Document:

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                                                                   EXHIBIT 10.31

                 SERVICING RIGHTS PURCHASE AND SALE AGREEMENT

     SERVICING RIGHTS PURCHASE AND SALE AGREEMENT, dated the 30th day of
January, 1998 (the "Agreement"), by and between FIRST NATIONWIDE MORTGAGE
CORPORATION (the "Purchaser") and COLE TAYLOR BANK (the "Seller").

                                 WITNESSETH:

     WHEREAS, Seller owns the right to service certain one-to-four family
residential mortgage loans with an aggregate outstanding principal balance, as
of October 31, 1997, of approximately $310,000,000, each of which loans is
identified on Exhibit A attached hereto (the "Mortgage Loans");

     WHEREAS, on the terms and subject to the conditions set forth herein,
Seller desires to sell, transfer and assign to Purchaser all of Seller's right,
title and interest to service the Mortgage Loans (the "Servicing Rights"), and
Purchaser desires to purchase and assume all right, title and interest in and
to the Servicing Rights.

     NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and upon the terms and subject to
the conditions set forth herein, the parties hereto agree as follows:

                                  ARTICLE I

                         DEFINITIONS AND CONSTRUCTION

     1.1 Definitions. As used in this Agreement, the following terms shall have
the meanings specified below.

     "Advances": The moneys that have been advanced by Seller from its funds in
connection with its servicing of the Mortgage Loans in accordance with the
Applicable Requirements (including, without limitation, advances for principal,
interest, taxes, ground rents, assessments, insurance premiums and other costs,
fees and expenses pertaining to the acquisition of title to and preservation
and repair of Mortgaged Properties) and for which Seller has a right of
reimbursement from Mortgagors, Agencies, Insurers, Investors or otherwise.

     "Agencies": FHLMC, FNMA, IHDA, FHA, VA and State Agencies, as applicable.

     "Agreement": This Servicing Rights Purchase and Sale Agreement, including
all amendments hereof and supplements hereto, and all Exhibits and Schedules
attached hereto or delivered pursuant hereto.

     "Ancillary Fees": Charges for late Mortgage Loan Payments, charges for
dishonored checks, pay-off fees, assumption fees, commissions and
administrative fees on insurance, all income earned or that could be earned in
connection with the solicitation of Mortgagors, and similar fees and charges
collected from or assessed against the Mortgagor, other than those charges
payable to an Agency or Investor under the terms of the Servicing Agreements.

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     "Applicable Percentage": One hundred thirty-eight basis points (1.38%).

     "Applicable Requirements": As of the time of reference, (i) all
contractual obligations of Seller and any Originators or Prior Services with
respect to the Servicing Rights, including without limitation those contractual
obligations contained in the Servicing Agreements, in any agreement with any
Agency, Insurer, Investor or other Person or in the Mortgage Loan Documents for
which Seller, or any Originator or Prior Servicer, is responsible or at any
time was responsible; (ii) all federal, state and local laws, statutes, rules,
regulations and ordinances applicable to Seller, any Originators or Prior
Servicers, or to the Servicing Rights or the origination, purchase, sale,
enforcement and insuring or guaranty of, or filing of claims in connection
with, the Mortgage Loans, including without limitation the applicable
requirements and guidelines of any Agency, Investor or Insurer, or any other
governmental agency, board, commission, instrumentality or other governmental
or quasi-governmental body or office; (iii) all other judicial and
administrative judgments, orders, stipulations, awards, writs and injunctions
applicable to Seller, any Originators or Prior Servicers, the Servicing Rights
or the Mortgage Loans; and (iv) all Investor and Agency guides, manuals,
handbooks, bulletins, circulars, announcements, issuances, releases, letters,
correspondence and other instructions applicable to the Servicing Rights.

     "Assignments of Mortgage Instruments": A written instrument that, when
recorded in the appropriate office of the local jurisdiction in which the
related Mortgaged Property is located, will reflect the transfer of the
Mortgage Instrument identified therein from the transferor to the transferee
named therein.

     "Bankruptcy Loan": A Mortgage Loan with respect to which, as of the Sale
Date, the Mortgagor thereof has sought relief under or has otherwise been
subjected to the federal bankruptcy laws (including, without limitation,
chapter 7) or any other similar federal or state laws of general application
for the relief of debtors, through the institution of appropriate proceedings,
and such proceedings are continuing.

     "Business Day": Any day other than a Saturday, Sunday, legal holiday or
other day on which banking institutions in the State of Maryland are required
by law or executive order to be closed.

     "Buydown": The waiver by Purchaser (or by Seller during the Interim
Period) of a portion of the indebtedness of a Mortgage Loan, which can take the
form of a reduction of the principal, a credit to escrow or unapplied funds
accounts, the forgiveness of accrued interest or any combination of the
foregoing, and which causes the VA to pay off the remaining amount of the
indebtedness owed and acquire the Mortgaged Property.

     "Buydown Loss": The portion, if any, of the indebtedness waived by
Purchaser (or by Seller during the Interim Period) in order to effect a Buydown.

     "Claim": Any claim, demand or litigation related to the Mortgage Loans or
this Agreement.

     "Custodial Accounts": The accounts in which Custodial Funds are deposited
and held by Servicer.

     "Custodial Funds": All funds held by Seller with respect to the Mortgage
Loans, including, but not limited to, all principal and interest funds and any
other funds due Investors, buydown funds, funds for the payment of taxes,
assessments, insurance premiums, ground rents and similar charges, funds from
hazard insurance loss drafts and other mortgage escrow and impound amounts
(including interest

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accrued thereon for the benefit of the Mortgagors under the Mortgage Loans, if
required by law or contract) maintained by Seller relating to the Mortgage
Loans.

     "Delinquent Loan": A Mortgage Loan that as of a specified date is ninety
(90) days or more past due. A Mortgage Loan is ninety (90) days or more past
due if a Mortgage Loan Payment due on the first day of a month is not paid by
the last calendar day of the second succeeding month.

     "Effective Date": The date set forth in the introductory phrase of this
Agreement.

     "Excluded Loan": Any Mortgage Loan that, as of the Sale Date, is a
Bankruptcy Loan, Delinquent Loan, Forbearance Loan, Foreclosure Loan or
Litigation Loan.

     "Federal Funds Rate": The "high" interest rate for reserves traded among
commercial banks for overnight use in amounts of one million dollars ($1
million) or more, as reported by The Wall Street Journal under "Federal Funds"
rates as of the first Business Day of each month.

     "FHA": The Federal Housing Administration of the United States Department
of Housing and Urban Development, or any successor thereto.

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

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

     "Forbearance Loan": A Mortgage Loan with respect to which, as of the Sale
Date, a written agreement is in effect pursuant to which the Mortgagor pays
less than the monthly payment provided for in the original Mortgage Loan
Documents.

     "Foreclosure": The procedure pursuant to which a lienholder acquires title
to a Mortgaged Property in a foreclosure sale, or a sale under power of sale,
or other acquisition of title to the Mortgaged Property based upon a default by
the Mortgagor under the Mortgage Loan Documents, under the law of the state
wherein the Mortgaged Property is located.

     "Foreclosure Loan": A Mortgage Loan with respect to which, as of the Sale
Date, the first action necessary to be taken to commence proceedings in
Foreclosure has been taken or may be taken under the terms of the applicable
Mortgage Loan Documents and Servicing Agreement at the election of the
mortgagee or Servicer.

     "IHDA": The Illinois Housing Development Authority, or any successor
thereto.

     "Insurer" or "Insurers": FHA, VA or any private mortgage insurer and any
insurer or guarantor under any standard hazard insurance policy, any federal
flood insurance policy, any title insurance policy, any earthquake insurance
policy or other insurance policy, and any successor thereto, with respect to
the Mortgage Loan or the Mortgaged Property.

     "Interim Period": The period of time between the Sale Date and the
applicable Transfer Date.

     "Interim Servicing Agreement": That certain Interim Servicing Agreement of
even date herewith by and between Seller and Purchaser and attached hereto as
Exhibit B.

     "Investor" or "Investors": FHLMC, FNMA and/or IHDA, as applicable.

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     "Investor Consent": The written consent of FHLMC, FNMA or IHDA to the
transfer of the applicable Servicing Rights from Seller to Purchaser, without
adverse modification to the rights of the Servicer with respect thereto.

     "Litigation Loan": A Mortgage Loan with respect to which, as of the Sale
Date, a Claim is pending or threatened relating to the Mortgage Loan the
adverse outcome of which could have a material adverse effect on the Servicing
Rights to such Mortgage Loan.

     "Loss" or "Losses": Any and all losses, damages, deficiencies, claims,
costs or expenses, including without limitation costs of investigation,
attorneys' fees and disbursements, and internal and administrative costs and
expenses.

     "Mortgage Escrow Payments": The portion, if any, of the Mortgage Loan
Payment in connection with a Mortgage Loan that relates to funds for the
payment of taxes, assessments, insurance premiums, ground rents and similar
charges, and other mortgage escrow amounts.

     "Mortgage File": Those documents (which, to the extent required by the
Applicable Requirements, shall include original documents) related to the
origination and servicing of the Mortgage Loans; the Mortgage Loan Documents
with respect to each Mortgage Loan; the related credit and closing packages;
all disclosures; all custodial documents; all documents required to be
delivered to Purchaser pursuant to the Servicing Transfer Instructions; and all
other files, books, records and documents necessary to (i) establish the
eligibility of the Mortgage Loans for insurance by an Insurer or sale to or
pooling by the Investor; (ii) service the Mortgage Loans in accordance with
Applicable Requirements; and (iii) otherwise comply with Applicable
Requirements regarding the Mortgage Loan documentation to be maintained by the
Servicer of the Mortgage Loans or its document custodian.

     "Mortgage Instrument": Any deed of trust, security deed, mortgage,
security agreement or any other instrument which constitutes a first-lien on
real estate (or shares of stock in the case of cooperatives) securing payment
by a Mortgagor of a Mortgage Note.

     "Mortgage Loan Documents": The Mortgage Instruments and Mortgage Notes.

     "Mortgage Loan Payment": With respect to a Mortgage Loan, the amount of
each monthly installment on such Mortgage Loan, whether principal and interest
or interest alone or escrow or other payment, required or permitted to be paid
by the Mortgagor in accordance with the terms of the Mortgage Loan Documents.

     "Mortgage Loans": The one-to-four family residential mortgage loans as to
which Seller is the owner of the Servicing Rights, detailed and included on
Exhibit A attached hereto. Mortgage Loans shall not include (i) any loan which
has been bought out of a Pool, or (ii) any real property owned by Seller
(whether for its own account or on behalf of an Investor, FHA or VA) as a
result of Foreclosure.

     "Mortgage Note": The promissory note executed by a Mortgagor and secured
by a Mortgage Instrument evidencing the indebtedness of the Mortgagor under a
Mortgage Loan.

     "Mortgaged Property": The one- to four-family residential real property
that is encumbered by a Mortgage Instrument, including all buildings and
fixtures thereon.

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     "Mortgagor": Any obligor under a Mortgage Note and Mortgage Instrument.

     No Bid": A delinquent Mortgage Loan with respect to which the VA has
notified Purchaser or Seller that the VA intends to exercise its option to pay
the amount guaranteed by the VA (and relinquish all rights with respect to the
Mortgaged Property to Purchaser or Seller, as the case may be).

     "Originator": With respect to any Mortgage Loan, the Person(s) that
performed one or more of the following functions: (i) took the loan
application, (ii) processed the loan application, (iv) underwrote the loan
application, and/or (iv) closed or funded the Mortgage Loan.

     "Parties": Seller and Purchaser.

     "Person": An individual, a corporation, a partnership, a limited liability
company, a joint venture, a trust, an unincorporated association or
organization, a government body, agency or instrumentality or any other entity.

     "Pool": One or more Mortgage Loans that have been aggregated pursuant to
the requirements of the applicable Investor, and have been pledged to secure
securities.

     "Prior Servicer: Any Person that was a Servicer of any Mortgage Loan
before Seller became the Servicer of the Mortgage Loan.

     "Purchase Price": The total amount to be paid by Purchaser pursuant to
Section 3.1 to acquire the Servicing Rights.

     "Purchaser": As defined in the introductory phrase of this Agreement.

     "Sale Date": January 30, 1998, the date on which Purchaser acquires all of
Seller's economic right, title and interest in and to the Servicing Rights.

     "Seller": As defined in the introductory phrase of this Agreement.

     "Servicer": The Person contractually obligated to administer the Servicing
Rights under the Servicing Agreements.

     "Servicing Agreements": The contracts, and all applicable rules,
regulations, procedures, manuals and guidelines incorporated therein defining
the rights and obligations of the Investors and Servicer, with respect to the
servicing of the Mortgage Loans.

     "Servicing Fee": The annual amount payable to Servicer under the
applicable Servicing Agreement related to a Mortgage Loan as consideration for
servicing the Mortgage Loan, expressed as a percentage.

     "Servicing Rights": The rights and obligations of Servicer to administer,
collect the payments for the reduction of principal and application of
interest, collect payments on account of taxes and insurance, pay taxes and
insurance, remit collected payments, provide foreclosure services, provide full
escrow administration and any other obligations required by any Agency,
Investor or Insurer in, of, for or in connection with the Mortgage Loans
pursuant to the Servicing Agreements, together with the right to receive the
Servicing Fee and any Ancillary Fees arising from or connected to the Mortgage
Loans, and all rights, powers and privileges incident to any of the foregoing.

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     "Servicing Transfer Instructions": The instructions, attached hereto as
Exhibit C, detailing the procedures pursuant to which Seller shall effect the
transfer of the Servicing Rights, the Advances, the Custodial Funds, the
Mortgage Files and the Servicing Agreements to Purchaser.

     "State Agency": Any state or local agency with authority to (i) regulate
the business of Purchaser or Seller, including without limitation any state or
local agency with authority to determine the investment or servicing
requirements with regard to mortgage loans originated, purchased or serviced by
Purchaser or Seller, or (ii) originate, purchase or service mortgage loans, or
otherwise promote mortgage lending, including without limitation state and
local housing finance authorities.

     "Trailing Documents": Those documents that are unavailable to Seller on
the applicable Transfer Date as a result of the transactions described herein
(but not as a result of the acts or omissions of Seller or any Originator or
Prior Servicer), such as recorded Mortgage Instruments, recorded Assignments of
Mortgage Instruments, government insurance certificates and title policies,
which have not yet been received back from the appropriate recording office or
Insurer.

     "Transfer Date": The date on which, pursuant to the applicable Investor
Consent, Purchaser shall commence servicing, and acquire all of Seller's legal
right, title and interest in and to the applicable Servicing Rights.

     "VA": The United States Department of Veterans Affairs or any successor
thereto.

     1.2. General Interpretive Principles. For purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise
requires:

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

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

     (c) References herein to a "section," shall be to the specified section(s)
of this Agreement and shall include all subsections of such section(s).

     (d) The words "herein," "hereof," "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular provisions.

     (e) Section headings and other similar headings are not to be considered
part of this Agreement, are solely for convenience of reference, and shall not
affect the meaning or interpretation of this Agreement or any of its
provisions.

     (f) Each reference to any federal, state or local statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder.

                                  ARTICLE II

                 SALE OF SERVICING RIGHTS AND RELATED MATTERS

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     2.1 Items to be Sold. Transferred and Assigned. Upon the terms and subject
to the conditions of this Agreement, and subject to the Applicable
Requirements, Seller should on and as of the Sale Date, sell, transfer and
assign to Purchaser, and Purchaser shall purchase and assume from Seller, all
beneficial right, title, interest of Seller in and to (i) the Servicing Rights,
(ii) the Advances, (iii) the Custodial Funds and (iv) the Mortgage Files. On and
as of the applicable Transfer Date, Purchaser shall have the exclusive right to
receive all and to enter into arrangements that generate, Ancillary Fees with
respect to the Mortgage Loans.

