Law and, to the knowledge of the  Obligors,  no such
Proceeding is threatened.

     8.12.  Environmental  Investigations.  As of the  Effectiveness  Date,  all
material environmental investigations, studies, audits or assessments which have
been  conducted  and which are in the  possession,  custody  or  control  of any
Company relating (i) to the current or prior business, operations, facilities or
Property of any Company or any of their  respective  predecessors in interest or
(ii) to any facility, Property or other asset now or previously owned, operated,
leased  or  used by any  Company  or any of  their  respective  predecessors  in
interest have been made available to Agents and the Lenders.

     8.13. Use of Proceeds. No Company is engaged principally,  or as one of its
important  activities,  in the  business of  extending  credit for the  purpose,
whether  immediate,  incidental or ultimate,  of buying or carrying Margin Stock
and no part of the proceeds of any  extension of credit  hereunder  will be used
directly or indirectly and whether  immediately,  incidentally  or ultimately to
purchase  or carry  any  Margin  Stock or to extend  credit  to others  for such
purpose  or  to  refund  Indebtedness  originally  incurred  for  such  purpose.
Following application of the proceeds of each extension of credit hereunder, not
more than 25  percent  of the value of the  assets  (either  of  Borrower  or PR
Borrower individually or of Borrower and its Consolidated  Subsidiaries) will be
Margin  Stock.  Borrower  and PR Borrower  will use the proceeds of all Loans to
finance the Transactions, pay fees and expenses related thereto, and for general
corporate purposes. If requested by any Lender or Administrative Agent, Borrower
will  furnish  to  Administrative  Agent  and  each  Lender a  statement  to the
foregoing  effect in conformity with the requirements of FR Form U-1 referred to
in Regulation U.

     8.14. Subsidiaries,  Etc. As of the Effectiveness Date (after giving effect
to the Transactions),  Parent,  Borrower and PR Borrower have no Subsidiaries or
interests  (whether direct or indirect) in partnerships,  Minority  Interests or
business  trusts  other  than the  entities  set forth on  Schedule  8.14.  Each
Subsidiary  listed on Schedule  8.14 (other than any Foreign  Subsidiary  or any
non-operating  Subsidiary,  as indicated on such  schedule) is a Guarantor as of
the Effectiveness Date. Each of Parent, Borrower and PR Borrower owns, as of the
Effectiveness  Date,  the  percentage  of  the  issued  and  outstanding  Equity
Interests  or other  evidences  of the  ownership  of each of  their  respective
Subsidiaries,  partnerships or Minority Interests listed on Schedule 8.14 as set
forth on such Schedule. No such Subsidiary, partnership or Minority Interest has
issued any securities  convertible into shares of its Equity Interests (or other
evidence of ownership) or any Equity Rights to acquire such shares or securities
convertible  into  such  shares  (or  other  evidence  of  ownership),  and  the
outstanding  stock and  securities  (or other  evidence  of  ownership)  of such
Subsidiaries,  partnerships or Minority Interests are owned by Parent,  Borrower
or PR Borrower, as applicable,  free and clear of all Liens and Equity Rights of
others  of any kind  whatsoever,  except  for  Liens  pursuant  to the  Security
Documents.  Parent does not have any direct equity  interest in any Person other
than  Borrower.  All  Minority  Interests  that will be the  source of  Dividend
Payments pursuant to Section 9.10(c)(iv) or 9.10(c)(v) are expressly  identified
on Schedule 8.14 (or were received as substantially equivalent value in exchange
for such Minority  Interests)  and are owned directly by Borrower or a Qualified
Subsidiary.

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<PAGE>

     8.15.  Properties.  Except as  otherwise  contemplated  or  provided in the
Mortgages,  the other Security Documents or this Agreement,  and except for such
exceptions that do not, or are not reasonably likely to, have a Material Adverse
Effect,  Borrower or a Subsidiary (i) has good and  marketable  title to all the
Property  reflected in the consolidated  balance sheet of Borrower dated May 31,
1999, or in any later financial  statements provided hereunder as being owned by
Borrower or any Subsidiary  (except Property sold or otherwise disposed of since
the date  thereof  in the  ordinary  course  of  business  or as  otherwise  not
prohibited by the Credit  Documents),  or acquired after the date thereof,  free
and clear of all Liens, except (x) Permitted Liens and (y) such imperfections or
irregularities  of title or Liens  as do not  materially  affect  the use of the
Properties  subject thereto or affected thereby or otherwise  materially  impair
business  operations at such  Properties and (ii) is the lessee of all leasehold
estates  and  is  in  possession  of  the  Properties  purported  to  be  leased
thereunder,  and to the knowledge of Borrower,  each such lease is valid without
default thereunder by the lessee or lessor. Title to all Property of any Company
is held by such Company free and clear of all Liens except for Permitted Liens.

     Except for such  exceptions  that do not, or are not  reasonably  likely to
have a Material Adverse Effect, the Properties of Borrower and the Subsidiaries,
taken as a whole, are in good operating  condition and repair (ordinary wear and
tear  excepted),  and  constitute  all of the  assets and  properties  which are
required for the businesses and operations of Borrower and the  Subsidiaries  as
presently conducted.

     8.16. Security Interest; Absence of Financing Statements; Etc. The Security
Documents,  once executed and delivered, will create, in favor of Administrative
Agent for the benefit of the Issuing Lender, Lenders and Agents, as security for
the obligations  purported to be secured thereby,  a valid and enforceable,  and
upon filing or  recording  with the  appropriate  Governmental  Authorities  and
delivery of the applicable  documents to Administrative  Agent,  perfected first
priority  security  interest  in and Lien  upon all of the  Collateral  (and the
proceeds  thereof),  superior  to and prior to the  rights of all third  persons
other than the holders of Permitted Liens.

     Except as set forth on Schedule 8.16 and except for Permitted Liens and the
Liens  created  by the  Security  Documents,  there  is no  currently  effective
financing statement,  security agreement, chattel mortgage, real estate mortgage
or other document filed or recorded with any filing records,  registry, or other
public office,  that purports to cover, affect or give notice of any Lien on, or
security interest in, any Property of any Company or rights thereunder.

     8.17.  Licenses and Permits;  Compliance  with Laws. The Companies hold all
governmental permits, licenses, authorizations, consents and approvals necessary
for the Companies to own, lease, and operate their respective  Properties and to
operate their respective  businesses as now being conducted  (collectively,  the
"Permits"),  except for Permits the failure of which to obtain is not reasonably
likely to have a Material Adverse Effect.  None of the Permits has been modified
in any way that is  reasonably  likely to have a Material  Adverse  Effect.  All
Permits  are in full force and  effect  except  where the  failure to be in full
force and effect is not reasonably likely to have a Material Adverse Effect.

     The businesses of the Companies are not being conducted in violation of any
applicable  law,  statute,  ordinance,  regulation,  judgment,  Permits,  order,
decree,  concession,  grant or other  authorization of any governmental  entity,
except for violations that are not reasonably  likely to have a Material Adverse
Effect.

     There  does not exist any  judgment,  order or  injunction  prohibiting  or
imposing material adverse  conditions upon the Transactions,  or the performance
by any Company of any of its material obligations under the Credit Documents.

     8.18. True and Complete  Disclosure.  The information,  reports,  financial
statements,  exhibits and schedules  furnished in writing by or on behalf of any
Obligor to any  Creditor in  connection  with the  negotiation,  preparation  or
delivery of this Agreement and the other Credit  Documents or included herein or
therein or delivered  pursuant  hereto or thereto or pursuant to the Information
Memorandum,  but in each case  excluding  all  projections,  whether prior to or
after the Effectiveness Date, when taken as a whole, do not, as of the date such
information was furnished, contain any untrue statement of material fact or omit
to state a material  fact  necessary in order to make the  statements  herein or
therein,  in  light  of the  circumstances  under  which  they  were  made,  not
materially  misleading.  The  projections  and pro forma  financial  information

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furnished at any time by any Obligor to any Creditor  pursuant to this Agreement
have been prepared in good faith based on assumptions believed by Borrower to be
reasonable  at the time  made,  it being  recognized  by the  Lenders  that such
financial information as it relates to future events is not to be viewed as fact
and that actual results  during the period or periods  covered by such financial
information  may  differ  from the  projected  results  set forth  therein  by a
material  amount and no Obligor,  however,  makes any  representation  as to the
ability of any Company to achieve the results set forth in any such projections.
Each  Obligor   understands  that  all  such  statements,   representations  and
warranties shall be deemed to have been relied upon by the Lenders as a material
inducement to make each extension of credit hereunder.

     8.19. Solvency;  Etc. As of the Effectiveness Date immediately prior to and
immediately following the consummation of the Transactions and the extensions of
credit to occur on such date each Obligor is and will be Solvent  (after  giving
effect to Section 6.08(a)).

     8.20.  Contracts.  No Company is in default under any material  Contractual
Obligation  to which it is a party or by which it is bound,  nor, to  Borrower's
knowledge,  does any condition exist that, with notice or lapse of time or both,
would constitute such default,  excluding in any case such defaults that are not
reasonably likely to have a Material Adverse Effect.  Schedule 8.20 and the Form
10-K for the fiscal year ended May 31, 1999 filed by Parent with the  Commission
accurately and completely  list all agreements,  if any, among the  stockholders
(or any of their  Affiliates  other than any  Company) of Parent on the one hand
and any Company on the other in effect on the date hereof.  PR Borrower and each
of its  Subsidiaries  are  in  compliance  in all  material  respects  with  the
requirements  of the  Facilities  Agreement  and the  Marketing  Agreements.  PR
Borrower and each of its Subsidiaries are in compliance in all material respects
with  the  requirements  of  (and no  default  has  occurred  under)  all  other
contracts,  agreements,  indentures,  mortgages,  leases  and other  instruments
binding on it or its property, assets or operations the violation of which could
have a Material Adverse Effect.

     8.21.  Labor Matters.  Except as set forth in Schedule  8.21,  there are no
strikes or other labor disputes against any Company pending or, to the knowledge
of Borrower,  threatened which are reasonably  likely to have a Material Adverse
Effect.

     8.22.  FCC Matters and  Governmental  Matters.  (a) Each Company  holds all
licenses,  permits  and  other  authorizations  issued  by the FCC or any  other
Communications  Regulatory  Authority (the "Licenses") that are required for the
operations  and  businesses  of  the  Companies  as  they  are  operated  on any
applicable  date  on  which  a Loan is made or a  Letter  of  Credit  is  issued
hereunder, in each case where the failure to hold a License,  individually or in
the aggregate,  is reasonably likely to have a Material Adverse Effect.  Without
limiting the foregoing,  each Company has received all necessary  authorizations
from the FAA for all existing  towers that are part of the cellular or microwave
systems  operated by the Companies and for any  facilities the  construction  of
which have been approved by the FCC or of which  applications  or  notifications
have been filed for such  approval in each case where the failure to obtain such
authorization,  individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect.

     (b)  Schedule  8.22(b)  sets  forth,  as of  the  Effectiveness  Date,  the
expiration date for each of the Licenses held by any Company.

     (c) The Licenses are valid and in full force and effect,  unimpaired by any
condition  or  restriction  or any  act or  omission  by any  Company  which  is
reasonably likely to have a Material Adverse Effect. Except as is not reasonably
likely  to  have  a  Material  Adverse  Effect,   there  are  no  modifications,
amendments,  applications,  revocations,  or other  proceedings,  or  complaints
pending  or, to the  knowledge  of  Borrower,  threatened,  with  respect to the
Licenses (other than proceedings that apply to the cellular industry generally).
Except as is not reasonably  likely to have a Material Adverse Effect,  all fees
due and payable to the FCC or any other Communications Regulatory Authority have
been paid and no event has occurred which,  with or without the giving of notice
or  lapse  of  time  or  both,  would  constitute   grounds  for  revocation  or
modification of any Licenses. Borrower does not conduct any microwave operations
on frequencies that are subject to relocation  under the FCC's rules,  except as
is not reasonably likely to result in a Material Adverse Effect.

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<PAGE>

     (d) Except where a lack of  compliance is not  reasonably  likely to have a
Material Adverse Effect,  (i) all reports required by the  Communications Act or
required  to be  filed  with  the  FCC or any  other  Communications  Regulatory
Authority  by any Company  have been filed and are  accurate and complete in all
material respects and (ii) all reports required to be filed by each Company with
all other governmental or administrative authorities,  federal, state and local,
have been filed and are accurate and complete in all material respects.

     (e) Except where a lack of  compliance is not  reasonably  likely to have a
Material  Adverse Effect,  each Company is in compliance with, and their Systems
have been operated in compliance  with,  the  Communications  Act and the rules,
regulations,  policies  and  orders  of  the  relevant  state  public  utilities
commissions  and the FAA,  including,  without  limitation,  the FCC's  time and
coverage  requirements  of 47 C.F.R. 22.142,  22.911,  22.912 and 22.946 (the
"Statutes").  Except as is not reasonably likely to result in a Material Adverse
Effect,  no Company has received any written notice to the effect,  or otherwise
been advised in writing,  that they are not in compliance  with any Statutes and
do not have any reason to anticipate that any presently  existing  circumstances
are reasonably likely to result in violations of any Statutes.

     (f) No Company  has  engaged in any  course of conduct  that is  reasonably
likely to impair the ability of any Company to be the holder of the  Licenses or
is aware of any reason  why the  Licenses  might not be renewed in the  ordinary
course,  why  any  of  the  Licenses  might  be  revoked,  or  why  any  pending
applications  or  notifications  might not be  approved,  in each case where the
failure to hold a  License,  individually  or in the  aggregate,  is  reasonably
likely to have a Material Adverse Effect.

     8.23.  Subordinated  Notes.  Each of Parent and  Borrower  has  provided to
Agents on the  Original  Closing Date true,  complete and correct  copies of the
Parent  Financing   Documents  and  the  Senior   Subordinated  Notes  Financing
Documents,  respectively.  All the  representations and warranties in the Parent
Financing  Documents and the Senior  Subordinated Notes Financing Documents were
true and correct in all material respects on and as of the date made. The Parent
Subordinated  Notes and the  Senior  Subordinated  Notes  and,  if  issued,  the
Additional Senior  Subordinated  Notes and the Parent Refinanced Notes when both
are issued and sold,  will either (a) have been  registered  or qualified  under
applicable  federal and state  securities laws or (b) be exempt  therefrom.  The
offering  documents for the issuance and sale of the Senior  Subordinated  Notes
and (if  issued)  the  Additional  Senior  Subordinated  Notes  and  the  Parent
Refinanced Notes, as of its respective date, did not contain an untrue statement
of material fact or omit to state a material fact required to be stated  therein
or necessary to make the statement  therein not misleading (it being  understood
that no  representation or warranty is being made with respect to information in
respect  of the  initial  purchasers  thereof  expressly  provided  by them  for
inclusion therein).

     8.24. Year 2000. Each Company has reviewed their  operations with a view to
assessing   whether  their   business  or  operations   will,  in  the  receipt,
transmissions,  processing,  manipulation, storage, retrieval, retransmission or
other  utilization of data, be vulnerable to any significant  risk that computer
hardware, software or any equipment containing embedded microchips used in their
business or operations  will not in the case of dates or time periods  occurring
after December 31, 1999 function at least as effectively as in the case of dates
or time periods occurring prior to January 1, 2000. In addition each Company has
obtained  assurances  from their  respective  third party billing  providers and
their  respective   principal  sources  of  cellular  equipment  that  they  are
addressing  the  potential  problems of the Year 2000.  No Company has reason to
believe that the risks associated with the Year 2000 issue are reasonably likely
to have a Material Adverse Effect.

     Section  9.  Covenants.  Each  Obligor,  for  itself  and on  behalf of its
Subsidiaries,  covenants  and agrees  with the  Creditors  that,  so long as any
Commitment,  Loan or Letter of Credit Liability is outstanding and until payment
in full of all amounts payable by Borrower and PR Borrower hereunder:

     9.01.   Financial   Statements,   Etc.  The  Companies   shall  deliver  to
Administrative Agent and each of the Lenders:

     (a) Quarterly  Financials.  As soon as available and in any event within 45
days after the end of each of the first three  quarterly  fiscal periods of each

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fiscal  year  beginning  with the  fiscal  quarter  ending  November  30,  1998,
consolidated  statements of operations,  cash flows and stockholders'  equity of
Borrower and its  Consolidated  Subsidiaries  for such period and for the period
from the beginning of the respective fiscal year to the end of such period,  and
the  related  consolidated  balance  sheet  of  Borrower  and  its  Consolidated
Subsidiaries  as at the end of  such  period,  setting  forth  in  each  case in
comparative form (i) the  corresponding  consolidated  statements of operations,
cash  flows  and  stockholders'  equity  for  the  corresponding  period  in the
preceding fiscal year to the extent such financial  statements are available and
(ii)  the  corresponding  budget  or plan  for  such  period,  accompanied  by a
certificate of a Responsible Officer of Borrower,  which certificate shall state
that said  consolidated  financial  statements  fairly present the  consolidated
financial  condition,  results of operations  and cash flows of Borrower and its
Consolidated  Subsidiaries in accordance with GAAP,  consistently applied, as at
the end of, and for, such period (subject to normal year-end audit adjustments);

     (b) Annual Financials. As soon as available and in any event within 90 days
after the end of each fiscal year,  (I)  consolidated  statements of operations,
cash  flows  and   stockholders'   equity  of  Borrower  and  its   Consolidated
Subsidiaries  for  such  year  and the  related  consolidated  balance  sheet of
Borrower and its Consolidated  Subsidiaries as at the end of such year,  setting
forth  in each  case in  comparative  form  (i) the  corresponding  consolidated
information  as of the end of and for the  preceding  fiscal  year to the extent
such  financial  statements are available and (ii) the  corresponding  budget or
plan for such period, and accompanied by an opinion,  without a going concern or
similar qualification or exception as to scope, thereon of Deloitte & Touche LLP
or  other  independent  certified  public  accountants  of  recognized  national
standing  reasonably  acceptable  to  Co-Syndication  Agents  and  the  Majority
Lenders,  which opinion shall state that said consolidated  financial statements
fairly present the consolidated  financial condition,  results of operations and
cash flows of Borrower and its  Consolidated  Subsidiaries as at the end of, and
for, such fiscal year in accordance with GAAP,  consistently  applied;  and (II)
consolidating   statements  of  operations  of  Borrower  and  its  Consolidated
Subsidiaries  for  such  year and the  related  consolidating  balance  sheet of
Borrower and its Consolidated  Subsidiaries as at the end of such year,  setting
forth  in each  case in  comparative  form (i) the  corresponding  consolidating
information  as of the end of and for the  preceding  fiscal  year to the extent
such  financial  statements are available and (ii) the  corresponding  budget or
plan for such period;  Borrower  shall supply such  additional  information  and
detail as to any item or items  contained in any such statement that Lenders may
reasonably require; all such financial statements will be prepared in accordance
with GAAP consistently applied;

     (c) Compliance Certificate; Performance Certificate.

     (i) concurrently with the delivery of the financial  statements referred to
in  Section  9.01(b),   a  certificate  of  the  independent   certified  public
accountants  reporting on such financial  statements  stating that in making the
examination necessary therefor no knowledge was obtained of any Event of Default
relating to the  Financial  Maintenance  Covenants,  except as specified in such
certificate;

     (ii) at the time it furnishes each set of financial  statements pursuant to
paragraph (a) or (b) above, (1) a certificate of a senior  financial  officer of
Borrower (I) to the effect that no Default has occurred and is  continuing  (or,
if any Default has occurred and is continuing, describing the same in reasonable
detail and  describing  the action that the Companies have taken and proposes to
take with  respect  thereto)  and (II) setting  forth in  reasonable  detail the
computations  necessary to determine  whether each Company is in compliance with
Section 9.11 as of the end of the respective  quarterly  fiscal period or fiscal
year,  (2) to the extent not  previously  disclosed to  Administrative  Agent, a
listing of any state within the United States where any Obligor keeps  inventory
or equipment and of any material  licenses  arising under the laws of the United
States (or any jurisdiction  therein)  acquired by any Obligor since the date of
the most recent list  delivered  pursuant to this clause (2) (or, in the case of
the first such list so delivered,  since the Original Closing Date), and (3) any
final  accountants'  management  letters delivered by the independent  certified
public  accountants  reporting on such  financial  statements to Borrower or any
Subsidiary; and

     (iii)  at the time the  financial  statements  are  furnished  pursuant  to
Section (A)  9.01(a),  an Officers'  Certificate,  setting  forth the  Specified
Wireless  System  Information  on a  consolidated  basis  for  Borrower  and the
Consolidated  Subsidiaries  for the fiscal  quarter  covered  by such  financial

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statements,  and  (B)  9.01(b),  an  Officers'  Certificate  setting  forth  the
Specified  Wireless System  Information (i) on a consolidated basis for Borrower
and the Consolidated Subsidiaries and (ii) for each cluster of Cellular Systems,
PCS Systems and SMR Systems  owned by Borrower or any  Subsidiary  with combined
Net Pops at such date for all such Cellular Systems, PCS Systems and SMR Systems
(as the case may be) of 1,000,000 or more,  in each case clause (i) and (ii) for
the fiscal year covered by such financial statements;

     (d) Other  Financial  Information.  Promptly upon  delivery  thereof to the
holders of any debt  securities or the  stockholders  of any Company  generally,
copies  of  all  financial  statements  and  reports  and  proxy  statements  so
delivered,  and  at the  time  the  same  are  filed,  copies  of all  financial
statements and reports which Borrower, PR Borrower or Parent may make to or file
with the Commission or any successor or analogous Governmental Authority;

     (e) Interest Rate  Certificates.  Together  with the  financial  statements
delivered  pursuant to clause (a) or (b) of this Section  9.01, an Interest Rate
Certificate;

     (f) Notice of Default.  Promptly  after any Company  knows or has reason to
believe  that any Default has  occurred or that any Company is in default of any
material term or provision of the Senior Subordinated Notes Financing Documents,
Parent Financing  Documents,  Additional Senior  Subordinated Notes Documents or
any  other   agreement  or  instrument   relating  to  or  evidencing   material
Indebtedness,  a notice of such Default describing the same in reasonable detail
and, together with such notice or as soon thereafter as possible,  a description
of the action that the  Companies  have taken and  propose to take with  respect
thereto;

     (g)  Environmental  Matters.  Written  notice  of any  Environmental  Claim
materially  affecting any Company, any Mortgaged Real Property or the operations
of any  Company  and any  notice  from any Person of (i) the  occurrence  of any
release,  spill or discharge of any Hazardous  Material that is reportable under
any  Environmental  Law, (ii) the commencement of any clean-up pursuant to or in
accordance with any Environmental Law of any Hazardous Material at, on, under or
within the  Mortgaged  Real  Property  or any part  thereof,  (iii) any  matters
relating to  Hazardous  Materials  or  Environmental  Laws that may  impair,  or
threaten to impair, Lenders' security interest in the Mortgaged Real Property or
any Obligor's  ability to perform any of its  obligations  under this  Agreement
when  such  performance  is due  or  (iv)  any  other  condition,  circumstance,
occurrence  or event  which is  reasonably  likely  to have a  Material  Adverse
Effect;

     (h) Auditors' Reports. Promptly upon receipt thereof, copies of all annual,
interim or special  reports  submitted to any Company by  independent  certified
public  accountants in connection with each annual,  interim or special audit of
such Company's books made by such accountants,  including,  without  limitation,
any management letter commenting on any Company's internal controls submitted by
such accountants to management in connection with their annual audit;

     (i) Annual Budgets.  As soon as practicable and in any event within 60 days
after the  beginning  of each fiscal year of  Borrower a  consolidated  plan and
financial  forecast for such fiscal year,  including  without  limitation  (a) a
forecasted  consolidated balance sheet and forecasted consolidated statements of
income and cash flows of Borrower  and the  Subsidiaries  for such fiscal  year,
together with  calculations  demonstrating  pro forma compliance for such fiscal
year with  Section  9.11 and an  explanation  of the  assumptions  on which such
forecasts  are based and (b)  forecasted  consolidated  statements of income and
cash flows of Borrower and the Subsidiaries for each quarter of each such fiscal
year,  together with an explanation  of the  assumptions on which such forecasts
are based;

     (j) Lien Matters. Written notice of (1) the incurrence of any material Lien
(other than Permitted Liens and other Liens expressly  permitted by the terms of
the applicable  Security Document) on, or material claim asserted against any of
the  Collateral  or (2) the  occurrence  of any other event which is  reasonably
likely to materially adversely affect the aggregate value of the Collateral;

     (k) Notice of Material Adverse Effect.  Written notice of the occurrence of
any Material Adverse Effect or any event or condition which is reasonably likely
to result in any Material Adverse Effect;

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     (l)   Governmental   Filings  and   Notices.   Promptly   upon  request  by
Administrative  Agent,  copies of any other  material  reports or documents that
were  filed  by  any  Company  with  any  Governmental  Agency  relating  to the
acquisition or maintenance of a material license including,  but not limited to,
the FCC or any other  Communications  Regulatory Authority and copies of any and
all material notices and other material  communications from any Federal,  state
or local Governmental Authority with respect to any Company;

     (m) ERISA  Information.  Promptly  upon the  occurrence  of any ERISA Event
that,  alone or together  with any other ERISA  Events  that have  occurred,  is
reasonably likely to result in liability to the Companies in an aggregate amount
exceeding  $5,000,000,  a written  notice  specifying the nature  thereof,  what
action the  Borrower,  its  Subsidiaries  or other ERISA Entity have taken,  are
taking or propose to take with  respect  thereto,  and,  when known,  any action
taken or threatened by the Internal Revenue Service,  Department of Labor,  PBGC
or Multiemployer Plan sponsor with respect thereto;

     (n) ERISA Filings,  Etc. Upon request by the Administrative  Agent,  copies
of: (i) each Schedule B (Actuarial  Information) to the annual report (Form 5500
Series) filed by Borrower, its Subsidiaries or ERISA Affiliate with the Internal
Revenue  Service  with  respect to each  Plan;  (ii) the most  recent  actuarial
valuation report for each Plan; (iii) all notices received by Borrower or any of
its  Subsidiaries or ERISA  Affiliates  from a Mutiemployer  Plan sponsor or any
governmental  agency concerning an ERISA Event; and (iv) such other documents or
governmental  reports or filings  relating to any  Employee  Benefit Plan as the
Administrative Agent shall reasonably request;

     (o)  FCC  Notices;   Notice  of  Certain  Information  Regarding  Permitted
Acquisitions.  Promptly upon (1) receipt thereof, copies of any material adverse
notice or reports  regarding  any Company from the FCC, the PRPSC,  the PRTRB or
any other Communications  Regulatory Authority, (2) receipt of notice of (A) any
forfeiture,  non-renewal,  cancellation,  termination,  revocation,  suspension,
impairment or material adverse  modification of any material License held by any
Company,  or any  notice of  default  or  forfeiture  with  respect  to any such
License, or (B) any refusal by any Communications  Regulatory Authority to renew
or extend any material  license,  permit,  certification or other  authorization
(including any License) held by any Company, an Officers' Certificate specifying
the nature of such event, the period of existence  thereof,  and what action the
Companies  are taking  and  propose to take with  respect  thereto,  and (3) the
consummation  of  any  Permitted  Acquisition  involving  aggregate  Acquisition
Consideration  and projected  Investments in excess of $50.0 million,  a written
notice  setting  forth with  respect to the business  acquired,  all of the data
required to be set forth in Schedule  8.22(b) with respect to such  business and
the  Licenses  and  any  other  licenses,  permits,   certifications  and  other
authorizations from any other  Communications  Regulatory  Authority required in
connection  with the operation of such business (as if the date of  consummation
of such Permitted Acquisition were the Effectiveness Date);

     (p) Name and Location Changes;  New Subsidiaries.  Prompt written notice to
the  Administrative  Agent of the creation or acquisition of any Subsidiary and,
with respect to each Obligor,  prompt written notice to the Administrative Agent
of any change (i) in such Company's  corporate name or in any trade name used to
identify  it in  the  conduct  of  its  business  or in  the  ownership  of  its
properties,  (ii) in the location of such Obligor's chief executive office,  its
principal  place of business,  any office in which it maintains books or records
relating to Collateral owned by it or any office or facility at which Collateral
owned by it is located  (including the  establishment  of any such new office or
facility),  (iii)  in such  Company's  identity  or  corporate  structure,  (iv)
resulting in any tangible  Collateral being located in any jurisdiction in which
a  financing  statement  must be,  but has not been,  filed in order to  perfect
Administrative  Agent's  Liens,  or  (v)  in  such  Company's  Federal  Taxpayer
Identification  Number (to the extent applicable);  each Company will not effect
or permit any change  referred to in the preceding  sentence  unless all filings
have been made under the Uniform  Commercial Code or otherwise that are required
in order for Administrative Agent to continue at all times following such change
to have a valid,  legal and perfected  security interests in all the Collateral;
and

     (q)  Miscellaneous.  Promptly,  such financial and other  information  with
respect to any Company as any Creditor may from time to time reasonably request.

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     9.02. Litigation, Etc. Borrower shall promptly give to Administrative Agent
and each Lender  notice of all  Proceedings,  and (except to the extent that any
such notice would,  in the  reasonable  opinion of outside  counsel to Borrower,
waive attorney client privilege) any material development thereof, affecting any
Company,  except  Proceedings which are not reasonably likely to have a Material
Adverse Effect.

     9.03. Existence;  Compliance with Law; Payment of Taxes; Inspection Rights;
Performance  of  Obligations;  Etc. Each Company shall (i) preserve and maintain
its legal existence and all of its material  rights,  privileges and franchises;
provided,  however,  that  nothing  in this  Section  9.03  shall  prohibit  any
transaction  expressly  permitted  under  Section  9.06,  (ii)  except as is not
reasonably   likely  to  have  a  Material  Adverse  Effect,   comply  with  the
requirements  of  all  applicable  laws,   rules,   regulations  and  orders  of
Governmental  Authorities,  (iii) except as is not  reasonably  likely to have a
Material  Adverse  Effect,  timely file true,  accurate and complete tax returns
required  by all  Governmental  Authorities  and pay and  discharge  all  Taxes,
assessments and governmental charges or levies imposed on it or on its income or
profits  or on any of its  Property  prior  to the date on  which  any  material
penalties  attach thereto (except for any such Tax,  assessment,  charge or levy
the payment of which is being contested in good faith and by proper  proceedings
and against which  adequate  reserves are being  maintained  in accordance  with
GAAP);  (iv)  maintain all of its  Properties  used or useful in its business in
good working order and condition, ordinary wear and tear excepted, except to the
extent  that the  failure  to do so with  respect  to any such  Property  is not
reasonably likely to have a Material Adverse Effect; (v) permit  representatives
of any Creditor during normal business hours and, except during the existence of
any Default,  upon reasonable prior notice,  to examine,  copy and make extracts
from its books and  records,  to inspect  its  Properties,  and to  discuss  its
business  and  affairs  with  its  officers  and  employees,  all to the  extent
reasonably requested by such Creditor;  (vi) upon reasonable notice, allow, with
the  presence of Borrower if Borrower so elects to  participate,  and subject to
reasonable  requirements of confidentiality,  including  requirements imposed by
law  or by  contract,  a  Co-Syndication  Agent,  Administrative  Agent  or  any
representative  chosen  by the  Majority  Lenders  to  consult  with  Borrower's
independent  public  accountants  and  auditors  with  respect to the  financial
affairs of the  Companies  and authorize  such  accountants  to disclose to such
Co-Syndication  Agent,  Administrative Agent or any representative chosen by the
Majority Lenders and the Lenders (and such Co-Syndication Agent,  Administrative
Agent or representative  to the Creditors) any and all financial  statements and
other  supporting  financial  documents  and schedules  including  copies of any
management  letter with respect to the business,  financial  condition and other
affairs  of  the  Companies;   at  the  request  of  a   Co-Syndication   Agent,
Administrative  Agent or any  representative  chosen  by the  Majority  Lenders,
Borrower shall deliver a letter addressed to such  accountants  instructing them
to comply with the  provisions  of this Section  9.03(vi);  (vii) perform in all
material respects all of its Contractual Obligations,  except where such failure
to so perform,  singly or in the aggregate with all other such failures,  is not
reasonably  likely to have a Material  Adverse  Effect;  and (viii)  keep proper
books of record and accounts, in which full and correct entries shall be made of
all  financial  transactions  and the  Property  and business of each Company in
accordance  with GAAP in effect  from time to time or as  otherwise  required by
applicable   rules  and  regulations  of  any   Governmental   Authority  having
jurisdiction over such Company.

     9.04.  Insurance.  (A) Each Company shall maintain,  with financially sound
and reputable  insurers,  insurance of the kinds and in the amounts  customarily
insured  against  by  companies  engaged  in the same or  similar  business  and
similarly situated (including  business  interruption  insurance).  Each Company
shall pay all insurance premiums payable by it as and when due.

     (B) All policies of insurance required to be maintained by any Company must
name  Administrative  Agent on behalf of Issuing Lender,  Lenders and Agents, as
mortgagees  (in the case of property  insurance) or  additional  insured (in the
case of liability insurance),  as applicable, or certificate holder (in the case
of workers'  compensation  insurance)  and must  provide  that no  cancellation,
non-renewal or modification (including reduced coverage) of the policies will be
made without  thirty days' prior written notice to  Administrative  Agent and if
the insurance  carrier shall have received  written  notice from  Administrative
Agent of the  occurrence and  continuance of an Event of Default,  the insurance
carrier  shall pay all  proceeds  otherwise  payable to any  Company  under such
policies (other than directors' and officers'  liability  insurance policies and
other than proceeds of liability  policies which a Company will  distribute to a
third  party  in  respect  of an  insured  claim  of  such  party)  directly  to
Administrative Agent.

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     (C) The Obligors shall give immediate  written notice of any loss in excess
of $10.0 million to the insurance carrier and to Administrative Agent.

     (D) If at any time the area in which any Mortgaged Real Property is located
is  designated  (i) a  "flood  hazard  area"  in any  Flood  Insurance  Rate Map
published by the Federal Emergency  Management Agency (or any successor agency),
Borrower  shall  obtain flood  insurance in such total amount as  Administrative
Agent or the  Majority  Lenders  may from time to time  require,  and  otherwise
comply  with the  National  Flood  Insurance  Program  as set forth in the Flood
Disaster  Protection  Act of 1973, as amended from time to time, or (ii) a "Zone
1" area,  Borrower  shall  obtain  earthquake  insurance in such total amount as
Administrative Agent or the Majority Lenders may require.

     9.05.  Limitation  on Lines of Business;  Limitation on Activity of License
Subsidiaries;  Limitation on Management Agreements. No Company shall directly or
indirectly,  engage  to any  material  extent  in any line or lines of  business
activity  other  than the  business  of the  type  conducted  by the  Companies,
respectively,  as of the Effectiveness Date, any business in  telecommunications
or  cable  television,  or any  business  related,  ancillary  or  complementary
thereto.  No  License  Subsidiary  shall  engage  in any  business  or incur any
liabilities other than the ownership of its Licenses and the execution, delivery
and  performance  of the  Credit  Documents  to which it is a party,  activities
incidental  to the foregoing and other de minimis  liabilities  and  activities,
except that  License  Subsidiaries  in Puerto Rico may have a limited  number of
employees and de minimis  liabilities and activities as contemplated by Borrower
as of the Effectiveness  Date. No Company shall,  directly or indirectly,  enter
into any management or similar agreement with any Person other than with any one
or more Principal  Investors and Investor  Affiliates (other than (i) employment
or consulting  agreements entered into in the ordinary course of business,  (ii)
such agreements  entered into with holders of substantial  minority interests in
Non-Qualified  Subsidiaries  operating in Caribbean  nations  (other than Puerto
Rico) which do not confer voting control of such  Subsidiaries  on such minority
holders and (iii)  operating and management  agreements with respect to Minority
Interests).

     9.06. Limitation on Fundamental Changes,  Acquisitions or Dispositions.  No
Company  shall,  directly or  indirectly,  in a single  transaction or series of
transactions,  (1)  merge,  consolidate  or  amalgamate  with or into any Person
(other than pursuant to the Reorganization),  or liquidate,  wind up or dissolve
itself (or suffer any liquidation or  dissolution),  (2) effect any Acquisition,
or  (3)  effect  any  Disposition  (or  agree  to  do  any  of  the  foregoing).
Notwithstanding  the  foregoing  provisions  of this Section  9.06,  each of the
following  shall be  permitted  if and to the extent  complying  with the Parent
Financing  Documents,  the Senior Subordinated Notes Financing Documents and the
Additional Senior Subordinated Notes Documents (and any Permitted Refinancing of
any thereof) as from time to time in effect (if then in effect):

          (a) purchases and sales of Property (other than business units) in the
     ordinary course of business;

          (b) the pledge of the  Collateral  pursuant to the Security  Documents
     and the incurrence of any Permitted Lien;

          (c) the merger,  consolidation,  dissolution or liquidation of (1) any
     Subsidiary  with or into (i)  Borrower  or PR  Borrower  if  Borrower or PR
     Borrower  shall be the  continuing  or  surviving  corporation  or (ii) any
     Qualified  Subsidiary  (other than PR Borrower)  if a Qualified  Subsidiary
     shall be the continuing or surviving corporation, (2) in any transaction in
     which no person other than Borrower,  PR Borrower or a Qualified Subsidiary
     receives  any  consideration,  any  Subsidiary  that  is  not  a  Qualified
     Subsidiary  with or into any Qualified  Subsidiary,  and (3) any Subsidiary
     that is not a Qualified  Subsidiary with or into any other  Subsidiary that
     is not a Qualified Subsidiary;

          (d)  Dispositions  by any  Company  to  Borrower  or to any  Qualified
     Subsidiary or by any Subsidiary  that is not a Qualified  Subsidiary to any
     other Subsidiary that is not a Qualified Subsidiary;

          (e)  Dispositions of used, worn out,  obsolete or surplus  Property by
     any Company in the ordinary course of business; provided, however, that the
     proceeds  thereof  shall be  reinvested  in the business of Borrower or any
     Subsidiary within one year of such Disposition;

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          (f) sale or  discount,  in each case  without  recourse,  of  accounts
     receivable past due arising in the ordinary course of business, but only in
     connection with the compromise or collection  thereof;  provided,  however,
     that in no event may any Company enter into any factoring or securitization
     program with respect to receivables;

          (g) Borrower or any Subsidiary may effect any Disposition  (other than
     any  Disposition  of  Equity  Interests  in  Borrower  (other  than  Equity
     Interests acquired by Parent and duly pledged under the Security Agreement)
     or,  except as  permitted  by Section  9.06(q),  PR  Borrower or any direct
     parent  thereof) for fair market value provided that (1) the aggregate book
     value of all  assets  subject to such  Dispositions  does not exceed at any
     time for all such Dispositions  since the  Effectiveness  Date for Borrower
     and the Subsidiaries in the aggregate 10% of total  consolidated  assets of
     the Borrower and the  Subsidiaries  immediately  prior to giving  effect to
     such  Disposition  and (2) the  assets and  operations  subject to all such
     Dispositions  consummated  in any fiscal year shall not have  accounted for
     more than 10% of Operating Cash Flow for the immediately  preceding  fiscal
     year;   provided  further,   however,   that  not  less  than  80%  of  the
     consideration  received in respect of such  Disposition  is paid in cash or
     cash  equivalents and the Net Available  Proceeds  therefrom are applied as
     specified in Section  2.10(a)(iv)  to prepay Loans or to be  reinvested  in
     other  property  usable or useful in the  business of the  Borrower and its
     Subsidiaries  (and if such Disposition is of or by a Qualified  Subsidiary,
     such  reinvestment  shall be made in an Obligor or shall be counted against
     and be subject to the limits set forth in  Sections  9.06 and 9.09);  it is
     expressly  understood that  dispositions that are part of swap transactions
     are permitted  under this Section  9.06(g)  subject to  satisfaction of the
     foregoing  requirements  and subject to the final paragraph of this Section
     9.06;

          (h)  Acquisitions  by Borrower or any  Qualified  Subsidiary of all or
     substantially  all  the  assets  of,  or  Equity  Interests  in  an  amount
     sufficient  to make such Person a Wholly Owned  Subsidiary  in, a Person or
     division or business unit engaged in a line or lines of business  permitted
     by Section 9.05 if, immediately after giving effect thereto:

          (i) no Default then exists or would result therefrom;

          (ii) after  giving pro forma  effect in  accordance  with GAAP to such
     Acquisition,  Borrower shall be in compliance  with all covenants set forth
     in Section 9.11 as of the Test Date  immediately  prior to the consummation
     thereof (assuming, for purposes of Section 9.11, that such Acquisition, and
     all other  Permitted  Acquisitions  consummated  since the first day of the
     relevant  measurement  period  for each  financial  covenant  set  forth in
     Section  9.11  ending  on or  prior to the  date of such  Acquisition,  had
     occurred on the first day of such relevant measurement period) and, if such
     Acquisition  involves  aggregate  Acquisition  Consideration  and projected
     Investments in an amount  greater than $50.0  million,  Borrower shall have
     delivered to Co-Syndication  Agents,  Administrative  Agent and the Lenders
     not later  than  three  Business  Days  prior to the  consummation  of such
     Acquisition  an  Officers'  Certificate  certifying  that such  Acquisition
     complies  with this  Section  9.06(h)  (which shall have  attached  thereto
     backup data and calculations  showing such compliance in such detail as the
     Co-Syndication  Agents and the  Administrative  Agent may from time to time
     reasonably request);

          (iii) the Properties  acquired in connection with any such Acquisition
     shall be free and clear of any Liens, other than Permitted Liens;

          (iv) the board of  directors  of the  acquired  Person  shall not have
     indicated  privately at the time of  consummation of the Acquisition to any
     Company or publicly its opposition to the consummation of such Acquisition;

          (v) such Acquisition shall be effected through Borrower or a Qualified
     Subsidiary  and the  Person  or  business  acquired  shall  at the  time of
     consummation of such Acquisition be merged or combined or consolidated with
     or into a  Qualified  Subsidiary  or shall  be at the time of  consummation
     thereof a Qualified  Subsidiary  and all actions  required to be taken with
     respect to any assets or Person acquired in such acquisition under Sections
     9.12 and 9.20 shall have been taken;

          (vi) prior to the completion of any such Acquisition,  Borrower shall,
     and shall cause its Subsidiaries to, obtain material approvals and consents

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     of all Governmental  Authorities and all material consents of other Persons
     (including  without  limitation  the  FCC  and  each  other  Communications
     Regulatory  Authority),  in each case that are  necessary  or  advisable in
     connection with the transfer of any Licenses and the continued operation of
     the System or business being acquired in substantially  the manner proposed
     to be conducted following the consummation of such Acquisition; and

          (vii)  contemporaneously  with  or as soon as  practicable  after  the
     completion of any such  Acquisition,  Borrower  shall,  and shall cause its
     Subsidiaries to, transfer to a License  Subsidiary any Licenses acquired in
     connection with such Acquisition  (other than Licenses on which the Lenders
     shall have an  enforceable  first  priority  perfected Lien and on which no
     other  Person  shall  have  any  Lien);  it is  expressly  understood  that
     Acquisitions  that are part of swap  transactions  are permitted under this
     Section 9.06(h) subject to the  satisfaction of the foregoing  requirements
     with respect to such Acquisition and subject to the final paragraph of this
     Section 9.06;

          (i) the  Acquisition  of the Puerto  Rico cable  television  assets of
     Pegasus Communications Corp. on substantially the terms contemplated by the
     Information  Memorandum  for  aggregate  Acquisition  Consideration  not to
     exceed $180.0 million;

          (j) transfers resulting from any casualty or condemnation of Property;

          (k) licenses or sublicenses by any Company of software, trademarks and
     other intellectual property and general intangible and leases,  licenses or
     subleases of other property in the ordinary course of business and which do
     not materially interfere with the business of any Company;

          (l) any consignment  arrangements or similar arrangements for the sale
     of assets in the ordinary course of business of any Company;

          (m)  the  liquidation  in  the  ordinary  course  of  business  of (A)
     Permitted   Investments  and  (B)  Investments  made  pursuant  to  Section
     9.09(A)(a);

          (n) the Acquisition of All America Cables and Radio,  Inc. and related
     assets  on  substantially   the  terms   contemplated  by  the  Information
     Memorandum  for  aggregate  Acquisition  Consideration  not to exceed $30.0
     million  plus  assumed  Indebtedness  that is in  compliance  with the last
     paragraph of Section 9.08;

          (o)   Acquisitions  or  investments  in  joint  ventures  or  Minority
     Interests not otherwise  permitted hereunder by Borrower or any Subsidiary;
     provided, however, that (1) the sole consideration provided therefor by any
     Company  consists of (A) common Equity  Interests of Parent or the proceeds
     of any common  Equity  Interests  of Parent  and/or  (B) other  Acquisition
     Consideration  and Investments in an aggregate  amount for such Acquisition
     or Investment  that when taken  together  with the aggregate  amount of the
     Acquisition   Consideration   for  all  the   Acquisitions  and  investment
     consideration  for all Investments  consummated  under this Section 9.06(o)
     and the aggregate amount of all Investments  made under Section  9.09(A)(m)
     since the Effectiveness  Date shall not exceed (net of return of capital of
     (but not  return  on) any such  Acquisition  Consideration  or  Investment)
     $250.0  million,  provided  that the aggregate  amount of such  Acquisition
     Consideration and Investments as of any date after the first anniversary of
     the  Effectiveness  Date shall not exceed the lesser of (i) $250.0  million
     and (ii) an amount  equal to the sum of (I)  $125.0  million  plus (II) the
     aggregate  amount  of  such  Acquisition   Consideration   and  Investments
     outstanding as of such first  anniversary of the  Effectiveness  Date, plus
     (III) the aggregate  amount of Acquisition  Consideration  and  Investments
     that the Borrower or any  Subsidiaries  are  obligated to pay or make after
     such first anniversary pursuant to contractual commitments to third parties
     existing on such first  anniversary  that were entered  into in  connection
     with an  Acquisition or Investment  partially  effected prior to such first
     anniversary  (provided  that the amount  referred to in this  clause  (III)
     shall only be available to make such  Acquisitions or Investments  pursuant
     to such  commitments),  in each case net of return of  capital  of (but not
     return on) any such Acquisition Consideration and Investments, and (2) such
     Acquisition shall comply with each of clauses (i), (ii),  (iii),  (iv), and
     (vi) of Section 9.06(h) (with  references  therein to Section 9.06(h) being
     deemed  references to this Section  9.06(o)) and Section 9.20; and provided
     further that (x) in the event that after any  Acquisition  of or Investment

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     in any such  Subsidiary or Person all the  requirements  of Section 9.06(h)
     shall have been satisfied for such  Subsidiary or Person,  compliance  with
     the  limits set forth in this  Section  9.06(o)  and in Section  9.09(A)(m)
     shall be determined without including any Acquisition  Consideration for or
     Investment in such Person or Subsidiary previously made in reliance on this
     Section 9.06(o) or Section  9.09(A)(m) and (y) the aggregate amount of such
     Acquisition  Consideration and Investments outstanding at any time that are
     attributable  to Minority  Investments  shall not exceed $50.0 million,  in
     each  case  net of  return  of  capital  of (but  not  return  on) any such
     Acquisition Consideration and Investments;  it is expressly understood that
     acquisitions  or  investments  that  are  part  of  swap  transactions  are
     permitted  under this Section  9.06(o)  subject to the  satisfaction of the
     foregoing  requirements  with respect to such acquisition or investment and
     subject to the final paragraph of this Section 9.06;

          (p) Sale and Leaseback Transactions permitted by Section 9.08(o);

          (q)  Borrower  and the  Subsidiaries  may  effect  the sale of  Equity
     Interests  of PR Borrower or  Centennial  Caribbean  Holding  Corp.  in any
     public  offering  of  shares so long as (1) after  giving  effect  thereto,
     Borrower  owns  directly  or  indirectly  not less  than 80% of the  Equity
     Interests  then  outstanding  in such  Subsidiary and (2) the Net Available
     Proceeds thereof are applied as required by Section 2.10(a)(iv); and

         (r)  any Investment expressly permitted under Section 9.09.

For  purposes  of  clarification,  the lease of cell sites  owned by any Company
shall not be prohibited  hereunder.  Subject to Section 12.04, to the extent the
Majority  Lenders waive the  provisions of this Section 9.06 with respect to the
sale or other  disposition of any  Collateral or property,  or any Collateral or
property is sold or  otherwise  disposed of as  permitted  by this  Section 9.06
(other than to any Obligor),  (x) such  Collateral in each case shall be sold or
otherwise  disposed  of free and  clear of the  Liens  created  by the  Security
Documents and Administrative Agent shall take such actions as are appropriate in
connection  therewith and (y) in the event that the  Collateral or property sold
or disposed of consists of all the Equity Interests of a Subsidiary owned by the
Companies,  such Subsidiary shall be released from all its obligations under the
Credit  Documents  and the  Administrative  Agent shall take such actions as are
appropriate in connection therewith.

For  purposes  of   clarification,   it  is  understood  and  agreed  that  swap
transactions in which the Companies acquire or dispose of Subsidiaries and other
interests are permitted  within the  requirements  of this Section 9.06 and that
the following rules shall apply to swap transactions for purposes of determining
compliance with the above provisions:

          (i) if the  acquired  swapped  business  or  businesses  or  interests
     constitute a Permitted Acquisition under Section 9.06(h), the book value of
     the assets  disposed of for  purposes of Section  9.06(g) in respect of the
     Disposition shall be deemed to consist solely of the assets received by the
     Companies other than such acquired swapped businesses or interests; and

          (ii) if the acquired  swapped  business or  businesses or interests do
     not  constitute a Permitted  Acquisition  under  Section  9.06(h),  (A) the
     Acquisition Consideration therefor for purposes of Section 9.06(o) shall be
     deemed to be the fair market  value of all the  consideration  given by the
     Companies less any part of such consideration consisting of a Non-Qualified
     Subsidiary or Minority  Interest or the assets  thereof and less the amount
     of any cash  consideration  received by the Companies in such swap and less
     the fair  market  value  of all  other  assets  (other  than  Non-Qualified
     Subsidiaries,  Minority Interests and Equity Interests therein) received by
     the Companies in such swap that will be owned by an Obligor and  constitute
     Collateral and (B) the book value of the assets disposed of for purposes of
     Section  9.06(g) in respect of the  Disposition  shall be deemed to consist
     solely of the assets  received by the  Companies,  other than such acquired
     swapped businesses or interests,  plus the fair market value of any part of
     such  swapped   business  or  businesses  or  interests   consisting  of  a
     Non-Qualified Subsidiary or Minority Interest or the assets thereof.

     9.07.  Limitation on Liens and Negative Pledges. No Company shall, directly
or indirectly,  create,  incur,  assume or suffer to exist any Lien upon or with

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respect to any of their  respective  Property,  whether  now owned or  hereafter
acquired,  except, with respect to Collateral,  for Liens expressly permitted by
the  applicable  Security  Document  and  except for the  following  (so long as
complying  with the Parent  Financing  Documents,  the Parent  Refinanced  Notes
Documents,  the Senior  Subordinated Notes Financing  Documents,  the Additional
Senior  Subordinated  Notes  Documents  (and any  Permitted  Refinancing  of any
thereof)  from time to time in effect  (if then in  effect)),  which are  herein
collectively referred to as "Permitted Liens":

          (a)  Liens   (including   any  Prior   Liens)  in   existence  on  the
     Effectiveness Date and identified in Schedule 9.07;

          (b) Liens imposed by any Governmental Authority for taxes, assessments
     or charges  (other than any de minimis  taxes,  assessments or charges) not
     yet due or which  are being  contested  in good  faith  and by  appropriate
     proceedings if adequate reserves with respect thereto are maintained on the
     books of the Companies, in accordance with GAAP;

          (c) Liens imposed by law which were incurred in the ordinary course of
     business,  such as carriers',  warehousemen's,  landlords'  and  mechanics'
     Liens and other similar  Liens arising in the ordinary  course of business,
     including in connection  with the buildout and  development of Systems,  in
     each case for sums the payment of which is not required by Section 9.03;

          (d)  pledges or deposits  under  workers'  compensation,  unemployment
     insurance  and other social  security  legislation  (including  the Federal
     Employer's  Liability  Act)  or the  deposits  securing  the  liability  to
     insurance  carriers,  in  each  case  arising  in the  ordinary  course  of
     business;

          (e)  pledges or  deposits  to secure the  performance  of bids,  trade
     contracts (other than for borrowed money),  leases,  statutory obligations,
     surety and appeal bonds,  performance bonds and other obligations of a like
     nature  incurred in the ordinary course of business under insurance or self
     insurance agreements;

          (f)  easements,  rights-of-way,   restrictions  or  minor  defects  or
     irregularities  in title imposed by law or incurred in the ordinary  course
     of business and encumbrances consisting of zoning restrictions,  easements,
     licenses,  restrictions on the use of Real Property or minor  imperfections
     in title thereto which, in the aggregate,  are not material in amount,  and
     which  do not in any case  materially  detract  from the  value of the Real
     Property  subject  thereto or interfere  with the  ordinary  conduct of the
     business of any Company;

          (g) Liens  upon  Property  acquired  after the  Effectiveness  Date by
     Borrower or any Subsidiary, which Liens either (A) existed on such Property
     before the time of its  acquisition  and were not  created in  anticipation
     thereof,   or  (B)  were  created   solely  for  the  purpose  of  securing
     Indebtedness representing, or incurred to finance or refinance, the cost of
     such Property or improvements thereon; provided,  however, that (1) no such
     Lien shall  extend to or cover any  Property of any Company  other than the
     Property so acquired and improvements thereon and proceeds thereof, and (2)
     the principal  amount of Indebtedness  secured by any such Lien shall at no
     time exceed 100% of the fair market  value of such  Property at the time it
     was acquired or constructed;

          (h) Liens  existing  on any  Property  of any  Person at the time such
     Property is acquired or such Person  becomes a  Subsidiary  or is merged or
     consolidated  with or into a Subsidiary  and, in each case,  not created in
     contemplation of or in connection with such event; provided,  however, that
     such Liens do not extend to any other Property of any Company;

          (i) Liens not otherwise  permitted  hereunder (on Property  other than
     the  Collateral)  securing  obligations  of any  Company  at any  time  not
     exceeding in the aggregate $10.0 million;

          (j) Liens securing  obligations under Swap Contracts with any Creditor
     to the extent such Swap  Contract  relates to the Loans and only so long as
     the Obligations are secured by the same collateral on at least a pari passu
     basis;

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          (k)  Liens  consisting  of  judgment  or  judicial   attachment  Liens
     (including  pre-judgment  attachment)  in existence less than 60 days after
     the entry  thereof or the  enforcement  of which is  effectively  stayed or
     payment of which is covered in full (subject to a customary  deductible) by
     insurance  or which do not  otherwise  result in an Event of Default  under
     Section 10(h) or (n);

          (l) Liens securing  obligations in respect of Capital Leases solely on
     Property (including  improvements thereto and the proceeds thereof) subject
     to such Capital Leases;

          (m) any  obligations  or duties  affecting  any of the Property of any
     Company  to any  municipality  or  public  authority  with  respect  to any
     franchise,  grant, license or permit which do not materially impair the use
     of such Property for the purposes for which it is held and  restrictions on
     the  transfer  of assets  imposed by the FCC or the  Communications  Act or
     other  regulatory  authorities in effect  generally on all Persons  subject
     thereto;

          (n) leases or subleases  granted to third Persons not  interfering  in
     any material respect with the business of any Company;

          (o) Liens  arising  from UCC  financing  statements  regarding  leases
     permitted by this Agreement;

          (p) any  interest  or title of a lessor or  sublessor  under any lease
     permitted by this Agreement;

          (q) Liens in favor of customs  and  revenue  authorities  arising as a
     matter of law to secure  payment of custom  duties in  connection  with the
     importation  of goods so long as such  Liens  attach  only to the  imported
     goods;

          (r) Liens arising out of consignment or similar  arrangements  for the
     sale of  goods  entered  into by any  Company  in the  ordinary  course  of
     business;

          (s) Liens  created  under  this  Agreement  and/or  the  other  Credit
     Documents;

          (t) Liens granted pursuant to the Senior  Subordinated  Notes Interest
     Escrow  Agreement  securing  the Senior  Subordinated  Notes as such Senior
     Subordinated  Notes Interest Escrow Agreement was in effect on the Original
     Closing Date and solely with respect to the Property  contemplated  thereby
     on the  Original  Closing Date and Liens  granted  pursuant to any interest
     escrow agreement  securing the Additional Senior  Subordinated Notes or the
     Parent  Refinanced  Notes so long as solely  covering  Property of the type
     contemplated by the Senior Subordinated Notes Interest Escrow Agreement;

          (u) Liens that are contractual rights of setoff;

          (v) Liens arising in connection  with buy/sell  agreements  related to
     Equity Interests of any Person that is not a Wholly Owned Subsidiary;

          (w) any Lien arising by operation of law pursuant to Section 107(l) of
     the Comprehensive Environmental Response, Compensation and Liability Act of
     1980, as amended, 42 U.S.C. 9607(l), for costs or damages which are not yet
     due (by virtue of a written demand for payment by a Governmental Authority)
     or which are being  contested in compliance  with the standard set forth in
     Section  9.03(iii);  provided that Borrower is in full  compliance with all
     obligations  hereunder  including  without  limitation  Sections  9.14  and
     12.03(b);  and  provided,  further,  that the liability of Borrower and the
     Subsidiaries  with  respect to the  matters  giving  rise to all such Liens
     shall not, in the reasonable estimate of Administrative  Agent, exceed $2.0
     million;

          (x) Liens disclosed in any title insurance policies delivered pursuant
     to Section 9.12 and permitted under Section 9.12(iii)(7); and

          (y) any extension, renewal or replacement of the foregoing;  provided,
     however,  that the Liens  permitted by this Section 9.07(y) shall not cover
     any additional  principal  amount of  Indebtedness  or Property (other than
     like Property substituted for Property covered by such Lien).

                                       73
<PAGE>

     Except with respect to (i) specific Property  encumbered pursuant to a Lien
permitted to be incurred  pursuant to this Section 9.07, (ii) specific  Property
to be sold pursuant to an executed  agreement  with respect to a Disposition  or
Excluded  Disposition  consummated  in  accordance  with this  Agreement,  (iii)
customary non-assignment clauses or (iv) Property the pledge of which is limited
by law, and except as  contemplated by the Security  Agreement,  no Company will
directly or indirectly,  enter into any agreement on or after the  Effectiveness
Date  prohibiting  or  restricting  in any manner  (directly or  indirectly  and
including  by way of covenant,  representation  or warranty or event of default)
the creation or assumption  of any Lien upon its Property to secure  obligations
under the Credit  Documents,  whether now owned or  hereafter  acquired,  except
pursuant  to the Credit  Documents,  the  Senior  Subordinated  Notes  Financing
Documents,  the  Additional  Senior  Subordinated  Notes  Documents,  the Parent
Refinanced Notes Documents and any Permitted Refinancing of any thereof (so long
as such Parent  Refinanced Notes Documents or any such Permitted  Refinancing is
not more restrictive in such regard than the Senior Subordinated Notes Financing
Documents as in effect on the Original  Closing  Date and  expressly  allows for
Liens securing the Obligations).

     For purposes of clarification, the lease of cell sites owned by any Company
shall not be prohibited hereunder.

     9.08. Prohibition on Disqualified Capital Stock; Limitation on Indebtedness
and Contingent  Obligations.  No Company shall  directly or indirectly  issue or
permit to be  outstanding  any  Disqualified  Capital  Stock.  No Company shall,
directly or indirectly,  incur any  Indebtedness  or any Contingent  Obligation,
except (each of which shall be given  independent  effect) for the following (so
long as complying with the Parent  Financing  Documents , the Parent  Refinanced
Notes  Documents  the Senior  Subordinated  Notes  Financing  Documents  and the
Additional Senior Subordinated Notes Documents (and any Permitted Refinancing of
any thereof) from time to time in effect (if then in effect)):

          (a) the Loans and the other  Obligations  (including  the  Guarantees)
     under the Credit Documents;

          (b) the Existing  Notes,  the Senior  Subordinated  Notes,  the Parent
     Subordinated Notes (but only so long as not a direct or indirect obligation
     of  Borrower  or  any  Subsidiary),   other   Indebtedness  and  Contingent
     Obligations  outstanding on the  Effectiveness  Date and listed in Schedule
     9.08 and  specified  on Schedule  9.08 as to remain  outstanding  after the
     Effectiveness Date (less the aggregate amount of any permanent  prepayments
     or repayments  thereof) and, in the case of the Senior  Subordinated Notes,
     the Parent  Subordinated Notes and any such Indebtedness listed on Schedule
     9.08, Permitted Refinancings thereof;

          (c)  Indebtedness  and  Contingent  Obligations  of  Borrower  or  any
     Subsidiary  owing  to  Borrower  or  any  Qualified  Subsidiary;  provided,
     however,  that  (1)  if  such  Indebtedness  is  owed  by  a  Non-Qualified
     Subsidiary  to any  Obligor,  such  Indebtedness  shall be  subject  to the
     limitations  set  forth  in  Section  9.09(A)(m),  (s) or (u) and (2)  such
     Indebtedness  and  Contingent  Obligations  shall not be held by any Person
     other than Borrower or a Qualified  Subsidiary and shall not be subordinate
     to any other Indebtedness or Contingent  Obligations or other obligation of
     the  obligor  unless  also  subordinated  to the  Loans  on  terms  no less
     favorable to the Lenders than that of any other creditor;

          (d) Contingent Obligations in respect of operating leases;

          (e)  Indebtedness and Contingent  Obligations  arising from honoring a
     check, draft or similar instrument against  insufficient  funds;  provided,
     however, that such Indebtedness is extinguished within two Business Days of
     its incurrence;

          (f)  Swap  Contracts  not  entered  into for any  speculative  purpose
     entered  into to protect  the  Obligors  against  fluctuations  in interest
     rates,  currency  exchange rates, or similar risks  (including any Interest
     Rate Protection Agreement entered into pursuant to Section 9.18);

          (g) Contingent  Obligations of Borrower or any Qualified Subsidiary in
     respect of Indebtedness or other  liabilities of Borrower or any Subsidiary
     to the extent that the existence of such  Indebtedness or other liabilities
     is not prohibited under this Agreement;

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<PAGE>

          (h) Contingent  Obligations in connection with Dispositions  permitted
     under Section 9.06,  arising in connection with  indemnification  and other
     agreements in respect of any contract relating to such Disposition,  not to
     exceed the  consideration  received  or to be  received  by Borrower or any
     Subsidiary (which  consideration  shall be deemed to exclude any obligation
     of any third Person  incurred in  connection  with the  acquisition  of the
     Property which is the subject of such  Disposition) in connection with such
     sale;

          (i) Subject to the final paragraph of this Section 9.08,  Indebtedness
     and  Contingent  Obligations  of Borrower and the  Subsidiaries  secured by
     Liens permitted under Section 9.07(g) or (l) (and  extensions,  renewals or
     replacements of such Liens pursuant to Section 9.07(y)) not exceeding $30.0
     million in the  aggregate  at any time  outstanding  for  Borrower  and the
     Subsidiaries collectively;

          (j) Subject to the final paragraph of this Section 9.08,  Indebtedness
     of a Person that  becomes a  Subsidiary  after the date  hereof;  provided,
     however,  that (1) such Indebtedness existed at the time such Person became
     a  Subsidiary  and was not created in  connection  with or in  anticipation
     thereof,  (2)  immediately  after giving effect to the  acquisition of such
     Person by Borrower no Default  shall have occurred and be  continuing,  and
     (3) the aggregate  amount of Indebtedness  outstanding at any time pursuant
     to this Section 9.08(j) shall not exceed (together with any Indebtedness of
     such  Person  that  refinances  such   Indebtedness,   provided  that  such
     refinancing  Indebtedness has a weighted average maturity greater than, and
     a principal  amount that does not exceed,  that of the  Indebtedness  being
     refinanced) $50.0 million for all Subsidiaries at any time;

          (k) Subject to the final paragraph of this Section 9.08,  Indebtedness
     and  Contingent  Obligations  incurred  by any Company not to exceed in the
     aggregate at any time  outstanding  $50.0  million in the aggregate for all
     Companies;

          (l)  Indebtedness of any Company to (including  obligations in respect
     of letters  of credit for the  benefit  of) any Person  providing  worker's
     compensation,  health,  disability or other employee  benefits or property,
     casualty or liability insurance to any Company;

          (m) Indebtedness or Contingent Obligation of any Company in respect of
     performance  bonds,  bid bonds,  appeal  bonds,  surety  bonds and  similar
     obligations  and trade  letters of  credit,  in each case  provided  in the
     ordinary  course of business,  including  those  incurred to secure health,
     safety and  environmental  obligations in the ordinary  course of business,
     and any extension,  renewal or refinancing thereof to the extent the amount
     of refinancing  Indebtedness or Contingent  Obligations is not greater than
     the amount of Indebtedness or Contingent Obligations being refinanced;

          (n) any  Additional  Senior  Subordinated  Notes  and  any  Contingent
     Obligation of any Obligor in respect thereof (which Contingent  Obligations
     shall be  subordinated  to the  Obligations  on customary  market terms for
     senior  subordinated  obligations  of debtors such as the  Companies and be
     subject  to  customary  release  provisions)  so long as at the time of the
     incurrence thereof and after giving pro forma effect thereto Borrower would
     be in compliance  with all Financial  Maintenance  Covenants and no Default
     has occurred and is  continuing  or would arise  therefrom,  and  Permitted
     Refinancings thereof;

          (o) Subject to the final paragraph of this Section 9.08, Capital Lease
     Obligations  incurred by Borrower  and the  Subsidiaries  in respect of any
     Sale and Leaseback  Transaction  not to exceed (x) with respect to any such
     transaction involving Borrower's or any of its Subsidiaries' towers, in the
     aggregate,  $20.0  million at any time,  or with the prior  approval of the
     terms  and  conditions  thereof  by  the   Administrative   Agent  and  the
     Co-Syndication  Agents,  $50.0 million at any time, and (y) with respect to
     other  assets,  in the  aggregate,  $50.0  million  at any time;  provided,
     however,  that  such  Sale and  Leaseback  Transaction  involves  a sale of
     Property by Borrower or a Subsidiary solely for cash consideration on terms
     not less favorable than would prevail in an  arm's-length  transaction  and
     (i)  except  in the  case of  obligations  under  clause  (x)  above,  such
     obligation  results from a financing  transaction  to acquire  Property and
     occurs within 270 days after the acquisition of such Property, (ii) results
     in an operating  lease not  involving  any Company,  or (iii)  results in a

                                       75
<PAGE>

     Capital  Lease  Obligation  or an  operating  lease  entered  into  for any
     purpose;  provided,  that  the  proceeds  of any such  Sale  and  Leaseback
     Transaction  in reliance upon this clause (iii) shall be deemed  subject to
     Section 2.10(a)(iv);

          (p) any Parent  Refinanced  Notes incurred solely to repay in full the
     Parent  Subordinated  Notes  Obligations  so  long  as at the  time  of the
     incurrence thereof the Parent  Subordinated Notes Obligations are repaid in
     full and  after  giving  pro  forma  effect  thereto  Borrower  would be in
     compliance  with all  Financial  Maintenance  Covenants and no Default then
     exists or would arise therefrom, and Permitted Refinancings thereof; and

          (q) Indebtedness or Contingent  Obligations  expressly permitted under
     Section 9.09 and not otherwise permitted under this Section 9.08.

     Notwithstanding  anything  to the  contrary in this  Agreement,  no License
Subsidiary shall incur any Indebtedness or Contingent  Obligation other than the
Guarantee and such obligations as are contemplated by the definition of "License
Subsidiary" or Section 9.05.

     All  intercompany  debt  shall be  unsecured  and  subordinate  in right of
payment (to the same extent as the subordination provisions set forth in Exhibit
B hereto) to the  Obligations.  Each  Obligor,  by its execution and delivery of
this  Agreement,  hereby  agrees to  subordinate  its right of payment under any
intercompany  debt  owed to it by  Borrower  or any  Subsidiary  to the full and
complete payment and performance of the Obligations.  No Obligor shall incur any
Subordinated  Debt or any Contingent  Obligation in respect of any  Subordinated
Debt unless otherwise  permitted by the foregoing  exceptions  listed as clauses
(a) through (r) above and unless such Subordinated Debt or Contingent Obligation
shall be  subordinated to the Obligations at least to the same extent and for so
long as such Subordinated Debt or the Subordinated Debt in respect of which such
Contingent Obligation is incurred is subordinated to such other Indebtedness. No
intercompany  debt may be  evidenced by any note or other  instrument  except as
expressly  required  hereby or in any case in which such note or instrument  has
been duly pledged under the Security Agreement.

     Notwithstanding any other provision of this Agreement, the aggregate amount
of  Indebtedness  and  Contingent  Obligations  that may be  outstanding  by the
Non-Qualified  Subsidiaries  at any time under  clauses (i),  (j),  (k), and (o)
above is $30.0 million.

     9.09.  Limitation on Investments;  Limitation on Creation of  Subsidiaries.
(A) No  Company  shall,  directly  or  indirectly,  make  or  permit  to  remain
outstanding any Investments, except for the following (so long as complying with
the  Parent  Financing  Documents,   the  Senior  Subordinated  Notes  Financing
Documents  and  the  Additional  Senior  Subordinated  Notes  Documents(and  any
Permitted  Refinancing  of any thereof)  from time to time in effect (if then in
effect)):

          (a) operating  deposit accounts and certificates of deposit with banks
     in the ordinary course of business;

          (b)  Permitted   Investments  and  Investments   that  were  Permitted
     Investments when made;

          (c) (i)  Investments  by any  Company  in  Borrower  or any  Qualified
     Subsidiary,  (ii) Investments  constituting  Permitted  Acquisitions  under
     Section  9.06(h)  or (i) in any  Subsidiary  if as a result  thereof  or in
     connection  therewith such  Subsidiary  becomes a Qualified  Subsidiary and
     (iii) Investments constituting Permitted Acquisitions under Section 9.06(n)
     or (o)  (provided  that no  Investment  will be permitted in respect of any
     Subsidiary  with respect to which  Borrower or PR Borrower has not complied
     with Section 9.20 and that no  Non-Qualified  Subsidiary may own any Equity
     Investment in any Qualified Subsidiary);

          (d) Investments  outstanding on the Effectiveness  Date and identified
     in Schedule 9.09 and any renewals, amendments and replacements thereof that
     do not increase the amount thereof;

          (e) Investments that constitute Indebtedness or Contingent Obligations
     permitted under Section 9.08;

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<PAGE>

          (f)  advances,  loans or  extensions  of credit by any  Company to (1)
     employees  of any Company in the  ordinary  course of  business;  provided,
     however,  that  the  aggregate  amount  of all  such  loans,  advances  and
     extensions  of credit  (other than  pursuant to clause (2) of this  Section
     9.09(A)(f))  shall not at any time  exceed in the  aggregate  $3.0  million
     (without  giving  effect to any  write-down  or write-off  thereof) and (2)
     employees of any Company in  connection  with stock option plans so long as
     (x) such loans do not  involve  cash  payments  by any  Company  and (y) no
     Company  incurs  any  obligations  at any time to  repurchase  the stock so
     purchased;

          (g) (i)  extensions of credit in the nature of accounts  receivable or
     notes receivable arising from the sale or lease of goods or services in the
     ordinary  course of  business  and (ii)  prepayments  and other  credits to
     suppliers made in the ordinary course of business;

          (h) pledges or  deposits in  connection  with  workers'  compensation,
     unemployment insurance and other social security or similar legislation;

          (i)  pledges or  deposits in  connection  with (i) the  non-delinquent
     performance  of bids,  trade  contracts  (other than for  borrowed  money),
     leases or statutory  obligations,  (ii) contingent obligations on surety or
     appeal bonds, and (iii) other non-delinquent  obligations of a like nature,
     in each case incurred in the ordinary course of business;

          (j) Investments  (including debt  obligations)  received in connection
     with the  bankruptcy  or  reorganization  of suppliers and customers and in
     settlement of delinquent obligations of, and other disputes with, customers
     and suppliers arising in the ordinary course of business;

          (k)  additional  Investments  in any  Non-Qualified  Subsidiary to the
     extent  that such  Investments  reflect an  increase  in the  stockholders'
     equity of such Subsidiary  resulting solely from retained  earnings of such
     Subsidiary;

          (l) Liens not prohibited by this Agreement;

          (m) Investments by any Company in any Non-Qualified  Subsidiary or any
     Minority  Interest or in any other Person so long as no Default  shall have
     occurred and be  continuing  or result from the making of such  Investment;
     provided,  however,  that (1) the aggregate  amount of all such Investments
     made since the  Effectiveness  Date shall not when taken  together with the
     aggregate amount of the Acquisition  Consideration for all the Acquisitions
     consummated under Section 9.06(o) since the Effectiveness  Date exceed (net
     of  return  of  capital  of  (but  not  return  on)  any  such  Acquisition
     Consideration  or Investment)  $250.0 million,  provided that the aggregate
     amount of such  Investments  and Acquisition  Consideration  as of any date
     after the first anniversary of the Effectiveness  Date shall not exceed the
     lesser of (i)  $250.0  million  and (ii) an amount  equal to the sum of (I)
     $125.0  million  plus  (II)  the  aggregate   amount  of  such  Acquisition
     Consideration and Investments outstanding as of such first anniversary date
     of the  Effectiveness  Date plus (III) the aggregate  amount of Acquisition
     Consideration  and Investments  that the Borrower or any  Subsidiaries  are
     obligated  to  pay  or  make  after  such  first  anniversary  pursuant  to
     contractual commitments to third parties existing on such first anniversary
     that were entered into in  connection  with an  Acquisition  or  Investment
     partially  effected  prior to such  first  anniversary  (provided  that the
     amount  referred to in this clause  (III) shall only be  available  to make
     such  Acquisitions or Investments  pursuant to such  commitments),  in each
     case, net of return of capital of (but not return on) any such  Acquisition
     Consideration  and Investments,  and (2) all such Investments  shall to the
     extent possible be evidenced by intercompany  notes, which shall be pledged
     to  Administrative  Agent pursuant to the Security  Agreement to the extent
     required by Section 9.20;  and provided  further that (x) in the event that
     after any Acquisition of or Investment in any such Subsidiary or Person all
     the  requirements  of Section  9.06(h)  shall have been  satisfied for such
     Subsidiary or Person,  compliance with the limits set forth in this Section
     9.09(A)(m) and Section  9.06(o) shall be determined  without  including any
     Acquisition  Consideration  for or  Investment in such Person or Subsidiary
     previously made in reliance on this Section  9.09(A)(m) or Section 9.06(o),
     and  (y)  the  aggregate   amount  of  such   Investments  and  Acquisition
     Consideration  outstanding  at any time that are  attributable  to Minority
     Investments shall not exceed $50.0 million,  in each case, net of return of
     capital  of (but not  return  on) any such  Acquisition  Consideration  and
     Investments;

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<PAGE>

          (n) Borrower or any  Subsidiary  may hold the Equity  Interests of any
     Subsidiary  existing  on the  Effectiveness  Date or  created  or  acquired
     thereafter  in accordance  with the  provisions  hereof and any  additional
     Equity Interests issued in exchange therefor or as a dividend thereon;

          (o)  Investments  consisting  of  prepayments  and  other  credits  to
     suppliers in the ordinary course of business;

          (p) Investments consisting of Permitted Acquisitions;

          (q) Investment in Minority Interests to the extent forming part of the
     assets  acquired  in a  Permitted  Acquisition  so long  as  such  Minority
     Interests do not comprise more than 20% of the  consolidated  assets of the
     entity acquired as set forth in the financial  statements  related thereto,
     provided  that the  aggregate  amount of such  Investments  made  after the
     Effectiveness Date does not exceed $50.0 million (net of return of (but not
     return  on)  capital)  when taken  together  with the  aggregate  amount of
     Investments  and  Acquisition  Consideration  outstanding at any time under
     Section   9.06(o)  or  9.09(A)(m)   that  are   attributable   to  Minority
     Investments;

          (r) Investments  (other than  Acquisitions) made with Equity Interests
     of Parent;

          (s)  Investments in All America Cables and Radio,  Inc. in addition to
     the Acquisition  Consideration  paid therefor in an aggregate amount not to
     exceed $140,000,000,  provided that all such Investments shall be evidenced
     by Intercompany Notes to the extent practicable,  which shall be pledged to
     Administrative Agent pursuant to the Security Agreement;

          (t) Investments  consisting of non-cash  consideration received in the
     form of notes,  securities or similar  obligations  in connection  with any
     permitted   Disposition,   provided  that  the  aggregate  amount  of  such
     Investments  made in  connection  with  Dispositions  other than those made
     under Section  9.06(g) and  outstanding  at any time shall not exceed $10.0
     million;

          (u) other Investments in an aggregate amount (net of return of capital
     of but not return on) not to exceed $5.0 million at any time; and

          (v) operating  contracts  between  Companies in the ordinary course of
     business that are not intended to be  Investments  and are not entered into
     on a basis that is systematically disadvantageous to the Obligors.

     (B) No  Company  shall,  directly  or  indirectly,  create or  acquire  any
Subsidiary  without the prior  written  consent of the Majority  Lenders,  which
consent shall not be  unreasonably  withheld;  provided,  however,  that (1) the
provisions  of this  Section  9.09(B)  shall not require the  Majority  Lenders'
consent for (I) the creation or acquisition  of direct or indirect  Wholly Owned
Subsidiaries  so long as Section 9.20 is complied  with at the time of formation
or  acquisition  thereof and (II) the creation or  acquisition of any Subsidiary
which  is not a  Wholly  Owned  Subsidiary  so  long as the  Investment  made in
connection  therewith  complies with Section 9.09(A) and so long as Section 9.20
is complied with at the time of formation or  acquisition  thereof;  and (2) all
Investments  in any  Subsidiary,  including in  connection  with the creation or
acquisition thereof, must comply with Section 9.09(A).

     9.10.  Limitation  on  Dividend  Payments.  No Company  shall,  directly or
indirectly, declare or make any Dividend Payment at any time, except:

          (a) any Subsidiary may declare and make Dividend  Payments to Borrower
     or any Subsidiary and to minority  interest  holders in such  Subsidiary if
     made on a pro  rata  basis  to all  holders  of  Equity  Interests  in such
     Subsidiary  at the same time except that no Qualified  Subsidiary  may make
     any Dividend Payment to any Non-Qualified Subsidiary;

          (b)   Dividend   Payments   on  the  date  of   consummation   of  the
     Reorganization  necessary to consummate the Transactions in accordance with
     the Transaction Documents;

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<PAGE>

          (c) so long as no Default  has  occurred  and is  continuing  or would
     arise  therefrom,  Borrower  may make  Dividend  Payments  to Parent if the
     proceeds  thereof are used at the time of such  Dividend  Payment by Parent
     (and Parent may use such Dividend Payments by Borrower as set forth below):

          (i) to pay  out-of-pocket  expenses,  for  administrative,  legal  and
     accounting  services  provided by third  parties  incurred in the  ordinary
     course of business for professional  services, or to pay franchise fees and
     similar costs;

          (ii) to pay taxes of the Companies as part of a consolidated, combined
     or unitary tax filing group or of the separate  operations  of Parent which
     are  actually  due and payable  arising  from the  ownership  of the Equity
     Interests  of  Borrower by Parent (not to exceed in any event the amount of
     tax that Borrower and the  Subsidiaries  would otherwise pay if not part of
     such filing group);

          (iii) to redeem  Equity  Interests  (other than  Disqualified  Capital
     Stock) held by current or former  employees or directors of any Company (or
     their  estates  or   beneficiaries   of  their  estates)  upon  the  death,
     disability, retirement or termination of employment or directorship, as the
     case may be, pursuant to any agreement in effect on the Effectiveness  Date
     as in effect on the Effectiveness  Date and pursuant to other agreements on
     substantially  similar  terms  entered into after the  Effectiveness  Date;
     provided,   however,   that  the  aggregate  cash  consideration  paid,  or
     distributions  made, pursuant to this clause (c)(iii) shall not exceed $5.0
     million in any fiscal year ending  after the  Effectiveness  Date (with any
     unused  portion  of  such  amount  being  available  for  use in  the  next
     succeeding  fiscal year),  except to the extent paid with the proceeds of a
     substantially contemporaneous issuance of Qualified Capital Stock of Parent
     (or any other direct or indirect parent of Borrower);

          (iv) to pay regularly  scheduled  interest  payments due on the Parent
     Subordinated Notes at the time of such Dividend Payment as set forth in the
     Parent Financing Documents;  provided,  however, any such Dividend Payments
     made  pursuant to this clause (iv) shall not exceed the  Minority  Interest
     Basket and shall not be made any earlier than the Business Day prior to the
     due date of such interest;

          (v) to the extent  regularly  scheduled  interest  payments due on the
     Parent Subordinated Notes are not satisfied by Dividend Payments allowed by
     clause (iv) of this Section  9.10(c),  if Borrower or any Subsidiary  shall
     have effected the Disposition of any Minority  Interest pursuant to Section
     9.06 (the "Sold Minority  Interests"),  to pay regularly scheduled interest
     payments due on the Parent Subordinated Notes; provided,  however, that (1)
     any such  Dividend  Payments  made  pursuant  to this  clause (v) shall not
     exceed  the sum of the  amounts  included  in the  definition  of  Minority
     Interest  Basket pursuant to clause (A) thereof in respect of all such Sold
     Minority  Interests for the twelve  months prior to each such  Disposition,
     (2) no such  Dividend may be paid unless at the time of the making  thereof
     Borrower could incur $1.00 of additional Indebtedness pursuant to the first
     paragraph  of  Section  4.11 of the  Senior  Subordinated  Notes  Indenture
     (without  giving  effect to any  waiver or  amendment  granted  in  respect
     thereof by the  holders of the Senior  Subordinated  Notes  unless  made in
     accordance  with  the  consent  of the  Majority  Lenders)  and (3) no such
     Dividend  Payment  shall be made any earlier than the Business Day prior to
     the due date of such interest; and

          (vi) to pay monitoring and management  fees permitted to be paid under
     Section 9.15(j); and

          (d) so long as no Default under Section 10(a), (d), (e), (f) or (g) or
     with respect to Section 9.11 has occurred and is  continuing or would arise
     therefrom,  Borrower  may  after the  Senior  Subordinated  Notes  Interest
     Trigger Date (with respect to the Additional Senior  Subordinated Notes (if
     issued by any parent of Borrower)) or the Parent  Refinanced  Notes Trigger
     Date (with respect to the Parent  Refinanced  Notes) make Dividend Payments
     to any direct or indirect  parent of Borrower  not earlier  than the second
     Business Day prior to the due date of any scheduled interest payment on the
     Additional Senior  Subordinated Notes or the Parent Refinanced Notes if the
     proceeds  thereof  are used at the time of such  Dividend  Payment  by such
     parent  to  pay,  on the  scheduled  semiannual  interest  payments  dates,
     interest accrued on the Additional Senior  Subordinated Notes or the Parent
     Refinanced Notes, as the case may be, subsequent to (1) with respect to the
     Additional  Senior   Subordinated  Notes,  the  Senior  Subordinated  Notes
     Interest  Trigger  Date (or such  later  date when the  interest  escrow in
     respect  thereof,  if any, has been  depleted)  and (2) with respect to the
     Parent Refinanced Notes, the Parent Refinanced Notes Interest Trigger Date.

                                       79
<PAGE>

          9.11. Financial Covenants.

          (a) Maximum Total Leverage Ratio.  The Total Leverage Ratio shall not,
     as of any Test Date during any period set forth in the table below,  exceed
     the ratio set forth opposite such period in the table below:

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

                                    Period                               Ratio
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         Effectiveness                                                9.00
         Date          -   5/31/00
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         6/1/00            -   8/31/00                                8.75
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         9/1/00            -   11/30/00                               8.50
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         12/1/00       -   2/28/01                                    8.00
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         3/1/01            -   5/31/01                                7.75
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         6/1/01            -   8/31/01                                7.25
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         9/1/01            -   11/30/01                               7.00
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         12/1/01       -   2/28/02                                    6.75
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         3/1/02            -   5/31/02                                6.50
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         6/1/02            -   8/31/02                                6.25
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         9/1/02            -   11/30/02                               6.00
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         12/1/02       -   2/28/03                                    5.75
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         3/1/03            -   5/31/03                                5.25
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         6/1/03            -   8/31/03                                5.00
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         9/1/03            -   11/30/03                               4.75
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         12/1/03 and thereafter                                       4.50
         -------------------------------------------------------- --------------

          (b) Maximum Senior  Leverage  Ratio.  The Senior  Leverage Ratio shall
     not,  as of any Test Date  during any period set forth in the table  below,
     exceed the ratio set forth opposite such period in the table below:

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

                                 Period                               Ratio
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         Effectiveness
         Date          -   5/31/00                                    7.00
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         6/1/00            -   8/31/00                                6.50
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         9/1/00            -   11/30/00                               6.25
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         12/1/00       -   2/28/01                                    6.00
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         3/1/01            -   5/31/01                                5.75
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         6/1/01            -   8/31/01                                5.50
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         9/1/01            -   11/30/01                               5.25
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         12/1/01       -   2/28/02                                    5.00
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         3/1/02            -   5/31/02                                4.75
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         6/1/02            -   8/31/02                                4.50
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         9/1/02            -   2/28/03                                4.25
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         3/1/03            -   5/31/03                                4.00
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         6/1/03            -   8/31/03                                3.75
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         9/1/03            -   2/29/04                                3.50
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

                                       80
<PAGE>

         3/1/04            -   5/31/04                                3.25
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         6/1/04 and thereafter                                        3.00
         -------------------------------------------------------- --------------

          (c) Minimum Interest Coverage Ratio. The Interest Coverage Ratio shall
     not, as of any Test Date during any period set forth in the table below, be
     less than the ratio set forth opposite such period in the table below:

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

                            Period                               Ratio
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         Effectiveness
         Date          -   5/31/01                                    1.35
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         6/1/01            -   8/31/01                                1.40
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         9/1/01            -   2/28/02                                1.45
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         3/1/02            -   8/31/02                                1.50
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         9/1/02            -   2/29/04                                1.75
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         3/1/04            -   2/28/05                                2.00
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         3/1/05            -   2/28/06                                2.25
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         3/1/06 and thereafter                                        2.50
         -------------------------------------------------------- --------------

          (d) Minimum Fixed Charge  Coverage  Ratio.  The Fixed Charge  Coverage
     Ratio  shall  not,  as of any Test Date  during any period set forth in the
     table below,  be less than the ratio set forth  opposite such period in the
     table below:

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

                                 Period                               Ratio
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         6/1/00 and thereafter                                        1.00
         -------------------------------------------------------- --------------

          (e) Minimum Pro Forma Debt Service  Coverage Ratio. The Pro Forma Debt
     Service Coverage Ratio shall not, as of any Test Date during any period set
     forth in the table below,  be less than the ratio set forth  opposite  such
     period in the table below:

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

                                 Period                               Ratio
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         12/1/00       -   5/31/01                                    1.10
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         6/1/01            -   5/31/02                                1.15
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         6/1/02            -   5/31/03                                1.20
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         6/1/03            -   5/31/04                                1.25
         -------------------------------------------------------- --------------
         -------------------------------------------------------- --------------

         6/1/04 and thereafter                                        1.30
         -------------------------------------------------------- --------------

          (f)  Limitation  on  Capital  Expenditures.  The  aggregate  amount of
     Capital  Expenditures  made by the  Companies in any period set forth below
     shall not exceed the amount set forth opposite such period below:

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

                             Period                              Amount
         ----------------------------------------------- -----------------------
         ----------------------------------------------- -----------------------

         Original Closing
         Date          -   11/30/99                          $135.0 million
         ----------------------------------------------- -----------------------
         ----------------------------------------------- -----------------------

         12/1/99       -   11/30/00                          $115.0 million
         ----------------------------------------------- -----------------------

                                       81
<PAGE>

; provided that to the extent Capital  Expenditures made in any period above are
less than the amount set forth above for such period,  such unused amount may be
carried forward to the succeeding  period set forth above;  and provided further
that additional Capital  Expenditures in an amount not to exceed $60,000,000 may
be made during the period  ending  November 30,  2000,  in  connection  with the
buildout of the business of All America Cables and Radio, Inc..