     2.2 Evidence of Sale. Prior to the applicable Transfer Date, Purchaser and
Seller shall execute and deliver the documents required by each Investor in
connection with the transfer of the Servicing Rights hereunder, in form and
substance reasonably satisfactory to Purchaser and Seller, and shall execute
and deliver such other instruments or documents as Purchaser shall reasonably
determine are necessary or appropriate to evidence the transactions
contemplated hereby.

     2.3 Interim Servicing. Simultaneously with the execution of this Agreement,
Purchaser and Seller shall execute and deliver the Interim Servicing Agreement
between Purchaser and Seller, providing for the servicing of the Mortgage Loans
between the Sale Date and the applicable Transfer Date.

     2.4 Servicing Transfer Instructions. In connection with the transfer of
the Servicing Rights from Seller to Purchaser pursuant to this Agreement,
Seller and Purchaser shall follow the Servicing Transfer Instructions.

                                 ARTICLE III

                      PURCHASE PRICE AND RELATED MATTERS

     3.1 Purchase Price. In consideration for the transfer and sale
contemplated herein of the Servicing Rights, Purchaser shall pay to Seller in
the manner, and subject to the adjustments, provided for in this Article III,
an amount equal to the Applicable Percentage multiplied by the aggregate
outstanding principal balance, as of the Sale Date, of the Mortgage Loans other
than Excluded Loans.

     3.2 Verification of Purchase Price Items.

     (a) Promptly following the Sale Date, but in no event after the date on
which Purchaser is required to make the initial payment of the Purchase Price
under Section 3.3(a), Seller shall provide Purchaser with a draft Schedule
3.2(a) that sets forth (i) the aggregate outstanding principal balance of all
Mortgage Loans relating to the Servicing Rights as of the Sale Date and the
aggregate outstanding principal balance of all Excluded Loans as of the Sale
Date, and (ii) each Mortgage Loan that as of the Sale Date was an Excluded
Loan, and Seller shall include appropriate supporting documentation with the
Schedule. Promptly following Purchaser's receipt of the draft Schedule 3.2(a),
but in no event after the date on which Purchaser is required to make the
initial payment of the Purchase Price under Section 3.3(a), the Parties shall
finalize such Schedule and append it hereto.

     (b) Within five (5) days following each Transfer Date, Seller shall
prepare and provide Purchaser with a draft Schedule 3.2(b) that lists all
Mortgage Loans (i) for which a payoff check is received by Servicer from the
Sale Date to the Transfer Date and (ii) the principal balance of which was
included in the calculation of the Purchase Price, and Seller shall include
appropriate supporting

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documentation with such Schedule. Promptly following Purchaser's receipt of the
draft Schedule 3.2(b), the Parties shall finalize such Schedule and append it
hereto.

     3.3 Payment of Purchase Price by Purchaser. The Purchase Price shall be
paid by Purchaser to Seller as follows:

     (a) Sale Date Related Payment. Upon the finalization of Schedule 3.2(a) by
the Parties, Purchaser shall pay to Seller an amount equal to twenty percent
(20%) of the Purchase Price.

     (b) Transfer Date Related Payments. By the fifth (5th) Business Day
following each applicable Transfer Date, subject to Purchaser's receipt of (i)
all Custodial Funds, and (ii) substantially all of the Mortgage Files, delivery
of which is in conformity with the Servicing Transfer Instructions and is
confirmed by Purchaser within a reasonable period of time following receipt,
Purchaser shall pay to Seller an amount equal to ninety percent (90%) of the
applicable portion of the Purchase Price less the applicable portion of the
amount paid to Seller under Section 3.3(a) above.

     (c) Final Payment. Thirty (30) days following the final Transfer Date,
subject to (i) Purchaser's receipt of all Custodial Funds and Mortgage Files,
delivery of which is in conformity with the Servicing Transfer Instructions and
is confirmed by Purchaser within a reasonable period of time following receipt,
and (ii) Seller's fulfillment of all of its other obligations hereunder,
Purchaser shall pay to Seller the remaining unpaid portion of the Purchase
Price.

     3.4 Escrows and Advances; Reconciliation. Unless otherwise set forth in
the Servicing Transfer Instructions, within three (3) Business Days following
each Transfer Date, (a) Seller shall remit and deliver to Purchaser, or
Purchaser's designee, the Custodial Funds and all other funds and collections
held by Seller in connection with the Mortgage Loans; and (b) Purchaser shall
remit to Seller an amount equal to the then outstanding Advances related to the
Mortgage Loans the Servicing Rights to which are being transferred on such
date. Unless otherwise set forth in the Servicing Transfer Instructions, (a)
within three (3) Business Days following the Sale Date, Seller shall provide to
Purchaser a reconciliation, as of the Sale Date, of the Custodial Funds and
Advances held as of such date; and (b) within three (3) Business Days following
each Transfer Date, Seller shall provide to Purchaser a reconciliation, as of
the respective Transfer Date, of the Custodial Funds and Advances held as of
such date. In the event of an error in the amount of Custodial Funds
transferred to Purchaser, or in the amount remitted by Purchaser to Seller for
the Advances in connection with a Transfer Date, Seller shall promptly remit
the appropriate amount to Purchaser or Purchaser shall promptly remit the
appropriate amount to Seller, as applicable. Purchaser and Seller shall perform
all of their respective obligations under this section 3.4 in accordance with
the Servicing Transfer Instructions.

     3.5 Certain Adjustments and Refunds.

        3.5.1 Prepayments. Upon the finalization by the Parties of Schedule
3.2(b) (regarding certain Mortgage Loans that prepay in full), Seller shall
remit to Purchaser an amount equal to the product of (i) the outstanding
principal balance, as of the Sale Date, of such prepaid Mortgage Loans required
to be listed in Schedule 3.2(b) and (ii) the Applicable Percentage. Seller
shall be obligated to pay to Purchaser the amount required under this Section
3.5.1 and Purchaser shall have no obligation to offset such amount against any
payment Purchaser is required to make to Seller under section 3.3.

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        3.5.2 NSF Payments. If Purchaser discovers that the payment on any one
(1) or more of the Mortgage Loans for the last month preceding the Sale Date
was made by the Mortgagor by an "NSF" check, and that the return of such "NSF"
check causes such Mortgage Loan to be ninety (90) days or more past due as of
the Sale Date, such Mortgage Loan shall be treated as a Delinquent Loan as
defined herein. In each case, the Purchase Price shall be adjusted accordingly
and Seller shall promptly reimburse Purchaser.

        3.5.3 Adjustments. If subsequent to the payment of any portion of the
Purchase Price, transfer of the Custodial Funds, payment for the Advances, or
payment or transfer of any other amounts due under this Agreement to either
Party, the Purchase Price or such other amounts are found to be in error,
within five (5) Business Days after the receipt of information sufficient to
provide notice that payment is due, the Party benefiting from the error shall
pay an amount sufficient to correct and reconcile the Purchase Price, Custodial
Fund, Advances or such other amounts and shall provide a reconciliation
statement and such other documentation sufficient to satisfy the other Party
(in such other Party's exercise of its reasonable discretion), concerning the
accuracy of such reconciliation.

     3.6 Form of Payment to be Made. Unless otherwise agreed to by the Parties,
all payments to be made by a Party to another Party, or such other Party's
designee, shall be made by wiring immediately available funds to the accounts
designated by the Party receiving the payment.

                                  ARTICLE IV

                   REPRESENTATIONS AND WARRANTIES OF SELLER

     As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and warrants
as follows (it being understood that, unless otherwise expressly provided
herein, each such representation and warranty is made to Purchaser as of the
Effective Date and the Sale Date, and all of the representations and warranties
of Seller contained herein shall survive the Sale Date and Transfer Date as
provided in Section 11.4):

     4.1 Due Organization and Good Standing. Seller is a bank, duly organized,
validly existing, and in good standing under the laws of the United States.
Seller has, and at all relevant times has had, in full force and effect
(without notice of possible suspension, revocation or impairment) all required
qualifications, permits, approvals, licenses, and registrations to conduct all
activities in all states in which its activities with respect to the Mortgage
Loans or the Servicing Rights require it to be qualified or licensed, except
where the failure of Seller to possess such qualifications, licenses, permits,
approvals and registrations would not have a material adverse effect on the
ability of Servicer to enforce any Mortgage Loan or to realize the full
benefits of any Servicing Rights.

     4.2 Authority and Capacity. Seller has all requisite corporate power,
authority and capacity to carry on its business as it is now being conducted,
to execute and deliver this Agreement and the Interim Servicing Agreement and
to perform all of its obligations hereunder and thereunder.

     4.3 Effective Agreement. The execution, delivery and performance of this
Agreement and the Interim Servicing Agreement by Seller and consummation of the
transactions contemplated hereby and thereby have been or will be duly and
validly authorized by all necessary corporate or other action; this Agreement
and the Interim Servicing Agreement have been duly and validly executed and
delivered by Seller, and this Agreement and the Interim Servicing Agreement are
valid and legally

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binding agreements of Seller enforceable against Seller in accordance with
their respective terms, subject to bankruptcy, insolvency and similar laws
affecting generally the enforcement of creditors rights and the discretion of a
court to grant specific performance.

     4.4 No Conflict. Neither the execution and delivery of this Agreement and
the Interim Servicing Agreement nor the consummation of the transactions
contemplated hereby and thereby, nor compliance with their respective terms and
conditions, shall (a) violate, conflict with, result in the breach of,
constitute a default under, be prohibited by, or require any additional
approval (except as shall have been obtained or made as of the Sale Date) under
any of the terms, conditions or provisions of (i) organizational documents of
Seller or (ii) of any mortgage, indenture, deed of trust, loan or credit
agreement or other agreement or instrument to which Seller is now a party or by
which Seller is bound, or any law, ordinance, rule or regulation of any
governmental authority applicable to Seller, or any order, judgment or decree
of any court or governmental authority applicable to Seller, except as would
not have a material adverse effect on the Mortgage Loans, taken as a whole, or
the value of the Servicing Rights, taken as a whole; or (b) result in the
creation or imposition of any lien, charge or encumbrance of any nature upon,
the Servicing Rights or any of the Mortgage Loans.

     4.5 Consents. Approvals and Compliance. Except for the Investor Consents,
there is no requirement applicable to Seller to make any filing with, or to
obtain any permit, authorization, consent or approval of, any Person as a
condition to the lawful performance by Seller of its obligations hereunder.
Seller is approved and in good standing with each applicable Agency, Investor
and Insurer. Seller has complied with, and is not in default under, any law,
ordinance, requirement, regulation, rule, or order applicable to its business
or properties, the violation of which might materially and adversely affect the
operations or financial condition of Seller or its ability to perform its
obligations hereunder.

     4.6 Material Adverse Change. The transfer, assignment and conveyance of
the Servicing Rights by Seller pursuant to this Agreement is not subject to the
Hart-Scott-Rodino Antitrust Improvements Act, or the bulk transfer or any
similar statutory provisions in effect in any jurisdiction, the laws of which
apply to such transfer, assignment and conveyance. Seller shall continue to act
as a Servicer of mortgage loans following the Transfer Dates. There has been no
material adverse change in the Servicing Rights or their value since October
31, 1997.

     4.7 Insurance. Error and omissions and fidelity insurance coverage, in
amounts as required by the Applicable Requirements, is in effect with respect
to Seller and will be maintained until the transactions contemplated by this
Agreement and the Interim Servicing Agreement have been consummated in
accordance with terms hereof and thereof

     4.8 Litigation. There is no litigation, claim, demand, proceeding or
governmental investigation existing or pending, or any order, injunction or
decree outstanding, against or relating to Seller that could materially
adversely affect the Servicing Rights being purchased by Purchaser hereunder,
the Mortgage Loans, the performance by Seller of its obligations (or by
Purchaser of its future obligations) under the Servicing Agreements or the
performance by Seller of its obligations under this Agreement.

     4.9 Facts and Omissions. No representation, warranty or written statement
made by Seller in this Agreement, in any Exhibit or Schedule to this Agreement,
in the Interim Servicing Agreement, in the Magnetic Media or in any data tape
provided by Seller to Purchaser hereunder, contains or will contain any
material misstatement of fact or will omit to state a material Act necessary in
order to make the statements in light of the circumstances in which they are
made not misleading.

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<PAGE>
     4.10 Mortgage Loans and Servicing Rights.

        4.10.1 General Compliance. Each Mortgage Loan and Servicing Rights
conforms in all material respects to the Applicable Requirements, and each
Mortgage Loan was eligible for sale to, insurance by, or pooling to back
securities issued or guaranteed by, or participation certificates issued by,
the applicable Agency,  Investor or Insurer upon such sale, issuance of
insurance or pooling. There has been no improper act or omission or alleged
improper act or omission or error by Seller or any Originator or Prior Servicer
with respect to the origination underwriting or servicing of any of the
Mortgage Loans. Each Mortgage Loan has been originated, underwritten and
serviced in compliance with all Applicable Requirements. Seller is not otherwise
in default with respect to Sellers obligations under the Servicing Agreements
or Applicable Requirements.

        4.10.2 Enforceability of Mortgage Loan. Each Mortgage Loan is evidenced
by a note and is duly secured by a mortgage or deed of trust, in each case, on
such forms and with such terms as comply with all Applicable Requirements. Each
Mortgage Note and the related Mortgage Instrument is genuine and each is the
legal, valid and binding obligation of the maker thereof, enforceable in
accordance with its terms, subject to bankruptcy, insolvency and similar laws
affecting generally the enforcement of creditors' rights and the discretion of
a court to grant specific performance. All parties to the Mortgage Note and the
Mortgage Instrument had legal capacity to execute the Mortgage Note and the
Mortgage Instrument and each Mortgage Note and Mortgage Instrument has been
duly and properly executed by such parties. The Mortgage Loan is not subject to
any rights of rescission set-off, counterclaim or defense, including the
defense of usury, nor will the operation of any of the terms of the Mortgage
Note or the Mortgage Instrument, or the exercise of any right thereunder,
render either the Mortgage Note or the Mortgage Instrument unenforceable by the
Seller or Purchaser, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim, or defense has been
asserted with respect thereto.

        4.10.3 Disbursement: Future Advances. The full original principal
amount of each Mortgage Loan (net of any discounts) has been fully advanced or
disbursed to the Mortgagor named therein, there is no requirement for future
advances and any and all requirements as to completion of any on-site or
off-site improvements and as to disbursements of any escrow funds therefor have
been satisfied. AD costs, fees and expenses incurred in making, closing or
recording the Mortgage Loan were paid. There is no obligation on the part of
Seller, or of any other party, to make supplemental payments in addition to
those made by the Mortgagor. Any future advances that were made in connection
with a Mortgage Loan have been consolidated with the outstanding principal
amount secured by the Mortgage Instrument, and the secured principal amount, as
consolidated, bears a single interest rate and single repayment term. The lien
of the Mortgage Instrument securing the consolidated principal amount is
expressly insured as having first lien priority by a title insurance policy
meeting the standards set forth in section 4.10.5. The consolidated principal
amount does not exceed the original principal amount of the Mortgage Loan.

        4.10.4 Priority of Lien. Each Mortgage Instrument has been duly
acknowledged and recorded or sent for recordation and is a valid and subsisting
first lien, and the Mortgaged Property is free and clear of all encumbrances
and liens having priority over the lien of the Mortgage Instruments, except for
(i) liens for real estate taxes and special assessments not yet due and
payable, (ii) covenants, conditions and restrictions, rights of way, easements
and other matters of the public record as of the date of recording, acceptable
to mortgage lending institutions generally and (iii) other matters to which
like properties are commonly subject which do not interfere with the benefits
of the security intended to be provided by the Mortgage Instrument or the use,
enjoyment, value or marketability of the related

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<PAGE>
Mortgaged Property. All tax identifications and property descriptions in the
Mortgage Instrument are legally sufficient.

        4.10.5 Title Insurance. . Except for any Mortgage Loan secured by a
Mortgage Property located in Iowa, as to which an opinion of counsel of the
type customarily rendered in such state in lieu of title insurance has been
received, a valid and enforceable title policy, or a commitment to issue such a
policy (with respect to which a title policy will be received to replace such
commitment), has been issued and is in full force and effect for such Mortgage
Loan in the amount not less that the original principal amount of such Mortgage
Loan, which title policy insures that the related Mortgage Instrument is a
valid first Lien on the Mortgage Property therein described and that the
Mortgaged Property is free and clear of all Liens having priority over the Lien
of the Mortgage Instrument, subject to the exceptions set forth in this
Section.

        4.10.6 No Default/No Waiver. There is no default, breach, violation or
event of acceleration existing under any Mortgage Loan, and no event has
occurred that, with the passage of time or with notice and the expiration of
any grace or cure period, would constitute a default, breach, violation or
event of acceleration. Except as permitted or required by the applicable
Investor or Insurer, neither Seller nor any Originator or Prior Servicer has
(i) agreed to any material modification, extension or forbearance in connection
with a Mortgage Note or Mortgage Instrument, (ii) released, satisfied or
canceled any Mortgage Note or Mortgage Argument in whole or in part, (iii)
subordinated any Mortgage Instrument in whole or in part, or (iv) released any
Mortgaged Property in whole or in part from the lien of any Mortgage
Instrument.

        4.10.7 Application of Funds. All payments received by Seller with
respect to any Mortgage Loan have been remitted and properly accounted for as
required by Applicable Requirements.

        4.10.8 Mortgage Insurance. Except as set forth in Schedule 4.10.8, each
Mortgage Loan that has FHA insurance is identified as an FHA Loan on the
Magnetic Media and, is, or is eligible in the normal course of business to be,
insured pursuant to the National Housing Act. Except as set forth in Schedule
4.10.8, each Mortgage Loan that is identified as a VA Loan on the Magnetic
Media is guaranteed by the VA and is, or is eligible in the normal course of
business to be, guaranteed under the provisions of Chapter 37 of Title 38 of
the United States Code. Except as set forth in Schedule 4.10.8, if required by
FNMA or FHLMC, each conforming conventional loan is, or prior to the Sale Date
will be, insured as to payment defaults by a policy of primary mortgage
guaranty insurance in the amount required, and by an Insurer approved, by FNMA
or FHLMC, and all provisions of such primary mortgage guaranty insurance policy
have been and are being complied with, such policy is in full force and effect
and all premiums due thereunder have been paid. As to each mortgage insurance
or guaranty certificate, the Seller and any Originator and Prior Servicer have
complied with applicable provisions of the insurance or guaranty contract and
Federal statutes and regulations, all premiums or other charges due in
connection with such insurance or guaranty have been paid, there has been no
act or omission which would or may invalidate any such insurance or guaranty
with respect to the Seller, and the insurance or guaranty is, or when issued,
will be, in full force and effect with respect to each Mortgage Loan. There are
no defenses, counterclaims, or rights of set-off against the Seller affecting
the validity or enforceability of any mortgage insurance or guaranty with
respect to a Mortgage Loan.

        4.10.9 Compliance with Laws. Seller and each Originator and Prior
Servicer have complied with the Applicable Requirements pertaining to the
subject matter of this Agreement, including, without limitation, the federal
Fair Housing Act, federal Equal Credit Opportunity Act and Regulation B,
federal Fair Credit Reporting Act, federal Truth in Lending Act and Regulation
Z.

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<PAGE>
National Flood Insurance Act of 1968, federal Flood Disaster Protection Act of
1973, federal Real Estate Settlement Procedures Act and Regulation X, federal
Fair Debt Collection Practices Act, federal Home Mortgage Disclosure Act, and
state consumer credit and usury codes and laws. Each Originator and Prior
Servicer was qualified to do business, and had all requisite licenses, permits
and approvals, in the jurisdictions in which the applicable Mortgaged
Properties are located, except where the failure to possess such
qualifications, licenses, permits and approvals would not materially and
adversely affect the enforceability of the Mortgage Loan Documents by
Purchaser.

        4.10.10 Filing of Reports. Seller has filed or will file in a timely
manner all reports required by the Agencies, Investors and Insurers with respect
to the Mortgage Loans and the Servicing Rights. Seller has filed all IRS Forms,
including but not limited to Forms 1041 Kl, 1041, 1099 INT, 1099 MISC, 1099A
and 1098, as appropriate, which are required to be filed with respect to the
Servicing Rights for activity that occurred on or before December 31, 1996.

        4.10.11 Custodial Accounts. All Custodial Accounts required to be
maintained by Seller have been established and continuously maintained in
accordance with Applicable Requirements. Custodial Funds received by Seller
have been credited to the appropriate Custodial Account, and have been retained
in and disbursed from the Custodial Accounts in accordance with the Applicable
Requirements. Seller has analyzed the payments required to be deposited into
the Custodial Accounts and adjusted the payment thereto in order to eliminate
any deficiency, except with respect to Mortgage Loans originated within the
twelve months prior to the Sale Date. With regard to Mortgage Loans that
provide for Mortgage Escrow Payments, Seller and each Originator and Prior
Servicer has (a) computed the amount of such payments in accordance with
Applicable Requirements, (b) paid on a timely basis all charges and other items
to be paid out of the Mortgage Escrow Payments, and when required by the
applicable Servicing Agreement has advanced its own funds to pay such charges
and items, and (c) delivered to the related Mortgagors the statements and
notices required by Applicable Requirements in connection with Custodial
Accounts, including without limitation statements of taxes and other items paid
out of the Mortgage Escrow Payments and notices of adjustments to the amount of
the Mortgage Escrow Payments. With respect to Mortgage Escrow Payments, there
exist no deficiencies in connection therewith for which customary arrangements
for repayment thereof have not been made in accordance with the Applicable
Requirements, and no Mortgage Escrow Payments or other charges or prepayments
due from Mortgagor have been capitalized under any Mortgage Instrument or the
related Mortgage Note. Purchaser reserves the right to independently verify the
sufficiency of the Custodial Accounts, employing such industry accepted
practices as, among other things, a test for minimum cash required. Should the
Purchaser, the Investor(s) or an auditor determine that the Custodial
Account(s) did not contain the required deposits as of the applicable Transfer
Date, then Purchaser may make claim against Seller for the amount of the
unrecoverable shortage (without interest thereon).

        4.10.12 Advances. The Advances are valid and subsisting accounts owing
to Seller, are carried on the books of Seller at values determined in
accordance with generally accepted accounting principles and are not subject to
any set-off or claim that could be asserted against Seller and Seller has not
received any notice from an Investor, Insurer or other Person in which the
Investor, Insurer or Person disputes or denies a claim by Seller for
reimbursement in connection with an Advance.

        4.10.13 Investor Remittances and Reporting. Seller and each Originator
and Prior Servicer have remitted or otherwise made available to each Investor
(i) all principal and interest payments received to which the Investor is
entitled under the applicable Servicing Agreements, including without
limitation any guaranty fees, and (ii) all advances of principal and interest
payments

                                      13
<PAGE>
required by such Servicing Agreements. In accordance with the Applicable
Requirements, Seller has prepared and submitted to each Investor all reports in
connection with such payments required by the Applicable Requirements.

        4.10.14 Taxes. All taxes, governmental assessments, insurance premiums,
water, sewer and municipal charges, leasehold payments and ground rents
relating to the Mortgage Loans have been paid by Seller to the extent such
items are required to be paid by Seller pursuant to Applicable Requirements.
Each Mortgage Loan is covered by a valid and assignable, fully paid, life of
loan tax service contract, in full force and effect, with Transamerica Real
Estate Tax Services.

        4.10.15 Hazard and Related Insurance. All improvements upon the
Mortgaged Property are insured against loss by fire, hazard (and, where
required pursuant to Applicable Requirements, flood) and/or extended coverage
insurance policies, in the amount, by the Insurer and otherwise in the manner
as may be required by Applicable Requirements. All such insurance policies are
in full force and effect, and all premiums with respect to such policies have
been paid.

        4.10.16 Damage. Condemnation. and Related Matters. There exists no
physical damage to any Mortgaged Property from fire, flood, windstorm,
earthquake, tornado, hurricane or any other similar casualty, which physical
damage is not adequately insured against or would materially and adversely
affect the value or marketability of any Mortgage Loan, the Servicing Rights,
the Mortgaged Property or the eligibility of the Mortgage Loan for insurance
benefits by any Insurer. There is no proceeding pending for the total or
partial condemnation of, or eminent domain with respect to, the Mortgaged
Property. All of the improvements that were included for the purpose of
determining the appraised value of the Mortgaged Property for a Mortgage Loan
lie wholly within the boundaries and building restriction lines of the
Mortgaged Property, and no improvements on adjoining properties encroach upon
the Mortgaged Property. With respect to any Mortgaged Property, the related
Mortgagor is not in and has not been in violation of, no prior owner of such
property was in violation of, and the property does not violate any standards
under, all applicable statutes, ordinances, rules, regulations, orders or
decisions relating to pollution, protection of human health or the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata and natural resources), including, without
limitation, all applicable statutes, ordinances, rules, regulations, orders or
decisions relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products, asbestos and asbestos-containing materials, polychlorinated
biphenyls and lead and lead-containing materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of such items.

        4.10.17 Pools. Prior to each applicable Transfer Date, all Pools have
been initially certified, finally certified and/or recertified if required by
and otherwise in accordance with the Applicable Requirements, and the securities
backed by Pools have been issued on uniform documents, as required by the
Applicable Requirements without any material deviations therefrom.

        4.10.18 Mortgage File. The Mortgage File contains each of the documents
and instruments specified to be included therein and required to be maintained
under the Applicable Requirements.

        4.10.19 Good Title. Seller is the sole owner and holder of all right,
title and interest in and to the Servicing Rights. The sale, transfer and
assignment by Seller to Purchaser of the Servicing Rights, and the instruments
required to be executed by Seller and delivered to Purchaser pursuant to the
Applicable Requirements, are, and will be on the Transfer Date, valid and
enforceable in

                                      14
<PAGE>
accordance with their terms and win effectively vest in Purchaser good and
marketable title to the Servicing Rights, free and clear of any and all liens,
claims, or encumbrances, except for those encumbrances required by the
Applicable Requirements. Seller has full right and authority, subject to no
interest, or agreement with, any other party to sell and assign the Servicing
Rights to Purchaser pursuant to this Agreement.

        4.10.20 Fraud. No fraud occurred on the part of any Person in
connection with any Mortgage Loan that could materially and adversely affect
the Servicing Rights, or result in Purchaser incurring Losses.

        4.10.21 Agency and Internal Audits.

        (a) Except as set forth on Schedule 4.10.21(a), since January 31, 1995,
neither Seller nor any Originator or Prior Servicer has been the subject of an
audit by any Agency, Investor or Insurer, which audit asserted a material
failure to comply with Applicable Requirements, or resulted in a repurchase of
ten or more Mortgage Loans or indemnification in connection with ten or more
Mortgage Loans in a period equal to or less than one year or resulted in
rescission of an insurance or guaranty contract or agreement applicable to ten
or more Mortgage Loans, payment of a material penalty by the Seller or
restrictions on the activities or commitment authority of the Seller that are
currently in effect.

        (b) The Mortgage Loans have been subject to Seller's origination and
servicing quality control reviews and internal audits to no less a degree than
other residential mortgage loans originated or serviced by Seller. Except as
set forth on Schedule 4.10.21(b), within the three (3) years immediately
preceding the Effective Date, Seller's internal quality control reviews and
audits have not revealed a failure to comply with Applicable Requirements in
connection with the Mortgage Loans that could reasonably be expected to have an
adverse effect on all or any portion of the Servicing Rights or on Seller's
ability to perform its obligations under this Agreement.

        4.10.22 Representations and Warranties to Agencies, Investors and
Insurers. All representations and warranties made by Seller to the applicable
Agencies, Investors and Insurer in connection with the Mortgage Loans and
Servicing Rights are incorporated herein by reference and inure to the benefit
of Purchaser.

        4.10.23 Mortgage Loan Characteristics. All information contained on any
magnetic tape with regard to the Mortgage Loans is as of the date thereof true,
complete and correct.

        4.10.24 No Recourse. None of the Servicing Agreements nor any other
agreement or understanding applicable to any of the Mortgage Loans provides for
recourse to the Servicer for losses incurred in connection with (or any
obligation to repurchase or reimburse, indemnify or hold harmless any Person
based upon) the default or foreclosure of, or acceptance of a deed in lieu of
foreclosure or other transfer or sale of the Mortgaged Property in connection
with, a Mortgage Loan, except insofar as such recourse is based upon a failure
of the Servicer to comply with the Applicable Requirements.

        4.10.25 No ARMs Loans. The interest rate and Mortgage Loan Payment for
each of the Mortgage Loans may not be adjusted at any time by the borrower or
pursuant to the Mortgage Loan Documents.

        4.10.26 "B and C" Loans. None of the Mortgage Loans were originated or
sold to

                                      15
<PAGE>
any investor pursuant to a loan program involving subprime lending, or pursuant
to any loan program not typically identified as "A paper" lending.

        4.10.27 Non-Amortizing Loans. All Mortgage Loans are self-amortizing
and will have no principal amount due to be paid to any Investor
notwithstanding payment by the Mortgagor of the full amount scheduled to be
paid to retire the indebtedness of the Mortgage Loan.

        4.10.28 Temporary Buydowns. Other than loan numbers 290018036,
290026669, 290028215, and 290016164 (expires February 1, 1998), none of the
Mortgage Loans have temporary buydowns in effect.

                                  ARTICLE V

                 REPRESENTATIONS AND WARRANTIES OF PURCHASER

     As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Purchaser represents and warrants as
follows (it being understood that, unless otherwise expressly provided herein,
each such representation and warranty is made to Seller as of the Effective
Date and the Sale Date, and all of the representations and warranties of
Purchaser contained herein shall survive the Sale Date and Transfer Date as
provided in Section 11.4):

     Due Incorporation and Good Standing. Purchaser is a corporation, duly
organized, validly existing, and in good standing under the laws of the State
of Delaware. Purchaser has in full force and effect (without notice of possible
suspension, revocation or impairment) all required qualifications, permits,
approvals, licenses, and registrations to conduct all activities in all states
in which its activities with respect to the Mortgage Loans or the Servicing
Rights require it to be qualified or licensed, except where the failure of
Purchaser to possess such qualifications, licenses, permits, approvals and
registrations would not have a material adverse effect on Seller.

     5.2 Authority and Capacity. Purchaser has all requisite corporate power,
authority and capacity, to execute and deliver this Agreement and the Interim
Servicing Agreement and to perform all of its obligations hereunder and
thereunder. Purchaser does not believe, nor does it have any cause or reason to
believe, that it cannot perform each and every covenant required of it
contained in this Agreement and the Interim Servicing Agreement.

     5.3 Effective Agreement. The execution, delivery and performance of this
Agreement and the Interim Servicing Agreement by Purchaser and consummation of
the transactions contemplated hereby and thereby have been or will be duly and
validly authorized by all necessary corporate, shareholder or other action by
Purchaser; and this Agreement and the Interim Servicing Agreement have been or
will be duly and validly executed and delivered by Purchaser, and this
Agreement and the Interim Servicing Agreement are valid and legally binding
agreements of Purchaser and enforceable against Purchaser in accordance with
their respective terms, subject to bankruptcy, insolvency and similar laws
affecting generally the enforcement of creditor's rights and the discretion of
a court to grant specific performance.