     9.12.  Pledge or Mortgage  of  Additional  Collateral.  In the case of each
Obligor, promptly, and in any event within 30 days, after the acquisition of any
Property of the type that would have constituted Collateral at the Effectiveness
Date  (including  the Equity  Interests of any Subsidiary  hereafter  created or
acquired) other than Real Property (the  "Additional  Collateral") and after the
creation or  acquisition of any  Subsidiary,  each Company shall take all action
reasonably  necessary  or  desirable  (to the  extent  permitted  by  applicable
Contractual  Obligations  existing on the Effectiveness Date), if any, including
the  execution  and  delivery of all such  agreements,  assignments,  documents,
registers and instruments (including amendments to the Credit Documents) and the
filing  of  appropriate  financing  statements  or  other  documents  under  the
provisions of the UCC or applicable  requirements of any Governmental  Authority
in each of the offices where such filing is necessary or  appropriate,  to grant
(in the reasonable judgment of Administrative  Agent or the Majority Lenders) to
Administrative  Agent, for the benefit of the Creditors,  a duly perfected first
priority  Lien on such  Property  pursuant  to  appropriate  Security  Documents
(subject to Permitted Liens); provided,  however, that (1) in no event shall any
Foreign  Subsidiary  be required to pledge  assets,  and (2) with respect to the
Equity  Interests  of  Subsidiaries,  Borrower,  PR  Borrower  and the  Domestic
Subsidiaries   need  only  pledge  65%  of  the  Equity   Interests  of  Foreign
Subsidiaries  and no Equity  Interests of any Subsidiary  that is both a Foreign
Subsidiary and not a direct Subsidiary of Borrower,  PR Borrower or any Domestic
Subsidiary need be pledged.

     In the event that, after the Effectiveness Date, any Obligor (including any
Subsidiary  created or acquired on or after the Effectiveness Date but excluding
any  Foreign  Subsidiary)  acquires or holds a fee  interest  with a fair market
value of $7.5 million or more in any Real  Property,  such Company  shall notify
Administrative  Agent and, if  requested by Majority  Lenders or  Administrative
Agent,  (i)  to the  extent  permitted  by  applicable  Contractual  Obligations
existing on the Effectiveness Date, take such actions and execute such documents
as  Administrative  Agent or the Majority  Lenders shall  reasonably  require to
confirm  the Lien of an existing  Mortgage,  if  applicable,  or to create a new
Mortgage on such  additional  Real  Property  and (ii) cause to be  delivered to
Administrative Agent, on behalf of the Creditors,  the documents and instruments
reasonably requested by Administrative Agent, including, without limitation, the
items set forth in Section  7.01 in  respect  of  Mortgaged  Real  Property.  If
reasonably requested by Administrative  Agent or the Majority Lenders,  Borrower
shall obtain at its sole expense and as soon as practicable but in any event not
later than 45 days after request therefor, Phase 1 environmental reports from an
environmental  engineering firm reasonably  acceptable to  Administrative  Agent
with  respect to any Real  Property  held by any Company if not  delivered on or
prior to the Effectiveness Date.

     With respect to each such Real  Property,  each such Company shall cause to
be delivered to Administrative Agent, on behalf of the Creditors,  the following
documents and  instruments (to the extent  permitted by Contractual  Obligations
existing on the Effectiveness Date):

          (i) a Mortgage  encumbering  each  Mortgaged Real Property in favor of
     Administrative  Agent,  for the  benefit  of the  Creditors,  in  form  for
     recording  in the  recording  office of each  jurisdiction  where each such
     Mortgaged Real Property is situated, together with such other documentation
     as shall be  required  to create a lien  under  applicable  law,  and other
     similar statements as are contemplated by counsel for Administrative  Agent
     and the  Lenders,  all of which shall be in form and  substance  reasonably
     satisfactory to Administrative  Agent, which Mortgage and other instruments
     shall be effective to create a first  priority Lien on such  Mortgaged Real
     Property  subject to no Liens  other than Prior  Liens  applicable  to such
     Mortgaged Real Property;

          (ii) with respect to each Mortgaged Real Property, such consents, lien
     waivers,  approvals,  estoppels,  tenant subordination  agreements or other
     instruments  as  necessary  or as shall be  reasonably  deemed  required by
     Administrative Agent to consummate the transactions  contemplated hereby or
     to grant the Lien contemplated by the Mortgage; and

                                       82
<PAGE>

          (iii)  to the  extent  requested  by  the  Administrative  Agent,  the
     following documents and instruments:

          (1) with  respect to each  Mortgaged  Real  Property,  if  required to
     obtain the title  insurance  coverage (if any)  required by  Administrative
     Agent, a Survey;

          (2)  with  respect  to  each  Mortgaged  Real  Property,  policies  or
     certificates of insurance as reasonably  required by the Mortgage  relating
     thereto;

          (3) with respect to each Mortgaged Real  Property,  judgment,  tax and
     other lien searches in form and substance  satisfactory  to  Administrative
     Agent;

          (4) evidence acceptable to Administrative Agent of payment by Borrower
     of all title insurance  premiums (if any), search and examination  charges,
     survey costs, mortgage recording taxes and related charges required for the
     recording of the Mortgages and issuance of the title insurance policies (if
     any) referred to in this Section 9.12;

          (5) with  respect to each Real  Property or Mortgaged  Real  Property,
     copies of all material  leases in which any Company holds the landlord's or
     the tenant's  interest,  each of which shall be  reasonably  acceptable  to
     Administrative Agent;

          (6)  with  respect  to each  Mortgaged  Real  Property,  an  Officer's
     Certificate that as of the date thereof there (a) has been issued and is in
     effect, to the extent required, a valid and proper certificate of occupancy
     of local or foreign equivalent (if any) for the use then being made of such
     Mortgaged Real Property, (b) has not occurred any uncured material Casualty
     Event of any Mortgaged  Real Property and (c) except as may be disclosed in
     the Survey of such Mortgaged Real Property  delivered pursuant to subclause
     (iii)(1) of this Section  9.12 above,  are no material  disputes  regarding
     boundary lines, location, encroachment or possession of such Mortgaged Real
     Property and no state of facts existing which could  reasonably be expected
     to give rise to any such claim;

          (7) if required by Administrative  Agent or Majority Lenders, a policy
     (or  commitment  to  issue  a  policy)  of  title  insurance  insuring  (or
     committing to insure) the Lien of such  Mortgage as a valid first  priority
     Lien on the real property and fixtures described therein in such amount not
     to exceed 100% of the fair market value thereof as Administrative Agent may
     reasonably  require which policy (or commitment) shall (a) be issued by the
     Title   Company  or  another   title   insurance   company   acceptable  to
     Administrative  Agent,  (b) include  such  reinsurance  arrangements  (with
     provisions  for  direct  access)  as  shall  be  reasonably  acceptable  to
     Administrative  Agent, (c) have been  supplemented by such endorsements (or
     where such  endorsements are not available,  opinions of special counsel or
     other  professionals  acceptable  to  Administrative  Agent)  as  shall  be
     reasonably  requested by Administrative  Agent, (d) include such affidavits
     and  instruments  of   indemnifications  by  Borrower  and  the  applicable
     Subsidiary as shall be reasonably  required to induce such title  insurance
     company to issue the policy or policies (or  commitment)  and  endorsements
     contemplated  in this paragraph (7), and (e) contain no exceptions to title
     other than exceptions for Prior Liens; and

          (8) with respect to each Mortgaged Real Property, all such other items
     as shall be  necessary in the opinion of counsel to the Lenders to create a
     valid perfected first priority mortgage in such Mortgaged Real Property.

     The costs of all actions taken by the parties in connection with the pledge
of  Additional  Collateral  or  in  connection  with  any  Mortgage,   including
reasonable  costs of  counsel  for  Administrative  Agent,  shall be paid by the
Obligors promptly following written demand.

     9.13. Security Interests; Further Assurances. Each Company shall, promptly,
upon the reasonable request of Administrative Agent or any Lender, at Borrower's
expense,   execute,   acknowledge   and   deliver,   or  cause  the   execution,
acknowledgment  and delivery of, and  thereafter  register,  file or record,  or
cause  to be  registered,  filed or  recorded,  in an  appropriate  governmental
office,  any  document or  instrument  supplemental  to or  confirmatory  of the
Security  Documents  or  otherwise  deemed by  Administrative  Agent  reasonably
necessary or desirable for the continued  validity,  perfection  and priority of

                                       83
<PAGE>

the Liens on the Collateral covered thereby, or obtain any consents,  including,
without  limitation,  landlord or similar lien waivers and  consents,  as may be
necessary or appropriate in connection therewith.

     Each Company shall deliver or cause to be delivered to Administrative Agent
from time to time such other documentation, consents, authorizations,  approvals
and orders in form and substance reasonably satisfactory to Administrative Agent
as  Administrative  Agent shall reasonably deem necessary to perfect or maintain
the Liens on the Collateral.

     Upon the  exercise  by  Administrative  Agent or the  Lenders of any power,
right,  privilege or remedy  pursuant to any Credit  Document which requires any
consent,   approval,   registration,   qualification  or  authorization  of  any
Governmental Authority, each Company shall execute and deliver all applications,
certifications,  instruments and other documents and papers that  Administrative
Agent or the Lenders may be so required to obtain.

     9.14.  Compliance  with  Environmental  Laws. (a) Each Company shall comply
with all Environmental Laws, and will keep or cause all Real Property to be kept
free of any Liens under  Environmental  Laws,  unless failure to do so could not
reasonably be expected to have a Material  Adverse  Effect or subject any Agent,
Lender or Issuing  Lender to any material risk of damages or  liability;  (b) in
the event of the presence of any  Hazardous  Material at, on, under or emanating
from any Real Property which would reasonably be expected to result in liability
under  or a  violation  of any  Environmental  Law,  in each  case  which  could
reasonably  be expected to have a Material  Adverse  Effect,  each Company shall
undertake,  and/or  cause  any of  their  respective  tenants  or  occupants  to
undertake,  at their sole expense, any action required pursuant to Environmental
Laws to mitigate and eliminate such presence; provided, however, that no Company
shall be required to comply with any order or directive which is being contested
in good faith and by proper  proceedings so long as it has  maintained  adequate
reserves with respect to such  compliance  to the extent  required in accordance
with GAAP; (c) each Company shall promptly  notify  Administrative  Agent of the
occurrence  of any event  specified in clause (b) of this Section 9.14 and shall
periodically  thereafter  keep  Administrative  Agent  informed of any  material
actions taken in response to such event and the results of such actions; and (d)
at the  written  request  of  Administrative  Agent at any time and from time to
time,  such Obligor will provide,  at such Obligor's  sole cost and expense,  an
environmental site assessment (including, without limitation, the results of any
groundwater or other  testing,  conducted if  Administrative  Agent directs that
such testing be conducted)  concerning any Real Property now or hereafter owned,
leased or operated by any Company, conducted by an environmental consulting firm
proposed by such Obligor and approved by  Administrative  Agent  indicating  the
presence  or  absence  of  Hazardous  Materials  and the  potential  cost of any
required  investigation or other response or any corrective action in connection
with any Hazardous Materials on, at, under or emanating from such Real Property;
provided,  however, that such request may be made only if (a) there has occurred
and is  continuing  an Event of Default,  (b)  Administrative  Agent  reasonably
believes  that  any  Company  or any  such  Real  Property  is  not in  material
compliance with  Environmental  Law or (c)  circumstances  exist that reasonably
could be  expected  to form the basis of an  Environmental  Claim  against  such
Company or any such Real Property which would have a Material Adverse Effect. If
any  Obligor  fails to provide  the same  within 60 days after such  request was
made,  Administrative  Agent may but is under no obligation to conduct the same,
and such Obligor shall grant and hereby grants to  Administrative  Agent and its
agents access to such Real Property and specifically grants Administrative Agent
an  irrevocable  non-exclusive  license,  subject to the rights of  tenants,  to
undertake such an assessment, all at such Obligor's sole cost and expense.

     9.15.  Limitation  on  Transactions  with  Affiliates.  No  Company  shall,
directly  or  indirectly:   enter  into  or  permit  to  exist  any  transaction
(including,  without  limitation,  the purchase,  sale, lease or exchange of any
Property,  the rendering of any service, or a merger or consolidation),  with or
for the  benefit of any  Affiliate  (an  "Affiliate  Transaction")  unless  such
Affiliate  Transaction is (i) otherwise not prohibited  under this Agreement and
(ii) on fair and  reasonable  terms that are not less  favorable to such Company
than  those  that  are  reasonably  obtainable  at the  time in an  arm's-length
transaction with a Person that is not such an Affiliate; provided, however, that
the following  shall be permitted:  (a) Dividend  Payments  permitted by Section
9.10;  (b)  fees  and  compensation   paid  to,  and  customary   indemnity  and
reimbursement  provided on behalf of,  officers,  directors and employees of any
Company in the ordinary  course of business;  (c) loans or advances to employees
permitted  by  Section  9.09;  (d) so long as no Event  of  Default  shall  have

                                       84
<PAGE>

occurred and be  continuing,  transactions  and agreements  contemplated  by any
management agreements so long as the terms and conditions thereof are reasonably
satisfactory  to  Co-Syndication  Agents;  (e)  transactions  and  agreements in
existence  on the  Original  Closing  Date and listed in Schedule  9.15 (as such
agreements were in effect on the Original Closing Date, the "Existing  Affiliate
Agreements") and the transactions pursuant to the Existing Affiliate Agreements;
(f) any employment agreements entered into by any Company in the ordinary course
of business;  (g) any purchase by any  Permitted  Holder of Equity  Interests of
Parent  or any  purchase  by  Parent  of Equity  Interests  of  Borrower  or any
contribution  by Parent to the equity  capital of  Borrower,  provided  that any
Equity   Interests  of  Borrower   purchased  by  Parent  shall  be  pledged  to
Administrative  Agent  on  behalf  of  the  Lenders  pursuant  to  the  Security
Documents; (h) transactions in which Borrower delivers to Co-Syndication Agents,
Administrative  Agent and the  Lenders a letter  from an  independent  financial
advisor  acceptable  to  Co-Syndication  Agents,  Administrative  Agent  and the
Majority  Lenders  stating that such  transaction is fair to such Company from a
financial point of view; (i) the existence of, or the performance by any Company
of its obligations  under the terms of, the Merger  Agreement,  or any agreement
contemplated thereunder (including any registration rights agreement or purchase
agreement  related  thereto) to which it was a party as of the Original  Closing
Date and any similar  agreements which it may enter into  thereafter;  provided,
however,  that the  existence  of, or the  performance  by any such  Company  of
obligations  under any future amendment to any such existing  agreement or under
any similar agreement entered into after the Original Closing Date shall only be
permitted by this clause (i) to the extent that the terms of any such  amendment
or new  agreement  are  not  otherwise  disadvantageous  to the  Lenders  in any
material respect;  (j) so long as no Event of Default shall have occurred and be
continuing,  payment of  monitoring or management or similar fees payable to the
Principal  Investors and their  Affiliates in an aggregate  amount in any fiscal
year not in excess of $1.0  million  (plus  reasonable  expenses  in  connection
therewith);  (k) so long as no Event  of  Default  shall  have  occurred  and be
continuing payments by Parent,  Borrower or any of their respective Subsidiaries
to any Permitted Holder made for any financial advisory, financing, underwriting
or  placement  services or in respect of other  investment  banking  activities,
including,  without limitation, in connection with acquisitions or divestitures,
which payments are approved by a majority of the board of directors of Parent in
good faith; and (l) the Transactions.

     9.16.  Limitation on Accounting  Changes;  Limitation on Investment Company
Status. No Company shall make or permit any change in (i) accounting policies or
reporting  practices,  except  immaterial  changes  and  except as  required  by
generally accepted accounting  principles or (ii) its fiscal year end (May 31 of
each year).  No Obligor shall be or become an investment  company subject to the
registration  requirements  under the United  States  Investment  Company Act of
1940, as amended.

     9.17.  Limitation on  Modifications of Certain  Documents,  Etc. No Company
shall, directly or indirectly, consent to any modification, supplement or waiver
of, or amend, in any manner which could  reasonably be expected to be materially
adverse to the  Lenders,  any of the  provisions  of any  Organic  Document.  No
material change that could reasonably be expected to be adverse to the Creditors
may be made to the Merger Agreement,  any Supplemental  Indenture, or any of the
Marketing  Agreements,  Century  M-L  Consent and  Agreement  or the  Facilities
Agreement.

     9.18.  Interest Rate Protection  Agreements.  Borrower shall obtain,  on or
within  90 days  after the  Original  Closing  Date,  Interest  Rate  Protection
Agreements  having  terms and with  counterparties  reasonably  satisfactory  to
Co-Syndication  Agents as shall result in effectively limiting the interest cost
to the  Companies  of at least  50% of the  aggregate  principal  amount of then
outstanding  Total Debt of the  Companies  for a period of at least  three years
from the date the Initial Interest Rate Protection Agreements were obtained.

     9.19. Limitation on Certain Restrictions Affecting Subsidiaries. No Company
shall,  directly or indirectly,  create or otherwise cause or suffer to exist or
become  effective  any direct or  indirect  encumbrance  or  restriction  on the
ability of any  Subsidiary to (a) pay dividends or make any other  distributions
on such Subsidiary's  Equity Interests or any other interest or participation in
its  profits  owned  by  any  Company,  or pay  any  Indebtedness  or any  other
obligation owed to any Company,  (b) make  Investments in or to any Company,  or
(c)  transfer  any of its  Property  to any  Company.  The  foregoing  shall not
prohibit (i) any such  encumbrances or restrictions  existing under or by reason
of (x) applicable law, (y) the Credit  Documents or (z) the Senior  Subordinated

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Notes  Financing  Documents  as in  effect on the  Original  Closing  Date,  the
Additional  Senior  Subordinated  Notes Documents,  the Parent  Refinanced Notes
Documents,  and  any  Permitted  Refinancing  of any  thereof  so  long  as such
restriction in such Additional Senior  Subordinated Notes Documents,  the Parent
Refinanced   Notes   Documents  or  such  Permitted   Refinancing  is  not  more
disadvantageous to the Creditors or Borrower than the Senior  Subordinated Notes
Financing Documents as in effect on the Original Closing Date, (ii) restrictions
on the transfer of assets subject to a Lien permitted under Section 9.07,  (iii)
customary  restrictions  on subletting  or  assignment of any lease  governing a
leasehold  interest of any  Company,  (iv)  restrictions  on the transfer of any
Property  subject  to a  Disposition  permitted  under  this  Agreement  and (v)
customary  restrictions  in  joint  venture  agreements  or  similar  agreements
relating to non-Wholly Owned Subsidiaries.

     9.20. Additional Obligors; Licenses To Be Held by License Subsidiaries. (A)
Upon any Company  creating or acquiring any  Subsidiary  (other than any Foreign
Subsidiary)  after the  Effectiveness  Date (each such  Subsidiary  referred  to
herein  as  an  "Additional   Obligor"  and   collectively  as  the  "Additional
Obligors"),  Borrower and PR Borrower shall (i) cause each such  Subsidiary that
is a Wholly  Owned  Subsidiary  to  execute  and  deliver  all such  agreements,
guarantees,  documents and certificates  (including any amendments to the Credit
Documents  and a Joinder  Agreement)  as  Administrative  Agent or the  Majority
Lenders  may   reasonably   request  and  do  such  other  acts  and  things  as
Administrative  Agent or the Majority Lenders may reasonably request in order to
have such  Subsidiary  guarantee the Obligations in accordance with the terms of
the Credit  Documents,  (ii)  promptly,  to the extent  permitted by Contractual
Obligations  existing  on the  Effectiveness  Date,  (I)  execute and deliver to
Administrative Agent such amendments to the Security Documents as Administrative
Agent deems  necessary or advisable in order to grant to  Administrative  Agent,
for the benefit of the Lenders,  a perfected first priority security interest in
the Equity  Interests and debt securities of such new Subsidiary which are owned
by Borrower,  PR Borrower or any Subsidiary and required to be pledged  pursuant
to the Security Agreement, (II) deliver to Administrative Agent the certificates
representing such Equity Interests and debt securities, together with (A) in the
case of such Equity  Interests,  undated stock powers endorsed in blank, and (B)
in the case of such debt  securities,  endorsed in blank,  in each case executed
and delivered by a Responsible  Officer of Borrower or such  Subsidiary,  as the
case may be, (III) to the extent permitted by Contractual  Obligations  existing
on the  Effectiveness  Date,  cause  such new  Subsidiary  to take such  actions
necessary or advisable to grant to  Administrative  Agent for the benefit of the
Creditors  a  perfected  first  priority  security  interest  in the  collateral
described  in the  Security  Agreement  with  respect  to such  new  Subsidiary,
including,  without limitation,  the filing of Uniform Commercial Code financing
statements in such jurisdictions as may be required by the Security Agreement or
by law or as may be reasonably  requested by  Administrative  Agent, and (IV) if
reasonably  requested by Administrative  Agent,  deliver to Administrative Agent
legal opinions relating to the matters described above,  which opinions shall be
in  form  and  substance,   and  from  counsel,   reasonably   satisfactory   to
Administrative  Agent.  All  Subsidiaries  operating  in  Puerto  Rico  will  be
organized  in a U.S.  jurisdiction  except to the extent that (x) a  substantial
minority partner or stockholder shall object thereto or (y) that would result in
material  adverse  tax  or  regulatory  consequences  to  the  Companies  or  as
contemplated  by the  next  sentence.  None of the  foregoing  actions  shall be
required  if such  action  would be a  violation  of  applicable  law or, in the
reasonable  judgment of Administrative  Agent in consultation with the Borrower,
the expense, tax or regulatory  consequences or difficulty of taking such action
would not, in light of the benefits  that would  accrue to the Lenders,  justify
taking such action.

     (B) The Obligors shall cause all Licenses (other than Licenses on which the
Lenders shall have an enforceable first priority  perfected Lien and on which no
other Person shall have any Lien) of any Company (other than  Subsidiaries  that
are not Wholly  Owned) to be held by one or more  License  Subsidiaries,  except
that if any Company shall acquire  (including by merger) any Person that holds a
License,  Borrower  shall  cause  such  License to be  transferred  to a License
Subsidiary  within  90 days of such  acquisition,  provided,  however,  that the
preceding  clause shall not apply to any  Certificate of  Territorial  Authority
issued by the State of Indiana, or any agency thereof, to any Company so long as
the Companies cannot comply with the preceding clause because any Requirement of
Laws of such  State or agency  would  prohibit  or impair the  operation  of the
business of such Company  pursuant to or in compliance with such  Certificate of
Territorial  Authority;  provided,  further that, if at any time compliance with
the aforementioned provision would no longer prohibit or impair the operation of
the business of such Company,  such Company shall theretofore  comply within 120
days of the date on which  such  Company  learned  that such  compliance  was no
longer  prohibited,  and provided further that such action shall not be required

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to be taken if it would be a violation of applicable  law or, in the  reasonable
judgment of Administrative Agent in consultation with the Borrower, the expense,
tax or regulatory consequences or difficulty of taking such action would not, in
light of the  benefits  that would accrue to the  Lenders,  justify  taking such
action.

     9.21.  Limitation  on  Activities  of Parent.  Parent shall not conduct any
business, incur any obligations (other than under the agreements relating to the
Merger  Agreement,  the Credit  Documents,  Parent Financing  Documents,  Senior
Subordinated Notes Financing Documents, the Additional Senior Subordinated Notes
Documents and the Parent  Refinanced Notes Documents,  as applicable) or hold or
acquire any assets (other than the Equity Interests of Borrower).

     9.22.  Limitation  on  Issuance  or  Dispositions  of Equity  Interests  of
Borrower and Subsidiaries.  Borrower shall not issue any of its Equity Interests
or Equity  Rights or permit  any Person to own any of its  Equity  Interests  or
Equity  Rights other than  Parent.  Parent  shall not,  directly or  indirectly,
effect any  Disposition  of any Equity  Interests or Equity  Rights of Borrower,
other than the pledge  thereof  pursuant to the  Security  Agreement.  Except as
permitted by Section  9.06(q),  neither Borrower nor any Subsidiary shall effect
the  Disposition  of any Equity  Interests of any  Subsidiary  unless all Equity
Interests in such Subsidiary  owned by Borrower and the Subsidiaries are sold in
accordance  with the Credit  Documents,  upon which sale the  Guarantee  by such
Subsidiary shall be automatically deemed to be released.

     9.23. Limitation on Payments or Prepayments of Indebtedness or Modification
of Debt Documents. No Company shall, directly or indirectly:

          (a) make any  payment or  prepayment  (optional  or  otherwise)  on or
     redemption  of or any  payments in  redemption,  defeasance  or  repurchase
     (whether in cash,  securities or other Property) of the Senior Subordinated
     Notes,  the Parent  Subordinated  Notes, any Existing Notes, any Additional
     Senior  Subordinated  Notes,  any Parent  Refinanced Notes or any Permitted
     Refinancing  of  any of  the  foregoing,  except  (1)  regularly  scheduled
     mandatory  payments  of  interest,  (2) the  conversion  or exchange of any
     Indebtedness into shares of common Equity Interests of Parent,  and (3) the
     exchange of Senior Subordinated Notes, Additional Senior Subordinated Notes
     or Parent  Refinanced  Notes for exchange  notes,  as  contemplated  by the
     respective definitions thereof;

          (b) amend, supplement, waive or otherwise modify any of the provisions
     of any Senior  Subordinated  Notes  Financing  Document,  Parent  Financing
     Documents, Additional Senior Subordinated Notes Document, Parent Refinanced
     Notes Document or any Existing  Indenture (or any Permitted  Refinancing of
     any thereof):

          (i)  which  shortens  the fixed  maturity,  or  increases  the rate or
     shortens the time of payment of interest or dividends  on, or increases the
     amount  or  shortens  the time of  payment  of any  principal,  liquidation
     preference  or premium  payable  whether at  maturity,  at a date fixed for
     prepayment  or by  acceleration  or  otherwise  of  such  Indebtedness,  or
     increases  the amount of, or  accelerates  the time of payment of, any fees
     payable in connection therewith;

          (ii) which relates to the affirmative or negative covenants, events of
     default,  redemption  or  repurchase  provisions,  or  remedies  under  the
     documents or instruments  evidencing  such  Indebtedness  and the effect of
     which is to subject  any  Company to any  materially  more  onerous or more
     restrictive provisions; or

          (iii) which effects and changes to the  subordination  provisions  (or
     related  definitions) therein or otherwise materially adversely affects the
     interests  of the  Creditors as senior  creditors  or the  interests of the
     Creditors under this Agreement or any other Credit Document in any respect;
     or

          (c)  effect  any  material  change in the  Senior  Subordinated  Notes
     Indenture in connection  with the Exchange  Offer or enter into an Exchange
     Indenture  which is  different  in any  material  respect  from the  Senior
     Subordinated  Notes Indenture in connection with the Exchange Offer in each
     case unless the terms thereof are  reasonably  acceptable to Agents and the
     Majority Lenders.

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     9.24.   Casualty   and   Condemnation.   Each   Company   will  furnish  to
Administrative  Agent and the Lenders  prompt  written notice of any casualty or
other  insured  damage  to  any  material  portion  of  the  Collateral  or  the
commencement of any action or proceeding for the taking of any material  portion
of the Collateral or any part thereof or interest therein under power of eminent
domain or by condemnation or similar proceeding.

     9.25. Limitation on Tax Sharing  Arrangements.  No Company shall enter into
or permit to exist any tax sharing agreement or similar  arrangement  unless the
same shall have been reviewed by, and consented to, by Agents.

     9.26. Limitation on Designation of Designated Senior Indebtedness. Borrower
shall not, nor shall it permit any Subsidiary to,  designate any Indebtedness or
other  obligation,  other  than  Indebtedness  under the  Credit  Documents,  as
"Designated  Senior  Indebtedness,"  as  such  term  is  defined  in the  Senior
Subordinated Notes Indenture, the Additional Senior Subordinated Notes Documents
or any Permitted Refinancing of any thereof, or any comparable  designation that
confers upon the holders of such Indebtedness or other obligation (or any Person
acting on their behalf) the right to initiate  blockage periods under the Senior
Subordinated Notes Indenture, the Additional Senior Subordinated Notes Documents
or any other  Indebtedness  or other  obligation of any Company.  Borrower shall
cause all the Indebtedness under the Credit Documents to constitute at all times
"Designated Senior  Indebtedness" under the Senior Subordinated Notes Indenture,
the Additional Senior Subordinated Notes Documents and any Permitted Refinancing
of any thereof.

     9.27.  No  Contractual  Bar. No Company shall enter into or permit to exist
any  Contractual  Obligation  that will prevent any Company from  complying with
Sections 9.12 or 9.20.

     9.28. Facilities Agreement. PR Borrower agrees to (i) request under Section
1 of the  Facilities  Agreement  to lease such  additional  capacity,  cable and
fibers on the Fiber  Network (as defined  therein) as may be  necessary,  in the
reasonable  commercial  judgment of PR  Borrower,  for the  operation  of the PR
Systems,  (ii)  notify  Agents of any failure of either  other party  thereto to
comply with its  obligations  thereunder in any material  respect and (iii) take
such action,  if any, as may be reasonably  requested by the Majority Lenders in
their reasonable  commercial judgment to enforce its rights and remedies against
such other party in respect of any such failure to comply with such  obligations
in any material respect provided that any such action shall not be prohibited by
law or by the Facilities Agreement.

     Section  10.  Events of  Default.  If one or more of the  following  events
(herein called "Events of Default") shall occur and be continuing:

          (a) (i) Borrower or PR Borrower  shall default in the payment when due
     (whether at stated maturity upon prepayment or repayment or acceleration or
     otherwise) of any  principal of any Loan or  Reimbursement  Obligation,  or
     (ii)  Borrower or PR  Borrower  shall  default in the  payment  when due of
     interest  on any  Loan or any  Reimbursement  Obligation  or any fee or any
     other amount  payable by it  hereunder  or under any other Credit  Document
     when due and such  default  under this  clause  (ii)  shall have  continued
     unremedied for three or more Business Days; or

          (b) Any Company shall default in the payment when due of any principal
     of  or  interest  on  any  of  its  Indebtedness  (other  than  the  Loans)
     aggregating  $15.0  million or more,  beyond  the period of grace,  if any,
     provided in the instrument or agreement under which such  Indebtedness  was
     created,  after giving effect to any consents or waivers  relating  thereto
     obtained  before the  expiration of any such period of grace;  or any event
     specified in any note, agreement, indenture or other document evidencing or
     relating to any Indebtedness  aggregating $15.0 million or more shall occur
     if the effect of such event (after giving effect to any consents or waivers
     relating  thereto  obtained  before the  expiration  of any such  period of
     grace) is to cause,  or (with the giving of notice if  required)  to permit
     the holder or holders of such Indebtedness (or a trustee or agent on behalf
     of such holder or holders) to cause, such Indebtedness to become due, or to
     be prepaid in full (whether by redemption,  purchase,  offer to purchase or
     otherwise), prior to its stated maturity; or

          (c) Any  representation  or warranty made or deemed made in any Credit
     Document (or in any  modification or supplement  thereto) by any Company or
     in any  certificate  furnished to any Creditor  pursuant to the  provisions

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     thereof,  shall prove to have been false or misleading as of the time made,
     deemed made or furnished in any material respect; or

          (d)  Any  Obligor  shall  default  in  the  performance  of any of its
     obligations  under any of Sections  9.01(f),  9.06 through 9.11, 9.15, 9.17
     through  9.24 or 9.26  through  9.28;  or  Borrower  shall  default  in the
     performance  of its  obligations  under  Section  9.01(e)  or (k) and  such
     default shall  continue  unremedied for at least five Business Days; or any
     Obligor shall default in the performance of any of its other obligations in
     this Agreement,  the Security  Documents or the Letter of Credit  Documents
     and such default shall continue  unremedied for a period of at least thirty
     days  after  written  notice  thereof  to  such  Obligor  and  Borrower  by
     Administrative Agent or the Majority Lenders; or

          (e) Any Company shall not, or shall admit in writing its inability to,
     or be generally unable to, pay its debts as such debts become due; or

          (f) Any Company shall (i) apply for or consent to the  appointment of,
     or  the  taking  of  possession  by,  a  receiver,  custodian,  trustee  or
     liquidator of itself or of all or a substantial part of its Property,  (ii)
     make a general assignment for the benefit of its creditors,  (iii) commence
     or consents to any Insolvency  Proceeding,  (iv) file a petition seeking to
     take  advantage  of any  other  law  relating  to  bankruptcy,  insolvency,
     reorganization,  winding-up,  or composition or readjustment of debts,  (v)
     fail to controvert within 60 days or in a timely and appropriate manner, or
     acquiesce in writing to, any petition  filed  against it in an  involuntary
     Insolvency Proceeding, or (vi) take any corporate action for the purpose of
     effecting any of the foregoing; or

          (g) (i) Any  Insolvency  Proceeding  is commenced or filed against any
     Company, or any writ, judgment, warrant of attachment, execution or similar
     process  is issued or levied  against  any  Company,  and  either  (1) such
     proceeding  or petition  shall not be  dismissed,  or such writ,  judgment,
     warrant of attachment,  execution or similar process shall not be released,
     vacated or fully bonded, within 60 days after commencement,  filing or levy
     or (2) such  proceeding  shall not be actively  contested by such  Company;
     (ii) any Company admits the material  allegations of a petition  against it
     in any  Insolvency  Proceeding,  or an order for relief (or  similar  order
     under  non-U.S.  law) is ordered in any  Insolvency  Proceeding;  (iii) any
     Company acquiesces in the appointment of a receiver,  receiver and manager,
     trustee, custodian,  conservator,  liquidator,  mortgagee in possession (or
     agent  therefor),  or other  similar  person  for  itself or a  substantial
     portion of its Property or business; or (iv) an order of relief against any
     Company shall be entered in any Insolvency Proceeding; or

          (h) A final  judgment or judgments  for the payment of money in excess
     of $15.0  million in the aggregate  (exclusive  of judgment  amounts to the
     extent  covered by  insurance)  shall be  rendered  by one or more  courts,
     administrative  tribunals or other bodies having  jurisdiction  against any
     Company and the same shall not be  discharged  (or  provision  shall not be
     made for such  discharge),  vacated or bonded pending appeal,  or a stay of
     execution  thereof  shall not be procured,  within 60 days from the date of
     entry thereof and such Company shall not, within said period of 60 days, or
     such  longer  period  during  which  execution  of the same shall have been
     stayed,  appeal  therefrom  and cause the  execution  thereof  to be stayed
     during such appeal; or

          (i) An ERISA  Event or  noncompliance  with  respect to Foreign  Plans
     shall have  occurred  that when taken  together with all other ERISA Events
     and  noncompliance  with respect to Foreign  Plans that have  occurred,  is
     reasonably  likely to result in  liability  of any Company in an  aggregate
     amount exceeding $15.0 million; or

          (j) Any Change of Control shall occur; or

          (k) Any Security Document after delivery thereof by any Obligor at any
     time  shall  cease to be in full  force and  effect or shall for any reason
     fail to  create  or cease to  maintain  a valid  and duly  perfected  first
     priority security interest in and Lien upon (subject to Permitted Liens and
     other Liens  expressly  permitted by the terms of the  applicable  Security
     Document) any material portion of the Collateral; or

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          (l) Any Guarantee ceases to be in full force and effect (other than in
     connection with the release thereof authorized by Section 9.22); or

          (m) Any Credit Document or any material provision thereof shall at any
     time and for any reason be declared by a court of competent jurisdiction to
     be null and void, or a Proceeding  shall be commenced by any Company or any
     other Person,  or by any Governmental  Authority,  seeking to establish the
     invalidity  or   unenforceability   thereof   (exclusive  of  questions  of
     interpretation of any provision thereof), or any Company shall repudiate or
     deny in writing that it has any liability or obligation  for the payment of
     principal or interest or other  obligations  purported to be created  under
     any Credit Document; or

          (n) Any non-monetary judgment,  order or decree is entered against any
     Company which is reasonably  likely to have a Material Adverse Effect,  and
     there shall be any period of 45  consecutive  days  during  which a stay of
     enforcement  of such  judgment or order,  by reason of a pending  appeal or
     otherwise, shall not be in effect; or

          (o) One or more Licenses  shall be terminated or revoked such that any
     Company is no longer  able to operate  the  related  System or any  portion
     thereof and retain the revenue  received  therefrom or one or more Licenses
     shall fail to be renewed at the  stated  expiration  thereof  such that any
     Company is no longer  able to operate  the  related  System or any  portion
     thereof and retain the revenue received  therefrom,  except with respect to
     any of the  foregoing  in the event  that the  termination,  revocation  or
     failure to renew is with  respect to any License  that is not  material (it
     being  understood that material  Licenses shall include (but not be limited
     to) any License  relating to 10% or more of Operating Cash Flow of Borrower
     for the most recently ended two consecutive fiscal quarters); or

          (p) Century-ML shall suffer the  cancellation,  non-renewal or adverse
     modification  of  any  one or  more  approvals,  authorizations,  licenses,
     franchises or other permissions of any governmental,  judicial,  regulatory
     or other agencies if such cancellation, non-renewal or adverse modification
     renders  the  continued  performance  by it of its  obligations  under  the
     Facilities  Agreement  unlawful,  or  the  Facilities  Agreement  shall  be
     terminated,  shall expire or shall be materially adversely modified, unless
     PR Borrower shall have secured alternative arrangements satisfactory to the
     Majority  Lenders to  substitute  for benefits  provided by the  Facilities
     Agreement for the operation by PR Borrower of the PR Systems; or

          (q) The subordination  provisions  relating to the Senior Subordinated
     Notes,  Additional Senior  Subordinated Notes (if issued by Borrower),  any
     Subordinated   Debt  or  any  Contingent   Obligation  in  respect  of  any
     Subordinated  Debt  (the  "Subordination  Provisions")  shall  fail  in any
     material  respect  to  be  enforceable  by  the  Lenders  (which  have  not
     effectively  waived the  benefits  thereof)  in  accordance  with the terms
     thereof, or any Obligation shall fail to constitute Senior Indebtedness (as
     defined  in  the  Senior   Subordinated   Notes,   the  Additional   Senior
     Subordinated Notes (if issued by Borrower) or any other Subordinated Debt),
     or any Obligor  shall,  directly or  indirectly,  disavow or contest in any
     manner any of the Subordination Provisions;

THEREUPON:  (1) in the case of an Event of Default other than one referred to in
clause  (e),  (f) or (g) of this  Section  10 with  respect  to  Borrower  or PR
Borrower,  Administrative  Agent may, and upon written direction of the Majority
Lenders shall, by notice to Borrower,  terminate the Commitments  and/or declare
the  principal  amount then  outstanding  of, and the accrued  interest  on, the
Loans, the  Reimbursement  Obligations and all other amounts payable by Borrower
and PR Borrower  hereunder and under the Notes  (including  any amounts  payable
under  Section 5.05 or 5.06) to be forthwith  due and  payable,  whereupon  such
amounts  shall be  immediately  due and  payable  without  presentment,  demand,
protest or other  formalities  of any kind,  all of which are  hereby  expressly
waived by Borrower and PR Borrower, reduce any claim to judgment, take any other
action  permitted  by law and/or  take any action  permitted  to be taken by the
Security  Documents during the existence of an Event of Default;  and (2) in the
case of the occurrence of an Event of Default  referred to in clause (e), (f) or
(g) of this Section 10 with respect to Borrower or PR Borrower,  the Commitments
shall  automatically be terminated and the principal amount then outstanding of,
and the accrued  interest on, the Loans, the  Reimbursement  Obligations and all
other amounts payable by Borrower and PR Borrower  hereunder and under the Notes
(including any amounts  payable under Section 5.05 or 5.06) shall  automatically

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become immediately due and payable without presentment, demand, protest or other
formalities  of any kind, all of which are hereby  expressly  waived by Borrower
and PR Borrower.

     In  addition,   Borrower  agrees,   upon  the  occurrence  and  during  the
continuance  of any Event of Default if  Administrative  Agent has  declared the
principal  amount then  outstanding  of, and accrued  interest on, the Revolving
Credit Loans,  and all other amounts  payable to the  Revolving  Credit  Lenders
hereunder and under the Notes  evidencing  such Loans to be due and payable,  it
may and shall,  if requested by the Majority  Revolving  Credit Lenders  through
Administrative  Agent (and,  in the case of any Event of Default  referred to in
clause  (e),  (f) or (g) of this  Section  10 with  respect  to  Borrower  or PR
Borrower,  forthwith,  without  any demand or the taking of any other  action by
Administrative  Agent or such  Lenders)  provide  cover for the Letter of Credit
Liabilities by paying to Administrative Agent immediately  available funds in an
amount equal to the then aggregate undrawn face amount of all Letters of Credit,
which funds shall be held by Administrative  Agent in the Collateral  Account as
collateral  security in the first instance for the Letter of Credit  Liabilities
and be subject to withdrawal only as provided in the Security Agreement.

     Section 11. Agents.

     11.01. General Provisions.  Each of the Lenders, the Agents and the Issuing
Lender hereby irrevocably  appoints the Agents as its agents and authorizes each
Agent to take such  actions  on its behalf and to  exercise  such  powers as are
delegated to such Agent by the terms hereof and the Security Documents, together
with  such   actions   and  powers  as  are   reasonably   incidental   thereto.
Administrative  Agent  agrees  to give  promptly  to each  Lender a copy of each
notice or other document  received by it pursuant to any Credit  Document (other
than any that are required to be delivered to the Lenders by any Obligor).

     The Lender or other financial  institution  serving as any Agent or Issuing
Lender  hereunder  shall have the same  rights and powers in its  capacity  as a
Lender as any other  Lender and may exercise the same as though it were not such
Agent or Issuing  Lender,  and such bank and its Affiliates may accept  deposits
from,  lend  money to and  generally  engage  in any kind of  business  with any
Company  or other  Affiliate  thereof  as if it were not such  Agent or  Issuing
Lender hereunder.

     No Agent or Issuing  Lender  shall have any  duties or  obligations  except
those  expressly  set forth  herein.  Without  limiting  the  generality  of the
foregoing,  (a) no Agent or Issuing  Lender shall be subject to any fiduciary or
other  implied  duties,  regardless  of whether a Default  has  occurred  and is
continuing,  (b) no  Agent or  Issuing  Lender  shall  have any duty to take any
discretionary action or exercise any discretionary  powers, except discretionary
rights  and  powers  expressly  contemplated  hereby  that such Agent or Issuing
Lender is required to exercise in writing by the Majority Lenders (or such other
number or percentage of the Lenders as shall be required by Section 12.04),  and
(c) except as expressly set forth herein,  no Agent or Issuing Lender shall have
any duty to disclose,  and shall not be liable for the failure to disclose,  any
information  relating to any Company that is  communicated to or obtained by the
financial  institution  serving as such  Agent or  Issuing  Lender or any of its
Affiliates in any capacity.  No Agent or Issuing  Lender shall be liable for any
action  taken or not  taken  by it with the  consent  or at the  request  of the
Majority  Lenders (or such other number or percentage of the Lenders as shall be
required  by Section  12.04) or in the  absence of its own gross  negligence  or
willful  misconduct.  No Agent shall be deemed to have  knowledge of any Default
unless and until written  notice  thereof is given to  Administrative  Agent and
such Agent by  Borrower  or a Lender,  and no Agent or Issuing  Lender  shall be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or  representation  made in or in connection with this Agreement or any
other Credit  Document,  (ii) the contents of any  certificate,  report or other
document delivered hereunder or under any other Credit Document or in connection
herewith,  (iii)  the  performance  or  observance  of  any  of  the  covenants,
agreements  or other terms or conditions  set forth  herein,  (iv) the validity,
enforceability,  effectiveness  or  genuineness  of this  Agreement or any other
Credit  Document  or any  other  agreement,  instrument  or  document,  (v)  the
satisfaction of any condition set forth in Section 7 or elsewhere herein,  other
than to confirm  receipt of items  expressly  required to be  delivered  to such
Agent or (vi) making a determination  that any condition  precedent set forth in
Section 7 that is to be to such Agent's satisfaction is satisfied.

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     Each Agent and Issuing Lender shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement,  instrument,  document or other writing  believed by it to be genuine
and to have been  signed or sent by the proper  Person.  Each Agent and  Issuing
Lender also may rely upon any  statement  made to it orally or by telephone  and
believed  by it to be made  by the  proper  Person,  and  shall  not  incur  any
liability for relying  thereon.  Each Agent and Issuing  Lender may consult with
legal counsel (who may be counsel for  Borrower),  independent  accountants  and
other  experts  selected by it, and shall not be liable for any action  taken or
not taken by it in accordance  with the advice of any such counsel,  accountants
or experts.  Each Agent and  Issuing  Lender may deem and treat the payee of any
Note  as the  owner  thereof  for  all  purposes  unless  a  written  notice  of
assignment,  negotiation  or  transfer  thereof  shall have been filed with such
Agent or Issuing Lender.  Each Agent and Issuing Lender shall be fully justified
in failing or  refusing  to take any action  under this  Agreement  or any other
Credit  Document unless it shall first receive such advice or concurrence of the
Majority  Lenders (or, if so specified  by this  Agreement,  all Lenders or such
other number or percentage of the Lenders as shall be required by Section 12.04)
as it deems  appropriate or it shall first be indemnified to its satisfaction by
the Lenders  against any and all  liability and expense which may be incurred by
it by  reason  of  taking  or  continuing  to take any  such  action  (it  being
understood  that this  provision  shall not  release  Administrative  Agent from
performing  any  action  with  respect  to  Borrower  expressly  required  to be
performed by it pursuant to the terms hereof) under this  Agreement.  Each Agent
and  Issuing  Lender  shall in all cases be fully  protected  in  acting,  or in
refraining from acting,  under this Agreement and the other Credit  Documents in
accordance  with a request of the Majority  Lenders (or, if so specified by this
Agreement, all Lenders), and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders of
the Loans.

     Each Agent and  Issuing  Lender may  perform  any and all of its duties and
exercise  its  rights  and  powers  by or  through  any one or  more  sub-agents
appointed by such Agent or Issuing Lender and reasonably acceptable to Borrower.
Each Agent, Issuing Lender and any such sub-agent may perform any and all of its
duties and exercise its rights and powers through their  respective  Affiliates,
directors,  officers,  employees,  agents and advisors ("Related Parties").  The
exculpatory  provisions  of the  preceding  paragraphs  shall  apply to any such
sub-agent  and to the Related  Parties of each Agent and Issuing  Lender and any
such  sub-agent,  and shall apply to their  respective  activities in connection
with the  syndication  of the credit  facilities  provided for herein as well as
activities of such Agent or Issuing Lender.

     Subject to the  appointment and acceptance of a successor Agent as provided
in this  paragraph,  any Agent may resign at any time by notifying  the Lenders,
the Issuing  Lender (with  respect to  Administrative  Agent only) and Borrower.
Upon any such resignation,  the Majority Lenders shall have the right to appoint
a  successor  which,  so long as no Event of  Default  is  continuing,  shall be
reasonably  acceptable to Borrower. If no successor shall have been so appointed
by the Majority Lenders and shall have accepted such appointment  within 30 days
after the  retiring  Agent gives  notice of its  resignation,  then the retiring
Agent may, on behalf of the Lenders and the Issuing Lender,  appoint a successor
Agent  which  shall be a bank  with an  office  in New  York,  New  York,  or an
Affiliate of any such bank which,  so long as no Event of Default is continuing,
shall  be  reasonably  acceptable  to  Borrower.  Upon  the  acceptance  of  its
appointment as Agent  hereunder by a successor,  such successor shall succeed to
and become  vested with all the  rights,  powers,  privileges  and duties of the
retiring  Agent,  and the retiring Agent shall be discharged from its duties and
obligations  hereunder.  The fees payable by Borrower to a successor Agent shall
be the same as those payable to its predecessor  unless otherwise agreed between
Borrower  and such  successor.  After the  Agent's  resignation  hereunder,  the
provisions  of this Section 11 shall  continue in effect for the benefit of such
retiring Agent, its sub-agents and their  respective  Related Parties in respect
of any  actions  taken or omitted to be taken by any of them while it was acting
as such Agent.

     Each Lender  acknowledges  that it has,  independently and without reliance
upon any Agent,  Issuing  Lender or any other Lender and based on such documents
and information as it has deemed  appropriate,  made its own credit analysis and
decision to enter into this  Agreement.  Each Lender also  acknowledges  that it
will,  independently and without reliance upon any Agent,  Issuing Lender or any
other Lender and based on such  documents and  information as it shall from time
to time deem  appropriate,  continue to make its own  decisions in taking or not

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taking action under or based upon this Agreement,  any related  agreement or any
document furnished hereunder or thereunder.  No Agent or Issuing Lender shall be
deemed a trustee or other fiduciary on behalf of any party.

     11.02.  Indemnification.  Each Lender agrees to indemnify and hold harmless
each Agent and the Issuing  Lender (to the extent not  reimbursed  under Section
12.03, but without limiting the obligations of any Obligor under Section 12.03),
ratably in accordance  with the  aggregate  principal  amount of the  respective
Commitments of and/or Loans and  Reimbursement  Obligations  held by the Lenders
(or, if all of the Commitments shall have been terminated or expired, ratably in
accordance with the aggregate  outstanding amount of the Loans and Reimbursement
Obligations  held  by the  Lenders),  for any  and  all  liabilities  (including
pursuant to any Environmental Law),  obligations,  losses,  damages,  penalties,
actions, judgments,  deficiencies,  suits, costs, expenses (including reasonable
attorney's fees) or disbursements of any kind and nature  whatsoever that may be
imposed  on,  incurred  by or  asserted  against  such Agent or  Issuing  Lender
(including by any Lender) arising out of or by reason of any investigation in or
in any way  relating  to or  arising  out of any  Credit  Document  or any other
documents contemplated by or referred to therein for any action taken or omitted
to be taken by such  Agent or Issuing  Lender  under or in respect of any of the
Credit  Documents  or other  such  documents  or the  transactions  contemplated
thereby (including the costs and expenses that the Obligors are obligated to pay
under Section 12.03, and including also any payments under any indemnity granted
pursuant  to  Section  19  of  the  Security  Agreement,  or  to  any  Financial
Intermediary  referred  to in  Section  10 of the  Security  Agreement  to which
remittances in respect of Receivables,  as defined in the Securities  Agreement,
are to be made but  excluding,  unless a Default has occurred and is continuing,
normal  administrative  costs and expenses  incident to the  performance  of its
agency  duties  hereunder)  or the  enforcement  of any of the  terms  hereof or
thereof or of any such other documents;  provided, however, that no Lender shall
be liable for any of the foregoing to the extent they are  determined by a court
of competent jurisdiction in a final and nonappealable judgment to have resulted
from the gross negligence or willful  misconduct of the party to be indemnified.
The  agreements set forth in this Section 11.02 shall survive the payment of all
Loans and other  obligations  hereunder  and shall be in  addition to and not in
lieu of any other  indemnification  agreements  contained  in any  other  Credit
Document.

     11.03. Consents Under Other Credit Documents.  Except as otherwise provided
in this Agreement and the other Credit Documents, Administrative Agent may, with
the prior consent of the Majority  Lenders (but not  otherwise),  consent to any
modification, supplement or waiver under any of the other Credit Documents.

     11.04. Collateral Sub-Agents.  Each Lender by its execution and delivery of
this  Agreement  agrees,  as  contemplated  by  Section  10(g)  of the  Security
Agreement,  that, in the event it shall hold any Permitted  Investments referred
to therein,  such Permitted  Investments shall be held in the name and under the
control of such Lender, and such Lender shall hold such Permitted Investments as
a collateral sub-agent for Administrative Agent thereunder.  Each Obligor by its
execution and delivery of this Agreement hereby consents to the foregoing.

     Section 12. Miscellaneous.

     12.01.  Waiver.  No failure on the part of any  Creditor to exercise and no
delay in exercising,  and no course of dealing with respect to, any right, power
or privilege under any Credit  Document shall operate as a waiver  thereof,  nor
shall any single or partial exercise of any right,  power or privilege under any
Credit Document  preclude any other or further  exercise thereof or the exercise
of any other  right,  power or  privilege.  The  remedies  provided  herein  are
cumulative and not exclusive of any remedies provided by law.

     12.02. Notices. All notices, requests and other communications provided for
herein and under the Security  Documents  (including  any  modifications  of, or
waivers,  requests or consents under,  this Agreement) shall be given or made in
writing  (including  by  facsimile)  delivered to the intended  recipient at the
"Address for Notices" specified below its name on the signature pages hereof (or
as to PR Borrower or any Guarantor,  as so specified for Borrower) or, as to any
party, at such other address as shall be designated by such party in a notice to
each other  party.  Except as  otherwise  provided in this  Agreement,  all such
communications  shall be  deemed to have been duly  given  when  transmitted  by
facsimile  or  personally  delivered  or, in the case of a mailed  notice,  upon

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receipt,  in each case given or addressed as aforesaid.  Any Notice of Borrowing
or Notice of Continuation/Conversion  shall be deemed to have been received when
actually received.

     12.03.  Expenses,  Indemnification,  Etc.  (a) The  Obligors,  jointly  and
severally, agree to pay or reimburse:

          (i) the Issuing Lender, Co-Syndication Agents, Documentation Agent and
     Administrative  Agent for all of their reasonable  out-of-pocket  costs and
     expenses  (including the reasonable  fees and expenses of one legal counsel
     (and all local  counsel  (including  in Puerto  Rico)  deemed  necessary by
     Agents)) in connection with (1) the negotiation, preparation, execution and
     delivery of the Credit Documents and the extension of credit hereunder, (2)
     the negotiation or preparation of any modification, supplement or waiver of
     any of the terms of any Credit  Document  (whether  or not  consummated  or
     effective) and (3) the syndication of the Loans and Commitments;

          (ii) each of the Lenders,  the Issuing Lender,  Co-Syndication  Agents
     and  Administrative  Agent  for  all  reasonable  out-of-pocket  costs  and
     expenses of the  Lenders,  the Issuing  Lender,  Co-Syndication  Agents and
     Administrative  Agent  (including the reasonable fees and expenses of legal
     counsel) in connection with (1) any  enforcement or collection  proceedings
     resulting  from any Default,  including all manner of  participation  in or
     other   involvement   with  (x)   bankruptcy,   insolvency,   receivership,
     foreclosure,  winding  up  or  liquidation  proceedings,  (y)  judicial  or
     regulatory proceedings and (z) workout, restructuring or other negotiations
     or proceedings  (whether or not the workout,  restructuring  or transaction
     contemplated  thereby is consummated),  (2) the enforcement of this Section
     12.03 and (3) any documentary taxes; and

          (iii) Administrative Agent for all reasonable costs, expenses,  taxes,
     assessments and other charges (including  reasonable fees and disbursements
     of counsel) incurred in connection with any filing, registration, recording
     or perfection of any security interest  contemplated by any Credit Document
     or any other document referred to therein.

     (b) The Obligors,  jointly and  severally,  hereby agree to indemnify  each
Creditor  and  their  respective  Affiliates,   directors,  trustees,  officers,
employees  and  agents  (each,  an  "Indemnitee")  from,  and hold  each of them
harmless  against,  and that no Indemnitee  will have any liability for, any and
all Losses incurred by any of them (including any and all Losses incurred by any
Agent or the  Issuing  Lender to any  Lender,  whether or not any  Creditor is a
party thereto) directly or indirectly arising out of or by reason of or relating
to  the  negotiation,   execution,  delivery,  performance,   administration  or
enforcement of any Credit Document, any of the transactions  contemplated by the
Credit Documents  (including the  Transactions),  any breach by any Company,  as
applicable,  of  any  representation,  warranty,  covenant  or  other  agreement
contained  in  any  of  the  Credit  Documents  in  connection  with  any of the
Transactions,  the use or proposed use of any of the Loans or Letters of Credit,
the  issuance  of or  performance  under any  Letter of Credit or the use of any
collateral security for the Loans (including the exercise by any Creditor of the
rights and remedies or any power of attorney with respect thereto and any action
or inaction in respect  thereof),  but  excluding  any such Losses to the extent
finally  determined  by  a  court  of  competent  jurisdiction  in a  final  and
nonappealable  judgment to have arisen from the gross negligence or bad faith of
the Indemnitee.

     Without limiting the generality of the foregoing, the Obligors, jointly and
severally, will indemnify each Creditor and each other Indemnitee from, and hold
each Creditor and each other Indemnitee  harmless against,  any Losses described
in the preceding sentence arising under any Environmental Law as a result of (A)
the past,  present or future  operations of any Company (or any  predecessor  in
interest to any Company),  (B) the past, present or future condition of any site
or facility owned,  operated,  leased or used at any time by any Company (or any
such predecessor in interest),  or (C) any Release or threatened  Release of any
Hazardous  Materials at, on, under or from any such site or facility,  including
any such Release or  threatened  Release that shall occur during any period when
any Creditor  shall be in possession of any such site or facility  following the
exercise by such  Creditor of any of its rights and remedies  hereunder or under
any of the Security Documents;  provided,  however, that the indemnity hereunder
shall  be  subject  to the  exclusions  from  indemnification  set  forth in the
preceding sentence.

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     To the extent that the undertaking to indemnify and hold harmless set forth
in this Section 12.03 or any other  provision of any Credit  Document  providing
for  indemnification  is  unenforceable  because it is  violative  of any law or
public  policy  or  otherwise,  the  Obligors,   jointly  and  severally,  shall
contribute the maximum portion that each of them is permitted to pay and satisfy
under  applicable  law to  the  payment  and  satisfaction  of  all  indemnified
liabilities incurred by any of the Persons indemnified hereunder.

     The  Obligors  also  agree  that no  Indemnitee  shall  have any  liability
(whether direct or indirect, in contract or tort or otherwise) for any Losses to
any Obligor or any  Obligor's  security  holders or  creditors  resulting  from,
arising out of, in any way related to or by reason of any matter  referred to in
any  indemnification  or  expense  reimbursement  provisions  set  forth in this
Agreement  or any other Credit  Document,  except to the extent that any Loss is
determined  by a  court  of  competent  jurisdiction  in a  final  nonappealable
judgment  to have  resulted  from  the  gross  negligence  or bad  faith of such
Indemnitee.

     The   Obligors   agree  that,   without  the  prior   written   consent  of
Administrative  Agent,  Co-Syndication  Agents and the  Majority  Lenders  which
consent shall not be unreasonably  withheld, no Obligor will settle,  compromise
or consent to the entry of any judgment in any pending or threatened  Proceeding
in respect of which  indemnification is reasonably likely to be sought under the
indemnification  provisions of this Section 12.03 (whether or not any Indemnitee
is an actual or potential  party to such  Proceeding),  unless such  settlement,
compromise  or  consent  includes  an  unconditional  written  release  of  each
Indemnitee  from  all  liability  arising  out of such  Proceeding  and does not
include any statement as to an admission of fault, culpability or failure to act
by or on behalf of any  Indemnitee  and does not involve any payment of money or
other value by any  Indemnitee or any injunctive  relief or factual  findings or
stipulations binding on any Indemnitee.

     12.04.  Amendments,  Etc. (i) No  provision  of any Credit  Document may be
amended,  modified or supplemented  except by an instrument in writing signed by
the Obligors  party thereto and the Majority  Lenders,  or by the Obligors party
thereto and Administrative Agent acting with the written consent of the Majority
Lenders,  and no  provision of any Credit  Document  may be waived  except by an
instrument  in writing  signed by the  Obligors  party  thereto and the Majority
Lenders,  or by the Obligors party thereto and Administrative  Agent acting with
the written consent of the Majority Lenders; provided, however, that:

          (a) no amendment, modification,  supplement or waiver shall, unless by
     an instrument signed by each Lender or by Administrative  Agent acting with
     the  written  consent of each Lender  (with the  consent of Lenders  having
     Obligations  directly  affected thereby in the case of clauses (I), (II) or
     (IV) (it being  understood  that the consent of no other Lender or Agent is
     needed in each such case)):  (I) extend the scheduled final maturity of any
     Loan or Note, or extend the stated  expiration date of any Letter of Credit
     beyond  the  Revolving  Credit   Commitment   Termination  Date  (it  being
     understood that the termination date of any Incremental  Facility,  if part
     of the Revolving Credit Facility or a new term loan facility, may be a date
     later than the Revolving  Credit  Commitment  Termination Date or the Final
     Maturity Date, respectively,  without requiring the consent of any Lender),
     or reduce the rate of interest  (other  than any waiver of any  increase in
     the interest rate  applicable to any of the Loans pursuant to clause (b) of
     Section 3.02) or fees thereon, or extend the time of payment of interest or
     fees thereon, or reduce the principal amount thereof, or make any change to
     the  definition of Applicable  Margin or  Applicable  Revolving  Credit Fee
     Percentage  (other than in connection with the addition of relevant margins
     relating to new term loan  facilities  comprising  part of any  Incremental
     Facility),  or make  any  change  to the last two  sentences  of the  first
     paragraph  of Section  2.09,  (II) extend the final  maturity of any of the
     Commitments (or reinstate any Commitment terminated pursuant to Section 10)
     (it being  understood that the addition of any Incremental  Facility with a
     longer  maturity  by itself  shall not be  deemed to be an  extension  of a
     Commitment  that is required of each Lender),  (III) change the currency in
     which any Obligation is payable, (IV) amend the terms of this Section 12.04
     or clause (iv) of Section 12.06(b), Section 4.07, 5 or 11.03 (other than to
     make conforming changes relating to any Incremental  Facility ), (V) reduce
     the percentages  specified in the definition of the term "Majority Lenders"
     or  "Supermajority  Lenders" or amend any provision of any Credit  Document
     requiring the consent of all the Lenders or reduce any other  percentage of
     the  Lenders  required  to make  any  determinations  or waive  any  rights
     hereunder or to modify any provision  hereof (it being  understood that any
     Incremental  Facility  shall  be,  and with  the  consent  of the  Majority

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     Lenders,  other additional  extensions of credit pursuant to this Agreement
     may  be,  included  in  the  determination  of  the  Majority  Lenders  and
     Supermajority  Lenders  without notice to or consent of any other Lender or
     Agent on  substantially  the same  basis as the  Commitments  (and  related
     extensions of credit) are included on the Closing  Date),  (VI) release any
     Guarantor from its  obligations  under Section 6 (unless  permitted by this
     Agreement),  (VII) consent to the  assignment or transfer by any Obligor of
     any of its rights and  obligations  under any Credit  Document  except in a
     transaction  permitted by Section 9.06, (VIII) release all or substantially
     all the  Collateral  or  terminate  the Lien under any Credit  Document  in
     respect of all or substantially all the Collateral  (except as permitted by
     the Credit  Documents) or agree to additional  obligations  (other than the
     Obligations and any Incremental Facility and any other extensions of credit
     under this Agreement consented to by the Majority Lenders) being secured by
     the Collateral or (IX) amend Section 12.03 or any other indemnification and
     expense reimbursement  provision set forth in any Credit Document (it being
     understood that,  notwithstanding the foregoing, any prepayment required by
     Section 2.10(a) may be waived or amended by the Majority Lenders);

          (b) no such amendment or waiver shall increase the  Commitments of any
     Lender over the amount  thereof then in effect  without the consent of such
     Lender (it being  understood  that  amendments  or  waivers  of  conditions
     precedent,  covenants or Defaults  shall not  constitute an increase of the
     Commitment of any Lender);

          (c) any  modification  or  supplement  of or waiver  with  respect  to
     Section 11 which  affects any Agent in its  capacity as such shall  require
     the consent of such Agent;

          (d) no consent  of any Lender  need be  obtained,  and  Administrative
     Agent is hereby authorized, to release any Lien securing the Obligations on
     Property  which is the subject of any  disposition  permitted by the Credit
     Documents and to release any Guarantee of a Subsidiary upon the sale of all
     of the Equity  Interests of such  Subsidiary in accordance  with the Credit
     Documents;

          (e) subject to clause  (a)(I)  above of this  proviso to this  Section
     12.04(i),  the  consent  of all of the  Lenders of the  affected  Term Loan
     Tranche  shall be required  with respect to any  extension of any scheduled
     Amortization  Payment  or any  reduction  in the  amount  of any  scheduled
     Amortization  Payment  (except in  accordance  with Section 2.09 or Section
     2.10) (it  being  understood  that,  subject  to  clause  (f) below of this
     Section  12.04,   any   prepayment   required  by  Section  2.10  (and  any
     corresponding  reduction  of  the  Revolving  Credit  Commitments)  may  be
     modified, supplemented or waived by the Majority Lenders);

          (f)  no  modification,  supplement  or  waiver  shall,  unless  by  an
     instrument signed by the Supermajority  Lenders of the Affected Class or by
     Administrative  Agent acting with the written consent of the  Supermajority
     Lenders of the Affected Class (it being  understood  that the consent of no
     other  Lender or Agent is needed),  change the timing of the receipt or the
     application of mandatory  prepayments hereunder as among the Tranche A Term
     Loans,  the Tranche  A-PR Term Loans,  the Tranche  B-PR Term Loans and the
     Tranche  C-PR  Term  Loans or the  order in which  any such  prepayment  is
     applied to the Tranche A Term Loans,  the Tranche A-PR Term Loans,  Tranche
     B-PR  Term  Loans  or  Tranche  C-PR  Term  Loans  (although  any  required
     prepayment   set  forth  in  Section   2.10  may   otherwise  be  modified,
     supplemented or waived by the Majority Lenders); provided, however, that if
     an Incremental Facility is extended as an increase in the Tranche B-PR Term
     Loans or the Tranche C-PR Term Loans or as a new term loan  facility,  such
     increase in the Tranche  B-PR Term Loans or the Tranche C-PR Term Loans and
     such new term loan facility may be treated on the same terms (including pro
     rata  application of prepayments) as the Tranche B-PR Term Loans Term Loans
     and the Tranche C-PR Term Loans without such consent;

          (g) no reduction of the  percentage  specified  in the  definition  of
     "Majority   Revolving  Credit  Lenders,"  "Majority  Tranche  A  Term  Loan
     Lenders," "Majority Tranche A-PR Term Loan Lenders," "Majority Tranche B-PR
     Lenders,"  or  "Majority  Tranche  C-PR  Term Loan  Lenders"  shall be made
     without the consent of each Revolving  Credit  Lender,  each Tranche A Term
     Loan Lender,  each  Tranche  A-PR Term Loan Lender,  each Tranche B-PR Term
     Loan Lender or each Tranche C-PR Term Loan Lender,  respectively  (it being
     understood  that only the  Lenders  of the Class of such Loan to which such
     definition  relates  need  consent  to any  such  reduction  and  that  any

                                       96
<PAGE>

     Incremental  Facility shall be (to the extent being an increase in any such
     facility),  and, with the consent of the Majority Lenders, other additional
     extensions of credit  pursuant to this  Agreement  may be,  included in any
     such  definition  without notice to or consent of any other Lender or Agent
     on substantially the same terms as the Commitments (and related  extensions
     of credit) are included on the Original Closing Date);

          (h) no reduction of the percentage  specified in the definition of (I)
     "Majority  Term Lenders"  shall be made without the consent of the Majority
     Tranche A Term Loan Lenders,  the Majority  Tranche A-PR Term Loan Lenders,
     the Majority  Tranche B-PR Term Loan Lenders and the Majority  Tranche C-PR
     Term Loan Lenders or (II)  "Supermajority  Lenders of the  Affected  Class"
     shall be made  without  the  consent  of each  Term Loan  Lender  (it being
     understood, that no consent of any other Lender or Agent is needed and that
     any  Incremental  Facility shall be (to the extent being an increase in any
     such facility),  and, with the consent of the Majority Lenders,  additional
     extensions of credit  pursuant to this Agreement may be, included in either
     such  definition  without notice to or consent of any other Lender or Agent
     on substantially the same terms as the Commitments (and related  extensions
     of credit) are included on the Original Closing Date);

          (i) no  amendment  or waiver  shall affect the rights or duties of the
     Issuing  Lender  in its  capacity  as such or alter the  obligation  of any
     Revolving  Credit Lender pursuant to Section 2.03(e) or 2.03(f) without the
     consent of the Issuing Lender;

          (j) no consent of any Lender need be obtained to effect any  amendment
     of any Credit  Document  necessary  to comply with  Section 9.12 or Section
     9.20 or as permitted by Section 2.01(f);

          (k) no  amendment,  modification,  supplement or waiver may be made to
     any  condition  precedent to any  extension  of credit under the  Revolving
     Credit Facility set forth in subsection 7.01 without the written consent of
     the  Majority  Revolving  Credit  Lenders,  it  being  understood  that  no
     amendment  to or waiver of any  representation  or warranty or any covenant
     contained  in  this  Agreement  or any  other  Credit  Document,  or of any
     Default,  shall be deemed  to be  effective  for  purposes  of  determining
     whether the conditions precedent set forth in subsection 7.01 to the making
     of any  extension  of credit  under the  Revolving  Credit  Loans have been
     satisfied unless the Majority Revolving Credit Lenders shall have consented
     to such amendment or waiver;

          (l) no amendments  or waiver shall make any change to Section  2.01(g)
     or the definitions of "Swing Loan  Commitment,"  "Swing Loan Maturity Date"
     or "Swing Loans" or the "Swing Loan Notes" without the consent of the Swing
     Loan Lender.

          (ii) If, in connection with any proposed change, waiver,  discharge or
     termination to any of the provisions of this Agreement as  contemplated  by
     Section 12.04(i)(a) (other than clause (I) of such section), the consent of
     the  Majority  Lenders is  obtained  but the consent of one or more of such
     other  Lenders  whose  consent is required is not  obtained,  then Borrower
     shall have the right to replace one or more of such  non-consenting  Lender
     or Lenders (so long as all non-consenting Lenders are so replaced) with one
     or more Replacement Lenders pursuant to Section 2.11 so long as at the time
     of such replacement  each such Replacement  Lender consents to the proposed
     change, waiver, discharge or termination;  provided, however, that Borrower
     shall  not have the  right to  replace  a Lender  solely as a result of the
     exercise of such  Lender's  rights  (and the  withholding  of any  required
     consent by such Lender) pursuant to clause (I) of Section 12.04(i)(a).

     12.05.  Successors and Assigns.  This  Agreement  shall be binding upon and
inure to the benefit of the parties hereto and their  respective  successors and
permitted assigns.

     12.06.  Assignments  and  Participations.  (a) No  Obligor  may  assign its
respective  rights  or  obligations  hereunder  or under  the Notes or any other
Credit Document without the prior written consent of all of the Lenders,  except
in a transaction permitted by Section 9.06.

     (b) Each  Lender may assign to any  Eligible  Person any of its Loans,  its
Notes,  its Letter of Credit  Interests and its  Commitments  (but only with the
consent (which shall not be  unreasonably  withheld,  delayed or conditioned) of
Borrower,  Administrative  Agent  and,  in  the  case  of the  Revolving  Credit

                                       97
<PAGE>

Commitments,  the Issuing  Lender);  provided,  however,  that (i) no consent of
Borrower,  Administrative  Agent, or the Issuing Lender shall be required in the
case of any  assignment  to  another  Lender  or any  Lender's  Affiliate  or an
Approved  Fund of any Lender (in which case,  the assignee and assignor  Lenders
shall give notice of the assignment to Administrative Agent); (ii) no consent of
Borrower,  Administrative  Agent or Issuing Lender need be obtained if any Event
of Default shall have occurred and be continuing;  (iii) each assignment,  other
than to a Lender or any Lender's Affiliate or an Approved Fund of any Lender and
other  than any  assignment  effected  by any  Agent or any of their  respective
Affiliates in connection with the syndication of the Commitments and/or Loans or
otherwise,  shall be in an  aggregate  amount of at least $2.5  million (or $1.0
million in the case of any  assignments  of  Tranche  B-PR Term Loans or Tranche
C-PR Term  Loans)  unless the  assigning  Lender's  exposure is reduced to $0 or
unless Borrower and Administrative  Agent otherwise consent and (iv) in no event
may any such assignment be made to any Obligor or any of its Affiliates  without
consent of all Lenders.  Any  assignment of a Loan shall be effective  only upon
appropriate  entries with respect  thereto  being made in the Register (and each
Note shall expressly so provide).  Any assignment or transfer of a Loan shall be
registered on the Register only upon surrender for registration of assignment or
transfer  of the Note  evidencing  such Loan (if a Note was  issued  in  respect
thereof),  accompanied by an instrument in writing  substantially in the form of
Exhibit F, and upon consent  thereto by Borrower,  Administrative  Agent and the
Issuing  Lender to the  extent  required  above  (none of which  consents  to be
unreasonably  withheld or delayed),  one or more new Notes (if  requested by the
New  Lender)  in the same  aggregate  principal  amount  shall be  issued to the
designated assignee and the old Notes shall be returned by Administrative  Agent
to Borrower marked  "cancelled".  Upon execution and delivery by the assignee to
Borrower and Administrative  Agent of an instrument in writing  substantially in
the form of Exhibit F, and upon  consent  thereto  by  Borrower,  Administrative
Agent  and the  Issuing  Lender  to the  extent  required  above  (none of which
consents to be  unreasonably  withheld or  delayed),  and in the case of a Loan,
upon appropriate  entries being made in the Register the assignee shall have, to
the extent of such assignment (unless otherwise provided in such assignment with
the consent of Administrative Agent), the obligations,  rights and benefits of a
Lender  hereunder  holding the  Commitment(s),  Loans (or portions  thereof) and
Letter of Credit  Interests  assigned to it (in  addition to the  Commitment(s),
Letter of Credit Interests and Loans, if any, theretofore held by such assignee)
and the assigning  Lender shall, to the extent of such  assignment,  be released
from the  Commitment(s)  (or  portion(s)  thereof)  so  assigned.  Upon any such
assignment  by any Lender  (other  than to any  Affiliate  of such Lender or any
Approved  Fund of such Lender and other than any  assignment by any Agent or any
of their respective Affiliates) the assignee Lender shall pay a fee of $3,500 to
Administrative  Agent. Upon any such assignment,  certain rights and obligations
of the  assigning  Lender  shall  survive  as set forth in Section  12.07.  Each
assignment  shall be made pursuant to an agreement  substantially in the form of
Exhibit  L.   Administrative   Agent  shall   promptly   upon  request   provide
Co-Syndication  Agents such information  regarding assignments as Co-Syndication
Agents may request.

     (c) A  Lender  may sell or agree  to sell to one or more  other  Persons  a
participation  in all or any part of any  Loans and  Letter of Credit  Interests
held  by  it,  or in  its  Commitments,  in  which  event  each  purchaser  of a
participation (a "Participant")  shall be entitled to the rights and benefits of
the provisions of Section 5 (provided,  however,  that no  Participant  shall be
entitled to receive any greater amount pursuant to Section 5 than the transferor
Lender  would have been  entitled  to  receive  in respect of the  participation
effected by such transferor  Lender had no participation  occurred) with respect
to its  participation in such Loans,  Letter of Credit Interests and Commitments
as if such Participant were a "Lender" for purposes of said Section, but, except
as  otherwise  provided in Section  4.07(c),  shall not have any other rights or
benefits  under this  Agreement  or any Note or any other Credit  Document  (the
Participant's  rights against such Lender in respect of such participation to be
those  set  forth in the  agreements  executed  by such  Lender  in favor of the
Participant).  All amounts  payable by Borrower to any Lender under Section 5 in
respect of Loans,  Letter of Credit  Interests and its  Commitments  shall be no
greater  than the amount that would have  applied if such Lender had not sold or
agreed to sell any  participation in such Loans,  Letter of Credit Interests and
Commitments,  and as if such Lender were  funding  each of such Loan,  Letter of
Credit  Interests and Commitments in the same way that it is funding the portion
of  such  Loan,   Letter  of  Credit  Interests  and  Commitments  in  which  no
participations  have  been  sold.  In no  event  shall  a  Lender  that  sells a
participation  agree with the  Participant  to take or refrain  from  taking any
action hereunder or under any other Credit Document, except that such Lender may
agree  with  the  Participant  that it will  not,  without  the  consent  of the

                                       98
<PAGE>

Participant, agree to any modification or amendment set forth in subclauses (I),
(II),  (III) or (VIII) of clause  (a) of the  proviso  to  Section  12.04 to the
extent such Lender's consent is required therefor.

     (d) In addition to the assignments and  participations  permitted under the
foregoing provisions of this Section 12.06, any Lender may assign and pledge all
or any portion of its Loans and its Notes to any United States  Federal  Reserve
Bank as collateral  security  pursuant to Regulation A of the Board of Governors
of the Federal Reserve System and any Operating  Circular issued by such Federal
Reserve Bank and, in the case of a Lender that is an investment  fund,  any such
Lender may assign or pledge all or any portion of its Loans and its Notes to its
trustee  or any  creditor  or  representative  of  creditors  in  support of its
obligations  to its  trustee  or  creditors,  without  notice to or  consent  of
Borrower, Administrative Agent, Co-Syndication Agents or Issuing Lender. No such
assignment shall release the assigning Lender from its obligations hereunder.

     (e) A Lender may  furnish  any  information  concerning  any Company in the
possession  of such  Lender  from  time to time to  assignees  and  participants
(including prospective assignees and participants)  subject,  however, to and so
long as the recipient  agrees to be bound by the provisions of Section 12.11. In
addition,  each Agent may furnish any information  concerning any Obligor or any
of its  Affiliates  in such Agent's  possession  to any Affiliate of such Agent,
subject,  however, to the provisions of Section 12.11. The Obligors shall assist
any Lender in  effectuating  any  assignment or  participation  pursuant to this
Section 12.06  (including  during  syndication)  in whatever  manner such Lender
reasonably deems necessary, including participation in meetings with prospective
transferees.

     12.07. Survival. The obligations of the Obligors under Sections 5.01, 5.05,
5.06 and 12.03,  the  obligations of each Guarantor  under Section 6.03, and the
obligations  of the Lenders  under  Sections  5.06 and 11.02,  shall survive the
repayment of the Loans and Reimbursement  Obligations and the termination of the
Commitments  and, in the case of any Lender that may assign any  interest in its
Commitments,  Loans or Letter of Credit Interest hereunder, shall (to the extent
relating to such time as it was a Lender) survive the making of such assignment,
notwithstanding that such assigning Lender may cease to be a "Lender" hereunder.
In addition,  each  representation  and warranty made, or deemed to be made by a
notice of any extension of credit, herein or pursuant hereto shall be considered
to have been  relied  upon by the other  parties  hereto and shall  survive  the
execution  and  delivery of this  Agreement  and the Notes and the making of any
extension of credit hereunder,  regardless of any investigation made by any such
other party or on its behalf and notwithstanding  that  Administrative  Agent or
any  Lender  may have had  notice  or  knowledge  of any  Default  or  incorrect
representation or warranty and regardless of whether any such  representation or
warranty under the Merger Agreement survives the Merger.

     12.08.  Captions.  The table of contents and captions and section  headings
appearing  herein are included  solely for  convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.

     12.09. Counterparts;  Interpretation;  Effectiveness. This Agreement may be
executed  in  counterparts   (and  by  different  parties  hereto  on  different
counterparts), each of which shall constitute an original, but all of which when
taken  together  shall  constitute a single  contract.  This  Agreement  and any
separate letter agreements with respect to fees payable to Administrative  Agent
constitute the entire contract among the parties  relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or
written,  relating  to the  subject  matter  hereof,  other  than  the  separate
engagement  letter  (to the  extent  specified  therein  as  surviving)  and the
separate fee letters with certain of the Agents and their affiliates,  which are
not superseded and survive.  Except as provided in Section 7.01,  this Agreement
shall become effective when it shall have been executed by Administrative  Agent
and when  Administrative  Agent shall have received  counterparts  hereof which,
when taken  together,  bear the signatures of each of the other parties  hereto,
and  thereafter  shall be binding  upon and inure to the  benefit of the parties
hereto and their  respective  successors  and  assigns.  Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.

     12.10. Governing Law; Submission to Jurisdiction; Waivers; Etc. Each Credit
Document shall be governed by, and construed in accordance  with, the law of the
State of New York, without regard to the principles of conflicts of laws thereof
(except  in the case of the other  Credit  Documents,  to the  extent  otherwise

                                       99
<PAGE>

expressly stated therein).  Each Obligor hereby irrevocably and unconditionally:
(I) submits for itself and its Property in any Proceeding relating to any Credit
Document  to which it is a party,  or for  recognition  and  enforcement  of any
judgment in respect thereof,  to the non-exclusive  general  jurisdiction of the
Supreme Court of the State of New York sitting in New York County, the courts of
the  United  States of  America  for the  Southern  District  of New  York,  and
appellate courts from any thereof; (II) consents that any such Proceeding may be
brought in any such court and waives trial by jury and any objection that it may
now or hereafter  have to the venue of any such  Proceeding in any such court or
that such  Proceeding  was  brought in an  inconvenient  court and agrees not to
plead or claim the same;  (III)  agrees  that  service  of  process  in any such
Proceeding  may be effected by mailing a copy thereof by registered or certified
mail (or any substantially  similar form of mail),  postage prepaid, to Borrower
at its address set forth on the  signature  page hereto or at such other address
of which  Administrative  Agent shall have been notified pursuant  thereto;  and
(IV) agrees that  nothing  herein  shall  affect the right to effect  service of
process in any other manner  permitted by law or shall limit the right to sue in
any other jurisdiction.

     12.11. Confidentiality. Each Lender agrees to keep confidential information
obtained by it pursuant  hereto and the other Credit  Documents  confidential in
accordance with such Lender's  customary  practices and agrees that it will only
use such  information in connection with the  transactions  contemplated by this
Agreement  and not  disclose  any of such  information  other  than  (a) to such
Lender's employees,  representatives,  directors,  attorneys,  auditors, agents,
professional   advisors,   trustees  or  affiliates   who  are  advised  of  the
confidential nature of such information or to any direct or indirect contractual
counterparty in swap agreements or such contractual counterparty's  professional
advisor (so long as such  contractual  counterparty or  professional  advisor to
such  contractual  counterparty  agrees  to be  bound by the  provision  of this
Section 12.11, such Lender being liable for any breach of confidentiality by any
Person  described  in this  clause  (a)),  (b) to the  extent  such  information
presently is or hereafter becomes available to such Lender on a non-confidential
basis from any source of such  information  that is in the public  domain at the
time of disclosure,  (c) to the extent  disclosure is required by law (including
applicable securities laws),  regulation,  subpoena or judicial order or process
(provided that notice of such  requirement or order shall be promptly  furnished
to Borrower  unless such notice is legally  prohibited) or requested or required
by bank, securities,  insurance or investment company regulations or auditors or
any administrative body or commission (including the Securities Valuation Office
of the NAIC) to whose jurisdiction such Lender may be subject, (d) to any rating
agency to the extent  required in  connection  with any rating to be assigned to
such Lender,  (e) to  assignees  or  participants  or  prospective  assignees or
participants  who agree to be bound by the provisions of this Section 12.11, (f)
to the extent required in connection with any litigation between any Obligor and
any Creditor  with respect to the Loans or this  Agreement  and the other Credit
Documents or (g) with Borrower's prior written consent.

     12.12.  Independence  of  Representations,  Warranties and  Covenants.  The
representations,  warranties and covenants contained herein shall be independent
of each other and no exception to any representation, warranty or covenant shall
be deemed to be an exception to any other  representation,  warranty or covenant
contained  herein unless  expressly  provided,  nor shall any such  exception be
deemed to permit  any  action or  omission  that  would be in  contravention  of
applicable  law.  Notwithstanding  anything  herein to the contrary,  any matter
identified  on a Schedule to this  Agreement  shall be deemed to be set forth on
all other  Schedules to this  Agreement for purposes of  determining  compliance
with any of the representations, warranties or covenants contained herein.

     12.13.  Severability.  Wherever possible,  each provision of this Agreement
shall  be  interpreted  in  such  manner  as to be  effective  and  valid  under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under  applicable law, such provision  shall be ineffective  only to the
extent of such prohibition or invalidity,  without invalidating the remainder of
such provisions or the remaining provisions of this Agreement.

     12.14.  Acknowledgments.  The Obligors hereby acknowledge that: (a) each of
them has been advised by counsel in connection with the  negotiation,  execution
and  delivery of the Credit  Documents;  (b) no Creditor  has any  fiduciary  or
similar  relationship to any Obligor and the relationship  between the Creditors
on the one hand,  and the Obligors,  on the other hand, is solely that of debtor
and creditor;  and (c) no joint venture  exists among the Creditors or among the
Obligors and the Creditors.