     5.4 No Conflict. Neither the execution and delivery of this Agreement and
the Interim Servicing Agreement nor the consummation of the transactions
contemplated hereby and thereby, nor compliance with their respective terms and
conditions, shall (a) violate, conflict with, result in the breach of, or
constitute a default under, be prohibited by, or require any additional
approval under any

                                      16
<PAGE>
of the terms, conditions or provisions of Purchaser's Articles of Incorporation
or By-Laws, or of any mortgage, indenture, deed of trust, loan or credit
agreement or instrument to which Purchaser is now a party or by which it is
bound, or of any order, judgment or decree of any court or governmental
authority applicable to Purchaser, or (b). result in the creation or imposition
of any lien, charge or encumbrance of any material nature upon any of the
properties or assets of Purchaser.

     5.5 Consents. Approvals and Compliance. Except for the Investor Consents,
there is no requirement applicable to Purchaser to make any filing with, or to
obtain any permit, authorization, consent or approval of, any Person as a
condition to the lawful performance by Purchaser of its obligations hereunder.
Purchaser is approved by and in good standing with each Agency, Investor or
Insurer, as necessary, in order to purchase and assume responsibility for the
Servicing Rights. Purchaser has complied with, and is not in default under, any
law, ordinance, requirement, regulation, rule, or order applicable to its
business or properties, the violation of which might materially and adversely
affect the operations or financial condition of Purchaser or its ability to
perform its obligations hereunder.

     5.6 Litigation. There is no litigation, claim, demand, proceeding or
governmental investigation existing or pending, or to Purchaser's knowledge,
threatened, or any order, injunction or decree outstanding, against or relating
to Purchaser that could materially and adversely effect or delay the
performance by Purchaser of its obligations under this Agreement.

     5.7 Facts and Omissions. No representation, warranty or written statement
made by Purchaser in this Agreement, in any Exhibit or Schedule to this
Agreement, or in the Interim Servicing Agreement contains or will contain any
material misstatement of fact or will omit to state a material fact necessary
in order to make the statements not misleading in light of the circumstances in
which they are made.

                                  ARTICLE VI

                                  COVENANTS

     6.1 Investor Consent. The purchase and sale of the Servicing Rights are
subject to approval by the applicable Investors. In accordance with the
Applicable Requirements, Seller shall submit to the Investors all materials
necessary to obtain the Investor Consents in a timely manner with respect to
the transfer of the Servicing Rights from Seller to Purchaser. Seller shall use
its best efforts to obtain Investor Consents promptly, and Purchaser shall
cooperate with Seller in obtaining the Investor Consents. Seller shall pay any
and all costs of securing Investor Consents for the transactions contemplated
in this Agreement, including, without limitation, fees to the Investors for the
transfer of the Servicing Rights in accordance with the Applicable
Requirements.

     6.2 FNMA Transfer Date. Subject to the following, the Transfer Date for
the FNMA Mortgage Loans shall be April 1, 1998. Seller shall promptly notify
Purchaser in writing if (i) FNMA advises Seller that the applicable Transfer
Date, for all or any portion of the Servicing Rights, will be a date other than
April 1, 1998, or (ii) FNMA advises Seller that all or any portion of the
Servicing Rights may not be transferred to Purchaser. The Transfer Date for the
FNMA Mortgage Loans may be changed upon the written agreement of the Parties.

     6.3 FHLMC and IHDA Transfer Dates. Subject to the following, the Transfer
Date for the FHLMA and IHDA Mortgage Loans shall be April 16, 1998. Seller
shall promptly notify

                                      17
<PAGE>
Purchaser in writing if (i) FHLMC or IHDA advises Seller that the Transfer Date
for all or any portion of the FHLMC or IHDA Servicing Rights will be any other
date, or (ii) FHLMC or IHDA advises Seller that all or any portion of the
FHLMC or IHDA Servicing Rights may not be transferred to Purchaser. The FHLMC
and IHDA Transfer Date may be changed upon the written agreement of the
Parties.

     6.4 Mortgage Loan Files and Related Materials.

        6.4.1 Conversion Data Tape. In accordance with the dates and format
specified in the Servicing Transfer Instructions, Seller shall provide
Purchaser with a data tape or tapes containing the information necessary to
service the Mortgage Loans in accordance with the Applicable Requirements so as
to permit Purchaser to test the conversion of Seller's records to Purchaser's
data processing system. Seller shall be responsible for all costs with respect
to the conversion or modification of Seller's data tapes to Purchaser's format
if the tapes cannot be properly read or do not contain the information
necessary to service the Mortgage Loans in accordance with the Applicable
Requirements. In addition, Seller shall provide master file data tape(s) to
Purchaser on or within three (3) Business Days of the Effective Date to support
Purchaser's conversion pre-planning activities. On or before the Transfer Date,
Seller shall cause its servicing system, and all data tapes provided by Seller
to Purchaser related to the Servicing Rights, to accurately reflect the
Mortgage Loans and Servicing Rights, including without limitation the
information contained in the Mortgage Loan Documents and all tax and insurance
records. All such data tapes shall be in such format as to allow their transfer
and conversion to Purchaser's servicing system without modification.

        6.4.2 Packaging and Shipment of Mortgage Files. At Seller's sole
expense, Seller shall (or shall cause its document custodian to) package and
ship to Purchaser, or Purchaser's designee, on the Transfer Date, all Mortgage
Files pertaining to the Mortgage Loans. Seller shall provide Purchaser with
prior written notice of the carrier, shipping arrangements and insurance
arrangements with respect to the delivery of the Mortgage Files. In the event
that any document required to be delivered to Purchaser hereunder is missing,
defective, not in accordance with Applicable Requirements or otherwise not
delivered, Seller shall obtain and/or cure all such documents at Seller's sole
cost and expense. Each Mortgage File shall clearly indicate the Purchaser's,
Seller's and Investor's loan numbers and the related Pool numbers.

        6.4.3 Assignments and Related Matters. Seller shall, in accordance with
all Applicable Requirements, utilize MERS in order to assign nominal title to
the Mortgage Instruments to Purchaser; to prepare and record or cause to be
prepared and recorded, as required by the applicable Investor, all prior
intervening Assignments of Mortgage Instruments and all Assignments of Mortgage
Instruments from Seller to Purchaser and from Purchaser to the applicable
Investor; and to endorse or cause to be endorsed, as appropriate, the Mortgage
Notes to Purchaser without recourse. In connection with the foregoing, Seller
shall reimburse Purchaser for the cost of registering each Mortgage Loan with
MERS at a rate of $3.00 per Mortgage Loan. Seller shall deliver to Purchaser
certified copies of all recorded Assignments of Mortgage Instruments promptly
upon receipt of same from the applicable recording offices or otherwise.

     6.5 Remittances. Seller shall take appropriate steps to make the first
payment of principal and interest due following each applicable Transfer Date
to the appropriate parties, and shall pay all related guaranty fees for the
applicable month, from payments received by Seller with respect to such
Mortgage Loans pursuant to the Interim Servicing Agreement. In the event the
payments so received by Seller are insufficient to pay these amounts by wiring
immediately available funds to Seller no later than twenty-four (24) hours
prior to the required remittance date.

                                      18
<PAGE>
     6.6 Undertakings by Seller.

        6.6.1 Forwarding of Pavements and Other Items. All bills (including,
without limitation, tax and insurance bills) pertaining to the Mortgage Loans
which are due and payable on or before the applicable Transfer Date or with
respect to which the earlier of the payment deadline to take advantage of a
discount or the payment deadline to avoid a penalty is before, on or within
thirty (30) days after the applicable Transfer Date shall be paid by Seller,
and Seller shall pay such bills in accordance with the Applicable Requirements.
All Mortgage Loan Payments and other funds or payments, all other bills, and all
transmittal lists or any other information used to pay bills pertaining to the
Mortgage Loans, and all documents, notices, correspondence and other
documentation related to the Mortgage Loans, that are received by Seller after
the applicable Transfer Date shall be forwarded by Seller to Purchaser, at
Seller's expense, by overnight delivery within one (1) Business Day following
Seller's receipt thereof for the first two (2) months after the applicable
Transfer Date, and thereafter by first class mail within one (1) Business Day
following Seller's receipt thereof.  All penalties and interest due on any
Mortgage Loan resulting from Seller's failure to pay a bill or to forward bills
or other items to Purchaser as provided above shall be borne by Seller. Seller
shall cooperate with Purchaser to obtain tax bills with respect to which the
earlier of the payment deadline to take advantage of a discount or the payment
deadline to avoid a penalty is between the thirty first (31st) and sixtieth
(60th) day after the applicable Transfer Date. All documents, notices,
correspondence and other documentation related to the Mortgage Loans that are
received by Seller after the applicable Transfer Date shall clearly indicate
the Purchaser's, Seller's and Investor's loan numbers and the related Pool
numbers.

        6.6.2 Assignment or Termination of Certain Contracts. Purchaser elects
to utilize the services of First American Real Estate Information Services,
Inc. ("First American") for life of loan tax service. Accordingly, Seller will
cancel tax service with Transamerica Real Estate Tax Service and any other tax
service provider other than First American as of the applicable Transfer Date
with respect to all Mortgage Loans. Thirty (30) days prior to the applicable
Transfer Date, Seller will provide a data tape to First American, which contains
information that First American requires to execute a "verified takeover" in
favor of Purchaser. It is anticipated that such data tape shall be in the
standard "AB38A3" format. If a data tape cannot be produced by Seller in the
required format, the Seller shall, with respect to each Mortgage Loan, provide
a hard copy of legal descriptions, identifying the parcels subject to tax.
Seller also shall assign to Purchaser, effective as of the applicable Transfer
Date, fully paid, transferable, life of the loan flood zone certification
contracts issued by First American Flood Data Services, Inc. related to all
Mortgage Loans, or Seller shall reimburse Purchaser for the cost of securing
such certifications; provided that Seller's liability in connection with
securing such certifications shall in no event be greater than $18.00 per
Mortgage Loan. Seller shall obtain, at its expense, the required consents, if
any, to assign such flood zone certification contracts to Purchaser.

        6.6.3 Custodial Fund Interest and Reporting. Seller shall pay interest
on Custodial Funds accrued through the applicable Transfer Date to the extent
interest with respect to Custodial Funds is required to be paid under the
Applicable Requirements for the benefit of Mortgagors under the Mortgage Loans.
Seller shall either credit such interest to the related Custodial Account
before the Custodial Funds are transferred to Purchaser or forward such
interest to Purchaser or Purchaser's designee within three (3) Business Days
after the applicable Transfer Date, with appropriate information regarding the
proper crediting of the interest.

        6.6.4 IRS Reporting. Seller shall, at its sole cost and expense,
prepare and file with the Internal Revenue Service all reports, forms, notices
and filings required by the Internal Revenue Code and rules, regulations and
interpretations thereunder in connection with the Servicing Rights and

                                      19
<PAGE>
Mortgage Loans with respect to events that occurred prior to the applicable
Transfer Date thereof, including without limitation, the reporting of all
interest paid by Seller for the account of Mortgagors under the Mortgage Loans.

     6.7 Final Certification and Recertification.

         6.7.1 Transfer Date Deadline. Seller shall use its best efforts to
obtain the final certification or recertification, as applicable, of any Pool
with respect to which the deadline for final certification or recertification
is a date that occurs on or before the applicable Transfer Date. If it appears
that a Pool required to be finally certified or recertified on or before the
scheduled Transfer Date will not be so certified or recertified, then, subject
to any necessary approval of the Investor, Seller shall, as directed by
Purchaser, (i) request that the Transfer Date with respect to such Pool be
delayed until the Pool is so certified or recertified, or (ii) if permitted by
the applicable Investor, repurchase any Mortgage Loan that is preventing the
Pool from being finally certified or recertified in time to permit the Pool to
be so certified or recertified by the scheduled Transfer Date. As a condition
to the transfer of the Servicing Rights to a Pool that is required to be, but
is not, finally certified or recertified on the applicable Transfer Date,
Seller shall pay the cost of posting any letter of credit or performance bond
required by the applicable Investor with respect to the Pool and reimburse
Purchaser for any Losses resulting from, arising out of or relating to the Pool
not being finally certified or recertified by the deadline.

         6.7.2 Post Transfer Date Deadline. Seller shall cooperate with the
Purchaser to obtain by the appropriate deadline the final certification or
recertification, as applicable, of any Pool with respect to which the deadline
for final certification or recertification is after the applicable Transfer
Date, including the recertification of Pools in connection with the transfer of
Servicing Rights to Purchaser hereunder. On and after the applicable Transfer
Date, Seller shall use its reasonable and timely best efforts to cause to be
delivered by Seller to Purchaser, at Purchaser's sole cost and expense, all
documents (including without limitation all missing documents and all documents
referred to in section 6.4.3 herein) necessary for the final certification or
recertification of a Pool.

         6.8 Notification of Mortgagors, Insurance Companies, etc. By no later
than thirty (30) days prior to the applicable Transfer Date, Seller shall
deliver to Purchaser for approval a form of Mortgagor notification letter in
connection with the transfer of the Servicing Rights. Fifteen (15) days prior
to the applicable Transfer Date and otherwise in accordance with Applicable
Requirements, Seller, at its expense, shall mail the approved form of
notification to the Mortgagors of the transfer of the Servicing Rights and
instruct the Mortgagors to deliver all Mortgage Loan Payments and all tax and
insurance notices to Purchaser after the applicable Transfer Date. Seller also
shall, at its expense, notify any applicable taxing authority, the custodian of
the Mortgage Files, the Purchaser's and Seller's electronic data processing
servicing bureau, and Insurers that the Servicing Rights are being transferred
and instruct such entities to deliver all tax bills, payments, notices and
insurance statements to Purchaser after the applicable Transfer Date.
Purchaser, at its expense, shall prepare and mail notification to the
Mortgagors of the transfer of the Servicing Rights after the applicable
Transfer Date in accordance with Applicable Requirements.

         6.9 Non-Solicitation. As part of the sale and transfer contemplated
hereunder, Seller shall sell, transfer, assign and convey to Purchaser all
intangible rights related to the Mortgage Loans and Servicing Rights, including
without limitation the exclusive right to receive all, and to enter into
arrangements that generate, Ancillary Fees with respect to the Mortgage Loans.
From and after the Effective Date, Seller shall not, and shall cause its
affiliates, officers, directors, shareholders,

                                     20
<PAGE>
managers, employees and agents not to, directly or indirectly, during the
remaining term of any of the Mortgage Loans, by telephone, by mail, by personal
solicitation or otherwise, (a) take any action to solicit the Mortgagors (i)
for refinance or prepayment of the Mortgage Loans, in whole or in part, (ii)
for mortgage-related products (including without limitation optional insurance
products), (iii) for any other products or services for which a Servicer or its
contractors or agents may solicit the Mortgagors or (iv) for any other purpose,
(b) take any action to facilitate or encourage any Person to solicit the
Mortgagors for any matter or item enumerated in clause (a) above, or (c)
disseminate to any third party, for compensation or otherwise, any complete or
partial list of the Mortgagors. Nothing in this Section shall prohibit Seller
from taking applications from those Mortgagors who initiate refinance action on
their own, or from engaging in a mass advertising program to the general public
at large such as mass mailings based on commercially acquired, non-targeted
mailing lists or newspaper, radio or television advertisements.