                                           [Signature Pages Follow]

                                      100
<PAGE>

                                                 SCHEDULE 1.01

                                                  GUARANTORS

Centennial Cellular Corp.
Alexandria Cellular Corporation
Alexandria Cellular License Corporation
Bauce Communications, Inc.
Bauce Communications of Beaumont, Inc.
Centennial Ashe Cellular Corp.
Centennial Beauregard Cellular LLC
Centennial Beauregard Holding Corp.
Centennial Benton Harbor Cellular Corp.
Centennial Benton Harbor Holding Corp.
Centennial Caldwell Cellular Corp.
Centennial Cellular Telephone Company of Del Norte
Centennial Cellular Telephone Company of Lawrence
Centennial Cellular Telephone Company of Modoc
Centennial Cellular Telephone Company of Sacramento Valley
Centennial Cellular Telephone Company of San Francisco
Centennial Cellular Tri-State Operating Partnership
Centennial Cellular Wireless Holding Corp.
Centennial Claiborne Cellular Corp.
Centennial Clinton Cellular Corp.
Centennial DeSoto Cellular Corp.
Centennial Hammond Cellular LLC
Centennial Iberia Holding Corp.
Centennial Lafayette Cellular Corp.
Centennial Lake Charles Cellular Corp.
Centennial Louisiana Holding Corp.
Centennial Mega Comm Holding Corp.
Centennial Michigan RSA 6 Cellular Corp.
Centennial Michigan RSA 7 Cellular Corp.
Centennial Morehouse Cellular LLC
Centennial Puerto Rico Wireless Corporation
Centennial Randloph Cellular LLC
Centennial Randolph Holding Corp.
Centennial Wireless PCS License Corp.
Centennial Wireless PCS Operations Corp.
Century Beaumont Cellular Corp.
Century Charlottesville Cellular Corp.
Century El Centro Corp.
Century Elkhart Cellular Corp.
Century Lynchburg Cellular Corp.
Century Michiana Cellular Corp.
Century Roanoke Cellular Corp. (DE)
Century Roanoke Cellular Corp. (VA)
Century South Bend Cellular Corp.
Century Yuma Cellular Corp.
El Centro Cellular Corporation
Elkhart Metronet, Inc.
Hendrix Electronics, Inc.
Hendrix Radio Communications, Inc.
Iberia Cellular Telephone Company LLC
Lafayette Communications, Inc.
Mega Comm LLC
Michiana Metronet, Inc.
South Bend Metronet, Inc.Exhibit 4.1

<PAGE>

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
                                    Depositor

                             CITICORP MORTGAGE, INC.
                     Master Servicer and Trust Administrator

                         U.S. BANK NATIONAL ASSOCIATION
                                     Trustee

                                       and

                      U.S. BANK TRUST NATIONAL ASSOCIATION
                                   Co-Trustee

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

                         POOLING AND SERVICING AGREEMENT
                            Dated as of March 1, 2000

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

                       Mortgage Pass-Through Certificates

                                  Series 2000-1

<PAGE>

<TABLE>
<CAPTION>
                                             TABLE OF CONTENTS
                                             -----------------

SECTION                                                                                               PAGE
-------                                                                                               ----
<S>                                                                                                   <C>
                                                 ARTICLE I

                                                DEFINITIONS

1.01.     Defined Terms..................................................................................3
          Administration Fee.............................................................................3
          Administration Fee Rate........................................................................3
          Advancing Person...............................................................................3
          Affiliate......................................................................................3
          Agreement......................................................................................3
          Allocated Realized Loss Amount.................................................................4
          Assignment.....................................................................................4
          Available Distribution Amount..................................................................4
          Bankruptcy Amount..............................................................................4
          Bankruptcy Code................................................................................5
          Bankruptcy Loss................................................................................5
          Book-Entry Certificate.........................................................................5
          Book-Entry Custodian...........................................................................5
          Business Day...................................................................................5
          Cash-out Refinancing...........................................................................5
          Certificate....................................................................................5
          Certificate Factor.............................................................................5
          Certificateholder or Holder....................................................................5
          Certificate Owner..............................................................................6
          Certificate Principal Balance..................................................................6
          Certificate Register...........................................................................6
          Class   .......................................................................................6
          Class A Certificate............................................................................6
          Class A-1 Certificate..........................................................................6
          Class A-2 Certificate..........................................................................6
          Class B Percentage.............................................................................7
          Class B-1 Certificate..........................................................................7
          Class B-1 Percentage...........................................................................7
          Class B-2 Certificate..........................................................................7
          Class B-2 Percentage...........................................................................7
          Class B-3 Certificate..........................................................................7
          Class B-3 Percentage...........................................................................7
          Class B-4 Certificate..........................................................................8
          Class B-4 Percentage...........................................................................8
          Class B-5 Certificate..........................................................................8
          Class B-5 Percentage...........................................................................8
          Class B-6 Certificate..........................................................................8

                                                     i

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

          Class B-6 Percentage...........................................................................8
          Class IO Certificate...........................................................................8
          Class IO Mortgage Loan.........................................................................9
          Class PO Certificate...........................................................................9
          Class PO Mortgage Loan.........................................................................9
          Class PO Percentage............................................................................9
          Class PO Principal Distribution Amount.........................................................9
          Class R-I Certificate.........................................................................10
          Class R-II Certificate........................................................................10
          Closing Date..................................................................................10
          Co-Trustee....................................................................................10
          Code    ......................................................................................10
          Collection Account............................................................................10
          Commission....................................................................................11
          Corporate Trust Office........................................................................11
          Cut-off Date..................................................................................11
          Debt Service Reduction........................................................................11
          Deficient Valuation...........................................................................11
          Definitive Certificates.......................................................................11
          Deleted Mortgage Loan.........................................................................11
          Depositor.....................................................................................11
          Depository....................................................................................11
          Depository Institution........................................................................11
          Depository Participant........................................................................12
          Determination Date............................................................................12
          Directly Operate..............................................................................12
          Disqualified Organization.....................................................................12
          Distribution Account..........................................................................12
          Distribution Date.............................................................................13
          DOL     ......................................................................................13
          DOL Regulations...............................................................................13
          Due Date......................................................................................13
          Due Period....................................................................................13
          Eligible Account..............................................................................13
          ERISA   ......................................................................................13
          Estate in Real Property.......................................................................13
          Excess Bankruptcy Loss........................................................................13
          Excess Fraud Loss.............................................................................13
          Excess Loss...................................................................................13
          Excess Special Hazard Loss....................................................................13
          Extraordinary Loss............................................................................13
          Extraordinary Trust Fund Expenses.............................................................14
          Fannie Mae....................................................................................14
          FDIC    ......................................................................................14

                                                    ii

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

          Final Recovery Determination..................................................................14
          Fraud Loss....................................................................................14
          Fraud Loss Amount.............................................................................15
          Freddie Mac...................................................................................15
          Independent...................................................................................15
          Independent Contractor........................................................................15
          Insurance Proceeds............................................................................15
          Interest Accrual Period.......................................................................16
          Interest Determination Date...................................................................16
          Interest Distribution Amount..................................................................16
          Late Collections..............................................................................16
          Liquidation Event.............................................................................16
          Liquidation Proceeds..........................................................................17
          Loan-to-Value Ratio...........................................................................17
          London Business Day...........................................................................17
          Master Servicer...............................................................................17
          Master Servicer Event of Default..............................................................17
          Master Servicer Remittance Date...............................................................17
          Monthly Payment...............................................................................17
          Mortgage......................................................................................17
          Mortgage File.................................................................................17
          Mortgage Loan.................................................................................18
          Mortgage Loan Purchase Agreement..............................................................18
          Mortgage Loan Remittance Rate.................................................................18
          Mortgage Loan Schedule........................................................................18
          Mortgage Note.................................................................................19
          Mortgage Pool.................................................................................19
          Mortgage Rate.................................................................................19
          Mortgaged Property............................................................................20
          Mortgagor.....................................................................................20
          Net Mortgage Rate.............................................................................20
          New Lease.....................................................................................20
          Non-Class PO Percentage.......................................................................20
          Nonrecoverable P&I Advance....................................................................20
          Non-United States Person......................................................................20
          Notional Amount...............................................................................20
          Officers' Certificate.........................................................................20
          One-Month LIBOR...............................................................................20
          Opinion of Counsel............................................................................21
          Original Mortgage Loan........................................................................21
          Overcollateralization.........................................................................21
          Ownership Interest............................................................................21
          Pass-Through Rate.............................................................................21
          Percentage Interest...........................................................................22

                                                    iii

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

          Permitted Investments.........................................................................22
          Permitted Transferee..........................................................................23
          Person  ......................................................................................23
          P&I Advance...................................................................................23
          Plan    ......................................................................................23
          Prepayment Assumption.........................................................................23
          Prepayment Interest Shortfall.................................................................23
          Prepayment Period.............................................................................23
          Primary Mortgage Insurance Policy.............................................................24
          Prime Rate....................................................................................24
          Principal Prepayment..........................................................................24
          Purchase Price................................................................................24
          Qualified Insurer.............................................................................24
          Qualified Substitute Mortgage Loan............................................................25
          Rate/Term Refinancing.........................................................................25
          Rating Agency.................................................................................25
          Realized Loss.................................................................................25
          Record Date...................................................................................26
          Reference Banks...............................................................................26
          Refinanced Mortgage Loan......................................................................27
          Regular Certificate...........................................................................27
          Regular Interest..............................................................................27
          Relief Act....................................................................................27
          Relief Act Interest Shortfall.................................................................27
          REMIC   ......................................................................................27
          REMIC I ......................................................................................27
          REMIC I Regular Interest......................................................................27
          REMIC I Regular Interest LT1..................................................................28
          REMIC I Regular Interest LT2..................................................................28
          REMIC I Regular Interest LTIO.................................................................28
          REMIC I Regular Interest LTPO.................................................................28
          REMIC I Remittance Rate.......................................................................28
          REMIC II......................................................................................28
          REMIC II Certificate..........................................................................28
          REMIC Provisions..............................................................................28
          Remittance Report.............................................................................28
          Rents from Real Property......................................................................29
          REO Account...................................................................................29
          REO Disposition...............................................................................29
          REO Imputed Interest..........................................................................29
          REO Property..................................................................................29
          Request for Release...........................................................................29
          Reserve Interest Rate.........................................................................29
          Residential Dwelling..........................................................................29

                                                    iv

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

          Residual Certificate..........................................................................29
          Residual Interest.............................................................................29
          Responsible Officer...........................................................................29
          Scheduled Principal Balance...................................................................30
          Seller  ......................................................................................30
          Senior Certificate............................................................................30
          Senior Percentage.............................................................................30
          Senior Prepayment Percentage..................................................................31
          Senior Principal Distribution Amount..........................................................31
          Servicing Account.............................................................................33
          Servicing Advances............................................................................33
          Servicing Fee.................................................................................33
          Servicing Fee Rate............................................................................33
          Servicing Officer.............................................................................33
          Single Certificate............................................................................33
          Special Hazard Amount.........................................................................34
          Special Hazard Loss...........................................................................34
          S&P     ......................................................................................34
          Startup Day...................................................................................34
          Stated Principal Balance......................................................................34
          Stayed Funds..................................................................................35
          Stripped Interest Rate........................................................................35
          Subordinate Certificate.......................................................................35
          Subordinate Percentage........................................................................35
          Subordinate Prepayment Percentage.............................................................35
          Subordinate Principal Distribution Amount.....................................................35
          Sub-Servicer..................................................................................37
          Sub-Servicing Account.........................................................................37
          Sub-Servicing Agreement.......................................................................37
          Tax Returns...................................................................................37
          Telerate Page 3750............................................................................37
          Termination Price.............................................................................37
          Trailing Recoveries...........................................................................37
          Transfer......................................................................................37
          Transferee....................................................................................38
          Transferor....................................................................................38
          Trust Administrator...........................................................................38
          Trust Fund....................................................................................38
          Trustee ......................................................................................38
          Uncertificated Balance........................................................................38
          Uncertificated Interest.......................................................................38
          Uncertificated LTPO Percentage................................................................38
          PO Principal Distribution Amount..............................................................38
          Uncertificated Notional Amount................................................................40

                                                     v

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

          Uncertificated Principal Distribution Amount..................................................40
          Uninsured Cause...............................................................................40
          United States Person..........................................................................40
          Value   ......................................................................................40
          Voting Rights.................................................................................40
          Weighted Average Stripped Interest Rate.......................................................41
1.02.     Allocation of Certain Interest Shortfalls.....................................................41

                                                ARTICLE II

                                       CONVEYANCE OF MORTGAGE LOANS;
                                     ORIGINAL ISSUANCE OF CERTIFICATES

2.01.     Conveyance of Mortgage Loans..................................................................42
2.02.     Acceptance of REMIC I by the Trustee..........................................................45
2.03.     Repurchase or Substitution of Mortgage Loans by the Seller or the Depositor...................46
2.04.     Representations and Warranties of the Depositor...............................................49
2.05.     Representations, Warranties and Covenants of the Master Servicer..............................51
2.06.     Issuance of Class R-I Certificates............................................................53
2.07.     Conveyance of REMIC I Regular Interests; Acceptance of REMIC II
          by the Trustee................................................................................53
2.08.     Issuance of REMIC II Certificates.............................................................53

                                                ARTICLE III

                                       ADMINISTRATION AND SERVICING
                                           OF THE MORTGAGE LOANS

3.01.     Master Servicer to Act as Master Servicer.....................................................54
3.02.     Sub-Servicing Agreements Between the Master Servicer and Sub-Servicers........................55
3.03.     Successor Sub-Servicers.......................................................................56
3.04.     Liability of the Master Servicer..............................................................57
3.05.     No Contractual Relationship Between Sub-Servicers
          and Trustee or Certificateholders.............................................................57
3.06.     Assumption or Termination of Sub-Servicing Agreements by Trustee..............................57
3.07.     Collection of Certain Mortgage Loan Payments..................................................58
3.08.     Sub-Servicing Accounts........................................................................58
3.09.     Collection of Taxes, Assessments and Similar Items; Servicing Accounts........................59
3.10.     Collection Account and Distribution Account...................................................60
3.11.     Withdrawals from the Collection Account and Distribution Account..............................62
3.12.     Investment of Funds in the Collection Account and the Distribution Account....................64
3.13.     Maintenance of the Primary Mortgage Insurance Policies;
          Collections Thereunder........................................................................66
3.14.     Maintenance of Hazard Insurance and Errors and Omissions

                                                    vi

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

          and Fidelity Coverage.........................................................................67
3.15.     Enforcement of Due-On-Sale Clauses; Assumption Agreements.....................................68
3.16.     Realization Upon Defaulted Mortgage Loans.....................................................69
3.17.     Trustee to Cooperate; Release of Mortgage Files...............................................71
3.18.     Servicing Compensation........................................................................72
3.19.     Reports to the Trustee; Collection Account Statements.........................................73
3.20.     Statement as to Compliance....................................................................73
3.21.     Independent Public Accountants' Servicing Report..............................................73
3.22.     Access to Certain Documentation...............................................................74
3.23.     Title, Management and Disposition of REO Property.............................................74
3.24.     Obligations of the Master Servicer in Respect
          of Prepayment Interest Shortfalls.............................................................78
3.25.     Obligations of the Master Servicer in Respect of Monthly Payments.............................78
3.26.     Advance Facility..............................................................................78

                                                ARTICLE IV

                                      PAYMENTS TO CERTIFICATEHOLDERS

4.01.     Distributions.................................................................................80
4.02.     Statements to Certificateholders..............................................................84
4.03.     Remittance Reports; P&I Advances..............................................................87
4.04.     Allocation of Extraordinary Trust Fund Expenses and Realized Losses...........................89
4.05.     Compliance with Withholding Requirements......................................................90
4.06.     Distributions on the REMIC I Regular Interests................................................90
4.07.     Commission Reporting..........................................................................91

                                                 ARTICLE V

                                             THE CERTIFICATES

5.01.     The Certificates..............................................................................92
5.02.     Registration of Transfer and Exchange of Certificates.........................................94
5.03.     Mutilated, Destroyed, Lost or Stolen Certificates.............................................98
5.04.     Persons Deemed Owners.........................................................................99
5.05.     Certain Available Information.................................................................99

                                                ARTICLE VI

                                   THE DEPOSITOR AND THE MASTER SERVICER

6.01.     Liability of the Depositor and the Master Servicer...........................................100
6.02.     Merger or Consolidation of the Depositor or the Master Servicer..............................100
6.03.     Limitation on Liability of the Depositor, the Master Servicer and Others.....................100

                                                    vii

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

6.04.     Limitation on Resignation of the Master Servicer.............................................101
6.05.     Rights of the Depositor in Respect of the Master Servicer....................................102

                                                ARTICLE VII

                                                  DEFAULT

7.01.     Master Servicer Events of Default............................................................103
7.02.     Trustee to Act; Appointment of Successor.....................................................105
7.03.     Notification to Certificateholders...........................................................107
7.04.     Waiver of Master Servicer Events of Default..................................................107

                                               ARTICLE VIII

                            CONCERNING THE TRUSTEE AND THE TRUST ADMINISTRATOR

8.01.     Duties of Trustee and Trust Administrator....................................................108
8.02.     Certain Matters Affecting the Trustee and the Trust Administrator............................109
8.03.     Neither Trustee nor Trust Administrator Liable for
          Certificates or Mortgage Loans...............................................................110
8.04.     Trustee and Trust Administrator May Own Certificates.........................................111
8.05.     Trustee's and Trust Administrator's Fees and Expenses........................................111
8.06.     Eligibility Requirements for Trustee and Trust Administrator.................................112
8.07.     Resignation and Removal of the Trustee and the Trust Administrator...........................112
8.08.     Successor Trustee or Trust Administrator.....................................................114
8.09.     Merger or Consolidation of Trustee or Trust Administrator....................................114
8.10.     Appointment of Co-Trustee or Separate Trustee................................................114
8.11.     [intentionally omitted]......................................................................116
8.12.     Appointment of Office or Agency..............................................................116
8.13.     Representations and Warranties...............................................................116
8.14.     Rights and Indemnification of Co-Trustee.....................................................117

                                                ARTICLE IX

                                                TERMINATION

9.01      Termination Upon Repurchase or Liquidation
          of the REMIC I Regular Interests.............................................................118
9.02      Additional Termination Requirements..........................................................120

                                                   viii

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

                                                 ARTICLE X

                                             REMIC PROVISIONS

10.01.    REMIC Administration.........................................................................121
10.02.    Prohibited Transactions and Activities.......................................................124
10.03.    Master Servicer, Trustee and Trust Administrator Indemnification.............................124

                                                ARTICLE XI

                                         MISCELLANEOUS PROVISIONS

11.01.    Amendment....................................................................................125
11.02.    Recordation of Agreement; Counterparts.......................................................126
11.03.    Limitation on Rights of Certificateholders...................................................126
11.04.    Governing Law................................................................................127
11.05.    Notices......................................................................................127
11.06.    Severability of Provisions...................................................................128
11.07.    Notice to Rating Agency......................................................................128
11.08.    Article and Section References...............................................................129
11.09.    Grant of Security Interest...................................................................129
</TABLE>

                                       ix

<PAGE>

Exhibits
--------

Exhibit A-1   Form of Class A-1 Certificate
Exhibit A-2   Form of Class A-2 Certificate
Exhibit A-3   Form of Class IO Certificate
Exhibit A-4   Form of Class PO Certificate
Exhibit A-5   Form of Class B-1 Certificate
Exhibit A-6   Form of Class B-2 Certificate
Exhibit A-7   Form of Class B-3 Certificate
Exhibit A-8   Form of Class B-4 Certificate
Exhibit A-9   Form of Class B-5 Certificate
Exhibit A-10  Form of Class B-6 Certificate
Exhibit A-11  Form of Class R-I Certificate
Exhibit A-12  Form of Class R-II Certificate
Exhibit B     [Reserved]
Exhibit C-1   Form of Trustee's Initial Certification
Exhibit C-2   Form of Trustee's Final Certification
Exhibit D     Form of Mortgage Loan Purchase Agreement
Exhibit E-1   Request for Release
Exhibit E-2   Request for Release Mortgage Loans paid in full
Exhibit F-1   Form of Transferor Representation Letter and Form of Transferee
              Representation Letter in Connection with Transfer of Class B-4
              Certificates, Class B-5 Certificates, Class B-6 Certificates and
              Residual Certificates Pursuant to Rule 144A Under the 1933 Act
Exhibit F-2   Form of Transfer Affidavit and Agreement and Form of Transferor
              Affidavit in Connection with Transfer of Residual Certificates
Exhibit G     Form of Certification with respect to ERISA and the Code
Exhibit H     Form of Omnibus Assignment
Exhibit I     Form of Report Pursuant to Section 4.07
Schedule 1    Mortgage Loan Schedule
Schedule      2 Mortgage Loan Schedule with respect to Mortgage
              Loans with Loan-to-Value Ratios in excess of 80% that
              have Primary Mortgage Insurance

                                        x

<PAGE>

                   This Pooling and Servicing Agreement, is dated and effective
as of March 1, 2000, among SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., as
Depositor, CITICORP MORTGAGE, INC., as Master Servicer and Trust Administrator,
U.S. BANK TRUST NATIONAL ASSOCIATION, as Co-Trustee and U.S. BANK NATIONAL
ASSOCIATION, as Trustee.

                             PRELIMINARY STATEMENT:

                   The Depositor intends to sell pass-through certificates
(collectively, the "Certificates"), to be issued hereunder in multiple classes,
which in the aggregate will evidence the entire beneficial ownership interest in
REMIC I created hereunder.

                   As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the Mortgage Loans and certain other
related assets subject to this Agreement as a REMIC (as defined herein) for
federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC I". The Class R-I Certificates will be the sole class of
"residual interests" in REMIC I for purposes of the REMIC Provisions (as defined
herein). The following table irrevocably sets forth the designation, the REMIC I
Remittance Rate, the initial Uncertificated Balance and, solely for purposes of
satisfying Treasury regulation Section 1.860G-1(a)(4)(iii), the "latest possible
maturity date" for each of the REMIC I Regular Interests (as defined herein).
None of the REMIC I Regular Interests will be certificated.

<TABLE>
<CAPTION>
                                                                                        Latest Possible
Designation            REMIC I Remittance Rate    Initial Uncertificated Balance       Maturity Date(1)
-----------            -----------------------    ------------------------------       ----------------
<S>                    <C>                        <C>                                  <C>
   LT1                    9.00% per annum                 $1,648,708.35                 March 25, 2022

   LT2                    9.00% per annum                $77,657,158.00                 March 25, 2022

  LTIO                      Variable(2)                  $82,393,708.61(3)              March 25, 2022

  LTPO                         0.00%(4)                   $3,087,842.26                 March 25, 2022
</TABLE>
-----------------------------

(1)   Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
      regulations, the Distribution Date immediately following the maturity date
      for the Mortgage Loan with the latest maturity date has been designated as
      the "latest possible maturity date" for each REMIC I Regular Interest.

(2)   Calculated in accordance with the definition of "REMIC I Remittance Rate"
      herein.

(3)   Initial Uncertificated Notional Amount. As provided herein, REMIC I
      Regular Interest LTIO is entitled solely to distributions of interest
      accrued on the Uncertificated Notional Amount of such REMIC I Regular
      Interest LTIO.

(4)   REMIC I Regular Interest LTPO is not entitled to distributions of
      interest.

                  As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC I Regular Interests as a REMIC
for federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC II". The Class R-II Certificates will be the sole class of
"residual interests" in REMIC II for purposes of the REMIC Provisions under
federal income tax law. The following table irrevocably sets forth the
designation, the Pass-Through Rate, the initial Certificate Principal Balance
and, solely for purposes of satisfying Treasury regulation Section
1.860G-1(a)(4)(iii), the "latest possible maturity date" for each of the Classes
of Certificates.

<PAGE>

<TABLE>
<CAPTION>
                                                   Initial Aggregate Certificate        Latest Possible
Designation                Pass-Through Rate             Principal Balance             Maturity Date(1)
-----------                -----------------             -----------------             ----------------
<S>                        <C>                     <C>                                 <C>
Class A-1                     Variable(2)                 $77,657,158.00                March 25, 2022

Class A-2                     Variable(2)                 $77,657,158.00(3)             March 25, 2022

Class PO                        0.00%(4)                   $3,087,842.26                March 25, 2022

Class IO                      Variable(2)                 $82,393,708.61(3)             March 25, 2022

Class B-1                   9.00% per annum                  $618,000.00                March 25, 2022

Class B-2                   9.00% per annum                  $206,000.00                March 25, 2022

Class B-3                   9.00% per annum                  $206,000.00                March 25, 2022

Class B-4                   9.00% per annum                  $330,000.00                March 25, 2022

Class B-5                   9.00% per annum                  $123,000.00                March 25, 2022

Class B-6                   9.00% per annum                  $165,708.35                March 25, 2022
</TABLE>
-----------------------------

(1)   Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
      regulations, the Distribution Date immediately following the maturity date
      for the Mortgage Loan with the latest maturity date has been designated as
      the "latest possible maturity date" for each Class of Certificates.

(2)   Calculated in accordance with the definition of "Pass-Through Rate"
      herein.

(3)   Initial Notional Amount. As provided herein, the Class A-2 Certificates
      and the Class IO Certificates entitle the Holders thereof solely to
      distributions of interest accrued on the related Notional Amount of such
      Certificates.

(4)   The Class PO Certificates are not entitled to distributions of interest.

                                       -2-

<PAGE>

                  As of the Cut-off Date, the Original Mortgage Loans had an
aggregate Scheduled Principal Balance equal to $82,393,708.61.

                  As of the Closing Date, the REMIC I Regular Interests have an
aggregate Uncertificated Balance equal to $82,393,708.61.

                  In consideration of the mutual agreements herein contained,
the Depositor, the Master Servicer, the Trust Administrator and the Trustee
agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

                  SECTION 1.01. Defined Terms.

                  Whenever used in this Agreement, including, without
limitation, in the Preliminary Statement hereto, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article. Unless otherwise specified, all calculations
described herein shall be made on the basis of a 360-day year consisting of
twelve 30-day months.

                  "Administration Fee": The amount payable to the Trustee on
each Distribution Date pursuant to Section 8.05 as compensation for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties of the Trustee hereunder, which
amount shall equal one twelfth of the product of (i) the Administration Fee
Rate, multiplied by (ii) the aggregate Scheduled Principal Balance of the
Mortgage Loans and any REO Properties as of the second preceding Due Date (or,
in the case of the initial Distribution Date, as of the Cut-off Date). The fees
payable to each of the Trust Administrator and the Co-Trustee for all services
rendered by it in the exercise and performance of any of its respective powers
and duties hereunder will be paid by the Trustee out of the Administration Fee.

                  "Administration Fee Rate": 0.03125% per annum. The portion of
the Administration Fee accruing at a rate of 0.0125% per annum is payable to the
Trust Administrator.

                  "Advancing Person": As defined in Section 3.26 hereof.

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

                  "Agreement": This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.

                                       -3-

<PAGE>

                  "Allocated Realized Loss Amount": With respect to any
Distribution Date and any Class of Certificates, the sum of (i) any Realized
Losses allocated to such Class of Certificates on any Distribution Date and (ii)
the amount of any Allocated Realized Loss Amount for such Class of Certificates
remaining unpaid from the prior Distribution Date.

                  "Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.

                  "Available Distribution Amount": With respect to any
Distribution Date, an amount equal to (1) the sum of (a) the aggregate of the
amounts on deposit in the Collection Account and Distribution Account as of the
close of business on the related Determination Date, (b) the aggregate of any
amounts received in respect of an REO Property withdrawn from any REO Account
and deposited in the Distribution Account for such Distribution Date pursuant to
Section 3.23, (c) the aggregate of any amounts deposited in the Distribution
Account by the Master Servicer in respect of Prepayment Interest Shortfalls for
such Distribution Date pursuant to Section 3.24, (d) the aggregate of any P&I
Advances made by the Master Servicer for such Distribution Date pursuant to
Section 4.03, (e) the aggregate amount of any Trailing Recoveries received or
collected during the related Prepayment Period and (f) the aggregate of any
advances made by the Trustee for such Distribution Date pursuant to Section
7.02, reduced (to not less than zero) by (2) the sum of (x) the portion of the
amount described in clause (1)(a) above that represents (i) Monthly Payments on
the Mortgage Loans received from a Mortgagor on or prior to the Determination
Date but due during any Due Period subsequent to the related Due Period, (ii)
Principal Prepayments on the Mortgage Loans received after the related
Prepayment Period (together with any interest payments received with such
Principal Prepayments to the extent they represent the payment of interest
accrued on the Mortgage Loans during a period subsequent to the related
Prepayment Period), (iii) Liquidation Proceeds, Insurance Proceeds and Trailing
Recoveries received in respect of the Mortgage Loans after the related
Prepayment Period, (iv) amounts reimbursable or payable to the Depositor, the
Master Servicer, the Trustee, the Trust Administrator, the Seller or any
Sub-Servicer pursuant to Section 3.11(a) or Section 3.12 or otherwise payable in
respect of Extraordinary Trust Fund Expenses, (v) Stayed Funds, (vi) the portion
of the Administration Fee payable to the Trustee from the Distribution Account
pursuant to Section 8.05 and the portion of the Administration Fee payable to
the Trust Administrator from the Distribution Account pursuant to Section 8.05,
if the Master Servicer is not the Trust Administrator, (vii) the portion of the
Administration Fee payable to the Trust Administrator from the Collection
Account pursuant to Section 3.11(a)(x), if the Master Servicer is the Trust
Administrator) and (viii) amounts deposited in the Collection Account or the
Distribution Account in error, and (y) amounts reimbursable to the Trustee for
an advance made pursuant to Section 7.02(b), which advance the Trustee has
determined to be nonrecoverable from the Stayed Funds in respect of which it was
made.

                  "Bankruptcy Amount": As of any date of determination, an
amount equal to the excess, if any, of (A) $100,000 over (B) the aggregate
amount of Bankruptcy Losses allocated solely to the Subordinate Certificates in
accordance with Section 4.04.

                                       -4-

<PAGE>

                  "Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11
of the United States Code), as amended.

                  "Bankruptcy Loss": With respect to any Mortgage Loan, a
Realized Loss resulting from a Deficient Valuation or Debt Service Reduction.

                  "Book-Entry Certificate": Any Certificate registered in the
name of the Depository or its nominee. Initially, the Book-Entry Certificates
will be the Class A Certificates of each Class, the Class B-1 Certificates, the
Class B-2 Certificates and the Class B-3 Certificates.

                  "Book-Entry Custodian": The custodian appointed pursuant to
Section 5.01.

                  "Business Day": Any day other than a Saturday, a Sunday or a
day on which banking or savings and loan institutions in the State of California
or the State of New York, or in the city in which the Corporate Trust Office of
the Trustee is located, are authorized or obligated by law or executive order to
be closed.

                  "Cash-out Refinancing": A Refinanced Mortgage Loan the
proceeds of which were in excess of the principal balance of any existing first
mortgage on the related Mortgaged Property and related closing costs, and were
used to pay any such existing first mortgage, related closing costs and
subordinate mortgages on the related Mortgaged Property.

                  "Certificate": Any one of the Mortgage Pass-Through
Certificates, Series 2000-1, issued under this Agreement.

                  "Certificate Factor": With respect to any Class of
Certificates as of any Distribution Date, a fraction, expressed as a decimal
carried to six places, the numerator of which is the aggregate Certificate
Principal Balance or Notional Amount of such Class of Certificates on such
Distribution Date (after giving effect to any distributions of principal and
allocations of Realized Losses and Extraordinary Trust Fund Expenses in
reduction of the Certificate Principal Balance or Notional Amount of such Class
of Certificates to be made on such Distribution Date), and the denominator of
which is the initial aggregate Certificate Principal Balance or Notional Amount
of such Class of Certificates as of the Closing Date.

                  "Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, except that a
Disqualified Organization or a Non-United States Person shall not be a Holder of
a Residual Certificate for any purposes hereof and, solely for the purposes of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of the Depositor or the Master Servicer or any Affiliate thereof shall be
deemed not to be outstanding and the Voting Rights to which it is entitled shall
not be taken into account in determining whether the requisite percentage of
Voting Rights necessary to effect any such consent has been obtained, except as
otherwise provided in Section 11.01. The Trustee and the Trust Administrator may
conclusively rely upon a certificate of the Depositor or the Master Servicer in
determining whether a Certificate is held by an Affiliate thereof. All
references herein to "Holders" or "Certificateholders" shall reflect the rights
of Certificate Owners as they may indirectly exercise such rights through the
Depository

                                       -5-

<PAGE>

and participating members thereof, except as otherwise specified herein;
provided, however, that the Trustee and the Trust Administrator shall be
required to recognize as a "Holder" or "Certificateholder" only the Person in
whose name a Certificate is registered in the Certificate Register.

                  "Certificate Owner": With respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Certificate as reflected on the
books of the Depository or on the books of a Depository Participant or on the
books of an indirect participating brokerage firm for which a Depository
Participant acts as agent.

                  "Certificate Principal Balance": With respect to any
Certificate, other than a Class IO Certificate or a Class A-2 Certificate, as of
any date of determination, the Certificate Principal Balance of such Certificate
on the Distribution Date immediately prior to such date of determination,
reduced by the aggregate of (a) all distributions of principal made thereon on
such immediately prior Distribution Date and (b) without duplication of amounts
described in clause (a) above, reductions in the Certificate Principal Balance
thereof in connection with allocations thereto of Realized Losses on the
Mortgage Loans and Extraordinary Trust Fund Expenses on such immediately prior
Distribution Date (or, in the case of any date of determination up to and
including the initial Distribution Date, the initial Certificate Principal
Balance of such Certificate, as stated on the face thereof); provided, however,
that the Certificate Principal Balance of each Subordinate Certificate of the
Class of Subordinate Certificates outstanding with the highest numerical
designation at any given time shall not be greater than the Percentage Interest
evidenced by such Certificate multiplied by the excess, if any, of (A) the then
aggregate Stated Principal Balance of the Mortgage Loans over (B) the then
aggregate Certificate Principal Balances of all other Classes of Certificates
then outstanding. The Class IO Certificates and the Class A-2 Certificates shall
not have Certificate Principal Balances and shall not be entitled to any
distributions of principal.

                  "Certificate Register": The register maintained pursuant to
Section 5.02.

                  "Class": Collectively, all of the Certificates bearing the
same class designation.

                  "Class A Certificate": Any Class A-1 Certificate or Class A-2
Certificate.

                  "Class A-1 Certificate": Any one of the Class A-1 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-1 and evidencing a Regular Interest in REMIC II for
purposes of the REMIC Provisions.

                  "Class A-2 Certificate": Any one of the Class A-2 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-2 and evidencing a Regular Interest in REMIC II for
purposes of the REMIC Provisions. The Class A-2 Certificates shall not have a
Certificate Principal Balance and shall not be entitled to any distributions of
principal.

                                       -6-

<PAGE>

                  "Class B Percentage": Any one of the Class B-1 Percentage, the
Class B-2 Percentage, the Class B-3 Percentage, the Class B-4 Percentage, the
Class B-5 Percentage or the Class B-6 Percentage.

                  "Class B-1 Certificate": Any one of the Class B-1 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-5 and evidencing a Regular Interest in REMIC II for
purposes of the REMIC Provisions.

                  "Class B-1 Percentage": With respect to any Distribution Date,
a fraction, expressed as a percentage, the numerator of which is the excess, if
any, of the aggregate Certificate Principal Balance of the Class B-1
Certificates immediately prior to such date over the aggregate amount, if any,
payable to the Holders of the Class B-1 Certificates on such date pursuant to
Section 4.01(b)(ii)(Z), and the denominator of which is the sum of (i) the
aggregate of the Non-Class PO Percentage of the Scheduled Principal Balance of
each of the Mortgage Loans, plus (ii) the aggregate of the Non-Class PO
Percentage of the Scheduled Principal Balance of each of the REO Properties, in
each case before reduction for any Realized Losses on such Distribution Date.

                  "Class B-2 Certificate": Any one of the Class B-2 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-6 and evidencing a Regular Interest in REMIC II for
purposes of the REMIC Provisions.

                  "Class B-2 Percentage": With respect to any Distribution Date,
a fraction, expressed as a percentage, the numerator of which is the excess, if
any, of the aggregate Certificate Principal Balance of the Class B-2
Certificates immediately prior to such date over the aggregate amount, if any,
payable to the Holders of the Class B-2 Certificates on such date pursuant to
Section 4.01(b)(ii)(Z), and the denominator of which is the sum of (i) the
aggregate of the Non-Class PO Percentage of the Scheduled Principal Balance of
each of the Mortgage Loans, plus (ii) the aggregate of the Non-Class PO
Percentage of the Scheduled Principal Balance of each of the REO Properties, in
each case before reduction for any Realized Losses on such Distribution Date.

                  "Class B-3 Certificate": Any one of the Class B-3 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-7 and evidencing a Regular Interest in REMIC II for
purposes of the REMIC Provisions.

                  "Class B-3 Percentage": With respect to any Distribution Date,
a fraction, expressed as a percentage, the numerator of which is the excess, if
any, of the aggregate Certificate Principal Balance of the Class B-3
Certificates immediately prior to such date over the aggregate amount, if any,
payable to the Holders of the Class B-3 Certificates on such date pursuant to
Section 4.01(b)(ii)(Z), and the denominator of which is the sum of (i) the
aggregate of the Non-Class PO Percentage of the Scheduled Principal Balance of
each of the Mortgage Loans, plus (ii) the aggregate of the Non-Class PO
Percentage of the Scheduled Principal Balance of each of the REO Properties, in
each case before reduction for any Realized Losses on such Distribution Date.

                                       -7-

<PAGE>

                  "Class B-4 Certificate": Any one of the Class B-4 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-8 and evidencing a Regular Interest in REMIC II for
purposes of the REMIC Provisions.

                  "Class B-4 Percentage": With respect to any Distribution Date,
a fraction, expressed as a percentage, the numerator of which is the excess, if
any, of the aggregate Certificate Principal Balance of the Class B-4
Certificates immediately prior to such date over the aggregate amount, if any,
payable to the Holders of the Class B-4 Certificates on such date pursuant to
Section 4.01(b)(ii)(Z), and the denominator of which is the sum of (i) the
aggregate of the Non-Class PO Percentage of the Scheduled Principal Balance of
each of the Mortgage Loans, plus (ii) the aggregate of the Non-Class PO
Percentage of the Scheduled Principal Balance of each of the REO Properties, in
each case before reduction for any Realized Losses on such Distribution Date.

                  "Class B-5 Certificate": Any one of the Class B-5 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-9 and evidencing a Regular Interest in REMIC II for
purposes of the REMIC Provisions.

                  "Class B-5 Percentage": With respect to any Distribution Date,
a fraction, expressed as a percentage, the numerator of which is the excess, if
any, of the aggregate Certificate Principal Balance of the Class B-5
Certificates immediately prior to such date over the aggregate amount, if any,
payable to the Holders of the Class B-5 Certificates on such date pursuant to
Section 4.01(b)(ii)(Z), and the denominator of which is the sum of (i) the
aggregate of the Non-Class PO Percentage of the Scheduled Principal Balance of
each of the Mortgage Loans, plus (ii) the aggregate of the Non-Class PO
Percentage of the Scheduled Principal Balance of each of the REO Properties, in
each case before reduction for any Realized Losses on such Distribution Date.

                  "Class B-6 Certificate": Any one of the Class B-6 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-10 and evidencing a Regular Interest in REMIC II for
purposes of the REMIC Provisions.

                  "Class B-6 Percentage": With respect to any Distribution Date,
a fraction, expressed as a percentage, the numerator of which is the excess, if
any, of the aggregate Certificate Principal Balance of the Class B-6
Certificates immediately prior to such date over the aggregate amount, if any,
payable to the Holders of the Class B-6 Certificates on such date pursuant to
Section 4.01(b)(ii)(Z), and the denominator of which is the sum of (i) the
aggregate of the Non-Class PO Percentage of the Scheduled Principal Balance of
each of the Mortgage Loans, plus (ii) the aggregate of the Non-Class PO
Percentage of the Scheduled Principal Balance of each of the REO Properties, in
each case before reduction for any Realized Losses on such Distribution Date.

                  "Class IO Certificate": Any one of the Class IO Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-3 and evidencing a Regular Interest in REMIC II for
purposes of the REMIC Provisions. The Class IO Certificates shall not have a
Certificate Principal Balance and shall not be entitled to any distributions of
principal.

                                       -8-

<PAGE>

                  "Class IO Mortgage Loan": Each Mortgage Loan with a Net
Mortgage Rate equal to or greater than 9.00% per annum.

                  "Class PO Certificate": Any one of the Class PO Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-4 and evidencing a Regular Interest in REMIC II for
purposes of the REMIC Provisions. The Class PO Certificates shall have a
Pass-Through Rate of 0% per annum and shall not be entitled to any distributions
of interest.

                  "Class PO Mortgage Loan": Each Mortgage Loan with a Net
Mortgage Rate below 9.00% per annum.

                  "Class PO Percentage": With respect to each Class PO Mortgage
Loan, the quotient of (i) 9.00% per annum minus the related Net Mortgage Rate
divided by (ii) 9.00% per annum. With respect to each Class IO Mortgage Loan, 0%
per annum.

                  "Class PO Principal Distribution Amount": For any Distribution
Date, an amount equal to the aggregate of:

                  (a) the sum of the following:

                         (i) the related Class PO Percentage of the principal
                  portion of each Monthly Payment due during the related Due
                  Period in respect of each Class PO Mortgage Loan whether or
                  not received;

                        (ii) the related Class PO Percentage of the principal
                  portion of all Insurance Proceeds, Trailing Recoveries and
                  Liquidation Proceeds (other than amounts described in clause
                  (c) below) received in respect of each Class PO Mortgage Loan
                  during the related Prepayment Period (other than any such
                  Class PO Mortgage Loan that was purchased, sold or replaced
                  pursuant to or as contemplated by Section 2.03, Section
                  3.16(c) or Section 9.01 during the related Prepayment Period),
                  net of any portion thereof that represents a recovery of
                  principal for which an advance was made by the Master Servicer
                  pursuant to Section 4.03 in respect of a preceding
                  Distribution Date;

                       (iii) the related Class PO Percentage of the Stated
                  Principal Balance (calculated immediately prior to such
                  Distribution Date) of each Class PO Mortgage Loan that was
                  purchased, sold or replaced pursuant to or as contemplated by
                  Section 2.03, Section 3.16(c) or Section 9.01 during the
                  related Prepayment Period;

                        (iv) [reserved]; and

                         (v) in connection with the substitution of one or more
                  Qualified Substitute Mortgage Loans for one or more Deleted
                  Mortgage Loans which were Class PO Mortgage Loans pursuant to
                  Section 2.03 during the related Prepayment Period, the

                                       -9-

<PAGE>

                  excess, if any, of (A) the related Class PO Percentage of the
                  aggregate of the Stated Principal Balances (calculated as of
                  the respective dates of substitution) of such Deleted Mortgage
                  Loans, net of the aggregate of the related Class PO Percentage
                  of the principal portions of the Monthly Payments due during
                  the related Prepayment Period (to the extent received from the
                  related Mortgagor or advanced by the Master Servicer and
                  distributed pursuant to Section 4.01 on the Distribution Date
                  in the related Prepayment Period) in respect of each such
                  Deleted Mortgage Loan that was replaced prior to the
                  Distribution Date in the related Prepayment Period, over (B)
                  the related Class PO Percentage of the Stated Principal
                  Balances (calculated as of the respective dates of
                  substitution) of such Qualified Substitute Mortgage Loans;

                  (b) the related Class PO Percentage of all Principal
         Prepayments received in respect of each Class PO Mortgage Loan during
         the related Prepayment Period;

                  (c) with respect to any Class PO Mortgage Loan which was the
         subject of a Final Recovery Determination in the related Prepayment
         Period, the related Class PO Percentage of the Stated Principal Balance
         of such Mortgage Loan at the time of such Final Recovery Determination
         (net of the principal portion of any Realized Loss allocated to the
         Class PO Certificates) to the extent of the principal portion of all
         Liquidation Proceeds with respect to such Class PO Mortgage Loan; and

                  (d) in the case of any Distribution Date subsequent to the
         initial Distribution Date, an amount equal to the excess, if any, of
         the Class PO Principal Distribution Amount for the immediately
         preceding Distribution Date, over the aggregate distributions of
         principal made in respect of the Class PO Certificates on such
         immediately preceding Distribution Date pursuant to Section 4.01 to the
         extent that any such amounts are not attributable to Realized Losses
         which were allocated to the Subordinate Certificates pursuant to
         Section 4.04.

                  "Class R-I Certificate": Any one of the Class R-I Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-11 and evidencing the Residual Interest in REMIC I
for purposes of the REMIC Provisions.

                  "Class R-II Certificate": Any one of the Class R-II
Certificates executed, authenticated and delivered by the Trustee, substantially
in the form annexed hereto as Exhibit A-12 and evidencing the Residual Interest
in REMIC II for purposes of the REMIC Provisions.

                  "Closing Date": March 30, 2000.

                  "Co-Trustee": U.S. Bank Trust National Association, or its
successor in interest.

                  "Code":  The Internal Revenue Code of 1986.

                  "Collection Account": The account or accounts created and
maintained by the Master Servicer pursuant to Section 3.10(a), which shall be
entitled, "Citicorp Mortgage, Inc., as Master

                                      -10-

<PAGE>

Servicer for U.S. Bank National Association, as Trustee, in trust for the
registered holders of Salomon Brothers Mortgage Securities VII, Inc., Mortgage
Pass-Through Certificates, Series 2000- 1." The Collection Account must be an
Eligible Account.

                  "Commission": The Securities and Exchange Commission.

                  "Corporate Trust Office": The principal corporate trust office
of the Trustee at which at any particular time its corporate trust business in
connection with this Agreement shall be administered, which office at the date
of the execution of this instrument is located at 180 East Fifth Street, St.
Paul, Minnesota 55101, or at such other address as the Trustee may designate
from time to time by notice to the Certificateholders, the Depositor, the Trust
Administrator and the Master Servicer.

                  "Cut-off Date": With respect to each Original Mortgage Loan,
March 1, 2000. With respect to all Qualified Substitute Mortgage Loans, their
respective dates of substitution. References herein to the "Cut-off Date," when
used with respect to more than one Mortgage Loan, shall be to the respective
Cut-off Dates for such Mortgage Loans.

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

                  "Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.

                  "Definitive Certificates":  As defined in Section 5.01(b).

                  "Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.

                  "Depositor": Salomon Brothers Mortgage Securities VII, Inc., a
Delaware corporation, or its successor in interest.

                  "Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.

                  "Depository Institution": Any depository institution or trust
company, including the Trustee, that (a) is incorporated under the laws of the
United States of America or any State thereof,

                                      -11-

<PAGE>

(b) is subject to supervision and examination by federal or state banking
authorities and (c) has outstanding unsecured commercial paper or other
short-term unsecured debt obligations that are rated A-1 by S&P (or a comparable
rating if S&P is not the Rating Agency).

                  "Depository Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.

                  "Determination Date": With respect to each Distribution Date,
the 18th day of the calendar month in which such Distribution Date occurs or, if
such 18th day is not a Business Day, the Business Day immediately preceding such
18th day.

                  "Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to customers, the performance of any construction work thereon or any use
of such REO Property in a trade or business conducted by REMIC I, other than
through an Independent Contractor; provided, however, that the Trustee (or the
Master Servicer on behalf of the Trustee) shall not be considered to Directly
Operate an REO Property solely because the Trustee (or the Master Servicer on
behalf of the Trustee) establishes rental terms, chooses tenants, enters into or
renews leases, deals with taxes and insurance, or makes decisions as to repairs
or capital expenditures with respect to such REO Property.

                  "Disqualified Organization": Any of the following: (i) the
United States, any State or political subdivision thereof, any possession of the
United States, or any agency or instrumentality of any of the foregoing (other
than an instrumentality which is a corporation if all of its activities are
subject to tax and, except for Freddie Mac, a majority of its board of directors
is not selected by such governmental unit), (ii) any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (including the tax imposed by Section 511 of the Code on
unrelated business taxable income), (iv) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code, (v) an "electing
large partnership" and (vi) any other Person so designated by the Trustee based
upon an Opinion of Counsel that the holding of an Ownership Interest in a
Residual Certificate by such Person may cause either REMIC I or REMIC II or any
Person having an Ownership Interest in any Class of Certificates (other than
such Person) to incur a liability for any federal tax imposed under the Code
that would not otherwise be imposed but for the Transfer of an Ownership
Interest in a Residual Certificate to such Person. The terms "United States,"
"State" and "international organization" shall have the meanings set forth in
Section 7701 of the Code or successor provisions.

                  "Distribution Account": The trust account or accounts created
and maintained by the Trustee pursuant to Section 3.10(b) which shall be
entitled "U.S. Bank National Association, as Trustee, in trust for the
registered holders of Salomon Brothers Mortgage Securities VII, Inc., Mortgage
Pass-Through Certificates, Series 2000-1." The Distribution Account must be an
Eligible Account.

                                      -12-

<PAGE>

                  "Distribution Date": The 25th day of any month, or if such
25th day is not a Business Day, the Business Day immediately following such 25th
day, commencing in April 2000.

                  "DOL": The United States Department of Labor or any successor
in interest.

                  "DOL Regulations": The regulations promulgated by the DOL at
29 C.F.R. ss.2510.3- 101.

                  "Due Date": With respect to each Distribution Date, the first
day of the calendar month in which such Distribution Date occurs, which is the
day of the month on which the Monthly Payment is due on a Mortgage Loan,
exclusive of any days of grace.

                  "Due Period": With respect to any Distribution Date, the
period commencing on the second day of the calendar month preceding the calendar
month in which such Distribution Date occurs and ending on the related Due Date.

                  "Eligible Account": Any of (i) an account or accounts
maintained with a federal or state chartered depository institution or trust
company the short-term unsecured debt obligations of which are rated A-1 by S&P
(or comparable rating S&P is not the Rating Agency) at the time any amounts are
held on deposit therein, (ii) an account or accounts the deposits in which are
fully insured by the FDIC or (iii) a trust account or accounts maintained with
the corporate trust department of a federal or state chartered depository
institution or trust company acting in its fiduciary capacity. Eligible Accounts
may bear interest.

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

                  "Estate in Real Property": A fee simple estate in a parcel of
land.

                  "Excess Bankruptcy Loss": Any Bankruptcy Loss, or portion
thereof, which exceeds the then applicable Bankruptcy Amount.

                  "Excess Fraud Loss": Any Fraud Loss, or portion thereof, which
exceeds the then applicable Fraud Loss Amount.

                  "Excess Loss": Any Excess Bankruptcy Loss, Excess Special
Hazard Loss, Excess Fraud Loss or Extraordinary Loss.

                  "Excess Special Hazard Loss": Any Special Hazard Loss, or
portion thereof, that exceeds the then applicable Special Hazard Amount.

                  "Extraordinary Loss": Any Realized Loss or portion thereof
caused by or resulting from:

            (i)   nuclear or chemical reaction or nuclear radiation or
                  radioactive or chemical contamination, all whether controlled
                  or uncontrolled and whether such loss be direct

                                      -13-

<PAGE>

                  or indirect, proximate or remote or be in whole or in part
                  caused by, contributed to or aggravated by a peril covered by
                  the definition of the term "Special Hazard Loss";

           (ii)   hostile or warlike action in time of peace or war, including
                  action in hindering, combating or defending against an actual,
                  impending or expected attack by any government or sovereign
                  power, DE JURE or DE FACTO, or by any authority maintaining or
                  using military, naval or air forces, or by military, naval or
                  air forces, or by an agent of any such government, power,
                  authority or forces;

          (iii)   any weapon of war employing atomic fission or radioactive
                  forces whether in time of peace or war, and

           (iv)   insurrection, rebellion, revolution, civil war, usurped power
                  or action taken by governmental authority in hindering,
                  combating or defending against such an occurrence, seizure or
                  destruction under quarantine or customs regulations,
                  confiscation by order of any government or public authority,
                  or risks of contraband or illegal transactions or trade.

              "Extraordinary Trust Fund Expenses": Any amounts reimbursable to
the Master Servicer or the Depositor pursuant to Section 6.03, any amounts
payable from the Distribution Account in respect of taxes pursuant to Section
10.01(g)(iii), any amounts reimbursable to the Trustee or the Trust
Administrator from the Trust Fund pursuant to Section 8.05 and any other costs,
expenses, liabilities and losses borne by the Trust Fund (exclusive of any cost,
expense, liability or loss that is specific to a particular Mortgage Loan or REO
Property and is taken into account in calculating a Realized Loss in respect
thereof) for which the Trust Fund has not and, in the reasonable good faith
judgment of the Trustee, shall not, obtain reimbursement or indemnification from
any other Person.

              "Fannie Mae": Fannie Mae, formerly known as the Federal National
Mortgage Association, or any successor thereto.

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

              "Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Seller, the Depositor or the Master Servicer pursuant to or as
contemplated by Section 2.03, Section 3.16(c) or Section 9.01), a determination
made by the Master Servicer that all Liquidation Proceeds have been recovered.
The Master Servicer shall maintain records of each Final Recovery Determination
made thereby.

              "Fraud Loss": Any Realized Loss or portion thereof sustained by
reason of a default arising from intentional fraud, dishonesty or
misrepresentation in connection with the related Mortgage Loan, including by
reason of the denial of coverage under any related Primary Mortgage Insurance
Policy.

                                      -14-

<PAGE>

              "Fraud Loss Amount": As of any date of determination after the
Cut-off Date, an amount equal to: (X) prior to the third anniversary of the
Cut-off Date, 1.00% of the aggregate Stated Principal Balance of the Original
Mortgage Loans as of the Cut-off Date (initially $823,937) minus the aggregate
amount of Fraud Losses allocated solely to the Subordinate Certificates in
accordance with Section 4.04 since the Cut-off Date up to such date of
determination and (Y) from the third to the fifth anniversary of the Cut-off
Date, an amount equal to (1) the lesser of (a) the Fraud Loss Amount as of the
most recent anniversary of the Cut-off Date and (b) 0.50% of the aggregate
outstanding principal balance of the Mortgage Loans as of the most recent
anniversary of the Cut-off Date minus (2) the Fraud Losses allocated solely to
the Subordinate Certificates in accordance with Section 4.04 since the most
recent anniversary of the Cut-off Date up to such date of determination.
On and after the fifth anniversary of the Cut-off Date the Fraud Loss Amount
shall be zero.

              "Freddie Mac": Freddie Mac, formally known as the Federal Home
Loan Mortgage Corporation, or any successor thereto.

              "Independent": When used with respect to any specified Person, any
such Person who (a) is in fact independent of the Depositor, the Master Servicer
and their respective Affiliates, (b) does not have any direct financial interest
in or any material indirect financial interest in the Depositor, the Master
Servicer or any Affiliate thereof, and (c) is not connected with the Depositor,
the Master Servicer or any Affiliate thereof as an officer, employee, promoter,
underwriter, trustee, partner, director or Person performing similar functions;
provided, however, that a Person shall not fail to be Independent of the
Depositor, the Master Servicer or any Affiliate thereof merely because such
Person is the beneficial owner of 1% or less of any class of securities issued
by the Depositor or the Master Servicer or any Affiliate thereof, as the case
may be.

              "Independent Contractor": Either (i) any Person (other than the
Master Servicer) that would be an "independent contractor" with respect to REMIC
I within the meaning of Section 856(d)(3) of the Code if REMIC I were a real
estate investment trust (except that the ownership tests set forth in that
section shall be considered to be met by any Person that owns, directly or
indirectly,
35% or more of any Class of Certificates), so long as REMIC I does not receive
or derive any income from such Person and provided that the relationship between
such Person and REMIC I is at arm's length, all within the meaning of Treasury
Regulation Section 1.856-4(b)(5), or (ii) any other Person (including the Master
Servicer) if the Trustee has received an Opinion of Counsel to the effect that
the taking of any action in respect of any REO Property by such Person, subject
to any conditions therein specified, that is otherwise herein contemplated to be
taken by an Independent Contractor will not cause such REO Property to cease to
qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code (determined without regard to the exception applicable for purposes of
Section 860D(a) of the Code), or cause any income realized in respect of such
REO Property to fail to qualify as Rents from Real Property.

              "Insurance Proceeds": Proceeds of any Primary Mortgage Insurance
Policy, title policy, hazard policy or other insurance policy covering a
Mortgage Loan, to the extent such proceeds are not to be applied to the
restoration of the related Mortgaged Property or released to the Mortgagor in
accordance with the procedures that the Master Servicer would follow in
servicing mortgage loans

                                      -15-

<PAGE>

held for its own account, subject to the terms and conditions of the related
Mortgage Note and Mortgage.

              "Interest Accrual Period": With respect to any Distribution Date
and any Class of Certificates (other than the Class A Certificates), the
one-month period ending on the last day of the calendar month preceding the
month in which such Distribution Date occurs. With respect to any Distribution
Date and the Class A Certificates, the period commencing on the Distribution
Date of the month immediately preceding the month in which such Distribution
Date occurs (or, in the case of the first Distribution Date, commencing on March
25, 2000) and ending on the day preceding such Distribution Date.

              "Interest Determination Date": With respect to the Class A
Certificates and any Interest Accrual Period therefor (other than the initial
Interest Accrual Period), the second London Business Day preceding the
commencement of such Interest Accrual Period.

              "Interest Distribution Amount": With respect to any Class of
Certificates (other than the Class PO Certificates) for any Distribution Date,
an amount equal to one month's interest accrued during the most recently ended
Interest Accrual Period at the applicable Pass-Through Rate on the Certificate
Principal Balance or Notional Amount thereof immediately prior to such
Distribution Date. The Class PO Certificates are not entitled to distributions
in respect of interest and, accordingly, will not accrue interest. The Interest
Distribution Amount for any Class of Certificates (a) will also include, in the
case of any Distribution Date subsequent to the initial Distribution Date, the
excess, if any, of the Interest Distribution Amount in respect of such
Certificates for the immediately preceding Distribution Date, over the aggregate
distributions of interest made in respect of such Certificates pursuant to
Section 4.01(a) on such immediately preceding Distribution Date, and (b) will be
reduced, in the case of any Distribution Date, by the amount of any Prepayment
Interest Shortfalls (to the extent not covered by payments by the Master
Servicer pursuant to Section 3.24) and Relief Act Interest Shortfalls that were
allocated to such Certificates on such Distribution Date pursuant to Section
1.02. The Interest Distribution Amount for any Class of Certificates will be
based on a 360 day year consisting of twelve 30 day Interest Accrual Periods.

         "Late Collections": With respect to any Mortgage Loan, all amounts
received subsequent to the Determination Date immediately following any Due
Period, whether as late payments of Monthly Payments or as Insurance Proceeds,
Liquidation Proceeds or otherwise, which represent late payments or collections
of principal and/or interest due (without regard to any acceleration of payments
under the related Mortgage and Mortgage Note) but delinquent for such Due Period
and not previously recovered.

              "Liquidation Event": With respect to any Mortgage Loan, any of the
following events: (i) such Mortgage Loan is paid in full; (ii) a Final Recovery
Determination is made as to such Mortgage Loan; or (iii) such Mortgage Loan is
removed from REMIC I by reason of its being purchased, sold or replaced pursuant
to or as contemplated by Section 2.03, Section 3.16(c) or Section 9.01. With
respect to any REO Property, either of the following events: (i) a Final
Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from REMIC I by reason of its being purchased pursuant to
Section 9.01.

                                      -16-

<PAGE>

              "Liquidation Proceeds": The amount (including any Insurance
Proceeds or amounts received in respect of the rental of any REO Property prior
to REO Disposition) received by the Master Servicer in connection with (i) the
taking of all or a part of a Mortgaged Property by exercise of the power of
eminent domain or condemnation, (ii) the liquidation of a defaulted Mortgage
Loan through a trustee's sale, foreclosure sale or otherwise, or (iii) the
repurchase, substitution or sale of a Mortgage Loan or an REO Property pursuant
to or as contemplated by Section 2.03, Section 3.16(c), Section 3.23 or Section
9.01.

              "Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at such date and the denominator of which
is the Value of the related Mortgaged Property.

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

              "Master Servicer": Citicorp Mortgage, Inc. or any successor master
servicer appointed as herein provided, in its capacity as Master Servicer
hereunder.

              "Master Servicer Event of Default": One or more of the events
described in Section 7.01.

              "Master Servicer Remittance Date": With respect to any
Distribution Date, 3:00 p.m. New York time on the 24th day of the calendar month
in which such Distribution Date occurs or, if such 24th day is not a Business
Day, the Business Day immediately preceding such 24th day; provided, however,
that if such immediately preceding Business Day is the Determination Date, the
Master Servicer Remittance Date shall be the next succeeding Business Day.

              "Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined: (a) after giving effect to (i) any Deficient Valuation and/or
Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction
in the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Master Servicer pursuant to Section 3.07; and (c) on the assumption that all
other amounts, if any, due under such Mortgage Loan are paid when due.

              "Mortgage": The mortgage, deed of trust or other instrument
creating a first lien on, or first priority security interest in, a Mortgaged
Property securing a Mortgage Note.

              "Mortgage File": The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.

                                      -17-

<PAGE>

              "Mortgage Loan": Each mortgage loan transferred and assigned to
the Trustee pursuant to Section 2.01 or Section 2.03(d) of this Agreement, as
from time to time held as a part of REMIC I, the Mortgage Loans so held being
identified in the Mortgage Loan Schedule.

              "Mortgage Loan Purchase Agreement": The agreement between the
Depositor and the Seller regarding the transfer of the Mortgage Loans by the
Seller to or at the direction of the Depositor, substantially in the form of
Exhibit D annexed hereto.

              "Mortgage Loan Remittance Rate": With respect to any Mortgage Loan
or REO Property, as of any date of determination, the then applicable Net
Mortgage Rate in respect thereof plus the Administration Fee Rate.

              "Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans included in REMIC I on such date, attached hereto as Schedule 1. The
Mortgage Loan Schedule shall set forth the following information with respect to
each Mortgage Loan:

            (i)   the Master Servicer's Mortgage Loan identifying number;

           (ii)   the Mortgagor's first and last name;

          (iii)   the street address of the Mortgaged Property including the
                  state and zip code;

           (iv)   a code indicating whether the Mortgaged Property is
                  owner-occupied;

            (v)   the type of Residential Dwelling constituting the Mortgaged
                  Property;

           (vi)   the original months to maturity;

          (vii)   the original date of the mortgage;

         (viii)   the Loan-to-Value Ratio at origination;

           (ix)   the Mortgage Rate;

            (x)   the date on which the first Monthly Payment was due on the
                  Mortgage Loan;

           (xi)   the stated maturity date;

          (xii)   the amount of the Monthly Payment at origination;

         (xiii)   the amount of the Monthly Payment as of the Cut-off Date;

          (xiv)   the last Due Date on which a Monthly Payment was actually
                  applied to the unpaid Stated Principal Balance;

                                      -18-

<PAGE>

           (xv)   the original principal amount of the Mortgage Loan;

          (xvi)   the Scheduled Principal Balance of the Mortgage Loan as of the
                  close of business on the Cut-off Date;

         (xvii)   a code indicating the purpose of the Mortgage Loan (I.E.,
                  purchase financing, Rate/Term Refinancing, Cash-Out
                  Refinancing);

         (xviii)  a code indicating the documentation style (i.e., full,
                  alternative or reduced);

          (xix)   a code indicating if the Mortgage Loan is subject to a Primary
                  Mortgage Insurance Policy;

           (xx)   the Value of the Mortgaged Property;

          (xxi)   the sale price of the Mortgaged Property, if applicable;

         (xxii)   the actual unpaid principal balance of the Mortgage Loan as of
                  the Cut-off Date;

         (xxiii)  the Servicing Fee; and

         (xxiv)   the Class PO Percentage.

                  The Mortgage Loan Schedule shall set forth the following
information with respect to the Mortgage Loans in the aggregate as of the
Cut-off Date: (1) the number of Mortgage Loans; (2) the current principal
balance of the Mortgage Loans; (3) the weighted average Mortgage Rate of the
Mortgage Loans; (4) the weighted average maturity of the Mortgage Loans; (5) the
Scheduled Principal Balance of the Mortgage Loans as of the close of business on
the Cut-off Date (not taking into account any Principal Prepayments received on
the Cut-off Date); and (6) the amount of the Monthly Payment as of the Cut-off
Date. The Mortgage Loan Schedule shall be amended from time to time by the
Depositor in accordance with the provisions of this Agreement. With respect to
any Qualified Substitute Mortgage Loan, Cut-off Date shall refer to the related
Cut-off Date for such Mortgage Loan, determined in accordance with the
definition of Cut-off Date herein.

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

                  "Mortgage Pool": The pool of Mortgage Loans, identified on
Schedule 1 from time to time, and any REO Properties acquired in respect
thereof.

                  "Mortgage Rate": With respect to each Mortgage Loan, the
annual rate at which interest accrues on such Mortgage Loan from time to time in
accordance with the provisions of the related Mortgage Note, without regard to
any reduction thereof as a result of a Debt Service Reduction or operation of
the Relief Act.

                                      -19-

<PAGE>

                  "Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property improved by a Residential Dwelling.

                  "Mortgagor":  The obligor on a Mortgage Note.

                  "Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property) as of any date of determination, a per annum rate of
interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus
the sum of the Servicing Fee Rate and the Administration Fee Rate.

                  "New Lease": Any lease of REO Property entered into on behalf
of REMIC I, including any lease renewed or extended on behalf of REMIC I, if
REMIC I has the right to renegotiate the terms of such lease.

                  "Non-Class PO Percentage": With respect to each Class IO
Mortgage Loan, 100%. With respect to each Class PO Mortgage Loan, 100% less the
Class PO Percentage.

                  "Nonrecoverable P&I Advance": Any P&I Advance previously made
or proposed to be made in respect of a Mortgage Loan or REO Property that, in
the good faith business judgment of the Master Servicer, will not or, in the
case of a proposed P&I Advance, would not be ultimately recoverable from related
late payments, Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan
or REO Property as provided herein.

                  "Non-United States Person": Any Person other than a United
States Person.

                  "Notional Amount": For any Distribution Date, (a) with respect
to the Class IO Certificates, the Uncertificated Notional Amount of REMIC I
Regular Interest LTIO for such Distribution Date and (b) with respect to the
Class A-2 Certificates, the Uncertificated Balance of REMIC I Regular Interest
LT2 for such Distribution Date.

                  "Officers' Certificate": A certificate signed by the Chairman
of the Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), and by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Seller or the Depositor, as
applicable; with respect to the Master Servicer, any officer who is authorized
to act for the Master Servicer in matters relating to this Agreement, and whose
action is binding upon the Master Servicer, initially including those
individuals whose names appear on the list of authorized officers delivered at
the closing.

                  "One-Month LIBOR": With respect to the Class A Certificates
and the initial Interest Accrual Period, 5.8800% per annum. With respect to the
Class A Certificates and any Interest Accrual Period therefor (other than the
initial Interest Accrual Period), the rate determined by the Trust Administrator
on the related Interest Determination Date on the basis of the offered rate for
one-month U.S. dollar deposits, as such rate appears on Telerate Page 3750 as of
11:00 a.m. (London time) on such Interest Determination Date; provided that if
such rate does not appear on Telerate Page 3750, the rate for such date will be
determined on the basis of the offered rates of the Reference

                                      -20-

<PAGE>

Banks for one-month U.S. dollar deposits, as of 11:00 a.m. (London time) on such
Interest Determination Date. In such event, the Trust Administrator will request
the principal London office of each of the Reference Banks to provide a
quotation of its rate. If on such Interest Determination Date, two or more
Reference Banks provide such offered quotations, One-Month LIBOR for the related
Interest Accrual Period shall be the arithmetic mean of such offered quotations
(rounded upwards if necessary to the nearest whole multiple of 1/16%). If on
such Interest Determination Date, fewer than two Reference Banks provide such
offered quotations, One-Month LIBOR for the related Interest Accrual Period
shall be the higher of (i) One-Month LIBOR as determined on the previous
Interest Determination Date and (ii) the Reserve Interest Rate. Notwithstanding
the foregoing, if, under the priorities described above, One-Month LIBOR for an
Interest Determination Date would be based on One-Month LIBOR for the previous
Interest Determination Date for the third consecutive Interest Determination
Date, the Trust Administrator shall select an alternative comparable index (over
which the Trust Administrator has no control), used for determining one- month
Eurodollar lending rates that is calculated and published (or otherwise made
available) by an independent party.

                  "Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Depositor, the Master Servicer
or the Trust Administrator acceptable to the Trustee, except that any opinion of
counsel relating to (a) the qualification of either REMIC I or REMIC II as a
REMIC or (b) compliance with the REMIC Provisions must be an opinion of
Independent counsel.

                  "Original Mortgage Loan": Any of the Mortgage Loans included
in REMIC I as of the Closing Date.

                  "Overcollateralization": With respect to any Distribution
Date, the excess, if any, of (a) the aggregate Stated Principal Balances of the
Mortgage Loans and REO Properties immediately following such Distribution Date
over (b) the sum of the aggregate Certificate Principal Balances of the
Certificates at the time of the allocation of any Realized Loss or Extraordinary
Trust Expense.

                  "Ownership Interest": As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.

                  "Pass-Through Rate": With respect to any Class of Certificates
(other than the Class A Certificates, the Class IO Certificates, the Class PO
Certificates and the Residual Certificates) for any Distribution Date, 9.00% per
annum. With respect to the Class A-1 Certificates for any Distribution Date, a
per annum rate equal to One-Month LIBOR plus 0.60% per annum, subject to a
maximum rate of 9.00% per annum and a minimum rate of 0.60% per annum. With
respect to the Class A-2 Certificates for any Distribution Date, a per annum
rate equal to 8.40% per annum minus One-Month LIBOR, subject to a maximum rate
of 8.40% per annum and a minimum rate of 0.00% per annum. With respect to the
Class IO Certificates, for any Distribution Date, the Weighted Average Stripped
Interest Rate for such Distribution Date which shall equal 100% of the interest
on REMIC I Regular Interest LTIO. The Class PO Certificates shall have a
Pass-Through Rate of 0% per annum and shall not be entitled to any distributions
of interest.

                                      -21-

<PAGE>

                  "Percentage Interest": With respect to any Class of
Certificates, the portion of the respective Class evidenced by such Certificate,
expressed as a percentage, the numerator of which is the initial Certificate
Principal Balance or Notional Amount represented by such Certificate, and the
denominator of which is the initial aggregate Certificate Principal Balance or
Notional Amount of all of the Certificates of such Class. The Book-Entry
Certificates are issuable only in Percentage Interests corresponding to initial
Certificate Principal Balances or Notional Amounts of $100,000 and integral
multiples of $1.00 in excess thereof. The Class PO Certificates, Class IO
Certificates, the Class B-4 Certificates, the Class B-5 Certificates and the
Class B-6 Certificates are issuable only in Percentage Interests corresponding
to the initial Certificate Principal Balances or Notional Amounts of $100,000
and integral multiples of $1,000 in excess thereof; provided, however, that a
single Certificate of each such Class of Certificates may be issued having a
Percentage Interest corresponding to the remainder of the aggregate initial
Certificate Principal Balance or Notional Amount of such Class or to an
otherwise authorized denomination for such Class plus such remainder. The
Residual Certificates are issuable only in Percentage Interests of 20% and
multiples thereof.

                  "Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, the Master Servicer, the Trustee,
the Trust Administrator or any of their respective Affiliates:

                           (i) direct obligations of, or obligations fully
         guaranteed as to timely payment of principal and interest by, the
         United States or any agency or instrumentality thereof, provided such
         obligations are backed by the full faith and credit of the United
         States;

                           (ii) demand and time deposits in, certificates of
         deposit of, or bankers' acceptances (which shall each have an original
         maturity of not more than 90 days and, in the case of bankers'
         acceptances, shall in no event have an original maturity of more than
         365 days or a remaining maturity of more than 30 days) denominated in
         United States dollars and issued by, any Depository Institution;

                           (iii) repurchase obligations with respect to any
         security described in clause (i) above entered into with a Depository
         Institution (acting as principal);

                           (iv) securities bearing interest or sold at a
         discount that are issued by any corporation incorporated under the laws
         of the United States of America or any state thereof and that are rated
         by the Rating Agency in its highest long-term unsecured rating category
         at the time of such investment or contractual commitment providing for
         such investment;

                           (v) commercial paper (including both
         non-interest-bearing discount obligations and interest-bearing
         obligations payable on demand or on a specified date not more than 30
         days after the date of acquisition thereof) that is rated by the Rating
         Agency in its highest short-term unsecured debt rating available at the
         time of such investment;

                           (vi) units of money market funds, including money
         market funds advised by the Trustee or an Affiliate thereof, that have
         been rated "AAA" by S & P; and

                                      -22-

<PAGE>

                           (viii) if previously confirmed in writing to the
         Trustee, any other demand, money market or time deposit, or any other
         obligation, security or investment, as may be acceptable to the Rating
         Agency as a permitted investment of funds backing securities having
         ratings equivalent to its highest initial rating of the Senior
         Certificates;

provided, however, that no instrument described hereunder shall evidence either
the right to receive (a) only interest with respect to the obligations
underlying such instrument or (b) both principal and interest payments derived
from obligations underlying such instrument and the interest and principal
payments with respect to such instrument provide a yield to maturity at par
greater than 120% of the yield to maturity at par of the underlying obligations.

                  "Permitted Transferee": Any Transferee of a Residual
Certificate other than a Disqualified Organization or Non-United States Person.

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

                  "P&I Advance": As to any Mortgage Loan or REO Property, any
advance made by the Master Servicer in respect of any Distribution Date pursuant
to Section 4.03.

                  "Plan": Any employee benefit plan or certain other retirement
plans and arrangements, including individual retirement accounts and annuities,
Keogh plans and bank collective investment funds and insurance company general
or separate accounts in which such plans, accounts or arrangements are invested,
that are subject to ERISA and Section 4975 of the Code.

                  "Prepayment Assumption": A prepayment rate for the Mortgage
Loans of 20% CPR. The Prepayment Assumption is used solely for determining the
accrual of original issue discount on the Certificates for federal income tax
purposes. A CPR (or Constant Prepayment Rate) represents an annualized constant
assumed rate of prepayment each month of a pool of mortgage loans relative to
its outstanding principal balance for the life of such pool.

                  "Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Mortgage Loan that was during the related Prepayment
Period the subject of a Principal Prepayment in full or in part that was applied
by the Master Servicer to reduce the outstanding principal balance of such loan
on a date preceding the Due Date in the succeeding Prepayment Period, an amount
equal to interest at the applicable Mortgage Loan Remittance Rate on the amount
of such Principal Prepayment for the number of days commencing on the date on
which the prepayment is applied and ending on the last day of the related
Prepayment Period. The obligations of the Master Servicer in respect of any
Prepayment Interest Shortfall are set forth in Section 3.24.

                  "Prepayment Period": With respect to any Distribution Date,
the calendar month preceding the calendar month in which such Distribution Date
occurs.

                                      -23-

<PAGE>

                  "Primary Mortgage Insurance Policy": Each primary policy of
mortgage guaranty insurance in effect as represented in the Mortgage Loan
Purchase Agreement and as so indicated on the Mortgage Loan Schedule, or any
replacement policy therefor obtained by the Master Servicer or any Sub-Servicer
pursuant to Section 3.13. Any Mortgage Loan which has a Primary Mortgage
Insurance Policy is set forth on Schedule 2 attached hereto.

                  "Prime Rate": The lesser of (i) the per annum rate of
interest, publicly announced from time to time by Chase Manhattan Bank at its
principal office in the City of New York, as its prime or base lending rate (any
change in such rate of interest to be effective on the date such change is
announced by Chase Manhattan Bank) and (ii) the maximum rate permissible under
applicable usury or similar laws limiting interest rates.

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

                  "Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.03, Section
3.16(c) or Section 9.01, and as confirmed by an Officers' Certificate from the
Master Servicer to the Trustee, an amount equal to the sum of: (i) 100% of the
Stated Principal Balance thereof as of the date of purchase (or such other price
as provided in Section 9.01), (ii) in the case of (x) a Mortgage Loan, accrued
interest on such Stated Principal Balance at the applicable Mortgage Loan
Remittance Rate in effect from time to time from the Due Date as to which
interest was last covered by a payment by the Mortgagor or an advance by the
Master Servicer, which payment or advance had as of the date of purchase been
distributed pursuant to Section 4.01, through the end of the calendar month in
which the purchase is to be effected, and (y) an REO Property, the sum of (1)
accrued interest on such Stated Principal Balance at the applicable Mortgage
Loan Remittance Rate in effect from time to time from the Due Date as to which
interest was last covered by a payment by the Mortgagor or an advance by the
Master Servicer through the end of the calendar month immediately preceding the
calendar month in which such REO Property was acquired, plus (2) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such purchase is to be effected, minus the total of all
net rental income, Insurance Proceeds, Liquidation Proceeds and P&I Advances
that as of the date of purchase had been distributed as or to cover REO Imputed
Interest pursuant to Section 4.01; (iii) any unreimbursed Servicing Advances and
P&I Advances and any unpaid Servicing Fees allocable to such Mortgage Loan or
REO Property; (iv) any amounts previously withdrawn from the Collection Account
in respect of such Mortgage Loan or REO Property pursuant to Sections
3.11(a)(ix) and Section 3.16(b); and (v) in the case of a Mortgage Loan required
to be purchased pursuant to Section 2.03, expenses reasonably incurred or to be
incurred by the Master Servicer or the Trustee in respect of the breach or
defect giving rise to the purchase obligation.

                  "Qualified Insurer": Any insurer which meets the requirements
of Fannie Mae and Freddie Mac.

                                      -24-

<PAGE>

                  "Qualified Substitute Mortgage Loan": A mortgage loan
substituted for a Deleted Mortgage Loan pursuant to the terms of this Agreement
which must, on the date of such substitution, (i) have an outstanding principal
balance, after application of all scheduled payments of principal and interest
due during or prior to the month of substitution, not in excess of the Scheduled
Principal Balance of the Deleted Mortgage Loan as of the Due Date in the
calendar month during which the substitution occurs, (ii) have a Mortgage Rate
not less than (and not more than one percentage point in excess of) the Mortgage
Rate of the Deleted Mortgage Loan, (iii) be covered under a Primary Mortgage
Insurance Policy if such Qualified Substitute Mortgage Loan has a Loan-to-Value
Ratio in excess of 80% and the Deleted Mortgage Loan was covered by a Primary
Mortgage Insurance Policy, (iv) have a remaining term to maturity not greater
than (and not more than one year less than) that of the Deleted Mortgage Loan,
(v) have the same Due Date as the Due Date on the Deleted Mortgage Loan, (vi)
have a Loan-to-Value Ratio as of the date of substitution equal to or lower than
the Loan-to-Value Ratio of the Deleted Mortgage Loan as of such date, (vii)
[intentionally omitted]; and (viii) conform to each representation and warranty
set forth in Section 6 of the Mortgage Loan Purchase Agreement applicable to the
Deleted Mortgage Loan. In the event that one or more mortgage loans are
substituted for one or more Deleted Mortgage Loans, the amounts described in
clause (i) hereof shall be determined on the basis of aggregate principal
balances, the Mortgage Rates described in clause (ii) hereof shall be determined
on the basis of weighted average Mortgage Rates, the Net Mortgage Rates
described in clause (iii) hereof shall be satisfied as to each such mortgage
loan, the terms described in clause (iv) shall be determined on the basis of
weighted average remaining terms to maturity, the Loan-to-Value Ratios described
in clause (vi) hereof shall be satisfied as to each such mortgage loan and,
except to the extent otherwise provided in this sentence, the representations
and warranties described in clause (viii) hereof must be satisfied as to each
Qualified Substitute Mortgage Loan or in the aggregate, as the case may be.

                  "Rate/Term Refinancing": A Refinanced Mortgage Loan, the
proceeds of which are not in excess of the existing first mortgage loan on the
related Mortgaged Property and related closing costs, and were used exclusively
to satisfy the then existing first mortgage loan of the Mortgagor on the related
Mortgaged Property and to pay related closing costs.

                  "Rating Agency": S&P or its successor. If such agency or its
successor is no longer in existence, "Rating Agency" shall be such nationally
recognized statistical rating agency, or other comparable Person, designated by
the Depositor, written notice of which designation shall be given to the
Trustee, the Trust Administrator and the Master Servicer.

                  "Realized Loss": With respect to each Mortgage Loan as to
which a Final Recovery Determination has been made, an amount (not less than
zero) equal to (i) the unpaid principal balance of such Mortgage Loan as of the
commencement of the calendar month in which the Final Recovery Determination was
made, plus (ii) accrued interest from the Due Date as to which interest was last
paid by the Mortgagor through the end of the calendar month in which such Final
Recovery Determination was made, calculated in the case of each calendar month
during such period (A) at an annual rate equal to the annual rate at which
interest was then accruing on such Mortgage Loan and (B) on a principal amount
equal to the Stated Principal Balance of such Mortgage Loan as of the close of
business on the Distribution Date during such calendar month, plus (iii) any
amounts previously withdrawn from the Collection Account in respect of such
Mortgage Loan pursuant to

                                      -25-

<PAGE>

Section 3.11(a)(ix) and Section 3.16(b), minus (iv) the proceeds, if any,
received in respect of such Mortgage Loan prior to the date such Final Recovery
Determination was made, net of amounts that are payable therefrom to the Master
Servicer with respect to such Mortgage Loan pursuant to Section 3.11(a)(iii).

                  With respect to any REO Property as to which a Final Recovery
Determination has been made an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of REMIC I, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the calendar month in which such
Final Recovery Determination was made, calculated in the case of each calendar
month during such period (A) at an annual rate equal to the annual rate at which
interest was then accruing on the related Mortgage Loan and (B) on a principal
amount equal to the Stated Principal Balance of the related Mortgage Loan as of
the close of business on the Distribution Date during such calendar month, plus
(iii) any amounts previously withdrawn from the Collection Account in respect of
the related Mortgage Loan pursuant to Section 3.11(a)(ix) and Section 3.16(b),
minus (iv) the aggregate of all P&I Advances and Servicing Advances made by the
Master Servicer in respect of such REO Property or the related Mortgage Loan and
any unpaid Servicing Fees for which the Master Servicer has been or, in
connection with such Final Recovery Determination, will be reimbursed pursuant
to Section 3.11(a)(iii) or Section 3.23 out of rental income, Insurance Proceeds
and Liquidation Proceeds received in respect of such REO Property, minus (v) the
total of all net rental income, Insurance Proceeds and Liquidation Proceeds
received in respect of such REO Property that has been, or in connection with
such Final Recovery Determination, will be transferred to the Distribution
Account pursuant to Section 3.23.

                  With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation.

                  With respect to each Mortgage Loan which has become the
subject of a Debt Service Reduction, the portion, if any, of the reduction in
each affected Monthly Payment attributable to a reduction in the Mortgage Rate
imposed by a court of competent jurisdiction. Each such Realized Loss shall be
deemed to have been incurred on the Due Date for each affected Monthly Payment.

                  "Record Date": With respect to each Distribution Date and any
Class A Certificate in book-entry form, the Business Day immediately preceding
such Distribution Date. With respect to each Distribution Date and any other
Certificates, including any Definitive Certificates, the last Business Day of
the month immediately preceding the month in which such Distribution Date
occurs.

                  "Reference Banks": Bankers Trust Company, Barclay's Bank PLC,
The Tokyo Mitsubishi Bank and National Westminster Bank PLC and their successors
in interest; provided, however, that if any of the foregoing banks are not
suitable to serve as a Reference Bank, then any leading banks selected by the
Trust Administrator which are engaged in transactions in Eurodollar

                                      -26-

<PAGE>

deposits in the international Eurocurrency market (i) with an established place
of business in London, (ii) not controlling, under the control of or under
common control with the Depositor or any Affiliate thereof and (iii) which have
been designated as such by the Trust Administrator.

                  "Refinanced Mortgage Loan": A Mortgage Loan the proceeds of
which were not used to purchase the related Mortgaged Property.

                  "Regular Certificate": Any Senior Certificate or Subordinate
Certificate.

                  "Regular Interest": A "regular interest" in a REMIC within the
meaning of Section 860G(a)(1) of the Code.

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

                  "Relief Act Interest Shortfall": With respect to any
Distribution Date and any Mortgage Loan, any reduction in the amount of interest
collectible on such Mortgage Loan for the most recently ended calendar month as
a result of the application of the Relief Act.

                  "REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.

                  "REMIC I": The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
with respect to which a REMIC election is to be made, consisting of: (i) such
Mortgage Loans as from time to time are subject to this Agreement, together with
the Mortgage Files relating thereto, and together with all collections thereon
and proceeds thereof; (ii) any REO Property, together with all collections
thereon and proceeds thereof; (iii) the Trustee's rights with respect to the
Mortgage Loans under all insurance policies required to be maintained pursuant
to this Agreement and any proceeds thereof; (iv) the Depositor's rights under
the Mortgage Loan Purchase Agreement (including any security interests created
thereby and excluding Section 17 thereof); and (v) the Collection Account, the
Distribution Account and any REO Account and such assets that are deposited
therein from time to time and any investments thereof, together with any and all
income, proceeds and payments with respect thereto. Notwithstanding the
foregoing, however, REMIC I specifically excludes all payments and other
collections of principal and interest due on the Mortgage Loans on or before the
Cut-off Date.

                  "REMIC I Regular Interest": Any of the four separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a "regular interest" in REMIC I. Each REMIC I Regular Interest
(other than REMIC I Regular Interest LTPO) shall accrue interest at the related
REMIC I Remittance Rate in effect from time to time, and shall be entitled to
distributions of principal (other than REMIC I Regular Interest LTIO), subject
to the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance or Uncertificated Notional Amount as set forth in the
Preliminary Statement hereto. The designations for the respective REMIC I
Regular Interests are set forth in the Preliminary Statement hereto.

                                      -27-

<PAGE>

                  "REMIC I Regular Interest LT1": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I which shall accrue interest at the
REMIC I Remittance Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Balance as set forth in the
Preliminary statement hereto.

                  "REMIC I Regular Interest LT2": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I which shall accrue interest at the
REMIC I Remittance Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Balance as set forth in the
Preliminary statement hereto.

                  "REMIC I Regular Interest LTIO": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I which shall accrue interest at the
REMIC I Remittance Rate on its Uncertificated Notional Amount in effect from
time to time, but which shall not be entitled to any distributions of principal.
The initial Uncertificated Notional Amount is as set forth in the Preliminary
statement hereto.

                  "REMIC I Regular Interest LTPO": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I which shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Balance as set forth in the
Preliminary statement hereto. REMIC I Regular Interest LTPO shall not be
entitled to distributions of interest.

                  "REMIC I Remittance Rate": With respect to REMIC I Regular
Interest LT1 and REMIC I Regular Interest LT2, 9.00% per annum. With respect to
REMIC I Regular Interest LTIO, the Weighted Average Stripped Interest Rate for
such Distribution Date. REMIC I Regular Interest LTPO shall have a REMIC I
Remittance Rate of 0% per annum and shall not be entitled to any distribution of
interest.

                  "REMIC II": The segregated pool of assets consisting of all of
the REMIC I Regular Interests conveyed in trust to the Trustee for the benefit
of the REMIC II Certificateholders pursuant to Section 2.07, with respect to
which a separate REMIC election is to be made.

                  "REMIC II Certificate": Any Regular Certificate or Class R-II
Certificate.

                  "REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of the Code, and related provisions, and proposed, temporary
and final regulations and published rulings, notices and announcements
promulgated thereunder, as the foregoing may be in effect from time to time.

                  "Remittance Report": A report in form and substance acceptable
to the Trust Administrator and the Trustee prepared by the Master Servicer
pursuant to Section 4.03 with such additions, deletions and modifications as
agreed to by the Trustee, the Trust Administrator and the Master Servicer.

                                      -28-

<PAGE>

                  "Rents from Real Property": With respect to any REO Property,
gross income of the character described in Section 856(d) of the Code as being
included in the term "rents from real property."

                  "REO Account": The account or accounts maintained by the
Master Servicer in respect of an REO Property pursuant to Section 3.23.

                  "REO Disposition": The sale or other disposition of an REO
Property on behalf of REMIC I.

                  "REO Imputed Interest": As to any REO Property, for any
calendar month during which such REO Property was at any time part of REMIC I,
one month's interest at the applicable Mortgage Loan Remittance Rate on the
Stated Principal Balance of such REO Property (or, in the case of the first such
calendar month, of the related Mortgage Loan if appropriate) as of the close of
business on the Distribution Date in such calendar month.

                  "REO Property": A Mortgaged Property acquired by the Master
Servicer on behalf of REMIC I through foreclosure or deed-in-lieu of
foreclosure, as described in Section 3.23.

                  "Request for Release": A release signed by a Servicing
Officer, in the form of Exhibit E-1 or Exhibit E-2 attached hereto.

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

                  "Residential Dwelling": Any one of the following: (i) an
attached or detached one- family dwelling, (ii) a detached two- to four-family
dwelling, (iii) a one-family dwelling unit in a Fannie Mae eligible condominium
project, or (iv) a detached one-family dwelling in a planned unit development,
none of which is a co-operative, mobile or manufactured home (as defined in 42
United States Code, Section 5402(6)).

                  "Residual Certificate": Any one of the Class R-I Certificates
or Class R-II Certificates.

                  "Residual Interest": The sole class of "residual interests" in
a REMIC within the meaning of Section 860G(a)(2) of the Code.

                  "Responsible Officer": When used with respect to the Trustee,
the Co-Trustee or the Trust Administrator, the Chairman or Vice Chairman of the
Board of Directors or Trustees, the

                                      -29-

<PAGE>

Chairman or Vice Chairman of the Executive or Standing Committee of the Board of
Directors or Trustees, the President, the Chairman of the Committee on Trust
Matters, any vice president, any assistant vice president, the Secretary, any
assistant secretary, the Treasurer, any assistant treasurer, the Cashier, any
assistant cashier, any trust officer or assistant trust officer, the Controller
and any assistant controller or any other officer of the Trustee, the Co-Trustee
or the Trust Administrator, as the case may be, customarily performing functions
similar to those performed by any of the above designated officers and, with
respect to a particular matter, to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.

                  "Scheduled Principal Balance": With respect to any Mortgage
Loan: (a) as of the Cut-off Date, the outstanding principal balance of such
Mortgage Loan as of such date, net of the principal portion of all unpaid
Monthly Payments, if any, due on or before such date; (b) as of any Due Date
subsequent to the Cut-off Date up to and including the Due Date in the calendar
month in which a Liquidation Event occurs with respect to such Mortgage Loan,
the Scheduled Principal Balance of such Mortgage Loan as of the Cut-off Date,
minus the sum of (i) the principal portion of each Monthly Payment due on or
before such Due Date but subsequent to the Cut-off Date, whether or not
received, (ii) all Principal Prepayments received before such Due Date but after
the Cut-off Date, (iii) the principal portion of all Liquidation Proceeds and
Insurance Proceeds received before such Due Date but after the Cut-off Date, net
of any portion thereof that represents principal due (without regard to any
acceleration of payments under the related Mortgage and Mortgage Note) on a Due
Date occurring on or before the date on which such proceeds were received and
(iv) any Realized Loss incurred with respect thereto as a result of a Deficient
Valuation occurring before such Due Date, but only to the extent such Realized
Loss represents a reduction in the portion of principal of such Mortgage Loan
not yet due (without regard to any acceleration of payments under the related
Mortgage and Mortgage Note) as of the date of such Deficient Valuation; and (c)
as of any Due Date subsequent to the occurrence of a Liquidation Event with
respect to such Mortgage Loan, zero. With respect to any REO Property: (a) as of
any Due Date subsequent to the date of its acquisition on behalf of REMIC I up
to and including the Due Date in the calendar month in which a Liquidation Event
occurs with respect to such REO Property, an amount (not less than zero) equal
to the Scheduled Principal Balance of the related Mortgage Loan as of the Due
Date in the calendar month in which such REO Property was acquired; and (b) as
of any Due Date subsequent to the occurrence of a Liquidation Event with respect
to such REO Property, zero.

                  "Seller": Salomon Brothers Realty Corp. or its successor in
interest, in its capacity as seller under the Mortgage Loan Purchase Agreement.

                  "Senior Certificate": Any Class A Certificate, Class PO
Certificate or Class IO Certificate.

                  "Senior Percentage": With respect to any Distribution Date,
the lesser of (a) 100% and (b) a fraction, expressed as a percentage, the
numerator of which is the excess, if any, of the aggregate Certificate Principal
Balance of the Class A-1 Certificates for such Distribution Date over the
aggregate amount, if any, payable to the Holders of the Class A Certificates on
such date pursuant to clause (d) of the definition of "Senior Principal
Distribution Amount," and the denominator of which is the sum of (i) the
aggregate of the Non-Class PO Percentage of the

                                      -30-

<PAGE>

Scheduled Principal Balance of each of the Mortgage Loans, plus (ii) the
aggregate of the Non-Class PO Percentage of the Scheduled Principal Balance of
each of the REO Properties, in each case before reduction for any Realized
Losses on such Distribution Date.

                  "Senior Prepayment Percentage": With respect to any
Distribution Date within the range indicated below, the percentage as indicated
below:

<TABLE>
<CAPTION>
                Distribution Date                                        Senior Prepayment Percentage
-------------------------------------------------       --------------------------------------------------------------
<S>                                                     <C>
April 2000 through March 2005                           100%

April 2005 through March 2006                           Senior Percentage, plus 70% of the Subordinate
                                                        Percentage

April 2006 through March 2007                           Senior Percentage, plus 60% of the Subordinate
                                                        Percentage

April 2007 through March 2008                           Senior Percentage, plus 40% of the Subordinate
                                                        Percentage

April 2008 through March 2009                           Senior Percentage, plus 20% of the Subordinate
                                                        Percentage

April 2009 and thereafter                               Senior Percentage;
</TABLE>

provided, however, no reduction to the Senior Prepayment Percentage described
above shall be made as of any Distribution Date unless (i) the outstanding
principal balance of the Mortgage Loans delinquent 60 days or more (including
REO Properties and Mortgage Loans in foreclosure) averaged over the last six
months does not exceed 50% of the sum of the then current Certificate Principal
Balances of the Subordinate Certificates and (ii) Realized Losses on the
Mortgage Loans to date are less than the then applicable Trigger Amount. The
"Trigger Amount" for any Distribution Date occurring after the first five years
will be as follows: for any Distribution Date during the sixth year after the
Closing Date, 30% of the initial sum of the Certificate Principal Balances of
the Subordinate Certificates; for any Distribution Date during the seventh year
after the Closing Date, 35% of the initial sum of the Certificate Principal
Balances of the Subordinate Certificates; for any Distribution Date during the
eighth year after the Closing Date, 40% of the initial sum of the Certificate
Principal Balances of the Subordinate Certificates; for any Distribution Date
during the ninth year after the Closing Date, 45% of the initial sum of the
Certificate Principal Balances of the Subordinate Certificates; and for any
Distribution Date during the tenth year (or any year thereafter) after the
Closing Date, 50% of the initial sum of the Certificate Principal Balances of
the Subordinate Certificates. Notwithstanding the foregoing, upon a reduction of
the Certificate Principal Balances of the Senior Certificates to zero, the
Senior Prepayment Percentage will equal 0%. In addition, on any Distribution
Date on which the Senior Percentage exceeds the initial Senior Percentage, the
Senior Prepayment Percentage shall be 100%.

                  "Senior Principal Distribution Amount": For any Distribution
Date, an amount equal to the sum of:

                                      -31-

<PAGE>

                  (a) the product of (x) the then-applicable Senior Percentage
         and (y) the sum of the following:

                         (i) the related Non-Class PO Percentage of the
                  aggregate of the principal portions of all Monthly Payments
                  due during the related Due Period in respect of the Mortgage
                  Loans whether or not received;

                        (ii) the related Non-Class PO Percentage of the
                  principal portion of all Insurance Proceeds, Trailing
                  Recoveries and Liquidation Proceeds (other than amounts
                  described in clause (c) below) received in respect of the
                  Mortgage Loans during the related Prepayment Period (other
                  than any such Mortgage Loan that was purchased, sold or
                  replaced pursuant to or as contemplated by Section 2.03,
                  Section 3.16(c) or Section 9.01 during the related Prepayment
                  Period), net of any portion thereof that represents a recovery
                  of principal for which an advance was made by the Master
                  Servicer pursuant to Section 4.03 in respect of a preceding
                  Distribution Date;

                       (iii) the related Non-Class PO Percentage of the Stated
                  Principal Balance (calculated immediately prior to such
                  Distribution Date) of each Mortgage Loan that was purchased,
                  sold or replaced pursuant to or as contemplated by Section
                  2.03, Section 3.16(c) or Section 9.01 during the related
                  Prepayment Period;

                        (iv) [reserved]; and

                         (v) in connection with the substitution of one or more
                  Qualified Substitute Mortgage Loans for one or more Deleted
                  Mortgage Loans pursuant to Section 2.03 during the related
                  Prepayment Period, the excess, if any, of (A) the aggregate of
                  the related Non-Class PO Percentage of the Stated Principal
                  Balances (calculated as of the respective dates of
                  substitution) of such Deleted Mortgage Loans, net of the
                  aggregate of the related Non-Class PO Percentage of the
                  principal portions of the Monthly Payments due during the
                  related Prepayment Period (to the extent received from the
                  related Mortgagor or advanced by the Master Servicer and
                  distributed pursuant to Section 4.01 on the Distribution Date
                  in the related Prepayment Period) in respect of each such
                  Deleted Mortgage Loan that was replaced prior to the
                  Distribution Date in the related Prepayment Period, over (B)
                  the aggregate of the related Non-Class PO Percentage of the
                  Stated Principal Balances (calculated as of the respective
                  dates of substitution) of such Qualified Substitute Mortgage
                  Loans;

                  (b) the product of (x) the then-applicable Senior Prepayment
         Percentage and (y) the related Non-Class PO Percentage of all Principal
         Prepayments received in respect of the Mortgage Loans during the
         related Prepayment Period;

                  (c) with respect to any Mortgage Loan which was the subject of
         a Final Recovery Determination in the related Prepayment Period, the
         least of (a) the then-applicable Senior Prepayment Percentage of the
         Non-Class PO Percentage multiplied by the net Liquidation Proceeds and
         Insurance Proceeds allocable to principal in respect of such Mortgage
         Loans,

                                      -32-

<PAGE>

         (b) the then-applicable Senior Percentage of the Non-Class PO
         Percentage multiplied by the Scheduled Principal Balance of such
         Mortgage Loan at the time of such Final Recovery Determination; and (c)
         the principal portion of all amounts collected in connection with such
         a Final Recovery Determination to the extent not distributed to the
         Class PO Certificates; and

                  (d) in the case of any Distribution Date subsequent to the
         initial Distribution Date, an amount equal to the excess, if any, of
         the Senior Principal Distribution Amount for the immediately preceding
         Distribution Date, over the aggregate distributions of principal made
         in respect of the Class A Certificates on such immediately preceding
         Distribution Date pursuant to Section 4.01 to the extent that any such
         amounts are not attributable to Realized Losses which were allocated to
         the Subordinate Certificates pursuant to Section 4.04.

                  "Servicing Account": The account or accounts created and
maintained pursuant to Section 3.09.

                  "Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Master Servicer in connection with a default,
delinquency or other unanticipated event by the Master Servicer in the
performance of its servicing obligations, including, but not limited to, the
cost of (i) the preservation, restoration and protection of a Mortgaged
Property, (ii) any enforcement or judicial proceedings, including foreclosures,
in respect of a particular Mortgage Loan, (iii) the management (including
reasonable fees in connection therewith) and liquidation of any REO Property,
and (iv) the performance of its obligations under Section 3.01, Section 3.09,
Section 3.13, Section 3.14, Section 3.16 and Section 3.23. The Master Servicer
shall not be required to make any Servicing Advance in respect of a Mortgage
Loan or REO Property that, in the good faith business judgment of the Master
Servicer, would not be ultimately recoverable from related Insurance Proceeds or
Liquidation Proceeds on such Mortgage Loan or REO Property as provided herein.

                  "Servicing Fee": With respect to each Mortgage Loan and for
any calendar month, an amount equal to one month's interest (or in the event of
any payment of interest which accompanies a Principal Prepayment in full made by
the Mortgagor during such calendar month, interest for the number of days
covered by such payment of interest) at the applicable Servicing Fee Rate on the
same principal amount on which interest on such Mortgage Loan accrues for such
calendar month. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation.

                  "Servicing Fee Rate": 0.25% per annum.

                  "Servicing Officer": Any employee of the Master Servicer
involved in, or responsible for, the administration and servicing of the
Mortgage Loans, whose name appear on a list of Servicing Officers furnished by
the Master Servicer to the Trustee, the Trust Administrator and the Depositor on
the Closing Date, as such list may from time to time be amended.

                  "Single Certificate": With respect to any Class of
Certificates (other than the Residual Certificates), a hypothetical Certificate
of such Class evidencing a Percentage Interest for such Class corresponding to
an initial Certificate Principal Balance or Notional Amount of $1,000.

                                      -33-

<PAGE>

With respect to the Residual Certificates, a hypothetical Certificate of such
Class evidencing a 20% Percentage Interest in such Class.

                  "Special Hazard Amount": Initially, an amount equal to
$1,430,689. As of each anniversary of the Cut-off Date, an amount equal to the
lesser of (a) the Special Hazard Amount as of the immediately preceding
anniversary of the Cut-off Date minus the aggregate amount of Special Hazard
Losses allocated solely to the Subordinate Certificates in accordance with
Section 4.04 since such immediately preceding anniversary and (b) the Adjustment
Amount (as defined below) as most recently calculated. For each anniversary of
the Cut-off Date, the Adjustment Amount shall be equal to the greatest of (i)
the product of 1.00% multiplied by the outstanding principal balance of the
Mortgage Loans on the Distribution Date immediately preceding such anniversary,
(ii) the aggregate outstanding principal balance (as of the immediately
preceding Distribution Date) of the Mortgage Loans secured by Mortgaged
Properties located in the same zip code area in the State of California and
(iii) twice the aggregate outstanding principal balance (as of the immediately
preceding Distribution Date) of the largest Mortgage Loan.

                  "Special Hazard Loss": Any Realized Loss or portion thereof
not in excess of the lesser of the cost of repair or replacement of a Mortgaged
Property suffered by such Mortgaged Property by reason of damage caused by
certain hazards (including earthquakes, mudflows, and, to a limited extent,
floods) not insured against under the hazard insurance policies or fire or flood
insurance policies required to be maintained in respect of such Mortgaged
Property pursuant to Section 3.14, or by reason of the application of any
co-insurance provision. Special Hazard Losses shall not include any
Extraordinary Loss or any of the following:

                (i)        wear and tear, deterioration, rust or corrosion,
                           mold, wet or dry rot; inherent vice or latent defect;
                           animals, birds, vermin, insects;

               (ii)        smog, smoke, vapor, liquid or dust discharge from
                           agricultural or industrial operations; pollution;
                           contamination;

              (iii)        settling, subsidence, cracking, shrinkage, bulging or
                           expansion of pavements, foundations, walls, floors,
                           roofs or ceilings; and

               (iv)        errors in design, faulty workmanship or faulty
                           materials, unless the collapse of the property or a
                           part thereof ensues and then only for the ensuing
                           loss.

                  "S&P": Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., or its successor in interest.

                  "Startup Day": With respect to each of REMIC I and REMIC II,
the day designated as such pursuant to Section 10.01(b) hereof.

                  "Stated Principal Balance": With respect to any Mortgage Loan:
(a) as of any date of determination up to but not including the Distribution
Date on which the proceeds, if any, of a Liquidation Event with respect to such
Mortgage Loan would be distributed, the Scheduled Principal

                                      -34-

<PAGE>

Balance of such Mortgage Loan as of the Cut-off Date, as shown in the Mortgage
Loan Schedule, minus the sum of (i) the principal portion of each Monthly
Payment due on a Due Date subsequent to the Cut-off Date, to the extent received
from the Mortgagor or advanced by the Master Servicer and distributed pursuant
to Section 4.01 on or before such date of determination, (ii) all Principal
Prepayments received after the Cut-off Date, to the extent distributed pursuant
to Section 4.01 on or before such date of determination, (iii) all Liquidation
Proceeds and Insurance Proceeds applied by the Master Servicer as recoveries of
principal in accordance with the provisions of Section 3.16, to the extent
distributed pursuant to Section 4.01 on or before such date of determination,
and (iv) any Realized Loss incurred with respect thereto as a result of a
Deficient Valuation made during or prior to the Prepayment Period for the most
recent Distribution Date coinciding with or preceding such date of
determination; and (b) as of any date of determination coinciding with or
subsequent to the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such Mortgage Loan would be distributed, zero.
With respect to any REO Property: (a) as of any date of determination up to but
not including the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such REO Property would be distributed, an
amount (not less than zero) equal to the Stated Principal Balance of the related
Mortgage Loan as of the date on which such REO Property was acquired on behalf
of REMIC I, minus, if such REO Property was acquired before the Distribution
Date in any calendar month, the principal portion of the Monthly Payment due on
the Due Date in the calendar month of acquisition, to the extent advanced by the
Master Servicer and distributed pursuant to Section 4.01 on or before such date
of determination, to the extent distributed pursuant to Section 4.01 on or
before such date of determination; and (b) as of any date of determination
coinciding with or subsequent to the Distribution Date on which the proceeds, if
any, of a Liquidation Event with respect to such REO Property would be
distributed, zero.

                  "Stayed Funds": If the Master Servicer is the subject of a
proceeding under the federal Bankruptcy Code and the making of a Remittance (as
defined in Section 7.02(b)) is prohibited by Section 362 of the federal
Bankruptcy Code, funds which are in the custody of the Master Servicer, a
trustee in bankruptcy or a federal bankruptcy court and should have been the
subject of such Remittance absent such prohibition.

                  "Stripped Interest Rate": With respect to any Mortgage Loan or
related REO Property, the excess, if any, of the Net Mortgage Rate minus 9.00%
per annum.

                  "Subordinate Certificate": Any Class B-1 Certificate, Class
B-2 Certificate, Class B-3 Certificate, Class B-4 Certificate, Class B-5
Certificate or Class B-6 Certificate.

                  "Subordinate Percentage": With respect to any Distribution
Date, a percentage equal to 100% minus the Senior Percentage for such
Distribution Date.

                  "Subordinate Prepayment Percentage": With respect to any
Distribution Date, a percentage equal to 100% minus the Senior Prepayment
Percentage.

                  "Subordinate Principal Distribution Amount": For any
Distribution Date, an amount equal to the sum of:

                                      -35-

<PAGE>

                  (a) the product of (x) the then-applicable Subordinate
         Percentage and (y) the sum of the following:

                         (i) the related Non-Class PO Percentage of the
                  aggregate of the principal portions of all Monthly Payments
                  due during the related Due Period in respect of the Mortgage
                  Loans whether or not received;

                        (ii) the related Non-Class PO Percentage of the
                  principal portion of all Insurance Proceeds, Trailing
                  Recoveries and Liquidation Proceeds (other than amounts
                  described in clause (c) below) received in respect of the
                  Mortgage Loans during the related Prepayment Period (other
                  than any such Mortgage Loan that was purchased, sold or
                  replaced pursuant to or as contemplated by Section 2.03,
                  Section 3.16(c) or Section 9.01 during the related Prepayment
                  Period), net of any portion thereof that represents a recovery
                  of principal for which an advance was made by the Master
                  Servicer pursuant to Section 4.03 in respect of a preceding
                  Distribution Date;

                       (iii) the related Non-Class PO Percentage of the Stated
                  Principal Balance (calculated immediately prior to such
                  Distribution Date) of each Mortgage Loan that was purchased,
                  sold or replaced pursuant to or as contemplated by Section
                  2.03, Section 3.16(c) or Section 9.01 during the related
                  Prepayment Period;

                        (iv) [reserved]; and

                         (v) in connection with the substitution of one or more
                  Qualified Substitute Mortgage Loans for one or more Deleted
                  Mortgage Loans pursuant to Section 2.03 during the related
                  Prepayment Period, the excess, if any, of (A) the aggregate of
                  the related Non-Class PO Percentage of the Stated Principal
                  Balances (calculated as of the respective dates of
                  substitution) of such Deleted Mortgage Loans, net of the
                  aggregate of the related Non-Class PO Percentage of the
                  principal portions of the Monthly Payments due during the
                  related Prepayment Period (to the extent received from the
                  related Mortgagor or advanced by the Master Servicer and
                  distributed pursuant to Section 4.01 on the Distribution Date
                  in the related Prepayment Period) in respect of each such
                  Deleted Mortgage Loan that was replaced prior to the
                  Distribution Date in the related Prepayment Period, over (B)
                  the aggregate of the related Non-Class PO Percentage of the
                  Stated Principal Balances (calculated as of the respective
                  dates of substitution) of such Qualified Substitute Mortgage
                  Loans;

                  (b) the product of (x) the then-applicable Subordinate
         Prepayment Percentage and (y) related Non-Class PO Percentage of all
         Principal Prepayments received in respect of the Mortgage Loans during
         the related Prepayment Period;

                  (c) with respect to any Mortgage Loans which were the subject
         of a Final Recovery Determination in the related Prepayment Period, the
         amount, if any, by which the net Liquidation Proceeds and Insurance
         Proceeds allocable to principal in respect of such Mortgage Loans
         exceed the amount distributable to the Class A-1 Certificates and the
         Class

                                      -36-

<PAGE>

         PO Certificates pursuant to clause (c) of the definition of "Senior
         Principal Distribution Amount" and clause (c) of the definition of
         "Class PO Principal Distribution Amount"; and

                  (d) in the case of any Distribution Date subsequent to the
         initial Distribution Date, an amount equal to the excess, if any, of
         the Subordinate Principal Distribution Amount for the immediately
         preceding Distribution Date, over the aggregate distributions of
         principal made in respect of the Subordinate Certificates on such
         immediately preceding Distribution Date pursuant to Section 4.01 to the
         extent that any such amounts are not attributable to Realized Losses
         that were allocated to the Subordinate Certificates pursuant to Section
         4.04.

                  "Sub-Servicer": Any Person with which the Master Servicer has
entered into a Sub- Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02.

                  "Sub-Servicing Account": An account established by a
Sub-Servicer which meets the requirements set forth in Section 3.08 and is
otherwise acceptable to the Master Servicer.

                  "Sub-Servicing Agreement": The written contract between the
Master Servicer and a Sub-Servicer relating to servicing and administration of
certain Mortgage Loans as provided in Section 3.02.

                  "Tax Returns": The federal income tax return on Internal
Revenue Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income
Tax Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of each of REMIC I or REMIC II due to its classification
as a REMIC under the REMIC Provisions, together with any and all other
information reports or returns that may be required to be furnished to the
Certificateholders or filed with the Internal Revenue Service or any other
governmental taxing authority under any applicable provisions of federal, state
or local tax laws.

                  "Telerate Page 3750": The display designated as page "3750" on
the Dow Jones Telerate Capital Markets Report (or such other page as may replace
page 3750 on that report for the purpose of displaying London interbank offered
rates of major banks).

                  "Termination Price":  As defined in Section 9.01.

                  "Trailing Recoveries": Any Insurance Proceeds, Liquidation
Proceeds and other payments or recoveries on a Mortgage Loan received or
collected by the Master Servicer after a Final Recovery Determination has been
made with respect to such Mortgage Loan or related REO Property.

                  "Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate.

                                      -37-

<PAGE>

                  "Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.

                  "Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.

                  "Trust Administrator": Citicorp Mortgage, Inc., or its
successor in interest, or any successor trust administrator appointed as herein
provided.

                  "Trust Fund": Collectively, all of the assets of REMIC I and
REMIC II.

                  "Trustee": U.S. Bank National Association, or its successor in
interest, or any successor trustee appointed as herein provided.

                  "Uncertificated Balance": The amount of any REMIC I Regular
Interest outstanding as of any date of determination. As of the Closing Date,
the Uncertificated Balance of each REMIC I Regular Interest (other than REMIC I
Regular Interest LTIO) shall equal the amount set forth in the Preliminary
Statement hereto as its initial uncertificated amount. On each Distribution
Date, the Uncertificated Balance of each REMIC I Regular Interest (other than
REMIC I Regular Interest LTIO) shall be reduced by all distributions of
principal deemed to have been made on such REMIC I Regular Interest on such
Distribution Date pursuant to Section 4.06 and, if and to the extent necessary
and appropriate, shall be further reduced on such Distribution Date as provided
in Section 4.06.

                  "Uncertificated Interest": With respect to any REMIC I Regular
Interest for any Distribution Date, one month's interest at the related REMIC I
Remittance Rate applicable to such REMIC I Regular Interest for such
Distribution Date, accrued on the Uncertificated Balance or Uncertificated
Notional Amount of such REMIC I Regular Interest outstanding immediately prior
to such Distribution Date. Uncertificated Interest in respect of any REMIC I
Regular Interest shall accrue on the basis of a 360-day year consisting of
twelve 30-day Interest Accrual Periods. Uncertificated Interest with respect to
each Distribution Date, as to any REMIC I Regular Interest shall be reduced by
an amount equal to the portion allocable to such Regular Interest pursuant to
Section 1.02 hereof of the sum of (a) the aggregate Prepayment Interest
Shortfall, if any, for such Distribution Date to the extent not covered by
payments pursuant to Section 3.24 and (b) the aggregate amount of any Relief Act
Interest Shortfall, if any, for such Distribution Date.

                  "Uncertificated LTPO Percentage": With respect to each Class
PO Mortgage Loan, the quotient of (i) 9.00% per annum minus the related Net
Mortgage Rate divided by (ii) 9.00% per annum. With respect to each Class IO
Mortgage Loan, 0% per annum.

                  "Uncertificated LTPO Principal Distribution Amount": For any
Distribution Date, an amount equal to the aggregate of:

                  (a) the sum of the following:

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<PAGE>

                         (i) the related Uncertificated LTPO Percentage of the
                  principal portion of each Monthly Payment due during the
                  related Due Period in respect of each Class PO Mortgage Loan
                  whether or not received;

                        (ii) the related Uncertificated LTPO Percentage of the
                  principal portion of all Insurance Proceeds, Trailing
                  Recoveries and Liquidation Proceeds (other than amounts
                  described in clause (c) below) received in respect of each
                  Class PO Mortgage Loan during the related Prepayment Period
                  (other than any such Class PO Mortgage Loan that was
                  purchased, sold or replaced pursuant to or as contemplated by
                  Section 2.03, Section 3.16(c) or Section 9.01 during the
                  related Prepayment Period), net of any portion thereof that
                  represents a recovery of principal for which an advance was
                  made by the Master Servicer pursuant to Section 4.03 in
                  respect of a preceding Distribution Date;

                       (iii) the related Uncertificated LTPO Percentage of the
                  Stated Principal Balance (calculated immediately prior to such
                  Distribution Date) of each Class PO Mortgage Loan that was
                  purchased, sold or replaced pursuant to or as contemplated by
                  Section 2.03, Section 3.16(c) or Section 9.01 during the
                  related Prepayment Period;

                        (iv) [reserved]; and

                         (v) in connection with the substitution of one or more
                  Qualified Substitute Mortgage Loans for one or more Deleted
                  Mortgage Loans which were Class PO Mortgage Loans pursuant to
                  Section 2.03 during the related Prepayment Period, the excess,
                  if any, of (A) the related Uncertificated LTPO Percentage of
                  the aggregate of the Stated Principal Balances (calculated as
                  of the respective dates of substitution) of such Deleted
                  Mortgage Loans, net of the aggregate of the related
                  Uncertificated LTPO Percentage of the principal portions of
                  the Monthly Payments due during the related Prepayment Period
                  (to the extent received from the related Mortgagor or advanced
                  by the Master Servicer and distributed pursuant to Section
                  4.01 on the Distribution Date in the related Prepayment
                  Period) in respect of each such Deleted Mortgage Loan that was
                  replaced prior to the Distribution Date in the related
                  Prepayment Period, over (B) the related Uncertificated LTPO
                  Percentage of the Stated Principal Balances (calculated as of
                  the respective dates of substitution) of such Qualified
                  Substitute Mortgage Loans;

                  (b) the related Uncertificated LTPO Percentage of all
         Principal Prepayments received in respect of each Class PO Mortgage
         Loan during the related Prepayment Period;

                  (c) with respect to any Class PO Mortgage Loan which was the
         subject of a Final Recovery Determination in the related Prepayment
         Period, the related Uncertificated LTPO Percentage of the Stated
         Principal Balance of such Mortgage Loan at the time of such Final
         Recovery Determination (net of the principal portion of any Realized
         Loss allocated to the

                                      -39-

<PAGE>

         REMIC I Regular Interest LTPO ) to the extent of the principal portion
         of all Liquidation Proceeds with respect to such Class PO Mortgage
         Loan; and

                  (d) in the case of any Distribution Date subsequent to the
         initial Distribution Date, an amount equal to the excess, if any, of
         the Uncertificated LTPO Principal Distribution Amount for the
         immediately preceding Distribution Date, over the aggregate
         distributions of principal made in respect of REMIC I Regular Interest
         LTPO on such immediately preceding Distribution Date pursuant to
         Section 4.01 to the extent that any such amounts are not attributable
         to Realized Losses which were allocated to the Subordinate Certificates
         pursuant to Section 4.04.

                  "Uncertificated Notional Amount": With respect to REMIC I
Regular Interest LTIO, the aggregate Stated Principal Balance of the Mortgage
Loans for such Distribution Date.

         "Uncertificated Principal Distribution Amount": With respect to REMIC I
Regular Interest LT1, the Senior Principal Distribution Amount (other than the
portion that relates to the Class A-1 Certificates) and the Subordinate
Principal Distribution Amount. With respect to REMIC I Regular Interest LT2, the
portion of the Senior Principal Distribution Amount that relates to the Class
A-1 Certificates. With respect to REMIC I Regular Interest LTPO, the
Uncertificated LTPO Principal Distribution Amount. REMIC I Regular Interest LTIO
is not entitled to any payments of principal.

                  "Uninsured Cause": Any cause of damage to a Mortgaged Property
such that the complete restoration of such property is not fully reimbursable by
the hazard insurance policies required to be maintained pursuant to Section
3.14.

                  "United States Person": A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof
(except, in the case of a partnership, to the extent provided in regulations),
or an estate whose income is subject to United States federal income tax
regardless of its source, or a trust if a court within the United States is able
to exercise primary supervision over the administration of the trust and one or
more United States Persons have the authority to control all substantial
decisions of the trust. The term "United States" shall have the meaning set
forth in Section 7701 of the Code.

                  "Value": With respect to any Mortgaged Property, the lesser of
(i) the value thereof as determined by an appraisal made for the originator of
the Mortgage Loan at the time of origination of the Mortgage Loan and (ii) the
purchase price paid for the related Mortgaged Property by the Mortgagor with the
proceeds of the Mortgage Loan, provided, however, in the case of a Refinanced
Mortgage Loan, such value of the Mortgaged Property is based solely upon the
value determined by an appraisal made for the originator of such Refinanced
Mortgage Loan at the time of origination of such Refinanced Mortgage Loan by an
appraiser.

                  "Voting Rights": The portion of the voting rights of all of
the Certificates which is allocated to any Certificate. At all times during the
term of this Agreement, (i) 97% of all of the Voting Rights shall be allocated
to the Regular Certificates, other than the Class A-2 Certificates and

                                      -40-

<PAGE>

the Class IO Certificates, in proportion to their then outstanding Certificate
Principal Balances, (ii) 1% of all of the Voting Rights shall be allocated to
the Class IO Certificates, in proportion to their then outstanding Notional
Amounts, (iii) 1% of all of the Voting Rights shall be allocated to the Class
A-2 Certificates, in proportion to their then outstanding Notional Amounts and
(iv) 1/2 of 1% of all Voting Rights will be allocated among the holders of each
Class of Residual Certificates, in proportion to their Percentage Interests in
each such Class. All Voting Rights allocated to any Class of Certificates shall
be allocated among such Certificates PRO RATA in accordance with the respective
Percentage Interests evidenced thereby.

                  "Weighted Average Stripped Interest Rate": With respect to any
Distribution Date, the weighted average of the Stripped Interest Rates in effect
during the most recently ended calendar month for the Mortgage Loans and REO
Properties based on the respective Scheduled Principal Balances thereof as of
the Due Date in such most recently ended calendar month (or, in the case of the
initial Distribution Date, as of the Cut-off Date).

                  SECTION 1.02. Allocation of Certain Interest Shortfalls.

                  The aggregate amount of any Prepayment Interest Shortfalls (to
the extent not covered by payments by the Master Servicer pursuant to Section
3.24) and any Relief Act Interest Shortfall incurred in respect of the Mortgage
Loans for any Distribution Date shall be allocated among the Certificates (other
than the Class PO Certificates), PRO RATA in accordance with, and to the extent
of one month's interest at the Pass-Through Rate on the respective Certificate
Principal Balance or Notional Amount of such Certificate immediately prior to
such Distribution Date.

                  The aggregate amount of any Prepayment Interest Shortfalls (to
the extent not covered by payments by the Master Servicer pursuant to Section
3.24) and any Relief Act Interest Shortfall allocated to the Class A
Certificates shall be deemed allocated to REMIC I Regular Interest LT2, the
aggregate amount of any Prepayment Interest Shortfalls (to the extent not
covered by payments by the Master Servicer pursuant to Section 3.24) and any
Relief Act Interest Shortfall allocated to the Class IO Certificates shall be
deemed allocated to REMIC I Regular Interest LTIO and the aggregate amount of
any Prepayment Interest Shortfalls (to the extent not covered by payments by the
Master Servicer pursuant to Section 3.24) and any Relief Act Interest Shortfall
allocated to any Class of Subordinate Certificates shall be deemed allocated to
REMIC I Regular Interest LT1.

                                      -41-

<PAGE>

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                        ORIGINAL ISSUANCE OF CERTIFICATES

                  SECTION 2.01. Conveyance of Mortgage Loans.

                  The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse for the benefit of the Certificateholders all the
right, title and interest of the Depositor, including any security interest
therein for the benefit of the Depositor, in and to the Mortgage Loans
identified on the Mortgage Loan Schedule, the rights of the Depositor under the
Mortgage Loan Purchase Agreement (except Section 17 thereof), and all other
assets included or to be included in REMIC I. Such assignment includes all
interest and principal received by the Depositor or the Master Servicer on or
with respect to the Mortgage Loans (other than payments of principal and
interest due on such Mortgage Loans on or before the Cut-off Date). The
Depositor herewith delivers to the Trustee an executed copy of the Mortgage Loan
Purchase Agreement.

                  In connection with such transfer and assignment, the Depositor
does hereby deliver to, and deposit with, the Trustee, the following documents
or instruments with respect to each Mortgage Loan so transferred and assigned (a
"Mortgage File"):

                         (i) the original Mortgage Note, endorsed in one of the
                  following forms: (i) in the name of the Co-Trustee or (ii) in
                  blank, in each case, with all prior and intervening
                  endorsements showing a complete chain of endorsement from the
                  originator to the Person so endorsing to the Co-Trustee;

                        (ii) the original Mortgage with evidence of recording
                  thereon. If in connection with any Mortgage Loan, the
                  Depositor has not caused the original recorded Mortgage to be
                  delivered to the Trustee because of a delay caused by the
                  public recording office where such Mortgage has been delivered
                  for recordation or because such Mortgage has been lost or
                  because such public recording office retains the original
                  recorded Mortgage, the Mortgage File shall include, in lieu of
                  such Mortgage, a photocopy of such Mortgage, together with (a)
                  in the case of a delay caused by the public recording office,
                  an Officer's Certificate of the title insurer insuring the
                  Mortgage stating that such Mortgage has been delivered to the
                  appropriate public recording office for recordation and that
                  the original recorded Mortgage or a copy of such Mortgage
                  certified by such public recording office to be a true and
                  complete copy of the original recorded Mortgage will be
                  promptly delivered to the Trustee upon receipt by the
                  Depositor; or (b) in the case where a public recording office
                  retains the original recorded Mortgage or in the case where a
                  Mortgage is lost after recordation in a public recording
                  office, a copy of such Mortgage with the recording information
                  thereon certified by such public recording office to be a true
                  and complete copy of the original recorded Mortgage;

                                      -42-

<PAGE>

                         (iii) an original Assignment of the Mortgage to the
                  Co-Trustee in recordable form;

                        (iv) the original recorded Assignment or Assignments of
                  the Mortgage showing a complete chain of assignment from the
                  originator to the Person assigning the Mortgage to the
                  Co-Trustee as contemplated by the immediately preceding clause
                  (iii), or if any such intervening assignment has not been
                  returned from the applicable public recording office or has
                  been lost or if such public recording office retains the
                  original recorded Assignments of Mortgage, the Mortgage File
                  shall include a photocopy of such intervening assignment,
                  together with (a) in the case of a delay caused by the public
                  recording, an Officer's Certificate of the title insurer
                  insuring the Mortgage stating that such intervening Assignment
                  of Mortgage has been delivered to the appropriate public
                  recording office for recordation and that such original
                  recorded intervening Assignment of Mortgage or a copy of such
                  intervening Assignment of Mortgage certified by the
                  appropriate public recording office to be a true and complete
                  copy of the original recorded intervening Assignment of
                  Mortgage will be promptly delivered to the Trustee upon
                  receipt thereof by the Depositor; or (b) in the case of an
                  intervening Assignment of Mortgage where a public recording
                  office retains the original recorded intervening Assignment of
                  Mortgage or in the case where an intervening Assignment of
                  Mortgage is lost after recordation in a public recording
                  office, a copy of such intervening Assignment with recording
                  information thereon certified by such public recording office
                  to be a true and complete copy of the original recorded
                  intervening Assignment of Mortgage;

                         (v) the originals of all assumption, modification,
                  consolidation or extension agreements, with evidence of
                  recording thereon, if any;

                         (vi) the original of any guarantee executed in
                  connection with the Mortgage Note;

                         (vii) with respect to any Mortgage Loan listed on
                  Schedule 2 attached hereto, the original Primary Mortgage
                  Insurance Policy or certificate;

                         (viii) the original mortgagee title insurance policy;

                         (ix) the original of any security agreement, chattel
                  mortgage or equivalent document executed in connection with
                  the Mortgage; and

                         (x) the original power of attorney, if applicable.

                  To the extent not already recorded, the Trustee, at the
expense of the Depositor shall promptly (and in no event later than five
Business Days following the later of the Closing Date and the date of receipt by
the Trustee of the recording information for a Mortgage) submit or cause to be
submitted for recording, at no expense to REMIC I or the Trustee, in the
appropriate public office for real property records, each Assignment delivered
to it pursuant to Sections 2.01(iii) and (iv)

                                      -43-

<PAGE>

above. In the event that any such Assignment is lost or returned unrecorded
because of a defect therein, the Trustee, at the expense of the Depositor, shall
promptly prepare or cause to be prepared a substitute Assignment or cure or
cause to be cured such defect, as the case may be, and thereafter cause each
such Assignment to be duly recorded.

                  All right, title and interest in and to each Mortgage Loan,
including but not limited to the related Mortgage and Mortgage Note, was
conveyed to the Trustee for the benefit of the Certificateholders pursuant to an
omnibus assignment in the form attached hereto as Exhibit H (the "Omnibus
Assignment"). For purposes of the following paragraph, U.S. Bank Trust National
Association (formerly known as First Trust National Association) hereby agrees
to act as co-trustee (the "Co-Trustee") for the benefit of Certificateholders.
The Co-Trustee hereby acknowledges that, notwithstanding any endorsements or
assignments in the related Mortgage Files indicating ownership of such Mortgage
Loans by the Co-Trustee in its capacity as trustee for the holders of
certificates of prior series set forth on Exhibit 1 to the Omnibus Assignment,
the Co-Trustee is holding such Mortgage Loans for the benefit of the registered
holders of Salomon Brothers Mortgage Securities VII, Inc., Series 2000-1
pursuant to this Agreement. To the extent necessary to enforce the rights of
such Certificateholders hereunder and in furtherance of the purposes of the
Omnibus Assignment, the Co-Trustee hereby agrees to execute and deliver, or
cause to be executed and delivered, such reasonable and appropriate additional
documents, instruments or agreements as may be requested by the Master Servicer,
the Depositor or the Trustee and are necessary or appropriate with respect to
such Mortgage Loans (including the recording of the Omnibus Assignment and any
additional assignments as may be necessary to record) and any such actions taken
by the Co-Trustee with respect to such Mortgage Loans shall be subject to the
provisions of Article VIII hereof as if the Co-Trustee were the Trustee
hereunder. The costs of recording the Omnibus Assignment or any additional
assignments shall be borne by the Depositor.

                  With respect to a maximum of approximately 0.5% of the
Original Mortgage Loans, by outstanding principal balance of the Original
Mortgage Loans as of the Cut-off Date, if any original Mortgage Note referred to
in Section 2.01(i) above cannot be located, the obligations of the Depositor to
deliver such documents shall be deemed to be satisfied upon delivery to the
Trustee of a photocopy of such Mortgage Note, if available, with a lost note
affidavit. If any of the original Mortgage Notes for which a lost note affidavit
was delivered to the Trustee is subsequently located, such original Mortgage
Note shall be delivered to the Trustee within three Business Days.

                  The Depositor shall deliver or cause to be delivered to the
Trustee promptly upon receipt thereof any other original documents constituting
a part of a Mortgage File received with respect to any Mortgage Loan, including,
but not limited to, any original documents evidencing an assumption,
modification, consolidation or extension of any Mortgage Loan.

                  All original documents relating to the Mortgage Loans that are
not delivered to the Trustee are and shall be held by or on behalf of the
Seller, the Depositor or the Master Servicer, as the case may be, in trust for
the benefit of the Trustee on behalf of the Certificateholders. In the event
that any such original document is required pursuant to the terms of this
Section to be a part of a Mortgage File, such document shall be delivered
promptly to the Trustee. Any such original

                                      -44-

<PAGE>

document delivered to or held by the Depositor that is not required pursuant to
the terms of this Section to be a part of a Mortgage File, shall be delivered
promptly to the Master Servicer.

                  SECTION 2.02. Acceptance of REMIC I by the Trustee.

                  Subject to the provisions of Section 2.01 and subject to any
exceptions noted on the exception report described in the next paragraph below,
the Trustee acknowledges receipt of the documents referred to in Section 2.01
(other than such documents described in Section 2.01(v)) above and all other
assets included in the definition of "REMIC I" under clauses (i), (iii), (iv)
and (v) (to the extent of amounts deposited into the Distribution Account) and
declares that it holds and will hold such documents and the other documents
delivered to it constituting the Mortgage File, and that it holds or will hold
all such assets and such other assets included in the definition of "REMIC I" in
trust for the exclusive use and benefit of all present and future
Certificateholders.

                  The Trustee agrees, for the benefit of the Certificateholders,
to review each Mortgage File on or before the Closing Date and to certify in
substantially the form attached hereto as Exhibit C-1 that, as to each Mortgage
Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or any Mortgage Loan specifically identified in the exception report
annexed thereto as not being covered by such certification), (i) all documents
constituting part of such Mortgage File (other than such documents described in
Section 2.01(v)) required to be delivered to it pursuant to this Agreement are
in its possession, (ii) such documents have been reviewed by it and are not
torn, mutilated, defaced or otherwise altered (except if initialed by the
obligor) and relate to such Mortgage Loan, (iii) based on its examination and
only as to the foregoing, the information set forth in the Mortgage Loan
Schedule that corresponds to items (i) through (iii), (vi), (vii), (ix), (x),
(xi) and (xv) of the definition of "Mortgage Loan Schedule" accurately reflects
information set forth in the Mortgage File. It is herein acknowledged that, in
conducting such review, the Trustee is under no duty or obligation (i) to
inspect, review or examine any such documents, instruments, certificates or
other papers to determine whether they are genuine, enforceable, or appropriate
for the represented purpose or whether they have actually been recorded or that
they are other than what they purport to be on their face, or (ii) to determine
whether any Mortgage File should include any of the documents specified in
clause (v) of Section 2.01.

                  Prior to the first anniversary date of this Agreement the
Trustee shall deliver to the Depositor and the Master Servicer a final
certification in the form annexed hereto as Exhibit C-2 evidencing the
completeness of the Mortgage Files, with any applicable exceptions noted
thereon.

                  If in the process of reviewing the Mortgage Files and making
or preparing, as the case may be, the certifications referred to above, the
Trustee finds any document or documents constituting a part of a Mortgage File
to be missing or defective in any material respect, at the conclusion of its
review the Trustee shall so notify the Depositor, the Trust Administrator and
the Master Servicer. In addition, upon the discovery by the Depositor, the
Master Servicer, the Trust Administrator or the Trustee of a breach of any of
the representations and warranties made by the Seller in the Mortgage Loan
Purchase Agreement in respect of any Mortgage Loan which materially adversely
affects such Mortgage Loan or the interests of the related Certificateholders in
such

                                      -45-

<PAGE>

Mortgage Loan, the party discovering such breach shall give prompt written
notice to the other parties.

                  The Trustee shall, at the written request and expense of any
Certificateholder, provide a written report to such Certificateholder of all
Mortgage Files released to the Master Servicer for servicing purposes.

                  SECTION 2.03. Repurchase or Substitution of Mortgage Loans by
                                the Seller or the Depositor.

                  (a) Upon discovery or receipt of notice of any materially
defective document in, or that a document is missing from, a Mortgage File or of
the breach by the Seller of any representation, warranty or covenant under the
Mortgage Loan Purchase Agreement in respect of any Mortgage Loan which
materially adversely affects the value of such Mortgage Loan or the interest
therein of the Certificateholders, the Trustee shall promptly notify the Seller,
the Trust Administrator and the Master Servicer of such defect, missing document
or breach and request that the Seller deliver such missing document or cure such
defect or breach within 60 days from the date the Seller was notified of such
missing document, defect or breach, and if the Seller does not deliver such
missing document or cure such defect or breach in all material respects during
such period, the Master Servicer shall enforce the obligations of the Seller
under the Mortgage Loan Purchase Agreement to repurchase such Mortgage Loan from
REMIC I at the Purchase Price within 60 days after the date on which the Seller
was notified (subject to Section 2.03(e)) of such missing document, defect or
breach, if and to the extent that the Seller is obligated to do so under the
Mortgage Loan Purchase Agreement. The Purchase Price for the repurchased
Mortgage Loan shall be deposited in the Collection Account, and the Trustee,
upon receipt of written certification from the Master Servicer of such deposit,
shall release to the Seller the related Mortgage File and shall execute and
deliver such instruments of transfer or assignment, in each case without
recourse, as the Seller shall furnish to it and as shall be necessary to vest in
the Seller any Mortgage Loan released pursuant hereto, and the Trustee shall
have no further responsibility with regard to such Mortgage File. In lieu of
repurchasing any such Mortgage Loan as provided above, if so provided in the
Mortgage Loan Purchase Agreement, the Seller may cause such Mortgage Loan to be
removed from REMIC I (in which case it shall become a Deleted Mortgage Loan) and
substitute one or more Qualified Substitute Mortgage Loans in the manner and
subject to the limitations set forth in Section 2.03(d).
It is understood and agreed that the obligation of the Seller to cure or to
repurchase (or to substitute for) any Mortgage Loan as to which a document is
missing, a material defect in a constituent document exists or as to which such
a breach has occurred and is continuing shall constitute the sole remedy
respecting such omission, defect or breach available to the Trustee on behalf of
the Certificateholders.

                  (b) Subject to Section 2.03(e), within 60 days of the earlier
of discovery by the Depositor or receipt of notice by the Depositor of the
breach of any representation or warranty of the Depositor set forth in Section
2.04 with respect to any Mortgage Loan, which materially adversely affects the
value of such Mortgage Loan or the interest therein of the Certificateholders,
the Depositor shall (i) cure such breach in all material respects, (ii)
repurchase the Mortgage Loan from REMIC I at the Purchase Price or (iii) remove
such Mortgage Loan from REMIC I (in which case

                                      -46-

<PAGE>

it shall become a Deleted Mortgage Loan) and substitute one or more Qualified
Substitute Mortgage Loans in the manner and subject to the limitations set forth
in Section 2.03(d). If any such breach is a breach of any of the representations
and warranties included in Section 2.04(a)(iv), and the Depositor is unable to
cure such breach, the Depositor shall repurchase or substitute the smallest
number of Mortgage Loans as shall be required to make such representation or
warranty true and correct. The Purchase Price for any repurchased Mortgage Loan
shall be delivered to the Master Servicer for deposit in the Collection Account,
and the Trustee, upon receipt of written certification from the Master Servicer
of such deposit, shall at the Depositor's direction release to the Depositor the
related Mortgage File and shall execute and deliver such instruments of transfer
or assignment furnished by the Depositor, in each case without recourse, as the
Depositor shall furnish to it and as shall be necessary to vest in the Depositor
any Mortgage Loan released pursuant hereto.

                  (c) Within 60 days of the earlier of discovery by the Master
Servicer or receipt of notice by the Master Servicer of the breach of any
representation, warranty or covenant of the Master Servicer set forth in Section
2.05 which materially and adversely affects the interests of the
Certificateholders in any Mortgage Loan, the Master Servicer shall cure such
breach in all material respects.

                  (d) Any substitution of Qualified Substitute Mortgage Loans
for Deleted Mortgage Loans made pursuant to Section 2.03(a), in the case of the
Seller, or Section 2.03(b), in the case of the Depositor, must be effected prior
to the date which is two years after the Startup Day for REMIC I.

                  As to any Deleted Mortgage Loan for which the Seller or the
Depositor substitutes a Qualified Substitute Mortgage Loan or Loans, such
substitution shall be effected by the Seller or the Depositor, as the case may
be, delivering to the Trustee, for such Qualified Substitute Mortgage Loan or
Loans, the Mortgage Note, the Mortgage, the Assignment to the Trustee, and such
other documents and agreements, with all necessary endorsements thereon, as are
required by Section 2.01, together with an Officers' Certificate providing that
each such Qualified Substitute Mortgage Loan satisfies the definition thereof
and specifying the Substitution Shortfall Amount (as described below), if any,
in connection with such substitution. The Trustee shall acknowledge receipt for
such Qualified Substitute Mortgage Loan or Loans and, within ten Business Days
thereafter, review such documents in the manner specified in Section 2.02 and
deliver to the Depositor and the Master Servicer, with respect to such Qualified
Substitute Mortgage Loan or Loans, a certification substantially in the form
attached hereto as Exhibit C-1, with any applicable exceptions noted thereon.
Within one year of the date of substitution, the Trustee shall deliver to the
Depositor and the Master Servicer a certification substantially in the form of
Exhibit C-2 hereto with respect to such Qualified Substitute Mortgage Loan or
Loans, with any applicable exceptions noted thereon.
Monthly Payments due with respect to Qualified Substitute Mortgage Loans in the
month of substitution are not part of REMIC I and will be retained by the
Depositor or the Seller, as the case may be. For the month of substitution,
distributions to Certificateholders will reflect the Monthly Payment due on such
Deleted Mortgage Loan on or before the Due Date in the month of substitution,
and the Depositor or the Seller, as the case may be, shall thereafter be
entitled to retain all amounts subsequently received in respect of such Deleted
Mortgage Loan. The Depositor shall give or cause to be given written notice to
the Certificateholders that such substitution has taken place, shall amend

                                      -47-

<PAGE>

the Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan
from the terms of this Agreement and the substitution of the Qualified
Substitute Mortgage Loan or Loans and shall deliver a copy of such amended
Mortgage Loan Schedule to the Trustee. Upon such substitution, such Qualified
Substitute Mortgage Loan or Loans shall constitute part of the Mortgage Pool and
shall be subject in all respects to the terms of this Agreement and, in the case
of a substitution effected by the Seller, the Mortgage Loan Purchase Agreement,
including, in the case of a substitution effected by the Seller, all applicable
representations and warranties thereof included in the Mortgage Loan Purchase
Agreement, and in the case of a substitution effected by the Depositor, all
applicable representations and warranties thereof set forth in Section 2.04, in
each case as of the date of substitution.

                  For any month in which the Depositor or the Seller substitutes
one or more Qualified Substitute Mortgage Loans for one or more Deleted Mortgage
Loans, the Master Servicer will determine the amount (the "Substitution
Shortfall Amount"), if any, by which the aggregate Purchase Price of all such
Deleted Mortgage Loans exceeds the aggregate of, as to each such Qualified
Substitute Mortgage Loan, the Scheduled Principal Balance thereof as of the date
of substitution, together with one month's interest on such Scheduled Principal
Balance at the applicable Mortgage Loan Remittance Rate. On the date of such
substitution, the Depositor or the Seller, as the case may be, will deliver or
cause to be delivered to the Master Servicer for deposit in the Collection
Account an amount equal to the Substitution Shortfall Amount, if any, and the
Trustee, upon receipt of the related Qualified Substitute Mortgage Loan or Loans
and certification by the Master Servicer of such deposit, shall release to the
Depositor or the Seller, as the case may be, the related Mortgage File or Files
and shall execute and deliver such instruments of transfer or assignment, in
each case without recourse, as the Depositor or the Seller, as the case may be,
shall deliver to it and as shall be necessary to vest therein any Deleted
Mortgage Loan released pursuant hereto.

                  In addition, the Depositor or the Seller, as the case may be,
shall obtain at its own expense and deliver to the Trustee an Opinion of Counsel
to the effect that such substitution will not cause (a) any federal tax to be
imposed on either REMIC I or REMIC II, including without limitation, any federal
tax imposed on "prohibited transactions" under Section 860F(a)(1) of the Code or
on "contributions after the startup date" under Section 860G(d)(1) of the Code,
or (b) either REMIC I or REMIC II to fail to qualify as a REMIC at any time that
any Certificate is outstanding.

                  (e) Upon discovery by the Depositor, the Seller, the Master
Servicer, the Trust Administrator or the Trustee that any Mortgage Loan does not
constitute a "qualified mortgage" within the meaning of Section 860G(a)(3) of
the Code, the party discovering such fact shall within two Business Days give
written notice thereof to the other parties. In connection therewith, the Seller
or the Depositor shall repurchase or, subject to the limitations set forth in
Section 2.03(d), substitute one or more Qualified Substitute Mortgage Loans for
the affected Mortgage Loan within 60 days of the earlier of discovery or receipt
of such notice with respect to such affected Mortgage Loan. Such repurchase or
substitution shall be made by (i) the Seller, if the affected Mortgage Loan's
status as a non-qualified mortgage is or results from a breach of any
representation, warranty or covenant made by the Seller under the Mortgage Loan
Purchase Agreement, or (ii) the Depositor, if the affected Mortgage Loan's
status as a non-qualified mortgage is a breach of any representation or warranty
of the Depositor set forth in Section 2.04 or if the status as a non-qualified
mortgage is

                                      -48-

<PAGE>

a breach of no representation or warranty. Any such repurchase or substitution
shall be made in the same manner as set forth in Sections 2.03(a), if made by
the Seller, or 2.03(b), if made by the Depositor. The Trustee shall reconvey to
the Depositor or the Seller, as the case may be, the Mortgage Loan to be
released pursuant hereto in the same manner, and on the same terms and
conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty.

                  SECTION 2.04. Representations and Warranties of the Depositor.

                  (a) The Depositor hereby represents and warrants to the
Trustee for the benefit of the Certificateholders that as of the Closing Date or
as of such other date specifically provided herein:

                         (i) The information set forth in the Mortgage Loan
                  Schedule for the Original Mortgage Loans is complete, true and
                  correct in all material respects at the date or dates
                  respecting which such information is furnished;

                           (ii) Except with respect to approximately 4.47% of
                  the Original Mortgage Loans which the related Mortgagors had
                  not made their February 2000 Monthly Payment as of February
                  29, 2000, by outstanding principal balance of the Original
                  Mortgage Loans as of the Cut-off Date; as of February 29,
                  2000, the Monthly Payment due under each Original Mortgage
                  Loan is not delinquent in payment; except with respect to
                  approximately 2.15% of the Original Mortgage Loans, by
                  outstanding principal balance of the Original Mortgage Loans
                  as of the Cut-off Date, the Monthly Payment due under each
                  Mortgage Loan has not been 30 or more days delinquent in
                  payment more than once in the twelve month period prior to the
                  Cut-off Date (assuming that a "rolling" 30 day Delinquency is
                  considered to be delinquent only once);

                       (iii) Each Original Mortgage Loan had an original term to
                  maturity of not greater than 30 years; each Original Mortgage
                  Loan is a fixed-rate, fully amortizing mortgage loan with
                  payments due on the first day of each month;

                        (iv) (A) no more than approximately 40.13%,
                  approximately 17.18%, approximately 15.50% and approximately
                  3.97% of the Original Mortgage Loans, by outstanding principal
                  balance of the Original Mortgage Loans as of the Cut-off Date,
                  will be secured by Mortgaged Properties located in California,
                  New York, New Jersey and Texas, respectively, and no more than
                  approximately 3.00% of the Original Mortgage Loans, by
                  outstanding principal balance of the Original Mortgage Loans
                  as of the Cut-off Date, will be secured by Mortgaged
                  Properties located in any other single state; (B) as of the
                  Cut-off Date, no more than approximately 1.74% of the Original
                  Mortgage Loans, by outstanding principal balance of the
                  Original Mortgage Loans as of the Cut-off Date, are secured by
                  Mortgaged Properties located in any one California zip code
                  area, and no more than approximately 8.06% of the Original
                  Mortgage Loans, by outstanding principal balance of the
                  Original Mortgage Loans as of the Cut-off Date are secured by
                  units in two- to four-family dwellings,

                                      -49-

<PAGE>

                  condominiums and planned unit developments; and (C) at least
                  approximately 91.94% of the Original Mortgage Loans, by
                  outstanding principal balance of the Original Mortgage Loans
                  as of the Cut-off Date, are secured by real property with a
                  single family residence erected thereon;

                         (v) If the Mortgaged Property securing an Original
                  Mortgage Loan is identified in the Federal Register by the
                  Federal Emergency Management Agency ("FEMA") as having special
                  flood hazards, a flood insurance policy is in effect at the
                  Closing Date which met the requirements of FEMA at the time
                  such policy was issued;

                        (vi) With respect to at least approximately 95.10% of
                  the Original Mortgage Loans, by outstanding principal balance
                  of the Original Mortgage Loans as of the Cut-off Date, the
                  Loan-to-Value Ratio was not more than 80.00% at the
                  origination of such Original Mortgage Loan and with respect to
                  approximately 4.90% of the Original Mortgage Loans, by
                  outstanding principal balance of the Original Mortgage Loans
                  as of the Cut-off Date, the Loan-to-Value Ratio was between
                  80.01% and 83.62% and except with respect to 2.86% of the
                  Original Mortgage Loans, by outstanding principal balance of
                  the Original Mortgage Loans as of the Cut-off Date, each such
                  Mortgage Loan is subject to a Primary Mortgage Insurance
                  Policy, issued by a Qualified Insurer, which insures as to
                  payment defaults that portion of the Mortgage Loan in excess
                  of the portion of the Value of the Mortgaged Property required
                  by Fannie Mae; and

                       (vii) With respect to at least approximately 93.41% of
                  the Original Mortgage Loans, by outstanding principal balance
                  of the Original Mortgage Loans as of the Cut-off Date, at the
                  time that the Mortgage Loan was made, the Mortgagor
                  represented that the Mortgagor would occupy the Mortgaged
                  Property as the Mortgagor's primary residence. With respect to
                  approximately 6.59% of the Original Mortgage Loans, by
                  outstanding principal balance of the Original Mortgage Loans
                  as of the Cut-off Date, at the time that the Mortgage Loan was
                  made, the Mortgagor represented that the Mortgagor would
                  occupy the Mortgaged Property as the Mortgagor's secondary
                  residence or that the Mortgaged Property would be an investor
                  property.

                  (b) It is understood and agreed that the representations and
warranties set forth in this Section 2.04 shall survive delivery of the Mortgage
Files to the Trustee and shall inure to the benefit of the Certificateholders
notwithstanding any restrictive or qualified endorsement or assignment. Upon
discovery by any of the Depositor, the Master Servicer, the Trust Administrator
or the Trustee of a breach of any of the foregoing representations and
warranties which materially and adversely affects the value of any Mortgage Loan
or the interests therein of the Certificateholders, the party discovering such
breach shall give prompt written notice to the other parties, and in no event
later than two Business Days from the date of such discovery. It is understood
and agreed that the obligations of the Depositor set forth in Section 2.03(b) to
cure, substitute for or repurchase a Mortgage Loan constitute the sole remedies
available to the

                                      -50-

<PAGE>

Certificateholders or to the Trustee on their behalf respecting a breach of the
representations and warranties contained in this Section 2.04.

                  SECTION 2.05. Representations, Warranties and Covenants of the
                                Master Servicer.

                  The Master Servicer hereby represents, warrants and covenants
to the Trust Administrator and the Trustee, for the benefit of each of the
Trustee, the Trust Administrator, the Certificateholders and to the Depositor
that as of the Closing Date or as of such date specifically provided herein:

                         (i) The Master Servicer is a corporation duly
                  organized, validly existing and in good standing under the
                  laws of the State of Delaware and is duly authorized and
                  qualified to transact any and all business contemplated by
                  this Agreement to be conducted by the Master Servicer in any
                  state in which a Mortgaged Property is located or is otherwise
                  not required under applicable law to effect such qualification
                  and, in any event, is in compliance with the doing business
                  laws of any such State, to the extent necessary to ensure its
                  ability to enforce each Mortgage Loan and to service the
                  Mortgage Loans in accordance with the terms of this Agreement;

                        (ii) The Master Servicer has the full corporate power
                  and authority to service each Mortgage Loan, and to execute,
                  deliver and perform, and to enter into and consummate the
                  transactions contemplated by this Agreement and has duly
                  authorized by all necessary corporate action on the part of
                  the Master Servicer the execution, delivery and performance of
                  this Agreement; and this Agreement, assuming the due
                  authorization, execution and delivery thereof by the other
                  parties hereto, constitutes a legal, valid and binding
                  obligation of the Master Servicer, enforceable against the
                  Master Servicer in accordance with its terms, except to the
                  extent that (a) the enforceability thereof may be limited by
                  bankruptcy, insolvency, moratorium, receivership and other
                  similar laws relating to creditors' rights generally and (b)
                  the remedy of specific performance and injunctive and other
                  forms of equitable relief may be subject to the equitable
                  defenses and to the discretion of the court before which any
                  proceeding therefor may be brought;

                       (iii) The execution and delivery of this Agreement by the
                  Master Servicer, the servicing of the Mortgage Loans by the
                  Master Servicer hereunder, the consummation of any other of
                  the transactions herein contemplated, and the fulfillment of
                  or compliance with the terms hereof are in the ordinary course
                  of business of the Master Servicer and will not (A) result in
                  a breach of any term or provision of the charter or by-laws of
                  the Master Servicer or (B) conflict with, result in a breach,
                  violation or acceleration of, or result in a default under,
                  the terms of any other material agreement or instrument to
                  which the Master Servicer is a party or by which it may be
                  bound, or any statute, order or regulation applicable to the
                  Master Servicer of any court, regulatory body, administrative
                  agency or governmental body having jurisdiction over the
                  Master Servicer; and the Master Servicer is not a party

                                      -51-

<PAGE>

                  to, bound by, or in breach or violation of any indenture or
                  other agreement or instrument, or subject to or in violation
                  of any statute, order or regulation of any court, regulatory
                  body, administrative agency or governmental body having
                  jurisdiction over it, which materially and adversely affects
                  or, to the Master Servicer's knowledge, would in the future
                  materially and adversely affect, (x) the ability of the Master
                  Servicer to perform its obligations under this Agreement or
                  (y) the business, operations, financial condition, properties
                  or assets of the Master Servicer taken as a whole;

                        (iv) The Master Servicer is an approved seller/servicer
                  for Fannie Mae or Freddie Mac in good standing and is a HUD
                  approved mortgagee pursuant to Section 203 of the National
                  Housing Act;

                         (v) No litigation is pending against the Master
                  Servicer that would materially and adversely affect the
                  execution, delivery or enforceability of this Agreement or the
                  ability of the Master Servicer to service the Mortgage Loans
                  or to perform any of its other obligations hereunder in
                  accordance with the terms hereof;

                        (vi) No consent, approval, authorization or order of any
                  court or governmental agency or body is required for the
                  execution, delivery and performance by the Master Servicer of,
                  or compliance by the Master Servicer with, this Agreement or
                  the consummation of the transactions contemplated by this
                  Agreement, except for such consents, approvals, authorizations
                  or orders, if any, that have been obtained prior to the
                  Closing Date; and

                       (vii) The Master Servicer covenants that its computer and
                  other systems used in servicing the Mortgage Loans operate in
                  a manner such that the Master Servicer can service the
                  Mortgage Loans in accordance with the terms of this Agreement.

                  It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.05 shall survive delivery
of the Mortgage Files to the Trustee and shall inure to the benefit of the
Trustee, the Trust Administrator, the Depositor and the Certificateholders. Upon
discovery by any of the Depositor, the Master Servicer, the Trust Administrator
or the Trustee of a breach of any of the foregoing representations, warranties
and covenants which materially and adversely affects the value of any Mortgage
Loan or the interests therein of the Certificateholders, the party discovering
such breach shall give prompt written notice (but in no event later than two
Business Days following such discovery) to the Trustee. Subject to Section 7.01,
the obligation of the Master Servicer set forth in Section 2.03(c) to cure
breaches shall constitute the sole remedies against the Master Servicer
available to the Certificateholders, the Depositor, the Trust Administrator or
the Trustee on behalf of the Certificateholders respecting a breach of the
representations, warranties and covenants contained in this Section 2.05.

                                      -52-

<PAGE>

                  SECTION 2.06. Issuance of Class R-I Certificates.

                  The Trustee acknowledges the assignment to it of the Mortgage
Loans and the delivery to it of the Mortgage Files, subject to the provisions of
Section 2.01 and Section 2.02, together with the assignment to it of all other
assets included in REMIC I delivered on the date hereof, receipt of which is
hereby acknowledged. Concurrently with such assignment and delivery of such
assets delivered on the date hereof and in exchange therefor, the Trustee,
pursuant to the written request of the Depositor executed by an officer of the
Depositor, has executed, authenticated and delivered to or upon the order of the
Depositor, the Class R-I Certificates in authorized denominations. The interests
evidenced by the Class R-I Certificates, together with the REMIC I Regular
Interests, constitute the entire beneficial ownership interest in REMIC I.

                  SECTION 2.07. Conveyance of REMIC I Regular Interests;
                                Acceptance of REMIC II by the Trustee.

                  The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse all the right, title and interest of the Depositor in
and to the REMIC I Regular Interests for the benefit of the REMIC II
Certificateholders. The Trustee acknowledges receipt of the REMIC I Regular
Interests and declares that it holds and will hold the same in trust for the
exclusive use and benefit of all present and future REMIC II Certificateholders.
The rights of the REMIC II Certificateholders to receive distributions from the
proceeds of REMIC II in respect of the REMIC II Certificates, and all ownership
interests of the REMIC II Certificateholders in and to such distributions, shall
be as set forth in this Agreement.

                  SECTION 2.08. Issuance of REMIC II Certificates.

                  The Trustee acknowledges the assignment to it of the REMIC I
Regular Interests and, concurrently therewith and in exchange therefor, pursuant
to the written request of the Depositor executed by an officer of the Depositor,
the Trustee has executed, authenticated and delivered to or upon the order of
the Depositor, the REMIC II Certificates in authorized denominations evidencing
the entire beneficial ownership interest in REMIC II.

                                      -53-

<PAGE>

                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                              OF THE MORTGAGE LOANS

                  SECTION 3.01. Master Servicer to Act as Master Servicer.

         The Master Servicer shall service and administer the Mortgage Loans on
behalf of the Trustee and in the best interests of and for the benefit of the
Certificateholders (as determined by the Master Servicer in its reasonable
judgment) in accordance with the terms of this Agreement and the respective
Mortgage Loans and, to the extent consistent with such terms, in the same manner
in which it services and administers similar mortgage loans for its own
portfolio, giving due consideration to customary and usual standards of practice
of prudent mortgage lenders and loan servicers administering similar mortgage
loans but without regard to:

                         (i) any relationship that the Master Servicer, any
                  Sub-Servicer or any Affiliate of the Master Servicer or any
                  Sub-Servicer may have with the related Mortgagor;

                         (ii) the ownership of any Certificate by the Master
                  Servicer or any Affiliate of the Master Servicer;

                         (iii) the Master Servicer's obligation to make P&I
                  Advances or Servicing Advances; or

                         (iv) the Master Servicer's or any Sub-Servicer's right
                  to receive compensation for its services hereunder or with
                  respect to any particular transaction.

To the extent consistent with the foregoing, the Master Servicer shall also seek
to maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above-described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the Master
Servicer shall have full power and authority, acting alone or through
Sub-Servicers as provided in Section 3.02, to do or cause to be done any and all
things in connection with such servicing and administration which it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Master Servicer in its own name or in the name of a Sub-Servicer is hereby
authorized and empowered by the Trustee when the Master Servicer believes it
appropriate in its best judgment in accordance with the servicing standards set
forth above, to execute and deliver, on behalf of the Certificateholders and the
Trustee, and upon notice to the Trustee, any and all instruments of satisfaction
or cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Mortgage Loans and the Mortgaged
Properties and to institute foreclosure proceedings or obtain a deed-in-lieu of
foreclosure so as to convert the ownership of such properties, and to hold or
cause to be held title to such properties, on behalf of the Trustee and
Certificateholders. The Master Servicer shall service and administer the
Mortgage Loans in accordance with applicable state and federal law and shall
provide to the Mortgagors any

                                      -54-

<PAGE>

reports required to be provided to them thereby. The Master Servicer shall also
comply in the performance of this Agreement with all reasonable rules and
requirements of each insurer under each Primary Mortgage Insurance Policy and
any standard hazard insurance policy. Subject to Section 3.17, the Trustee shall
execute, at the written request of the Master Servicer, and furnish to the
Master Servicer and any Sub-Servicer such documents as are necessary or
appropriate to enable the Master Servicer or any Sub-Servicer to carry out their
servicing and administrative duties hereunder, and the Trustee hereby grants to
the Master Servicer a power of attorney to carry out such duties.
The Trustee shall not be liable for the actions of the Master Servicer or any
Sub-Servicers under such powers of attorney.

                  In accordance with the standards of the preceding paragraph,
the Master Servicer shall advance or cause to be advanced funds as necessary for
the purpose of effecting the timely payment of taxes and assessments on the
Mortgaged Properties, which advances shall be Servicing Advances reimbursable in
the first instance from related collections from the Mortgagors pursuant to
Section 3.09, and further as provided in Section 3.11. Any cost incurred by the
Master Servicer or by Sub- Servicers in effecting the timely payment of taxes
and assessments on a Mortgaged Property shall not, for the purpose of
calculating distributions to Certificateholders, be added to the unpaid
principal balance of the related Mortgage Loan, notwithstanding that the terms
of such Mortgage Loan so permit.

                  Notwithstanding anything in this Agreement to the contrary,
the Master Servicer may not make any future advances with respect to a Mortgage
Loan (except as provided in Section 4.03) and the Master Servicer shall not (i)
permit any modification with respect to any Mortgage Loan that would change the
Mortgage Rate, reduce or increase the principal balance (except for reductions
resulting from actual payments of principal) or change the final maturity date
on such Mortgage Loan or (ii) permit any modification, waiver or amendment of
any term of any Mortgage Loan that would both (A) effect an exchange or
reissuance of such Mortgage Loan under Section 1001 of the Code (or final,
temporary or proposed Treasury regulations promulgated thereunder) and (B) cause
either REMIC I or REMIC II to fail to qualify as a REMIC under the Code or the
imposition of any tax on "prohibited transactions" or "contributions after the
startup date" under the REMIC Provisions.

                  The Master Servicer may delegate its responsibilities under
this Agreement; provided, however, that no such delegation shall release the
Master Servicer from the responsibilities or liabilities arising under this
Agreement.

                  SECTION 3.02. Sub-Servicing Agreements Between the Master
                                Servicer and Sub-Servicers.

                  (a) The Master Servicer may enter into Sub-Servicing
Agreements (provided that such agreements would not result in a withdrawal or a
downgrading by the Rating Agency of the rating on any Class of Certificates)
with Sub-Servicers, for the servicing and administration of the Mortgage Loans.

                  Each Sub-Servicer shall be (i) authorized to transact business
in the state or states in which the related Mortgaged Properties it is to
service are situated, if and to the extent required by

                                      -55-

<PAGE>

applicable law to enable the Sub-Servicer to perform its obligations hereunder
and under the Sub- Servicing Agreement, (ii) an institution approved as a
mortgage loan originator by the Federal Housing Administration or an institution
the deposit accounts of which are insured by the FDIC and (iii) a Freddie Mac or
Fannie Mae approved mortgage servicer. Each Sub-Servicing Agreement must impose
on the Sub-Servicer requirements conforming to the provisions set forth in
Section 3.08 and provide for servicing of the Mortgage Loans consistent with the
terms of this Agreement. The Master Servicer will examine each Sub-Servicing
Agreement and will be familiar with the terms thereof. The terms of any
Sub-Servicing Agreement will not be inconsistent with any of the provisions of
this Agreement. The Master Servicer and the Sub-Servicers may enter into and
make amendments to the Sub-Servicing Agreements or enter into different forms of
Sub-Servicing Agreements; provided, however, that any such amendments or
different forms shall be consistent with and not violate the provisions of this
Agreement, and that no such amendment or different form shall be made or entered
into which could be reasonably expected to be materially adverse to the
interests of the Certificateholders, without the consent of the Holders of
Certificates entitled to at least 66% of the Voting Rights. Any variation
without the consent of the Holders of Certificates entitled to at least 66% of
the Voting Rights from the provisions set forth in Section 3.08 relating to
insurance or priority requirements of Sub-Servicing Accounts, or credits and
charges to the Sub- Servicing Accounts or the timing and amount of remittances
by the Sub-Servicers to the Master Servicer, are conclusively deemed to be
inconsistent with this Agreement and therefore prohibited. The Master Servicer
shall deliver to the Trustee copies of all Sub-Servicing Agreements, and any
amendments or modifications thereof, promptly upon the Master Servicer's
execution and delivery of such instruments.

                  (b) As part of its servicing activities hereunder, the Master
Servicer (except as otherwise provided in the last sentence of this paragraph),
for the benefit of the Trustee and the Certificateholders, shall enforce the
obligations of each Sub-Servicer under the related Sub-Servicing Agreement and
of the Seller under the Mortgage Loan Purchase Agreement, including, without
limitation, any obligation to make advances in respect of delinquent payments as
required by a Sub- Servicing Agreement, or to purchase a Mortgage Loan on
account of missing or defective documentation or on account of a breach of a
representation, warranty or covenant, as described in Section 2.03(a). Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Sub-Servicing Agreements, and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at such
time as the Master Servicer, in its good faith business judgment, would require
were it the owner of the related Mortgage Loans. The Master Servicer shall pay
the costs of such enforcement at its own expense, and shall be reimbursed
therefor only (i) from a general recovery resulting from such enforcement, to
the extent, if any, that such recovery exceeds all amounts due in respect of the
related Mortgage Loans, or (ii) from a specific recovery of costs, expenses or
attorneys' fees against the party against whom such enforcement is directed.

                  SECTION 3.03. Successor Sub-Servicers.

                  The Master Servicer shall be entitled to terminate any
Sub-Servicing Agreement and the rights and obligations of any Sub-Servicer
pursuant to any Sub-Servicing Agreement in accordance with the terms and
conditions of such Sub-Servicing Agreement. In the event of

                                      -56-

<PAGE>

termination of any Sub-Servicer, all servicing obligations of such Sub-Servicer
shall be assumed simultaneously by the Master Servicer without any act or deed
on the part of such Sub-Servicer or the Master Servicer, and the Master Servicer
either shall service directly the related Mortgage Loans or shall enter into a
Sub-Servicing Agreement with a successor Sub-Servicer which qualifies under
Section 3.02.

                  Any Sub-Servicing Agreement shall include the provision that
such agreement may be immediately terminated by the Trustee without fee, in
accordance with the terms of this Agreement, in the event that the Master
Servicer shall, for any reason, no longer be the Master Servicer (including
termination due to a Master Servicer Event of Default).

                  SECTION 3.04. Liability of the Master Servicer.

                  Notwithstanding any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Master Servicer and a Sub-Servicer or reference to actions taken through a
Sub-Servicer or otherwise, the Master Servicer shall remain obligated and
primarily liable to the Trustee and the Certificateholders for the servicing and
administering of the Mortgage Loans in accordance with the provisions of Section
3.01 without diminution of such obligation or liability by virtue of such
Sub-Servicing Agreements or arrangements or by virtue of indemnification from
the Sub-Servicer and to the same extent and under the same terms and conditions
as if the Master Servicer alone were servicing and administering the Mortgage
Loans. The Master Servicer shall be entitled to enter into any agreement with a
Sub- Servicer for indemnification of the Master Servicer by such Sub-Servicer
and nothing contained in this Agreement shall be deemed to limit or modify such
indemnification.

                  SECTION 3.05. No Contractual Relationship Between
                                Sub-Servicers and Trustee or Certificateholders.

                  Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Master Servicer alone, and the Trustee and Certificateholders shall not be
deemed parties thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to the Sub-Servicer except as set forth in Section
3.06. The Master Servicer shall be solely liable for all fees owed by it to any
Sub-Servicer, irrespective of whether the Master Servicer's compensation
pursuant to this Agreement is sufficient to pay such fees.

                  SECTION 3.06. Assumption or Termination of Sub-Servicing
                                Agreements by Trustee.

                  In the event the Master Servicer shall for any reason no
longer be the master servicer (including by reason of the occurrence of a Master
Servicer Event of Default), the Trustee or its designee shall thereupon assume
all of the rights and obligations of the Master Servicer under each
Sub-Servicing Agreement that the Master Servicer may have entered into, unless
the Trustee elects to terminate any Sub-Servicing Agreement in accordance with
its terms as provided in Section 3.03. Upon such assumption, the Trustee, its
designee or the successor servicer for the Trustee appointed

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<PAGE>

pursuant to Section 7.02 shall be deemed, subject to Section 3.03, to have
assumed all of the Master Servicer's interest therein and to have replaced the
Master Servicer as a party to each Sub-Servicing Agreement to the same extent as
if each Sub-Servicing Agreement had been assigned to the assuming party, except
that (i) the Master Servicer shall not thereby be relieved of any liability or
obligations under any Sub-Servicing Agreement and (ii) none of the Trustee, its
designee or any successor Master Servicer shall be deemed to have assumed any
liability or obligation of the Master Servicer that arose before it ceased to be
the Master Servicer.

                  The Master Servicer at its expense shall, upon request of the
Trustee, deliver to the assuming party all documents and records relating to
each Sub-Servicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by or on behalf of it, and otherwise
use its best efforts to effect the orderly and efficient transfer of the Sub-
Servicing Agreements to the assuming party.

                  SECTION 3.07. Collection of Certain Mortgage Loan Payments.

                  The Master Servicer shall make reasonable efforts to collect
all payments called for under the terms and provisions of the Mortgage Loans,
and shall, to the extent such procedures shall be consistent with this Agreement
and the terms and provisions of any related Primary Mortgage Insurance Policy
and any other applicable insurance policies, follow such collection procedures
as it would follow with respect to mortgage loans comparable to the Mortgage
Loans and held for its own account. Consistent with the foregoing, the Master
Servicer may in its discretion (i) waive any late payment charge or, if
applicable, penalty interest, only upon determining that the coverage of such
Mortgage Loan by the related Primary Mortgage Insurance Policy, if any, will not
be affected, or (ii) extend the due dates for Monthly Payments due on a Mortgage
Note for a period of not greater than 180 days; provided that any extension
pursuant to clause (ii) above shall not affect the amortization schedule of any
Mortgage Loan for purposes of any computation hereunder, except as provided
below. In the event of any such arrangement pursuant to clause (ii) above, the
Master Servicer shall make timely advances on such Mortgage Loan during such
extension pursuant to Section 4.03 and in accordance with the amortization
schedule of such Mortgage Loan without modification thereof by reason of such
arrangements. Notwithstanding the foregoing, in the event that any Mortgage Loan
is in default or, in the judgment of the Master Servicer, such default is
reasonably foreseeable, the Master Servicer, consistent with the standards set
forth in Section 3.01, may also accept payment from the related Mortgagor of an
amount less than the Stated Principal Balance in final satisfaction of such
Mortgage Loan (such payment, a "Short Pay-off") or consent to the postponement
of strict compliance with any such term or otherwise grant indulgence to any
Mortgagor.

                  SECTION 3.08. Sub-Servicing Accounts.

                  In those cases where a Sub-Servicer is servicing a Mortgage
Loan pursuant to a Sub- Servicing Agreement, the Sub-Servicer will be required
to establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account and shall
comply with all requirements of this Agreement relating to the Collection
Account. The Sub-Servicer shall deposit in the clearing account (which account
must be an Eligible

                                      -58-

<PAGE>

Account) in which it customarily deposits payments and collections on mortgage
loans in connection with its mortgage loan servicing activities on a daily
basis, and in no event more than two Business Day after the Sub-Servicer's
receipt thereof, all proceeds of Mortgage Loans received by the Sub- Servicer
less its servicing compensation to the extent permitted by the Sub-Servicing
Agreement, and shall thereafter deposit such amounts in the Sub-Servicing
Account, in no event more than one Business Days after the deposit of such funds
into the clearing account. The Sub-Servicer shall thereafter deposit such
proceeds in the Collection Account or remit such proceeds to the Master Servicer
for deposit in the Collection Account not later than two Business Days after the
deposit of such amounts in the Sub-Servicing Account. For purposes of this
Agreement, the Master Servicer shall be deemed to have received payments on the
Mortgage Loans when the Sub-Servicer receives such payments.

                  SECTION 3.09. Collection of Taxes, Assessments and Similar
                                Items; Servicing Accounts.

                  The Master Servicer shall establish and maintain one or more
accounts (the "Servicing Accounts"), into which all collections from the
Mortgagors (or related advances from Sub-Servicers) for the payment of ground
rents, taxes, assessments, fire and hazard insurance premiums, Primary Mortgage
Insurance Premiums, water charges, sewer rents and comparable items for the
account of the Mortgagors ("Escrow Payments") shall be deposited and retained.
Servicing Accounts shall be Eligible Accounts. The Master Servicer shall deposit
in the clearing account (which account must be an Eligible Account) in which it
customarily deposits payments and collections on mortgage loans in connection
with its mortgage loan servicing activities on a daily basis, and in no event
more than two Business Day after the Master Servicer's receipt thereof, all
Escrow Payments collected on account of the Mortgage Loans and shall thereafter
deposit such Escrow Payments in the Servicing Accounts, in no event more than
one Business Days after the deposit of such funds in the clearing account, for
the purpose of effecting the payment of any such items as required under the
terms of this Agreement. Withdrawals of amounts from a Servicing Account may be
made only to (i) effect payment of Escrow Payments; (ii) reimburse the Master
Servicer (or a Sub-Servicer to the extent provided in the related Sub-Servicing
Agreement) out of related collections for any advances made pursuant to Section
3.01 (with respect to taxes and assessments) and Section 3.14 (with respect to
hazard insurance); (iii) refund to Mortgagors any sums as may be determined to
be overages; (iv) pay interest, if required and as described below, to
Mortgagors on balances in the Servicing Account; (v) clear and terminate the
Servicing Account at the termination of the Master Servicer's obligations and
responsibilities in respect of the Mortgage Loans under this Agreement in
accordance with Article IX; or (vi) recover amounts deposited in error. As part
of its servicing duties, the Master Servicer or Sub-Servicers shall pay to the
Mortgagors interest on funds in Servicing Accounts, to the extent required by
law and, to the extent that interest earned on funds in the Servicing Accounts
is insufficient, to pay such interest from its or their own funds, without any
reimbursement therefor. To the extent that a Mortgage does not provide for
Escrow Payments, the Master Servicer shall determine whether any such payments
are made by the Mortgagor in a manner and at a time that avoids the loss of the
Mortgaged Property due to a tax sale or the foreclosure of a tax lien. The
Master Servicer assumes full responsibility for the payment of all such bills
and shall effect payments of all such bills irrespective of the Mortgagor's

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<PAGE>

faithful performance in the payment of same or the making of the Escrow Payments
and shall make advances from its own funds to effect such payments.

                  SECTION 3.10. Collection Account and Distribution Account.

                  (a) On behalf of the Trust Fund, the Master Servicer shall
establish and maintain one or more accounts (such account or accounts, the
"Collection Account"), held in trust for the benefit of the Trustee and the
Certificateholders. On behalf of the Trust Fund, the Master Servicer shall
deposit or cause to be deposited in the clearing account (which account must be
an Eligible Account) in which it customarily deposits payments and collections
on mortgage loans in connection with its mortgage loan servicing activities on a
daily basis, and in no event more than two Business Day after the Master
Servicer's receipt thereof, and shall thereafter deposit in the Collection
Account, in no event more than one Business Days after the deposit of such funds
into the clearing account, as and when received or as otherwise required
hereunder, the following payments and collections received or made by it from
and after the Cut-off Date (other than in respect of principal or interest on
the related Mortgage Loans due on or before the Cut-off Date), or payments
(other than Principal Prepayments) received by it on or prior to the Cut-off
Date but allocable to a Due Period subsequent thereto:

                         (i) all payments on account of principal, including
                  Principal Prepayments, on the Mortgage Loans;

                         (ii) all payments on account of interest (net of the
                  related Servicing Fee) on each Mortgage Loan;

                       (iii) all Insurance Proceeds, Trailing Recoveries and
                  Liquidation Proceeds (other than proceeds collected in respect
                  of any particular REO Property and amounts paid by the Master
                  Servicer in connection with a purchase of Mortgage Loans and
                  REO Properties pursuant to Section 9.01);

                        (iv) any amounts required to be deposited pursuant to
                  Section 3.12 in connection with any losses realized on
                  Permitted Investments with respect to funds held in the
                  Collection Account;

                         (v) any amounts required to be deposited by the Master
                  Servicer pursuant to the second paragraph of Section 3.14(a)
                  in respect of any blanket policy deductibles;

                         (vi) all proceeds of any Mortgage Loan repurchased or
                  purchased in accordance with Section 2.03 or Section 9.01; and

                         (vii) all amounts required to be deposited in
                  connection with shortfalls in principal amount of Qualified
                  Substitute Mortgage Loans pursuant to Section 2.03.

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<PAGE>

For purposes of the immediately preceding sentence, the Cut-off Date with
respect to any Qualified Substitute Mortgage Loan shall be deemed to be the date
of substitution.

                  The foregoing requirements for deposit in the Collection
Accounts shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of late payment
charges or assumption fees need not be deposited by the Master Servicer in the
Collection Account. In the event the Master Servicer shall deposit in the
Collection Account any amount not required to be deposited therein, it may at
any time withdraw such amount from the Collection Account, any provision herein
to the contrary notwithstanding.

                  (b) On behalf of the Trust Fund, the Trustee shall establish
and maintain one or more accounts (such account or accounts, the "Distribution
Account"), held in trust for the benefit of the Certificateholders. On behalf of
the Trust Fund, the Master Servicer shall deliver to the Trustee in immediately
available funds for deposit in the Distribution Account on or before 3:00 p.m.
New York time (i) on the Master Servicer Remittance Date, that portion of the
Available Distribution Amount (calculated without regard to the references in
clause (2) of the definition thereof to amounts that may be withdrawn from the
Distribution Account) for the related Distribution Date then on deposit in the
Collection Account and the amount of any funds reimbursable to an Advancing
Person pursuant to Section 3.26, and (ii) on each Business Day as of the
commencement of which the balance on deposit in the Collection Account exceeds
$75,000 following any withdrawals pursuant to the next succeeding sentence, the
amount of such excess, but only if the Collection Account constitutes an
Eligible Account solely pursuant to clause (ii) of the definition of "Eligible
Account." If the balance on deposit in the Collection Account exceeds $75,000 as
of the commencement of business on any Business Day and the Collection Account
constitutes an Eligible Account solely pursuant to clause (ii) of the definition
of "Eligible Account," the Master Servicer shall, on or before 3:00 p.m. New
York time on such Business Day, withdraw from the Collection Account any and all
amounts payable or reimbursable to the Depositor, the Master Servicer, the
Trustee, the Trust Administrator, the Co-Trustee, the Seller or any Sub-Servicer
pursuant to Section 3.11 and shall pay such amounts to the Persons entitled
thereto.

                  (c) Funds in the Collection Account and the Distribution
Account may be invested in Permitted Investments in accordance with the
provisions set forth in Section 3.12. The Master Servicer shall give notice to
the Trustee, the Trust Administrator and the Depositor of the location of the
Collection Account maintained by it when established and prior to any change
thereof. The Trustee shall give notice to the Master Servicer, the Trust
Administrator and the Depositor of the location of the Distribution Account when
established and prior to any change thereof.

                  (d) Funds held in the Collection Account at any time may be
delivered by the Master Servicer to the Trustee for deposit in an account (which
may be the Distribution Account and must satisfy the standards for the
Distribution Account as set forth in the definition thereof) and for all
purposes of this Agreement shall be deemed to be a part of the Collection
Account; provided, however, that the Trustee shall have the sole authority to
withdraw any funds held pursuant to this subsection (d). In the event the Master
Servicer shall deliver to the Trustee for deposit in the Distribution Account
any amount not required to be deposited therein, it may at any time request that

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<PAGE>

the Trustee withdraw such amount from the Distribution Account and remit to it
any such amount, any provision herein to the contrary notwithstanding. In
addition, the Master Servicer shall deliver to the Trustee from time to time for
deposit, and upon written notification from the Master Servicer, the Trustee
shall so deposit, in the Distribution Account:

                         (i) any P&I Advances, as required pursuant to Section
                  4.03, unless delivered directly to the Trustee by an Advancing
                  Person;

                         (ii) any amounts required to be deposited pursuant to
                  Section 3.23(d) or (f) in connection with any REO Property;

                         (iii) any amounts to be paid by the Master Servicer in
                  connection with a purchase of Mortgage Loans and REO
                  Properties pursuant to Section 9.01;

                         (iv) any amounts required to be deposited pursuant to
                  Section 3.24 in connection with any Prepayment Interest
                  Shortfalls; and

                         (v) any Stayed Funds, as soon as permitted by the
                  federal bankruptcy court having jurisdiction in such matters.

                  (e) Promptly upon receipt of any Stayed Funds, whether from
the Master Servicer, a trustee in bankruptcy, or federal bankruptcy court or
other source, the Trustee shall deposit such funds in the Distribution Account,
subject to withdrawal thereof pursuant to Section 7.02(b) or as otherwise
permitted hereunder.

                  (f) The Master Servicer shall deposit in the Collection
Account any amounts required to be deposited pursuant to Section 3.12(b) in
connection with losses realized on Permitted Investments with respect to funds
held in the Collection Account.

                  SECTION 3.11. Withdrawals from the Collection Account and
                                Distribution Account.