         6.10 Dispute Resolution. Purchaser and Seller agree to attempt in good
faith to resolve any dispute between or among them hereunder. If,
notwithstanding such efforts, within thirty (30) days after one party gives
another party notice of the dispute, which notice shall contain a reasonable
description of the dispute, the parties cannot resolve such dispute, the matter
shall be submitted to an independent consulting, accounting or brokerage firm
(or, in the case of disputes of legal issues, an arbitrator) reasonably
acceptable to the applicable parties that is knowledgeable in the area in which
the dispute arises (the "Firm") whose determination shall be final and binding
on all of the parties. The Firm's determination may be entered as a judgment in
any court having jurisdiction, subject only to challenges on the grounds set
forth in the appropriate jurisdiction's statutes relating to the enforceability
or appealability of binding arbitration, or the Firm's incorrect application of
the substantive laws of the state where the Firm conducts its hearing on the
dispute. If the Firm is at any time unable or unwilling to serve in such
capacity, the parties shall in good faith select another firm which the parties
reasonably agree is knowledgeable and independent to serve as the "Firm"
hereunder. The fees of the Firm shall be paid by the party determined by the
Firm to be the non-prevailing party with respect to such dispute, and in the
event that the Firm determines that the non-prevailing party had no reasonable
basis to raise such dispute or that the dispute was not raised in good faith,
the non-prevailing party also shall pay all costs and expenses (including all
attorney and other professional fees) of the other party in connection with
such dispute. The Firm shall be chosen within fifteen (15) Business Days after
written notice by a party to the other parties that a Firm be chosen to resolve
the dispute. If the parties cannot agree on the Firm, then the Firm shall be
selected by the appropriate court of law having jurisdiction over the dispute
by filing an application with the presiding judge of that court for the
selection of the Firm. Each party shall present to the Firm its position, in
the form of a proposed monetary settlement, with regard to the dispute. The
Firm shall render its decision, which shall be one of the parties' positions,
within sixty (60) days after the Firm has had a hearing with the parties. All
discovery issues shall be resolved by the Firm and shall be final. The parties
may use consultants and advisors to assist them and participate in the hearing.
The parties shall indemnify the Firm in connection with its services as long as
the Firm acts in good faith and without negligence. The parties shall enter
into any retention and indemnification agreements as may be reasonably required
by the Firm in connection with the performance of its duties under this section
6.10 which are not inconsistent with the provisions of this section 6.10.

         6.11 Payment of Costs. Except as otherwise provided herein (a) Seller
shall be responsible for all fees, costs and expenses with respect to (i) the
transfer of the Servicing Rights, (ii) the delivery of the Mortgage Files and
related documents, (iii) the remittance of the Custodial Funds, and (iv) all
other fees, costs and expenses incurred by Seller in its performance of its
obligations under this Agreement, including without limitation the fees of
Seller's document custodian, attorneys and

                                     21
<PAGE>
accountants, and (b) Purchaser shall be responsible for the fees, costs and
expenses of Purchaser in its performance of its obligations under this
Agreement, including without limitation the fees of Purchaser's document
custodian, attorneys and accountants.

     6.12 Access to Information. Prior to each Transfer Date, Seller shall
allow Purchaser and its counsel accountants, and other representatives,
reasonable access, during normal business hours, to all of Seller's files,
books and records directly relating to the Servicing Rights, the Mortgage
Loans, Custodial Accounts and Advances. Purchaser (or a contractor of
Purchaser) shall have the right, among other things, to inventory the Mortgage
Files during the Interim Period if it wishes. Each Party shall, except in the
event one Party has brought an action against the other Party, allow the other
Party and their respective counsel, accountants, and other representatives,
reasonable access, during normal business hours following each Transfer Date,
to all of such Party's files, books and records directly relating to the
Servicing Rights, the Mortgage Loans, Custodial Accounts and Advances. Each
Party and its representatives and affiliates shall treat all information so
obtained, not otherwise in the public domain, as confidential and shall not use
any such information for its own benefit.

     6.13 Cooperation. To the extent reasonably possible, the Parties shall
cooperate with and assist each other, as requested, in carrying out the
purposes of this Agreement. Without limiting the foregoing, Seller shall
cooperate with Purchaser in connection with, among other things, the
preparation and recordation of all Assignments of Mortgage Instruments and all
prior intervening Assignments of Mortgage Instruments, the endorsement of all
Mortgage Notes, the execution of appropriate powers of attorney, and the
delivery of all documents, and the final certification and recertification of
all Pools (including, without limitation, the correction, completion and
preparation of appropriate Mortgage File documents).

                                  ARTICLE VII

              CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER

     The obligations of Purchaser under this Agreement are subject to the
satisfaction in all material respects, at or prior to the Sale Date and, solely
with respect to section 7.4, at or prior to the initial Transfer Date, of each
of the following conditions, any or all of which may be waived in writing by
Purchaser:

     7.1  Correctness of Representations and Warranties. The representations and
warranties made by Seller in this Agreement are true and correct in all
material respects as of the Sale Date.

     7.2  Compliance with Covenants. All terms and covenants contained in this
Agreement and the Interim Servicing Agreement required to be complied with and
performed by Seller at or prior to the Sale Date shall have been duly complied
with and performed by Seller in all material respects as of the Sale Date.

     7.3  Corporate Resolution or Other Approval. Purchaser shall have received
from Seller a duly executed Certificate of its Secretary or Assistant Secretary
reciting the approval of the Board of Directors of Seller of the transfer and
sale of the Servicing Rights to Purchaser and authorizing the officers of
Seller to execute such documents as may be necessary to accomplish the
transactions contemplated hereby.

     7.4  Investor Approval. At or prior to the initial Transfer Date, the
Investor Consents shall

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<PAGE>
have been issued by all of FHLMC, FNMA and IHDA and delivered to Purchaser and
shall not contain any term or condition that could adversely affect the value
of the Servicing Rights to Purchaser or impose any cost or obligation on
Purchaser not normally imposed in the ordinary course of a transfer of
servicing rights.

     7.5  Litigation. No court order shall have been entered in any action or
proceeding instituted by any Person which enjoins, restrains or prohibits or
seeks to enjoin, restrain or prohibit this Agreement or consummation of the
transactions contemplated by this Agreement.

     7.6  Financial Condition of Seller. On or before the Sale Date, Seller
shall have provided to Purchaser information reasonably satisfactory to
Purchaser to evidence that the financial condition of Seller is adequate to
support the performance by Seller on a timely basis of Seller's potential
indemnification and other obligations hereunder.

     7.7  No Material Adverse Change. Prior to the Sale Date, there shall have
been no material adverse change (or pending adverse change) in the
characteristics of the Mortgage Loans, Servicing Rights or Advances (including
without limitation delinquency rates, escrow balances, average weighted
servicing spread, interest rates, outstanding principal balances and loan
modifications) since October 31, 1997.

                                  ARTICLE VIII

                 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER

     The obligations of Seller under this Agreement are subject to the
satisfaction in all material respects, at or prior to the Sale Date and, solely
with respect to section 8.3, at or prior to the initial Transfer Date, of each
of the following conditions, any or all of which may be waived in writing by
Seller:

     8.1  Correctness of Representations and Warranties. The representations and
warranties made by Purchaser in this Agreement are true and correct in all
material respects as of the Sale Date.

     8.2  Compliance with Covenants. All terms and covenants in the Agreement
required to be complied with and performed by Purchaser at or prior to the Sale
Date shall have been duly complied with and performed by Purchaser in all
material respects as of the Sale Date.

     8.3  Investor Consents. Seller shall have received the Investor Consents of
FHLMC, FNMA and IHDA.

                                   ARTICLE IX

                                INDEMNIFICATION

     9.1  Indemnification of Purchaser. Subject to Section 9.5 below, Seller
shall indemnify and hold Purchaser harmless from, and will reimburse Purchaser
for, any and all Losses incurred by Purchaser to the extent that such Losses
arise out of, relate to, or result from:

          (a) the inaccuracy of any representation or warranty made by Seller in
this

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<PAGE>
 Agreement;

          (b) the failure by Seller to perform or observe any term or provision
of this Agreement;

          (c) any Claim pending or arising out of events occurring in whole or
in part before each transfer Date in connection with the Servicing Rights
transferred to Purchaser on such Transfer Date;

          (d) any missing documents that are required to be delivered to
Purchaser hereunder;

          (e) any and all items listed on any disclosure schedule hereto or
stated as an exception to Seller's representations and warranties in this
Agreement;

          (f) any Excluded Loan, the Servicing Rights to which are transferred
to Purchaser hereunder;

          (g) Seller's escrow, forced placement and other servicing practices in
connection with the Servicing Rights and any such practices of Seller different
from Purchaser's practices that Purchaser continues in connection with the
Servicing Rights until the first anniversary of the Transfer Date or, with
respect to escrow practices, Purchaser's earlier completion of its annual
escrow analysis of the Servicing Rights;

          (b) No Bids, and Buydowns resulting from or made to avoid a No Bid, in
connection with any VA Mortgage Loan for which Foreclosure proceedings have
been initiated prior to the third anniversary of the Sale Date.

     For purposes of establishing whether any matter is indemnifiable under
Section 9.1, the accuracy of the representations and warranties of Seller
contained herein shall be determined without giving effect to the
qualifications to such representations and warranties concerning knowledge or
materiality (including, without limitation, any reference to "material adverse
effect" or any other terms similar thereto).

     9.2  Repurchase of Mortgage Loans and Servicing Rights. In the event
Purchaser discovers that any of the representations and warranties made in this
Agreement by Seller were not accurate at or as of the time they were made by
Seller, or if there exists a basis to demand indemnification under Section 9.1
hereof, or if Purchaser repurchases a Mortgage Loan or indemnifies an Investor
or Agency with respect to a Mortgage Loan as a result of any event arising in
whole or in part before the applicable Transfer Date, Purchaser, subject to any
limitations of the applicable Investor, may demand that Seller (i) repurchase
from Purchaser the Servicing Rights to the affected Mortgage Loans, or (ii)
provide Purchaser with the amount of funds necessary to repurchase such
Mortgage Loans and repurchase from Purchaser the Mortgage Loans and related
Servicing Rights. To the extent permitted by the applicable Investor, Purchaser
shall provide Seller with the opportunity, at Seller's sole cost and expense,
to cure any defects in the affected Servicing Rights and Mortgage Loans. The
purchase price under this Section for any repurchased Servicing Rights shall
equal the sum of (i) the Applicable Percentage multiplied by the then
outstanding principal balance for the related Mortgage Loan, (ii) all other
sums paid by Purchaser to Seller for such Servicing Rights and for the related
Advances to the extent Purchaser has not been reimbursed for such Advances,
(iii) all other documented unreimbursed Losses incurred by

                                     24
<PAGE>
Purchaser in connection with such Mortgage Loans and Servicing Rights, except
to the extent that such Losses are attributable to Purchaser's failure to
service the related Mortgage Loans in accordance with Applicable Requirements;
and (iv) the carrying costs incurred by Purchaser, calculated at the Federal
Funds Rate, with respect to the funds that Purchaser is or was required to
provide to the applicable Agency or Investor to effect the repurchase or
indemnity. In connection with the repurchase of a Mortgage Loan, the amount of
funds that Seller shall provide to Purchaser shall equal the amount of funds
that Purchaser must pay to buy the Mortgage Loan out of a Pool and to otherwise
effect the repurchase. Subject to Applicable Requirements, when Seller is
required to repurchase a Mortgage Loan or Servicing Rights from Purchaser, such
repurchase shall be accomplished by Seller within fifteen (15) Business Days
following receipt of written demand from Purchaser pursuant hereto. Purchaser
shall sub-service such repurchased Mortgage Loan for such period of time that
will enable the Parties to provide proper transfer notices to be given to the
Mortgagor in accordance with the Applicable Requirements, but in no event for
longer than thirty (30) days, and Purchaser shall be entitled to all Servicing
Fees and Ancillary Fees as consideration for sub-servicing the Mortgage Loan.
Upon completion of such repurchase by Seller, Purchaser shall forward to Seller
all servicing records and all documents relating to such Mortgage Loans and\or
Servicing Rights, as applicable.

     9.3  Indemnification of Seller. Subject to Section 9.5 below, Purchaser
shall indemnify and hold Seller harmless from, and will reimburse Seller for,
any and all Losses incurred by Seller after the applicable Transfer Date to the
extent that such Losses result from:

          (a) the inaccuracy of any representation or warranty made by Purchaser
in this Agreement;

          (b) the failure by Purchaser to perform or observe any term of
provision of this Agreement; or

          (c) the failure by Purchaser following the applicable Transfer Date to
service the Mortgage Loans with respect to which the Servicing Rights are
transferred to Purchaser hereunder in accordance with the Applicable
Requirements.

     9.4  Notice and Settlement of Claims.

          (a) Each Party to this Agreement shall promptly notify the other Party
in writing of the existence of any material fact known to it giving rise to any
obligations of any Party under Article 9 and, in the case of any Claim brought
by a third party, which may give rise to any such obligations, each Party shall
promptly notify the other Party of the making of such Claim or the commencement
of such action by a third party as and when same becomes known to it. The
failure to provide notice in such manner shall not relieve the Party receiving
such notice of any obligation to indemnify or reimburse any other Party
hereunder unless such failure materially prejudices the rights or increases the
liability of the Party receiving such notice with respect to the matter as to
which such notice relates, and then such Party's obligation to indemnify or
reimburse hereunder shall be reduced only by the amount that it actually has
been damaged thereby. The indemnifying Party (the "Indemnifying Party") may, at
its own cost and expenses, assume and control defense of any Claim, including,
without limitation, the right to designate counsel and to control, all
negotiations, litigation, settlements, compromises and appeals of any such
Claim or potential Claim; provided that such counsel shall be satisfactory to
the indemnified Party ("Indemnified Party") in the exercise of its reasonable
discretion. The Party not controlling the defense or prosecution of any such
Claim may participate at its own costs and expense. Notwithstanding the
foregoing, if Purchaser is the Indemnified Party and

                                     25
<PAGE>
Purchaser reasonably believes that the assumption of the defense or prosecution
of all or a portion of such Claim is necessary to assure that its right or
ability to enforce a material portion of its other Mortgage Loans or Servicing
Rights or to assure that its method of doing business or its authority and
approvals to service are not materially impaired, then, upon notice to Seller
from Purchaser, Seller shall permit such assumption by Purchaser. Neither the
Indemnifying Party nor the Indemnified Party shall be entitled to settle,
compromise, decline to appeal, or otherwise dispose of any Claim, without the
written consent of the other Party, which consent shall not be unreasonably
withheld or delayed; provided, however, such consent shall not be required for a
Claim involving less than Ten Thousand Dollars ($10,000), unless the other
Party reasonably believes that the settlement, compromise, declination to appeal
or other disposition may (a) prejudice the Party in connection with other
Claims or potential Claims, or (b) result in injunctive or other relief
(excepting the payment of monetary damages) against the Party that could
materially interfere with the business or operations of the Party. Following
the discharge of the Indemnifying Party's obligations with respect to any Claim
under Article 9, the Indemnified Party shall, subject to Applicable
Requirements, assign to the Indemnifying Party any and all related Claims
against third parties. Within fifteen (15) days after receipt, the Indemnified
Party shall refund to the Indemnifying Party the amounts of all recoveries
received by the Indemnified Party with respect to any claim with respect to
which it is reimbursed for Losses. The obligations of the Indemnifying Party
under this section 9.4(a) shall include Losses for Claims that are settled
(with the Indemnifying Party's prior written consent) whether or not such
settlement includes any acknowledgment or admission of fault, liability or
breach by the Indemnifying Party.

          (b) Following the receipt of written notice from the Indemnified Party
of a demand for indemnification, the Indemnifying Party shall seek to cure the
problem giving rise to the demand, if possible, and pay the amount for which it
is liable, or otherwise take the actions which it is required to take within
thirty (30) days or such lesser time as may be required by the applicable
Investor, Insurer or third party claimant. As to any Claim for indemnity for
which notice is given as hereinbefore provided, the corresponding obligation of
indemnity shall continue to survive, subject to Section 11.4, until whichever
of the following events first occurs: (1) the Indemnifying Party shall have
discharged its obligation of indemnity to the Indemnified Party with respect to
such claim, as required hereunder; (2) a court of competent jurisdiction shall
have finally determined that the Indemnifying Party is not liable to the
Indemnified Party with respect to such claim; or (3) the Indemnified Party
shall have released in writing (or be held to have released) the Indemnified
Party from any liability with respect to such Claim.