                  (a) The Master Servicer shall, from time to time, make
withdrawals from the Collection Account for any of the following purposes or as
described in Section 4.03:

                         (i) to remit to the Trustee for deposit in the
                  Distribution Account the amounts required to be so remitted
                  pursuant to Section 3.10(b) or permitted to be so remitted
                  pursuant to the first sentence of Section 3.10(d);

                        (ii) subject to Section 3.16(d), to reimburse the Master
                  Servicer for P&I Advances, but only to the extent of amounts
                  received which represent Late Collections (net of the related
                  Servicing Fees) of Monthly Payments on Mortgage Loans with
                  respect to which such P&I Advances were made in accordance
                  with the provisions of Section 4.03;

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<PAGE>

                       (iii) subject to Section 3.16(d), to pay the Master
                  Servicer or any Sub- Servicer (a) any unpaid Servicing Fees,
                  (b) any unreimbursed Servicing Advances with respect to each
                  Mortgage Loan, but only to the extent of any Liquidation
                  Proceeds, Insurance Proceeds or other amounts as may be
                  collected by the Master Servicer from a Mortgagor, or
                  otherwise received with respect to such Mortgage Loan and (c)
                  any nonrecoverable Servicing Advances following the final
                  liquidation of a Mortgage Loan, but only to the extent that
                  Late Collections, Liquidation Proceeds and Insurance Proceeds
                  received with respect to such Mortgage Loan are insufficient
                  to reimburse the Master Servicer or any Sub-Servicer for
                  Servicing Advances;

                        (iv) to pay to the Master Servicer as servicing
                  compensation (in addition to the Servicing Fee) on the Master
                  Servicer Remittance Date any interest or investment income
                  earned on funds deposited in the Collection Account;

                         (v) to pay to the Master Servicer, the Depositor or the
                  Seller, as the case may be, with respect to each Mortgage Loan
                  that has previously been purchased or replaced pursuant to
                  Section 2.03 or Section 3.16(c) all amounts received thereon
                  subsequent to the date of purchase or substitution, as the
                  case may be;

                        (vi) to reimburse the Master Servicer for any P&I
                  Advance previously made which the Master Servicer has
                  determined to be a Nonrecoverable P&I Advance in accordance
                  with the provisions of Section 4.03;

                       (vii) to reimburse the Master Servicer or the Depositor
                  for expenses incurred by or reimbursable to the Master
                  Servicer or the Depositor, as the case may be, pursuant to
                  Section 6.03;

                      (viii) to reimburse the Master Servicer or the Trustee, as
                  the case may be, for expenses reasonably incurred in respect
                  of the breach or defect giving rise to the purchase obligation
                  under Section 2.03 or Section 2.04 of this Agreement that were
                  included in the Purchase Price of the Mortgage Loan, including
                  any expenses arising out of the enforcement of the purchase
                  obligation;

                       (ix) to pay, or to reimburse the Master Servicer for
                  advances in respect of, expenses incurred in connection with
                  any Mortgage Loan pursuant to Section 3.16(b);

                       (x) if the Master Servicer is the Trust Administrator, to
                  pay to the Trust Administrator the related portion of the
                  Administration Fee; and

                       (xi) to clear and terminate the Collection Account
                  pursuant to Section 9.01.

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<PAGE>

                  The Master Servicer shall keep and maintain separate
accounting, on a Mortgage Loan by Mortgage Loan basis, for the purpose of
justifying any withdrawal from the Collection Account, to the extent held by or
on behalf of it, pursuant to subclauses (ii), (iii), (iv), (v), (vi), (viii) and
(ix) above. The Master Servicer shall provide written notification to the
Trustee and the Trust Administrator, on or prior to the next succeeding Master
Servicer Remittance Date, upon making any withdrawals from the Collection
Account pursuant to subclause (vii) above.

                  (b) The Trustee shall, from time to time, make withdrawals
from the Distribution Account, for any of the following purposes, without
priority:

                         (i) to make distributions to Certificateholders in
                  accordance with Section 4.01;

                        (ii) to pay to itself and the Trust Administrator (if
                  the Trust Administrator is not the Master Servicer) amounts to
                  which each is entitled pursuant to Section 8.05 and any other
                  Extraordinary Trust Fund Expenses;

                         (iii) to pay itself any interest income earned on funds
                  deposited in the Distribution Account pursuant to Section
                  3.12(c);

                         (iv) to reimburse itself pursuant to Section 7.02;

                         (v) to pay any amounts in respect of taxes pursuant to
                  10.01(g)(iii);

                         (vi) to pay to an Advancing Person reimbursements for
                  P&I Advances and/or Servicing Advances pursuant to Section
                  3.26;

                       (vii) to reimburse itself for any P&I Advance made by it
                  under Section 7.01 (if not reimbursed by the Master Servicer)
                  to the same extent the Master Servicer would be entitled to
                  reimbursement under Section 3.11(a); and

                         (viii) to clear and terminate the Distribution Account
                  pursuant to Section 9.01.

                  SECTION 3.12. Investment of Funds in the Collection Account
                                and the Distribution Account.

                  (a) The Master Servicer may direct any depository institution
maintaining the Collection Account (for purposes of this Section 3.12, an
"Investment Account"), and the Trustee, in its individual capacity, may direct
any depository institution maintaining the Distribution Account (for purposes of
this Section 3.12, also an "Investment Account"), to invest the funds in such
Investment Account in one or more Permitted Investments bearing interest or sold
at a discount, and maturing, unless payable on demand, (i) no later than the
Business Day immediately preceding the date on which such funds are required to
be withdrawn from such account pursuant to this Agreement, if a Person other
than the Trustee is the obligor thereon, and (ii) no later than the date

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<PAGE>

on which such funds are required to be withdrawn from such account pursuant to
this Agreement, if the Trustee is the obligor thereon. All such Permitted
Investments shall be held to maturity, unless payable on demand. Any investment
of funds in an Investment Account shall be made in the name of the Trustee (in
its capacity as such) or in the name of a nominee of the Trustee. The Trustee
shall be entitled to sole possession (except with respect to investment
direction of funds held in the Collection Account and any income and gain
realized thereon) over each such investment, and any certificate or other
instrument evidencing any such investment shall be delivered directly to the
Trustee or its agent, together with any document of transfer necessary to
transfer title to such investment to the Trustee or its nominee. In the event
amounts on deposit in an Investment Account are at any time invested in a
Permitted Investment payable on demand, the Trustee shall:

                  (x)      consistent with any notice required to be given
                           thereunder, demand that payment thereon be made on
                           the last day such Permitted Investment may otherwise
                           mature hereunder in an amount equal to the lesser of
                           (1) all amounts then payable thereunder and (2) the
                           amount required to be withdrawn on such date; and

                  (y)      demand payment of all amounts due thereunder promptly
                           upon determination by a Responsible Officer of the
                           Trustee that such Permitted Investment would not
                           constitute a Permitted Investment in respect of funds
                           thereafter on deposit in the Investment Account.

                  (b) All income and gain realized from the investment of funds
deposited in the Collection Account held by or on behalf of the Master Servicer,
shall be for the benefit of the Master Servicer and shall be subject to its
withdrawal in accordance with Section 3.11. The Master Servicer shall deposit in
the Collection Account the amount of any loss of principal incurred in respect
of any such Permitted Investment made with funds in such accounts immediately
upon realization of such loss.

                  (c) All income and gain realized from the investment of funds
deposited in the Distribution Account held by or on behalf of the Trustee, shall
be for the benefit of the Trustee and shall be subject to its withdrawal at any
time. The Trustee shall deposit in the Distribution Account, the amount of any
loss of principal incurred in respect of any such Permitted Investment made with
funds in such accounts immediately upon realization of such loss.

                  (d) Except as otherwise expressly provided in this Agreement,
if any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Trustee may and, subject to Section 8.01 and Section
8.02(a)(v), upon the request of the Holders of Certificates representing more
than 50% of the Voting Rights allocated to any Class of Certificates, shall take
such action as may be appropriate to enforce such payment or performance,
including the institution and prosecution of appropriate proceedings.

                                      -65-

<PAGE>

                  SECTION 3.13. Maintenance of the Primary Mortgage Insurance
                                Policies; Collections Thereunder.

                  The Master Servicer will maintain or cause the related
Sub-Servicer, if any, to maintain in full force and effect, if required under
the Mortgage Loan Purchase Agreement and to the extent available, a Primary
Mortgage Insurance Policy with respect to each Mortgage Loan so insured as of
the Closing Date (or, in the case of a Qualified Substitute Mortgage Loan, on
the date of substitution). Such coverage will be maintained with respect to each
such Mortgage Loan for so long as it is outstanding, subject to any applicable
laws or until the related Loan-to-Value Ratio is reduced to less than or equal
to 80% based on Mortgagor payments. The Master Servicer shall cause the premium
for each Primary Mortgage Insurance Policy to be paid on a timely basis and
shall pay such premium out of its own funds if it is not otherwise paid. The
Master Servicer or the related Sub-Servicer, if any, will not cancel or refuse
to renew any such Primary Mortgage Insurance Policy in effect on the Closing
Date (or, in the case of a Qualified Substitute Mortgage Loan, on the date of
substitution) that is required to be kept in force under this Agreement unless a
replacement Primary Mortgage Insurance Policy for such canceled or non-renewed
policy is obtained from and maintained with a Qualified Insurer.

                  The Master Servicer shall not take, or permit any Sub-Servicer
to take, any action which would result in non-coverage under any applicable
Primary Mortgage Insurance Policy of any loss which, but for the actions of the
Master Servicer or Sub-Servicer, would have been covered thereunder. The Master
Servicer will comply in the performance of this Agreement with all reasonable
rules and requirements of each insurer under each Primary Mortgage Insurance
Policy. In connection with any assumption and modification agreement or
substitution of liability agreement entered into or to be entered into pursuant
to Section 3.15, the Master Servicer shall promptly notify the insurer under the
related Primary Mortgage Insurance Policy, if any, of such assumption in
accordance with the terms of such policies and shall take all actions which may
be required by such insurer as a condition to the continuation of coverage under
the Primary Mortgage Insurance Policy. If any such Primary Mortgage Insurance
Policy is terminated as a result of such assumption, the Master Servicer or the
related Sub-Servicer shall obtain a replacement Primary Mortgage Insurance
Policy as provided above.

                  In connection with its activities as administrator and
servicer of the Mortgage Loans, the Master Servicer agrees to prepare and
present, on behalf of itself, the Trustee and the Certificateholders, claims to
the insurer under any Primary Mortgage Insurance Policy in a timely fashion in
accordance with the terms of such policies and, in this regard, to take such
action as shall be necessary to permit recovery under any Primary Mortgage
Insurance Policy respecting a defaulted Mortgage Loan. Any amounts collected by
the Master Servicer under any Primary Mortgage Insurance Policy shall be
deposited in the Collection Account, subject to withdrawal pursuant to Section
3.11; and any amounts collected by the Master Servicer under any Primary
Mortgage Insurance Policy in respect of any REO Property shall be deposited in
the Collection Account, subject to withdrawal pursuant to Section 3.23. In those
cases in which a Mortgage Loan is serviced by a Sub-Servicer, the Sub-Servicer,
on behalf of itself, the Trustee, and the Certificateholders, will present
claims to the insurer under any Primary Mortgage Insurance Policy and all
collections thereunder shall be deposited initially in the Sub-Servicing
Account.

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<PAGE>

                  SECTION 3.14. Maintenance of Hazard Insurance and Errors and
                                Omissions and Fidelity Coverage.

                  (a) The Master Servicer shall cause to be maintained for each
Mortgage Loan fire insurance with extended coverage on the related Mortgaged
Property in an amount which is at least equal to the least of (i) the current
principal balance of such Mortgage Loan, (ii) the amount necessary to fully
compensate for any damage or loss to the improvements that are a part of such
property on a replacement cost basis and (iii) the maximum insurable value of
the improvements which are a part of such Mortgaged Property, in each case in an
amount not less than such amount as is necessary to avoid the application of any
coinsurance clause contained in the related hazard insurance policy. The Master
Servicer shall also cause to be maintained fire insurance with extended coverage
on each REO Property in an amount which is at least equal to the lesser of (i)
the maximum insurable value of the improvements which are a part of such
property and (ii) the outstanding principal balance of the related Mortgage Loan
at the time it became an REO Property, plus accrued interest at the Mortgage
Rate and related Servicing Advances. The Master Servicer will comply in the
performance of this Agreement with all reasonable rules and requirements of each
insurer under any such hazard policies. Any amounts to be collected by the
Master Servicer under any such policies (other than amounts to be applied to the
restoration or repair of the property subject to the related Mortgage or amounts
to be released to the Mortgagor in accordance with the procedures that the
Master Servicer would follow in servicing loans held for its own account,
subject to the terms and conditions of the related Mortgage and Mortgage Note)
shall be deposited in the Collection Account, subject to withdrawal pursuant to
Section 3.11, if received in respect of a Mortgage Loan, or in the REO Account,
subject to withdrawal pursuant to Section 3.23, if received in respect of an REO
Property. Any cost incurred by the Master Servicer in maintaining any such
insurance shall not, for the purpose of calculating distributions to
Certificateholders, be added to the unpaid principal balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so permit.
It is understood and agreed that no earthquake or other additional insurance is
to be required of any Mortgagor other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged Property or REO Property is at any time
in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards, the Master Servicer will
cause to be maintained a flood insurance policy in respect thereof. Such flood
insurance shall be in an amount equal to the lesser of (i) the unpaid principal
balance of the related Mortgage Loan and (ii) the maximum amount of such
insurance available for the related Mortgaged Property under the national flood
insurance program (assuming that the area in which such Mortgaged Property is
located is participating in such program).

                  In the event that the Master Servicer shall obtain and
maintain a blanket policy with an insurer having a General Policy Rating of A:X
or better in Best's Key Rating Guide (or such other rating that is comparable to
such rating) insuring against hazard losses on all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligations as set forth in
the first two sentences of this Section 3.14, it being understood and agreed
that such policy may contain a deductible clause, in which case the Master
Servicer shall, in the event that there shall not have been maintained on the
related Mortgaged Property or REO Property a policy complying with the first two
sentences of this Section 3.14, and there shall have been one or more losses
which would have been covered by such

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<PAGE>

policy, deposit to the Collection Account from its own funds the amount not
otherwise payable under the blanket policy because of such deductible clause. In
connection with its activities as administrator and servicer of the Mortgage
Loans, the Master Servicer agrees to prepare and present, on behalf of itself,
the Trustee and Certificateholders, claims under any such blanket policy in a
timely fashion in accordance with the terms of such policy.

                  (b) The Master Servicer shall keep in force during the term of
this Agreement a policy or policies of insurance covering errors and omissions
for failure in the performance of the Master Servicer's obligations under this
Agreement, which policy or policies shall be in such form and amount that would
meet the requirements of Fannie Mae or Freddie Mac if it were the purchaser of
the Mortgage Loans, unless the Master Servicer has obtained a waiver of such
requirements from Fannie Mae or Freddie Mac. The Master Servicer shall also
maintain a fidelity bond in the form and amount that would meet the requirements
of Fannie Mae or Freddie Mac, unless the Master Servicer has obtained a waiver
of such requirements from Fannie Mae or Freddie Mac. The Master Servicer shall
provide the Trustee (upon the Trustee's reasonable request) with copies of any
such insurance policies and fidelity bond. The Master Servicer shall be deemed
to have complied with this provision if an Affiliate of the Master Servicer has
such errors and omissions and fidelity bond coverage and, by the terms of such
insurance policy or fidelity bond, the coverage afforded thereunder extends to
the Master Servicer. Any such errors and omissions policy and fidelity bond
shall by its terms not be cancelable without thirty days' prior written notice
to the Trustee. The Master Servicer shall also cause each Sub-Servicer to
maintain a policy of insurance covering errors and omissions and a fidelity bond
which would meet such requirements.

                  SECTION 3.15. Enforcement of Due-On-Sale Clauses; Assumption
                                Agreements.

                  The Master Servicer will, to the extent it has knowledge of
any conveyance or prospective conveyance of any Mortgaged Property by any
Mortgagor (whether by absolute conveyance or by contract of sale, and whether or
not the Mortgagor remains or is to remain liable under the Mortgage Note and/or
the Mortgage), exercise its rights to accelerate the maturity of such Mortgage
Loan under the "due-on-sale" clause, if any, applicable thereto; provided,
however, that the Master Servicer shall not exercise any such rights if
prohibited by law from doing so or if the exercise of such rights would impair
or threaten to impair any recovery under the related Primary Mortgage Insurance
Policy, if any. If the Master Servicer reasonably believes it is unable under
applicable law to enforce such "due-on-sale" clause, or if any of the other
conditions set forth in the proviso to the preceding sentence apply, the Master
Servicer will enter into an assumption and modification agreement from or with
the person to whom such property has been conveyed or is proposed to be
conveyed, pursuant to which such person becomes liable under the Mortgage Note
and, to the extent permitted by applicable state law, the Mortgagor remains
liable thereon. The Master Servicer is also authorized to enter into a
substitution of liability agreement with such person, pursuant to which the
original Mortgagor is released from liability and such person is substituted as
the Mortgagor and becomes liable under the Mortgage Note, provided that no such
substitution shall be effective unless such person satisfies the underwriting
criteria of the Master Servicer. In connection with any assumption or
substitution, the Master Servicer shall apply such underwriting standards and
follow such practices and procedures as shall be normal and usual in its general

                                      -68-

<PAGE>

mortgage servicing activities and as it applies to other mortgage loans owned
solely by it. The Master Servicer shall not take or enter into any assumption
and modification agreement, however, unless (to the extent practicable in the
circumstances) it shall have received confirmation, in writing, of the continued
effectiveness of any applicable Primary Mortgage Insurance Policy or hazard
insurance policy, or a new policy meeting the requirements of this Section is
obtained. Any fee collected by the Master Servicer in respect of an assumption
or substitution of liability agreement will be retained by the Master Servicer
as additional servicing compensation. In connection with any such assumption, no
material term of the Mortgage Note (including but not limited to the related
Mortgage Rate and the amount of the Monthly Payment) may be amended or modified,
except as otherwise required pursuant to the terms thereof. The Master Servicer
shall notify the Trustee that any such substitution or assumption agreement has
been completed by forwarding to the Trustee the executed original of such
substitution or assumption agreement, which document shall be added to the
related Mortgage File and shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof.

                  Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the Master Servicer shall not be deemed to be in default,
breach or any other violation of its obligations hereunder by reason of any
assumption of a Mortgage Loan by operation of law or by the terms of the
Mortgage Note or any assumption which the Master Servicer may be restricted by
law from preventing, for any reason whatever. For purposes of this Section 3.15,
the term "assumption" is deemed to also include a sale (of the Mortgaged
Property) subject to the Mortgage that is not accompanied by an assumption or
substitution of liability agreement.

                  SECTION 3.16. Realization Upon Defaulted Mortgage Loans.

                  (a) The Master Servicer shall, consistent with the servicing
standard set forth in Section 3.01, foreclose upon or otherwise comparably
convert the ownership of properties securing such of the Mortgage Loans as come
into and continue in default and as to which no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 3.07. The Master
Servicer shall be responsible for all costs and expenses incurred by it in any
such proceedings; provided, however, that such costs and expenses will be
recoverable as Servicing Advances by the Master Servicer as contemplated in
Section 3.11 and Section 3.23. The foregoing is subject to the provision that,
in any case in which Mortgaged Property shall have suffered damage from an
Uninsured Cause, the Master Servicer shall not be required to expend its own
funds toward the restoration of such property unless it shall determine in its
discretion that such restoration will increase the proceeds of liquidation of
the related Mortgage Loan after reimbursement to itself for such expenses.

                  (b) Notwithstanding the foregoing provisions of this Section
3.16 or any other provision of this Agreement, with respect to any Mortgage Loan
as to which the Master Servicer has received actual notice of, or has actual
knowledge of, the presence of any toxic or hazardous substance on the related
Mortgaged Property, the Master Servicer shall not, on behalf of the Trustee,
either (i) obtain title to such Mortgaged Property as a result of or in lieu of
foreclosure or otherwise, or (ii) otherwise acquire possession of, or take any
other action with respect to, such Mortgaged Property, if, as a result of any
such action, the Trustee, the Co-Trustee, the Trust Fund, the Trust

                                      -69-

<PAGE>

Administrator, the Master Servicer or the Certificateholders would be considered
to hold title to, to be a "mortgagee-in-possession" of, or to be an "owner" or
"operator" of such Mortgaged Property within the meaning of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended from
time to time, or any comparable law, unless the Master Servicer has also
previously determined, based on its reasonable judgment and a report prepared by
a Person who regularly conducts environmental audits using customary industry
standards, that:

                         (1) such Mortgaged Property is in compliance with
                  applicable environmental laws or, if not, that it would be in
                  the best economic interest of the Trust Fund to take such
                  actions as are necessary to bring the Mortgaged Property into
                  compliance therewith; and

                         (2) there are no circumstances present at such
                  Mortgaged Property relating to the use, management or disposal
                  of any hazardous substances, hazardous materials, hazardous
                  wastes, or petroleum-based materials for which investigation,
                  testing, monitoring, containment, clean-up or remediation
                  could be required under any federal, state or local law or
                  regulation, or that if any such materials are present for
                  which such action could be required, that it would be in the
                  best economic interest of the Trust Fund to take such actions
                  with respect to the affected Mortgaged Property.

                  The cost of the environmental audit report contemplated by
this Section 3.23 shall be advanced by the Master Servicer, subject to the
Master Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.11(a)(ix), such right of reimbursement being prior to the
rights of Certificateholders to receive any amount in the Collection Account
received in respect of the affected Mortgage Loan or other Mortgage Loans.

                  If the Master Servicer determines, as described above, that it
is in the best economic interest of the Trust Fund to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes or petroleum-based materials affecting any such Mortgaged Property, then
the Master Servicer shall take such action as it deems to be in the best
economic interest of the Trust Fund. The cost of any such compliance,
containment, cleanup or remediation shall be advanced by the Master Servicer,
subject to the Master Servicer's right to be reimbursed therefor from the
Collection Account as provided in Section 3.11(a)(ix), such right of
reimbursement being prior to the rights of Certificateholders to receive any
amount in the Collection Account received in respect of the affected Mortgage
Loan or other Mortgage Loans.

                  (c) The Master Servicer may at its option purchase from REMIC
I any Mortgage Loan that is 90 days or more delinquent, which the Master
Servicer determines in good faith will otherwise become subject to foreclosure
proceedings (evidence of such determination to be delivered in writing to the
Trustee prior to purchase), at a price equal to the Purchase Price. The Purchase
Price for any Mortgage Loan purchased hereunder shall be deposited in the
Collection Account, and the Trustee, upon receipt of written certification from
the Master Servicer of such deposit, shall release

                                      -70-

<PAGE>

or cause to be released to the Master Servicer the related Mortgage File and
shall execute and deliver such instruments of transfer or assignment, in each
case without recourse, as the Master Servicer shall furnish and as shall be
necessary to vest in the Master Servicer title to any Mortgage Loan released
pursuant hereto.

                  (d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: first, to reimburse the
Master Servicer or any Sub-Servicer for any related unreimbursed Servicing
Advances and P&I Advances, pursuant to Section 3.11(a)(ii) or (a)(iii); second,
to accrued and unpaid interest on the Mortgage Loan, to the date of the Final
Recovery Determination, or to the Due Date prior to the Distribution Date on
which such amounts are to be distributed if not in connection with a Final
Recovery Determination; and third, as a recovery of principal of the Mortgage
Loan. If the amount of the recovery so allocated to interest is less than the
full amount of accrued and unpaid interest due on such Mortgage Loan, the amount
of such recovery will be allocated by the Master Servicer as follows: first, to
unpaid Servicing Fees; and second, to the balance of the interest then due and
owing. The portion of the recovery so allocated to unpaid Servicing Fees shall
be reimbursed to the Master Servicer or any Sub-Servicer pursuant to Section
3.11(a)(iii).

                  SECTION 3.17. Trustee to Cooperate; Release of Mortgage Files.

                  (a) Upon the payment in full of any Mortgage Loan, or the
receipt by the Master Servicer of a notification that payment in full shall be
escrowed in a manner customary for such purposes, the Master Servicer will
immediately notify the Trustee by a certification in the form of Exhibit E-2
(which certification shall include a statement to the effect that all amounts
received or to be received in connection with such payment which are required to
be deposited in the Collection Account pursuant to Section 3.10 have been or
will be so deposited) of a Servicing Officer and shall request delivery to it of
the Mortgage File. Upon receipt of such certification and request, the Trustee
shall promptly release the related Mortgage File to the Master Servicer. No
expenses incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be chargeable to the Collection Account or the Distribution
Account.

                  (b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any Primary Mortgage Insurance Policy or any other insurance policy relating to
the Mortgage Loans, the Trustee shall, upon request of the Master Servicer and
delivery to the Trustee of a Request for Release in the form of Exhibit E-l,
release the related Mortgage File to the Master Servicer, and the Trustee shall,
at the direction of the Master Servicer, execute such documents as shall be
necessary to the prosecution of any such proceedings. Such Request for Release
shall obligate the Master Servicer to return each and every document previously
requested from the Mortgage File to the Trustee when the need therefor by the
Master Servicer no longer exists, unless the Mortgage Loan has been liquidated
and the Liquidation Proceeds relating to the Mortgage Loan have been deposited
in the Collection Account or the Mortgage File or such document has been
delivered to an attorney, or to a public trustee or other public official as
required by law, for purposes of initiating or pursuing legal action or other
proceedings for the foreclosure of the Mortgaged Property either judicially or
non-judicially, and the

                                      -71-

<PAGE>

Master Servicer has delivered to the Trustee a certificate of a Servicing
Officer certifying as to the name and address of the Person to which such
Mortgage File or such document was delivered and the purpose or purposes of such
delivery. Upon receipt of a certificate of a Servicing Officer stating that such
Mortgage Loan was liquidated and that all amounts received or to be received in
connection with such liquidation that are required to be deposited into the
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO Property, a copy of the Request for Release shall be released by the
Trustee to the Master Servicer.

                  (c) Upon written certification of a Servicing Officer, the
Trustee shall execute and deliver to the Master Servicer any court pleadings,
requests for trustee's sale or other documents reasonably necessary to the
foreclosure or trustee's sale in respect of a Mortgaged Property or to any legal
action brought to obtain judgment against any Mortgagor on the Mortgage Note or
Mortgage or to obtain a deficiency judgment, or to enforce any other remedies or
rights provided by the Mortgage Note or Mortgage or otherwise available at law
or in equity. Each such certification shall include a request that such
pleadings or documents be executed by the Trustee and a statement as to the
reason such documents or pleadings are required and that the execution and
delivery thereof by the Trustee will not invalidate or otherwise affect the lien
of the Mortgage, except for the termination of such a lien upon completion of
the foreclosure or trustee's sale.

                  SECTION 3.18. Servicing Compensation.

                  As compensation for the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to the Servicing Fee with
respect to each Mortgage Loan payable solely from payments of interest in
respect of such Mortgage Loan, subject to Section 3.24. In addition, the Master
Servicer shall be entitled to recover unpaid Servicing Fees out of Insurance
Proceeds or Liquidation Proceeds to the extent permitted by Section 3.11(a)(iii)
and out of amounts derived from the operation and sale of an REO Property to the
extent permitted by Section 3.23. The right to receive the Servicing Fee may not
be transferred in whole or in part except in connection with the transfer of all
of the Master Servicer's responsibilities and obligations under this Agreement.

                  Additional servicing compensation in the form of assumption
fees, late payment charges and other similar fees and charges shall be retained
by the Master Servicer (subject to Section 3.24) only to the extent such fees or
charges are received by the Master Servicer. The Master Servicer shall also be
entitled pursuant to Section 3.11(a)(iv) to withdraw from the Collection
Account, and pursuant to Section 3.23(b) to withdraw from any REO Account, as
additional servicing compensation, interest or other income earned on deposits
therein, subject to Section 3.12 and Section 3.24. The Master Servicer shall be
required to pay all expenses incurred by it in connection with its servicing
activities hereunder (including premiums due under the Primary Insurance
Policies, if any, premiums for the insurance required by Section 3.14, to the
extent such premiums are not paid by the related Mortgagors or by a
Sub-Servicer, servicing compensation of each Sub-Servicer, and to the extent
provided herein in Section 8.05, the fees and expenses of the Trustee) and shall
not be entitled to reimbursement therefor except as specifically provided
herein.

                                      -72-

<PAGE>

                  SECTION 3.19. Reports to the Trustee; Collection Account
                                Statements.

                  Not later than fifteen days after each Distribution Date, the
Master Servicer shall forward to the Trustee, upon the request of the Trustee, a
statement prepared by the Master Servicer setting forth the status of the
Collection Account as of the close of business on the last day of the calendar
month relating to such Distribution Date and showing, for the period covered by
such statement, the aggregate amount of deposits into and withdrawals from the
Collection Account of each category of deposit specified in Section 3.10(a) and
each category of withdrawal specified in Section 3.11. Such statement may be in
the form of the then current Fannie Mae Monthly Accounting Report for its
Guaranteed Mortgage Pass-Through Program with appropriate additions and changes,
and shall also include information as to the aggregate of the outstanding
principal balances of all of the Mortgage Loans as of the last day of the
calendar month immediately preceding such Distribution Date. Copies of such
statement shall be provided by the Trustee to any Certificateholder and to any
Person identified to the Trustee as a prospective transferee of a Certificate,
upon request at the expense of the requesting party, provided such statement is
delivered by the Master Servicer to the Trustee.

                  SECTION 3.20. Statement as to Compliance.

                  The Master Servicer will deliver to the Trust Administrator,
the Trustee, the Depositor and the Rating Agency on or before April 15 of each
calendar year commencing in 2001, an Officers' Certificate stating, as to each
signatory thereof, that (i) a review of the activities of the Master Servicer
during the preceding year and of performance under this Agreement has been made
under such officers' supervision and (ii) to the best of such officers'
knowledge, based on such review, the Master Servicer has fulfilled all of its
obligations under this Agreement throughout such year, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof. Copies of any such
statement shall be provided by the Trustee to any Certificateholder and to any
Person identified to the Trustee as a prospective transferee of a Certificate,
upon the request and at the expense of the requesting party, provided that such
statement is delivered by the Master Servicer to the Trustee.

                  SECTION 3.21. Independent Public Accountants' Servicing
                                Report.

                  Not later than April 15 of each calendar year commencing in
2001, the Master Servicer, at its expense, shall cause a nationally recognized
firm of independent certified public accountants to furnish to the Master
Servicer a report stating that (i) it has obtained a letter of representation
regarding certain matters from the management of the Master Servicer which
includes an assertion that the Master Servicer has complied with certain minimum
residential mortgage loan servicing standards, identified in the Uniform Single
Attestation Program for Mortgage Bankers established by the Mortgage Bankers
Association of America, with respect to the servicing of residential mortgage
loans during the most recently completed fiscal year and (ii) on the basis of an
examination conducted by such firm in accordance with standards established by
the American Institute of Certified Public Accountants, such representation is
fairly stated in all material respects, subject to such exceptions and other
qualifications that may be appropriate. In rendering its report such firm may
rely, as to matters relating to the direct servicing of residential mortgage
loans by Sub-

                                      -74-

<PAGE>

Servicers, upon comparable reports of firms of independent certified public
accountants rendered on the basis of examinations conducted in accordance with
the same standards (rendered within one year of such report) with respect to
those Sub-Servicers. Immediately upon receipt of such report, the Master
Servicer shall furnish a copy of such report to the Trustee, the Trust
Administrator and the Rating Agency. Copies of such statement shall be provided
by the Trustee to any Certificateholder upon request at the Master Servicer's
expense, provided that such statement is delivered by the Master Servicer to the
Trustee. In the event such firm of independent certified public accountants
requires the Trustee to agree to the procedures performed by such firm, the
Master Servicer shall direct the Trustee in writing to so agree; it being
understood and agreed that the Trustee will deliver such letter of agreement in
conclusive reliance upon the direction of the Master Servicer, and the Trustee
has not made any independent inquiry or investigation as to, and shall have no
obligation or liability in respect of, the sufficiency, validity or correctness
of such procedures.

                  SECTION 3.22. Access to Certain Documentation.

                  The Master Servicer shall provide to the Office of Thrift
Supervision, the FDIC, and any other federal or state banking or insurance
regulatory authority that may exercise authority over any Certificateholder,
access to the documentation regarding the Mortgage Loans required by applicable
laws and regulations. Such access shall be afforded without charge, but only
upon reasonable request and during normal business hours at the offices of the
Master Servicer designated by it. In addition, access to the documentation
regarding the Mortgage Loans required by applicable laws and regulations will be
provided to such Certificateholder, the Trustee, the Trust Administrator and to
any Person identified to the Master Servicer as a prospective transferee of a
Certificate, upon reasonable request during normal business hours at the offices
of the Master Servicer designated by it at the expense of the Person requesting
such access.

                  SECTION 3.23. Title, Management and Disposition of REO
                                Property.

                  (a) The deed or certificate of sale of any REO Property shall
be taken in the name of the Trustee, or its nominee, in trust for the benefit of
the Certificateholders. The Master Servicer, on behalf of the Trust Fund, shall
either sell any REO Property within three years after the Trust Fund acquires
ownership of such REO Property for purposes of Section 860G(a)(8) of the Code or
request from the Internal Revenue Service, no later than 60 days before the day
on which the three- year grace period would otherwise expire, an extension of
the three-year grace period, unless the Master Servicer shall have delivered to
the Trustee, the Trust Administrator and the Depositor an Opinion of Counsel,
addressed to the Trustee, the Trust Administrator and the Depositor, to the
effect that the holding by the Trust Fund of such REO Property subsequent to
three years after its acquisition will not result in the imposition on REMIC I
or REMIC II of taxes on "prohibited transactions" thereof, as defined in Section
860F of the Code, or cause REMIC I or REMIC II to fail to qualify as a REMIC
under Federal law at any time that any Certificates are outstanding. The Master
Servicer shall manage, conserve, protect and operate each REO Property for the
Certificateholders solely for the purpose of its prompt disposition and sale in
a manner which does not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
result in the receipt by REMIC I or REMIC II of any "income

                                      -74-

<PAGE>

from non-permitted assets" within the meaning of Section 860F(a)(2)(B) of the
Code, or any "net income from foreclosure property" which is subject to taxation
under the REMIC Provisions.

                  (b) The Master Servicer shall segregate and hold all funds
collected and received in connection with the operation of any REO Property
separate and apart from its own funds and general assets and shall establish and
maintain with respect to REO Properties an account held in trust for the Trustee
for the benefit of the Certificateholders (the "REO Account"), which shall be an
Eligible Account. The Master Servicer shall be permitted to allow the Collection
Account to serve as the REO Account, subject to separate ledgers for each REO
Property. The Master Servicer shall be entitled to retain or withdraw any
interest income paid on funds deposited in the REO Account.

                  (c) The Master Servicer shall have full power and authority,
subject only to the specific requirements and prohibitions of this Agreement, to
do any and all things in connection with any REO Property as are consistent with
the manner in which the Master Servicer manages and operates similar property
owned by the Master Servicer or any of its Affiliates, all on such terms and for
such period as the Master Servicer deems to be in the best interests of
Certificateholders. In connection therewith, the Master Servicer shall deposit,
or cause to be deposited in the clearing account (which account must be an
Eligible Account) in which it customarily deposits payments and collections on
mortgage loans in connection with its mortgage loan servicing activities on a
daily basis, and in no event more than two Business Day after the Master
Servicer's receipt thereof, and shall thereafter deposit in the REO Account, in
no event more than one Business Days after the deposit of such funds into the
clearing account, all revenues received by it with respect to an REO Property
and shall withdraw therefrom funds necessary for the proper operation,
management and maintenance of such REO Property including, without limitation:

                         (i) all insurance premiums due and payable in respect
                  of such REO Property;

                         (ii) all real estate taxes and assessments in respect
                  of such REO Property that may result in the imposition of a
                  lien thereon; and

                         (iii) all costs and expenses necessary to maintain such
                  REO Property.

To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Master Servicer shall advance
from its own funds such amount as is necessary for such purposes if, but only
if, the Master Servicer would make such advances if the Master Servicer owned
the REO Property and if in the Master Servicer's judgment, the payment of such
amounts will be recoverable from the rental or sale of the REO Property.

                  Notwithstanding the foregoing, none of the Master Servicer,
the Trust Administrator or the Trustee shall:

                                      -75-

<PAGE>

                         (i) authorize the Trust Fund to enter into, renew or
                  extend any New Lease with respect to any REO Property, if the
                  New Lease by its terms will give rise to any income that does
                  not constitute Rents from Real Property;

                        (ii) authorize any amount to be received or accrued
                  under any New Lease other than amounts that will constitute
                  Rents from Real Property;

                       (iii) authorize any construction on any REO Property,
                  other than the completion of a building or other improvement
                  thereon, and then only if more than ten percent of the
                  construction of such building or other improvement was
                  completed before default on the related Mortgage Loan became
                  imminent, all within the meaning of Section 856(e)(4)(B) of
                  the Code; or

                        (iv) authorize any Person to Directly Operate any REO
                  Property on any date more than 90 days after its date of
                  acquisition by the Trust Fund;

unless, in any such case, the Master Servicer has obtained an Opinion of
Counsel, provided to the Trust Administrator and the Trustee, to the effect that
such action will not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code at any time that
it is held by the Trust Fund, in which case the Master Servicer may take such
actions as are specified in such Opinion of Counsel.

                  The Master Servicer may contract with any Independent
Contractor for the operation and management of any REO Property, provided that:

                         (i) the terms and conditions of any such contract shall
                  not be inconsistent herewith;

                        (ii) any such contract shall require, or shall be
                  administered to require, that the Independent Contractor pay
                  all costs and expenses incurred in connection with the
                  operation and management of such REO Property, including those
                  listed above and remit all related revenues (net of such costs
                  and expenses) to the Master Servicer as soon as practicable,
                  but in no event later than thirty days following the receipt
                  thereof by such Independent Contractor;

                       (iii) none of the provisions of this Section 3.23(c)
                  relating to any such contract or to actions taken through any
                  such Independent Contractor shall be deemed to relieve the
                  Master Servicer of any of its duties and obligations to the
                  Trustee on behalf of the Certificateholders with respect to
                  the operation and management of any such REO Property; and

                        (iv) the Master Servicer shall be obligated with respect
                  thereto to the same extent as if it alone were performing all
                  duties and obligations in connection with the operation and
                  management of such REO Property.

                                      -76-

<PAGE>

The Master Servicer shall be entitled to enter into any agreement with any
Independent Contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Master Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Master Servicer shall be solely liable for
all fees owed by it to any such Independent Contractor, irrespective of whether
the Master Servicer's compensation pursuant to Section 3.18 is sufficient to pay
such fees.

                  (d) In addition to the withdrawals permitted under Section
3.23(c), the Master Servicer may from time to time make withdrawals from the REO
Account for any REO Property: (i) to pay itself or any Sub-Servicer unpaid
Servicing Fees in respect of the related Mortgage Loan; and (ii) to reimburse
itself or any Sub-Servicer for unreimbursed Servicing Advances and P&I Advances
made in respect of such REO Property or the related Mortgage Loan. Any income
from the related REO Property received during any calendar months prior to a
Final Recovery Determination, net of any withdrawals made pursuant to Section
3.23(c) or this Section 3.23(d), shall be withdrawn by the Master Servicer from
each REO Account maintained by it and deposited into the Distribution Account in
accordance with Section 3.10(d)(ii) on the Master Servicer Remittance Date
relating to a Final Recovery Determination with respect to such Mortgage Loan,
for distribution on the related Distribution Date in accordance with Section
4.01.

                  (e) Subject to the time constraints set forth in Section
3.23(a), and further subject to obtaining the approval of the insurer under any
related Primary Mortgage Insurance Policy (if and to the extent that such
approvals are necessary to make claims under such policies in respect of the
affected REO Property), each REO Disposition shall be carried out by the Master
Servicer at such price and upon such terms and conditions as the Master Servicer
shall deem necessary or advisable, as shall be normal and usual in its general
servicing activities for similar properties.

                  (f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Master Servicer or any
Sub-Servicer as provided above, shall be deposited in the Distribution Account
in accordance with Section 3.10(d)(ii) on the Master Servicer Remittance Date in
the month following the receipt thereof for distribution on the related
Distribution Date in accordance with Section 4.01. Any REO Disposition shall be
for cash only (unless changes in the REMIC Provisions made subsequent to the
Startup Day allow a sale for other consideration).

                  (g) The Master Servicer shall file information returns with
respect to the receipt of mortgage interest received in a trade or business,
reports of foreclosures and abandonments of any Mortgaged Property and
cancellation of indebtedness income with respect to any Mortgaged Property as
required by Sections 6050H, 6050J and 6050P of the Code, respectively. Such
reports shall be in form and substance sufficient to meet the reporting
requirements imposed by such Sections 6050H, 6050J and 6050P of the Code.

                                      -77-

<PAGE>

                  SECTION 3.24. Obligations of the Master Servicer in Respect of
                                Prepayment Interest Shortfalls.

                  The Master Servicer shall deliver to the Trustee for deposit
into the Distribution Account on or before 3:00 p.m. New York time on the Master
Servicer Remittance Date from its own funds an amount equal to the lesser of (i)
the aggregate of the Prepayment Interest Shortfalls for the related Distribution
Date resulting from full or partial Principal Prepayments during the related
Prepayment Period and (ii) the amount of its aggregate Servicing Fee for the
most recently ended calendar month.

                  SECTION 3.25. Obligations of the Master Servicer in Respect of
                                Monthly Payments.

                  In the event that a shortfall in any collection on or
liability with respect to any Mortgage Loan results from or is attributable to
adjustments to Stated Principal Balances that were made by the Master Servicer
in a manner not consistent with the terms of the related Mortgage Note and this
Agreement, the Master Servicer, upon discovery or receipt of notice thereof,
immediately shall deliver to the Trustee for deposit in the Distribution Account
from its own funds the amount of any such shortfall and shall indemnify and hold
harmless the Trust Fund, the Trustee, the Trust Administrator, the Depositor and
any successor master servicer in respect of any such liability. Such indemnities
shall survive the termination or discharge of this Agreement.

                  SECTION 3.26. Advance Facility.

                  (a) The Master Servicer is hereby authorized to enter into a
facility with any Person which provides that such Person (an "Advancing Person")
may fund P&I Advances and/or Servicing Advances under this Agreement, although
no such facility shall reduce or otherwise affect the Master Servicer's
obligation to fund such P&I Advances and/or Servicing Advances. To the extent
that an Advancing Person funds any P&I Advance or any Servicing Advance and
provides the Trustee with notice acknowledged by the Master Servicer that such
Advancing Person is entitled to reimbursement, such Advancing Person shall be
entitled to receive reimbursement pursuant to this Agreement for such amount to
the extent provided in Section 3.26(b). Such notice from the Advancing Person
must specify the amount of the reimbursement and must specify which Section of
this Agreement permits the applicable P&I Advance or Servicing Advance to be
reimbursed. The Trustee shall have no duty or liability with respect to any
calculation of any reimbursement to be paid to an Advancing Person and shall be
entitled to rely without independent investigation on the Advancing Person's
notice provided pursuant to this Section 3.26. An Advancing Person whose
obligations hereunder are limited to the funding of P&I Advances and/or
Servicing Advances shall not be required to meet the qualifications of a
Sub-Servicer pursuant to Section 3.02 hereof.

                  (b) If an Advancing Person is entitled to reimbursement for
any particular P&I Advance or Servicing Advance, then the Master Servicer shall
not be permitted to reimburse itself therefor under Section 3.11(a)(ii), Section
3.11(a)(iii), Section 3.11(a)(vi) or Section 3.11(a)(ix), but instead the Master
Servicer shall include such amounts in the applicable remittance to the Trustee
made pursuant to Section 3.10(b) to the extent of amounts on deposit in the
Collection Account on

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the related Master Servicer Remittance Date. The Trustee is hereby authorized to
pay to an Advancing Person, reimbursements for P&I Advances and Servicing
Advances from the Distribution Account to the same extent the Master Servicer
would have been permitted to reimburse itself for such P&I Advances and/or
Servicing Advances in accordance with Section 3.11(a)(ii), Section 3.11(a)(iii),
Section 3.11(a)(vi) or Section 3.11(a)(ix), as the case may be, had the Master
Servicer made such Advance or Servicing Advance.

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                                   ARTICLE IV

                         PAYMENTS TO CERTIFICATEHOLDERS

                  SECTION 4.01. Distributions.

                  (a)(i) On each Distribution Date, the Trustee shall withdraw
from the Distribution Account, but only to the extent necessary to make the
distributions described in clauses first through ninth below, the Available
Distribution Amount for such Distribution Date, less any amounts permitted to be
withdrawn from the Distribution Account pursuant to this Agreement, and shall
apply such amounts for the following purposes and in the following order of
priority, in each case to the extent of remaining available funds:

                  first, to distributions of interest in respect of the Class A
                  Certificates and the Class IO Certificates, in an amount
                  (allocable among such Certificates PRO RATA in accordance with
                  the respective amounts payable as to each pursuant to this
                  clause first) equal to the aggregate of the Interest
                  Distribution Amounts in respect of such Certificates for such
                  Distribution Date;

                  second, to the extent of the Class PO Principal Distribution
                  Amount, to distributions of principal to the Class PO
                  Certificates (applied to reduce the Certificate Principal
                  Balances of such Certificates), until the Certificate
                  Principal Balance of such Class has been reduced to zero;

                  third, to the extent of the Senior Principal Distribution
                  Amount, to distributions of principal to the Class A-1
                  Certificates (applied to reduce the Certificate Principal
                  Balance of such Certificates), until the Certificate Principal
                  Balance of such Class has been reduced to zero;

                  fourth, to distributions of interest in respect of the
                  Subordinate Certificates, other than the Class of Subordinate
                  Certificates with the highest numerical designation then
                  outstanding, in an amount (allocable among such Certificates
                  PRO RATA in accordance with the respective amounts payable as
                  to each pursuant to this clause fourth, in the order of
                  priority from the Class of Subordinate Certificates with the
                  lowest numerical designation to the Class of Subordinate
                  Certificates with the highest numerical designation entitled
                  to a distribution of interest pursuant to this clause fourth)
                  equal to the aggregate of the Interest Distribution Amounts in
                  respect of such Certificates for such Distribution Date;

                  fifth, to distributions of principal to the Class PO
                  Certificates (applied to reduce the Certificate Principal
                  Balance of such Certificates) in an amount equal to the
                  excess, if any, of the Class PO Percentage of the Stated
                  Principal Balance of each Class
                  PO
                  Mortgage Loan as to which a Final Liquidation has occurred,
                  over the amount distributed in respect of such Class PO
                  Mortgage Loan to the Class PO Certificates pursuant to clause
                  second above;

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<PAGE>

                  sixth, to distributions in respect of the Class of Subordinate
                  Certificates with the highest numerical designation then
                  outstanding, in an amount equal to the Interest Distribution
                  Amount in respect of such Certificates for such Distribution
                  Date;

                  seventh, to the Holders of the Classes of the Subordinate
                  Certificates, an aggregate amount equal to the Subordinate
                  Principal Distribution Amount for such Distribution Date
                  (applied to reduce the Certificate Principal Balances of such
                  Certificates), allocable among the Classes of Subordinate
                  Certificates PRO RATA in accordance with the respective
                  amounts payable as to each such Class pursuant to the
                  priorities and amounts set forth in Section 4.01(b)(ii);

                  eighth, to the Holders of the Certificates, to reimburse any
                  Allocated Realized Loss Amounts in the following order of
                  priority, in each case, to the extent of any Allocated
                  Realized Loss Amount allocated to such Certificates and to the
                  extent such Certificates are still outstanding: (i) to the
                  Class A-1 Certificates and the Class PO Certificates, on a PRO
                  RATA basis, based on their respective unpaid Allocated
                  Realized Loss Amounts; (ii) to the Class B-1 Certificates;
                  (iii) to the Class B-2 Certificates; (iv) to the Class B-3
                  Certificates; (v) to the Class B-4 Certificates; (vi) to the
                  Class B-5 Certificates; and (vii) to the Class B-6
                  Certificates; and

                  ninth, to the Holders of the Class R-II Certificates, any
                  remaining amounts.

                  (ii) All references above to the Certificate Principal Balance
         of any Class of Certificates shall be to the Certificate Principal
         Balance of such Class prior to the allocation of Extraordinary Trust
         Fund Expenses and Realized Losses, in each case allocated to such Class
         of Certificates, on such Distribution Date pursuant to Section 4.04.

                  (b)(i)   [reserved];

                  (ii) On each Distribution Date, the aggregate distributions of
         principal made on such date in respect of the Subordinate Certificates
         pursuant to Section 4.01(a)(i) seventh above shall be applied among the
         various Classes thereof, in the order of priority from the Class of
         Subordinate Certificates with the lowest numerical designation to the
         Class of Subordinate Certificates with the highest numerical
         designation, in each case to the extent of remaining available funds up
         to the amount allocable to such Class for such Distribution Date and in
         each case until the Certificate Principal Balance of each such Class is
         reduced to zero, in an amount with respect to each such Class equal to
         the sum of (X) the related Class B Percentage of the amounts described
         in clauses (i) through (v) of clause (a) of the definition of
         Subordinate Principal Distribution Amount, (Y) the portion of the
         amounts described in clauses (b) and (c) of the definition of
         Subordinate Principal Distribution Amount allocable to such Class
         pursuant to Section 4.01(b)(iii) below and (Z) the excess, if any, of
         the amount required to be distributed to such Class pursuant to this
         Section 4.01(b)(ii) for the immediately preceding Distribution Date,
         over the aggregate distributions of principal made in respect of such
         Class of Certificates on such immediately preceding Distribution Date
         pursuant to Section 4.01 to the extent that any such excess is not

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         attributable to Realized Losses which were allocated to Subordinate
         Certificates with a lower priority pursuant to Section 4.04.

                  (iii) On any Distribution Date, the portion of (a) all net
         Liquidation Proceeds and Insurance Proceeds with respect to any
         Mortgage Loans that were the subject of a Final Recovery Determination
         in the related Prepayment Period and (b) all Principal Prepayments
         received in respect of the Mortgage Loans in the related Prepayment
         Period, allocable to principal and not included in the Senior Principal
         Distribution Amount and the Class PO Principal Distribution Amount,
         will be allocated on a PRO RATA basis among the following Classes of
         Subordinate Certificates (each, an "Eligible Class") in proportion to
         the respective outstanding Certificate Principal Balances thereof: (i)
         the Class B-1 Certificates, (ii) the Class B-2 Certificates, if on such
         Distribution Date the aggregate percentage interest in the Trust Fund
         evidenced by the Class B-2 Certificates, the Class B-3 Certificates,
         the Class B-4 Certificates, the Class B-5 Certificates and the Class
         B-6 Certificates equal or exceeds 1.25% before giving effect to
         distributions on such Distribution Date, (iii) the Class B-3
         Certificates, if on such Distribution Date the aggregate percentage
         interest in the Trust Fund evidenced by the Class B-3 Certificates, the
         Class B-4 Certificates, the Class B-5 Certificates and the Class B-6
         Certificates equal or exceeds 1.00% before giving effect to
         distributions on such Distribution Date, (iv) the Class B-4
         Certificates, if on such Distribution Date the aggregate percentage
         interest in the Trust Fund evidenced by the Class B-4 Certificates, the
         Class B-5 Certificates and the Class B-6 Certificates equal or exceeds
         0.75% before giving effect to distributions on such Distribution Date,
         (v) the Class B-5 Certificates, if on such Distribution Date the
         aggregate percentage interest in the Trust Fund evidenced by the Class
         B-5 Certificates and the Class B-6 Certificates equal or exceeds 0.35%
         before giving effect to distributions on such Distribution Date and
         (iii) the Class B-6 Certificates, if on such Distribution Date the
         percentage interest in the Trust Fund evidenced by the Class B-6
         Certificates equals or exceeds 0.20% before giving effect to
         distributions on such Distribution Date. Notwithstanding the foregoing,
         if the application of the foregoing on any Distribution Date as
         provided in Section 4.01 would result in a distribution in respect of
         principal to any Class or Classes of Subordinate Certificates in an
         amount greater than the remaining Certificate Principal Balance thereof
         (any such Class, a "Maturing Class") then: (a) the amount to be
         allocated to each Maturing Class shall be reduced to a level that, when
         applied as described above, would exactly reduce the Certificate
         Principal Balance of such Class to zero and (b) the total amount of the
         reductions pursuant to clause (a) above in the amount to be allocated
         to the Maturing Class or Classes shall be allocated among the remaining
         Eligible Classes on a PRO RATA basis in proportion to the respective
         outstanding Certificate Principal Balances thereof prior to the
         allocation thereto of any of the amounts described in the preceding
         sentence.

                  (c) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated PRO RATA among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 4.01(e) or
Section 9.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their

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respective Certificates, and shall be made by wire transfer of immediately
available funds to the account of any such Holder at a bank or other entity
having appropriate facilities therefor, if such Holder shall have so notified
the Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and with respect to any Class of
Certificates other than the Residual Certificates is the registered owner of
Certificates having an initial aggregate Certificate Principal Balance or
Notional Amount that is in excess of the lesser of (i) $5,000,000 or (ii)
two-thirds of the initial Certificate Principal Balance or Notional Amount of
such Class of Certificates, or otherwise by check mailed by first class mail to
the address of such Holder appearing in the Certificate Register. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the Corporate Trust Office or
such other location specified in the notice to Certificateholders of such final
distribution.

                  Each distribution with respect to a Book-Entry Certificate
shall be paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trustee, the Trust
Administrator, the Depositor or the Master Servicer shall have any
responsibility therefor except as otherwise provided by this Agreement or
applicable law.

                  (d) The rights of the Certificateholders to receive
distributions in respect of the Certificates, and all interests of the
Certificateholders in such distributions, shall be as set forth in this
Agreement. None of the Holders of any Class of Certificates, the Trust
Administrator, the Trustee or the Master Servicer shall in any way be
responsible or liable to the Holders of any other Class of Certificates in
respect of amounts properly previously distributed on the Certificates.

                  (e) Except as otherwise provided in Section 9.01, whenever the
Trustee expects that the final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Trustee shall, no
later than five days after the related Determination Date, mail on such date to
each Holder of such Class of Certificates a notice to the effect that:

                         (i) the Trustee expects that the final distribution
                  with respect to such Class of Certificates will be made on
                  such Distribution Date, but only upon presentation and
                  surrender of such Certificates at the office of the Trustee
                  therein specified, and

                        (ii) no interest shall accrue on such Certificates from
                  and after the end of the related Interest Accrual Period.

Any funds not distributed to any Holder or Holders of Certificates of such Class
on such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust by
the Trustee and credited to the account of the appropriate non- tendering Holder
or Holders. If any Certificates as to which notice has been given pursuant to
this

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<PAGE>

Section 4.01(e) shall not have been surrendered for cancellation within six
months after the time specified in such notice, the Trustee shall mail a second
notice to the remaining non-tendering Certificateholders to surrender their
Certificates for cancellation in order to receive the final distribution with
respect thereto. If within one year after the second notice all such
Certificates shall not have been surrendered for cancellation, the Trustee
shall, directly or through an agent, mail a final notice to remaining
non-tendering Certificateholders concerning surrender of their Certificates and
shall continue to hold any remaining funds for the benefit of non-tendering
Certificateholders. The costs and expenses of maintaining the funds in trust and
of contacting such Certificateholders shall be paid out of the assets remaining
in such trust fund. If within one year after the final notice any such
Certificates shall not have been surrendered for cancellation, the Trustee shall
pay to Salomon Smith Barney Inc. all such amounts, and all rights of
non-tendering Certificateholders in or to such amounts shall thereupon cease. No
interest shall accrue or be payable to any Certificateholder on any amount held
in trust by the Trustee as a result of such Certificateholder's failure to
surrender its Certificate(s) for final payment thereof in accordance with this
Section 4.01(e).

                  SECTION 4.02. Statements to Certificateholders.

                  On the third Business Day prior to each Distribution Date, the
Trust Administrator shall prepare and forward by telecopy (or by such other
means as the Trust Administrator and the Trustee may agree from time to time) to
the Trustee and on each Distribution Date the Trustee shall forward by mail to
each Holder of the Regular Certificates, a statement as to the distributions
made on such Distribution Date setting forth:

                         (i) the amount of the distribution made on such
                  Distribution Date to the Holders of Certificates of each such
                  Class allocable to principal;

                         (ii) the amount of the distribution made on such
                  Distribution Date to the Holders of Certificates of each such
                  Class allocable to interest;

                       (iii) the aggregate amount of servicing compensation
                  received by the Master Servicer during the related Due Period
                  and such other customary information as the Trust
                  Administrator or the Trustee deems necessary or desirable, or
                  which a Certificateholder reasonably requests, to enable
                  Certificateholders to prepare their tax returns;

                         (iv) the aggregate amount of P&I Advances for such
                  Distribution Date;

                         (v) the aggregate Stated Principal Balance of the
                  Mortgage Loans and any REO Properties at the close of business
                  on such Distribution Date;

                         (vi) the number, aggregate principal balance, weighted
                  average remaining term to maturity and weighted average
                  Mortgage Rate of the Mortgage Loans as of the related Due
                  Date;

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<PAGE>

                       (vii) the number and aggregate unpaid principal balance
                  of Mortgage Loans that are (a) delinquent 30 to 59 days, (b)
                  delinquent 60 to 89 days, (c) delinquent 90 or more days in
                  each case, as of the last day of the preceding calendar month,
                  (d) as to which foreclosure proceedings have been commenced
                  and (e) with respect to which the related Mortgagor has filed
                  for protection under applicable bankruptcy laws, with respect
                  to whom bankruptcy proceedings are pending or with respect to
                  whom bankruptcy protection is in force;

                      (viii) with respect to any Mortgage Loan that became an
                  REO Property during the preceding calendar month, the loan
                  number of such Mortgage Loan, the unpaid principal balance and
                  the Stated Principal Balance of such Mortgage Loan as of the
                  date it became an REO Property;

                        (ix) the book value and the Stated Principal Balance of
                  any REO Property as of the close of business on the last
                  Business Day of the calendar month preceding the Distribution
                  Date;

                         (x) the aggregate amount of Principal Prepayments made
                  during the related Prepayment Period;

                        (xi) the aggregate amount of Realized Losses incurred
                  during the related Prepayment Period (or, in the case of
                  Bankruptcy Losses allocable to interest, during the related
                  Due Period), separately identifying whether such Realized
                  Losses constituted Fraud Losses, Special Hazard Losses or
                  Bankruptcy Losses;

                         (xii) the aggregate amount of Extraordinary Trust Fund
                  Expenses withdrawn from the Collection Account or the
                  Distribution Account for such Distribution Date;

                      (xiii) the aggregate Certificate Principal Balance or
                  Notional Amount of each such Class of Certificates, after
                  giving effect to the distributions, and allocations of
                  Realized Losses and Extraordinary Trust Fund Expenses, made on
                  such Distribution Date, separately identifying any reduction
                  thereof due to allocations of Realized Losses and
                  Extraordinary Trust Fund Expenses;

                         (xiv) the Certificate Factor for each such Class of
                  Certificates applicable to such Distribution Date;

                        (xv) the Interest Distribution Amount in respect of each
                  such Class of Certificates (other than the Class PO
                  Certificates) for such Distribution Date (separately
                  identifying any reductions in the case of Subordinate
                  Certificates resulting from the allocation of Realized Losses
                  allocable to interest and Extraordinary Trust Fund Expenses on
                  such Distribution Date) and the respective portions thereof,
                  if any, remaining unpaid following the distributions made in
                  respect of such Certificates on such Distribution Date;

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                       (xvi) the aggregate amount of any Prepayment Interest
                  Shortfalls for such Distribution Date, to the extent not
                  covered by payments by the Master Servicer pursuant to Section
                  3.24;

                         (xvii) the aggregate amount of Relief Act Interest
                  Shortfalls for such Distribution Date;

                         (xviii) the then-applicable Bankruptcy Amount, Fraud
                  Loss Amount, and Special Hazard Amount;

                         (xix) the Weighted Average Stripped Interest Rate with
                  respect to the Mortgage Loans for such Distribution Date;

                        (xx) with respect to any Mortgage Loan as to which
                  foreclosure proceedings have been concluded, the loan number
                  and unpaid principal balance of such Mortgage Loan as of the
                  date of such conclusion of foreclosure proceedings;

                       (xxi) with respect to Mortgage Loans as to which a Final
                  Liquidation has occurred, the number of Mortgage Loans, the
                  unpaid principal balance of such Mortgage Loans as of the date
                  of such Final Liquidation and the amount of proceeds
                  (including Liquidation Proceeds and Insurance Proceeds)
                  collected in respect of such Mortgage Loans;

                         (xxii) any Allocated Realized Loss Amount with respect
                  to each Class of Certificates for such Distribution Date; and

                     (xxiii) with respect to the Class A Certificates and the
                  Class IO Certificates, the related Pass-Through Rate for such
                  Distribution Date and the immediately succeeding Distribution
                  Date.

                  In the case of information furnished pursuant to subclauses
(i) through (iii) above, the amounts shall be expressed as a dollar amount per
Single Certificate of the relevant Class.

                  Within a reasonable period of time after the end of each
calendar year, the Trust Administrator shall furnish to the Trustee, and the
Trustee shall forward to each Person who at any time during the calendar year
was a Holder of a Regular Certificate a statement containing the information set
forth in subclauses (i) through (iii) above, aggregated for such calendar year
or applicable portion thereof during which such person was a Certificateholder.
Such obligation of the Trust Administrator and the Trustee shall be deemed to
have been satisfied to the extent that substantially comparable information
shall be provided by the Trustee pursuant to any requirements of the Code as
from time to time are in force.

                  On each Distribution Date, the Trustee shall forward to the
Depositor, each Holder of a Residual Certificate and the Master Servicer, a copy
of the reports forwarded to the Regular

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Certificateholders on such Distribution Date and a statement setting forth the
amounts, if any, actually distributed with respect to the Residual Certificates,
respectively, on such Distribution Date.

                  Within a reasonable period of time after the end of each
calendar year, the Trust Administrator shall furnish to the Trustee and the
Trustee shall forward to each Person who at any time during the calendar year
was a Holder of a Residual Certificate a statement setting forth the amount, if
any, actually distributed with respect to the Residual Certificates, as
appropriate, aggregated for such calendar year or applicable portion thereof
during which such Person was a Certificateholder. Such obligation of the Trust
Administrator and the Trustee shall be deemed to have been satisfied to the
extent that substantially comparable information shall be prepared by the
Trustee and furnished to such Holders pursuant to the rules and regulations of
the Code as are in force from time to time.

                  Upon request, the Trust Administrator shall furnish to the
Trustee and the Trustee shall forward to each Certificateholder, during the term
of this Agreement, such periodic, special, or other reports or information,
whether or not provided for herein, as shall be reasonable with respect to the
Certificateholder, or otherwise with respect to the purposes of this Agreement,
all such reports or information to be provided at the expense of the
Certificateholder in accordance with such reasonable and explicit instructions
and directions as the Certificateholder may provide. For purposes of this
Section 4.02, the Trust Administrator's duties are limited to the extent that
the Trust Administrator receives timely reports as required from the Master
Servicer and the Trustee's duties are limited to the extent that the Trustee
receives timely reports as required from the Trust Administrator.

                  On each Distribution Date, the Trust Administrator shall
provide Bloomberg Financial Markets, L.P. ("Bloomberg") cusip level factors for
each class of Certificates as of such Distribution Date, using a format and
media mutually acceptable to the Trust Administrator and Bloomberg.

                  SECTION 4.03. Remittance Reports; P&I Advances.

                  (a) On the second Business Day prior to the related
Distribution Date, the Master Servicer shall deliver to the Trust Administrator
and the Trustee by telecopy (or by such other means as the Master Servicer, the
Trust Administrator and the Trustee may agree from time to time) a Remittance
Report with respect to the related Distribution Date. Such Remittance Report
will include (i) the amount of P&I Advances to be made by the Master Servicer in
respect of the related Distribution Date, the aggregate amount of P&I Advances
outstanding after giving effect to such P&I Advances, and the aggregate amount
of Nonrecoverable P&I Advances in respect of such Distribution Date and (ii)
such other information with respect to the Mortgage Loans as the Trust
Administrator may reasonably require to perform the calculations necessary to
make the distributions contemplated by Section 4.01 and to prepare the
statements to Certificateholders contemplated by Section 4.02; provided,
however, that if the Master Servicer is not the Trust Administrator, the Master
Servicer will forward to the successor trust administrator the information set
forth in clause (i) above on the next Business Day following the related
Determination Date and the information set forth in clause (ii) above on the
fifth Business Day following the last day of the related calendar

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month. The Trustee and the Trust Administrator shall not be responsible to
recompute, recalculate or verify any information provided to it by the Master
Servicer.

                  (b) The amount of P&I Advances to be made by the Master
Servicer for any Distribution Date shall equal, subject to Section 4.03(d), the
sum of (i) the aggregate amount of Monthly Payments (with each interest portion
thereof net of the related Servicing Fee), due on the related Due Date in
respect of the Mortgage Loans, which Monthly Payments were delinquent as of the
close of business on the related Determination Date and (ii) with respect to
each REO Property, which REO Property was acquired during or prior to the
related Prepayment Period and as to which such REO Property an REO Disposition
did not occur during the related Prepayment Period, an amount equal to the
Monthly Payments (with each interest portion thereof net of the related
Servicing Fee) that would have been due on the related Due Date in respect of
the related Mortgage Loans.

                  On or before 3:00 p.m. New York time on the Master Servicer
Remittance Date, the Master Servicer shall remit in immediately available funds
to the Trustee for deposit in the Distribution Account an amount equal to the
aggregate amount of P&I Advances, if any, to be made in respect of the Mortgage
Loans and REO Properties for the related Distribution Date either (i) from its
own funds or (ii) from the Collection Account, to the extent of funds held
therein for future distribution (in which case, it will cause to be made an
appropriate entry in the records of Collection Account that amounts held for
future distribution have been, as permitted by this Section 4.03, used by the
Master Servicer in discharge of any such P&I Advance) or (iii) in the form of
any combination of (i) and (ii) aggregating the total amount of P&I Advances to
be made by the Master Servicer with respect to the Mortgage Loans and REO
Properties. Any amounts held for future distribution and so used shall be
appropriately reflected in the Master Servicer's records and replaced by the
Master Servicer by deposit in the Collection Account on or before any future
Master Servicer Remittance Date to the extent that the Available Distribution
Amount for the related Distribution Date (determined without regard to P&I
Advances to be made on the Master Servicer Remittance Date) shall be less than
the total amount that would be distributed to the Classes of Certificateholders
pursuant to Section 4.01 on such Distribution Date if such amounts held for
future distributions had not been so used to make P&I Advances. The Trustee will
provide notice to the Master Servicer by telecopy by the close of business on
the Master Servicer Remittance Date in the event that the amount remitted by the
Master Servicer to the Trustee on such Master Servicer Remittance Date is less
than the P&I Advances required to be made by the Master Servicer for the related
Distribution Date.

                  (c) The obligation of the Master Servicer to make such P&I
Advances is mandatory, notwithstanding any other provision of this Agreement but
subject to (d) below, and, with respect to any Mortgage Loan or REO Property,
shall continue until a Final Recovery Determination in connection therewith or
the removal thereof from REMIC I pursuant to any applicable provision of this
Agreement, except as otherwise provided in this Section.

                  (d) Notwithstanding anything herein to the contrary, no P&I
Advance shall be required to be made hereunder by the Master Servicer if such
P&I Advance would, if made, constitute a Nonrecoverable P&I Advance. The
determination by the Master Servicer that it has

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<PAGE>

made a Nonrecoverable P&I Advance or that any proposed P&I Advance, if made,
would constitute a Nonrecoverable P&I Advance, shall be evidenced by an
Officers' Certificate of the Master Servicer delivered to the Depositor, the
Trust Administrator and the Trustee.

                  SECTION 4.04. Allocation of Extraordinary Trust Fund Expenses
                                and Realized Losses.

                  (a) Prior to each Distribution Date, the Master Servicer shall
determine as to each Mortgage Loan and REO Property: (i) the total amount of
Realized Losses, if any, incurred in connection with any Final Recovery
Determinations made during the related Prepayment Period; (ii) whether and the
extent to which such Realized Losses constituted Fraud Losses or Special Hazard
Losses; and (iii) the respective portions of such Realized Losses allocable to
interest and allocable to principal. Prior to each Distribution Date, the Master
Servicer shall also determine as to each Mortgage Loan: (A) the total amount of
Realized Losses, if any, incurred in connection with any Deficient Valuations
made during the related Prepayment Period; and (B) the total amount of Realized
Losses, if any, incurred in connection with Debt Service Reductions in respect
of Monthly Payments due during the related Due Period. The information described
in the two preceding sentences that is to be supplied by the Master Servicer
shall be evidenced by an Officers' Certificate delivered to the Trust
Administrator and the Trustee by the Master Servicer prior to the Determination
Date immediately following the end of (x) in the case of Bankruptcy Losses
allocable to interest, the Due Period during which any such Realized Loss was
incurred, and (y) in the case of all other Realized Losses, the Prepayment
Period during which any such Realized Loss was incurred.

                  (b) All Realized Losses on the Mortgage Loans (other than
Excess Losses) shall be allocated by the Trust Administrator on each
Distribution Date as follows: first, to the Class B-6 Certificates; second, to
the Class B-5 Certificates; third, to the Class B-4 Certificates; fourth, to the
Class B-3 Certificates; fifth, to the Class B-2 Certificates; and sixth, to the
Class B-1 Certificates, in each case until the Certificate Principal Balance
thereof has been reduced to zero. Thereafter, upon the reduction of the
Certificate Principal Balances of the Subordinate Certificates to zero, all
Realized Losses shall be allocated among the Senior Certificates as follows: the
related Class PO Percentage of such Realized Losses shall be allocated to the
Class PO Certificates and the related Non-Class PO Percentage of such Realized
Losses shall be allocated to the Class A-1 Certificates. Any Excess Losses
attributable to any Mortgage Loan shall be allocated among all the Certificates
(other than the Class A-2 Certificates and the Class IO Certificates) as
follows: the related Class PO Percentage of such Realized Losses shall be
allocated to the Class PO Certificates and the related Non-Class PO Percentage
of such Realized Losses shall be allocated among the Class A-1 Certificates and
Subordinate Certificates on a PRO RATA basis. Any allocation of a Realized Loss
to a Certificate will be made by reducing the Certificate Principal Balance
thereof by the amount so allocated as of the Distribution Date in the month
following the calendar month in which such Realized Loss was incurred.

                  Extraordinary Trust Fund Expenses shall be allocated by the
Trust Administrator on each Distribution Date as follows: first, to the Class
B-6 Certificates; second, to the Class B-5 Certificates; third, to the Class B-4
Certificates; fourth, to the Class B-3 Certificates; fifth, to the

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Class B-2 Certificates; and sixth, to the Class B-1 Certificates, in each case
until the Certificate Principal Balance thereof has been reduced to zero.
Thereafter, upon the reduction of the Certificate Principal Balances of the
Subordinate Certificates to zero, such Extraordinary Trust Fund Expenses shall
be allocated among the Senior Certificates (other than the Class A-2
Certificates and the Class IO Certificates) on a PRO RATA basis.

         Notwithstanding the method of allocation of Realized Losses and
Extraordinary Trust Fund Expenses above, if any Overcollateralization exists
when Realized Losses or Extraordinary Trust Fund Expenses are to be allocated,
such Realized Losses or Extraordinary Trust Fund Expenses will be allocated
first to the Overcollateralization, until the Overcollateralization is reduced
to zero, prior to allocating such Realized Losses or Extraordinary Trust Fund
Expenses to the Certificates in accordance with the priorities set forth above.

                  As used herein, an allocation of a Realized Loss or
Extraordinary Trust Fund Expense on a "PRO RATA basis" among two or more
specified Classes of Certificates means an allocation on a PRO RATA basis, among
the various Classes so specified, to each such Class of Certificates on the
basis of their then outstanding Certificate Principal Balances prior to giving
effect to distributions to be made on such Distribution Date. All Realized
Losses and all other losses allocated to a Class of Certificates hereunder will
be allocated among the Certificates of such Class in proportion to the
Percentage Interests evidenced thereby.

                  (c) Notwithstanding anything to the contrary herein, in no
event shall the Certificate Principal Balance of a Class A Certificate be
reduced more than once in respect of any particular amount both (i) allocable to
such Certificate in respect of Realized Losses or Extraordinary Trust Fund
Expenses pursuant to Section 4.04 and (ii) payable to the Holder of such
Certificate pursuant to Section 4.01(a) as a portion of the Senior Principal
Distribution Amount.

                  SECTION 4.05. Compliance with Withholding Requirements.

                  Notwithstanding any other provision of this Agreement, the
Trust Administrator shall comply with all federal withholding requirements
respecting payments to Certificateholders of interest or original issue discount
that the Trust Administrator reasonably believes are applicable under the Code.
The consent of Certificateholders shall not be required for such withholding. In
the event the Trust Administrator does withhold any amount from interest or
original issue discount payments or advances thereof to any Certificateholder
pursuant to federal withholding requirements, the Trust Administrator shall
indicate the amount withheld to such Certificateholders.

                  SECTION 4.06. Distributions on the REMIC I Regular Interests.

         (a) [reserved].

         (b) On each Distribution Date, the Trustee shall be deemed to
distribute to itself, as the holder of the REMIC I Regular Interests, the
Uncertificated Interest and the Uncertificated Principal Distribution Amount in
the following order of priority to the extent of the Available Distribution
Amount;

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                (i) Uncertificated Interest on the REMIC I Regular Interests for
         such Distribution Date, plus any Uncertificated Interest thereon
         remaining unpaid from any previous Distribution Date; and

               (ii) the Uncertificated Principal Distribution Amount for such
         Distribution Date.

         (b) Realized Losses allocated to the Certificates (other than the Class
A-1 Certificates and the Class PO Certificates) under Section 4.04 shall be
deemed allocated to REMIC I Regular Interest LT1. Realized Losses allocated to
the Class A-1 Certificates under Section 4.04 shall be deemed allocated to REMIC
I Regular Interest LT2. Realized Losses allocated to the Class PO under Section
4.04 shall be deemed allocated to REMIC I Regular Interest LTPO.

         (c) Notwithstanding the deemed distributions on the REMIC I Regular
Interests described in this Section 4.06, distributions of funds from the
Collection Account shall be made only in accordance with Section 4.01.

                  SECTION 4.07. Commission Reporting.

                  Within 15 days after each Distribution Date, the Trust
Administrator shall file with the Commission via the Electronic Data Gathering
and Retrieval System, a Form 8-K with a copy of the statement to
Certificateholders for such Distribution Date as an exhibit thereto. Prior to
January 30, 2001, the Trust Administrator shall file a Form 15 Suspension
Notification with respect to the Trust Fund, if applicable. Prior to March 30,
2001, the Trust Administrator shall file a Form 10-K, substantially in the form
attached hereto as Exhibit I, with respect to the Trust Fund. The Depositor
hereby grants to the Trust Administrator a limited power of attorney to execute
and file each such document on behalf of the Depositor. Such power of attorney
shall continue until the earlier of (i) receipt by the Trust Administrator from
the Depositor of written termination of such power of attorney and (ii) the
termination of the Trust Fund. At least three Business Days prior to filing any
Form 8-K or Form 10-K pursuant to this Section 4.07, the Trust Administrator
shall deliver a copy of such Form 8-K or Form 10-K, as the case may be, to the
Depositor. The Depositor agrees to promptly furnish to the Trust Administrator,
from time to time upon request, such further information, reports and financial
statements within its control related to this Agreement and the Mortgage Loans
as the Trust Administrator reasonably deems appropriate to prepare and file all
necessary reports with the Commission.

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                                    ARTICLE V

                                THE CERTIFICATES

                  SECTION 5.01. The Certificates.

                  (a) The Certificates in the aggregate will represent the
entire beneficial ownership interest in the Mortgage Loans and all other assets
included in REMIC I. At the Closing Date, the aggregate Certificate Principal
Balance of the Certificates will equal the aggregate Stated Principal Balance of
the Mortgage Loans.

                  The Certificates will be substantially in the forms annexed
hereto as Exhibits A-1 through A-12. The Certificates of each Class will be
issuable in registered form only, in denominations of authorized Percentage
Interests as described in the definition thereof. Each Certificate will share
ratably in all rights of the related Class.

                  Upon original issue, the Certificates shall be executed,
authenticated and delivered by the Trustee to or upon the order of the
Depositor. The Certificates shall be executed and attested by manual or
facsimile signature on behalf of the Trustee by an authorized signatory.
Certificates bearing the manual or facsimile signatures of individuals who were
at any time the proper officers of the Trustee shall bind the Trustee,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Certificates or did not
hold such offices at the date of such Certificates. No Certificate shall be
entitled to any benefit under this Agreement or be valid for any purpose, unless
there appears on such Certificate a certificate of authentication substantially
in the form provided herein executed by the Trustee by manual signature, and
such certificate of authentication shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.

                  (b) The Class A Certificates, the Class B-1 Certificates, the
Class B-2 Certificates and the Class B-3 Certificates shall initially be issued
as one or more Certificates held by the Book- Entry Custodian or, if appointed
to hold such Certificates as provided below, the Depository and registered in
the name of the Depository or its nominee and, except as provided below,
registration of such Certificates may not be transferred by the Trustee except
to another Depository that agrees to hold such Certificates for the respective
Certificate Owners with Ownership Interests therein. The Certificate Owners
shall hold their respective Ownership Interests in and to such Certificates
through the book-entry facilities of the Depository and, except as provided
below, shall not be entitled to definitive, fully registered Certificates
("Definitive Certificates") in respect of such Ownership Interests. All
transfers by Certificate Owners of their respective Ownership Interests in the
Book- Entry Certificates shall be made in accordance with the procedures
established by the Depository Participant or brokerage firm representing such
Certificate Owner. Each Depository Participant shall only transfer the Ownership
Interests in the Book-Entry Certificates of Certificate Owners it represents or
of brokerage firms for which it acts as agent in accordance with the
Depository's

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<PAGE>

normal procedures. The Trustee is hereby initially appointed as the Book-Entry
Custodian and hereby agrees to act as such in accordance herewith and in
accordance with the agreement that it has with the Depository authorizing it to
act as such. The Book-Entry Custodian may, and if it is no longer qualified to
act as such, the Book-Entry Custodian shall, appoint, by a written instrument
delivered to the Depositor, the Master Servicer, the Trust Administrator, the
Trustee (if the Trustee is not the Book-Entry Custodian) and any other transfer
agent (including the Depository or any successor Depository) to act as
Book-Entry Custodian under such conditions as the predecessor Book-Entry
Custodian and the Depository or any successor Depository may prescribe, provided
that the predecessor Book-Entry Custodian shall not be relieved of any of its
duties or responsibilities by reason of any such appointment of other than the
Depository. If the Trustee resigns or is removed in accordance with the terms
hereof, the successor trustee or, if it so elects, the Depository shall
immediately succeed to its predecessor's duties as Book-Entry Custodian. The
Depositor shall have the right to inspect, and to obtain copies of, any
Certificates held as Book-Entry Certificates by the Book-Entry Custodian.

                  The Trustee, the Trust Administrator, the Master Servicer and
the Depositor may for all purposes (including the making of payments due on the
Book-Entry Certificates) deal with the Depository as the authorized
representative of the Certificate Owners with respect to the Book-Entry
Certificates for the purposes of exercising the rights of Certificateholders
hereunder. The rights of Certificate Owners with respect to the Book-Entry
Certificates shall be limited to those established by law and agreements between
such Certificate Owners and the Depository Participants and brokerage firms
representing such Certificate Owners. Multiple requests and directions from, and
votes of, the Depository as Holder of the Book-Entry Certificates with respect
to any particular matter shall not be deemed inconsistent if they are made with
respect to different Certificate Owners. The Trustee may establish a reasonable
record date in connection with solicitations of consents from or voting by
Certificateholders and shall give notice to the Depository of such record date.

                  If (i)(A) the Depositor advises the Trustee in writing that
the Depository is no longer willing or able to properly discharge its
responsibilities as Depository, and (B) the Depositor is unable to locate a
qualified successor, (ii) the Depositor at its option advises the Trustee in
writing that it elects to terminate the book-entry system through the Depository
or (iii) after the occurrence of a Master Servicer Event of Default, Certificate
Owners representing in the aggregate not less than 51% of the Ownership
Interests of the Book-Entry Certificates advise the Trustee through the
Depository, in writing, that the continuation of a book-entry system through the
Depository is no longer in the best interests of the Certificate Owners, the
Trustee shall notify all Certificate Owners, through the Depository, of the
occurrence of any such event and of the availability of Definitive Certificates
to Certificate Owners requesting the same. Upon surrender to the Trustee of the
Book- Entry Certificates by the Book-Entry Custodian or the Depository, as
applicable, accompanied by registration instructions from the Depository for
registration of transfer, the Trustee shall issue the Definitive Certificates.
Such Definitive Certificates will be issued in minimum denominations of
$100,000, except that any beneficial ownership that was represented by a
Book-Entry Certificate in an amount less than $100,000 immediately prior to the
issuance of a Definitive Certificate shall be issued in a minimum denomination
equal to the amount represented by such Book-Entry Certificate. None of the
Depositor, the Master Servicer, the Trust Administrator nor the Trustee shall be
liable for any delay in the delivery of such instructions and may conclusively
rely on, and shall be protected

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in relying on, such instructions. Upon the issuance of Definitive Certificates
all references herein to obligations imposed upon or to be performed by the
Depository shall be deemed to be imposed upon and performed by the Trustee, to
the extent applicable with respect to such Definitive Certificates, and the
Trustee shall recognize the Holders of the Definitive Certificates as
Certificateholders hereunder.

                  SECTION 5.02. Registration of Transfer and Exchange of
                                Certificates.

                  (a) The Trustee shall cause to be kept at one of the offices
or agencies to be appointed by the Trustee in accordance with the provisions of
Section 8.12 a Certificate Register for the Certificates in which, subject to
such reasonable regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided.

                  (b) No transfer of any Class B-4 Certificate, Class B-5
Certificate or Class B-6 Certificate shall be made unless that transfer is made
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of a Class B-4 Certificate, Class B-5 Certificate or
Class B-6 Certificate is to be made without registration or qualification (other
than in connection with the initial transfer of any such Certificate by the
Depositor to an affiliate of the Depositor), the Trustee shall require, receipt
of: (i) if such transfer is purportedly being made in reliance upon Rule 144A
under the 1933 Act, written certifications from the Certificateholder desiring
to effect the transfer and from such Certificateholder's prospective transferee,
substantially in the forms attached hereto as Exhibit F-1; and (ii) in all other
cases, an Opinion of Counsel satisfactory to it that such transfer may be made
without such registration or qualification (which Opinion of Counsel shall not
be an expense of the Depositor, the Trustee, the Trust Administrator, the Master
Servicer, in its capacity as such, or the Trust Fund), together with copies of
the written certification(s) of the Certificateholder desiring to effect the
transfer and/or such Certificateholder's prospective transferee upon which such
Opinion of Counsel is based, if any. Neither the Depositor or the Trustee is
obligated to register or qualify the Class B-4 Certificates, Class B-5
Certificates or the Class B-6 Certificates under the 1933 Act or any other
securities laws or to take any action not otherwise required under this
Agreement to permit the transfer of such Certificates without registration or
qualification. Any Certificateholder desiring to effect the transfer of a Class
B-4 Certificate, Class B-5 Certificate or Class B-6 Certificate shall, and does
hereby agree to, indemnify the Trustee, the Trust Administrator, the Depositor
and the Master Servicer against any liability that may result if the transfer is
not so exempt or is not made in accordance with such federal and state laws.

                  (c) No transfer of a Subordinate Certificate or a Residual
Certificate or any interest therein shall be made to any Plan subject to ERISA
or Section 4975 of the Code, any Person acting, directly or indirectly, on
behalf of any such Plan or any Person acquiring such Certificates with "Plan
Assets" of a Plan within the meaning of the Department of Labor regulation
promulgated at 29 C.F.R. ss. 2510.3-101 ("Plan Assets") unless the Depositor,
the Trustee, the Trust Administrator and the Master Servicer are provided with
an Opinion of Counsel which establishes to the

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<PAGE>

satisfaction of the Depositor, the Trustee, the Trust Administrator and the
Master Servicer that the purchase of such Certificates is permissible under
applicable law, will not constitute or result in any prohibited transaction
under ERISA or Section 4975 of the Code and will not subject the Depositor, the
Master Servicer, the Trustee, the Trust Administrator or the Trust Fund to any
obligation or liability (including obligations or liabilities under ERISA or
Section 4975 of the Code) in addition to those undertaken in this Agreement,
which Opinion of Counsel shall not be an expense of the Depositor, the Master
Servicer, the Trustee, the Trust Administrator or the Trust Fund. In the case of
the Subordinate Certificates, in lieu of such Opinion of Counsel, any
prospective Transferee of such Certificates may provide a certification (which
in the case of the Class B-1 Certificates, Class B-2 Certificates or Class B-3
Certificates sold in book-entry form, the Transferee will be deemed to have
represented such certification) in the form of Exhibit G to this Agreement (or
other form acceptable to the Depositor, the Trustee, the Trust Administrator and
the Master Servicer), which the Trustee may rely upon without further inquiry or
investigation. An Opinion of Counsel, any certification or a deemed
representation will not be required in connection with the initial transfer of
any such Certificate by the Depositor to an affiliate of the Depositor (in which
case, the Depositor or any affiliate thereof shall have deemed to have
represented that such affiliate is not a Plan or a Person investing Plan Assets)
and the Trustee shall be entitled to conclusively rely upon a representation
(which, upon the request of the Trustee, shall be a written representation) from
the Depositor of the status of such transferee as an affiliate of the Depositor.

         If any Subordinate Certificate or Residual Certificate or any interest
therein is acquired or held in violation of the provisions of the preceding
paragraph, the next preceding permitted beneficial owner will be treated as the
beneficial owner of that Certificate retroactive to the date of transfer to the
purported beneficial owner. Any purported beneficial owner whose acquisition or
holding of any such Certificate or interest therein was effected in violation of
the provisions of the preceding paragraph shall indemnify and hold harmless the
Depositor, the Master Servicer, the Trustee, the Trust Administrator and the
Trust Fund from and against any and all liabilities, claims, costs or expenses
incurred by those parties as a result of that acquisition or holding.

                  (d) (i) Each Person who has or who acquires any Ownership
Interest in a Residual Certificate shall be deemed by the acceptance or
acquisition of such Ownership Interest to have agreed to be bound by the
following provisions and to have irrevocably authorized the Trustee or its
designee under clause (iii)(A) below to deliver payments to a Person other than
such Person and to negotiate the terms of any mandatory sale under clause
(iii)(B) below and to execute all instruments of Transfer and to do all other
things necessary in connection with any such sale. The rights of each Person
acquiring any Ownership Interest in a Residual Certificate are expressly subject
to the following provisions:

                                    (A) Each Person holding or acquiring any
                           Ownership Interest in a Residual Certificate shall be
                           a Permitted Transferee and shall promptly notify the
                           Trustee of any change or impending change in its
                           status as a Permitted Transferee.

                                    (B) In connection with any proposed Transfer
                           of any Ownership Interest in a Residual Certificate,
                           the Trustee shall require delivery to it and

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<PAGE>

                           shall not register the Transfer of any Residual
                           Certificate until its receipt of an affidavit and
                           agreement (a "Transfer Affidavit and Agreement"), in
                           the form attached hereto as Exhibit F-2, from the
                           proposed Transferee, in form and substance
                           satisfactory to the Trustee, representing and
                           warranting, among other things, that such Transferee
                           is a Permitted Transferee, that it is not acquiring
                           its Ownership Interest in the Residual Certificate
                           that is the subject of the proposed Transfer as a
                           nominee, trustee or agent for any Person that is not
                           a Permitted Transferee, that for so long as it
                           retains its Ownership Interest in a Residual
                           Certificate, it will endeavor to remain a Permitted
                           Transferee, and that it has reviewed the provisions
                           of this Section 5.02(d) and agrees to be bound by
                           them.