          (c) In the event that Mortgage Loans related to Servicing Rights
acquired by Purchaser hereunder become subject to any Claim covered by Section
9.1, and other mortgage loans owned or serviced by the Purchaser also are
subject to such Claim, then the extent of Seller's indemnification under
Section 9.1 shall equal (i) the amount of any judgment or settlement
attributable to Seller's actions or omissions for which Seller must indemnify
Purchaser under Section 9.1, and (ii) a share of (a) the expenses and
attorneys' fees incurred by the Purchaser after the relevant Transfer Date in
the defense and/or settlement of any such Claim and (b) the expenses and
attorneys' fees incurred by the claimants after the relevant Transfer Date that
Purchaser is required to pay pursuant to the terms of any judgment or
settlement. Seller's share of (a) and (b) shall be calculated by multiplying
the percentage of the amount that Seller is required to pay under clause (i) of
the entire judgment or settlement amount by the total amount of expenses and
attorneys' fees incurred by Purchaser under clauses (ii)(a) and (ii)(b). For
example, if the amount payable by Seller to the Purchaser under clause (i)
above is equal to 10% of the full amount payable by Purchaser under the terms
of any judgment or settlement (regardless of the percentage of Purchaser's
servicing portfolio (or portion thereof) that is the subject matter of any
claim or settlement that is comprised of Servicing Rights purchased from
Seller), then Seller would also be responsible for 10% of the amounts under
clauses (ii)(a) and (ii)(b).

                                     26
<PAGE>
     9.5  Losses Net of Insurance. Etc. The amount of any Loss for which
indemnification is provided under this Article IX shall be net of (i) any
amount recovered by the indemnified party pursuant to any indemnification by or
indemnification agreement with any third party, (ii) any insurance proceeds or
other cash receipts or sources of reimbursement received with respect to such
loss (and no right of subrogation shall accrue to any insurer or third party
indemnitor hereunder). If the amount to be netted hereunder from any payment
required under Sections 9.1 or 9.2 is determined after payment to the
indemnified party pursuant to this Article IX, the indemnified party shall repay
to the indemnifying party, promptly after such determination, any amount that
the indemnifying party would not have had to pay pursuant to this Article IX
had such determination had been made at the time of such payment.

                                  ARTICLE X

                                 TERMINATION

     10.1  Termination.

     (a)  This Agreement and the transactions contemplated hereby may be
terminated as follows:

        (i)   by mutual written consent of the parties at any time prior to the
Sale Date; or

        (ii)  by Purchaser or Seller, by written notice to the other, if any
condition precedent to the other Party's obligations under this Agreement is
not met within the specified time period and the failure to meet such condition
would have a material and adverse affect on the transactions contemplated
hereunder; provided, however, that neither of the Parties may terminate this
Agreement pursuant to this section 10.1 (ii) if such Party is itself in breach
in any material respect of any of its representations, warranties, covenants or
other obligations set forth herein.

     (b)  In the event that an Investor Consent of one or more Investors is
not obtained pursuant hereto, or in the event that any such Investor Consent
contains any term or condition that could adversely affect the value of the
related Servicing Rights to Purchaser or impose any material cost or obligation
on Purchaser not normally imposed in the ordinary course of a transfer or
servicing rights, then Purchaser, in addition to its termination rights
afforded through section 7.4, shall have the right to terminate this Agreement
with respect to the related Servicing Rights only, and upon such a termination,
within five (5) Business Days thereafter, Seller shall return to Purchaser any
portions of the Purchase Price related to such Servicing Rights that were paid
by Purchaser to Seller, plus interest on such amounts at the Federal Funds
Rate, less all Servicing Fees paid by Seller to Purchaser pursuant to the
Interim Servicing Agreement with respect to such Servicing Rights.

     10.2  Effect of Termination. In the event of the termination of this
Agreement pursuant to section 10.1 hereof, this Agreement (other than Section
11.2 and this Section 10.2) shall forthwith become void and have no effect,
without any liability on the part of any Party other than liability pursuant to
this section 10.2. Upon such a termination of this Agreement for any reason,
within five (5) Business Days thereafter, Seller shall return to Purchaser any
portions of the Purchase Price paid by Purchaser to Seller, plus interest on
such amounts at the Federal Funds Rate, less all Servicing Fees paid by Seller
to Purchaser pursuant to the Interim Servicing Agreement. If this Agreement is
terminated pursuant to Section 10.l(ii) as a result of a willful breach or
default by the non-terminating Party, then the terminating Party shall be
entitled to such additional remedies as may be available to it at
law or in equity.

                                     27
<PAGE>
                                 ARTICLE XI

                                MISCELLANEOUS

     11.1  Supplementary Information. From time to time prior to and after
the Transfer Date, each Party shall furnish to the other Party such information
supplementary to the information contained in the documents and schedules
delivered pursuant hereto which is reasonably available and may reasonably be
requested or which may be necessary to file any reports due to the Investors in
connection with the Mortgage Loans or Servicing Rights.

     11.2  No Broker's Fees. Each party hereto represents and warrants to the
others that it has made no agreement to pay any agent, finder, or broker or any
other representative, any fee or commission in the nature of a finder's or
broker's fee arising out of or in connection with the subject matter of this
Agreement. Notwithstanding anything to the contrary, Seller shall be
responsible for all fees and commissions of Countrywide Servicing Exchange.

     11.3  Further Assurances. Each Party shall, at any time and from time to
time, promptly, upon the reasonable request of the other Party or its
representatives, execute, acknowledge, deliver or perform all such further
acts, deeds, assignments, transfers, conveyances, and assurances as may be
required for the better vesting and confining to Purchaser and its successors
and assigns of title to Servicing Rights or as shall be necessary to effect the
transactions provided for in this Agreement. Purchaser and Seller shall
cooperate in good faith to consummate the transactions contemplated by this
Agreement.

     11.4  Survival. Notwithstanding anything else to the contrary herein, all
warranties, representations, covenants, indemnities and other agreements of the
Parties set forth herein shall survive the closing of the sale hereunder until
the expiration of the one-year period commencing on the date that all of the
Mortgage Loans have been paid in full, foreclosed or otherwise retired.

     11.5  Assignment. No party hereto shall assign, sub-license, sub-contract,
charge or otherwise encumber any of its rights or obligations under this
Agreement without the prior written consent of the other party.

     11.6  Due Diligence. The parties hereto agree that any and all
determinations made by Purchaser in connection with its due diligence review of
the Mortgage Loans, Servicing Rights and related books and records shall have
no bearing on, and shall not limit the effect of, Seller's representations,
warranties, covenants, indemnities and other obligations under this Agreement.

     11.7  Notices. Except as otherwise expressly permitted by this Agreement,
all notices and statements to be given under this Agreement are to be in
writing, delivered by hand, facsimile, telegram, national overnight mail
service, or first class United States mail postage prepaid and registered or
certified with return receipt requested, to the following addresses or
facsimile numbers, as applicable (which addresses and facsimile numbers may be
revised by notice):

                                     28
<PAGE>
          (a)  If to the Purchaser, to:

               Lawrence P. Washington
               Executive Vice President and Chief Financial Officer
               First Nationwide Mortgage Corporation
               5280 Corporate Drive
               Frederick, MD 21701
               Facsimile Number: (301) 696-5111

                       - and -

               Stephen E. Simcock, Esq.
               Senior Vice President and Senior Counsel
               First Nationwide Mortgage Corporation
               5280 Corporate Drive
               Frederick, MD 21701
               Facsimile Number: (301) 815-5612

               With a copy to (which shall not constitute notice):

               Weiner, Brodsky, Sidman & Kider, P.C.
               1350 New York Avenue, N.W.
               Suite 800
               Washington, DC 20005
               Attn: Don J. Halpern, Esq.
               Facsimile Number: (202) 628-2011

          (b)  If to Seller, to:

               Cole Taylor Bank
               5501 West 79th Street
               Burbank, Illinois 60459
               Attn: Tom Pisapia
               Facsimile Number: (708) 857-3377

All notices and statements shall be deemed given, delivered, received and
effective upon personal delivery or receipt of facsimile or telegram, one (1)
Business Day after sending by overnight mail or three (3) Business Days after
mailing by first class United States mail in the manner set forth above.

     11.8  Entire Agreement. This Agreement and the Interim Servicing Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof. No amendments, modifications or supplements of this Agreement
shall be binding unless executed in writing by the parties hereto. The Exhibits
and Schedules are part of this Agreement.

     11.9  Binding Effect; Third Parties. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, express or
implied, is intended to confer on any Person, other than the parties hereto and
their successors and permitted assigns, any rights, obligations, remedies or
liabilities.

                                     29
<PAGE>
     11.10  Applicable Laws. This Agreement shall be construed in accordance
with federal law and the laws of the State of Maryland, without reference to
the choice of law principles under the laws of the State of Maryland. Any
lawsuit or other legal action instituted by any party hereto in connection with
this Agreement shall be brought in a federal or state court of appropriate
jurisdiction in Frederick County, Maryland.

     11.11  Counterparts. This Agreement may be executed in any number of
counterparts, which together shall constitute full and proper execution hereof.

     11.12  No Remedy Exclusive. No remedy under this Agreement is intended to
be exclusive of any other available remedy, but each remedy shall be cumulative
AND shall be in addition to any remedies given under this Agreement or existing
at law or in equity.

     11.13  Attorney's Fees and Expenses. If any Party shall bring suit against
the other Party as a result of any alleged breach or failure by the other Party
to fulfill or perform any covenants or obligations under this Agreement, then
the prevailing party in such action shall be entitled to receive from the
non-prevailing party reasonable attorney's fees incurred by reason of such
action and all costs of suit and preparation at both trial and appellate levels.

     11.14  Waiver. Any forbearance by a Party in exercising any right or remedy
under this Agreement or otherwise afforded by applicable law shall not be a
waiver or preclude the exercise of that or any other right or remedy.

     11.15  Announcements. Neither Party shall issue press releases or
announcements regarding, or otherwise disclose to the general public or
mortgage industry, the existence or terms of this Agreement without the prior
written approval of the other parties hereto, except to the extent required by
any court, tribunal, regulatory authority or law.

     11.16  Interpretation of Representations and Warranties. The failure of any
event or occurrence to constitute a breach of any one of Seller's
representations or warranties contained herein or in the Interim Servicing
Agreement shall not, by and of itself, prevent such event or occurrence from
constituting a breach of any other representation or warranty of Seller.
Without limiting the foregoing, if a representation or warranty specifically
related to a particular issue is not breached by the occurrence of an event as
to which a loss is incurred, a breach and the related indemnity protection
therefor shall exist hereunder if a general representation and warranty (for
instance, a representation regarding compliance with Applicable Requirements)
would be breached by such occurrence.

     11.17  Exclusivity. From the Effective Date to the earlier of the Transfer
Date or the termination of this Agreement in accordance with the terms hereof,
Seller and its affiliates, shareholders, employees, directors and agents shall
not, and Seller shall cause its affiliates, shareholders, employees, directors
and agents to not, directly or indirectly, initiate, encourage, entertain or
accept any bid, submission, proposal or offer to purchase directly or
indirectly all or a portion of the Servicing Rights.

                                     30
<PAGE>
     IN WITNESS WHEREOF, each of the undersigned parties to this Agreement has
caused this Agreement to be duly executed in its name by one of its duly
authorized officers, all as of the date first above written

FIRST NATIONWIDE MORTGAGE CORPORATION

By:   /s/ SIGNATURE
   ----------------------------------
Its: Senior Vice President
    ---------------------------------

COLE TAYLOR BANK

    /s/ Frank S. DeGradi
    ---------------------------------
By:   Frank S. DeGradi
    ---------------------------------
Its:  Group Executive Vice President
     --------------------------------

                                     31
<PAGE>
                                  EXHIBIT A

                           LIST OF MORTGAGE LOANS

                                     32
<PAGE>
                                  EXHIBIT B

                     FORM OF INTERIM SERVICING AGREEMENT

                                     33
<PAGE>
                                  EXHIBIT C

                       SERVICING TRANSFER INSTRUCTIONS

                                     34
<PAGE>
                         INTERIM SERVICING AGREEMENT

     THIS INTERIM SERVICING AGREEMENT (Interim Agreement") is entered into on
the 30th day of January, 1998 by and between FIRST NATIONWIDE MORTGAGE
CORPORATION ("FNMC") and COLE TAYLOR BANK ("Subservicer").

                                 WITNESSETH:

     WHEREAS, FNMC AND SUBSERVICER ENTERED INTO A SERVICING RIGHTS PURCHASE AND
SALE AGREEMENT DATED JANUARY 30, 1998 (the "PURCHASE AND SALE AGREEMENT");

     WHEREAS, pursuant to the Purchase and Sale Agreement, Subservicer has
sold, assigned and transferred to FNMC on the Sale Date all beneficial rights
and interest in and to the Servicing Rights relating to the Mortgage Loans, the
Custodial Accounts and the Mortgage Files; and

     WHEREAS, the Purchase and Sale Agreement provides that, effective as of
the Sale Date, the parties thereto shall enter into an Interim Servicing
Agreement regarding: (i) Subservicer's Obligations to perform servicing
functions with respect to the Mortgage Loans for a temporary period from the
Sale Date until the respective Transfer Dates, and (ii) the compensation to be
paid by FNMC to Subservicer for the performance of such functions.

     NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, FNMC and Subservicer agree as
follows:

                           SECTION I. DEFINITIONS

     All capitalized terms used but not defined in this Interim Agreement shall
have the meanings set forth in the Purchase and Sale Agreement.

                               SECTION 2. TERM

     (a) The term of this Interim Agreement shall commence as of the Sale Date
and shall terminate with respect to the Mortgage Loans upon the close of
business on the Business Day immediately preceding the applicable Transfer Date
(except with respect to reconciliations and related matters required by the
Purchase and Sale Agreement and remittances to the applicable Investor on the
following remittance date and the related reports), unless earlier terminated
by either party pursuant to Section 14.

     (b) FNMC is and during the term of this Interim Agreement shall remain the
beneficial owner of the Servicing Rights, the Custodial Accounts and the
Mortgage Files, and, subject to the rights of the applicable Investor and the
terms of this Interim Agreement, is entitled to possession thereof.

                                      1
<PAGE>
                       SECTION 3. SERVICING ACTIVITIES

     During the term of this Interim Agreement:

     (a) Subservicer shall perform all servicing activities with respect to the
Mortgage Loans that are required by, and in accordance with the Applicable
Requirements. Subservicer shall observe and perform all material covenants,
undertakings and obligations required to be observed or performed under to the
Interim Agreement, the Purchase and Sale Agreement and the Applicable
Requirements. All representations and warranties of Subservicer continued in
the Purchase and Sale Agreement are incorporated herein by reference and deemed
made by Subservicer on and as of the Sale Date and the Transfer Date.
Subservicer shall exercise at least the same standard of care as it usually
does in servicing mortgage loans for its own account.

     (b) Subservicer shall use commercially reasonable efforts to collect
payments due from Mortgagors under the Mortgage Loans as they become due,
including but not limited to (i) principal, (ii) interest, (iii) amounts for
hazard and flood insurance premiums, mortgage insurance or guaranty premiums,
taxes, legal fees, and costs, as well as repayment of amounts advanced by the
Subservicer on behalf of the Mortgagor, (iv) late charges, (v) assumption fees
and (vi) bad check charges.

     (c) During the term of this Interim Agreement, Subservicer shall prepare
and deliver to the applicable Investors (with a copy to FNMC) all reports
relating to the Mortgage Loans that are required pursuant to the Applicable
Requirements. All such reports shall be delivered in a timely manner.
Subservicer will provide FNMC with copies of existing computer reports as
reasonably requested or a monthly master tape, if requested and to the extent
available.

     (d) Subservicer shall not, without the prior written consent of FNMC,
destroy any Mortgage File records in its possession that relate to the Mortgage
Loans, nor shall it instruct any third party to destroy such records.

     (e) During the term of this Interim Agreement, FNMC shall have the right
to inspect and audit Subservicer's servicing activities and operations, during
normal business hours provided that any such inspection and audit shall not
unreasonably interfere with Subservicer's activities hereunder and that
reasonable notice is given. Subservicer agrees to cooperate with FNMC and to
make available such Mortgage File records and other information as FNMC may
reasonably request. In the event that FNMC discovers any pattern or practice of
Subservicer that is materially inconsistent with Applicable Requirements, FNMC
may notify Subservicer thereof and Subservicer shall use commercially
reasonable efforts to cure or correct such pattern or practice. This paragraph
(e) shall not limit the indemnification obligations of Subservicer hereunder or
under the Purchase and Sale Agreement.

     (f) In addition to the other obligations of Subservicer set forth herein,
Subservicer shall process all loan payoffs in the ordinary and normal course of
business, and materially in accordance with Applicable Requirements.
Subservicer shall cause all payoff checks received by it, or on its behalf, to
be date-stamped on the same date that it is received.

                                      2
<PAGE>
     (g) Seller shall cause all forced order policies to be canceled as of
the applicable Transfer Date.

                        SECTION 4. CUSTODIAL ACCOUNTS

     (a) During the term of this Interim Agreement, Subservicer shall maintain
and subservice the Custodial Accounts as required pursuant to the Applicable
Requirements in the depository institution presently utilized by Subservicer
for such purpose; provided, however, that the Custodial Accounts must at all
times be on deposit in an institution that meets the requirements of the
applicable Investor.

     (b) The Custodial Accounts will be held in the name of Subservicer in the
manner required by the Purchase and Sale Agreement and the Applicable
Requirements. Subservicer will not withdraw funds from any such account except
as specifically authorized in the Purchase and Sale Agreement, this Interim
Agreement and the Applicable Requirements.

     (c) On each Business Day during the term of this Interim Agreement,
Subservicer shall deposit in the appropriate Custodial Account all principal
and interest, escrow/impound and other collections received by it with respect
to the Mortgage Loans. Subservicer shall be responsible for making all advances
required by the Applicable Requirements, and shall be responsible for prompt
payment of all monthly remittances to the applicable Investor (including the
guaranty fees) and securities holders, all taxes, assessments, premiums for
mortgage insurance and guaranty and premiums for hazard insurance and flood
insurance policies, and all other related fees and charges during the term of
this Interim Agreement. If adequate funds are not held in the Custodial
Accounts to pay such amounts when due, Subservicer shall advance sufficient
funds to cover any such deficiency in a manner to ensure payment of such
amounts prior to the time at which any such items become delinquent.
Subservicer shall be responsible for any damages or tax penalties to the extent
provided for in the Purchase and Sale Agreement. Subservicer shall transfer the
Custodial Accounts to FNMC in accordance with the terms and conditions of the
Purchase and Sale Agreement.

                               SECTION 5. FEES

     (a) The interim servicing fee during the term of this Interim Agreement
shall be equal to Five Dollars ($5.00) per Mortgage Loan for each full or
partial calendar month during the term hereof (the "Interim Servicing Fee"),
provided, however, that FNMC shall have no obligation to pay the Interim
Servicing Fee in any calendar month with respect to any Mortgage Loan that is
serviced by Subservicer hereunder for three (3) or fewer Business Days in such
calendar month. Subservicer shall remit to FNMC within five (5) Business Days
after the monthly Investor cutoff dates, as applicable, all servicing fee
income, less guarantee fees and less the Interim Servicing Fee. In addition,
Subservicer will retain all Ancillary Fees, as collected during the term of
this Interim Agreement, and Subservicer will retain all benefits related to the
Custodial Accounts during the term of this Interim Agreement.

     (b) Subservicer will carry out all of its obligations hereunder at its own
expense, except as otherwise specifically provided herein.

                                      3
<PAGE>
     (c) Subservicer shall be responsible for the payment of any document
custodian fees (other than the fees of FNMC's document custodian). .

                            SECTION 6. INSURANCE

     At all times while this Interim Agreement is in force, FNMC and
Subservicer each shall maintain at their own expense polices of fidelity,
theft, forgery and errors and omissions insurance in such amounts as are
required to maintain FNMC and Subservicer, respectively, in good standing under
all applicable laws and under the requirements of the Applicable Requirements.

                  SECTION 7. REPRESENTATIONS OF SUBSERVICER

     Subservicer hereby represents and warrants to and covenants with FNMC
(such representations and warranties to be true and correct throughout the term
of this Interim Agreement) as follows:

     (a) Subservicer is a duly organized, validly existing and in good
standing under the laws of the United States. Subservicer has obtained and will
maintain all necessary permits, qualifications, registrations, licenses, and
other governmental, FHLMC, FNMA, IHDA, HUD, FHA, VA, State Agency and Insurer
approvals, as are necessary in order to conduct its activities hereunder.

     (b) Subservicer has the power, authority and legal right to enter into and
perform this Interim Agreement and to perform each of the obligations required
of it hereunder, and this Interim Agreement and any document or instrument
delivered to FNMC by Subservicer pursuant hereto has been duly authorized,
executed and delivered.

     (c) This Interim Agreement and any documents or instruments now or
hereafter executed and delivered to FNMC by Subservicer pursuant to this
Interim Agreement constitute (or shall, when delivered to FNMC by Subservicer,
constitute) valid and legally binding obligations of Subservicer enforceable
against Subservicer in accordance with their respective terms, except as may be
limited by or subject to (i) any bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally, and (ii)
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

     (d) Subservicer has in full force and effect all insurance required
under Section 6.

     (e) During the term of this Interim Agreement, Subservicer will service
the Mortgage Loans in accordance with all Applicable Requirements.

                                      4
<PAGE>
                     SECTION 8. REPRESENTATIONS OF FNMC

     FNMC hereby represents and warrants to and covenants with subservicer
(such representations and warranties to be true and correct throughout the term
of the Interim Agreement) as follows:

     (a) FNMC is a duly organized, validly existing and in good standing under
the laws of the state of Delaware. FNMC has obtained and will maintain all
necessary permits, qualifications, registrations, licenses, and other
governmental, FHLMC, FNMA, GNMA, HUD, FHA, VA and any Insurer approvals, as
are necessary in order to conduct its activities hereunder.

     (b) FNMC has the power, authority and legal right to enter into and
perform this Interim Agreement, and this Interim Agreement and any document or
instrument to be delivered by FNMC to Subservicer pursuant hereto has been duly
authorized, executed and delivered.

     (c) This Interim Agreement and any document or instruments now or
hereafter executed or delivered by FNMC to Subservicer pursuant to this
Agreement constitute (or shall, when delivered by FNMC to Subservicer,
constitute), valid and legally binding obligations of FNMC enforceable against
FNMC in accordance with their respective terms except as may be limited by or
subject to (i) any bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights generally, and (ii) general principals or
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).

     (d) FNMC has in full force and effect all insurance required under
Section 6.

                         SECTION 9. INDEMNIFICATION

     (a) In addition to and not in limitation of the respective obligations of
the parties set forth in the Purchase and Sale Agreement, each party shall
indemnify and hold harmless the other party against, and reimburse such other
party for, any Losses resulting from or arising out of a breach of any
representation or warranty or covenant, agreement or other requirement of the
indemnifying party contained in this Interim Agreement.

     (b) For purposes of establishing whether any matter is indemnifiable under
Section 9, the accuracy of the representations and warranties of Subservicer
and the performance of and compliance with the covenants and other obligations
and agreements of Subservicer contained herein shall be determined without
giving effect to the qualifications to such representations, warranties,
covenants, other obligations and agreements concerning knowledge or materiality
(including, without limitation, any reference to "in all material respects,"
"materially" or any other terms similar thereto).

     (c) Each Party shall promptly notify the other Party in writing of the
existence of any material fact known to it giving rise to any obligations of
any Party under this Section 9 and, in the case of any Claim brought by a third
Party, which may give rise to any such obligations, each Party shall promptly
notify the other Party of the making of such Claim or the commencement of such
action by a third Party as and when same becomes known to it. The failure to
provide notice in such manner shall not relieve the Party receiving such notice
of any obligation to indemnify or reimburse any other

                                      5
<PAGE>
Party hereunder unless such failure materially prejudices the rights or
increases the liability of the Party receiving such notice with respect to the
matter as to which such notice relates, and then such Party's obligation to
indemnify or reimburse hereunder shall be reduced only by the amount that it
actually has been damaged thereby. The indemnifying Party or Parties, as the
case may be (the "Indemnifying Party") may, at its own cost and expenses,
assume and control defense of any Claim, including, without limitation, the
right to designate counsel and to control, all negotiations, litigation,
settlements, compromises and appeals of any such Claim or potential Claim;
provided that the counsel is satisfactory to the indemnified Party or Parties,
as the case may be ("Indemnified Party") in the exercise of its reasonable
discretion. The Party not controlling the defense or prosecution of any such
Claim may participate at its own costs and expense. Notwithstanding the
foregoing, if FNMC is the Indemnified Party and FNMC reasonably believes that
the assumption of the defense or prosecution OF all or a portion of such Claim
is necessary to assure that its right or ability to enforce a material portion
of its other mortgage loans or servicing rights or to assure that its method of
doing business or its authority and approvals to service are not materially
impaired, then, upon notice to Subservicer from FNMC, Subservicer shall permit
such assumption by FNMC. Neither the Indemnifying Party nor the Indemnified
Party shall be entitled to settle, compromise, decline to appeal, or otherwise
dispose of any Claim, without the written consent of the other Party, which
consent shall not be unreasonably withheld or delayed; provided, however, such
consent shall not be required for a Claim involving less than Ten Thousand
Dollars ($10,000), unless the other Party reasonably believes that the
settlement, compromise, declination to appeal or other disposition may (a)
prejudice the Party in connection with other Claims or potential Claims, or (b)
result in injunctive or other relief (excepting the payment of monetary
damages) against the Party that could materially interfere with the business or
operations of the Party. Following the discharge of the Indemnifying Party's
obligations with respect to any Claim under this Section 9, the Indemnified
Party shall, subject to Applicable Requirements, assign to the Indemnifying
Party any and all related Claims against third parties.  Within fifteen (15)
days after receipt, the Indemnified Party shall refund to the Indemnifying
Party the amounts of all recoveries received by the Indemnified Party with
respect to any claim with respect to which it is reimbursed for Losses. The
obligations of the Indemnifying Party under this section 9(d) shall include
Losses for Claims that are settled (with the Indemnifying Party's prior written
consent) whether or not such settlement includes any acknowledgment or
admission of fault, liability or breach by the Indemnifying Party.

     (d) Following the receipt of written notice from the Indemnified Party of
a demand for indemnification, the Indemnifying Party shall seek to cure the
problem giving rise to the demand, if possible, and pay the amount for which it
is liable, or otherwise take the actions which it is required to take within
thirty (30) days or such lesser time as may be required by the applicable
Investor, Insurer or third party claimant. As to any Claim for indemnity for
which notice is given as hereinbefore provided, the corresponding obligation of
indemnity shall continue to survive, subject to Section 9(c)(ii), until
whichever of the following events first occurs: (1) the Indemnifying Party
shall have discharged its obligation of indemnity to the Indemnified Party with
respect to such claim, as required hereunder; (2) a court of competent
jurisdiction shall have finally determined that the Indemnifying Party is not
liable to the Indemnified Party with respect to such claim; or (3) the
Indemnified Party shall have released in writing (or be held to have released)
the Indemnified Party from any liability with respect to such Claim.

     (e) In the event that Mortgage Loans related to Servicing Rights acquired
by FNMC under the Purchase and Sale Agreement become subject to any Claim
covered by Section 9(a) prior to the

                                      6
<PAGE>
applicable Transfer Date, and other mortgage loans owned or serviced by FNMC
also are subject to such Claim, then the extent of Subservicer's
indemnification under Section 9(a) shall equal (i) the amount of any judgment
or settlement attributable to Subservicer's actions or omissions for which
Subservicer must indemnify FNMC under Section 9(a), and (ii) a share of (a) the
expenses and attorneys' fees incurred by FNMC after the relevant Transfer Date
in the defense and/or settlement of any such Claim and (b) the expenses and
attorneys' fees incurred by the claimants after the relevant Transfer Date that
FNMC is required to pay pursuant to the terms of any judgment or settlement.
Subservicer's share of (a) and (b) shall be calculated by multiplying the
percentage of the amount that Subservicer is required to pay under clause (i)
of the entire judgment or settlement amount by the total amount of expenses and
attorneys' fees incurred by FNMC under Clauses (ii)(a) and (ii)(b). For example,
if the amount payable by Subservicer to FNMC under clause (i) above is equal to
10% of the full amount payable by FNMC under the terms of any judgment or
settlement (regardless of the percentage of FNMC's servicing portfolio (or
portion thereof) that is the subject matter of any claim or settlement that is
comprised of Servicing Rights purchased from Subservicer), then Subservicer
shall also be responsible for 10% of the amounts under clauses (ii)(a) and
(ii)(b).

                       SECTION 10. NOTICE OF PROBLEMS

     Subservicer shall promptly furnish to FNMC (a) any notice it receives from
any governmental authority, Insurer, Investor, Agency or Mortgagor of a
possible or asserted claim or lawsuit against Subservicer or FNMC for
repurchase of a Mortgage Loan, indemnification for damages, rescission of an
insurance policy or denial of an insurance claim, or other possible remedy or
sanction based upon an alleged breach or violation by Subservicer, or any prior
servicer, of any Applicable Requirement with respect to the Servicing Rights it
subservices hereunder, or (b) notice of any prior servicing or origination
deficiency of which it receives notice or discovers following its assumption of
servicing responsibilities hereunder, and in either case, shall consult with
FNMC.

                          SECTION 11. NOTIFICATIONS

     Each party shall immediately upon receipt, notify the other party of any
notice, instruction, demand, or any communication from any Investor which
affects the Mortgage Loans, the Servicing Rights, the Custodial Accounts or the
Mortgage File documents.

                             SECTION 12. DEFAULT

     The failure of Subservicer or FNMC to materially perform or materially
comply with any term, condition, or agreement applicable to it contained in
this Interim Agreement shall be an event of default ("Event of Default").

                          SECTION 13. RIGHT TO CURE

     If an Event of Default occurs which does not relate to the payment of
money, then the defaulting party shall have until the earlier of ten ( 10) days
after receipt of written notice of such Event of Default or the applicable
Transfer Date to cure such Event of Default. A party that becomes aware of an
Event of Default by it shall promptly notify the other party.

                                      7
<PAGE>
                            SECTION 14. REMEDIES

     If an Event of Default has occurred and has not been cured within any
applicable cure period, FNMC may require Subservicer to repurchase each
Mortgage Loan for which FNMC has incurred a Loss as a result of such Event of
Default in accordance with Section 9.2 of the Purchase and Sale Agreement. The
non-defaulting party may pursue any other remedy available to it under the
terms of this Interim Agreement, the Purchase and Sale Agreement or at law or
in equity.

                      SECTION 15. EFFECT OF TERMINATION

     Each party's indemnification obligations pursuant to Section 9 of this
Interim Agreement shall continue after the term or any termination of this
Interim Agreement subject to the limitations contained in Section 9 of this
Interim Servicing Agreement.