                                    (C) Notwithstanding the delivery of a
                           Transfer Affidavit and Agreement by a proposed
                           Transferee under clause (B) above, if a Responsible
                           Officer of the Trustee who is assigned to this
                           transaction has actual knowledge that the proposed
                           Transferee is not a Permitted Transferee, no Transfer
                           of an Ownership Interest in a Residual Certificate to
                           such proposed Transferee shall be effected.

                                    (D) Each Person holding or acquiring any
                           Ownership Interest in a Residual Certificate shall
                           agree (x) to require a Transfer Affidavit and
                           Agreement from any other Person to whom such Person
                           attempts to transfer its Ownership Interest in a
                           Residual Certificate and (y) not to transfer its
                           Ownership Interest unless it provides a transferor
                           affidavit (a "Transferor Affidavit"), in the form
                           attached hereto as Exhibit F-2, to the Trustee
                           stating that, among other things, it has no actual
                           knowledge that such other Person is not a Permitted
                           Transferee.

                                    (E) Each Person holding or acquiring an
                           Ownership Interest in a Residual Certificate, by
                           purchasing an Ownership Interest in such Certificate,
                           agrees to give the Trustee written notice that it is
                           a "pass-through interest holder" within the meaning
                           of temporary Treasury regulation Section 1.67-
                           3T(a)(2)(i)(A) immediately upon acquiring an
                           Ownership Interest in a Residual Certificate, if it
                           is, or is holding an Ownership Interest in a Residual
                           Certificate on behalf of, a "pass-through interest
                           holder."

                        (ii) The Trustee will register the Transfer of any
                  Residual Certificate only if it shall have received the
                  Transfer Affidavit and Agreement and all of such other
                  documents as shall have been reasonably required by the
                  Trustee as a condition to such registration. In addition, no
                  Transfer of a Residual Certificate shall be made unless the
                  Trustee shall have received a representation letter from the
                  Transferee of such Certificate to the effect that such
                  Transferee is a Permitted Transferee.

                       (iii) (A) If any purported Transferee shall become a
                  Holder of a Residual Certificate in violation of the
                  provisions of this Section 5.02(d), then the

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<PAGE>

                  last preceding Permitted Transferee shall be restored, to the
                  extent permitted by law, to all rights as holder thereof
                  retroactive to the date of registration of such Transfer of
                  such Residual Certificate. The Trustee shall be under no
                  liability to any Person for any registration of Transfer of a
                  Residual Certificate that is in fact not permitted by this
                  Section 5.02(d) or for making any payments due on such
                  Certificate to the holder thereof or for taking any other
                  action with respect to such holder under the provisions of
                  this Agreement.

                                    (B) If any purported Transferee shall become
                  a holder of a Residual Certificate in violation of the
                  restrictions in this Section 5.02(d) and to the extent that
                  the retroactive restoration of the rights of the holder of
                  such Residual Certificate as described in clause (iii)(A)
                  above shall be invalid, illegal or unenforceable, then the
                  Trustee shall have the right, without notice to the holder or
                  any prior holder of such Residual Certificate, to sell such
                  Residual Certificate to a purchaser selected by the Trustee on
                  such terms as the Trustee may choose. Such purported
                  Transferee shall promptly endorse and deliver each Residual
                  Certificate in accordance with the instructions of the
                  Trustee. Such purchaser may be the Trustee itself or any
                  Affiliate of the Trustee. The proceeds of such sale, net of
                  the commissions (which may include commissions payable to the
                  Trustee or its Affiliates), expenses and taxes due, if any,
                  will be remitted by the Trustee to such purported Transferee.
                  The terms and conditions of any sale under this clause
                  (iii)(B) shall be determined in the sole discretion of the
                  Trustee, and the Trustee shall not be liable to any Person
                  having an Ownership Interest in a Residual Certificate as a
                  result of its exercise of such discretion.

                        (iv) The Trust Administrator and the Trustee shall make
                  available to the Internal Revenue Service and those Persons
                  specified by the REMIC Provisions all information necessary to
                  compute any tax imposed (A) as a result of the Transfer of an
                  Ownership Interest in a Residual Certificate to any Person who
                  is a Disqualified Organization, including the information
                  described in Treasury regulations sections 1.860D-1(b)(5) and
                  1.860E-2(a)(5) with respect to the "excess inclusions" of such
                  Residual Certificate and (B) as a result of any regulated
                  investment company, real estate investment trust, common trust
                  fund, partnership, trust, estate or organization described in
                  Section 1381 of the Code that holds an Ownership Interest in a
                  Residual Certificate having as among its record holders at any
                  time any Person which is a Disqualified Organization.
                  Reasonable compensation for providing such information may be
                  accepted by the Trust Administrator and the Trustee.

                         (v) The provisions of this Section 5.02(d) set forth
                  prior to this subsection (v) may be modified, added to or
                  eliminated, provided that there shall have been delivered to
                  the Trustee at the expense of the party seeking to modify, add
                  to or eliminate any such provision the following:

                                    (A) written notification from the Rating
                           Agency to the effect that the modification, addition
                           to or elimination of such provisions will not cause

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                           the Rating Agency to downgrade its then-current
                           ratings of any Class of Certificates; and

                                    (B) an Opinion of Counsel, in form and
                           substance satisfactory to the Trustee, to the effect
                           that such modification of, addition to or elimination
                           of such provisions will not cause either REMIC I or
                           REMIC II to cease to qualify as a REMIC and will not
                           cause (x) either REMIC I or REMIC II, as the case may
                           be, to be subject to an entity-level tax caused by
                           the Transfer of any Residual Certificate to a Person
                           that is not a Permitted Transferee or (y) a Person
                           other than the prospective transferee to be subject
                           to a REMIC-tax caused by the Transfer of a Residual
                           Certificate to a Person that is not a Permitted
                           Transferee.

                  (e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office or agency of the
Trustee maintained for such purpose pursuant to Section 8.12, the Trustee shall
execute, authenticate and deliver, in the name of the designated Transferee or
Transferees, one or more new Certificates of the same Class of a like aggregate
Percentage Interest.

                  (f) At the option of the Holder thereof, any Certificate may
be exchanged for other Certificates of the same Class with authorized
denominations and a like aggregate Percentage Interest, upon surrender of such
Certificate to be exchanged at any office or agency of the Trustee maintained
for such purpose pursuant to Section 8.12. Whenever any Certificates are so
surrendered for exchange the Trustee shall execute, authenticate and deliver the
Certificates which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for transfer or exchange
shall (if so required by the Trustee) be duly endorsed by, or be accompanied by
a written instrument of transfer in the form satisfactory to the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing.

                  (g) No service charge to the Certificateholders shall be made
for any transfer or exchange of Certificates, but the Trustee may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.

                  (h) All Certificates surrendered for transfer and exchange
shall be canceled and destroyed by the Trustee in accordance with its customary
procedures.

                  SECTION 5.03. Mutilated, Destroyed, Lost or Stolen
                                Certificates.

                  If (i) any mutilated Certificate is surrendered to the
Trustee, or the Trustee receive evidence to its satisfaction of the destruction,
loss or theft of any Certificate, and (ii) there is delivered to the Trustee
such security or indemnity as may be required by them to save each of them
harmless, then, in the absence of actual knowledge by the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of the same Class and

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of like denomination and Percentage Interest. Upon the issuance of any new
Certificate under this Section, the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith. Any replacement Certificate issued pursuant to
this Section shall constitute complete and indefeasible evidence of ownership in
the applicable REMIC created hereunder, as if originally issued, whether or not
the lost, stolen or destroyed Certificate shall be found at any time.

                  SECTION 5.04. Persons Deemed Owners.

                  The Depositor, the Master Servicer, the Trustee, the Trust
Administrator and any agent of any of them may treat the Person in whose name
any Certificate is registered as the owner of such Certificate for the purpose
of receiving distributions pursuant to Section 4.01 and for all other purposes
whatsoever, and none of the Depositor, the Master Servicer, the Trustee, the
Trust Administrator or any agent of any of them shall be affected by notice to
the contrary.

                  SECTION 5.05. Certain Available Information.

                  On or prior to the date of the first sale of any Class B-4
Certificate, Class B-5 Certificate or Class B-6 Certificate to an Independent
third party, the Depositor shall provide to the Trustee ten copies of any
private placement memorandum or other disclosure document used by the Depositor
in connection with the offer and sale of the Class B-4 Certificates, Class B-5
Certificates or Class B-6 Certificates. In addition, if any such private
placement memorandum or disclosure document is revised, amended or supplemented
at any time following the delivery thereof to the Trustee, the Depositor
promptly shall inform the Trustee of such event and shall deliver to the Trustee
ten copies of the private placement memorandum or disclosure document, as
revised, amended or supplemented. The Trustee shall maintain at its Corporate
Trust Office and shall make available free of charge during normal business
hours for review by any Holder of a Certificate or any Person identified to the
Trustee as a prospective transferee of a Certificate, originals or copies of the
following items: (i) in the case of a Holder or prospective transferee of a
Class B-4 Certificate, Class B-5 Certificate or Class B-6 Certificate, the
private placement memorandum or other disclosure document relating to such
Certificates in the form most recently provided to the Trustee; and (ii) in all
cases, (A) this Agreement and any amendments hereof entered into pursuant to
Section 11.01, (B) all monthly statements required to be delivered to
Certificateholders of the relevant Class pursuant to Section 4.02 since the
Closing Date, and all other notices, reports, statements and written
communications delivered to the Certificateholders of the relevant Class
pursuant to this Agreement since the Closing Date, (C) all certifications
delivered by a Responsible Officer of the Trust Administrator since the Closing
Date pursuant to Section 10.01(h), (D) any and all Officers' Certificates
delivered to the Trustee by the Master Servicer since the Closing Date to
evidence the Master Servicer's determination that any P&I Advance was, or if
made, would be a Nonrecoverable P&I Advance and (E) any and all Officers'
Certificates delivered to the Trustee by the Master Servicer since the Closing
Date pursuant to Section 4.04(a). Copies and mailing of any and all of the
foregoing items will be available from the Trustee upon request at the expense
of the person requesting the same.

                                      -99-

<PAGE>

                                   ARTICLE VI

                      THE DEPOSITOR AND THE MASTER SERVICER

                  SECTION 6.01. Liability of the Depositor and the Master
                                Servicer.

                  The Depositor and the Master Servicer each shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
by this Agreement and undertaken hereunder by the Depositor and the Master
Servicer herein.

                  SECTION 6.02. Merger or Consolidation of the Depositor or the
                                Master Servicer.

                  Subject to the following paragraph, the Depositor will keep in
full effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation. Subject to the following paragraph,
the Master Servicer will keep in full effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and its qualification as an approved conventional seller/servicer
for Fannie Mae or Freddie Mac in good standing. The Depositor and the Master
Servicer each 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, the
Certificates or any of the Mortgage Loans and to perform its respective duties
under this Agreement.

                  The Depositor or the Master Servicer may be merged or
consolidated with or into any Person, or transfer all or substantially all of
its assets to any Person, in which case any Person resulting from any merger or
consolidation to which the Depositor or the Master Servicer shall be a party, or
any Person succeeding to the business of the Depositor or the Master Servicer,
shall be the successor of the Depositor or the Master Servicer, as the case may
be, 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 to
the Master Servicer shall be qualified to service mortgage loans on behalf of
Fannie Mae or Freddie Mac; and provided further that the Rating Agency's ratings
of the Senior Certificates in effect immediately prior to such merger or
consolidation will not be qualified, reduced or withdrawn as a result thereof
(as evidenced by a letter to such effect from the Rating Agency).

                  SECTION 6.03. Limitation on Liability of the Depositor, the
                                Master Servicer and Others.

                  None of the Depositor, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor or the Master Servicer
shall be under any liability to the Trust Fund or the Certificateholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Depositor, the Master Servicer or any such
person against any breach of warranties, representations or covenants made
herein, or against any specific liability imposed on the Master Servicer
pursuant hereto, or against any liability which would otherwise be imposed by
reason of

                                      -100-

<PAGE>

willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations and duties hereunder. The Depositor,
the Master Servicer and any director, officer, employee or agent of the
Depositor or the Master Servicer may rely in good faith on any document of any
kind which, PRIMA FACIE, is properly executed and submitted by any Person
respecting any matters arising hereunder. The Depositor, the Master Servicer and
any director, officer, employee or agent of the Depositor or the Master Servicer
shall be indemnified and held harmless by the Trust Fund against any loss,
liability or expense incurred in connection with any legal action relating to
this Agreement or the Certificates, other than any loss, liability or expense to
any specific Mortgage Loan or Mortgage Loans (except as any such loss, liability
or expense shall be otherwise reimbursable pursuant to this Agreement) or any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder. Neither the Depositor nor the
Master Servicer shall be under any obligation to appear in, prosecute or defend
any legal action unless such action is related to its respective duties under
this Agreement and, in its opinion, does not involve it in any expense or
liability; provided, however, that each of the Depositor and the Master Servicer
may in its discretion undertake any such action which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the
parties hereto and the interests of the Certificateholders hereunder. In such
event, unless the Depositor or the Master Servicer acts without the consent of
Holders of Certificates entitled to at least 51% of the Voting Rights (which
consent shall not be necessary in the case of litigation or other legal action
by either to enforce their respective rights or defend themselves hereunder),
the legal expenses and costs of such action and any liability resulting
therefrom (except any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of duties hereunder or
by reason of reckless disregard of obligations and duties hereunder) shall be
expenses, costs and liabilities of the Trust Fund, and the Depositor (subject to
the limitations set forth above) and the Master Servicer shall be entitled to be
reimbursed therefor from the Collection Account as and to the extent provided in
Section 3.11, any such right of reimbursement being prior to the rights of the
Certificateholders to receive any amount in the Collection Account.

                  SECTION 6.04. Limitation on Resignation of the Master
                                Servicer.

                  The Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) upon determination that its duties
hereunder are no longer permissible under applicable law or (ii) with the
written consent of the Trustee, which consent may not be unreasonably withheld,
with written confirmation from the Rating Agency (which confirmation shall be
furnished to the Depositor, the Trustee and the Trust Administrator) that such
resignation will not cause the Rating Agency to reduce the then current rating
of the Class A Certificates and provided that a qualified successor has agreed
to assume the duties and obligations of the Master Servicer hereunder.
Any such determination pursuant to clause (i) of the preceding sentence
permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel to such effect obtained at the expense of the Master Servicer
and delivered to the Trustee and the Trust Administrator. No resignation of the
Master Servicer shall become effective until the Trustee or a successor servicer
shall have assumed the Master Servicer's responsibilities, duties, liabilities
(other than those liabilities arising prior to the appointment of such
successor) and obligations under this Agreement.

                                      -101-

<PAGE>

                  Except as expressly provided herein, the Master Servicer shall
not assign nor transfer any of its rights, benefits or privileges hereunder to
any other Person, nor delegate to or subcontract with, nor authorize or appoint
any other Person to perform any of the duties, covenants or obligations to be
performed by the Master Servicer hereunder. If, pursuant to any provision
hereof, the duties of the Master Servicer are transferred to a successor master
servicer, the entire amount of the Servicing Fee and other compensation payable
to the Master Servicer pursuant hereto shall thereafter be payable to such
successor master servicer.

                  SECTION 6.05. Rights of the Depositor in Respect of the Master
                                Servicer.

                  The Master Servicer shall afford (and any Sub-Servicing
Agreement shall provide that each Sub-Servicer shall afford) the Depositor, the
Trustee and the Trust Administrator, upon reasonable notice, during normal
business hours, access to all records maintained by the Master Servicer (and any
such Sub-Servicer) in respect of the Master Servicer's rights and obligations
hereunder and access to officers of the Master Servicer (and those of any such
Sub-Servicer) responsible for such obligations. Upon request, the Master
Servicer shall furnish to the Depositor, the Trustee and the Trust Administrator
its (and any such Sub-Servicer's) most recent financial statements of the parent
company of the Master Servicer and such other information relating to the Master
Servicer's capacity to perform its obligations under this Agreement that it
possesses. To the extent such information is not otherwise available to the
public, the Depositor, the Trustee and the Trust Administrator shall not
disseminate any information obtained pursuant to the preceding two sentences
without the Master Servicer's written consent, except as required pursuant to
this Agreement or to the extent that it is appropriate to do so (i) in working
with legal counsel, auditors, taxing authorities or other governmental agencies,
rating agencies or reinsurers or (ii) pursuant to any law, rule, regulation,
order, judgment, writ, injunction or decree of any court or governmental
authority having jurisdiction over the Depositor, the Trustee, the Trust
Administrator or the Trust Fund, and in either case, the Depositor, the Trustee
or the Trust Administrator, as the case may be, shall use its best efforts to
assure the confidentiality of any such disseminated non-public information. The
Depositor may, but is not obligated to, enforce the obligations of the Master
Servicer under this Agreement and may, but is not obligated to, perform, or
cause a designee to perform, any defaulted obligation of the Master Servicer
under this Agreement or exercise the rights of the Master Servicer under this
Agreement; provided that the Master Servicer shall not be relieved of any of its
obligations under this Agreement by virtue of such performance by the Depositor
or its designee. The Depositor shall not have any responsibility or liability
for any action or failure to act by the Master Servicer and is not obligated to
supervise the performance of the Master Servicer under this Agreement or
otherwise.

                                      -102-

<PAGE>

                                   ARTICLE VII

                                     DEFAULT

                  SECTION 7.01. Master Servicer Events of Default.

                  "Master Servicer Event of Default," wherever used herein,
means any one of the following events:

                         (i) any failure by the Master Servicer to remit to the
                  Trustee for distribution to the Certificateholders any payment
                  (other than a P&I Advance required to be made from its own
                  funds on any Master Servicer Remittance Date pursuant to
                  Section 4.03) required to be made under the terms of the
                  Certificates and this Agreement which continues unremedied for
                  a period of one Business Day after the date upon which written
                  notice of such failure, requiring the same to be remedied,
                  shall have been given to the Master Servicer by the Depositor,
                  the Trust Administrator or the Trustee (in which case notice
                  shall be provided by telecopy), or to the Master Servicer, the
                  Depositor, the Trust Administrator and the Trustee by the
                  Holders of Certificates entitled to at least 25% of the Voting
                  Rights; or

                        (ii) any failure on the part of the Master Servicer duly
                  to observe or perform in any material respect any of the
                  covenants or agreements on the part of the Master Servicer
                  contained in the Certificates or in this Agreement which
                  continues unremedied for a period of 30 days after the earlier
                  of (i) the date on which written notice of such failure,
                  requiring the same to be remedied, shall have been given to
                  the Master Servicer by the Depositor, the Trust Administrator
                  or the Trustee, or to the Master Servicer, the Depositor, the
                  Trust Administrator and the Trustee by the Holders of
                  Certificates entitled to at least 25% of the Voting Rights and
                  (ii) actual knowledge of such failure by a Servicing Officer
                  of the Master Servicer; or

                       (iii) a decree or order of a court or agency or
                  supervisory authority having jurisdiction in the premises in
                  an involuntary case under any present or future federal or
                  state bankruptcy, insolvency or similar law or the appointment
                  of a conservator or receiver or liquidator in any insolvency,
                  readjustment of debt, marshalling of assets and liabilities or
                  similar proceeding, or for the winding-up or liquidation of
                  its affairs, shall have been entered against the Master
                  Servicer and if such proceeding is being contested by the
                  Master Servicer in good faith such decree or order shall have
                  remained in force undischarged or unstayed for a period of 60
                  consecutive days or results in the entry of an order for
                  relief or any such adjudication or appointment; or

                        (iv) the Master Servicer shall consent to the
                  appointment of a conservator or receiver or liquidator in any
                  insolvency, readjustment of debt, marshalling of assets and
                  liabilities or similar proceedings of or relating to the
                  Master Servicer or of or relating to all or substantially all
                  of its property; or

                                      -103-

<PAGE>

                         (v) the Master Servicer shall admit in writing its
                  inability to pay its debts generally as they become due, file
                  a petition to take advantage of any applicable insolvency or
                  reorganization statute, make an assignment for the benefit of
                  its creditors, or voluntarily suspend payment of its
                  obligations; or

                        (vi) any failure of the Master Servicer to make any P&I
                  Advance on any Master Servicer Remittance Date required to be
                  made from its own funds pursuant to Section 4.03 which
                  continues unremedied for a period of one Business Day after
                  the date upon which written notice of such failure (which
                  notice the Trustee must provide by 3:00 p.m. New York time on
                  the Business Day following the Master Servicer Remittance
                  Date), requiring the same to be remedied, shall have been
                  given to the Master Servicer by the Trustee.

If a Master Servicer Event of Default described in clauses (i) through (v) of
this Section shall occur, then, and in each and every such case, so long as such
Master Servicer Event of Default shall not have been remedied, the Depositor or
the Trustee may, and at the written direction of the Holders of Certificates
entitled to at least 51% of Voting Rights, the Trustee shall, by notice in
writing to the Master Servicer (and to the Depositor if given by the Trustee or
to the Trustee if given by the Depositor), terminate all of the rights and
obligations of the Master Servicer in its capacity as a Master Servicer under
this Agreement, to the extent permitted by law, and in and to the Mortgage Loans
and the proceeds thereof. If a Master Servicer Event of Default described in
clause (vi) hereof shall occur and shall not have been remedied by 1:00 p.m. on
the related Distribution Date, the Trustee shall be obligated to make such P&I
Advance and, then so long as such Master Servicer Event of Default shall not
have been remedied during the applicable time period set forth in clause (vi)
above (including the reimbursement to the Trustee by the Master Servicer, with
interest thereon at the Prime Rate, for any P&I Advance made), the Trustee
shall, by notice in writing to the Master Servicer and the Depositor, terminate
all of the rights and obligations of the Master Servicer in its capacity as a
Master Servicer under this Agreement and in and to the Mortgage Loans and the
proceeds thereof. On or after the receipt by the Master Servicer of such written
notice, all authority and power of the Master Servicer under this Agreement,
whether with respect to the Certificates (other than as a Holder of any
Certificate) or the Mortgage Loans or otherwise, shall pass to and be vested in
the Trustee pursuant to and under this Section and, without limitation, the
Trustee is hereby authorized and empowered, as attorney-in-fact or otherwise, to
execute and deliver on behalf of and at the expense of the Master Servicer, any
and all documents and other instruments and to do or accomplish all other acts
or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Mortgage Loans and related documents, or otherwise. The Master Servicer
agrees, at its sole cost and expense, promptly (and in any event no later than
ten Business Days subsequent to such notice) to provide the Trustee with all
documents and records requested by it to enable it to assume the Master
Servicer's functions under this Agreement, and to cooperate with the Trustee in
effecting the termination of the Master Servicer's responsibilities and rights
under this Agreement, including, without limitation, the transfer within one
Business Day to the Trustee for administration by it of all cash amounts which
at the time shall be or should have been credited by the Master Servicer to the
Collection Account held by or on behalf of the Master Servicer, the Distribution
Account or any REO Account or Servicing Account held by or on behalf of the
Master Servicer or thereafter be received with respect

                                      -104-

<PAGE>

to the Mortgage Loans or any REO Property serviced by the Master Servicer
(provided, however, that the Master Servicer shall continue to be entitled to
receive all amounts accrued or owing to it under this Agreement on or prior to
the date of such termination, whether in respect of P&I Advances or otherwise,
and shall continue to be entitled to the benefits of Section 6.03,
notwithstanding any such termination, with respect to events occurring prior to
such termination). For purposes of this Section 7.01, the Trustee shall not be
deemed to have knowledge of a Master Servicer Event of Default unless a
Responsible Officer of the Trustee assigned to and working in the Trustee's
Corporate Trust Office has actual knowledge thereof or unless written notice of
any event which is in fact such a Master Servicer Event of Default is received
by the Trustee and such notice references the Certificates, REMIC I or this
Agreement.

                  SECTION 7.02. Trustee to Act; Appointment of Successor.

                  (a) On and after the time the Master Servicer receives a
notice of termination, the Trustee shall be the successor in all respects to the
Master Servicer in its capacity as Master Servicer under this Agreement, the
Master Servicer shall not have the right to withdraw any funds from the
Collection Account without the consent of the Trustee and the transactions set
forth or provided for herein and shall be subject to all the responsibilities,
duties and liabilities relating thereto and arising thereafter placed on the
Master Servicer (except for any representations or warranties of the Master
Servicer under this Agreement, the responsibilities, duties and liabilities
contained in Section 2.03(c) and its obligation to deposit amounts in respect of
losses pursuant to Section 3.12) by the terms and provisions hereof including,
without limitation, the Master Servicer's obligations to make P&I Advances
pursuant to Section 4.03; provided, however, that if the Trustee is prohibited
by law or regulation from obligating itself to make advances regarding
delinquent mortgage loans, then the Trustee shall not be obligated to make P&I
Advances pursuant to Section 4.03; and provided further, that any failure to
perform such duties or responsibilities caused by the Master Servicer's failure
to provide information required by Section 7.01 shall not be considered a
default by the Trustee as successor to the Master Servicer hereunder. As
compensation therefor, the Trustee shall be entitled to the Servicing Fees and
all funds relating to the Mortgage Loans to which the Master Servicer would have
been entitled if it had continued to act hereunder (other than amounts which
were due or would become due to the Master Servicer prior to its termination or
resignation). Notwithstanding the above and subject to the next paragraph, the
Trustee may, if it shall be unwilling to so act, or shall, if it is unable to so
act or if it is prohibited by law from making advances regarding delinquent
mortgage loans, or if the Holders of Certificates entitled to at least 51% of
the Voting Rights so request in writing to the Trustee, promptly appoint or
petition a court of competent jurisdiction to appoint, an established mortgage
loan servicing institution acceptable to the Rating Agency and having a net
worth of not less than $15,000,000 as the successor to the Master Servicer under
this Agreement in the assumption of all or any part of the responsibilities,
duties or liabilities of the Master Servicer under this Agreement. No
appointment of a successor to the Master Servicer under this Agreement shall be
effective until the assumption by the successor of all of the Master Servicer's
responsibilities, duties and liabilities hereunder. In connection with such
appointment and assumption described herein, the Trustee may make such
arrangements for the compensation of such successor out of payments on Mortgage
Loans as it and such successor shall agree; provided, however, that no such
compensation shall be in excess of that permitted the Master Servicer as such
hereunder. The Depositor, the Trustee and such successor shall take such action,
consistent with this

                                      -105-

<PAGE>

Agreement, as shall be necessary to effectuate any such succession. Pending
appointment of a successor to the Master Servicer under this Agreement, the
Trustee shall act in such capacity as hereinabove provided.

                  Upon removal or resignation of the Master Servicer, the
Trustee, with the cooperation of the Depositor, (x) shall solicit bids for a
successor Master Servicer as described below and (y) pending the appointment of
a successor Master Servicer as a result of soliciting such bids, shall serve as
Master Servicer of the Mortgage Loans serviced by such predecessor Master
Servicer. The Trustee shall solicit, by public announcement, bids from housing
and home finance institutions, banks and mortgage servicing institutions meeting
the qualifications set forth above (including the Trustee or any affiliate
thereof). Such public announcement shall specify that the successor Master
Servicer shall be entitled to the servicing compensation agreed upon between the
Trustee, the successor Master Servicer and the Depositor; provided, however,
that no such fee shall exceed the related Servicing Fee. Within thirty days
after any such public announcement, the Trustee, with the cooperation of the
Depositor, shall negotiate in good faith and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid as to the price they
will pay to obtain such servicing. The Trustee upon receipt of the purchase
price shall pay such purchase price to the Master Servicer being so removed,
after deducting from any sum received by the Trustee from the successor to the
Master Servicer in respect of such sale, transfer and assignment all costs and
expenses of any public announcement and of any sale, transfer and assignment of
the servicing rights and responsibilities reasonably incurred hereunder. After
such deductions, the remainder of such sum shall be paid by the Trustee to the
Master Servicer at the time of such sale.

                  (b) If the Master Servicer fails to remit to the Trustee for
distribution to the Certificateholders any payment required to be made under the
terms of the Certificates and this Agreement (for purposes of this Section
7.02(b), a "Remittance") because the Master Servicer is the subject of a
proceeding under the federal Bankruptcy Code and the making of such Remittance
is prohibited by Section 362 of the federal Bankruptcy Code, the Trustee shall
upon notice of such prohibition, regardless of whether it has received a notice
of termination under Section 7.01, advance the amount of such Remittance by
depositing such amount in the Distribution Account on the related Distribution
Date. The Trustee shall be obligated to make such advance only if (i) such
advance, in the good faith judgment of the Trustee, can reasonably be expected
to be ultimately recoverable from Stayed Funds and (ii) the Trustee is not
prohibited by law from making such advance or obligating itself to do so. Upon
remittance of the Stayed Funds to the Trustee or the deposit thereof in the
Distribution Account by the Master Servicer, a trustee in bankruptcy or a
federal bankruptcy court, the Trustee may recover the amount so advanced,
without interest, by withdrawing such amount from the Distribution Account;
however, nothing in this Agreement shall be deemed to affect the Trustee's
rights to recover from the Master Servicer's own funds interest on the amount of
any such advance. If the Trustee at any time makes an advance under this
Subsection which it later determines in its good faith judgment will not be
ultimately recoverable from the Stayed Funds with respect to which such advance
was made, the Trustee shall be entitled to reimburse itself for such advance,
without interest, by withdrawing from the Distribution Account, out of amounts
on deposit therein, an amount equal to the portion of such advance attributable
to the Stayed Funds.

                                      -106-

<PAGE>

                  SECTION 7.03. Notification to Certificateholders.

                  (a) Upon any termination of the Master Servicer pursuant to
Section 7.01 above or any appointment of a successor to the Master Servicer
pursuant to Section 7.02 above, the Trustee shall give prompt written notice
thereof to Certificateholders at their respective addresses appearing in the
Certificate Register.

                  (b) Not later than the later of 60 days after the occurrence
of any event, which constitutes or which, with notice or lapse of time or both,
would constitute a Master Servicer Event of Default or five days after a
Responsible Officer of the Trustee becomes aware of the occurrence of such an
event, the Trustee shall transmit by mail to all Holders of Certificates notice
of each such occurrence, unless such default or Master Servicer Event of Default
shall have been cured or waived.

                  SECTION 7.04. Waiver of Master Servicer Events of Default.

                  Subject to Section 11.09(d), the Holders representing at least
66% of the Voting Rights evidenced by all Classes of Certificates affected by
any default or Master Servicer Event of Default hereunder may waive such default
or Master Servicer Event of Default; provided, however, that a default or Master
Servicer Event of Default under clause (i) or (vi) of Section 7.01 may be waived
only by all of the Holders of the Regular Certificates. Upon any such waiver of
a default or Master Servicer Event of Default, such default or Master Servicer
Event of Default shall cease to exist and shall be deemed to have been remedied
for every purpose hereunder. No such waiver shall extend to any subsequent or
other default or Master Servicer Event of Default or impair any right consequent
thereon except to the extent expressly so waived.

                                      -107-

<PAGE>

                                  ARTICLE VIII

               CONCERNING THE TRUSTEE AND THE TRUST ADMINISTRATOR

                  SECTION 8.01. Duties of Trustee and Trust Administrator.

                  Each of the Trustee and the Trust Administrator, prior to the
occurrence of a Master Servicer Event of Default and after the curing of all
Master Servicer Events of Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement. During a Master Servicer Event of Default, each of the Trustee and
the Trust Administrator shall exercise such of the rights and powers vested in
it by this Agreement, and use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs. Any permissive right of the Trustee or
the Trust Administrator enumerated in this Agreement shall not be construed as a
duty.

                  Each of the Trustee and the Trust Administrator, upon receipt
of all resolutions, certificates, statements, opinions, reports, documents,
orders or other instruments furnished to it, which are specifically required to
be furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they conform to the requirements of this Agreement. If any
such instrument is found not to conform to the requirements of this Agreement in
a material manner, it shall take such action as it deems appropriate to have the
instrument corrected, and if the instrument is not corrected to its
satisfaction, it will provide notice thereof to the Certificateholders.

                  No provision of this Agreement shall be construed to relieve
the Trustee or the Trust Administrator from liability for its own negligent
action, its own negligent failure to act or its own misconduct; provided,
however, that:

                         (i) Prior to the occurrence of a Master Servicer Event
                  of Default, and after the curing of all such Master Servicer
                  Events of Default which may have occurred, the duties and
                  obligations of each of the Trustee and the Trust Administrator
                  shall be determined solely by the express provisions of this
                  Agreement, neither the Trustee nor the Trust Administrator
                  shall be liable except for the performance of such duties and
                  obligations as are specifically set forth in this Agreement,
                  no implied covenants or obligations shall be read into this
                  Agreement against the Trustee or the Trust Administrator and,
                  in the absence of bad faith on the part of the Trustee or the
                  Trust Administrator, as applicable, the Trustee or the Trust
                  Administrator, as the case may be, may conclusively rely, as
                  to the truth of the statements and the correctness of the
                  opinions expressed therein, upon any certificates or opinions
                  furnished to the Trustee or the Trust Administrator, as the
                  case may be, that conform to the requirements of this
                  Agreement;

                        (ii) Neither the Trustee nor the Trust Administrator
                  shall be personally liable for any error of judgment made in
                  good faith by a Responsible Officer or Responsible Officers of
                  the it unless it shall be proved that it was negligent in
                  ascertaining the pertinent facts;

                                      -108-

<PAGE>

                       (iii) Neither the Trustee nor the Trust Administrator
                  shall be personally liable with respect to any action taken,
                  suffered or omitted to be taken by it in good faith in
                  accordance with the direction of the Holders of Certificates
                  entitled to at least 25% of the Voting Rights relating to the
                  time, method and place of conducting any proceeding for any
                  remedy available to the it or exercising any trust or power
                  conferred upon it, under this Agreement; and

                        (iv) Neither the Trustee nor the Trust Administrator
                  shall be required to take notice or be deemed to have notice
                  or knowledge of any default unless a Responsible Officer of
                  the Trustee shall have received written notice thereof or a
                  Responsible Officer shall have actual knowledge thereof. In
                  the absence of receipt of such notice or actual knowledge, the
                  Trustee or the Trust Administrator, as the case may be, may
                  conclusively assume there is no default.

                  SECTION 8.02. Certain Matters Affecting the Trustee and the
                                Trust Administrator.

                  (a) Except as otherwise provided in Section 8.01:

                         (i) Each of the Trustee and the Trust Administrator and
                  any director, officer, employee or agent of the Trustee and
                  the Trust Administrator, as the case may be, may request and
                  rely upon and shall be protected in acting or refraining from
                  acting upon any resolution, Officers' Certificate, certificate
                  of auditors or any other certificate, statement, instrument,
                  opinion, report, notice, request, consent, order, appraisal,
                  bond or other paper or document reasonably believed by it to
                  be genuine and to have been signed or presented by the proper
                  party or parties;

                        (ii) Each of the Trustee and the Trust Administrator may
                  consult with counsel and any Opinion of Counsel shall be full
                  and complete authorization and protection in respect of any
                  action taken or suffered or omitted by it hereunder in good
                  faith and in accordance with such Opinion of Counsel;

                       (iii) Neither the Trustee nor the Trust Administrator
                  shall be under any obligation to exercise any of the trusts or
                  powers vested in it by this Agreement or to institute, conduct
                  or defend any litigation hereunder or in relation hereto at
                  the request, order or direction of any of the
                  Certificateholders, pursuant to the provisions of this
                  Agreement, unless such Certificateholders shall have offered
                  to the Trustee or the Trust Administrator, as applicable,
                  reasonable security or indemnity against the costs, expenses
                  and liabilities which may be incurred therein or thereby;
                  nothing contained herein shall, however, relieve the Trustee
                  or the Trust Administrator of the obligation, upon the
                  occurrence of a Master Servicer Event of Default (which has
                  not been cured or waived), to exercise such of the rights and
                  powers vested in it by this Agreement, and to use the same
                  degree of care and skill in their exercise as a prudent person
                  would exercise or use under the circumstances in the conduct
                  of such person's own affairs;

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<PAGE>

                        (iv) Neither the Trustee nor the Trust Administrator
                  shall be personally liable for any action taken, suffered or
                  omitted by it in good faith and believed by it to be
                  authorized or within the discretion or rights or powers
                  conferred upon it by this Agreement;

                         (v) Prior to the occurrence of a Master Servicer Event
                  of Default hereunder and after the curing of all Master
                  Servicer Events of Default which may have occurred, neither
                  the Trustee nor the Trust Administrator shall be bound to make
                  any investigation into the facts or matters stated in any
                  resolution, certificate, statement, instrument, opinion,
                  report, notice, request, consent, order, approval, bond or
                  other paper or document, unless requested in writing to do so
                  by the Holders of Certificates entitled to at least 25% of the
                  Voting Rights; provided, however, that if the payment within a
                  reasonable time to the Trustee or the Trust Administrator, as
                  applicable, of the costs, expenses or liabilities likely to be
                  incurred by it in the making of such investigation is, in the
                  opinion of the Trustee or the Trust Administrator, as
                  applicable, not reasonably assured to the Trustee or the Trust
                  Administrator, as applicable, by such Certificateholders, the
                  Trustee or the Trust Administrator, as applicable, may require
                  reasonable indemnity against such cost, expense, or liability
                  from such Certificateholders as a condition to taking any such
                  action;

                        (vi) Each of the Trustee and the Trust Administrator may
                  execute any of the trusts or powers hereunder or perform any
                  duties hereunder either directly or by or through agents or
                  attorneys;

                       (vii) Neither the Trustee nor the Trust Administrator
                  shall be personally liable for any loss resulting from the
                  investment of funds held in the Collection Account at the
                  direction of the Master Servicer pursuant to Section 3.12; and

                      (viii) Any request or direction of the Depositor, the
                  Master Servicer or the Certificateholders mentioned herein
                  shall be sufficiently evidenced in writing.

                  (b) All rights of action under this Agreement or under any of
the Certificates, enforceable by the Trustee or the Trust Administrator, may be
enforced by it without the possession of any of the Certificates, or the
production thereof at the trial or other proceeding relating thereto, and any
such suit, action or proceeding instituted by the Trustee or the Trust
Administrator shall be brought in its name for the benefit of all the Holders of
such Certificates, subject to the provisions of this Agreement.

                  SECTION 8.03. Neither Trustee nor Trust Administrator Liable
                                for Certificates or Mortgage Loans.

                  The recitals contained herein and in the Certificates (other
than the signature of the Trustee or the Trust Administrator, the authentication
of the Trustee on the Certificates, the acknowledgments of the Trustee contained
in Article II and the representations and warranties of the

                                      -110-

<PAGE>

Trustee and the Trust Administrator in Section 8.12) shall be taken as the
statements of the Depositor and neither the Trustee nor the Trust Administrator
assumes any responsibility for their correctness.
Neither the Trustee nor the Trust Administrator makes any representations or
warranties as to the validity or sufficiency of this Agreement (other than as
specifically set forth in Section 8.12) or of the Certificates (other than the
signature of the Trustee and authentication of the Trustee on the Certificates)
or of any Mortgage Loan or related document. Neither the Trustee nor the Trust
Administrator shall be accountable for the use or application by the Depositor
of any of the Certificates or of the proceeds of such Certificates, or for the
use or application of any funds paid to the Depositor or the Master Servicer in
respect of the Mortgage Loans or deposited in or withdrawn from the Collection
Account by the Master Servicer, other than any funds held by or on behalf of the
Trustee in accordance with Section 3.10.

                  SECTION 8.04. Trustee and Trust Administrator May Own
                                Certificates.

                  Each of the Trustee and the Trust Administrator in its
individual capacity or any other capacity may become the owner or pledgee of
Certificates with the same rights it would have if it were not Trustee or Trust
Administrator, as applicable.

                  SECTION 8.05. Trustee's and Trust Administrator's Fees and
                                Expenses.

                  (a) The Trustee shall withdraw from the Distribution Account
on each Distribution Date and pay to itself the related portion of the
Administration Fee and pay to the Trust Administrator (if the Trust
Administrator is not the Master Servicer) the related portion of the
Administration Fee and, to the extent funds therein are at anytime insufficient
for such purpose, the Depositor shall pay such fees. Each of the Trustee and the
Trust Administrator and any director, officer, employee or agent of the Trustee
or the Trust Administrator, as applicable, shall be indemnified by REMIC I and
held harmless against any loss, liability or expense (not including expenses,
disbursements and advances incurred or made by the Trustee or the Trust
Administrator, as applicable, including the compensation and the expenses and
disbursements of its agents and counsel, in the ordinary course of the Trustee's
or Trust Administrator's, as the case may be, performance in accordance with the
provisions of this Agreement) incurred by the Trustee or the Trust
Administrator, as applicable, in connection with any claim or legal action or
any pending or threatened claim or legal action arising out of or in connection
with the acceptance or administration of its obligations and duties under this
Agreement, other than any loss, liability or expense (i) resulting from any
breach of the Master Servicer's (and in the case of the Trustee, the Trust
Administrator's or in the case of the Trust Administrator, the Trustee's)
obligations in connection with this Agreement and the Mortgage Loans, (ii) that
constitutes a specific liability of the Trustee or the Trust Administrator, as
applicable, pursuant to Section 10.01(c) or (iii) any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder or as a result of a breach of the Trust
Administrator's obligations under Article X hereof. Any amounts payable to the
Trustee, or any director, officer, employee or agent of the Trustee in respect
of the indemnification provided by this paragraph (a), or pursuant to any other
right of reimbursement from the Trust Fund that the Trustee or any director,
officer, employee or agent of the Trustee may have

                                      -111-

<PAGE>

hereunder in its capacity as such, may be withdrawn by the Trustee from the
Distribution Account at any time.

                  (b) The Master Servicer agrees to indemnify the Trustee and
the Trust Administrator from, and hold each harmless against, any loss,
liability or expense resulting from a breach of the Master Servicer's
obligations and duties under this Agreement. Such indemnity shall survive the
termination or discharge of this Agreement and the resignation or removal of the
Trustee or the Trust Administrator, as the case may be. Any payment hereunder
made by the Master Servicer to the Trustee or the Trust Administrator shall be
from the Master Servicer's own funds, without reimbursement from the Trust Fund
therefor.

                  (c) The Trustee shall pay any annual rating agency fees of S&P
for ongoing surveillance from its own funds without right of reimbursement.

                  SECTION 8.06. Eligibility Requirements for Trustee and Trust
                                Administrator.

                  Each of the Trustee and the Trust Administrator hereunder
shall at all times be a corporation or an association (other than the Depositor,
the Seller; and, solely in the case of the Trustee, the Master Servicer or any
Affiliate of the foregoing) organized and doing business under the laws of any
state or the United States of America, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal or state
authority. If such corporation or association publishes reports of conditions at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section the
combined capital and surplus of such corporation or association shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
conditions so published. In case at any time the Trustee or the Trust
Administrator shall cease to be eligible in accordance with the provisions of
this Section, the Trustee or the Trust Administrator, as the case may be, shall
resign immediately in the manner and with the effect specified in Section 8.07.

                  SECTION 8.07. Resignation and Removal of the Trustee and the
                                Trust Administrator.

                  Either of the Trustee or the Trust Administrator may at any
time resign and be discharged from the trust hereby created by giving written
notice thereof to the Depositor, the Master Servicer and the Certificateholders
and, if the Trustee is resigning, to the Trust Administrator, or, if the Trust
Administrator is resigning, to the Trustee. Upon receiving such notice of
resignation, the Depositor shall promptly appoint a successor trustee or trust
administrator (which may be the same Person in the event the Trust Administrator
resigns or is removed) by written instrument, in duplicate, which instrument
shall be delivered to the resigning Trustee or Trust Administrator and to the
successor trustee or trust administrator, as applicable. A copy of such
instrument shall be delivered to the Certificateholders, the Trustee or Trust
Administrator, as applicable, and the Master Servicer by the Depositor. If no
successor trustee or trust administrator shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the

                                      -112-

<PAGE>

resigning Trustee or Trust Administrator, as applicable, may petition any court
of competent jurisdiction for the appointment of a successor trustee or trust
administrator, as applicable.

                  If at any time the Trustee or the Trust Administrator shall
cease to be eligible in accordance with the provisions of Section 8.06 and shall
fail to resign after written request therefor by the Depositor (or in the case
of the Trust Administrator, the Trustee), or if at any time the Trustee or the
Trust Administrator shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or the Trust Administrator
or of its property shall be appointed, or any public officer shall take charge
or control of the Trustee or the Trust Administrator or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Depositor (or in the case of the Trust Administrator, the Trustee) may remove
the Trustee or the Trust Administrator, as applicable, and appoint a successor
trustee or trust administrator (which may be the same Person in the event the
Trust Administrator resigns or is removed) by written instrument, in duplicate,
which instrument shall be delivered to the Trustee or Trust Administrator, so
removed, so removed and to the successor trustee or trust administrator. A copy
of such instrument shall be delivered to the Certificateholders, the Trustee or
the Trust Administrator, as applicable, and the Master Servicer by the
Depositor.

                  The Holders of Certificates entitled to at least 51% of the
Voting Rights may at any time remove the Trustee or the Trust Administrator and
appoint a successor trustee or trust administrator by written instrument or
instruments, in triplicate, signed by such Holders or their attorneys-in-fact
duly authorized, one complete set of which instruments shall be delivered to the
Depositor, one complete set to the Trustee or the Trust Administrator, as the
case may be, so removed and one complete set to the successor so appointed. A
copy of such instrument shall be delivered to the Certificateholders and the
Master Servicer by the Depositor. In addition, if the Trustee has knowledge that
the Trust Administrator has breached any of its duties under this Agreement, the
Trustee may remove the Trust Administrator in the same manner as provided in the
prior sentence. For purposes of this Section, the Trustee shall not be deemed to
have knowledge of a breach by the Trust Administrator of any of its duties
hereunder, unless a Responsible Officer of the Trustee, assigned to and working
in the Trustee's Corporate Trust Office has actual knowledge thereof or unless
written notice of any event which is in fact such a breach is received by the
Trustee, and such notice references the Certificates, the Trust Fund or this
Agreement.

                  Any resignation or removal of the Trustee or the Trust
Administrator and appointment of a successor trustee or trust administrator, as
the case may be, pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee or
trust administrator as provided in Section 8.08. Notwithstanding the foregoing,
in the event the Trust Administrator advises the Trustee that it is unable to
continue to perform its obligations pursuant to the terms of this Agreement
prior to the appointment of a successor, the Trustee shall be obligated to
perform such obligations until a new trust administrator is appointed. Such
performance shall be without prejudice to any claim by a party hereto or
beneficiary hereof resulting from the Trust Administrator's breach of its
obligations hereunder.

                                      -113-

<PAGE>

                  SECTION 8.08. Successor Trustee or Trust Administrator.

                  Any successor trustee or trust administrator appointed as
provided in Section 8.07 shall execute, acknowledge and deliver to the
Depositor, the Trustee or the Trust Administrator, as applicable, and to its
predecessor trustee or trust administrator an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee or trust administrator shall become effective and such
successor trustee or trust administrator, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee or trust administrator herein. The predecessor trustee or trust
administrator shall deliver to the successor trustee or trust administrator all
Mortgage Files and related documents and statements, as well as all moneys, held
by it hereunder and the Depositor and the predecessor trustee or trust
administrator shall execute and deliver such instruments and do such other
things as may reasonably be required for more fully and certainly vesting and
confirming in the successor trustee or trust administrator all such rights,
powers, duties and obligations.

                  No successor trustee or trust administrator shall accept
appointment as provided in this Section unless at the time of such acceptance
such successor trustee or trust administrator shall be eligible under the
provisions of Section 8.06 and the appointment of such successor trustee or
trust administrator shall not result in a downgrading of any Class of
Certificates by the Rating Agency, as evidenced by a letter from the Rating
Agency.

                  Upon acceptance of appointment by a successor trustee or trust
administrator as provided in this Section, the Depositor shall mail notice of
the succession of such trustee or trust administrator hereunder to all Holders
of Certificates at their addresses as shown in the Certificate Register. If the
Depositor fails to mail such notice within 10 days after acceptance of
appointment by the successor trustee or trust administrator, the successor
trustee or trust administrator shall cause such notice to be mailed at the
expense of the Depositor.

                  SECTION 8.09. Merger or Consolidation of Trustee or Trust
                                Administrator.

                  Any corporation or association into which either the Trustee
or the Trust Administrator may be merged or converted or with which it may be
consolidated or any corporation or association resulting from any merger,
conversion or consolidation to which the Trustee or the Trust Administrator, as
the case may be, shall be a party, or any corporation or association succeeding
to the business of the Trustee or the Trust Administrator, as applicable, shall
be the successor of the Trustee or the Trust Administrator, as the case may be,
hereunder, provided such corporation or association shall be eligible under the
provisions of Section 8.06, 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.

                  SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.

                  Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of REMIC I or property securing the

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<PAGE>

same may at the time be located, the Master Servicer and the Trustee acting
jointly shall have the power and shall execute and deliver all instruments to
appoint one or more Persons approved by the Trustee to act as co-trustee or
co-trustees, jointly with the Trustee, or separate trustee or separate trustees,
of all or any part of REMIC I, and to vest in such Person or Persons, in such
capacity, such title to REMIC I, or any part thereof, and, subject to the other
provisions of this Section 8.10, such powers, duties, obligations, rights and
trusts as the Master Servicer and the Trustee may consider necessary or
desirable. If the Master Servicer shall not have joined in such appointment
within 15 days after the receipt by it of a request to do so, or in case a
Master Servicer Event of Default shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment.
No co-trustee or separate trustee hereunder shall be required to meet the terms
of eligibility as a successor trustee under Section 8.06 hereunder and no notice
to Holders of Certificates of the appointment of co-trustee(s) or separate
trustee(s) shall be required under Section 8.08 hereof.

                  In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee (whether as
Trustee hereunder or as successor to the Master Servicer hereunder), the Trustee
shall be incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of title to
REMIC I or any portion thereof in any such jurisdiction) shall be exercised and
performed by such separate trustee or co-trustee at the direction of the
Trustee.

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

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

                                      -115-

<PAGE>

                  SECTION 8.11. [intentionally omitted]

                  SECTION 8.12. Appointment of Office or Agency.

                  The Trustee will appoint an office or agency in the City of
St. Paul, Minnesota where the Certificates may be surrendered for registration
of transfer or exchange, and presented for final distribution, and where notices
and demands to or upon the Trustee in respect of the Certificates and this
Agreement may be served.

                  SECTION 8.13. Representations and Warranties.

                  Each of the Trustee and the Trust Administrator hereby
represents and warrants to the Master Servicer, the Depositor and the Trustee or
the Trust Administrator, as applicable, as of the Closing Date, that:

                  (i) It is a national banking association duly organized,
         validly existing and in good standing under the laws of the United
         States of America.

                  (ii) The execution and delivery of this Agreement by it, and
         the performance and compliance with the terms of this Agreement by it,
         will not violate its articles of association or bylaws or constitute a
         default (or an event which, with notice or lapse of time, or both,
         would constitute a default) under, or result in the breach of, any
         material agreement or other instrument to which it is a party or which
         is applicable to it or any of its assets.

                  (iii) It has the full power and authority to enter into and
         consummate all transactions contemplated by this Agreement, has duly
         authorized the execution, delivery and performance of this Agreement,
         and has duly executed and delivered this Agreement.

                  (iv) This Agreement, assuming due authorization, execution and
         delivery by the other parties hereto, constitutes a valid, legal and
         binding obligation of it, enforceable against it in accordance with the
         terms hereof, subject to (A) applicable bankruptcy, insolvency,
         receivership, reorganization, moratorium and other laws affecting the
         enforcement of creditors' rights generally, and (B) general principles
         of equity, regardless of whether such enforcement is considered in a
         proceeding in equity or at law.

                  (v) It is not in violation of, and its execution and delivery
         of this Agreement and its performance and compliance with the terms of
         this Agreement will not constitute a violation of, any law, any order
         or decree of any court or arbiter, or any order, regulation or demand
         of any federal, state or local governmental or regulatory authority,
         which violation, in its good faith and reasonable judgment, is likely
         to affect materially and adversely either the ability of the it to
         perform its obligations under this Agreement or the financial condition
         of it.

                  (vi) No litigation is pending or, to the best of its
         knowledge, threatened against it which would prohibit it from entering
         into this Agreement or, in its good faith reasonable

                                      -116-

<PAGE>

         judgment, is likely to materially and adversely affect either the
         ability of it to perform its obligations under this Agreement or the
         financial condition of it.

                  SECTION 8.14. Rights and Indemnification of Co-Trustee.

                  The Co-Trustee hereby is given all rights and indemnifications
as the Trustee is entitled to under Article VIII of this Agreement.

                                      -117-

<PAGE>

                                   ARTICLE IX

                                   TERMINATION

                  SECTION 9.01 Termination Upon Repurchase or Liquidation of the
                               REMIC I Regular Interests.

                  (a) Subject to Section 9.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Master Servicer, the
Trustee, the Co-Trustee and the Trust Administrator with respect to the Mortgage
Loans (other than the obligations of the Master Servicer to the Trustee, the
Co-Trustee and the Trust Administrator pursuant to Section 8.05 and of the
Master Servicer to provide for and the Trustee to make payments to the Holders
of the related Class(es) of REMIC II Certificates and Class R-I Certificates as
hereinafter set forth) shall terminate upon payment to the Certificateholders
and the deposit of all amounts held by or on behalf of the Trustee and required
hereunder to be so paid or deposited on the Distribution Date coinciding with or
following the earlier to occur of (i) the purchase by the Master Servicer of all
Mortgage Loans and each REO Property remaining in REMIC I and (ii) the final
payment or other liquidation (or any advance with respect thereto) of the last
Mortgage Loan or REO Property remaining in REMIC I; provided, however, that in
no event shall the trust created hereby continue beyond the expiration of 21
years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St. James,
living on the date hereof. The purchase by the Master Servicer of all Mortgage
Loans and each REO Property remaining in REMIC I shall be at a price (the
"Termination Price") equal to the greater of (A) the aggregate Purchase Price of
all the Mortgage Loans included in REMIC I, plus the appraised value of each REO
Property, if any, included in REMIC I, such appraisal to be conducted by an
appraiser mutually agreed upon by the Master Servicer and the Trustee in their
reasonable discretion and (B) the aggregate fair market value of all of the
assets in REMIC I (as determined by the Master Servicer, with the consent of the
Trustee, as of the close of business on the third Business Day next preceding
the date upon which notice of any such termination is furnished to
Certificateholders pursuant to the third paragraph of this Section 9.01).

                  (b) The Master Servicer shall have the right to purchase all
of the Mortgage Loans and each REO Property remaining in REMIC I pursuant to
clause (i) of the preceding paragraph no later than the Determination Date in
the month immediately preceding the Distribution Date on which the Certificates
will be retired; provided, however, that the Master Servicer, as provided above,
may elect to purchase all of the Mortgage Loans and each REO Property remaining
in REMIC I pursuant to clause (i) above only if the aggregate Stated Principal
Balance of the Mortgage Loans and each REO Property remaining in the Trust Fund
at the time of such election is reduced to less than 5% of the aggregate Stated
Principal Balance of the Mortgage Loans at the Cut-off Date. For federal income
tax purposes, the purchase by the Master Servicer of all Mortgage Loans and all
REO Properties underlying the REMIC I Regular Interests is intended to
facilitate a redemption of such REMIC I Regular Interests pursuant to a "cleanup
call" within the meaning of Treasury regulation section 1.860G-2(j).
Notwithstanding the foregoing, the Master Servicer shall have the right to
transfer, sell or assign its rights to purchase all of the Mortgage Loans and
each REO Property remaining in REMIC I.

                                      -118-

<PAGE>

                  (c) Notice of the liquidation of the REMIC I Regular Interests
shall be given promptly by the Trustee by letter to Certificateholders mailed
(a) in the event such notice is given in connection with the purchase of the
Mortgage Loans and each REO Property remaining in REMIC I by the Master
Servicer, not earlier than the 15th day and not later than the 25th day of the
month next preceding the month of the final distribution on the Certificates or
(b) otherwise during the month of such final distribution on or before the
Determination Date in such month, in each case specifying (i) the Distribution
Date upon which the Trust Fund will terminate and final payment of the REMIC II
Certificates will be made upon presentation and surrender of the REMIC II
Certificates at the office of the Trustee therein designated, (ii) the amount of
any such final payment, (iii) that no interest shall accrue in respect of the
REMIC II Certificates from and after the Interest Accrual Period relating to the
final Distribution Date therefor and (iv) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the REMIC II Certificates at the office of
the Trustee. In the event such notice is given in connection with the purchase
of all of the Mortgage Loans and each REO Property remaining in REMIC I by the
Master Servicer, the Master Servicer shall deliver to the Trustee for deposit in
the Distribution Account not later than the last Business Day of the month next
preceding the month in which such distribution will be made an amount in
immediately available funds equal to the Termination Price. Upon certification
to the Trustee by a Servicing Officer of the making of such final deposit, the
Trustee shall promptly release or cause to be released to the Master Servicer
the Mortgage Files for the remaining Mortgage Loans, and the Trustee shall
execute all assignments, endorsements and other instruments necessary to
effectuate such transfer.

                  (d) Upon presentation of the Certificates by the
Certificateholders on the final Distribution Date, the Trustee shall distribute
to each Certificateholder so presenting and surrendering its Certificates the
amount otherwise distributable on such Distribution Date in accordance with
Section 4.01 in respect of the Certificates so presented and surrendered. Any
funds not distributed to any Holder or Holders of Certificates being retired on
such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust by
the Trustee and credited to the account of the appropriate non-tendering Holder
or Holders. If any Certificates as to which notice has been given pursuant to
this Section 9.01 shall not have been surrendered for cancellation within six
months after the time specified in such notice, the Trustee shall mail a second
notice to the remaining non-tendering Certificateholders to surrender their
Certificates for cancellation in order to receive the final distribution with
respect thereto. If within one year after the second notice all such
Certificates shall not have been surrendered for cancellation, the Trustee
shall, directly or through an agent, mail a final notice to remaining related
non-tendering Certificateholders concerning surrender of their Certificates. The
costs and expenses of maintaining the funds in trust and of contacting such
Certificateholders shall be paid out of the assets remaining in the trust funds.
If within one year after the final notice any such Certificates shall not have
been surrendered for cancellation, the Trustee shall pay to Salomon Smith Barney
Inc. all such amounts, and all rights of non-tendering Certificateholders in or
to such amounts shall thereupon cease. No interest shall accrue or be payable to
any Certificateholder on any amount held in trust by the Trustee as a result of
such Certificateholder's failure to surrender its Certificate(s) for final
payment thereof in accordance with this Section 9.01.

                                      -119-

<PAGE>

                  Immediately following the deposit of funds in trust hereunder
in respect of the REMIC I Regular Interests, the Trust Fund shall terminate.

                  SECTION 9.02 Additional Termination Requirements.

                  (a) In the event that the Master Servicer purchases all the
Mortgage Loans and each REO Property, the Trust Fund shall be terminated in
accordance with the following additional requirements (or in connection with the
final payment on or other liquidation of the last Mortgage Loan or REO Property
remaining in REMIC I, the additional requirement specified in clause (i) below):

                         (i) The Trust Administrator shall specify the first day
                  in the 90-day liquidation period in a statement attached to
                  REMIC I's and REMIC II's final Tax Return pursuant to Treasury
                  regulation Section 1.860F-1, and such termination shall
                  satisfy all requirements of a qualified liquidation under
                  Section 860F of the Code and any regulations thereunder, as
                  evidenced by an Opinion of Counsel obtained at the expense of
                  the Master Servicer;

                        (ii) During such 90-day liquidation period, and at or
                  prior to the time of making of the final payment on the
                  Certificates, the Trustee shall sell all of the assets of
                  REMIC I to the Master Servicer for cash; and

                       (iii) At the time of the making of the final payment on
                  the Certificates, the Trustee shall distribute or credit, or
                  cause to be distributed or credited, to the Holders of the
                  applicable Class of Residual Certificates all cash on hand in
                  each or REMIC I and REMIC II (other than cash retained to meet
                  claims), and the Trust Fund shall terminate at that time.

                  (b) At the expense of the Master Servicer (or in the event of
termination under Section 9.01(a)(ii), at the expense of the Trust
Administrator), the Trust Administrator shall prepare or cause to be prepared
the documentation required in connection with the adoption of a plan of
liquidation of each of REMIC I and REMIC II pursuant to this Section 9.02.

                  (c) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trust Administrator to specify the 90-day
liquidation period for each of REMIC I and REMIC II, which authorization shall
be binding upon all successor Certificateholders.

                                      -120-

<PAGE>

                                    ARTICLE X

                                REMIC PROVISIONS

                  SECTION 10.01. REMIC Administration.

                  (a) The Trustee shall elect to treat each of REMIC I and REMIC
II as a REMIC under the Code and, if necessary, under applicable state law. Each
such election will be made by the Trust Administrator on behalf of the Trustee
on Form 1066 or other appropriate federal tax or information return or any
appropriate state return for the taxable year ending on the last day of the
calendar year in which the Certificates are issued. For the purposes of the
REMIC election in respect of REMIC I, REMIC I Regular Interests shall be
designated as the Regular Interests in REMIC I and the Class R-I Certificates
shall be designated as the Residual Interests in REMIC I. Each of the Classes
listed in the Preliminary Statement hereto shall be designated as the Regular
Interests in REMIC II and the Class R-II Certificates shall be designated as the
Residual Interests in REMIC II. The Trustee shall not permit the creation of any
"interests" in REMIC I or REMIC II (within the meaning of Section 860G of the
Code) other than the REMIC I Regular Interests and the interests represented by
the Certificates.

                  (b) The Closing Date is hereby designated as the "Startup Day"
of REMIC I and REMIC II within the meaning of Section 860G(a)(9) of the Code.

                  (c) The Trust Administrator shall pay out of its own funds,
without any right of reimbursement, any and all expenses relating to any tax
audit of the Trust Fund (including, but not limited to, any professional fees or
any administrative or judicial proceedings with respect to either REMIC I or
REMIC II that involve the Internal Revenue Service or state tax authorities),
other than the expense of obtaining any tax related Opinion of Counsel except as
specified herein. The Trust Administrator, as agent for both of REMIC I's and
REMIC II's tax matters person, shall (i) act on behalf of the Trust Fund in
relation to any tax matter or controversy involving either REMIC I or REMIC II
and (ii) represent the Trust Fund in any administrative or judicial proceeding
relating to an examination or audit by any governmental taxing authority with
respect thereto. The holder of the largest Percentage Interest of each Class of
Residual Certificates shall be designated, in the manner provided under Treasury
regulations section 1.860F-4(d) and Treasury regulations section
301.6231(a)(7)-1, as the tax matters person of the related REMIC created
hereunder. By their acceptance thereof, the holder of the largest Percentage
Interest of the Residual Certificates hereby agrees to irrevocably appoint the
Trust Administrator or an Affiliate as its agent to perform all of the duties of
the tax matters person for the Trust Fund.

                  (d) The Trust Administrator shall prepare and the Trustee
shall sign and the Trust Administrator shall file all of the Tax Returns in
respect of each REMIC created hereunder. The expenses of preparing and filing
such returns shall be borne by the Trust Administrator without any right of
reimbursement therefor. The Master Servicer shall provide on a timely basis to
the Trust Administrator or its designee such information with respect to the
assets of the Trust Fund as is in its possession and reasonably required by the
Trust Administrator to enable it to perform its obligations under this Article.

                                      -121-

<PAGE>

                  (e) The Trust Administrator shall perform on behalf of each of
REMIC I and REMIC II all reporting and other tax compliance duties that are the
responsibility of the REMIC under the Code, the REMIC Provisions or other
compliance guidance issued by the Internal Revenue Service or any state or local
taxing authority. Among its other duties, as required by the Code, the REMIC
Provisions or other such compliance guidance, the Trust Administrator shall
provide (i) to any Transferor of a Residual Certificate such information as is
necessary for the application of any tax relating to the transfer of a Residual
Certificate to any Person who is not a Permitted Transferee, (ii) to the
Certificateholders such information or reports as are required by the Code or
the REMIC Provisions including reports relating to interest, original issue
discount and market discount or premium (using the Prepayment Assumption as
required) and (iii) to the Internal Revenue Service the name, title, address and
telephone number of the person who will serve as the representative of REMIC I
and REMIC II. The Master Servicer shall provide on a timely basis to the Trust
Administrator such information with respect to the assets of the Trust Fund,
including, without limitation, the Mortgage Loans, as is in its possession and
reasonably required by the Trust Administrator to enable it to perform its
obligations under this subsection. In addition, the Depositor shall provide or
cause to be provided to the Trust Administrator, within ten (10) days after the
Closing Date, all information or data that the Trust Administrator reasonably
determines to be relevant for tax purposes as to the valuations and issue prices
of the Certificates, including, without limitation, the price, yield, prepayment
assumption and projected cash flow of the Certificates.

                  (f) The Master Servicer, the Trustee and the Trust
Administrator shall take such action and shall cause each REMIC created
hereunder to take such action as shall be necessary to create or maintain the
status thereof as a REMIC under the REMIC Provisions. The Master Servicer, the
Trustee and the Trust Administrator shall not take any action, cause the Trust
Fund to take any action or fail to take (or fail to cause to be taken) any
action that, under the REMIC Provisions, if taken or not taken, as the case may
be, could (i) endanger the status of REMIC I or REMIC II as a REMIC or (ii)
result in the imposition of a tax upon the Trust Fund (including but not limited
to the tax on prohibited transactions as defined in Section 860F(a)(2) of the
Code and the tax on contributions to a REMIC set forth in Section 860G(d) of the
Code) (either such event, an "Adverse REMIC Event") unless the Trustee and the
Trust Administrator have received an Opinion of Counsel, addressed to the
Trustee and the Trust Administrator (at the expense of the party seeking to take
such action but in no event at the expense of the Trust Administrator or the
Trustee) to the effect that the contemplated action will not, with respect to
either REMIC I or REMIC II, endanger such status or result in the imposition of
such a tax, nor shall the Master Servicer take or fail to take any action
(whether or not authorized hereunder) as to which the Trustee or the Trust
Administrator has advised it in writing that it has received an Opinion of
Counsel to the effect that an Adverse REMIC Event could occur with respect to
such action. In addition, prior to taking any action with respect to REMIC I or
REMIC II or the respective assets of each, or causing REMIC I or REMIC II to
take any action, which is not contemplated under the terms of this Agreement,
the Master Servicer will consult with the Trustee and the Trust Administrator or
their designee, in writing, with respect to whether such action could cause an
Adverse REMIC Event to occur with respect to either REMIC I or REMIC II, and the
Master Servicer shall not take any such action or cause either REMIC I or REMIC
II to take any such action as to which the Trustee or the Trust Administrator
has advised it in writing that an Adverse REMIC Event could occur. The Trust
Administrator and the Trustee may consult with counsel to make such written
advice, and the cost of same shall be borne

                                      -122-

<PAGE>

by the party seeking to take the action not permitted by this Agreement, but in
no event shall such cost be an expense of the Trustee or the Trust
Administrator. At all times as may be required by the Code, the Trust
Administrator, the Trustee or the Master Servicer will ensure that substantially
all of the assets of both REMIC I and REMIC II will consist of "qualified
mortgages" as defined in Section 860G(a)(3) of the Code and "permitted
investments" as defined in Section 860G(a)(5) of the Code.

                  (g) In the event that any tax is imposed on "prohibited
transactions" of either REMIC created hereunder as defined in Section 860F(a)(2)
of the Code, on the "net income from foreclosure property" of such REMIC as
defined in Section 860G(c) of the Code, on any contributions to either such
REMIC after the Startup Day therefor pursuant to Section 860G(d) of the Code, or
any other tax is imposed by the Code or any applicable provisions of state or
local tax laws, such tax shall be charged (i) to the Trust Administrator
pursuant to Section 10.03 hereof, if such tax arises out of or results from a
breach by the Trust Administrator of any of its obligations under this Article
X, (ii) to the Trustee pursuant to Section 10.03 hereof, if such tax arises out
of or results from a breach by the Trustee of any of its obligations under this
Article X, (iii) to the Master Servicer pursuant to Section 10.03 hereof, if
such tax arises out of or results from a breach by the Master Servicer of any of
its obligations under Article III or this Article X, or otherwise (iv) against
amounts on deposit in the Distribution Account and shall be paid by withdrawal
therefrom.

                  (h) On or before April 15 of each calendar year, commencing
April 15, 2001, the Trust Administrator shall deliver to the Master Servicer,
the Trustee and the Rating Agency a Certificate from a Responsible Officer of
the Trust Administrator stating the Trust Administrator's compliance with this
Article X.

                  (i) The Trust Administrator shall, for federal income tax
purposes, maintain books and records with respect to each of REMIC I and REMIC
II on a calendar year and on an accrual basis.

                  (j) Following the Startup Day, the Master Servicer, the
Trustee and the Trust Administrator shall not accept any contributions of assets
to either REMIC I or REMIC II other than in connection with any Qualified
Substitute Mortgage Loan delivered in accordance with Section 2.03 unless it
shall have received an Opinion of Counsel to the effect that the inclusion of
such assets in the Trust Fund will not cause the related REMIC to fail to
qualify as a REMIC at any time that any Certificates are outstanding or subject
such REMIC to any tax under the REMIC Provisions or other applicable provisions
of federal, state and local law or ordinances.

                  (k) None of the Trustee, the Trust Administrator or the Master
Servicer shall enter into any arrangement by which REMIC I or REMIC II will
receive a fee or other compensation for services nor permit either such REMIC to
receive any income from assets other than "qualified mortgages" as defined in
Section 860G(a)(3) of the Code or "permitted investments" as defined in Section
860G(a)(5) of the Code.

                                      -123-

<PAGE>

                  SECTION 10.02. Prohibited Transactions and Activities.

                  None of the Depositor, the Master Servicer, the Trust
Administrator or the Trustee shall sell, dispose of or substitute for any of the
Mortgage Loans (except in connection with (i) the foreclosure of a Mortgage
Loan, including but not limited to, the acquisition or sale of a Mortgaged
Property acquired by deed in lieu of foreclosure, (ii) the bankruptcy of REMIC
I, (iii) the termination of REMIC I pursuant to Article IX of this Agreement,
(iv) a substitution pursuant to Article II of this Agreement or (v) a purchase
of Mortgage Loans pursuant to Article II or III of this Agreement), nor acquire
any assets for either REMIC I or REMIC II (other than REO Property acquired in
respect of a defaulted Mortgage Loan), nor sell or dispose of any investments in
the Collection Account or the Distribution Account for gain, nor accept any
contributions to either REMIC I or REMIC II after the Closing Date (other than a
Qualified Substitute Mortgage Loan delivered in accordance with Section 2.03),
unless it has received an Opinion of Counsel, addressed to the Trustee and the
Trust Administrator (at the expense of the party seeking to cause such sale,
disposition, substitution, acquisition or contribution but in no event at the
expense of the Trustee or the Trust Administrator) that such sale, disposition,
substitution, acquisition or contribution will not (a) affect adversely the
status of either REMIC I or REMIC II as a REMIC or (b) cause either REMIC I or
REMIC II to be subject to a tax on "prohibited transactions" or "contributions"
pursuant to the REMIC Provisions.

                  SECTION 10.03. Master Servicer, Trustee and Trust
                                 Administrator Indemnification.

                  (a) The Trustee agrees to indemnify the Trust Fund, the
Depositor, the Master Servicer and the Trust Administrator for any taxes and
costs including, without limitation, any reasonable attorneys fees imposed on or
incurred by the Trust Fund, the Depositor, the Master Servicer or the Trust
Administrator as a result of a breach of the Trustee's covenants set forth in
this Article X.

                  (b) The Trust Administrator agrees to indemnify the Trust
Fund, the Depositor, the Master Servicer and the Trustee for any taxes and costs
including, without limitation, any reasonable attorneys fees imposed on or
incurred by the Trust Fund, the Depositor, the Master Servicer or the Trustee as
a result of a breach of the Trust Administrator's covenants set forth in this
Article X.

                  (b) The Master Servicer agrees to indemnify the Trust Fund,
the Depositor, the Trust Administrator and the Trustee for any taxes and costs
including, without limitation, any reasonable attorneys' fees imposed on or
incurred by the Trust Fund, the Depositor, the Trust Administrator or the
Trustee, as a result of a breach of the Master Servicer's covenants set forth in
Article III or this Article X.

                                      -124-

<PAGE>

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

                  SECTION 11.01. Amendment.

                   This Agreement may be amended from time to time by the
Depositor, the Master Servicer, the Trustee, the Co-Trustee and the Trust
Administrator without the consent of any of the Certificateholders, (i) to cure
any ambiguity or defect, (ii) to correct, modify or supplement any provisions
herein (including to give effect to the expectations of Certificateholders) or
(iii) to make any other provisions with respect to matters or questions arising
under this Agreement which shall not be inconsistent with the provisions of this
Agreement, provided that such action shall not, as evidenced by an Opinion of
Counsel delivered to the Trustee, adversely affect in any material respect the
interests of any Certificateholder. No amendment shall be deemed to adversely
affect in any material respect the interests of any Certificateholder who shall
have consented thereto, and no Opinion of Counsel shall be required to address
the effect of any such amendment on any such consenting Certificateholder.

         This Agreement may also be amended from time to time by the Depositor,
the Master Servicer, the Trust Administrator, the Co-Trustee and the Trustee
with the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Holders of Certificates; provided, however, that no
such amendment shall (i) reduce in any manner the amount of, or delay the timing
of, payments received on Mortgage Loans which are required to be distributed on
any Certificate without the consent of the Holder of such Certificate, (ii)
adversely affect in any material respect the interests of the Holders of any
Class of Certificates in a manner, other than as described in (i), without the
consent of the Holders of Certificates of such Class evidencing at least 66% of
the Voting Rights allocated to such Class, or (iii) modify the consents required
by the immediately preceding clauses (i) and (ii) without the consent of the
Holders of all Certificates then outstanding. Notwithstanding any other
provision of this Agreement, for purposes of the giving or withholding of
consents pursuant to this Section 11.01, Certificates registered in the name of
the Depositor or the Master Servicer or any Affiliate thereof shall be entitled
to Voting Rights with respect to matters affecting such Certificates.

                  Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel to the effect that such amendment will
not result in the imposition of any tax on either REMIC I or REMIC II pursuant
to the REMIC Provisions or cause either REMIC I or REMIC II to fail to qualify
as a REMIC at any time that any Certificates are outstanding.

                  Promptly after the execution of any such amendment the Trustee
shall furnish a copy of such amendment to each Certificateholder.

                  It shall not be necessary for the consent of
Certificateholders under this Section 11.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent

                                      -125-

<PAGE>

shall approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable regulations as the Trustee may prescribe.

                  The cost of any Opinion of Counsel to be delivered pursuant to
this Section 11.01 shall be borne by the Person seeking the related amendment,
but in no event shall such Opinion of Counsel be an expense of the Trustee, the
Co-Trustee or the Trust Administrator.

                  Notwithstanding the foregoing, each of the Trustee, the
Co-Trustee and Trust Administrator may, but shall not be obligated to enter into
any amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.

                  SECTION 11.02. Recordation of Agreement; Counterparts.

                  To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Master Servicer at the expense of the Certificateholders, but
only upon direction of the Trustee accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders.

                  For the purpose of facilitating the recordation 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 but one and the same instrument.

                  SECTION 11.03. Limitation on Rights of Certificateholders.

                  The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.

                  No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of any of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.

                  No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this

                                      -126-

<PAGE>

Agreement, unless (i) such Holder previously shall have given to the Trustee a
written notice of default and of the continuance thereof, as hereinbefore
provided, and (ii) the Holders of Certificates entitled to at least 25% of the
Voting Rights shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee, for 15 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding. It is understood and intended, and expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificates shall have any right in any manner
whatsoever by virtue of any provision of this Agreement to affect, disturb or
prejudice the rights of the Holders of any other of such Certificates, or to
obtain or seek to obtain priority over or preference to any other such Holder,
or to enforce any right under this Agreement, except in the manner herein
provided and for the equal, ratable and common benefit of all
Certificateholders. For the protection and enforcement of the provisions of this
Section, each and every Certificateholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.

                  SECTION 11.04. Governing Law.

                  This Agreement shall be construed in accordance with the laws
of the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.

                  SECTION 11.05. Notices.

                  All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Depositor, 390 Greenwich Street, New York, New York 10013,
Attention: Mortgage Finance Group (telecopy number (212) 723-8604), or such
other address or telecopy number as may hereafter be furnished to the Master
Servicer, the Trust Administrator, the Co- Trustee and the Trustee in writing by
the Depositor, (b) in the case of the Master Servicer and Trust Administrator,
15851 Clayton Road, Ballwin, Missouri 63011, Attention: William Felts (telecopy
number (636) 256-5433), or such other address or telecopy number as may
hereafter be furnished to the Trustee, the Co-Trustee and the Depositor in
writing by the Master Servicer and Trust Administrator, (c) in the case of the
Trustee, 180 East Fifth Street, St. Paul, Minnesota, 55101, Attention:
Structured Finance/SBMSVII 2000-1 (telecopy number (612) 244-0089), or such
other address or telecopy number as may hereafter be furnished to the Master
Servicer, the Trust Administrator, the Co-Trustee and the Depositor in writing
by the Trustee and (d) in the case of the Co-Trustee, 180 East Fifth Street, St.
Paul, Minnesota, 55101, Attention: Structured Finance/SBMSVII 2000-1 (telecopy
number (612) 244-0089), or such other address or telecopy number as may
hereafter be furnished to the Master Servicer, the Trust Administrator, the
Trustee and the Depositor in writing by the Co-Trustee. Any notice required or
permitted to be given to a Certificateholder shall be given by first class mail,
postage prepaid, at the address of such Holder as shown in the Certificate
Register. Any notice so mailed within the time prescribed in this Agreement

                                      -127-

<PAGE>

shall be conclusively presumed to have been duly given when mailed, whether or
not the Certificateholder receives such notice. A copy of any notice required to
be telecopied hereunder also shall be mailed to the appropriate party in the
manner set forth above.

                  SECTION 11.06. Severability of Provisions.

                  If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.

                  SECTION 11.07. Notice to Rating Agency.

                  The Trustee shall use its best efforts promptly to provide
notice to the Rating Agency with respect to each of the following of which it
has actual knowledge:

                  1.       Any material change or amendment to this Agreement;

                  2.       The occurrence of any Master Servicer Event of
                           Default that has not been cured or waived;

                  3.       The resignation or termination of the Master
                           Servicer, the Trust Administrator or the Trustee;

                  4.       The repurchase or substitution of Mortgage Loans
                           pursuant to or as contemplated by Section 2.03;

                  5.       The final payment to the Holders of any Class of
                           Certificates;

                  6.       Any change in the location of the Collection Account
                           or the Distribution Account;

                  7.       Any event that would result in the inability of the
                           Trustee, were it to succeed as Master Servicer, to
                           make advances regarding delinquent Mortgage Loans;
                           and

                  8.       The filing of any claim under the Master Servicer's
                           blanket bond and errors and omissions insurance
                           policy required by Section 3.14 or the cancellation
                           or material modification of coverage under any such
                           instrument.

                  In addition, the Trustee shall promptly furnish to the Rating
Agency copies of each report to Certificateholders described in Section 4.02 and
the Master Servicer, as required pursuant to Section 3.20 and Section 3.21,
shall promptly furnish to the Rating Agency copies of the following:

                                      -128-

<PAGE>

                  1.       Each annual statement as to compliance described in
                           Section 3.20; and

                  2.       Each annual independent public accountants' servicing
                           report described in Section 3.21.

                  Any such notice pursuant to this Section 11.07 shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service
to Standard & Poor's Ratings Services, 25 Broadway, New York, New York 10004, or
such other addresses as the Rating Agency may designate in writing to the
parties hereto.

                  SECTION 11.08. Article and Section References.

                  All article and section references used in this Agreement,
unless otherwise provided, are to articles and sections in this Agreement.

                  SECTION 11.09. Grant of Security Interest.

                  It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Depositor to the Trustee be, and be
construed as, a sale of the Mortgage Loans by the Depositor and not a pledge of
the Mortgage Loans by the Depositor to secure a debt or other obligation of the
Depositor. However, in the event that, notwithstanding the aforementioned intent
of the parties, the Mortgage Loans are held to be property of the Depositor,
then, (a) it is the express intent of the parties that such conveyance be deemed
a pledge of the Mortgage Loans by the Depositor to the Trustee to secure a debt
or other obligation of the Depositor and (b)(1) this Agreement shall also be
deemed to be a security agreement within the meaning of Articles 8 and 9 of the
Uniform Commercial Code as in effect from time to time in the State of New York;
(2) the conveyance provided for in Section 2.01 hereof shall be deemed to be a
grant by the Depositor to the Trustee of a security interest in all of the
Depositor's right, title and interest in and to the Mortgage Loans and all
amounts payable to the holders of the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including
without limitation all amounts, other than investment earnings, from time to
time held or invested in the Collection Account and the Distribution Account,
whether in the form of cash, instruments, securities or other property; (3) the
obligations secured by such security agreement shall be deemed to be all of the
Depositor's obligations under this Agreement, including the obligation to
provide to the Certificateholders the benefits of this Agreement relating to the
Mortgage Loans and the Trust Fund; and (4) notifications to persons holding such
property, and acknowledgments, receipts or confirmations from persons holding
such property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Trustee for the purpose of perfecting such security interest under
applicable law. Accordingly, the Depositor hereby grants to the Trustee a
security interest in the Mortgage Loans and all other property described in
clause (2) of the preceding sentence, for the purpose of securing to the Trustee
the performance by the Depositor of the obligations described in clause (3) of
the preceding sentence. Notwithstanding the foregoing, the parties hereto intend
the conveyance pursuant to Section 2.01 to be a true, absolute

                                      -129-

<PAGE>

and unconditional sale of the Mortgage Loans and assets constituting the Trust
Fund by the Depositor to the Trustee.

                                      -130-

<PAGE>

                  IN WITNESS WHEREOF, the Depositor, the Master Servicer, the
Trust Administrator, the Trustee and the Co-Trustee have caused their names to
be signed hereto by their respective officers thereunto duly authorized, in each
case as of the day and year first above written.

                                     SALOMON BROTHERS MORTGAGE
                                     SECURITIES VII, INC.,
                                     as Depositor

                                     By:  /s/  David Reedy
                                        ----------------------------------------
                                     Name:     David Reedy
                                     Title:    Assistant Vice President

                                     CITICORP MORTGAGE, INC.,
                                     as Master Servicer and Trust Administrator

                                     By:  /s/  William S. Felts
                                        ----------------------------------------
                                     Name:     William S. Felts
                                     Title:    Vice President

                                     U.S. BANK NATIONAL ASSOCIATION,
                                     as Trustee

                                     By:  /s/  Eve D. Kaplan
                                        ----------------------------------------
                                     Name:     Eve D. Kaplan
                                     Title:    Vice President

                                     U.S. BANK TRUST NATIONAL ASSOCIATION,
                                     as Co-Trustee

                                     By:  /s/  Eve D. Kaplan
                                        ----------------------------------------
                                     Name:     Eve D. Kaplan
                                     Title:    Vice President

<PAGE>

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

                  On the 30th day of March 2000, before me, a notary public in
and for said State, personally appeared _________________, known to me to be an
Assistant Vice President of Salomon Brothers Mortgage Securities VII, Inc., one
of the corporations that executed the within instrument, and also known to me to
be the person who executed it on behalf of said corporation, and acknowledged to
me that such corporation executed the within instrument.

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

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

[Notarial Seal]

<PAGE>

STATE OF ______________   )
                          ) ss.:
COUNTY OF ___________     )

                  On the 30th day of March 2000, before me, a notary public in
and for said State, personally appeared ______________, known to me to be a
________________ of Citicorp Mortgage, Inc., one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

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

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

[Notarial Seal]

<PAGE>

STATE OF ____________   )
                        ) ss.:
COUNTY OF ___________   )

                  On the 30th day of March 2000, before me, a notary public in
and for said State, personally appeared ______________, known to me to be a
_______________ of U.S. Bank National Association, one of the entities that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
entity executed the within instrument.

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

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

[Notarial Seal]

<PAGE>

STATE OF ____________  )
                       ) ss.:
COUNTY OF ___________  )

                  On the 30th day of March 2000, before me, a notary public in
and for said State, personally appeared ______________, known to me to be a
_______________ of U.S. Bank Trust National Association, one of the entities
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
entity executed the within instrument.

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

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

[Notarial Seal]

<PAGE>

                              EXHIBIT A-1
                              -----------

                     FORM OF CLASS A-1 CERTIFICATE

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS
     A  "REGULAR  INTEREST"  IN A  "REAL  ESTATE  MORTGAGE  INVESTMENT
     CONDUIT", AS THOSE TERMS ARE DEFINED,  RESPECTIVELY,  IN SECTIONS
     860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

Series 2000-1, Class A-1               Aggregate Certificate Principal
                                       Balance of Class A-1 Certificates as
                                       of the Issue Date: $77,657,158.00
Pass-Through Rate:  Variable
                                       Denomination:  $77,657,158.00

Date of Agreement and Cut-off Date:    Master Servicer and Trust Administrator:
March 1, 2000                          Citicorp Mortgage, Inc.

                                       Trustee: U.S. Bank National Association
First Distribution Date:
April 25, 2000
                                       Issue Date: March 30, 2000

No. 1                                  CUSIP: 79548K 3A 4

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE
     OF THIS  CERTIFICATE  MAY BE MADE  MONTHLY  AS SET FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
     AT ANY  TIME  MAY BE LESS  THAN  THE  AMOUNT  SHOWN  ABOVE AS THE
     DENOMINATION OF THIS CERTIFICATE.

<PAGE>

                                       -2-

                        MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional, one- to four-family, fixed-rate,
first lien mortgage loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
     IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII, INC., THE MASTER
     SERVICER,  THE TRUST  ADMINISTRATOR,  THE TRUSTEE OR ANY OF THEIR
     RESPECTIVE   AFFILIATES.   NEITHER  THIS   CERTIFICATE   NOR  THE
     UNDERLYING  MORTGAGE  LOANS  ARE  GUARANTEED  BY  ANY  AGENCY  OR
     INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Cede & Company is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class A-1 Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class A-1 Certificates in REMIC II created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer, the Trust Administrator, the Co-Trustee, the Co- Trustee and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class A-1 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A-1 Certificates, the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class A-1 Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be

<PAGE>

                                       -3-

made after due notice by the Trustee of the pendency of such distribution and
only upon the presentation and surrender of this Certificate at the office or
agency appointed by the Trustee for that purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Mortgage Pass-Through Certificates of the Series specified on the
face hereof (hereinafter called the "Certificates") and representing a
Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to Holders
of the Certificates, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions and conditions provided
therein, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trust Administrator and
the Trustee and the rights of the Holders of the Certificates under the
Agreement at any time by the Depositor, the Master Servicer, the Trust
Administrator and the Trustee, with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations set forth therein, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

          No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other

<PAGE>

                                       -4-

governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.

          The Depositor, the Master Servicer, the Trust Administrator, the
Trustee and any agent of the Depositor, the Master Servicer, the Trust
Administrator or the Trustee may treat the Person in whose name this Certificate
is registered as the owner hereof for all purposes, and none of the Depositor,
the Master Servicer, the Trust Administrator, the Trustee nor any such agent
shall be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment (or provision for payment) to the Holders
of the Certificates of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the final payment (or any advance with respect thereto) on or other
liquidation of the last Mortgage Loan remaining in REMIC I, and (ii) the
purchase by the party designated in the Agreement at a price determined as
provided in the Agreement from REMIC I of all the Mortgage Loans and all
property acquired in respect of such Mortgage Loans remaining therein. The
Agreement permits, but does not require, the party designated in the Agreement
to purchase from REMIC I all the Mortgage Loans and all property acquired in
respect of any Mortgage Loan remaining therein at a price determined as provided
in the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
5% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March 30, 2000

                                         U.S. BANK NATIONAL ASSOCIATION
                                         as Trustee

                                         By:____________________________
                                                  Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class A-1 Certificates referred to in the
within-mentioned Agreement.

                                         U.S. BANK NATIONAL ASSOCIATION
                                         as Trustee

                                         By:____________________________
                                                  Authorized Signatory

<PAGE>

                                  ABBREVIATIONS
                                  -------------

          The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common             UNIF GIFT MIN ACT -   Custodian
                                                              ---------------
                                                              (Cust)   (Minor)
TEN ENT - as tenants by the entireties                       under Uniform Gifts
                                                               to Minors Act
JT TEN  - as joint tenants with right                   _______________
           of survivorship and not as                       (State)
           tenants in common

    Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

the Percentage Interest evidenced by the within Mortgage Pass-Through
Certificate and hereby authorize(s) the registration of transfer of such
interest to assignee on the Certificate Register of the Trust Fund.

          I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS
                            -------------------------

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________,
for the account of ____________________________, account number _______________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.

     This information is provided by ______________________________________, the
assignee named above, or ________________________________________, as its agent.

<PAGE>

                              EXHIBIT A-2
                              -----------

                     FORM OF CLASS A-2 CERTIFICATE

     SOLELY FOR U.S.  FEDERAL  INCOME TAX PURPOSES,  THIS  CERTIFICATE
     REPRESENTS  A  "REGULAR  INTEREST"  IN A  "REAL  ESTATE  MORTGAGE
     INVESTMENT CONDUIT", AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
     SECTIONS 860G AND 860D OF THE INTERNAL  REVENUE CODE OF 1986 (THE
     "CODE").

     THE FOLLOWING  INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF
     APPLYING  THE U.S.  FEDERAL  INCOME TAX ORIGINAL  ISSUE  DISCOUNT
     ("OID")  RULES  TO  THIS  CERTIFICATE.  THE  ISSUE  DATE  OF THIS
     CERTIFICATE IS MARCH 30, 2000.  BASED ON THE OID  REGULATIONS AND
     ASSUMING  THAT THE MORTGAGE  LOANS PREPAY AT 20% CPR, USED SOLELY
     FOR THE  PURPOSES OF APPLYING  THE OID RULES TO THE  CERTIFICATES
     (THE "PREPAYMENT  ASSUMPTION"),  THIS CERTIFICATE HAS BEEN ISSUED
     WITH NO MORE THAN $5400 OF OID PER  $100,000 OF INITIAL  NOTIONAL
     AMOUNT,  THE YIELD TO  MATURITY  IS 40.57%  AND THE AMOUNT OF OID
     ATTRIBUTABLE  TO THE  INITIAL  ACCRUAL  PERIOD  IS NO  MORE  THAN
     $105.00 PER $100,000 OF INITIAL NOTIONAL  AMOUNT,  COMPUTED UNDER
     THE EXACT  METHOD.  NO  REPRESENTATION  IS MADE THAT THE MORTGAGE
     LOANS WILL PREPAY AT A RATE BASED ON THE PREPAYMENT ASSUMPTION OR
     AT ANY OTHER RATE.

Series 2000-1, Class A-2                Aggregate Notional Amount of Class A-2
                                        Certificates as of the Issue Date:
Variable Pass-Through Rate              $77,657,158.00

Date of Agreement and Cut-off Date:     Notional Amount of this Class A-2
March 1, 2000                           Certificate: $77,657,158.00

First Distribution Date:                Master Servicer and Trust Administrator:
April 25, 2000                          Citicorp Mortgage, Inc.

No. 1                                   Trustee: U.S. Bank National Association

                                        Issue Date:  March 30, 2000

                                        CUSIP:  79548K 3B 2

<PAGE>

                                       -2-

                        MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional, one- to four-family, fixed-rate,
first lien mortgage loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
     IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII, INC., THE MASTER
     SERVICER,  THE TRUST  ADMINISTRATOR,  THE TRUSTEE OR ANY OF THEIR
     RESPECTIVE   AFFILIATES.   NEITHER  THIS   CERTIFICATE   NOR  THE
     UNDERLYING  MORTGAGE  LOANS  ARE  GUARANTEED  BY  ANY  AGENCY  OR
     INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Cede & Company is the registered owner of a
Percentage Interest (obtained by dividing the Notional Amount of this
Certificate by the aggregate Notional Amount of the Class A-2 Certificates as of
the Issue Date) in that certain beneficial ownership interest evidenced by all
the Class A-2 Certificates in REMIC II created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer, the Trust Administrator, the Co- Trustee, the Co-Trustee and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class A-2 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A-2 Certificates, the
aggregate initial Notional Amount of which is in excess of the lesser of (i)
$5,000,000 or (ii) two-thirds of the aggregate initial Notional Amount of the
Class A-2 Certificates, or otherwise by check mailed by first class mail to the
address of the Person entitled thereto, as such name and address shall

<PAGE>

                                       -3-

appear on the Certificate Register. Notwithstanding the above, the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon the presentation and surrender
of this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Mortgage Pass-Through Certificates of the Series specified on the
face hereof (hereinafter called the "Certificates") and representing a
Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Notional Amount of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to Holders
of the Certificates, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions and conditions provided
therein, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trust Administrator and
the Trustee and the rights of the Holders of the Certificates under the
Agreement at any time by the Depositor, the Master Servicer, the Trust
Administrator and the Trustee, with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations set forth therein, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

<PAGE>

                                       -4-

          No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.

          The Depositor, the Master Servicer, the Trust Administrator, the
Trustee and any agent of the Depositor, the Master Servicer, the Trust
Administrator or the Trustee may treat the Person in whose name this Certificate
is registered as the owner hereof for all purposes, and none of the Depositor,
the Master Servicer, the Trust Administrator, the Trustee nor any such agent
shall be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment (or provision for payment) to the Holders
of the Certificates of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the purchase by the party designated in the Agreement at a price determined
as provided in the Agreement from REMIC I of all the Mortgage Loans and each REO
Property remaining therein, and (ii) the final payment (or any advance with
respect thereto) on or other liquidation of the last Mortgage Loan or REO
Property remaining in REMIC I. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from REMIC I all the Mortgage
Loans and all property acquired in respect of any Mortgage Loan remaining
therein at a price determined as provided in the Agreement. The exercise of such
right will effect early retirement of the Certificates; however, such right to
purchase is subject to the aggregate Stated Principal Balance of the Mortgage
Loans at the time of purchase being less than 5% of the aggregate principal
balance of the Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March 30, 2000

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                  Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class A-2 Certificates referred to in the
within-mentioned Agreement.

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                  Authorized Signatory

<PAGE>

                                  ABBREVIATIONS
                                  -------------

          The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common             UNIF GIFT MIN ACT -   Custodian
                                                              ---------------
                                                              (Cust)   (Minor)
TEN ENT - as tenants by the entireties                       under Uniform Gifts
                                                               to Minors Act
JT TEN  - as joint tenants with right                   _______________
           of survivorship and not as                       (State)
           tenants in common

    Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

the Percentage Interest evidenced by the within Mortgage Pass-Through
Certificate and hereby authorize(s) the registration of transfer of such
interest to assignee on the Certificate Register of the Trust Fund.

          I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS
                            -------------------------

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________,
for the account of ____________________________, account number _______________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.

     This information is provided by ______________________________________, the
assignee named above, or ________________________________________, as its agent.

<PAGE>

                              EXHIBIT A-3
                              -----------

                     FORM OF CLASS IO CERTIFICATE

     SOLELY FOR U.S.  FEDERAL  INCOME TAX PURPOSES,  THIS  CERTIFICATE
     REPRESENTS  A  "REGULAR  INTEREST"  IN A  "REAL  ESTATE  MORTGAGE
     INVESTMENT CONDUIT", AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
     SECTIONS 860G AND 860D OF THE INTERNAL  REVENUE CODE OF 1986 (THE
     "CODE").

     THE FOLLOWING  INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF
     APPLYING  THE U.S.  FEDERAL  INCOME TAX ORIGINAL  ISSUE  DISCOUNT
     ("OID")  RULES  TO  THIS  CERTIFICATE.  THE  ISSUE  DATE  OF THIS
     CERTIFICATE IS MARCH 30, 2000.  BASED ON THE OID  REGULATIONS AND
     ASSUMING  THAT THE MORTGAGE  LOANS PREPAY AT 20% CPR, USED SOLELY
     FOR THE  PURPOSES OF APPLYING  THE OID RULES TO THE  CERTIFICATES
     (THE "PREPAYMENT  ASSUMPTION"),  THIS CERTIFICATE HAS BEEN ISSUED
     WITH NO MORE THAN $700.00 OF OID PER $100,000 OF INITIAL NOTIONAL
     AMOUNT,  THE YIELD TO  MATURITY  IS 19.31%  AND THE AMOUNT OF OID
     ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD IS NO MORE THAN $10.20
     PER $100,000 OF INITIAL NOTIONAL AMOUNT, COMPUTED UNDER THE EXACT
     METHOD.  NO  REPRESENTATION  IS MADE THAT THE MORTGAGE LOANS WILL
     PREPAY AT A RATE  BASED ON THE  PREPAYMENT  ASSUMPTION  OR AT ANY
     OTHER RATE.

Series 2000-1, Class IO                 Aggregate Notional Amount of Class IO
                                        Certificates as of the Issue Date:
Variable Pass-Through Rate              $82,393,708.61

Date of Agreement and Cut-off Date:     Notional Amount of this Class IO
March 1, 2000                           Certificate: $82,393,708.61

First Distribution Date:                Master Servicer and Trust Administrator:
April 25, 2000                          Citicorp Mortgage, Inc.

No. 1                                   Trustee:U.S. Bank National Association

                                        Issue Date: March 30, 2000

                                        CUSIP: 79548K 3G 1

<PAGE>

                                       -2-

                        MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional, one- to four-family, fixed-rate,
first lien mortgage loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
     IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII, INC., THE MASTER
     SERVICER,  THE TRUST  ADMINISTRATOR,  THE TRUSTEE OR ANY OF THEIR
     RESPECTIVE   AFFILIATES.   NEITHER  THIS   CERTIFICATE   NOR  THE
     UNDERLYING  MORTGAGE  LOANS  ARE  GUARANTEED  BY  ANY  AGENCY  OR
     INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Salomon Smith Barney Inc. is the registered owner
of a Percentage Interest (obtained by dividing the Notional Amount of this
Certificate by the aggregate Notional Amount of the Class IO Certificates as of
the Issue Date) in that certain beneficial ownership interest evidenced by all
the Class IO Certificates in REMIC II created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer, the Trust Administrator, the Co-Trustee, the Co-Trustee and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class IO Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class IO Certificates, the
aggregate initial Notional Amount of which is in excess of the lesser of (i)
$5,000,000 or (ii) two-thirds of the

<PAGE>

                                       -3-

aggregate initial Notional Amount of the Class IO Certificates, or otherwise by
check mailed by first class mail to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon the presentation and surrender of this Certificate at the office or
agency appointed by the Trustee for that purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Mortgage Pass-Through Certificates of the Series specified on the
face hereof (hereinafter called the "Certificates") and representing a
Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Notional Amount of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to Holders
of the Certificates, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions and conditions provided
therein, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trust Administrator and
the Trustee and the rights of the Holders of the Certificates under the
Agreement at any time by the Depositor, the Master Servicer, the Trust
Administrator and the Trustee, with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations set forth therein, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

<PAGE>

                                       -4-

          No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.

          The Depositor, the Master Servicer, the Trust Administrator, the
Trustee and any agent of the Depositor, the Master Servicer, the Trust
Administrator or the Trustee may treat the Person in whose name this Certificate
is registered as the owner hereof for all purposes, and none of the Depositor,
the Master Servicer, the Trust Administrator, the Trustee nor any such agent
shall be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment (or provision for payment) to the Holders
of the Certificates of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the purchase by the party designated in the Agreement at a price determined
as provided in the Agreement from REMIC I of all the Mortgage Loans and each REO
Property remaining therein, and (ii) the final payment (or any advance with
respect thereto) on or other liquidation of the last Mortgage Loan or REO
Property remaining in REMIC I. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from REMIC I all the Mortgage
Loans and all property acquired in respect of any Mortgage Loan remaining
therein at a price determined as provided in the Agreement. The exercise of such
right will effect early retirement of the Certificates; however, such right to
purchase is subject to the aggregate Stated Principal Balance of the Mortgage
Loans at the time of purchase being less than 5% of the aggregate principal
balance of the Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March 30, 2000

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                  Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class IO Certificates referred to in the
within-mentioned Agreement.

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                  Authorized Signatory

<PAGE>

                                  ABBREVIATIONS
                                  -------------

          The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common             UNIF GIFT MIN ACT -   Custodian
                                                              ---------------
                                                              (Cust)   (Minor)
TEN ENT - as tenants by the entireties                       under Uniform Gifts
                                                               to Minors Act
JT TEN  - as joint tenants with right                   _______________
           of survivorship and not as                       (State)
           tenants in common

    Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

the Percentage Interest evidenced by the within Mortgage Pass-Through
Certificate and hereby authorize(s) the registration of transfer of such
interest to assignee on the Certificate Register of the Trust Fund.

          I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS
                            -------------------------

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________,
for the account of ____________________________, account number _______________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.

     This information is provided by ______________________________________, the
assignee named above, or ________________________________________, as its agent.

<PAGE>

                              EXHIBIT A-4
                              -----------

                     FORM OF CLASS PO CERTIFICATE

     SOLELY FOR U.S.  FEDERAL  INCOME TAX PURPOSES,  THIS  CERTIFICATE
     REPRESENTS  A  "REGULAR  INTEREST"  IN A  "REAL  ESTATE  MORTGAGE
     INVESTMENT CONDUIT", AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
     SECTIONS 860G AND 860D OF THE INTERNAL  REVENUE CODE OF 1986 (THE
     "CODE").

     THE FOLLOWING  INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF
     APPLYING  THE U.S.  FEDERAL  INCOME TAX ORIGINAL  ISSUE  DISCOUNT
     ("OID")  RULES  TO  THIS  CERTIFICATE.  THE  ISSUE  DATE  OF THIS
     CERTIFICATE IS MARCH 30, 2000.  BASED ON THE OID  REGULATIONS AND
     ASSUMING  THAT THE MORTGAGE  LOANS PREPAY AT 20% CPR, USED SOLELY
     FOR THE  PURPOSES OF APPLYING  THE OID RULES TO THE  CERTIFICATES
     (THE "PREPAYMENT  ASSUMPTION"),  THIS CERTIFICATE HAS BEEN ISSUED
     WITH  NO  MORE  THAN   $274.00  OF  OID  PER  $1,000  OF  INITIAL
     CERTIFICATE  PRINCIPAL  BALANCE,  THE YIELD TO MATURITY IS 10.63%
     AND THE AMOUNT OF OID  ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD
     IS NO MORE THAN $5.36 PER $1,000 OF INITIAL CERTIFICATE PRINCIPAL
     BALANCE,  COMPUTED UNDER THE EXACT METHOD.  NO  REPRESENTATION IS
     MADE THAT THE  MORTGAGE  LOANS WILL PREPAY AT A RATE BASED ON THE
     PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE.

Series 2000-1, Class PO                 Aggregate Certificate Principal
                                        Balance of Class PO Certificates as of
                                        the Issue Date: $3,087,842.26
Pass-Through Rate: 0.00% per annum

                                        Denomination:  $3,087,842.26
Date of Agreement and Cut-off Date:
March 1, 2000                           Master Servicer and Trust Administrator
                                        Citicorp Mortgage, Inc.

First Distribution Date:
April 25, 2000                          Trustee: U.S. Bank National Association

No. 1                                   Issue Date: March 30, 2000

                                        CUSIP: 79548K 3F 3

<PAGE>

                                       -2-

                        MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional, one- to four-family, fixed-rate,
first lien mortgage loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
     IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII, INC., THE MASTER
     SERVICER,  THE TRUST  ADMINISTRATOR,  THE TRUSTEE OR ANY OF THEIR
     RESPECTIVE   AFFILIATES.   NEITHER  THIS   CERTIFICATE   NOR  THE
     UNDERLYING  MORTGAGE  LOANS  ARE  GUARANTEED  BY  ANY  AGENCY  OR
     INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Salomon Smith Barney Inc. is the registered owner
of a Percentage Interest (obtained by dividing the Certificate Principal Balance
of this Certificate by the aggregate Certificate Principal Balance of the Class
PO Certificates as of the Issue Date) in that certain beneficial ownership
interest evidenced by all the Class PO Certificates in REMIC II created pursuant
to a Pooling and Servicing Agreement, dated as specified above (the
"Agreement"), among Salomon Brothers Mortgage Securities VII, Inc. (hereinafter
called the "Depositor," which term includes any successor entity under the
Agreement), the Master Servicer, the Trust Administrator, the Co-Trustee, the
Co-Trustee and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class PO Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class PO Certificates, the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two- thirds of the aggregate initial
Certificate Principal Balance of the Class PO Certificates, or otherwise by
check mailed by first class mail to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon the presentation and surrender of this Certificate at the office or
agency appointed by the Trustee for that purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Mortgage Pass-Through Certificates of the Series specified on the
face hereof (hereinafter called the "Certificates") and representing a
Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to Holders
of the Certificates, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions and conditions provided
therein, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trust Administrator and
the Trustee and the rights of the Holders of the Certificates under the
Agreement at any time by the Depositor, the Master Servicer, the Trust
Administrator and the Trustee, with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations set forth therein, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

<PAGE>

                                       -3-

          No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.

          The Depositor, the Master Servicer, the Trust Administrator, the
Trustee and any agent of the Depositor, the Master Servicer, the Trust
Administrator or the Trustee may treat the Person in whose name this Certificate
is registered as the owner hereof for all purposes, and none of the Depositor,
the Master Servicer, the Trust Administrator, the Trustee nor any such agent
shall be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment (or provision for payment) to the Holders
of the Certificates of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the purchase by the party designated in the Agreement at a price determined
as provided in the Agreement from REMIC I of all the Mortgage Loans and each REO
Property remaining therein, and (ii) the final payment (or any advance with
respect thereto) on or other liquidation of the last Mortgage Loan or REO
Property remaining in REMIC I. The Agreement permits, but does not require, the
party designated in the Agreement to purchase from REMIC I all the Mortgage
Loans and all property acquired in respect of any Mortgage Loan remaining
therein at a price determined as provided in the Agreement. The exercise of such
right will effect early retirement of the Certificates; however, such right to
purchase is subject to the aggregate Stated Principal Balance of the Mortgage
Loans at the time of purchase being less than 5% of the aggregate principal
balance of the Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March 30, 2000

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                  Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class PO Certificates referred to in the
within-mentioned Agreement.

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                 Authorized Signatory

<PAGE>

                                  ABBREVIATIONS
                                  -------------

          The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common             UNIF GIFT MIN ACT -   Custodian
                                                              ---------------
                                                              (Cust)   (Minor)
TEN ENT - as tenants by the entireties                       under Uniform Gifts
                                                               to Minors Act
JT TEN  - as joint tenants with right                   _______________
           of survivorship and not as                       (State)
           tenants in common

    Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

the Percentage Interest evidenced by the within Mortgage Pass-Through
Certificate and hereby authorize(s) the registration of transfer of such
interest to assignee on the Certificate Register of the Trust Fund.

          I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS
                            -------------------------

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________,
for the account of ____________________________, account number _______________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.

     This information is provided by ______________________________________, the
assignee named above, or ________________________________________, as its agent.

<PAGE>

                              EXHIBIT A-5
                              -----------

                     FORM OF CLASS B-1 CERTIFICATE

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS
     A  "REGULAR  INTEREST"  IN A  "REAL  ESTATE  MORTGAGE  INVESTMENT
     CONDUIT", AS THOSE TERMS ARE DEFINED,  RESPECTIVELY,  IN SECTIONS
     860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS CERTIFICATE IS SUBORDINATE TO THE SENIOR CERTIFICATES TO THE
     EXTENT DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.

     NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT PLAN OR
     OTHER  RETIREMENT  ARRANGEMENT  (EACH A  "PLAN")  SUBJECT  TO THE
     EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS  AMENDED
     ("ERISA"),  OR THE CODE WILL BE  REGISTERED  EXCEPT IN COMPLIANCE
     WITH THE PROCEDURES DESCRIBED HEREIN.

Series 2000-1, Class B-1                Aggregate Certificate Principal
                                        Balance of Class B-1 Certificates as
                                        of the Issue Date: $618,000.00
Pass-Through Rate: 9.00% per annum
                                        Denomination:  $618,000.00

Date of Agreement and Cut-off Date:     Master Servicer and Trust Administrator
March 1, 2000                           Citicorp Mortgage, Inc.

                                        Trustee: U.S. Bank National Association
First Distribution Date:
April 25, 2000                          Issue Date: March 30, 2000

No. 1                                   CUSIP: 79548K 3C 0

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE
     OF THIS  CERTIFICATE  MAY BE MADE  MONTHLY  AS SET FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
     AT ANY  TIME  MAY BE LESS  THAN  THE  AMOUNT  SHOWN  ABOVE AS THE
     DENOMINATION OF THIS CERTIFICATE.

<PAGE>

                        MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional, one- to four-family, fixed-rate,
first lien mortgage loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
     IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII, INC., THE MASTER
     SERVICER,  THE TRUST  ADMINISTRATOR,  THE TRUSTEE OR ANY OF THEIR
     RESPECTIVE   AFFILIATES.   NEITHER  THIS   CERTIFICATE   NOR  THE
     UNDERLYING  MORTGAGE  LOANS  ARE  GUARANTEED  BY  ANY  AGENCY  OR
     INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Cede & Company is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class B-1 Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class B-1 Certificates in REMIC II created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer, the Trust Administrator, the Co- Trustee, the Co-Trustee and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class B-1 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class B-1 Certificates, the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two- thirds of the aggregate initial
Certificate Principal Balance of the Class B-1 Certificates, or otherwise by
check mailed by first class mail to the address of the Person entitled thereto,
as such name and address shall appear on the Certificate Register.
Notwithstanding the above, the final

<PAGE>

                                       -3-

distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such distribution and only upon the presentation and surrender
of this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Mortgage Pass-Through Certificates of the Series specified on the
face hereof (hereinafter called the "Certificates") and representing a
Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to Holders
of the Certificates, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions and conditions provided
therein, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trust Administrator and
the Trustee and the rights of the Holders of the Certificates under the
Agreement at any time by the Depositor, the Master Servicer, the Trust
Administrator and the Trustee, with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations set forth therein, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

     No transfer of this Certificate to a Plan subject to ERISA or Section 4975
of the Code, any Person acting, directly or indirectly, on behalf of any such
Plan or any person using Plan

<PAGE>

                                       -4-

Assets to acquire this Certificate shall be made except in accordance with
Section 5.02(c) of the Agreement.

          No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.

          The Depositor, the Master Servicer, the Trust Administrator, the
Trustee and any agent of the Depositor, the Master Servicer, the Trust
Administrator or the Trustee may treat the Person in whose name this Certificate
is registered as the owner hereof for all purposes, and none of the Depositor,
the Master Servicer, the Trust Administrator, the Trustee nor any such agent
shall be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment (or provision for payment) to the Holders
of the Certificates of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the final payment (or any advance with respect thereto) on or other
liquidation of the last Mortgage Loan remaining in REMIC I, and (ii) the
purchase by the party designated in the Agreement at a price determined as
provided in the Agreement from REMIC I of all the Mortgage Loans and all
property acquired in respect of such Mortgage Loans remaining therein. The
Agreement permits, but does not require, the party designated in the Agreement
to purchase from REMIC I all the Mortgage Loans and all property acquired in
respect of any Mortgage Loan remaining therein at a price determined as provided
in the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
5% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March 30, 2000

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                  Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class B-1 Certificates referred to in the
within-mentioned Agreement.

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                  Authorized Signatory

<PAGE>

                                  ABBREVIATIONS
                                  -------------

          The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common             UNIF GIFT MIN ACT -   Custodian
                                                              ---------------
                                                              (Cust)   (Minor)
TEN ENT - as tenants by the entireties                       under Uniform Gifts
                                                               to Minors Act
JT TEN  - as joint tenants with right                   _______________
           of survivorship and not as                       (State)
           tenants in common

    Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

the Percentage Interest evidenced by the within Mortgage Pass-Through
Certificate and hereby authorize(s) the registration of transfer of such
interest to assignee on the Certificate Register of the Trust Fund.

          I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS
                            -------------------------

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________,
for the account of ____________________________, account number _______________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.

     This information is provided by ______________________________________, the
assignee named above, or ________________________________________, as its agent.

<PAGE>

                              EXHIBIT A-6
                              -----------

                     FORM OF CLASS B-2 CERTIFICATE

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS
     A  "REGULAR  INTEREST"  IN A  "REAL  ESTATE  MORTGAGE  INVESTMENT
     CONDUIT", AS THOSE TERMS ARE DEFINED,  RESPECTIVELY,  IN SECTIONS
     860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS  CERTIFICATE IS SUBORDINATE TO THE SENIOR  CERTIFICATES  AND
     THE  CLASS  B-1  CERTIFICATES  TO  THE  EXTENT  DESCRIBED  IN THE
     AGREEMENT REFERRED TO HEREIN.

     NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT PLAN OR
     OTHER  RETIREMENT  ARRANGEMENT  (EACH A  "PLAN")  SUBJECT  TO THE
     EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS  AMENDED
     ("ERISA"),  OR THE CODE WILL BE  REGISTERED  EXCEPT IN COMPLIANCE
     WITH THE PROCEDURES DESCRIBED HEREIN.

<PAGE>

Series 2000-1, Class B-2                Aggregate Certificate Principal
                                        Balance of Class B-2 Certificates as
                                        of the Issue Date: $206,000.00
Pass-Through Rate: 9.00% per annum

                                        Denomination:  $206,000.00
Date of Agreement and Cut-off Date:
March 1, 2000                           Master Servicer and Trust Administrator
                                        Citicorp Mortgage, Inc.

First Distribution Date:
April 25, 2000                          Trustee: U.S. Bank National Association

No. 1
                                        Issue Date: March 30, 2000

                                        CUSIP: 79548K 3D 8

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE
     OF THIS  CERTIFICATE  MAY BE MADE  MONTHLY  AS SET FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
     AT ANY  TIME  MAY BE LESS  THAN  THE  AMOUNT  SHOWN  ABOVE AS THE
     DENOMINATION OF THIS CERTIFICATE.

<PAGE>

                                       -3-

                        MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional, one- to four-family, fixed-rate,
first lien mortgage loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
     IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII, INC., THE MASTER
     SERVICER,  THE TRUST  ADMINISTRATOR,  THE TRUSTEE OR ANY OF THEIR
     RESPECTIVE   AFFILIATES.   NEITHER  THIS   CERTIFICATE   NOR  THE
     UNDERLYING  MORTGAGE  LOANS  ARE  GUARANTEED  BY  ANY  AGENCY  OR
     INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Cede & Company is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class B-2 Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class B-2 Certificates in REMIC II created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer, the Trust Administrator, the Co- Trustee, the Co-Trustee and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the last Business Day of the month immediately
preceding the month of such distribution (the "Record Date"), in an amount equal
to the product of the Percentage Interest evidenced by this Certificate and the
amount required to be distributed to the Holders of Class B-2 Certificates on
such Distribution Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class B-2 Certificates, the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two- thirds of the aggregate initial
Certificate Principal Balance of the Class B-2 Certificates, or

<PAGE>

                                       -4-

otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon the presentation and surrender of this Certificate at
the office or agency appointed by the Trustee for that purpose as provided in
the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Mortgage Pass-Through Certificates of the Series specified on the
face hereof (hereinafter called the "Certificates") and representing a
Percentage Interest in the Class B-2 Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class B-2 Certificates specified on the
face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to Holders
of the Certificates, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions and conditions provided
therein, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trust Administrator and
the Trustee and the rights of the Holders of the Certificates under the
Agreement at any time by the Depositor, the Master Servicer, the Trust
Administrator and the Trustee, with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations set forth therein, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

<PAGE>

                                       -5-

     No transfer of this Certificate to a Plan subject to ERISA or Section 4975
of the Code, any Person acting, directly or indirectly, on behalf of any such
Plan or any person using Plan Assets to acquire this Certificate shall be made
except in accordance with Section 5.02(c) of the Agreement.

          No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.

          The Depositor, the Master Servicer, the Trust Administrator, the
Trustee and any agent of the Depositor, the Master Servicer or the Trustee may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trust Administrator, the Trustee nor any such agent shall be affected by notice
to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment (or provision for payment) to the Holders
of the Certificates of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the final payment (or any advance with respect thereto) on or other
liquidation of the last Mortgage Loan remaining in REMIC I, and (ii) the
purchase by the party designated in the Agreement at a price determined as
provided in the Agreement from REMIC I of all the Mortgage Loans and all
property acquired in respect of such Mortgage Loans remaining therein. The
Agreement permits, but does not require, the party designated in the Agreement
to purchase from REMIC I all the Mortgage Loans and all property acquired in
respect of any Mortgage Loan remaining therein at a price determined as provided
in the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
5% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March 30, 2000

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                  Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class B-2 Certificates referred to in the
within-mentioned Agreement.

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                 Authorized Signatory

<PAGE>

                                  ABBREVIATIONS
                                  -------------

          The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common             UNIF GIFT MIN ACT -   Custodian
                                                              ---------------
                                                              (Cust)   (Minor)
TEN ENT - as tenants by the entireties                       under Uniform Gifts
                                                               to Minors Act
JT TEN  - as joint tenants with right                   _______________
           of survivorship and not as                       (State)
           tenants in common

    Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

the Percentage Interest evidenced by the within Mortgage Pass-Through
Certificate and hereby authorize(s) the registration of transfer of such
interest to assignee on the Certificate Register of the Trust Fund.

          I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS
                            -------------------------

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________,
for the account of ____________________________, account number _______________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.

     This information is provided by ______________________________________, the
assignee named above, or ________________________________________, as its agent.

<PAGE>

                              EXHIBIT A-7
                              -----------

                     FORM OF CLASS B-3 CERTIFICATE

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS
     A  "REGULAR  INTEREST"  IN A  "REAL  ESTATE  MORTGAGE  INVESTMENT
     CONDUIT", AS THOSE TERMS ARE DEFINED,  RESPECTIVELY,  IN SECTIONS
     860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THE FOLLOWING  INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF
     APPLYING  THE U.S.  FEDERAL  INCOME TAX ORIGINAL  ISSUE  DISCOUNT
     ("OID")  RULES  TO  THIS  CERTIFICATE.  THE  ISSUE  DATE  OF THIS
     CERTIFICATE IS MARCH 30, 2000.  BASED ON THE OID  REGULATIONS AND
     ASSUMING  THAT THE MORTGAGE  LOANS PREPAY AT 20% CPR, USED SOLELY
     FOR THE  PURPOSES OF APPLYING  THE OID RULES TO THE  CERTIFICATES
     (THE "PREPAYMENT  ASSUMPTION"),  THIS CERTIFICATE HAS BEEN ISSUED
     WITH NO MORE THAN $24.00 OF OID PER $1,000 OF INITIAL CERTIFICATE
     PRINCIPAL BALANCE,  THE YIELD TO MATURITY IS 9.44% AND THE AMOUNT
     OF OID ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD IS NO MORE THAN
     $0.16  PER  $1,000  OF  INITIAL  CERTIFICATE  PRINCIPAL  BALANCE,
     COMPUTED UNDER THE EXACT METHOD.  NO  REPRESENTATION IS MADE THAT
     THE MORTGAGE  LOANS WILL PREPAY AT A RATE BASED ON THE PREPAYMENT
     ASSUMPTION OR AT ANY OTHER RATE.

     THIS CERTIFICATE IS SUBORDINATE TO THE SENIOR  CERTIFICATES,  THE
     CLASS B-1  CERTIFICATES  AND THE CLASS B- 2  CERTIFICATES  TO THE
     EXTENT DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.

     NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT PLAN OR
     OTHER  RETIREMENT  ARRANGEMENT  (EACH A  "PLAN")  SUBJECT  TO THE
     EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS  AMENDED
     ("ERISA"),  OR THE CODE WILL BE  REGISTERED  EXCEPT IN COMPLIANCE
     WITH THE PROCEDURES DESCRIBED HEREIN.

<PAGE>

Series 2000-1, Class B-3                Aggregate Certificate Principal
                                        Balance of Class B-3 Certificates as
                                        of the Issue Date: $206,000.00
Pass-Through Rate: 9.00% per annum

                                        Denomination:  $206,000.00
Date of Agreement and Cut-off Date:
March 1, 2000                           Master Servicer and Trust Administrator
                                        Citicorp Mortgage, Inc.

First Distribution Date:
April 25, 2000                          Trustee: U.S. Bank National Association

No. 1                                   Issue Date: March 30, 2000

                                        CUSIP: 79548K 3E 6

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE
     OF THIS  CERTIFICATE  MAY BE MADE  MONTHLY  AS SET FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
     AT ANY  TIME  MAY BE LESS  THAN  THE  AMOUNT  SHOWN  ABOVE AS THE
     DENOMINATION OF THIS CERTIFICATE.

<PAGE>

                                       -3-

                        MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional, one- to four-family, fixed-rate,
first lien mortgage loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
     IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII, INC., THE MASTER
     SERVICER,  THE TRUST  ADMINISTRATOR,  THE TRUSTEE OR ANY OF THEIR
     RESPECTIVE   AFFILIATES.   NEITHER  THIS   CERTIFICATE   NOR  THE
     UNDERLYING  MORTGAGE  LOANS  ARE  GUARANTEED  BY  ANY  AGENCY  OR
     INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Cede & Company is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class B-3 Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class B-3 Certificates in REMIC II created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer, the Trust Administrator, the Co- Trustee, the Co-Trustee and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class B-3 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class B-3 Certificates, the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two- thirds of the aggregate initial
Certificate Principal Balance of the Class B-3 Certificates, or otherwise by
check mailed by first class mail to the address of the Person entitled thereto,
as such

<PAGE>

                                       -4-

name and address shall appear on the Certificate Register. Notwithstanding the
above, the final distribution on this Certificate will be made after due notice
by the Trustee of the pendency of such distribution and only upon the
presentation and surrender of this Certificate at the office or agency appointed
by the Trustee for that purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Mortgage Pass-Through Certificates of the Series specified on the
face hereof (hereinafter called the "Certificates") and representing a
Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to Holders
of the Certificates, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions and conditions provided
therein, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trust Administrator and
the Trustee and the rights of the Holders of the Certificates under the
Agreement at any time by the Depositor, the Master Servicer, the Trust
Administrator and the Trustee, with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations set forth therein, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

<PAGE>

                                       -5-

     No transfer of this Certificate to a Plan subject to ERISA or Section 4975
of the Code, any Person acting, directly or indirectly, on behalf of any such
Plan or any person using Plan Assets to acquire this Certificate shall be made
except in accordance with Section 5.02(c) of the Agreement.

          No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.

                  The Depositor, the Master Servicer, the Trust Administrator,
the Trustee and any agent of the Depositor, the Master Servicer or the Trustee
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trust Administrator, the Trustee nor any such agent shall be affected by notice
to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment (or provision for payment) to the Holders
of the Certificates of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the final payment (or any advance with respect thereto) on or other
liquidation of the last Mortgage Loan remaining in REMIC I, and (ii) the
purchase by the party designated in the Agreement at a price determined as
provided in the Agreement from REMIC I of all the Mortgage Loans and all
property acquired in respect of such Mortgage Loans remaining therein. The
Agreement permits, but does not require, the party designated in the Agreement
to purchase from REMIC I all the Mortgage Loans and all property acquired in
respect of any Mortgage Loan remaining therein at a price determined as provided
in the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
5% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March 30, 2000

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                  Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class B-3 Certificates referred to in the
within-mentioned Agreement.

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                 Authorized Signatory

<PAGE>

                                  ABBREVIATIONS
                                  -------------

          The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common             UNIF GIFT MIN ACT -   Custodian
                                                              ---------------
                                                              (Cust)   (Minor)
TEN ENT - as tenants by the entireties                       under Uniform Gifts
                                                               to Minors Act
JT TEN  - as joint tenants with right                   _______________
           of survivorship and not as                       (State)
           tenants in common

    Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

the Percentage Interest evidenced by the within Mortgage Pass-Through
Certificate and hereby authorize(s) the registration of transfer of such
interest to assignee on the Certificate Register of the Trust Fund.

          I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS
                            -------------------------

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________,
for the account of ____________________________, account number _______________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.

     This information is provided by ______________________________________, the
assignee named above, or ________________________________________, as its agent.

<PAGE>

                              EXHIBIT A-8
                              -----------

                     FORM OF CLASS B-4 CERTIFICATE

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS
     A  "REGULAR  INTEREST"  IN A  "REAL  ESTATE  MORTGAGE  INVESTMENT
     CONDUIT", AS THOSE TERMS ARE DEFINED,  RESPECTIVELY,  IN SECTIONS
     860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THE FOLLOWING  INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF
     APPLYING  THE U.S.  FEDERAL  INCOME TAX ORIGINAL  ISSUE  DISCOUNT
     ("OID")  RULES  TO  THIS  CERTIFICATE.  THE  ISSUE  DATE  OF THIS
     CERTIFICATE IS MARCH 30, 2000.  BASED ON THE OID  REGULATIONS AND
     ASSUMING  THAT THE MORTGAGE  LOANS PREPAY AT 20% CPR, USED SOLELY
     FOR THE  PURPOSES OF APPLYING  THE OID RULES TO THE  CERTIFICATES
     (THE "PREPAYMENT  ASSUMPTION"),  THIS CERTIFICATE HAS BEEN ISSUED
     WITH  NO  MORE  THAN   $132.00  OF  OID  PER  $1,000  OF  INITIAL
     CERTIFICATE  PRINCIPAL  BALANCE,  THE YIELD TO MATURITY IS 11.72%
     AND THE AMOUNT OF OID  ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD
     IS NO MORE THAN $0.83 PER $1,000 OF INITIAL CERTIFICATE PRINCIPAL
     BALANCE,  COMPUTED UNDER THE EXACT METHOD.  NO  REPRESENTATION IS
     MADE THAT THE  MORTGAGE  LOANS WILL PREPAY AT A RATE BASED ON THE
     PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE.

     THIS CERTIFICATE IS SUBORDINATE TO THE SENIOR  CERTIFICATES,  THE
     CLASS B-1 CERTIFICATES,  THE CLASS B-2 CERTIFICATES AND THE CLASS
     B-3  CERTIFICATES  TO  THE  EXTENT  DESCRIBED  IN  THE  AGREEMENT
     REFERRED TO HEREIN.

     THIS  CERTIFICATE  HAS NOT BEEN AND WILL NOT BE REGISTERED  UNDER
     THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
     ANY  STATE  AND MAY NOT BE  RESOLD  OR  TRANSFERRED  UNLESS IT IS
     REGISTERED   PURSUANT  TO  SUCH  ACT  AND  LAWS  OR  IS  SOLD  OR
     TRANSFERRED  IN  TRANSACTIONS  THAT ARE EXEMPT FROM  REGISTRATION
     UNDER SUCH ACT AND UNDER  APPLICABLE STATE LAW AND IS TRANSFERRED
     IN  ACCORDANCE  WITH  THE  PROVISIONS  OF  SECTION  5.02  OF  THE
     AGREEMENT.

     NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT PLAN OR
     OTHER  RETIREMENT  ARRANGEMENT  (EACH A  "PLAN")  SUBJECT  TO THE
     EMPLOYEE RETIREMENT INCOME SECURITY

<PAGE>

     ACT OF 1974, AS AMENDED ("ERISA"), OR THE CODE WILL BE REGISTERED
     EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.

Series 2000-1, Class B-4                Aggregate Certificate Principal
                                        Balance of Class B-4 Certificates as
                                        of the Issue Date: $330,000.00
Pass-Through Rate: 9.00% per annum
                                        Denomination:  $330,000.00

Date of Agreement and Cut-off Date:     Master Servicer and Trust Administrator
March 1, 2000                           Citicorp Mortgage, Inc.

First Distribution Date:                Trustee: U.S. Bank National Association
April 25, 2000

                                        Issue Date: March 30, 2000
No. 1

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE
     OF THIS  CERTIFICATE  MAY BE MADE  MONTHLY  AS SET FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
     AT ANY  TIME  MAY BE LESS  THAN  THE  AMOUNT  SHOWN  ABOVE AS THE
     DENOMINATION OF THIS CERTIFICATE.

<PAGE>

                                       -3-

                        MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional, one- to four-family, fixed-rate,
first lien mortgage loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
     IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII, INC., THE MASTER
     SERVICER,  THE TRUST  ADMINISTRATOR,  THE TRUSTEE OR ANY OF THEIR
     RESPECTIVE   AFFILIATES.   NEITHER  THIS   CERTIFICATE   NOR  THE
     UNDERLYING  MORTGAGE  LOANS  ARE  GUARANTEED  BY  ANY  AGENCY  OR
     INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Salomon Smith Barney Inc. is the registered owner
of a Percentage Interest (obtained by dividing the denomination of this
Certificate by the aggregate Certificate Principal Balance of the Class B-4
Certificates as of the Issue Date) in that certain beneficial ownership interest
evidenced by all the Class B-4 Certificates in REMIC II created pursuant to a
Pooling and Servicing Agreement, dated as specified above (the "Agreement"),
among Salomon Brothers Mortgage Securities VII, Inc. (hereinafter called the
"Depositor," which term includes any successor entity under the Agreement), the
Master Servicer, the Trust Administrator, the Co-Trustee, the Co-Trustee and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on Record Date, in an amount equal to the product of
the Percentage Interest evidenced by this Certificate and the amount required to
be distributed to the Holders of Class B-4 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class B-4 Certificates, the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two- thirds of the aggregate initial
Certificate Principal Balance of the Class B-4 Certificates, or

<PAGE>

                                       -4-

otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon the presentation and surrender of this Certificate at
the office or agency appointed by the Trustee for that purpose as provided in
the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Mortgage Pass-Through Certificates of the Series specified on the
face hereof (hereinafter called the "Certificates") and representing a
Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to Holders
of the Certificates, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions and conditions provided
therein, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trust Administrator and
the Trustee and the rights of the Holders of the Certificates under the
Agreement at any time by the Depositor, the Master Servicer, the Trust
Administrator and the Trustee, with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations set forth therein, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

<PAGE>

                                       -5-

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Master Servicer in their respective capacities as such), together with
copies of the written certification(s) of the Holder of the Certificate desiring
to effect the transfer and/or such Holder's prospective transferee upon which
such Opinion of Counsel is based. None of the Depositor or the Trustee is
obligated to register or qualify the Class of Certificates specified on the face
hereof under the 1933 Act or any other securities law or to take any action not
otherwise required under the Agreement to permit the transfer of such
Certificates without registration or qualification. Any Holder desiring to
effect a transfer of this Certificate shall be required to indemnify the
Trustee, the Depositor and the Master Servicer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.

     No transfer of this Certificate to a Plan subject to ERISA or Section 4975
of the Code, any Person acting, directly or indirectly, on behalf of any such
Plan or any person using Plan Assets to acquire this Certificate shall be made
except in accordance with Section 5.02(c) of the Agreement.

          No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.

          The Depositor, the Master Servicer, the Trust Administrator, the
Trustee and any agent of the Depositor, the Master Servicer or the Trustee may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trust Administrator, the Trustee nor any such agent shall be affected by notice
to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment (or provision for payment) to the Holders
of the Certificates of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the final payment (or any advance with respect thereto) on or other
liquidation of the last Mortgage Loan remaining in REMIC I, and (ii) the
purchase by the party designated in the Agreement at a price determined as
provided in the Agreement from REMIC I of all the Mortgage Loans and all
property acquired in respect of such Mortgage Loans remaining therein. The
Agreement permits, but does not require, the party designated in the

<PAGE>

                                       -6-

Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan remaining therein at a price determined
as provided in the Agreement. The exercise of such right will effect early
retirement of the Certificates; however, such right to purchase is subject to
the aggregate Stated Principal Balance of the Mortgage Loans at the time of
purchase being less than 5% of the aggregate principal balance of the Mortgage
Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March 30, 2000

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                  Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class B-4 Certificates referred to in the
within-mentioned Agreement.

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                 Authorized Signatory

<PAGE>

                                  ABBREVIATIONS
                                  -------------

          The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common             UNIF GIFT MIN ACT -   Custodian
                                                              ---------------
                                                              (Cust)   (Minor)
TEN ENT - as tenants by the entireties                       under Uniform Gifts
                                                               to Minors Act
JT TEN  - as joint tenants with right                   _______________
           of survivorship and not as                       (State)
           tenants in common

    Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

the Percentage Interest evidenced by the within Mortgage Pass-Through
Certificate and hereby authorize(s) the registration of transfer of such
interest to assignee on the Certificate Register of the Trust Fund.

          I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS
                            -------------------------

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________,
for the account of ____________________________, account number _______________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.

     This information is provided by ______________________________________, the
assignee named above, or ________________________________________, as its agent.

<PAGE>

                              EXHIBIT A-9
                              -----------

                     FORM OF CLASS B-5 CERTIFICATE

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS
     A  "REGULAR  INTEREST"  IN A  "REAL  ESTATE  MORTGAGE  INVESTMENT
     CONDUIT", AS THOSE TERMS ARE DEFINED,  RESPECTIVELY,  IN SECTIONS
     860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THE FOLLOWING  INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF
     APPLYING  THE U.S.  FEDERAL  INCOME TAX ORIGINAL  ISSUE  DISCOUNT
     (OID)  RULES  TO  THIS  CERTIFICATE.   THE  ISSUE  DATE  OF  THIS
     CERTIFICATE IS MARCH 30, 2000.  BASED ON THE OID  REGULATIONS AND
     ASSUMING  THAT THE MORTGAGE  LOANS PREPAY AT 20% CPR, USED SOLELY
     FOR THE  PURPOSES OF APPLYING  THE OID RULES TO THE  CERTIFICATES
     (THE "PREPAYMENT  ASSUMPTION"),  THIS CERTIFICATE HAS BEEN ISSUED
     WITH  NO  MORE  THAN   $306.00  OF  OID  PER  $1,000  OF  INITIAL
     CERTIFICATE  PRINCIPAL  BALANCE,  THE YIELD TO MATURITY IS 16.79%
     AND THE AMOUNT OF OID  ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD
     IS NO MORE THAN $1.71 PER $1,000 OF INITIAL CERTIFICATE PRINCIPAL
     BALANCE,  COMPUTED UNDER THE EXACT METHOD.  NO  REPRESENTATION IS
     MADE THAT THE  MORTGAGE  LOANS WILL PREPAY AT A RATE BASED ON THE
     PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE.

     THIS CERTIFICATE IS SUBORDINATE TO THE SENIOR  CERTIFICATES,  THE
     CLASS B-1 CERTIFICATES, THE CLASS B-2 CERTIFICATES, THE CLASS B-3
     CERTIFICATES  AND  THE  CLASS  B- 4  CERTIFICATES  TO THE  EXTENT
     DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.

     THIS  CERTIFICATE  HAS NOT BEEN AND WILL NOT BE REGISTERED  UNDER
     THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
     ANY  STATE  AND MAY NOT BE  RESOLD  OR  TRANSFERRED  UNLESS IT IS
     REGISTERED   PURSUANT  TO  SUCH  ACT  AND  LAWS  OR  IS  SOLD  OR
     TRANSFERRED  IN  TRANSACTIONS  THAT ARE EXEMPT FROM  REGISTRATION
     UNDER SUCH ACT AND UNDER  APPLICABLE STATE LAW AND IS TRANSFERRED
     IN  ACCORDANCE  WITH  THE  PROVISIONS  OF  SECTION  5.02  OF  THE
     AGREEMENT.

     NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT PLAN OR
     OTHER RETIREMENT ARRANGEMENT (EACH A "PLAN")

<PAGE>

     SUBJECT TO THE EMPLOYEE  RETIREMENT  INCOME SECURITY ACT OF 1974,
     AS AMENDED  ("ERISA"),  OR THE CODE WILL BE REGISTERED  EXCEPT IN
     COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.

Series 2000-1, Class B-5                Aggregate Certificate Principal
                                        Balance of Class B-5 Certificates as
                                        of the Issue Date: $123,000.00
Pass-Through Rate: 9.00% per annum
                                        Denomination:  $123,000.00

Date of Agreement and Cut-off Date:     Master Servicer and Trust Administrator
March 1, 2000                           Citicorp Mortgage, Inc.

First Distribution Date:                Trustee: U.S. Bank National Association
April 25, 2000

No. 1                                   Issue Date: March 30, 2000

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE
     OF THIS  CERTIFICATE  MAY BE MADE  MONTHLY  AS SET FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
     AT ANY  TIME  MAY BE LESS  THAN  THE  AMOUNT  SHOWN  ABOVE AS THE
     DENOMINATION OF THIS CERTIFICATE.

<PAGE>

                                       -3-

                        MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional, one- to four-family, fixed-rate,
first lien mortgage loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
     IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII, INC., THE MASTER
     SERVICER,  THE TRUST  ADMINISTRATOR,  THE TRUSTEE OR ANY OF THEIR
     RESPECTIVE   AFFILIATES.   NEITHER  THIS   CERTIFICATE   NOR  THE
     UNDERLYING  MORTGAGE  LOANS  ARE  GUARANTEED  BY  ANY  AGENCY  OR
     INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Salomon Smith Barney Inc. is the registered owner
of a Percentage Interest (obtained by dividing the denomination of this
Certificate by the aggregate Certificate Principal Balance of the Class B-5
Certificates as of the Issue Date) in that certain beneficial ownership interest
evidenced by all the Class B-5 Certificates in REMIC II created pursuant to a
Pooling and Servicing Agreement, dated as specified above (the "Agreement"),
among Salomon Brothers Mortgage Securities VII, Inc. (hereinafter called the
"Depositor," which term includes any successor entity under the Agreement), the
Master Servicer, the Trust Administrator, the Co-Trustee, the Co-Trustee and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class B-5 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class B-5 Certificates, the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two- thirds of the aggregate initial
Certificate Principal Balance of the Class B-5 Certificates, or

<PAGE>

                                       -4-

otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon the presentation and surrender of this Certificate at
the office or agency appointed by the Trustee for that purpose as provided in
the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Mortgage Pass-Through Certificates of the Series specified on the
face hereof (hereinafter called the "Certificates") and representing a
Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to Holders
of the Certificates, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions and conditions provided
therein, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trust Administrator and
the Trustee and the rights of the Holders of the Certificates under the
Agreement at any time by the Depositor, the Master Servicer, the Trust
Administrator and the Trustee, with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations set forth therein, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

<PAGE>

                                       -5-

     No transfer of this Certificate shall be made unless the transfer is made
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Master Servicer in their respective capacities as such), together with
copies of the written certification(s) of the Holder of the Certificate desiring
to effect the transfer and/or such Holder's prospective transferee upon which
such Opinion of Counsel is based. None of the Depositor or the Trustee is
obligated to register or qualify the Class of Certificates specified on the face
hereof under the 1933 Act or any other securities law or to take any action not
otherwise required under the Agreement to permit the transfer of such
Certificates without registration or qualification. Any Holder desiring to
effect a transfer of this Certificate shall be required to indemnify the
Trustee, the Depositor and the Master Servicer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.

     No transfer of this Certificate to a Plan subject to ERISA or Section 4975
of the Code, any Person acting, directly or indirectly, on behalf of any such
Plan or any person using Plan Assets to acquire this Certificate shall be made
except in accordance with Section 5.02(c) of the Agreement.

          No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.

          The Depositor, the Master Servicer, the Trust Administrator, the
Trustee and any agent of the Depositor, the Master Servicer or the Trustee may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trust Administrator, the Trustee nor any such agent shall be affected by notice
to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment (or provision for payment) to the Holders
of the Certificates of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the final payment (or any advance with respect thereto) on or other
liquidation of the last Mortgage Loan remaining in REMIC I, and (ii) the
purchase by the party designated in the Agreement at a price determined as
provided in the Agreement from REMIC I of all the Mortgage Loans and all
property acquired in respect of such Mortgage Loans remaining therein. The
Agreement permits, but does not require, the party designated in the

<PAGE>

                                       -6-

Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan remaining therein at a price determined
as provided in the Agreement. The exercise of such right will effect early
retirement of the Certificates; however, such right to purchase is subject to
the aggregate Stated Principal Balance of the Mortgage Loans at the time of
purchase being less than 5% of the aggregate principal balance of the Mortgage
Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March 30, 2000

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                  Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class B-5 Certificates referred to in the
within-mentioned Agreement.

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                 Authorized Signatory

<PAGE>

                                  ABBREVIATIONS
                                  -------------

          The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common             UNIF GIFT MIN ACT -   Custodian
                                                              ---------------
                                                              (Cust)   (Minor)
TEN ENT - as tenants by the entireties                       under Uniform Gifts
                                                               to Minors Act
JT TEN  - as joint tenants with right                   _______________
           of survivorship and not as                       (State)
           tenants in common

    Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

the Percentage Interest evidenced by the within Mortgage Pass-Through
Certificate and hereby authorize(s) the registration of transfer of such
interest to assignee on the Certificate Register of the Trust Fund.

          I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS
                            -------------------------

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________,
for the account of ____________________________, account number _______________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.

     This information is provided by ______________________________________, the
assignee named above, or ________________________________________, as its agent.

<PAGE>

                             EXHIBIT A-10
                             ------------

                     FORM OF CLASS B-6 CERTIFICATE

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS
     A  "REGULAR  INTEREST"  IN A  "REAL  ESTATE  MORTGAGE  INVESTMENT
     CONDUIT", AS THOSE TERMS ARE DEFINED,  RESPECTIVELY,  IN SECTIONS
     860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THE FOLLOWING  INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF
     APPLYING  THE U.S.  FEDERAL  INCOME TAX ORIGINAL  ISSUE  DISCOUNT
     (OID)  RULES  TO  THIS  CERTIFICATE.   THE  ISSUE  DATE  OF  THIS
     CERTIFICATE IS MARCH 30, 2000.  BASED ON THE OID  REGULATIONS AND
     ASSUMING  THAT THE MORTGAGE  LOANS PREPAY AT 20% CPR, USED SOLELY
     FOR THE  PURPOSES OF APPLYING  THE OID RULES TO THE  CERTIFICATES
     (THE "PREPAYMENT  ASSUMPTION"),  THIS CERTIFICATE HAS BEEN ISSUED
     WITH  NO  MORE  THAN   $755.00  OF  OID  PER  $1,000  OF  INITIAL
     CERTIFICATE  PRINCIPAL  BALANCE,  THE YIELD TO MATURITY IS 51.68%
     AND THE AMOUNT OF OID  ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD
     IS NO MORE THAN $2.59 PER $1,000 OF INITIAL CERTIFICATE PRINCIPAL
     BALANCE,  COMPUTED UNDER THE EXACT METHOD.  NO  REPRESENTATION IS
     MADE THAT THE  MORTGAGE  LOANS WILL PREPAY AT A RATE BASED ON THE
     PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE.

     THIS CERTIFICATE IS SUBORDINATE TO THE SENIOR  CERTIFICATES,  THE
     CLASS B-1 CERTIFICATES, THE CLASS B-2 CERTIFICATES, THE CLASS B-3
     CERTIFICATES, THE CLASS B-4 CERTIFICATES AND THE B-5 CERTIFICATES
     TO THE EXTENT DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.

     THIS  CERTIFICATE  HAS NOT BEEN AND WILL NOT BE REGISTERED  UNDER
     THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
     ANY  STATE  AND MAY NOT BE  RESOLD  OR  TRANSFERRED  UNLESS IT IS
     REGISTERED   PURSUANT  TO  SUCH  ACT  AND  LAWS  OR  IS  SOLD  OR
     TRANSFERRED  IN  TRANSACTIONS  THAT ARE EXEMPT FROM  REGISTRATION
     UNDER SUCH ACT AND UNDER  APPLICABLE STATE LAW AND IS TRANSFERRED
     IN  ACCORDANCE  WITH  THE  PROVISIONS  OF  SECTION  5.02  OF  THE
     AGREEMENT.

     NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT PLAN OR
     OTHER RETIREMENT ARRANGEMENT (EACH A "PLAN")

<PAGE>

     SUBJECT TO THE EMPLOYEE  RETIREMENT  INCOME SECURITY ACT OF 1974,
     AS AMENDED  ("ERISA"),  OR THE CODE WILL BE REGISTERED  EXCEPT IN
     COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.

Series 2000-1, Class B-6                Aggregate Certificate Principal
                                        Balance of Class B-6 Certificates as
                                        of the Issue Date: $165,708.35
Pass-Through Rate: 9.00% per annum
                                        Denomination: $165,708.35

Date of Agreement and Cut-off Date:     Master Servicer and Trust Administrator
March 1, 2000                           Citicorp Mortgage, Inc.

First Distribution Date:                Trustee: U.S. Bank National Association
April 25, 2000

No. 1                                   Issue Date: March 30, 2000

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE
     OF THIS  CERTIFICATE  MAY BE MADE  MONTHLY  AS SET FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
     AT ANY  TIME  MAY BE LESS  THAN  THE  AMOUNT  SHOWN  ABOVE AS THE
     DENOMINATION OF THIS CERTIFICATE.

<PAGE>

                                       -3-

                        MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional, one- to four-family, fixed-rate,
first lien mortgage loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
     IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII, INC., THE MASTER
     SERVICER,  THE TRUST  ADMINISTRATOR,  THE TRUSTEE OR ANY OF THEIR
     RESPECTIVE   AFFILIATES.   NEITHER  THIS   CERTIFICATE   NOR  THE
     UNDERLYING  MORTGAGE  LOANS  ARE  GUARANTEED  BY  ANY  AGENCY  OR
     INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Salomon Smith Barney Inc. is the registered owner
of a Percentage Interest (obtained by dividing the denomination of this
Certificate by the aggregate Certificate Principal Balance of the Class B-6
Certificates as of the Issue Date) in that certain beneficial ownership interest
evidenced by all the Class B-6 Certificates in REMIC II created pursuant to a
Pooling and Servicing Agreement, dated as specified above (the "Agreement"),
among Salomon Brothers Mortgage Securities VII, Inc. (hereinafter called the
"Depositor," which term includes any successor entity under the Agreement), the
Master Servicer, the Trust Administrator, the Co-Trustee, the Co-Trustee and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class B6 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class B-6 Certificates, the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two- thirds of the aggregate initial
Certificate Principal Balance of the Class B-6 Certificates, or

<PAGE>

                                       -4-

otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon the presentation and surrender of this Certificate at
the office or agency appointed by the Trustee for that purpose as provided in
the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Mortgage Pass-Through Certificates of the Series specified on the
face hereof (hereinafter called the "Certificates") and representing a
Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to Holders
of the Certificates, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions and conditions provided
therein, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trust Administrator and
the Trustee and the rights of the Holders of the Certificates under the
Agreement at any time by the Depositor, the Master Servicer, the Trust
Administrator and the Trustee, with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations set forth therein, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

<PAGE>

                                       -5-

     No transfer of this Certificate shall be made unless the transfer is made
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Master Servicer in their respective capacities as such), together with
copies of the written certification(s) of the Holder of the Certificate desiring
to effect the transfer and/or such Holder's prospective transferee upon which
such Opinion of Counsel is based. None of the Depositor or the Trustee is
obligated to register or qualify the Class of Certificates specified on the face
hereof under the 1933 Act or any other securities law or to take any action not
otherwise required under the Agreement to permit the transfer of such
Certificates without registration or qualification. Any Holder desiring to
effect a transfer of this Certificate shall be required to indemnify the
Trustee, the Depositor and the Master Servicer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.

     No transfer of this Certificate to a Plan subject to ERISA or Section 4975
of the Code, any Person acting, directly or indirectly, on behalf of any such
Plan or any person using Plan Assets to acquire this Certificate shall be made
except in accordance with Section 5.02(c) of the Agreement.

          No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.

          The Depositor, the Master Servicer, the Trust Administrator, the
Trustee and any agent of the Depositor, the Master Servicer or the Trustee may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trust Administrator, the Trustee nor any such agent shall be affected by notice
to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment (or provision for payment) to the Holders
of the Certificates of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the final payment (or any advance with respect thereto) on or other
liquidation of the last Mortgage Loan remaining in REMIC I, and (ii) the
purchase by the party designated in the Agreement at a price determined as
provided in the Agreement from REMIC I of all the Mortgage Loans and all
property acquired in respect of such Mortgage Loans remaining therein. The
Agreement permits, but does not require, the party designated in the

<PAGE>

                                       -6-

Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan remaining therein at a price determined
as provided in the Agreement. The exercise of such right will effect early
retirement of the Certificates; however, such right to purchase is subject to
the aggregate Stated Principal Balance of the Mortgage Loans at the time of
purchase being less than 5% of the aggregate principal balance of the Mortgage
Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March 30, 2000

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                  Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class B-6 Certificates referred to in the
within-mentioned Agreement.

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                 Authorized Signatory

<PAGE>

                                  ABBREVIATIONS
                                  -------------

          The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common             UNIF GIFT MIN ACT -   Custodian
                                                              ---------------
                                                              (Cust)   (Minor)
TEN ENT - as tenants by the entireties                       under Uniform Gifts
                                                               to Minors Act
JT TEN  - as joint tenants with right                   _______________
           of survivorship and not as                       (State)
           tenants in common

    Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

the Percentage Interest evidenced by the within Mortgage Pass-Through
Certificate and hereby authorize(s) the registration of transfer of such
interest to assignee on the Certificate Register of the Trust Fund.

          I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS
                            -------------------------

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________,
for the account of ____________________________, account number _______________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.

     This information is provided by ______________________________________, the
assignee named above, or ________________________________________, as its agent.

<PAGE>

                             EXHIBIT A-11
                             ------------

                     FORM OF CLASS R-I CERTIFICATE

     THIS  CERTIFICATE  MAY NOT BE TRANSFERRED TO A NON-UNITED  STATES
     PERSON.

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS
     A  "RESIDUAL  INTEREST"  IN A "REAL  ESTATE  MORTGAGE  INVESTMENT
     CONDUIT" ("REMIC"), AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN
     SECTIONS 860G AND 860D OF THE INTERNAL  REVENUE CODE OF 1986 (THE
     "CODE").

     ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
     BE MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
     THE AGREEMENT REFERRED TO HEREIN.

     THIS  CERTIFICATE  HAS NOT BEEN AND WILL NOT BE REGISTERED  UNDER
     THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
     ANY  STATE  AND MAY NOT BE  RESOLD  OR  TRANSFERRED  UNLESS IT IS
     REGISTERED   PURSUANT  TO  SUCH  ACT  AND  LAWS  OR  IS  SOLD  OR
     TRANSFERRED  IN  TRANSACTIONS  THAT ARE EXEMPT FROM  REGISTRATION
     UNDER SUCH ACT AND UNDER  APPLICABLE STATE LAW AND IS TRANSFERRED
     IN  ACCORDANCE  WITH  THE  PROVISIONS  OF  SECTION  5.02  OF  THE
     AGREEMENT.

     NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT PLAN OR
     OTHER  RETIREMENT  ARRANGEMENT  (EACH A  "PLAN")  SUBJECT  TO THE
     EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS  AMENDED
     ("ERISA"),  OR THE CODE WILL BE  REGISTERED  EXCEPT IN COMPLIANCE
     WITH THE PROCEDURES DESCRIBED HEREIN.

     ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
     BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (I) AN AFFIDAVIT
     TO THE  TRUSTEE  THAT (A) SUCH  TRANSFEREE  IS NOT (1) THE UNITED
     STATES  OR  ANY  POSSESSION  THEREOF,   ANY  STATE  OR  POLITICAL
     SUBDIVISION  THEREOF,  ANY FOREIGN GOVERNMENT,  ANY INTERNATIONAL
     ORGANIZATION,  OR ANY  AGENCY  OR  INSTRUMENTALITY  OF ANY OF THE
     FOREGOING,   (2)  ANY  ORGANIZATION  (OTHER  THAN  A  COOPERATIVE
     DESCRIBED IN SECTION 521 OF THE CODE) THAT IS EXEMPT FROM THE TAX
     IMPOSED BY CHAPTER 1 OF THE

<PAGE>

                                   -2-

     CODE  UNLESS SUCH  ORGANIZATION  IS SUBJECT TO THE TAX IMPOSED BY
     SECTION  511 OF THE  CODE,  (3)  ANY  ORGANIZATION  DESCRIBED  IN
     SECTION  1381(A)(2)(C)  OF THE CODE (ANY SUCH PERSON DESCRIBED IN
     THE  FOREGOING  CLAUSES  (1),  (2) OR (3)  SHALL  HEREINAFTER  BE
     REFERRED TO AS A "DISQUALIFIED  ORGANIZATION") OR (4) AN AGENT OF
     A DISQUALIFIED  ORGANIZATION  AND (B) NO PURPOSE OF SUCH TRANSFER
     IS TO IMPEDE THE  ASSESSMENT  OR COLLECTION OF TAX, AND (II) SUCH
     TRANSFEREE  SATISFIES CERTAIN ADDITIONAL  CONDITIONS  RELATING TO
     THE   FINANCIAL    CONDITION   OF   THE   PROPOSED    TRANSFEREE.
     NOTWITHSTANDING  THE REGISTRATION IN THE CERTIFICATE  REGISTER OF
     ANY TRANSFER,  SALE OR OTHER DISPOSITION OF THIS CERTIFICATE TO A
     DISQUALIFIED   ORGANIZATION   OR  AN  AGENT  OF  A   DISQUALIFIED
     ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL
     FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO
     BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER,  INCLUDING, BUT
     NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE.
     EACH HOLDER OF THIS  CERTIFICATE  BY  ACCEPTANCE  HEREOF SHALL BE
     DEEMED TO HAVE  CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH AND
     THE  PROVISIONS OF SECTION  5.02(D) OF THE AGREEMENT  REFERRED TO
     HEREIN.  ANY  PERSON  THAT  IS  A  DISQUALIFIED  ORGANIZATION  IS
     PROHIBITED   FROM   ACQUIRING   BENEFICIAL   OWNERSHIP   OF  THIS
     CERTIFICATE.

Series 2000-1, Class R-I                Aggregate Percentage Interest of Class
                                        R-I Certificates as of the Issue Date:
                                        100.00%

Date of Agreement and Cut-off Date:
March 1, 2000                           Master Servicer and Trust Administrator
                                        Citicorp Mortgage, Inc.
First Distribution Date:
April 25, 2000
                                        Trustee: U.S. Bank National Association

No. 1
                                        Issue Date: March 30, 2000

<PAGE>

                                       -3-

                        MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional, one- to four-family, fixed-rate,
first lien mortgage loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
     IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII, INC., THE MASTER
     SERVICER,  THE TRUST  ADMINISTRATOR,  THE TRUSTEE OR ANY OF THEIR
     RESPECTIVE   AFFILIATES.   NEITHER  THIS   CERTIFICATE   NOR  THE
     UNDERLYING  MORTGAGE  LOANS  ARE  GUARANTEED  BY  ANY  AGENCY  OR
     INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Salomon Smith Barney Inc. is the registered owner
of a Percentage Interest (obtained by dividing the denomination of this
Certificate by the aggregate Certificate Principal Balance of the Class R-I
Certificates as of the Issue Date) in that certain beneficial ownership interest
evidenced by all the Class R-I Certificates in REMIC I created pursuant to a
Pooling and Servicing Agreement, dated as specified above (the "Agreement"),
among Salomon Brothers Mortgage Securities VII, Inc. (hereinafter called the
"Depositor," which term includes any successor entity under the Agreement), the
Master Servicer, the Trust Administrator, the Co-Trustee, the Co-Trustee and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class R-I Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date or otherwise by check mailed by first class mail to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register. Notwithstanding the above, the final distribution on
this Certificate will be made after due notice

<PAGE>

                                       -4-

by the Trustee of the pendency of such distribution and only upon the
presentation and surrender of this Certificate at the office or agency appointed
by the Trustee for that purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Mortgage Pass-Through Certificates of the Series specified on the
face hereof (hereinafter called the "Certificates") and representing a
Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to Holders
of the Certificates, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions and conditions provided
therein, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trust Administrator and
the Trustee and the rights of the Holders of the Certificates under the
Agreement at any time by the Depositor, the Master Servicer, the Trust
Administrator and the Trustee, with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations set forth therein, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933

<PAGE>

                                       -5-

Act"), and an effective registration or qualification under applicable state
securities laws, or is made in a transaction that does not require such
registration or qualification. In the event that such a transfer of this
Certificate is to be made without registration or qualification, the Trustee
shall require receipt of (i) if such transfer is purportedly being made in
reliance upon Rule 144A under the 1933 Act, written certifications from the
Holder of the Certificate desiring to effect the transfer, and from such
Holder's prospective transferee, substantially in the forms attached to the
Agreement as Exhibit F-1, and (ii) in all other cases, an Opinion of Counsel
satisfactory to it that such transfer may be made without such registration or
qualification (which Opinion of Counsel shall not be an expense of the Trust
Fund or of the Depositor, the Trustee or the Master Servicer in their respective
capacities as such), together with copies of the written certification(s) of the
Holder of the Certificate desiring to effect the transfer and/or such Holder's
prospective transferee upon which such Opinion of Counsel is based. None of the
Depositor or the Trustee is obligated to register or qualify the Class of
Certificates specified on the face hereof under the 1933 Act or any other
securities law or to take any action not otherwise required under the Agreement
to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Depositor and the Master
Servicer against any liability that may result if the transfer is not so exempt
or is not made in accordance with such federal and state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any person using Plan Assets to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          Prior to registration of any transfer, sale or other disposition of
this Certificate, the proposed transferee shall provide to the Trustee (i) an
affidavit to the effect that such transferee is any Person other than a
Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-I Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-I Certificates. Notwithstanding the registration
in the Certificate Register of any transfer, sale or other disposition of this
Certificate to a Disqualified Organization or an agent (including a broker,
nominee or middleman) of a Disqualified Organization, such registration shall be
deemed to be of no legal force or effect whatsoever and such Person shall not be
deemed to be a Certificateholder for any purpose, including, but not limited to,
the receipt of distributions in respect of this Certificate.

     The Holder of this Certificate, by its acceptance hereof, shall be deemed
to have consented to the provisions of Section 5.02 of the Agreement and to any
amendment of the Agreement deemed necessary by counsel of the Depositor to
ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the Trust Fund to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC.

<PAGE>

                                       -6-

          No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.

          The Depositor, the Master Servicer, the Trust Administrator, the
Trustee and any agent of the Depositor, the Master Servicer or the Trustee may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trust Administrator, the Trustee nor any such agent shall be affected by notice
to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment (or provision for payment) to the Holders
of the Certificates of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the final payment (or any advance with respect thereto) on or other
liquidation of the last Mortgage Loan remaining in the Trust Fund, and (ii) the
purchase by the party designated in the Agreement at a price determined as
provided in the Agreement from the Trust Fund of all the Mortgage Loans and all
property acquired in respect of such Mortgage Loans remaining therein. The
Agreement permits, but does not require, the party designated in the Agreement
to purchase from the Trust Fund all the Mortgage Loans and all property acquired
in respect of any Mortgage Loan remaining therein at a price determined as
provided in the Agreement. The exercise of such right will effect early
retirement of the Certificates; however, such right to purchase is subject to
the aggregate Stated Principal Balance of the Mortgage Loans at the time of
purchase being less than 5% of the aggregate principal balance of the Mortgage
Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March 30, 2000

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                  Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class R-I Certificates referred to in the
within-mentioned Agreement.

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                 Authorized Signatory

<PAGE>

                                  ABBREVIATIONS
                                  -------------

          The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common             UNIF GIFT MIN ACT -   Custodian
                                                              ---------------
                                                              (Cust)   (Minor)
TEN ENT - as tenants by the entireties                       under Uniform Gifts
                                                               to Minors Act
JT TEN  - as joint tenants with right                   _______________
           of survivorship and not as                       (State)
           tenants in common

    Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

the Percentage Interest evidenced by the within Mortgage Pass-Through
Certificate and hereby authorize(s) the registration of transfer of such
interest to assignee on the Certificate Register of the Trust Fund.

          I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS
                            -------------------------

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________,
for the account of ____________________________, account number _______________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.

     This information is provided by ______________________________________, the
assignee named above, or ________________________________________, as its agent.

<PAGE>

                             EXHIBIT A-12
                             ------------

                    FORM OF CLASS R-II CERTIFICATE

     THIS  CERTIFICATE  MAY NOT BE TRANSFERRED TO A NON-UNITED STATES
     PERSON.

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS
     A  "RESIDUAL  INTEREST"  IN A "REAL  ESTATE  MORTGAGE  INVESTMENT
     CONDUIT" ("REMIC"), AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN
     SECTIONS 860G AND 860D OF THE INTERNAL  REVENUE CODE OF 1986 (THE
     "CODE").

     ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
     BE MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
     THE AGREEMENT REFERRED TO HEREIN.

     THIS  CERTIFICATE  HAS NOT BEEN AND WILL NOT BE REGISTERED  UNDER
     THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
     ANY  STATE  AND MAY NOT BE  RESOLD  OR  TRANSFERRED  UNLESS IT IS
     REGISTERED   PURSUANT  TO  SUCH  ACT  AND  LAWS  OR  IS  SOLD  OR
     TRANSFERRED  IN  TRANSACTIONS  THAT ARE EXEMPT FROM  REGISTRATION
     UNDER SUCH ACT AND UNDER  APPLICABLE STATE LAW AND IS TRANSFERRED
     IN  ACCORDANCE  WITH  THE  PROVISIONS  OF  SECTION  5.02  OF  THE
     AGREEMENT.

     NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT PLAN OR
     OTHER  RETIREMENT  ARRANGEMENT  (EACH A  "PLAN")  SUBJECT  TO THE
     EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS  AMENDED
     ("ERISA"),  OR THE CODE WILL BE  REGISTERED  EXCEPT IN COMPLIANCE
     WITH THE PROCEDURES DESCRIBED HEREIN.

     ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
     BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (I) AN AFFIDAVIT
     TO THE  TRUSTEE  THAT (A) SUCH  TRANSFEREE  IS NOT (1) THE UNITED
     STATES  OR  ANY  POSSESSION  THEREOF,   ANY  STATE  OR  POLITICAL
     SUBDIVISION  THEREOF,  ANY FOREIGN GOVERNMENT,  ANY INTERNATIONAL
     ORGANIZATION,  OR ANY  AGENCY  OR  INSTRUMENTALITY  OF ANY OF THE
     FOREGOING,   (2)  ANY  ORGANIZATION  (OTHER  THAN  A  COOPERATIVE
     DESCRIBED IN SECTION 521 OF THE CODE) THAT IS EXEMPT FROM THE TAX
     IMPOSED  BY CHAPTER 1 OF THE CODE  UNLESS  SUCH  ORGANIZATION  IS
     SUBJECT TO THE TAX

<PAGE>

     IMPOSED  BY  SECTION  511  OF  THE  CODE,  (3)  ANY  ORGANIZATION
     DESCRIBED IN 1 SECTION 1381(A)(2)(C) OF THE CODE (ANY SUCH PERSON
     DESCRIBED  IN  THE  FOREGOING  CLAUSES  (1),  (2)  OR  (3)  SHALL
     HEREINAFTER BE REFERRED TO AS A "DISQUALIFIED  ORGANIZATION")  OR
     (4) AN AGENT OF A DISQUALIFIED ORGANIZATION AND (B) NO PURPOSE OF
     SUCH  TRANSFER IS TO IMPEDE THE  ASSESSMENT OR COLLECTION OF TAX,
     AND (II) SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL  CONDITIONS
     RELATING TO THE FINANCIAL  CONDITION OF THE PROPOSED  TRANSFEREE.
     NOTWITHSTANDING  THE REGISTRATION IN THE CERTIFICATE  REGISTER OF
     ANY TRANSFER,  SALE OR OTHER DISPOSITION OF THIS CERTIFICATE TO A
     DISQUALIFIED   ORGANIZATION   OR  AN  AGENT  OF  A   DISQUALIFIED
     ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL
     FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO
     BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER,  INCLUDING, BUT
     NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE.
     EACH HOLDER OF THIS  CERTIFICATE  BY  ACCEPTANCE  HEREOF SHALL BE
     DEEMED TO HAVE  CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH AND
     THE  PROVISIONS OF SECTION  5.02(D) OF THE AGREEMENT  REFERRED TO
     HEREIN.  ANY  PERSON  THAT  IS  A  DISQUALIFIED  ORGANIZATION  IS
     PROHIBITED   FROM   ACQUIRING   BENEFICIAL   OWNERSHIP   OF  THIS
     CERTIFICATE.

Series 2000-1, Class R-II               Aggregate Percentage Interest of Class
                                        R-II Certificates as of the Issue
                                        Date: 100.00%
Date of Agreement and Cut-off Date:
March 1, 2000                           Master Servicer and Trust Administrator
                                        Citicorp Mortgage, Inc.

First Distribution Date:
April 25, 2000                          Trustee:  U.S. Bank National Association

No. 1                                   Issue Date:  March 30, 2000

<PAGE>

                                       -3-

                        MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional, one- to four-family, fixed-rate,
first lien mortgage loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
     IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII, INC., THE MASTER
     SERVICER,  THE TRUST  ADMINISTRATOR,  THE TRUSTEE OR ANY OF THEIR
     RESPECTIVE   AFFILIATES.   NEITHER  THIS   CERTIFICATE   NOR  THE
     UNDERLYING  MORTGAGE  LOANS  ARE  GUARANTEED  BY  ANY  AGENCY  OR
     INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Salomon Smith Barney Inc. is the registered owner
of a Percentage Interest (obtained by dividing the denomination of this
Certificate by the aggregate Certificate Principal Balance of the Class R-II
Certificates as of the Issue Date) in that certain beneficial ownership interest
evidenced by all the Class R-II Certificates in REMIC II created pursuant to a
Pooling and Servicing Agreement, dated as specified above (the "Agreement"),
among Salomon Brothers Mortgage Securities VII, Inc. (hereinafter called the
"Depositor," which term includes any successor entity under the Agreement), the
Master Servicer, the Trust Administrator, the Co-Trustee and the Trustee, a
summary of certain of the pertinent provisions of which is set forth hereafter.
To the extent not defined herein, the capitalized terms used herein have the
meanings assigned in the Agreement. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class R-II Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date or otherwise by check mailed by first class mail to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register. Notwithstanding the above, the final distribution on
this Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon the presentation and surrender

<PAGE>

                                       -4-

of this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Mortgage Pass-Through Certificates of the Series specified on the
face hereof (hereinafter called the "Certificates") and representing a
Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to Holders
of the Certificates, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions and conditions provided
therein, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trust Administrator and
the Trustee and the rights of the Holders of the Certificates under the
Agreement at any time by the Depositor, the Master Servicer, the Trust
Administrator and the Trustee, with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations set forth therein, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is

<PAGE>

                                       -5-

made in a transaction that does not require such registration or qualification.
In the event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Master Servicer in their respective capacities as such), together with
copies of the written certification(s) of the Holder of the Certificate desiring
to effect the transfer and/or such Holder's prospective transferee upon which
such Opinion of Counsel is based. None of the Depositor or the Trustee is
obligated to register or qualify the Class of Certificates specified on the face
hereof under the 1933 Act or any other securities law or to take any action not
otherwise required under the Agreement to permit the transfer of such
Certificates without registration or qualification. Any Holder desiring to
effect a transfer of this Certificate shall be required to indemnify the
Trustee, the Depositor and the Master Servicer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any person using Plan Assets to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          Prior to registration of any transfer, sale or other disposition of
this Certificate, the proposed transferee shall provide to the Trustee (i) an
affidavit to the effect that such transferee is any Person other than a
Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-II Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-II Certificates. Notwithstanding the
registration in the Certificate Register of any transfer, sale or other
disposition of this Certificate to a Disqualified Organization or an agent
(including a broker, nominee or middleman) of a Disqualified Organization, such
registration shall be deemed to be of no legal force or effect whatsoever and
such Person shall not be deemed to be a Certificateholder for any purpose,
including, but not limited to, the receipt of distributions in respect of this
Certificate.

          The Holder of this Certificate, by its acceptance hereof, shall be
deemed to have consented to the provisions of Section 5.02 of the Agreement and
to any amendment of the Agreement deemed necessary by counsel of the Depositor
to ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the Trust Fund to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC.

<PAGE>

                                       -6-

          No service charge will be made for any such registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.

          The Depositor, the Master Servicer, the Trust Administrator, the
Trustee and any agent of the Depositor, the Master Servicer or the Trustee may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Master Servicer, the
Trust Administrator, the Trustee nor any such agent shall be affected by notice
to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment (or provision for payment) to the Holders
of the Certificates of all amounts held by or on behalf of the Trustee and
required to be paid to them pursuant to the Agreement following the earlier of
(i) the final payment (or any advance with respect thereto) on or other
liquidation of the last Mortgage Loan remaining in the Trust Fund, and (ii) the
purchase by the party designated in the Agreement at a price determined as
provided in the Agreement from the Trust Fund of all the Mortgage Loans and all
property acquired in respect of such Mortgage Loans remaining therein. The
Agreement permits, but does not require, the party designated in the Agreement
to purchase from the Trust Fund all the Mortgage Loans and all property acquired
in respect of any Mortgage Loan remaining therein at a price determined as
provided in the Agreement. The exercise of such right will effect early
retirement of the Certificates; however, such right to purchase is subject to
the aggregate Stated Principal Balance of the Mortgage Loans at the time of
purchase being less than 5% of the aggregate principal balance of the Mortgage
Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  March 30, 2000

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                  Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class R-II Certificates referred to in the
within-mentioned Agreement.

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as Trustee

                                         By:____________________________
                                                 Authorized Signatory

<PAGE>

                                  ABBREVIATIONS
                                  -------------

          The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common             UNIF GIFT MIN ACT -   Custodian
                                                              ---------------
                                                              (Cust)   (Minor)
TEN ENT - as tenants by the entireties                       under Uniform Gifts
                                                               to Minors Act
JT TEN  - as joint tenants with right                   _______________
           of survivorship and not as                       (State)
           tenants in common

    Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

the Percentage Interest evidenced by the within Mortgage Pass-Through
Certificate and hereby authorize(s) the registration of transfer of such
interest to assignee on the Certificate Register of the Trust Fund.

          I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS
                            -------------------------

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________,
for the account of ____________________________, account number _______________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.

     This information is provided by ______________________________________, the
assignee named above, or ________________________________________, as its agent.

<PAGE>

                                    EXHIBIT B

                                   [RESERVED]

<PAGE>

                                   EXHIBIT C-1
                                   -----------

                     FORM OF TRUSTEE'S INITIAL CERTIFICATION

                                                 [Date]

Salomon Brothers Mortgage                        Citicorp Mortgage, Inc.
Securities VII, Inc.                             15851 Clayton Road
390 Greenwich Street                             Ballwin, Missouri 63011
New York, New York  10013

          Re:  Pooling and Servicing Agreement, dated as of March 1, 2000, among
               Salomon Brothers Mortgage Securities VII, Inc., as Depositor
               Citicorp Mortgage, Inc. as Master Serivcer and Trust
               Administrator and U.S. Bank National Association as Trustee
               Mortgage Pass-Through Certificates, Series 2000-1
               -----------------------------------------------------------------

Ladies and Gentlemen:

     Attached is the Trustee's preliminary exceptions in accordance with Section
2.02 of the referenced Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"). Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them in the Pooling and Servicing Agreement.

     The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond the review specifically required in the Pooling and
Servicing Agreement. The Trustee makes no representations as to: (i) the
validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in the Mortgage File of any of the Mortgage Loans identified
on the Mortgage Loan Schedule, (ii) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan, or (iii) whether any
Mortgage File included any of the documents specified in clause (v) of Section
2.01 of the Pooling and Servicing Agreement.

                                          U.S. BANK NATIONAL ASSOCIATION

                                          By:______________________________
                                          Name:____________________________
                                          Title:___________________________

<PAGE>

                                   EXHIBIT C-2
                                   -----------

                       FORM OF TRUSTEE FINAL CERTIFICATION

                                                  [Date]

Salomon Brothers Mortgage
Securities VII, Inc.
390 Greenwich Street
New York, New York  10013

Citicorp Mortgage, Inc.
15851 Clayton Road
Ballwin, Missouri 63011

          Re:  Pooling and Servicing Agreement, dated as of March 1, 2000, among
               Salomon Brothers Mortgage Securities VII, Inc., as Depositor
               Citicorp Mortgage, Inc. as Master Serivcer and Trust
               Administrator and U.S. Bank National Association as Trustee
               Mortgage Pass-Through Certificates, Series 2000-1
               -----------------------------------------------------------------

Ladies and Gentlemen:

     In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or specifically identified in the exception report annexed
hereto), (i) all documents constituting part of such Mortgage File (other than
such documents described in Section 2.01(v) of the Pooling and Servicing
Agreement) required to be delivered to it pursuant to the Pooling and Servicing
Agreement are in its possession, (ii) such documents have been reviewed by it
and appear regular on their face and relate to such Mortgage Loan, (iii) based
on its examination and only as to the foregoing, the information set forth in
the Mortgage Loan Schedule that corresponds to items (i) through (iii), (vi),
(vii), (ix), (x), (xi) and (xv) of the definition of "Mortgage Loan Schedule"
accurately reflects information set forth in the Mortgage File.

     The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in the Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.

<PAGE>

     Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.

                                             U.S. BANK NATIONAL ASSOCIATION

                                             By:_____________________________
                                             Name:
                                             Title:

<PAGE>

                                    EXHIBIT D
                                    ---------

                    FORM OF MORTGAGE LOAN PURCHASE AGREEMENT

<PAGE>

                        MORTGAGE LOAN PURCHASE AGREEMENT

                  This is a Mortgage Loan Purchase Agreement (the "Agreement"),
dated March 27, 2000, between Salomon Brothers Mortgage Securities VII, Inc., a
Delaware corporation (the "Purchaser") and Salomon Brothers Realty Corp., a New
York corporation (the "Seller").

                              PRELIMINARY STATEMENT

                  The Seller intends to sell the Mortgage Loans (as hereinafter
defined) to the Purchaser on the terms and subject to the conditions set forth
in this Agreement. The Purchaser intends to deposit the Mortgage Loans into a
mortgage pool comprising the trust fund. The trust fund will be evidenced by a
single series of mortgage pass-through certificates designated as Series 2000-1
(the "Certificates"). The Certificates will consist of twelve classes of
certificates. The Certificates will be issued pursuant to a Pooling and
Servicing Agreement, dated as of March 1, 2000 (the "Pooling and Servicing
Agreement"), among the Purchaser as depositor, U.S. Bank National Association as
trustee (the "Trustee"), U.S. Bank Trust National Association as co-trustee (the
"Co-Trustee") and Citicorp Mortgage, Inc. as master servicer (in such capacity,
the "Master Servicer") and as trust administrator (in such capacity, the "Trust
Administrator"). Capitalized terms used but not defined herein shall have the
meanings set forth in the Pooling and Servicing Agreement.

                  The parties hereto agree as follows:

                  SECTION 1. AGREEMENT TO PURCHASE. The Seller agrees to sell,
and the Purchaser agrees to purchase, on or before March 30, 2000 (the "Closing
Date"), certain fixed-rate, seasoned conventional residential mortgage loans
(the "Mortgage Loans"), having an aggregate principal balance as of the close of
business on March 1, 2000 (the "Cut-off Date") of approximately $82,393,709 (the
"Closing Balance"), after giving effect to all payments due on the Mortgage
Loans on or before the Cut-off Date, whether or not received.

                  SECTION 2. MORTGAGE LOAN SCHEDULE. The Purchaser and the
Seller have agreed upon which of the mortgage loans owned by the Seller are to
be purchased by the Purchaser pursuant to this Agreement and the Seller will
prepare or cause to be prepared on or prior to the Closing Date a final schedule
(the "Closing Schedule") that together shall describe such Mortgage Loans and
set forth all of the Mortgage Loans to be purchased under this Agreement. The
Closing Schedule will conform to the requirements set forth in this Agreement
and to the definition of "Mortgage Loan Schedule" under the Pooling and
Servicing Agreement. The Closing Schedule shall be used as the Mortgage Loan
Schedule under the Pooling and Servicing Agreement.

                  SECTION 3.        CONSIDERATION.

                           (a) In consideration for the Mortgage Loans to be
purchased hereunder, the Purchaser shall, as described in Section 8, pay to or
upon the order of the Seller in immediately available funds an amount (the
"Purchase Price") equal to the net sale proceeds of the Certificates, plus
accrued interest in the case of the Certificates (other than the Class PO
Certificates).

<PAGE>

                                       -2-

                           (b) The Purchaser or any assignee, transferee or
designee of the Purchaser shall be entitled to all scheduled payments of
principal due after the Cut-off Date, all other payments of principal due and
collected after the Cut-off Date, and all payments of interest on the Mortgage
Loans allocable to the period after the Cut-off Date. All scheduled payments of
principal and interest due on or before the Cut-off Date and collected after the
Cut-off Date shall belong to the Seller.

                           (c) Pursuant to the Pooling and Servicing Agreement,
the Purchaser will assign all of its right, title and interest in and to the
Mortgage Loans, together with its rights under this Agreement, to the Trustee
for the benefit of the related Certificateholders.

                  SECTION 4.        TRANSFER OF THE MORTGAGE LOANS.

                           (a) POSSESSION OF MORTGAGE FILES. The Seller does
hereby sell, transfer, assign, set over and convey to the Purchaser, without
recourse but subject to the terms of this Agreement, all of its right, title and
interest in, to and under the Mortgage Loans. The contents of each Mortgage File
not delivered to the Purchaser or to any assignee, transferee or designee of the
Purchaser on or prior to the Closing Date are and shall be held in trust by the
Seller for the benefit of the Purchaser or any assignee, transferee or designee
of the Purchaser. Upon the sale of the Mortgage Loans the ownership of each
Mortgage Note, the related Mortgage and the other contents of the related
Mortgage File is vested in the Purchaser and the ownership of all records and
documents with respect to the related Mortgage Loan prepared by or that come
into the possession of the Seller on or after the Closing Date shall immediately
vest in the Purchaser and shall be delivered immediately to the Purchaser or as
otherwise directed by the Purchaser.

                           (b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. In
connection with such transfer and assignment, the Seller does hereby deliver to,
and deposit with, the Purchaser, the following documents or instruments with
respect to each Mortgage Loan so transferred and assigned (a "Mortgage File"):

                         (i) the original Mortgage Note, endorsed in one of the
                  following forms: (i) in the name of the Co-Trustee or (ii) in
                  blank, in each case, with all prior and intervening
                  endorsements showing a complete chain of endorsement from the
                  originator to the Person so endorsing to the Co-Trustee;

                        (ii) the original Mortgage with evidence of recording
                  thereon. If in connection with any Mortgage Loan, the Seller
                  has not caused the original recorded Mortgage to be delivered
                  to the Purchaser because of a delay caused by the public
                  recording office were such Mortgage has been delivered for
                  recordation or because such Mortgage has been lost or because
                  such public recording office retains the original recorded
                  Mortgage, the Mortgage File shall include, in lieu of such
                  Mortgage, a photocopy of such Mortgage, together with (a) in
                  the case of a delay caused by the public recording office, an
                  Officer's Certificate of the title insurer insuring the
                  Mortgage stating that such Mortgage has been delivered to the
                  appropriate public recording office for recordation and that
                  the original recorded

<PAGE>

                                       -3-

                  Mortgage or a copy of such Mortgage certified by such public
                  recording office to be a true and complete copy of the
                  original recorded Mortgage will be promptly delivered to the
                  Purchaser upon receipt by the Seller; or (b) in the case where
                  a public recording office retains the original recorded
                  Mortgage or in the case where a Mortgage is lost after
                  recordation in a public recording office, a copy of such
                  Mortgage with the recording information thereon certified by
                  such public recording office to be a true and complete copy of
                  the original recorded Mortgage;

                       (iii) an original Assignment of the Mortgage to the
                  Co-Trustee in recordable form;

                        (iv) the original recorded Assignment or Assignments of
                  the Mortgage showing a complete chain of assignment from the
                  originator to the Person assigning the Mortgage to the
                  Co-Trustee as contemplated by the immediately preceding clause
                  (iii), or if any such intervening assignment has not been
                  returned from the applicable public recording office or has
                  been lost or if such public recording office retains the
                  original recorded Assignments of Mortgage, the Mortgage File
                  shall include a photocopy of such intervening assignment,
                  together with (a) in the case of a delay caused by the public
                  recording, an Officer's Certificate of the title insurer
                  insuring the Mortgage stating that such intervening Assignment
                  of Mortgage has been delivered to the appropriate public
                  recording office for recordation and that such original
                  recorded intervening Assignment of Mortgage or a copy of such
                  intervening Assignment of Mortgage certified by the
                  appropriate public recording office to be a true and complete
                  copy of the original recorded intervening Assignment of
                  Mortgage will be promptly delivered to the Purchaser upon
                  receipt thereof by the Seller; or (b) in the case of an
                  intervening Assignment of Mortgage where a public recording
                  office retains the original recorded intervening Assignment of
                  Mortgage or in the case where an intervening Assignment of
                  Mortgage is lost after recordation in a public recording
                  office, a copy of such intervening Assignment with recording
                  information thereon certified by such public recording office
                  to be a true and complete copy of the original recorded
                  intervening Assignment of Mortgage;

                       (v) the originals of all assumption, modification,
                  consolidation or extension agreements, with evidence of
                  recording thereon, if any;

                       (vi) the original of any guarantee executed in connection
                  with the Mortgage Note;

                       (vii) with respect to any Mortgage Loan listed on
                  Schedule 2 attached to the Pooling and Servicing Agreement,
                  the original Primary Mortgage Insurance Policy or certificate;

                       (viii) the original mortgagee title insurance policy;

<PAGE>

                                       -4-

                       (ix) the original of any security agreement, chattel
                  mortgage or equivalent document executed in connection with
                  the Mortgage; and

                       (x) the original power of attorney, if applicable.

                  To the extent not already recorded, the Seller shall promptly
(and in no event later than five Business Days following the later of the
Closing Date and the date of receipt by the Seller of the recording information
for a Mortgage) submit or cause to be submitted for recording, at no expense to
the Trust Fund or the Trustee, in the appropriate public office for real
property records, each Assignment referred to in Sections 4(b)(iii) and (iv)
above. In the event that any such Assignment is lost or returned unrecorded
because of a defect therein, the Seller shall promptly prepare or cause to be
prepared a substitute Assignment or cure or cause to be cured such defect, as
the case may be, and thereafter cause each such Assignment to be duly recorded.

                  With respect to a maximum of approximately 0.5% of the
Mortgage Loans, by outstanding principal balance of the Mortgage Loans as of the
Cut-off Date, if any original Mortgage Note referred to in Section 4(b)(i) above
cannot be located, the obligations of the Seller to deliver such documents shall
be deemed to be satisfied upon delivery to the Purchaser of a photocopy of such
Mortgage Note, if available, with a lost note affidavit. If any of the original
Mortgage Notes for which a lost note affidavit was delivered to the Purchaser is
subsequently located, such original Mortgage Note shall be delivered to the
Purchaser within three Business Days.

                  The Seller shall deliver or cause to be delivered to the
Purchaser promptly upon receipt thereof any other original documents
constituting a part of a Mortgage File received with respect to any Mortgage
Loan, including, but not limited to, any original documents evidencing an
assumption, modification, consolidation or extension of any Mortgage Loan.

                  All original documents relating to the Mortgage Loans that are
not delivered to the Purchaser are and shall be held by or on behalf of the
Seller in trust for the benefit of the Trustee on behalf of the
Certificateholders. In the event that any such original document is required
pursuant to the terms of this Section to be a part of a Mortgage File, such
document shall be delivered promptly to the Purchaser. Any such original
document delivered to or held by the Seller that is not required pursuant to the
terms of this Section to be a part of a Mortgage File, shall be delivered
promptly to the Seller.

                           (c) ACCEPTANCE OF MORTGAGE LOANS. The documents
delivered pursuant to Section 4(b) hereof shall be reviewed by the Purchaser or
any assignee, transferee or designee of the Purchaser at any time before or
after the Closing Date (and with respect to each document permitted to be
delivered after the Closing Date within seven days of its delivery) to ascertain
that all required documents have been executed and received and that such
documents relate to the Mortgage Loans identified on the Mortgage Loan Schedule.

<PAGE>

                                       -5-

                           (d) TRANSFER OF INTEREST IN AGREEMENTS. The Purchaser
has the right to assign its interest under this Agreement, in whole or in part,
to the Trustee, as may be required to effect the purposes of the Pooling and
Servicing Agreement, without the consent of the Seller, and the assignee shall
succeed to the rights and obligations hereunder of the Purchaser. Any expense
reasonably incurred by or on behalf of the Purchaser or the Trustee in
connection with enforcing any obligations of the Seller under this Agreement
will be promptly reimbursed by the Seller.

                           (e) EXAMINATION OF MORTGAGE FILES. Prior to the
Closing Date, the Seller shall either (i) deliver in escrow to the Purchaser or
to any assignee, transferee or designee of the Purchaser, for examination, the
Mortgage File pertaining to each Mortgage Loan, or (ii) make such Mortgage Files
available to the Purchaser or to any assignee, transferee or designee of the
Purchaser for examination. Such examination may be made by the Purchaser or the
Trustee, and their respective designees, upon reasonable notice to the Seller
during normal business hours before the Closing Date and within 60 days after
the Closing Date. If any such person makes such examination prior to the Closing
Date and identifies any Mortgage Loans that do not conform to the requirements
of the Purchaser as described in this Agreement, such Mortgage Loans shall be
deleted from the Closing Schedule. The Purchaser may, at its option and without
notice to the Seller, purchase all or part of the Mortgage Loans without
conducting any partial or complete examination. The fact that the Purchaser or
any person has conducted or has failed to conduct any partial or complete
examination of the Mortgage Files shall not affect the rights of the Purchaser
or any assignee, transferee or designee of the Purchaser to demand repurchase or
other relief as provided herein or under the Pooling and Servicing Agreement.

                  SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
                             SELLER

                  (a) The Seller hereby represents and warrants, as of the date
hereof and as of the Closing Date, and covenants, that:

                           (i) The Seller is a corporation, duly organized and
validly existing and in good standing under the laws of the State of New York
with full corporate power and authority to conduct its business as presently
conducted by it to the extent material to the consummation of the transactions
contemplated herein. The Seller had the full corporate power and authority to
acquire the Mortgage Loans. The Seller has the full corporate power and
authority to own the Mortgage Loans and to transfer and convey the Mortgage
Loans to the Purchaser and has the full corporate power and authority to execute
and deliver, engage in the transactions contemplated by, and perform and observe
the terms and conditions of this Agreement;

                           (ii) This Agreement has been duly and validly
authorized, executed and delivered by the Seller, all requisite corporate action
having been taken, and (assuming the due authorization, execution and delivery
hereof by the Purchaser) constitutes the valid, legal and binding obligation of
the Seller, enforceable in accordance with its terms, except as such enforcement
may be limited by (A) bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, (B) general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law) or (C) public
policy

<PAGE>

                                       -6-

considerations underlying the securities laws, to the extent that such public
policy considerations limit the enforceability of the provisions of this
Agreement which purport to provide indemnification from securities laws
liabilities;

                           (iii) No consent, approval, authorization or order
of, registration or filing with, or notice to any governmental authority or
court is required, under federal laws or the laws of the State of New York, for
the execution, delivery and performance by the Seller of, or compliance by the
Seller with, this Agreement or the consummation by the Seller of any other
transaction contemplated hereby and by the Pooling and Servicing Agreement;
provided, however, that the Seller makes no representation or warranty regarding
federal or state securities laws in connection with the sale or distribution of
the Certificates;

                           (iv) No certificate of an officer, statement or other
information furnished in writing or report delivered by the Seller to the
Purchaser, any affiliate of the Purchaser or the Trustee for use in connection
with the purchase of the Mortgage Loans and the transactions contemplated
hereunder and under the Pooling and Servicing Agreement will contain any untrue
statement of a material fact, or omit a material fact necessary to make the
information, certificate, statement or report not misleading in any material
respect.

                           (v) Neither the sale of the Mortgage Loans to the
Purchaser, nor the execution, delivery or performance of this Agreement by the
Seller, conflicts or will conflict with or results or will result in a breach of
or constitutes or will constitute a default (or an event, which with notice or
lapse of time or both, would constitute a default) under (A) any terms or
provisions of the certificate of incorporation or by-laws of the Seller, (B) any
term or provision of any material agreement, contract, instrument or indenture,
to which the Seller is a party or by which the Seller or any of its property is
bound, or (C) any law, rule, regulation, order, judgment, writ, injunction or
decree of any court or governmental authority having jurisdiction over the
Seller or any of its property, or results or will result in the creation or
imposition of any lien, charge or encumbrance which would have a material
adverse effect upon the Mortgage Loans or any documents or instruments
evidencing or securing the Mortgage Loans;

                           (vi) The Seller has not dealt with any broker,
investment banker, agent or other person, except for the Purchaser or any of its
affiliates, that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans;

                           (vii) There is no litigation currently pending or, to
the best of the Seller's knowledge, threatened against the Seller that would
reasonably be expected to adversely affect the transfer of the Mortgage Loans,
the issuance of the Certificates, the execution, delivery, performance or
enforceability of this Agreement or that would result in a material adverse
change in the financial condition of the Seller;

                           (viii) Each Mortgage Note, each Mortgage, each
Assignment and any other document required to be delivered by or on behalf of
the Seller under this Agreement or the Pooling and Servicing Agreement to the
Purchaser or any assignee, transferee or designee of the Purchaser

<PAGE>

                                       -7-

for each Mortgage Loan has been or will be, in accordance with Section 4(b)
hereof, delivered to the Purchaser or any such assignee, transferee or designee.
With respect to each Mortgage Loan, the Seller is in possession of a complete
Mortgage File in compliance with the Pooling and Servicing Agreement, except for
such documents that (A) have been delivered (1) to the Purchaser or any
assignee, transferee or designee of the Purchaser or (2) for recording to the
appropriate public recording office and have not yet been returned or (B) are
not required to be delivered to the Purchaser or any assignee, transferee or
designee of the Purchaser until 90 days following the Closing Date or such later
date as provided in Section 4;

                           (ix) 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 relevant jurisdiction, except any as may have been complied with;

                           (x) The Seller (A) is a solvent entity and is paying
its debts as they become due and (B) after giving effect to the transfer of the
Mortgage Loans, will be a solvent entity and will have sufficient resources to
pay its debts as they become due;

                           (xi) The form of endorsement of each Mortgage Note
satisfied the requirement, if any, of endorsement in order to transfer all
right, title and interest of the party so endorsing, as noteholder or assignee
thereof, in and to that Mortgage Note; and each Assignment to be delivered
hereunder is in recordable form and is sufficient to effect the assignment of
and to transfer to the assignee thereunder the benefits of the assignor, as
mortgagee or assignee thereof, under each Mortgage to which that Assignment
relates;

                           (xii) The transfer of the Mortgage Loans to the
Purchaser at the Closing Date will be treated by the Seller for financial
accounting and reporting purposes as a sale of assets;

                           (xiii) Immediately prior to the sale of the Mortgage
Loans to the Purchaser as herein contemplated, the Seller had good title to, and
was the sole owner of, the Mortgage Loans, and such sale validly transfers the
Mortgage Loans to the Purchaser free and clear of any pledge, lien, encumbrance
or security interest; and

                           (xiv) With respect to the Mortgage Loans, the Seller
hereby represents and warrants, as of the date hereof and as of the Closing
Date, that each Mortgage Loan constitutes a "qualified mortgage" within the
meaning of Section 860(G)(a)(3) of the Code.

                  SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE SELLER
                             RELATING TO THE MORTGAGE LOANS.

         Capitalized terms used in this Section 6 but not defined herein or in
the Pooling and Servicing Agreement, shall have the meanings given to such terms
in Exhibit 4 hereto. The Seller hereby represents and warrants to the Purchaser
that, as to each Mortgage Loan, as of the Closing Date for such Mortgage Loan:

<PAGE>

                                       -8-

                  (i) The information set forth in the Mortgage Loan Schedule is
complete, true and correct;

                  (ii) The Mortgage Loan Documents are genuine, the Mortgage
Notes and Mortgages are enforceable in accordance with their terms, each
Mortgage and Mortgage Note is duly and properly executed by a Mortgagor of legal
capacity, and all insertions in any Mortgage Loan Document are correct. To the
Seller's knowledge, there are no facts that would impair the validity or value
of the Mortgage Note, the Mortgage, any other Mortgage Loan Document or the
collateral.

                  (iii) The amount of the unpaid balance for each Mortgage Loan
which is reflected on the Mortgage Loan Schedule is correct as of the date
thereof and there are no defenses, setoffs, rights of rescission or
counterclaims against any Mortgage Loan.

                  (iv) The security interest granted by the Mortgagor in the
Mortgaged Property described in the Mortgage is an enforceable and valid first
lien on the Mortgaged Property described therein.

                  (v) The origination of each Mortgage Loan complies in all
material respects with the Applicable Requirements.

                  (vi) All applicable taxes, special government assessments,
ground rents and flood, hazard and PMI insurance premiums have been paid when
due in accordance with Applicable Requirements.

                  (vii) All flood, hazard and PMI insurance policies and flood
certifications were obtained where required and are in compliance with all
Applicable Requirements and remain in full force and effect.

                  (viii) All real estate tax identifications relating to the
Mortgage Loans are legally sufficient and in accordance with Applicable
Requirements. Tax segregation, where required, has been completed.

                  (ix) All payoff and assumption statements with respect to each
Mortgage Loan provided to Mortgagors or their agents were complete and accurate
when provided.

                  (x) A title policy (except with respect to Mortgaged
Properties located in Iowa, as to which an opinion of counsel of the type
customarily rendered in Iowa in lieu of title insurance is acceptable), which is
currently in effect, conforming to Applicable Requirements, and has not been
modified, has been issued for each Mortgage Loan insuring, in an amount no less
than the outstanding Mortgage Loan balance, that the Mortgage relating thereto
is a valid first lien on the property therein described and that the related
Mortgaged Property is free and clear of all encumbrances and liens having
priority over the first lien of the Mortgage, except for liens for real estate
taxes and special assessments not yet due and payable and except for easements
and restrictions of record being applicable to mortgage lending institutions
generally and specifically

<PAGE>

                                       -9-

identified in the title policy. In jurisdictions that give unpaid common expense
assessments limited priority over a first mortgage lien, the policy provides
assurance that those assessments have been paid through the effective date of
the policy.

                  (xi) To the Seller's knowledge, the Mortgage Loans have been
serviced in compliance with all Applicable Requirements pertaining to tax
reporting in all material respects. For example, but not by way of limitation,
the Seller has, to the extent required under the Applicable Requirements:

                          (a) Implemented backup withholding of interest accrual
                  on Escrow Accounts, where required;

                          (b) Certified Social Security or Taxpayer
                  Identification numbers for each Mortgage Loan; and

                           (c) Provided all appropriate tax forms and
                  information to (i) the Internal Revenue Service, (ii) the
                  buyers and sellers in assumption or foreclosure transactions
                  and (iii) Mortgagors who have a buydown account as part of
                  their Mortgage Loan.

                  (xii) No misrepresentation or fraud with respect to a Mortgage
Loan has taken place on the part of the Seller, or to the Seller's Knowledge,
any Person with respect to the origination of the Mortgage Loan or in the
application of any insurance regarding such Mortgage Loan which materially and
adversely affects the Purchaser, the Mortgage Loan or the servicing rights.

                  (xiii) Each Mortgage Loan has been, and is being, serviced in
all material respects in accordance with the terms of its Mortgage Note,
Mortgage and related Mortgage Loan Documents and the Applicable Requirements and
Customary Servicing Procedures.

                  (xiv) Except in accordance with Applicable Requirements and as
documented in the Mortgage Loan Documents, no waiver, alterations or
modifications have been made to the Mortgage Loan Documents constituting the
Mortgage Loan nor have same been satisfied, subordinated or released in whole or
in part.

                  (xv) Each Mortgage has been duly acknowledged and recorded or
sent for recordation except where not required by law to preserve the interest
of the owner against claims of subsequent transferees.

                  (xvi) There is a life of loan tax service contract in place
for each Mortgage Loan (including Mortgage Loans with respect to which an escrow
waiver has been granted).

                  (xvii) The Mortgage Loan is in compliance with the
characteristics of the Mortgage Loans as set Forth on Exhibit 5.

<PAGE>

                                      -10-

                  (xviii) Except with respect to approximately 4.47% of the
Mortgage Loans, by aggregate principal balance of the Mortgage Loans as of the
Cut-off Date; as of February 29, 2000, the Monthly Payment due under each
Mortgage Loan is not delinquent in payment; and except with respect to
approximately 2.15% of the Mortgage Loans, by aggregate principal balance of the
Cut-off date, the Monthly Payment due under each Mortgage Loan has not been 30
or more days delinquent in payment more than once during the preceding twelve
months (assuming that a "rolling" 30 day delinquency is considered to be
delinquent only once) and no Mortgage Loan will ever have experienced a
delinquency of 60 or more days since the origination thereof.

                  SECTION 7. REPURCHASE OBLIGATION FOR DEFECTIVE DOCUMENTATION
                             AND FOR BREACH OF REPRESENTATION AND WARRANTY.

                  (a) The representations and warranties contained in Section 6
shall not be impaired by any review and examination of loan files or other
documents evidencing or relating to the Mortgage Loans or any failure on the
part of the Seller or the Purchaser to review or examine such documents and
shall inure to the benefit of any assignee, transferee or designee of the
Purchaser, including the Trustee for the benefit of holders of Mortgage
Pass-Through Certificates evidencing an interest in all or a portion of the
Mortgage Loans.

                  Upon discovery by the Seller, the Purchaser or any assignee,
transferee or designee of the Purchaser of any materially defective document in,
or that any material document was not transferred by the Seller as part of any
Mortgage File or of a breach of any of the representations and warranties
contained in Section 5 or Section 6 that materially and adversely affects the
value of any Mortgage Loan, the Purchaser or the Purchaser's assignee,
transferee or designee or the party discovering the breach shall give prompt
written notice to the Seller. Within sixty (60) days of its discovery or its
receipt of notice of any such missing documentation which was not transferred to
the Purchaser as described above or materially defective documentation or any
breach of a represen tation and warranty, the Seller promptly shall deliver such
missing document or cure such defect or breach in all material respects, or in
the event the Seller cannot deliver such missing document or such defect or
breach cannot be cured, the Seller shall within sixty (60) days of its discovery
or receipt of notice, either (i) repurchase the affected Mortgage Loan at the
Purchase Price (as such term is defined in the Pooling and Servicing Agreement)
or (ii) pursuant to the provisions of the Pooling and Servicing Agreement, cause
the removal of such Mortgage Loan from the Trust Fund and substi tute one or
more Qualified Substitute Mortgage Loans. With respect to Mortgage Loans where
the Mortgage File is missing a material document that was transferred from the
Seller to the Purchaser or upon discovery by the Seller, the Purchaser or any
assignee, transferee or designee of the Purchaser of a breach of any of the
representations and warranties contained in Section 5(xi), (xiii) and (xiv) that
materially and adversely affects the value of any Mortgage Loan, the Purchaser
or the Purchaser's assignee, transferee or designee, the party discovering such
breach shall give prompt written notice to the Seller. Within sixty (60) days of
its discovery or its receipt of notice of any such missing document or any such
breach of a representation and warranty the Seller promptly shall deliver such
missing document or cure such defect or breach in all material respects, or in
the event the Seller cannot deliver such missing document or such defect or
breach cannot be cured, the Seller shall, within sixty (60) days of its
discovery or receipt of notice, either (i) repurchase the affected

<PAGE>

                                      -11-

Mortgage Loan at the Purchase Price (as such term is defined in the Pooling and
Servicing Agreement) or (ii) pursuant to the provisions of the Pooling and
Servicing Agreement, cause the removal of such Mortgage Loan from the Trust Fund
and substitute one or more Qualified Substitute Mortgage Loans. The Seller shall
amend the Closing Schedule to reflect the withdrawal of such Mortgage Loan from
the terms of this Agreement and the Pooling and Servicing Agreement and the
addition, if any, of a Qualified Substitute Mortgage Loan. The Seller shall
deliver to the Purchaser such amended Closing Schedule and shall deliver such
other documents as are required by this Agreement or the Pooling and Servicing
Agreement within five (5) days of any such amendment.
Any repurchase pursuant to this Section 7(a) shall be accomplished by deposit in
the Collection Account of the amount of the Purchase Price in accordance with
Section 2.03 of the Pooling and Servicing Agreement. Any repurchase or
substitution required by this Section shall be made in a manner consistent with
Section 2.03 of the Pooling and Servicing Agreement.

                  (b) It is understood and agreed that the obligations of the
Seller set forth in this Section 7 to cure, repurchase or substitute for a
defective Mortgage Loan constitute the sole remedies of the Purchaser against
the Seller, respecting a missing or defective document or a breach of the rep
resentations and warranties contained in Section 5 or Section 6. It is
understood and agreed that the obligations of the Seller set forth in this
Section 7 to repurchase or substitute for a Mortgage Loan as to which a material
document is missing constitute the sole remedies of the Purchaser against the
Seller respecting a missing document.

                  SECTION 8. CLOSING; PAYMENT FOR THE MORTGAGE LOANS. The
closing of the purchase and sale of the Mortgage Loans shall be held at the New
York City office of Thacher Proffitt & Wood at 10:00 AM New York City time on
the Closing Date.

                  The closing 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
                           in all material respects as of the date as of which
                           they are made and no event shall have occurred which,
                           with notice or the passage of time, would constitute
                           a default under this Agreement;

                  (b)      The Purchaser shall have received, or the attorneys
                           of the Purchaser shall have received in escrow (to be
                           released from escrow at the time of closing), all
                           Closing Documents as specified in Section 9 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 respective terms thereof;

                  (c)      The Seller shall have delivered or caused to be
                           delivered and released to the Purchaser or to its
                           designee, all documents (including without
                           limitation, the Mortgage Loans) required to be so
                           delivered by the Purchaser; and

<PAGE>

                                      -12-

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

                  Subject to the foregoing conditions, the Purchaser shall
deliver or cause to be delivered to the Seller on the Closing Date, against
delivery and release by the Seller to the Trustee of all documents required
pursuant to the Pooling and Servicing Agreement, the consideration for the
Mortgage Loans as specified in Section 3 of this Agreement, by delivery to the
Seller of the Purchase Price in immediately available funds.

                  SECTION 9. CLOSING DOCUMENTS. Without limiting the generality
of Section 8 hereof, the closing shall be subject to delivery of each of the
following documents:

                           (a)      An Officers' Certificate of the Seller,
                                    dated the Closing Date, upon which the
                                    Purchaser and Salomon Smith Barney Inc. (the
                                    "Underwriter") may rely, in the form of
                                    Exhibit 1 hereto, and attached thereto
                                    copies of the certificate of incorporation,
                                    by-laws and certificate of good standing of
                                    the Seller under the laws of New York;

                           (b)      An Officers' Certificate of the Seller,
                                    dated the Closing Date, upon which the
                                    Purchaser and the Underwriter may rely, in
                                    the form of Exhibit 2 hereto, with respect
                                    to certain facts regarding the sale of the
                                    Mortgage Loans by the Seller to the
                                    Purchaser;

                           (c)      An Opinion of Counsel of the Seller, dated
                                    the Closing Date and addressed to the
                                    Purchaser and the Underwriter, substantially
                                    in the form attached hereto as Exhibit 3;

                           (d)      Such opinions of counsel as the Rating
                                    Agencies or the Trustee may request in
                                    connection with the sale of the Mortgage
                                    Loans by the Seller to the Purchaser or the
                                    Seller's execution and delivery of, or
                                    performance under, this Agreement;

                            (e)     A letter from Deloitte & Touche L.L.P.,
                                    certified public accountants, dated the date
                                    hereof and to the effect that they have
                                    performed certain specified procedures as a
                                    result of which they determined that certain
                                    information of an accounting, financial or
                                    statistical nature set forth in the
                                    Purchaser's Prospectus Supplement, dated
                                    March 27, 2000 under the subheadings
                                    "Summary of Prospectus Supplement--The
                                    Mortgage Loans," "Risk Factors," "The
                                    Mortgage Pool," "Yield on the Certificates"
                                    and "Description of the Certificates" agrees
                                    with the records of the Seller; and

                           (f)      Such further information, certificates,
                                    opinions and documents as the Purchaser or
                                    the Underwriter may reasonably request.

<PAGE>

                                      -13-

                  SECTION 10. COSTS. The Seller shall pay (or shall reimburse
the Purchaser or any other Person to the extent that the Purchaser or such other
Person shall pay) all costs and expenses incurred in connection with the
transfer and delivery of the Mortgage Loans, including without limitation,
recording fees, fees for title policy endorsements and continuations and the
fees for recording Assignments, the costs and expenses of printing (or otherwise
reproducing) and delivering this Agreement, the Pooling and Servicing Agreement,
the Certificates, the prospectus, prospectus supplement, and private placement
memorandum relating to the Certificates and other related documents, the initial
fees, costs and expenses of the Trustee, the fees and expenses of the Seller's
counsel in connection with the preparation of all documents relating to the
securitization of the Mortgage Loans, the filing fee charged by the Securities
and Exchange Commission for registration of the Certificates and the fees
charged by any rating agency to rate the Certificates. All other costs and
expenses in connection with the transactions contemplated hereunder shall be
borne by the party incurring such expense.

                  SECTION 11.       [Reserved].

                  SECTION 12. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST.
The sale and delivery on the Closing Date of the Mortgage Loans described on the
Mortgage Loan Schedule in accordance with the terms and conditions of this
Agreement is mandatory. It is specifically understood and agreed that each
Mortgage Loan is unique and identifiable on the date hereof and that an award of
money damages would be insufficient to compensate the Purchaser for the losses
and damages incurred by the Purchaser in the event of the Seller's failure to
deliver the Mortgage Loans on or before the Closing Date. The Seller hereby
grants to the Purchaser a lien on and a continuing security interest in the
Seller's interest in each Mortgage Loan and each document and instrument
evidencing each such Mortgage Loan to secure the performance by the Seller of
its obligation hereunder, and the Seller agrees that it holds such Mortgage
Loans in custody for the Purchaser, subject to the Purchaser's (i) right, prior
to the Closing Date, to reject any Mortgage Loan to the extent permitted by this
Agreement, and (ii) obligation to deliver or cause to be delivered the
consideration for the Mortgage Loans pursuant to Section 8 hereof. Any Mortgage
Loans rejected by the Purchaser shall concurrently therewith be released from
the security interest created hereby.
The Seller agrees that, upon acceptance of the Mortgage Loans by the Purchaser
or its designee and delivery of payment to the Seller, that its security
interest in the Mortgage Loans shall be released.
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 or equity and all such rights and remedies may be exercised
concurrently, independently or successively.

                  Notwithstanding the foregoing, if on the Closing Date, each of
the conditions set forth in Section 8 hereof shall have been satisfied and the
Purchaser shall not have paid or caused to be paid the Purchase Price, or any
such condition shall not have been waived or satisfied and the Purchaser
determines not to pay or cause to be paid the Purchase Price, the Purchaser
shall immediately effect the redelivery of the Mortgage Loans, if delivery to
the Purchaser has occurred and the security interest created by this Section 12
shall be deemed to have been released.

<PAGE>

                                      -14-

                  SECTION 13. NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by telex or telegraph and confirmed by a similar mailed writing, if
to the Purchaser, addressed to the Purchaser at 390 Greenwich Street, New York,
New York 10013, Attention: Mortgage Finance Group, or such other address as may
hereafter be furnished to the Seller in writing by the Purchaser; if to the
Seller, addressed to the Seller at 390 Greenwich Street, New York, New York
10013, Attention: Mortgage Finance Group, or to such other address as the Seller
may designate in writing to the Purchaser.

                  SECTION 14. SEVERABILITY OF PROVISIONS. Any part, provision,
representation or warranty of this Agreement which is prohibited or which is
held to be void or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof. 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, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction 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.

                  SECTION 15. AGREEMENT OF PARTIES. The Seller and the Purchaser
each agree to execute and deliver such instruments and take such actions as
either of the others may, from time to time, reasonably request in order to
effectuate the purpose and to carry out the terms of this Agree ment and the
Pooling and Servicing Agreement.

                  SECTION 16. SURVIVAL. The Seller agrees that the
representations, warranties and agreements made by it herein and in any
certificate or other instrument delivered pursuant hereto shall be deemed to be
relied upon by the Purchaser, notwithstanding any investigation heretofore or
hereafter made by the Purchaser or on its behalf, and that the representations,
warranties and agreements made by the Seller herein or in any such certificate
or other instrument shall survive the delivery of and payment for the Mortgage
Loans and shall continue in full force and effect, notwithstanding any
restrictive or qualified endorsement on the Mortgage Notes and notwithstanding
subsequent termination of this Agreement, the Pooling and Servicing Agreement or
the Trust Fund.

                  SECTION 17. INDEMNIFICATION. (a) The Seller will indemnify and
hold harmless each of (i) the Purchaser and (ii) each person, if any, who
controls the Purchaser within the meaning of the Securities Act of 1933, as
amended (the "1933 Act") (i) through (iii) collectively, the "Indemnified
Party"), against any losses, claims, damages or liabilities to which such
Indemnified Party may become subject, under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (a) any untrue statement or alleged untrue
statement of any material fact contained in the Prospectus Supplement dated
March 27, 2000 (the "Prospectus Supplement"), as amended or supplemented,
relating to the public offering of the Certificates, representing interests in
the Mortgage Loans, or in any other offering document (the "Private Placement
Memorandum") relating to the offering by the Purchaser or an affiliate

<PAGE>

                                      -15-

thereof, of the Class B-4, Class B-5, and Class B-6 Certificates or in any
revision or amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading in each case to the extent and only
to the extent that such untrue statement or alleged untrue statement or omission
or alleged omission relates to information furnished by the Seller specifically
for use in the Prospectus Supplement, under the captions "Summary of Prospectus
Supplement--The Mortgage Loans," "Risk Factors," "The Mortgage Pool," "Yield on
the Certificates" and "Description of the Certificates"(and substantially
identical information approved by the Seller for inclusion in the Private
Placement Memorandum relating to the Class B-4, Class B-5, Class B-6
Certificates), (b) any representation, warranty or covenant made by the Seller
in this Agreement and (c) any updated collateral information provided by the
Underwriter to a purchaser of the certificates derived from the data provided by
the Seller or in the Remittance Report or a current collateral tape obtained
from the Seller or an affiliate of the Seller, including the current loan
balances of the Mortgage Loans to the extent such information was inaccurate
((a) through (c) collectively, the "Seller Information") and will reimburse each
such Indemnified Party for any legal or other expenses reasonably incurred by
such Indemnified Party and each such controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action.
The Seller's liability under this Section 17 shall be in addition to any other
liability the Seller may otherwise have.

                  (b) The Purchaser agrees to indemnify and hold harmless the
Seller, its officers and its directors, and each person who controls the Seller
within the meaning of the 1933 Act against any and all losses, claims, damages
or liabilities, joint or several, to which they may become subject under the
1933 Act, or other federal or state statutory law or regulation, at common law
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based in whole or in part upon any
untrue statement or alleged untrue statement of a material fact contained in the
Prospectus Supplement, the Prospectus or Private Placement Memorandum, or in any
revision or amendment thereof or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances in which they were made, not misleading, as of
the date thereof and as of the Closing Date, except insofar as such losses,
claims, damages or liabilities are caused by any untrue statement or omission or
alleged untrue statement or omission made therein in reliance upon and in
conformity with the Seller Information and will reimburse the Seller and each
such controlling person for any legal or other expenses reasonably incurred by
the Seller and each such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. The Purchaser's
liability under this Section 17 shall be in addition to any other liability the
Purchaser may otherwise have.

                  (c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either Section 17(a) or 17(b) above, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the

<PAGE>

                                      -16-

indemnifying party may designate in such proceeding and shall pay the reasonable
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the reasonable fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. Such
firm shall be designated in writing by the Purchaser, in the case of parties
indemnified pursuant to clause 17(a) and by the Seller, in the case of parties
indemnified pursuant to clause 17(b). The indemnifying party may, at its option,
at any time upon written notice to the indemnified party, assume the defense of
any proceeding and may designate counsel satisfactory to the indemnified party
in connection therewith provided that the counsel so designated would have no
actual or potential conflict of interest in connection with such representation.
Unless it shall assume the defense of any proceeding, the indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. If the indemnifying party assumes the defense of any
proceeding, it shall be entitled to settle such proceeding with the consent of
the indemnified party or, if such settlement provides for release of the
indemnified party in connection with all matters relating to the proceeding
which have been asserted against the indemnified party in such proceeding by the
other parties to such settlement, without the consent of the indemnified party.

                  (d) If the indemnification provided for in this Section 17 is
unavailable to an indemnified party under Section 17(a) or 17(b) hereof or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities, in
such proportion as is appropriate to reflect the relative fault of the
indemnified and indemnifying parties in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
indemnified and indemnifying parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such parties and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

                  (e) The Purchaser and the Seller agree that it would not be
just and equitable if contribution pursuant to Section 17 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the considerations referred to in Section 17(d) above.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in this Section 17 shall be deemed
to include, subject to the limitations set forth

<PAGE>

                                      -17-

above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim, except
where the indemnified party is required to bear such expenses pursuant to this
Section 17, which expenses the indemnifying party shall pay as and when
incurred, at the request of the indemnified party, to the extent that the
indemnifying party will be ultimately obligated to pay such expenses. In the
event that any expenses so paid by the indemnifying party are subsequently
determined to not be required to be borne by the indemnifying party hereunder,
the party which received such payment shall promptly refund the amount so paid
to the party which made such payment. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.

                  (f) The indemnity and contribution agreements contained in
this Section 17 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement, (ii) any investigation made by the
Purchaser or any person controlling the Purchaser or by or on behalf of the
Seller and their respective directors or officers or any person controlling the
Seller and (iii) acceptance of and payment for any of the Certificates.

                  SECTION 18. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS,
DUTIES, OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS (INCLUDING THE CHOICE OF LAW
PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK. THE PARTIES HERETO INTEND
THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW
SHALL APPLY TO THIS AGREEMENT.

                  SECTION 19. MISCELLANEOUS. This Agreement may be executed in
two or more counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
instrument. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.

                  It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Seller to the Purchaser as provided in
Section 4 hereof be, and be construed as, a sale of the Mortgage Loans by the
Seller to the Purchaser and not as a pledge of the Mortgage Loans by the Seller
to the Purchaser to secure a debt or other obligation of the Seller. However, in
the event that, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Seller, then, (a) it is the
express intent of the parties that such conveyance be deemed a pledge of the
Mortgage Loans by the Seller to the Purchaser to secure a debt or other
obligation of the Seller and (b) (1) this Agreement shall also be deemed to be a
security agreement within the meaning of Articles 8 and 9 of the New York
Uniform Commercial Code; (2) the conveyance provided for in

<PAGE>

                                      -18-

Section 4 hereof shall be deemed to be a grant by the Seller to the Purchaser of
a security interest in all of the Seller's right, title and interest in and to
the Mortgage Loans and all amounts payable to the holders of the Mortgage Loans
in accordance with the terms thereof and all proceeds of the con version,
voluntary or involuntary, of the foregoing into cash, instruments, securities or
other property, including without limitation all amounts, other than investment
earnings, from time to time held or invested in the Collection Account whether
in the form of cash, instruments, securities or other property; (3) the
possession by the Purchaser or its agent of Mortgage Notes, the related
Mortgages and such other items of property that constitute instruments, money,
negotiable documents or chattel paper shall be deemed to be "possession by the
secured party" for purposes of perfecting the security interest pursuant to
Section 9-305 of the New York Uniform Commercial Code; and (4) notifications to
persons holding such property, and acknowledgments, receipts or confirmations
from persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the Purchaser for the purpose of perfecting
such security interest under applicable law.
Any assignment of the interest of the Purchaser pursuant to Section 4(d) hereof
shall also be deemed to be an assignment of any security interest created
hereby. The Seller and the Purchaser shall, to the extent consistent with this
Agreement, take such actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in the Mortgage Loans, such
security interest would be deemed to be a perfected security interest of first
priority under applicable law and will be maintained as such throughout the term
of this Agreement and the Pooling and Servicing Agreement.

<PAGE>

                  IN WITNESS WHEREOF, the Purchaser and the Seller have caused
their names to be signed by their respective officers thereunto duly authorized
as of the date first above written.

                                             SALOMON BROTHERS MORTGAGE
                                             SECURITIES VII, INC.

                                             By:
                                                ------------------------------
                                             Name:
                                             Title:   Assistant Vice President

                                             SALOMON BROTHERS REALTY CORP.

                                             By:
                                                ------------------------------
                                             Name:
                                             Title:   Authorized Agent

<PAGE>

                                                                       EXHIBIT 1

                  [FORM OF OFFICER'S CERTIFICATE OF THE SELLER]

                          Salomon Brothers Realty Corp.

                              Officer's Certificate

                  I, ________________, hereby certify that I am the duly
appointed Authorized Agent of Salomon Brothers Realty Corp., a New York
corporation (the "Seller"), and further certify as follows:

                  1. Attached hereto is a true and correct copy of the
         Certificate of Incorporation and By-laws of the Seller, all of which
         are in full force and effect on the date hereof. There has been no
         amendment or other document filed affecting the Certificate of
         Incorporation of the Seller since December 20, 1982, and no such
         amendment has been authorized. There has been no amendment or other
         document filed affecting the By-laws of the Seller since October 7,
         1986, and no such amendment has been authorized. Attached hereto is a
         good standing certificate issued by the Secretary of State of the State
         of New York with respect to the Seller. No event has occurred since the
         date thereof that, to the best knowledge of the undersigned, has
         affected the good standing of the Seller under the laws of New York.

                  2. There are no actions, suits or proceedings pending or, to
         the best of my knowledge, threatened against or affecting the Seller
         which, if adversely determined, individually or in the aggregate, would
         materially and adversely affect the Seller's ability to perform its
         obligations under the Mortgage Loan Purchase Agreement (the "Mortgage
         Loan Purchase Agreement"), dated March __, 2000, between the Seller and
         Salomon Brothers Mortgage Securities VII, Inc (the "Depositor"). No
         proceedings looking toward merger, consolidation or liquidation,
         dissolution or bankruptcy of the Seller are pending or contemplated.

                  3. Each person who, as an officer or representative of the
         Seller, signed the Mortgage Loan Purchase Agreement and any other
         document delivered prior hereto or on the date hereof in connection
         with the purchase described in the Mortgage Loan Purchase Agreement
         was, at the respective times of such signing and delivery, and is now,
         duly elected or appointed, qualified and acting as such officer or
         representative, and the signatures of such persons appearing on such
         documents are their genuine signatures.

                  4. All of the representations and warranties of the Seller
         under the Mortgage Loan Purchase Agreement are true and correct in all
         material respects as of the Closing Date subject, in the case of the
         Closing Schedule delivered pursuant to the Mortgage Loan Purchase
         Agreement, to such amendments thereto as were duly made on or before
         the date hereof and no event has occurred with respect to the Seller
         which, with notice or the passage of time or both, would constitute a
         default under the Mortgage Loan Purchase Agreement.

<PAGE>

                                       -2-

                  5. The information set forth in the Mortgage Loan Schedule
         attached as an exhibit to the Pooling and Servicing Agreement is true
         and correct in all material respects.

                  6. The transactions contemplated in the Mortgage Loan Purchase
         Agreement will be reported as a sale in the Seller's financial reports.

                  7. With respect to its sale of the Mortgage Loans and the
         transactions and undertakings contemplated by the Mortgage Loan
         Purchase Agreement, the Seller has complied in all material respects
         with all the obligations by which it is bound and has satisfied in all
         material respects all the conditions on its part to be performed or
         satisfied prior to the Closing Date.

                  8. Capitalized terms used but not defined herein shall have
         the meanings assigned in the Mortgage Loan Purchase Agreement.

<PAGE>

                                       -3-

                  IN WITNESS WHEREOF, I have hereunto signed my name.

Dated:
                                                    By:
                                                       ------------------------
                                                    Name:
                                                    Title:     Authorized Agent

                  I, _____________________________, an ________________ of
Salomon Brothers Realty Corp., hereby certify that ________________ is a duly
appointed, qualified and acting Authorized Agent of the Seller and that the
signature appearing above is his genuine signature.

                  IN WITNESS WHEREOF, I have hereunto signed my name.

Dated:
                                                    By:
                                                       ------------------------
                                                    Name:
                                                    Title:

<PAGE>

                                                                       EXHIBIT 2

                  [FORM OF OFFICER'S CERTIFICATE OF THE SELLER]

                                   CERTIFICATE
                                       OF
                          SALOMON BROTHERS REALTY CORP.

         This Certificate is being delivered to Thacher Proffitt & Wood ("TPW")
for reliance hereon by TPW in rendering its opinion letter to which this
Certificate is annexed, dated the date hereof (the "Opinion Letter"). The
undersigned and the individual signing on its behalf understand, acknowledge and
agree that the facts set forth in the Opinion Letter have been relied upon by
TPW in rendering the Opinion Letter and by each addressee thereof and other
parties to the transactions to which the Opinion Letter relates in the
consummation of those transactions. Capitalized terms not defined herein have
the meanings assigned to them in the Opinion Letter and the Agreements.
The undersigned hereby represents, warrants, covenants and certifies after
reasonable investigation as follows:

                  Reference is made to the sale of mortgage loans (the "Mortgage
Loans") by Salomon Brothers Realty Corp. ("SBRC") to Salomon Brothers Mortgage
Securities VII, Inc. (the "Depositor") pursuant to a Mortgage Loan Purchase
Agreement, dated March __, 2000 (the "Purchase Agreement"), between the
Depositor and SBRC and the simultaneous issuance of Mortgage Pass-Through
Certificates, Series 2000-1, Class A-1, Class A-2, Class PO, Class IO, Class
B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class R-I and Class
R-II (the "Certificates"), pursuant to a Pooling and Servicing Agreement, dated
as of March 1, 2000 (the "Pooling and Servicing Agreement"), among the Depositor
as depositor, Citicorp Mortgage, Inc. as master servicer (in such capacity, the
"Master Servicer") and as Trust Administrator (in such capacity, the "Trust
Administrator"), U.S. Bank Trust National Association as co-trustee (the "Co-
trustee) and U.S. Bank National as trustee (the "Trustee"). In consideration for
its purchase of the Mortgage Loans, the Depositor will deliver to SBRC
immediately available funds. The Depositor will sell the Certificates to Salomon
Smith Barney Inc. (the "Underwriter") pursuant to the terms of an Underwriting
Agreement, dated March __, 2000 (the "Underwriting Agreement"), between the
Depositor and the Underwriter. The Purchase Agreement, the Pooling and Servicing
Agreement and the Underwriting Agreement collectively, are hereinafter referred
to as the "Agreements." Capitalized terms not otherwise defined herein have the
meanings set forth in the Agreements.

         Pursuant to the Mortgage Loan Purchase Agreement, the Seller sold the
Mortgage Loans to the Depositor for consideration (the "Mortgage Loan Purchase
Price") consisting of the cash proceeds of the sale of the Underwritten
Certificates pursuant to the Underwriting Agreement. Pursuant to the Pooling and
Servicing Agreement, the Depositor transferred the Mortgage Loans to the Trustee
in exchange for the Certificates. Pursuant to the Underwriting Agreement, the
Depositor sold the Underwritten Certificates to the Purchaser in exchange for
cash proceeds. The Depositor remitted those cash proceeds to the Seller in
payment of the Mortgage Loan Purchase Price.

<PAGE>

                                       -2-

         1. The transfer of the Mortgage Loans by the undersigned pursuant to
the Agreements was intended to be a sale and to be reported as such under
generally accepted accounting principles ("GAAP") and for federal income tax
purposes.

         2. In connection with the sale of the Mortgage Loans by the undersigned
pursuant to the Agreements, the undersigned (i) was solvent at all relevant
times prior thereto and was not rendered insolvent thereby, (ii) after giving
effect thereto, is able to pay its debts as they mature, (iii) was not left with
unreasonably small capital for the business in which it is engaged and proposes
to be engaged, (iv) had and has no intention of commencing any bankruptcy,
insolvency or similar proceeding, (v) did not and does not have any intent to
hinder, delay or defraud any of the undersigned's creditors, (vi) had a valid
business reason therefor and (vii) received new value and consideration
constituting reasonably equivalent value and fair consideration.

         3. The undersigned has not acquired, and will not acquire at any time,
any direct or indirect ownership or other economic interest in, or other right
or obligation with respect to, any Mortgage Loan or Certificate, except as
described in the Agreements.

         4. The factual assumptions in the Opinion Letter are accurate.

         The undersigned has executed this Certificate as of March __, 20000.

                                            SALOMON BROTHERS REALTY CORP.

                                            By:_________________________________
                                            Name:
                                            Title:

<PAGE>

                                                                       EXHIBIT 3

                   [FORM OF OPINION OF COUNSEL TO THE SELLER]

                                   SEE TAB 10

<PAGE>

                                                                       EXHIBIT 4

                                                    DEFINITIONS

         "Applicable Requirements" shall mean, as of the time of reference, with
respect to the Mortgage Loans and the origination, closing, pooling and
servicing thereof, all of the (a) contractual obligations of Citicorp Mortgage,
Inc. ("Citicorp") or the Seller, as applicable, including without limitation
those contractual obligations of Citicorp contained in the Transfer of
Termination Rights and Servicing Agreement, dated as of November 9, 1999,
between Citicorp and Salomon Smith Barney Inc., in any agreement with an
insurer, in the Mortgage Loan Documents; (b) all applicable federal, state and
local legal and regulatory requirements (including statutes, rules, regulations
and ordinances) binding upon Citicorp or the Seller, as applicable; (c) all
other applicable requirements and guidelines of each governmental agency, board,
commission, instrumentality and other governmental or quasi-governmental body or
officer having jurisdiction and (d) all other applicable judicial and
administrative judgments, orders, stipulations, awards, writs and injunctions.

         "Customary Servicing Procedures" shall mean procedures (including
collection procedures) that Citicorp customarily employs and exercises in
servicing and administering mortgage loans for its own account and which are in
accordance with accepted mortgage servicing practices of prudent lending
institutions.

         "Knowledge" shall mean the actual knowledge of any senior officers
(senior vice president or above) of the Seller.

         "Mortgage Loan Documents" shall mean the Mortgage Note, Mortgage,
credit and closing packages (including disclosures), custodial documents,
servicing documents, escrow documents and all other documents, records and tapes
relating to a Mortgage Loan that are required to document and service the
Mortgage Loan in accordance with Applicable Requirements, whether on hard copy,
microfiche, microfilm or its equivalent or in electronic format.

<PAGE>

                                                                       EXHIBIT 5

                  Pool Characteristics of the Mortgage Loans as delivered on the
Closing Date:

                  All percentages set forth herein are based upon the aggregate
unpaid principal balances of the Mortgage Loans as of the Cut-off Date.

         (1)      No Mortgage Loan had a Loan-to-Value Ratio in excess of
                  83.62%;

         (2)      No more than 1.74% of the Mortgage Loans (measured by the
                  Cut-off Date Principal Balance), are related to Mortgaged
                  Properties located in any one zip code area;

         (3)      Each Mortgaged Property is located in one of the states listed
                  in the chart entitled "Geographic Distribution of the
                  Mortgaged Properties" in the Prospectus Supplement;

         (4)      No more than approximately 7.45% of the Mortgage Loans
                  (measured by the Cut-off Date Principal Balance) are secured
                  by condominium units and all condominium Mortgage Loans have
                  been originated on a form acceptable to Fannie Mae or Freddie
                  Mac with such riders as have been acceptable to Fannie Mae or
                  Freddie Mac, as the case may be;

         (5)      No more than 0.45% of the Mortgage Loans (measured by the
                  Cut-off Date Principal Balance) are secured by two- to
                  four-family dwellings. None of the Mortgage Loans are secured
                  by Town Houses or Manufactured Housing. No more than 0.16% of
                  the Mortgage Loans (measured by the Cut-off Date Principal
                  Balance) are secured by dwelling units in PUDs;

         (6)      No Mortgage Loan had a principal balance in excess of $689,817
                  at origination;

         (7)      Each Mortgage Loan was originated between May 1987 and May
                  1992;

         (8)      On the basis of representations made by the Mortgagors in
                  their loan applications, no more than 6.59% of the Mortgage
                  Loans are secured by investor properties or by second homes
                  and at least 93.41% of the Mortgage Loans are owner-occupied
                  Mortgaged Properties (in each case measured by the Cut-off
                  Date Principal Balance);

         (9)      The Mortgage Rates borne by the Mortgage Loans as of the
                  Cut-off Date ranged from 8.250% per annum to 11.250% per annum
                  and the weighted average Mortgage Interest Rate as of the
                  Cut-off Date was 9.3491% per annum;

         (10)     As of the Cut-off Date, approximately 26.28% of the Mortgage
                  Loans were rate/term refinancings, approximately 21.74% of the
                  Mortgage Loans were cash out refinancings and approximately
                  51.98% of the Mortgage Loans were made to purchase the related
                  Mortgaged Properties;

<PAGE>

                                   EXHIBIT E-1
                                   -----------

                               REQUEST FOR RELEASE
                             (for Trustee/Custodian)

Loan Information
----------------

     Name of Mortgagor:       __________________________________

     Master Servicer
     Loan No.:                __________________________________

Trustee/Custodian

     Name:                    __________________________________

     Address:                 __________________________________
                              __________________________________

     Trustee/Custodian
     Mortgage File No.:       __________________________________

Depositor
---------

     Name:                SALOMON BROTHERS MORTGAGE
                              SECURITIES VII, INC.

     Address:                 __________________________________
                              __________________________________

     Certificates:            Mortgage Pass-Through Certificates,
                              Series 2000-1.

<PAGE>

          The undersigned Master Servicer hereby acknowledges that it has
received from _______________________, as Trustee for the Holders of Mortgage
Pass-Through Certificates, Series 2000-1, the documents referred to below (the
"Documents"). All capitalized terms not otherwise defined in this Request for
Release shall have the meanings given them in the Pooling and Servicing
Agreement, dated as of March 1, 2000, among the Trustee, the Depositor and the
Master Servicer (the "Pooling and Servicing Agreement").

()   Promissory Note dated _______________, 20__, in the original principal sum
     of $__________, made by _____________________, payable to, or endorsed to
     the order of, the Trustee.

()   Mortgage recorded on _________________________ as instrument no.
     ____________________ in the County Recorder's Office of the County of
     _________________, State of __________________ in book/reel/docket
     _________________ of official records at page/image _____________.

()   Deed of Trust recorded on ___________________ as instrument no.
     ________________ in the County Recorder's Office of the County of
     _________________, State of ____________________ in book/reel/docket
     _________________ of official records at page/image ______________.

()   Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
     ___________________ as instrument no. _________ in the County Recorder's
     Office of the County of _______________, State of _______________________
     in book/reel/docket ____________ of official records at page/image
     ____________.

()   Other documents, including any amendments, assignments or other assumptions
     of the Mortgage Note or Mortgage.

()   ______________________________________________

()   ______________________________________________

()   ______________________________________________

()   ______________________________________________

          The undersigned Master Servicer hereby acknowledges and agrees as
follows:

          (1) The Master Servicer shall hold and retain possession of the
     Documents in trust for the benefit of the Trustee, solely for the purposes
     provided in the Agreement.

          (2) The Master Servicer shall not cause or permit the Documents to
     become subject to, or encumbered by, any claim, liens, security interest,
     charges, writs of attachment or other impositions nor shall the Master
     Servicer assert or seek to assert any claims or rights of setoff to or
     against the Documents or any proceeds thereof.

<PAGE>

          (3) The Master Servicer shall return each and every Document
     previously requested from the Mortgage File to the Trustee when the need
     therefor no longer exists, unless the Mortgage Loan relating to the
     Documents has been liquidated and the proceeds thereof have been remitted
     to the Collection Account and except as expressly provided in the
     Agreement.

          (4) The Documents and any proceeds thereof, including any proceeds of
     proceeds, coming into the possession or control of the Master Servicer
     shall at all times be earmarked for the account of the Trustee, and the
     Master Servicer shall keep the Documents and any proceeds separate and
     distinct from all other property in the Master Servicer's possession,
     custody or control.

Dated:

                                     [Master Servicer]

                                     By:____________________________
                                     Name:__________________________
                                     Title:_________________________

<PAGE>

                                   EXHIBIT E-2
                                   -----------

                               REQUEST FOR RELEASE
                          [Mortgage Loans Paid in Full]

                     OFFICERS' CERTIFICATE AND TRUST RECEIPT
                       MORTGAGE PASS-THROUGH CERTIFICATES
                                  Series 2000-1

____________________________________________________ HEREBY CERTIFIES THAT
HE/SHE IS AN OFFICER OF THE MASTER SERVICER, HOLDING THE OFFICE SET FORTH
BENEATH HIS/HER SIGNATURE, AND HEREBY FURTHER CERTIFIES AS FOLLOWS:

WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE POOLING AND
SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:

ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN
MADE.

LOAN NUMBER:_________________                BORROWER'S NAME:_________________

COUNTY:______________________

WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE POOLING AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.

__________________________________          DATED:______________________

/ /   VICE PRESIDENT

/ /   ASSISTANT VICE PRESIDENT

<PAGE>

                                   EXHIBIT F-1
                                   -----------

                    FORM OF TRANSFEROR REPRESENTATION LETTER

                                     [Date]

[Trustee]
______________________
______________________

               Re:  Salomon Brothers Mortgage Securities VII, Inc., Mortgage
                    Pass-Through Certificates, Series 2000-1, Class ___,
                    representing a ___% Class ___ Percentage Interest
                    ---------------------------------------------------------

Ladies and Gentlemen:

          In connection with the transfer by ________________ (the "Transferor")
to ________________ (the "Transferee") of the captioned mortgage pass-through
certificates (the "Certificates"), the Transferor hereby certifies as follows:

          Neither the Transferor nor anyone acting on its behalf has (a)
offered, pledged, sold, disposed of or otherwise transferred any Certificate,
any interest in any Certificate or any other similar security to any person in
any manner, (b) has solicited any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c) has
otherwise approached or negotiated with respect to any Certificate, any interest
in any Certificate or any other similar security with any person in any manner,
(d) has made any general solicitation by means of general advertising or in any
other manner, (e) has taken any other action, that (in the case of each of
subclauses (a) through (e) above) would constitute a distribution of the
Certificates under the Securities Act of 1933, as amended (the "1933 Act"), or
would render the disposition of any Certificate a violation of Section 5 of the
1933 Act or any state securities law or would require registration or
qualification pursuant thereto. The Transferor will not act, nor has it
authorized or will it authorize any person to act, in any manner set forth in
the foregoing sentence with respect to any Certificate. The Transferor will not
sell or otherwise transfer any of the Certificates, except in compliance with
the provisions of that certain Pooling and Servicing Agreement, dated as of
March 1, 2000, among Salomon Brothers Mortgage Securities VII, Inc. as
Depositor, Citicorp Mortgage, Inc. as Master Servicer and Trust Administrator
and U.S. Bank National Association as Trustee (the "Pooling and Servicing
Agreement"), pursuant to which Pooling and Servicing Agreement the Certificates
were issued.

<PAGE>

          Capitalized terms used but not defined herein shall have the meanings
assigned thereto in the Pooling and Servicing Agreement.

                                         Very truly yours,

                                         [Transferor]

                                         By:__________________________
                                         Name:________________________
                                         Title:_______________________

<PAGE>

                    FORM OF TRANSFEREE REPRESENTATION LETTER

                                                 [Date]

[Trustee]

               Re:  Salomon Brothers Mortgage Securities VII, Inc., Mortgage
                    Pass-Through Certificates, Series 2000-1, Class ___,
                    representing a ___% Class ___ Percentage Interest
                    ---------------------------------------------------------

Ladies and Gentlemen:

          In connection with the purchase from ______________________ (the
"Transferor") on the date hereof of the captioned trust certificates (the
"Certificates"), _______________ (the "Transferee") hereby certifies as follows:

          1. The Transferee is a "qualified institutional buyer" as that term is
     defined in Rule 144A ("Rule 144A") under the Securities Act of 1933 (the
     "1933 Act") and has completed either of the forms of certification to that
     effect attached hereto as Annex 1 or Annex 2. The Transferee is aware that
     the sale to it is being made in reliance on Rule 144A. The Transferee is
     acquiring the Certificates for its own account or for the account of a
     qualified institutional buyer, and understands that such Certificate may be
     resold, pledged or transferred only (i) to a person reasonably believed to
     be a qualified institutional buyer that purchases for its own account or
     for the account of a qualified institutional buyer to whom notice is given
     that the resale, pledge or transfer is being made in reliance on Rule 144A,
     or (ii) pursuant to another exemption from registration under the 1933 Act.

          2. The Transferee has been furnished with all information regarding
     (a) the Certificates and distributions thereon, (b) the nature, performance
     and servicing of the Mortgage Loans, (c) the Pooling and Servicing
     Agreement referred to below, and (d) any credit enhancement mechanism
     associated with the Certificates, that it has requested.

<PAGE>

          All capitalized terms used but not otherwise defined herein have the
respective meanings assigned thereto in the Pooling and Servicing Agreement,
dated as of March 1, 2000, among Salomon Brothers Mortgage Securities VII, Inc.
as Depositor, Citicorp Mortgage, Inc. as Master Servicer and Trust Administrator
and U.S. Bank National Association as Trustee, pursuant to which the
Certificates were issued.

                                      [TRANSFEREE]

                                      By:______________________________
                                      Name:____________________________
                                      Title:___________________________

<PAGE>

                                                          ANNEX 1 TO EXHIBIT F-1
                                                          ----------------------

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

          [For Transferees Other Than Registered Investment Companies]

          The undersigned hereby certifies as follows to [name of Transferor]
(the "Transferor") and U.S. Bank National Association, as Trustee, with respect
to the mortgage pass- through certificates (the "Certificates") described in the
Transferee Certificate to which this certification relates and to which this
certification is an Annex:

          1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
entity purchasing the Certificates (the "Transferee").

          2. In connection with purchases by the Transferee, the Transferee is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because (i) the Transferee owned and/or
invested on a discretionary basis $______________________1 in securities (except
for the excluded securities referred to below) as of the end of the Transferee's
most recent fiscal year (such amount being calculated in accordance with Rule
144A) and (ii) the Transferee satisfies the criteria in the category marked
below.

     ___  CORPORATION, ETC. The Transferee is a corporation (other than a bank,
          savings and loan association or similar institution), Massachusetts or
          similar business trust, partnership, or any organization described in
          Section 501(c)(3) of the Internal Revenue Code of 1986.

     ___  BANK. The Transferee (a) is a national bank or banking institution
          organized under the laws of any State, territory or the District of
          Columbia, the business of which is substantially confined to banking
          and is supervised by the State or territorial banking commission or
          similar official or is a foreign bank or equivalent institution, and
          (b) has an audited net worth of at least $25,000,000 as demonstrated
          in its latest annual financial statements, a copy of which is attached
          hereto.

     ___  SAVINGS AND LOAN. The Transferee (a) is a savings and loan
          association, building and loan association, cooperative bank,
          homestead association or similar institution, which is supervised and
          examined by a State or Federal authority having supervision over any
          such institutions or is a foreign savings and loan association or
          equivalent institution and (b) has an audited net worth of at least

_________________________

1 Transferee must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Transferee is a dealer, and, in that case,
Transferee must own and/or invest on a discretionary basis at least $10,000,000
in securities.

<PAGE>

          $25,000,000 as demonstrated in its latest annual financial statements,
          A COPY OF WHICH IS ATTACHED HERETO.

     ___  BROKER-DEALER. The Transferee is a dealer registered pursuant to
          Section 15 of the Securities Exchange Act of 1934.

     ___  INSURANCE COMPANY. The Transferee is an insurance company whose
          primary and predominant business activity is the writing of insurance
          or the reinsuring of risks underwritten by insurance companies and
          which is subject to supervision by the insurance commissioner or a
          similar official or agency of a State, territory or the District of
          Columbia.

     ___  STATE OR LOCAL PLAN. The Transferee is a plan established and
          maintained by a State, its political subdivisions, or any agency or
          instrumentality of the State or its political subdivisions, for the
          benefit of its employees.

     ___  ERISA PLAN. The Transferee is an employee benefit plan within the
          meaning of Title I of the Employee Retirement Income Security Act of
          1974.

     ___  INVESTMENT ADVISOR. The Transferee is an investment advisor registered
          under the Investment Advisers Act of 1940.

          3. The term "SECURITIES" as used herein DOES NOT INCLUDE (i)
securities of issuers that are affiliated with the Transferee, (ii) securities
that are part of an unsold allotment to or subscription by the Transferee, if
the Transferee is a dealer, (iii) securities issued or guaranteed by the U.S. or
any instrumentality thereof, (iv) bank deposit notes and certificates of
deposit, (v) loan participations, (vi) repurchase agreements, (vii) securities
owned but subject to a repurchase agreement and (viii) currency, interest rate
and commodity swaps.

          4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Transferee, the Transferee
used the cost of such securities to the Transferee and did not include any of
the securities referred to in the preceding paragraph. Further, in determining
such aggregate amount, the Transferee may have included securities owned by
subsidiaries of the Transferee, but only if such subsidiaries are consolidated
with the Transferee in its financial statements prepared in accordance with
generally accepted accounting principles and if the investments of such
subsidiaries are managed under the Transferee's direction. However, such
securities were not included if the Transferee is a majority-owned, consolidated
subsidiary of another enterprise and the Transferee is not itself a reporting
company under the Securities Exchange Act of 1934.

          5. The Transferee acknowledges that it is familiar with Rule 144A and
understands that the Transferor and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Transferee may be in reliance on Rule 144A.

    ___   ___    Will the Transferee be purchasing the Certificates

<PAGE>

    Yes   No     only for the Transferee's own account?

          6. If the answer to the foregoing question is "no", the Transferee
agrees that, in connection with any purchase of securities sold to the
Transferee for the account of a third party (including any separate account) in
reliance on Rule 144A, the Transferee will only purchase for the account of a
third party that at the time is a "qualified institutional buyer" within the
meaning of Rule 144A. In addition, the Transferee agrees that the Transferee
will not purchase securities for a third party unless the Transferee has
obtained a current representation letter from such third party or taken other
appropriate steps contemplated by Rule 144A to conclude that such third party
independently meets the definition of "qualified institutional buyer" set forth
in Rule 144A.

          7. The Transferee will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Transferee's purchase of the Certificates will
constitute a reaffirmation of this certification as of the date of such
purchase. In addition, if the Transferee is a bank or savings and loan as
provided above, the Transferee agrees that it will furnish to such parties
updated annual financial statements promptly after they become available.

Dated:

                                    Print Name of Transferee

                                    By:_____________________________
                                    Name:___________________________
                                    Title:__________________________

<PAGE>

                                                          ANNEX 2 TO EXHIBIT F-1
                                                          ----------------------

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

           [For Transferees That Are Registered Investment Companies]

          The undersigned hereby certifies as follows to [name of Transferor]
(the "Transferor") and U.S. Bank National Association, as Trustee, with respect
to the mortgage pass- through certificates (the "Certificates") described in the
Transferee Certificate to which this certification relates and to which this
certification is an Annex:

          1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the entity purchasing the
Certificates (the "Transferee") or, if the Transferee is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because the Transferee is part of a Family of
Investment Companies (as defined below), is such an officer of the investment
adviser (the "Adviser").

          2. In connection with purchases by the Transferee, the Transferee is a
"qualified institutional buyer" as defined in Rule 144A because (i) the
Transferee is an investment company registered under the Investment Company Act
of 1940, and (ii) as marked below, the Transferee alone, or the Transferee's
Family of Investment Companies, owned at least $100,000,000 in securities (other
than the excluded securities referred to below) as of the end of the
Transferee's most recent fiscal year. For purposes of determining the amount of
securities owned by the Transferee or the Transferee's Family of Investment
Companies, the cost of such securities was used.

____      The Transferee owned $___________________ in securities (other than
          the excluded securities referred to below) as of the end of the
          Transferee's most recent fiscal year (such amount being calculated in
          accordance with Rule 144A).

____      The Transferee is part of a Family of Investment Companies which owned
          in the aggregate $______________ in securities (other than the
          excluded securities referred to below) as of the end of the
          Transferee's most recent fiscal year (such amount being calculated in
          accordance with Rule 144A).

          3. The term "FAMILY OF INVESTMENT COMPANIES" as used herein means two
or more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).

          4. The term "SECURITIES" as used herein does not include (i)
securities of issuers that are affiliated with the Transferee or are part of the
Transferee's Family of Investment Companies, (ii) securities issued or
guaranteed by the U.S. or any instrumentality thereof, (iii) bank deposit notes
and certificates of deposit, (iv) loan participations, (v) repurchase
agreements,

<PAGE>

(vi) securities owned but subject to a repurchase agreement and (vii) currency,
interest rate and commodity swaps.

          5. The Transferee is familiar with Rule 144A and understands that the
parties to which this certification is being made are relying and will continue
to rely on the statements made herein because one or more sales to the
Transferee will be in reliance on Rule 144A. In addition, the Transferee will
only purchase for the Transferee's own account.

          6. The undersigned will notify the parties to which this certification
is made of any changes in the information and conclusions herein. Until such
notice, the Transferee's purchase of the Certificates will constitute a
reaffirmation of this certification by the undersigned as of the date of such
purchase.

Dated:

                                      _____________________________________
                                      Print Name of Transferee or Advisor

                                      By:__________________________________
                                      Name:________________________________
                                      Title:_______________________________

                                      IF AN ADVISER:

                                      _____________________________________
                                      Print Name of Transferee

<PAGE>

                    FORM OF TRANSFEREE REPRESENTATION LETTER

          The undersigned hereby certifies on behalf of the purchaser named
below (the "Purchaser") as follows:

          1. I am an executive officer of the Purchaser.

          2. The Purchaser is a "qualified institutional buyer", as defined in
     Rule 144A, ("Rule 144A") under the Securities Act of 1933, as amended.

          3. As of the date specified below (which is not earlier than the last
     day of the Purchaser's most recent fiscal year), the amount of
     "securities", computed for purposes of Rule 144A, owned and invested on a
     discretionary basis by the Purchaser was in excess of $100,000,000.

Name of Purchaser _____________________________________________________________

By: (Signature) _______________________________________________________________

Name of Signatory _____________________________________________________________

Title _________________________________________________________________________

Date of this certificate ______________________________________________________

Date of information provided in paragraph 3 ___________________________________

<PAGE>

                                   EXHIBIT F-2
                                   -----------

                    FORM OF TRANSFER AFFIDAVIT AND AGREEMENT

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

          ______________________ , being duly sworn, deposes, represents and
warrants as follows:

          1. I am a ______________________ of ____________________________ (the
"Owner") a corporation duly organized and existing under the laws of
______________, the record owner of Salomon Brothers Mortgage Securities VII,
Inc., Mortgage Pass-Through Certificates, Series 2000-1, [Class R-I] [and Class
R-II] (the "Class R Certificates"), on behalf of whom I make this affidavit and
agreement. Capitalized terms used but not defined herein have the respective
meanings assigned thereto in the Pooling and Servicing Agreement pursuant to
which the Class R Certificates were issued.

          2. The Owner (i) is and will be a "Permitted Transferee" as of
____________________, 200___ and (ii) is acquiring the Class R Certificates for
its own account or for the account of another Owner from which it has received
an affidavit in substantially the same form as this affidavit. A "Permitted
Transferee" is any person other than a "disqualified organization" or a
possession of the United States. For this purpose, a "disqualified organization"
means the United States, any state or political subdivision thereof, any agency
or instrumentality of any of the foregoing (other than an instrumentality all of
the activities of which are subject to tax and, except for the Federal Home Loan
Mortgage Corporation, a majority of whose board of directors is not selected by
any such governmental entity) or any foreign government, international
organization or any agency or instrumentality of such foreign government or
organization, any rural electric or telephone cooperative, or any organization
(other than certain farmers' cooperatives) that is generally exempt from federal
income tax unless such organization is subject to the tax on unrelated business
taxable income.

          3. The Owner is aware (i) of the tax that would be imposed on
transfers of the Class R Certificates to disqualified organizations under the
Internal Revenue Code of 1986 that applies to all transfers of the Class R
Certificates after March 31, 1988; (ii) that such tax would be on the transferor
or, if such transfer is through an agent (which person includes a broker,
nominee or middleman) for a non-Permitted Transferee, on the agent; (iii) that
the person otherwise liable for the tax shall be relieved of liability for the
tax if the transferee furnishes to such person an affidavit that the transferee
is a Permitted Transferee and, at the time of transfer, such person does not
have actual knowledge that the affidavit is false; and (iv) that each of the
Class R Certificates may be a "noneconomic residual interest" within the meaning
of proposed Treasury regulations promulgated under the Code and that the
transferor of a "noneconomic residual interest" will remain liable for any taxes
due with respect to the income on such residual

<PAGE>

interest, unless no significant purpose of the transfer is to impede the
assessment or collection of tax.

          4. The Owner is aware of the tax imposed on a "pass-through entity"
holding the Class R Certificates if, at any time during the taxable year of the
pass-through entity, a non-Permitted Transferee is the record holder of an
interest in such entity. (For this purpose, a "pass-through entity" includes a
regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.)

          5. The Owner is aware that the Trustee will not register the transfer
of any Class R Certificate unless the transferee, or the transferee's agent,
delivers to the Trustee, among other things, an affidavit in substantially the
same form as this affidavit. The Owner expressly agrees that it will not
consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.

          6. The Owner consents to any additional restrictions or arrangements
that shall be deemed necessary upon advice of counsel to constitute a reasonable
arrangement to ensure that the Class R Certificates will only be owned, directly
or indirectly, by an Owner that is a Permitted Transferee.

          7. The Owner's taxpayer identification number is ___________________.

          8. The Owner has reviewed the restrictions set forth on the face of
the Class R Certificates and the provisions of Section 5.02(d) of the Pooling
and Servicing Agreement under which the Class R Certificates were issued (in
particular, clauses (iii)(A) and (iii)(B) of Section 5.02(d) which authorize the
Trustee to deliver payments to a person other than the Owner and negotiate a
mandatory sale by the Trustee in the event that the Owner holds such Certificate
in violation of Section 5.02(d)); and that the Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.

          9. The Owner is not acquiring and will not transfer the Class R
Certificates in order to impede the assessment or collection of any tax.

          10. The Owner anticipates that it will, so long as it holds
the Class R Certificates, have sufficient assets to pay any taxes owed by the
holder of such Class R Certificates, and hereby represents to and for the
benefit of the person from whom it acquired the Class R Certificates that the
Owner intends to pay taxes associated with holding such Class R Certificates as
they become due, fully understanding that it may incur tax liabilities in excess
of any cash flows generated by the Class R Certificates.

          11. The Owner has no present knowledge that it may become insolvent or
subject to a bankruptcy proceeding for so long as it holds the Class R
Certificates.

          12. The Owner has no present knowledge or expectation that it will be
unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding.

<PAGE>

          13. The Owner is not acquiring the Class R Certificates with the
intent to transfer the Class R Certificates to any person or entity that will
not have sufficient assets to pay any taxes owed by the holder of such Class R
Certificates, or that may become insolvent or subject to a bankruptcy
proceeding, for so long as the Class R Certificates remain outstanding.

          14. The Owner will, in connection with any transfer that it makes of
the Class R Certificates, obtain from its transferee the representations
required by Section 5.02(d) of the Pooling and Servicing Agreement under which
the Class R Certificate were issued and will not consummate any such transfer if
it knows, or knows facts that should lead it to believe, that any such
representations are false.

          15. The Owner will, in connection with any transfer that it makes of
the Class R Certificates, deliver to the Trustee an affidavit, which represents
and warrants that it is not transferring the Class R Certificates to impede the
assessment or collection of any tax and that it has no actual knowledge that the
proposed transferee: (i) has insufficient assets to pay any taxes owed by such
transferee as holder of the Class R Certificates; (ii) may become insolvent or
subject to a bankruptcy proceeding for so long as the Class R Certificates
remains outstanding; and (iii) is not a "Permitted Transferee".

          16. The Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States may be included in
gross income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.

<PAGE>

          IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
__________, 200___.

                                     [OWNER]

                                     By:________________________________
                                     Name:______________________________
                                     Title:    [Vice] President

ATTEST:

By:____________________________
Name:__________________________
Title:   [Assistant] Secretary

          Personally appeared before me the above-named , known or
proved to me to be the same person who executed the foregoing instrument and to
be a [Vice] President of the Owner, and acknowledged to me that [he/she]
executed the same as [his/her] free act and deed and the free act and deed of
the Owner.

          Subscribed and sworn before me this ____ day of __________, 200___.

                                     ___________________________________
                                                  Notary Public

                                     County of ________________________
                                     State of _________________________

                                     My Commission expires:

<PAGE>

                          FORM OF TRANSFEROR AFFIDAVIT

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

          ______________________________, being duly sworn, deposes, represents
and warrants as follows:

1.   I am a ____________________ of _____________________________ (the "Owner"),
a corporation duly organized and existing under the laws of ______________, on
behalf of whom I make this affidavit.

          2. The Owner is not transferring the [Class R-I][and Class R-II] (the
"Residual Certificates") to impede the assessment or collection of any tax.

          3. The Owner has no actual knowledge that the Person that is the
proposed transferee (the "Purchaser") of the Residual Certificates: (i) has
insufficient assets to pay any taxes owed by such proposed transferee as holder
of the Residual Certificates; (ii) may become insolvent or subject to a
bankruptcy proceeding for so long as the Residual Certificates remain
outstanding and (iii) is not a Permitted Transferee.

          4. The Owner understands that the Purchaser has delivered to the
Trustee a transfer affidavit and agreement in the form attached to the Pooling
and Servicing Agreement as Exhibit F-2. The Owner does not know or believe that
any representation contained therein is false.

          5. At the time of transfer, the Owner has conducted a reasonable
investigation of the financial condition of the Purchaser as contemplated by
Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result of that
investigation, the Owner has determined that the Purchaser has historically paid
its debts as they became due and has found no significant evidence to indicate
that the Purchaser will not continue to pay its debts as they become due in the
future. The Owner understands that the transfer of a Residual Certificate may
not be respected for United States income tax purposes (and the Owner may
continue to be liable for United States income taxes associated therewith)
unless the Owner has conducted such an investigation.

          6. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Pooling and Servicing Agreement

<PAGE>

          IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
___________, 200___.

                                     [OWNER]

                                     By:_______________________________
                                     Name:_____________________________
                                     Title:     [Vice] President

ATTEST:

By:_______________________________
Name:_____________________________
Title:    [Assistant] Secretary

          Personally appeared before me the above-named , known or proved to me
to be the same person who executed the foregoing instrument and to be a [Vice]
President of the Owner, and acknowledged to me that [he/she] executed the same
as [his/her] free act and deed and the free act and deed of the Owner.

          Subscribed and sworn before me this ____ day of __________, 200___.

                                            ___________________________________
                                                      Notary Public

                                            County of ______________________
                                            State of _______________________

                                            My Commission expires:

<PAGE>

                                    EXHIBIT G
                                    ---------

            FORM OF CERTIFICATION WITH RESPECT TO ERISA AND THE CODE

                                                _____________, 200__

Salomon Brothers Mortgage Securities VII, Inc.
390 Greenwich Street
New York, New York 10013

U.S. Bank National Association,
180 East Fifth Street
St. Paul, Minnesota 55101

Citicorp Mortgage, Inc.
15851 Clayton Road
Ballwin, Missouri 63011

               Re: Salomon Brothers Mortgage Securities VII, Inc.
                   Mortgage Pass-Through Certificates, Series 2000-1, Class__
                   ----------------------------------------------------------

Dear Sirs:

          __________________________________ (the "Transferee") intends to
acquire from _____________________ (the "Transferor") $____________ Initial
Certificate Principal Balance of Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Through Certificates, Series 2000-1, [Class B-1][Class B-2][Class
B-3][Class B-4][Class B-5][Class B-6] (the "Certificates"), issued pursuant to a
Pooling and Servicing Agreement (the "Pooling and Servicing Agreement") dated as
of March 1, 2000 among Salomon Brothers Mortgage Securities VII, Inc. as
depositor (the "Depositor"), Citicorp Mortgage, Inc. as master servicer (in such
capacity, the "Master Servicer") and as trust administrator (in such capacity,
the "Trust Administrator") and U.S. Bank National Association as trustee (the
"Trustee"). Capitalized terms used herein and not otherwise defined shall have
the meanings assigned thereto in the Pooling and Servicing Agreement. The
Transferee hereby certifies, represents and warrants to, and covenants with the
Depositor, the Trustee and the Master Servicer that the following statements in
either (1) or (2) are accurate:

         _____ (1) The Certificates (i) are not being acquired by, and will not
         be transferred to, any employee benefit plan within the meaning of
         section 3(3) of the Employee Retirement Income Security Act of 1974, as
         amended ("ERISA"), or other retirement arrangement, including
         individual retirement accounts and annuities, Keogh plans and bank
         collective investment funds and insurance company general or separate
         accounts in which such plans, accounts or arrangements are invested,
         that is subject to Section 406 of ERISA or Section 4975 of the Internal
         Revenue Code of 1986 (the "Code") (any of the

<PAGE>

         foregoing, a "Plan"), (ii) are not being acquired with "plan assets" of
         a Plan within the meaning of the Department of Labor ("DOL")
         regulation, 29 C.F.R. ss. 2510.3-101, and (iii) will not be transferred
         to any entity that is deemed to be investing in plan assets within the
         meaning of the DOL regulation at 29 C.F.R. ss. 2510.3-101; or

         _____ (2) The purchase of Certificates is permissible under applicable
         law, will not constitute or result in any prohibited transaction under
         ERISA or Section 4975 of the Code, will not subject the Depositor, the
         Trustee or the Master Servicer to any obligation in addition to those
         undertaken in the Pooling and Servicing Agreement and the transferee is
         an insurance company and (A) the source of funds used to purchase such
         Certificate is an "insurance company general account" (as such term is
         defined in PTCE 95-60), (B) the conditions set forth in PTCE 95-60 have
         been satisfied and (C) there is no Plan with respect to which the
         amount of such general account's reserves and liabilities for contracts
         held by or on behalf of such Plan and all other Plans maintained by the
         same employer (or any "affiliate" thereof, as defined in PTCE 95-60) or
         by the same employee organization, exceeds 10% of the total of all
         reserves and liabilities of such general account (as determined under
         PTCE 95-60) as of the date of the acquisition of such Certificates.

                                             Very truly yours,

                                             __________________________________

                                             By:_______________________________
                                             Name:
                                             Title:

<PAGE>

                                    EXHIBIT H
                                    ---------

                           FORM OF OMNIBUS ASSIGNMENT
                           --------------------------

     U.S. BANK NATIONAL ASSOCIATION, as trustee for the registered holders of
Salomon Brothers Mortgage Securities VII, Inc., Series __________ (the
"Assignor") for good and valuable consideration, the receipt and sufficiency of
which are acknowledged, hereby sells, transfers, assigns, delivers, sets-over
and conveys (without representation, warranty or recourse) to U.S. BANK NATIONAL
ASSOCIATION, as trustee for the registered holders of Salomon Brothers Mortgage
Securities VII, Inc., Floating Rate Mortgage Pass-Through Certificates, Series
__________, its successors and assigns, all right, title and interest of the
Assignor in and to:

     All of the Mortgage Loans listed on the attached Exhibit A.

     IN WITNESS WHEREOF, Assignor has executed this instrument to be effective
as of the __ day of ______, 200_

                                        U.S. BANK NATIONAL ASSOCIATION, as
                                        trustee for the registered holders of
                                        Salomon Brothers Mortgage Securities
                                        VII, Inc., Series ______

                                        By:____________________________________
                                        Name:
                                        Title:

<PAGE>

                                    EXHIBIT I
                                    ---------

                     FORM OF REPORT PURSUANT TO SECTION 4.07

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549

                                    Form 10-K

     Annualreport pursuant to Section 13 or 15(d) of the Securities Exchange
          Act of 1934 (Fee Required). For fiscal year ended __________

                        Commission file number: 333-84249

                 Salomon Brothers Mortgage Securities VII, Inc.
       (AS DEPOSITOR UNDER THE POOLING AND SERVICING AGREEMENT DATED AS OF
                                 MARCH 1, 2000,
        PROVIDING FOR THE ISSUANCE OF MORTGAGE PASS-THROUGH CERTIFICATES
                                 SERIES 2000-1)
--------------------------------------------------------------------------------

             (Exact name of registrant as specified in its charter)

               Delaware                                13-3439681
               -------------                           ---------------
      (State or Other Jurisdiction                (I.R.S. Employer
            of Incorporation                     Identification Number)

                         390 Greenwich Street, 4th Floor
                            New York, New York 10013
                     --------------------------------------
                       (Address of Principal  (Zip Code)
                        Executive Offices)

                  Registrant's telephone number: (212) 816-6000

           Securities registered pursuant to Section 12(b) of the Act:

                                      None

           Securities registered pursuant to Section 12(g) of the Act:

                                      None

<PAGE>

Indicate whether the Registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
                           X  YES                  No
                         -----                -----

Item 1.  Business:

         Not applicable

Item 2.  Properties:

         Not applicable

Item 3.  Legal Proceedings:

         None

Item 4.  Submission of Matters to a Vote of Security-Holders

         None

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

         To the best knowledge of the registrant there is no established public
         trading market for the certificates.

         There are approximately _____ holders of record as of the end of the
         reporting year.

Item 6.  Selected Financial Data.

         Not applicable.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

         Not applicable

Item 8.  Financial Statements and Supplementary Data.

         Not applicable.

Item 9.  Changes in and Disagreements With Accountants on Accounting and
         Financial Disclosure

         None

<PAGE>

Item 10.

         Not applicable

Item 11.  Executive Compensation

         Not applicable

Item 12.  Security Ownership of Certain Beneficial Owners and Management

         Not applicable

Item 13.  Certain Relationships and Related Transactions

         Not applicable

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

         a)   The company filed on Form 8-K, separately for each
              distribution date, the distribution of funds related to the
              trust for each of the following distribution dates:

                  Distribution Date              Form 8-K Filing Date
                  -----------------              --------------------
                  ____________________           ______________________
                  ____________________           ______________________
                  ____________________           ______________________

         b)   99.1     Annual Report of Independent Public Accountants' as to
                       master servicing activities or servicing activities, as
                       applicable

                       (a)   Citicorp Mortgage, Inc., as master servicer

              99.2     Annual Statement of Compliance with obligations under
                       the Pooling and Servicing Agreement or servicing
                       agreement, as applicable, of:

                       (a)   Citicorp Mortgage, Inc., as master servicer

         Such document (i) is not filed herewith since such document was not
         received by the Reporting Person at least three business days prior to
         the due date of this report; and (ii) will be included in an amendment
         to this report on Form 10-K/A to be filed within 30 days of the
         Reporting Person's receipt of such document.

<PAGE>

Signatures

          Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

Date: ___________

Salomon Brothers Mortgage Securities VII, Inc. by Citicorp Mortgage, Inc., as
Trust Administrator for Salomon Brothers Mortgage Securities VII, Inc. Floating
Rate Mortgage Pass- Through Certificates, Series _______,

By:__________________________
Name:
Title:
Company:

<PAGE>

                                   Schedule 1
                                   ----------

                             MORTGAGE LOAN SCHEDULE

                                [FILED BY PAPER]

<PAGE>

                                   Schedule 2
                                   ----------

        MORTGAGE LOAN SCHEDULE WITH RESPECT TO MORTGAGE LOANS WITH LOAN-
               TO-VALUE RATIOS IN EXCESS OF 80% THAT HAVE PRIMARY
                           MORTGAGE INSURANCE POLICES

                                [FILED BY PAPER]

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