                          SECTION 16. MISCELLANEOUS

     (a) Notices. All notices, requests, demands and other communications that
are required or permitted to be given under this Agreement shall be in writing
and shall be deemed to have been duly given upon the delivery or mailing
thereof, as the case may be, sent by overnight delivery service or by
registered or certified mail, return receipt requested, postage prepaid to the
persons and at the addresses set forth in the corresponding provision in the
Purchase and Sale Agreement or to such other address as FNMC or Subservicer
shall have specified in writing to the other.

     (b) Severability of Provisions. If any one or more of the covenants,
agreements, provisions, or terms of this Interim Agreement shall be held
invalid for any reasons whatsoever, then such covenants, agreements,
provisions, or terms shall be deemed severable from the remaining covenants,
agreements, provisions, or terms of this Interim Agreement and shall in no way
affect the validity or enforceability of other covenants, agreements,
provisions, or terms to this Interim Agreement. If the invalidity of any part,
provision, representation, or warranty of this Interim Agreement shall deprive
any party of the economic benefit intended to be conferred by this Interim
Agreement, the parties shall negotiate in good faith to develop a structure the
economic effect of which is nearly as possible the same as the economic effect
of this Interim Agreement without regard to such invalidity.

     (c) No Partnership. Nothing herein contained shall be deemed or construed
to create a partnership or joint venture between the parties hereto and the
services of Subservicer shall be rendered as an independent contractor and not
as agent for FNMC.

     (d) Execution. This Interim Agreement may be executed in one or more
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
agreement.

     (e) Assignment. This Interim Agreement is not assignable.

                                      8
<PAGE>
     (f) Effect of Headings. The headings in this Interim Agreement are for
purpose of reference only and shall not limit or otherwise affect the meaning
hereof.

     (g) Other Agreements. This Interim Agreement Supersedes all prior
agreements and understandings relating to the subject matter hereof, except for
the Purchase and Sale Agreement. In the event of any conflict, contradiction or
inconsistency between the Interim Agreement and Purchase and Sale Agreement,
the terms of the Purchase and Sale agreement shall control over the Interim
Agreement.

     (h) Amendments: Waiver. Neither this Interim 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. A failure or delay on the
part of either party to exercise any right, power or privilege hereunder shall
not operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right,
power or privilege, nor shall any waiver as to a particular matter constitute a
waiver as to any future similar matter.

     (i) Agreement. The parties agree to execute and deliver such instruments
and take such actions as either party may, from time to time, reasonably
request in order to effectuate the purposes and carry out the terms of this
Interim Agreement.

     (j) Existence of the Parties. During the term of this Interim Agreement,
the parties will keep in full force and effect their existence, rights and
franchises, and their status as a HUD-approved mortgagee, a VA-approved
lender, an IHDA originator and servicer, a FHLMC seller/servicer and a FNMA
seller/servicer in good standing.

     (k) Governing Law. This Interim Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, without giving
effect to its choice of law principles.

     (l) Access to Information. Subservicer shall, except with respect to those
items as to which one Party has brought an action against the other Party,
allow FNMC and its counsel, accountants, and other representatives, reasonable
access, during normal business hours throughout the Interim Period, to all of
Subservicer's files, books and records directly relating to the Servicing
Rights, the Mortgage Loans, Custodial Accounts and Advances. FNMC and its
representatives and affiliates shall treat all information obtained in such
investigation, not otherwise in the public domain, as confidential and shall
not use any such information for its own benefit, unless FNMC acquires the
related Servicing Rights hereunder.

     IN WITNESS WHEREOF, each of the undersigned parties to this Interim
Agreement has caused this Interim Agreement to be duly executed in its name by
one of its duly authorized officers, all as of the date first above written.

                                      FIRST NATIONWIDE MORTGAGE CORPORATION

                                      By:
                                         ----------------------
                                      Its:
                                          -------------------------------

                                      COLE TAYLOR BANK

                                          -------------------------------
                                      By:
                                          -------------------------------
                                      Its: Group Executive Vice President

                                      9<PAGE>
                                                                   EXHIBIT 10.32

                            STOCK PURCHASE AGREEMENT

                                  by and among

                                JEFFREY W. TAYLOR
                                       AND
                               CINDY TAYLOR BLEIL,
                                   AS SELLERS

                                       AND

                           TAYLOR CAPITAL GROUP, INC.
               PROFIT SHARING AND EMPLOYEE STOCK OWNERSHIP TRUST,
                                    AS BUYER

                                       AND

                           TAYLOR CAPITAL GROUP, INC.

                          DATED AS OF NOVEMBER 25, 1998

                            STOCK PURCHASE AGREEMENT

                  This STOCK PURCHASE AGREEMENT ("Agreement") dated November 25,
by and among (i) Jeffrey W. Taylor and Cindy Taylor Bleil, (the "Sellers"), (ii)
Cole Taylor Bank, not in its corporate capacity, but solely as trustee (the
"Trustee") of the Taylor Capital Group, Inc. Profit Sharing and Employee Stock
Ownership Trust (the "Trust" or "Buyer"), which implements and forms a part of
the Taylor Capital Group, Inc. Employee Stock Ownership Plan (the "Plan") (the
Plan and Trust are collectively referred to as the "ESOP"), and (iii) Taylor
Capital Group, a Delaware corporation (the "Company").

                  WHEREAS, the Sellers desire to sell collectively 24,000 shares
of the Company's common stock, $.01 par value (the "Common Shares") to the Buyer
and the Buyer desire to purchase the Common Shares from the Sellers; and

                  WHEREAS, the Company and will make a loan to the Buyer in
order to permit the Buyer to purchase shares of Company Stock;

                  NOW, THEREFORE, in consideration of the foregoing and of the
mutual agreements, covenants, representations and warranties hereinafter
contained, the parties hereby agree as follows:

SECTION 1.        Purchase and Sale of Common Shares.

                  Subject to the terms and conditions of this Agreement, at the
Closing (as defined in Section 3 hereof), each of the Sellers will sell to the
Buyer, and the Buyer will purchase from the Sellers the number of Common Shares,
as defined in the recitals, set forth opposite such Seller's name in Schedule 1,
attached hereto.
<PAGE>
SECTION 2.        Purchase Price and Payment.

                  In full consideration of the Sellers' sale, conveyance,
transfer and delivery to the Buyer of the Common Shares at the Closing, the
Buyer shall pay the aggregate purchase price for the Common Shares (the
"Purchase Price") of Five Hundred Seventy-Six Thousand Dollars ($576,000),
payable to each Seller by delivery of separate certified or cashier's check to
her order, or by wire transfer to an account designated by such Seller, in the
amount set forth opposite each Seller's name in Schedule 1.

SECTION 3.        Closing.

                  3.1 Time and Place. The documents to be transferred and the
payments to be made on the Closing shall be transferred and made at the offices
of the Company 350 East Dundee Rd., Wheeling, IL 60090, at 9:00 a.m., on
November 25, 1998, or at such other time as shall be mutually agreed upon by the
parties. However, as used herein, the term "Closing" shall

mean the date on which the Common Shares are delivered to Buyer and the Purchase
Price is paid to the Sellers.

                  3.2 Deliveries. At or prior to the Closing: (i) each Sellers
shall deliver, or previously have delivered, to the Buyer certificates
representing the number of Common Shares set forth opposite such Seller's name
in Schedule 1, which certificates shall be duly endorsed to the Buyer or
accompanied by duly executed stock powers, in transferable form, accompanied by
all documentation required for transfer; and (ii) the Buyer shall deliver to the
Sellers the Purchase Price as described in Section 2. On the Closing, and from
time to time thereafter, the Sellers shall, at the request of the Buyer, take
all action necessary to put the Buyer in actual possession and control of the
Common Shares and shall execute and deliver such further instruments of transfer
and conveyance and take such other actions as the Buyer may reasonably request,
in order more effectively to transfer and convey the Common Shares to the Buyer,
to confirm the title of the Buyer to the Common Shares, and to assist the Buyer
in exercising any rights with respect thereto. Notwithstanding any provision in
this Agreement to the contrary, Buyer's obligation to consummate the Closing is
conditioned on the Trustee's receipt of a favorable opinion from Alex Sheshunoff
& Co. ("Sheshunoff") that the Purchase Price does not exceed "Adequate
Consideration" (as defined in Section 3(18) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")).

SECTION 4.        Representations and Warranties of the Sellers.

                  Each Seller severally and not jointly represents and warrants
to the Buyer as follows only with respect to himself or herself and only with
respect to his or her Shares:

                  4.1 Title to Common Shares. Each Seller is the lawful record
and beneficial owners of their Common Shares, free and clear of any security
interest, claim, lien, pledge, option, encumbrance or restriction (on
transferability or otherwise) whatsoever in law or at equity, and the delivery
of the Common Shares by each Seller to the Buyer pursuant to this Agreement will
convey to the Buyer lawful, valid and indefeasible title thereto, free and clear
of any security interest, claim, lien, pledge, option, encumbrance or
restriction whatsoever.

                  4.2 Necessary Authority. The Seller has full power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Seller and constitutes the legal, valid and binding obligation
of the Seller, enforceable against the Seller in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, reorganization or
other laws affecting the enforcement of creditors' rights generally now or
hereafter in effect, and subject to the availability of equitable remedies. The
Seller's execution and performance of this Agreement, as well as the
consummation of the transactions contemplated hereby will not result in a breach
or violation of any of the terms and provisions of any agreement or instrument
to which the Seller is a party or by which the Common Shares are bound.

                  4.3. No Bankruptcy, etc. There has not been filed any petition
or application, or any proceedings commenced, by or against, or with respect to
any assets of the Seller under Title 11 of the United States Code or any other
law, domestic or foreign, relating to bankruptcy,

                                       2
<PAGE>
reorganization, compromise, arrangement, insolvency, readjustment of debt or
creditors' rights, and the Seller has not made any assignment for the benefit of
creditors.

                  4.4 Legal Proceedings. There is no action, suit, proceeding or
investigation pending (or, to the knowledge of the Seller, threatened) affecting
the right of the Seller to sell the Seller's shares pursuant to this Agreement
or otherwise to carry out the provisions of this Agreement and the transactions
contemplated hereby, in any court, at law or in equity, or before or by any
Federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or before any arbitrator
of any kind.

                  4.5 No Conflicts. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby do
not and will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under (i) any indenture, mortgage, deed
of trust, instrument, order, arbitration award, judgment or decree to which the
Seller is a party or by which the Seller is bound, or (ii) any statute, rule or
regulation of any federal, state or local government or agency applicable to the
Seller or his or her assets or properties.

                  4.6 Required Consents. No consent, approval or authorization
of, or declaration, filing or registration with any governmental or regulatory
authority is required to be obtained by the Seller in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby.

SECTION 5.        Representations and Warranties of the Sellers and the Company.

                  The Sellers and the Company represent and warrant to the Buyer
as follows.

                  5.1 Necessary Authority. The Company has all requisite
corporate power and authority to enter into, deliver and perform this Agreement
and to consummate the transactions contemplated herein. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all necessary action on the
part of the Company. This Agreement has been duly executed and delivered by the
Company and constitutes its valid and legally binding obligation, enforceable
against the Company in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally, now or hereafter in effect, and
subject to the availability of equitable remedies.

                  5.2 No Conflicts. The execution, delivery and performance of
this Agreement by the Company and its consummation of the transactions
contemplated herein, do not and will not (i) require the consent, approval,
authorization, order, filing, registration or qualification of or with any
court, governmental authority or third person which has not been obtained, (ii)
conflict with or result in any violation of or default under any provision of
the Certificate of Incorporation or Bylaws of the Company or of any mortgage,
indenture, lease, agreement or other instrument, permit, concession, grant,
franchise or license to which the Company is a party or by which it or its
properties are bound, (iii) violate any law, ordinance,

                                       3
<PAGE>
rule, regulation, judgment, order or decree applicable to the Company, or (iv)
result in the creation of any security interest, claim, lien, charge or
encumbrance upon any of the Shares (except as otherwise contemplated herein).

                  5.3 Corporate Organization and Good Standing of the Company.
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own, operate and lease its properties and to carry on its
business as such business is now being conducted.

                  5.4 Authorized and Outstanding Stock. The Company's authorized
capital stock consists of 7,000,000 shares of common stock, $.01 par value per
share and 3,000,000 shares of preferred stock, $.01 par value per share. The
Common Shares have been duly authorized and are validly issued, fully paid,
nonassessable, free of preemptive rights. There are no liens, charges,
encumbrances, security interests or restrictions agreed to or granted by the
Company as to such Common Shares, and they were issued in full compliance with
all applicable federal and state securities laws. Other than stock options and
shares of restricted stock granted pursuant to the Taylor Capital Group, Inc.
Incentive Compensation Plan to key employees and directors of the Company, there
are no options, warrants or rights to acquire, or securities convertible into or
exchangeable for shares of the Company's capital stock which were issued or
granted by the Company.

                  5.5 Ownership of Subsidiaries. The Company's only material
subsidiary is Cole Taylor Bank (the "Subsidiary").

                  5.6 Financial Statements.

                  (a) True and complete copies of the annual reviewed
consolidated financial statements of the Company and the Subsidiary for the
years ended December 31, 1995 through December 31, 1997, and the interim
statement for the period ending October 31, 1998 (collectively and including any
notes thereto, the "Financial Statements") have been delivered to Sheshunoff.

                  (b) To the knowledge of the Company and the Sellers, the
Financial Statements: (i) are true and correct in all material respects, are in
accordance with the books and records of the Company and the Subsidiary, present
fairly the financial condition and results of operations of the Company and the
Subsidiary at and for the periods indicated, and (ii) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis.

                  (c) To the knowledge of the Company and the Sellers and except
as would not have a material adverse effect on the financial condition of the
Company, the Company and the Subsidiary have no liabilities, commitments or
obligations of any nature whether absolute, accrued, contingent, known or
unknown, due or to become due or otherwise, except: (i) as reflected in the
Financial Statements and not heretofore discharged, (ii) as otherwise disclosed
in the SEC Reports (as defined in Section 6.4, and (iii) as incurred as a result
of the normal and ordinary course of business since the date of such Financial
Statements.

                                       4
<PAGE>
                  5.7 Taxes.

                  (a) The Company and the Subsidiary have duly filed all
federal, state, local and foreign tax returns necessary to be filed (all such
returns being true and correct in all material respects) and has duly paid or
made provisions for the payment of all taxes (including any interest or
penalties) which are due or payable pursuant to such returns or pursuant to any
assessment with respect to taxes, whether or not in conjunction with such
returns.

                  (b) To the knowledge of the Company and the Sellers, the
liability for taxes reflected in the most recent balance sheet(s) of the Company
and the Subsidiary included within the Financial Statements is sufficient for
the payment of all unpaid federal, state, local and foreign taxes (including
interest and penalties), whether or not disputed, for all years and periods
ended prior thereto.

                  (c) Except as would not have a material adverse effect on the
financial condition of the Company or the Subsidiary, proper amounts have been
withheld by the Company and the Subsidiary from its employees for all prior
periods in compliance with the tax withholding provisions of all applicable
federal, state, local and other laws. Accurate and complete federal, state,
local and other returns have been filed by the Company and the Subsidiary for
all periods for which returns were due with respect to income tax withholding,
social security and unemployment taxes and the amounts shown on such returns to
be due and payable have been paid in full or adequate provision therefor has
been included by the Company and the Subsidiary in the Financial Statements.

                  5.8 No Violation. To the knowledge of the Company and the
Sellers, except as disclosed in the SEC Reports (as defined in Section 6.4) and
except as would not have a material adverse effect on the Company, neither the
Company nor the Subsidiary is in violation of, or under investigation with
respect to, nor has it been formally charged with or been given notice of any
violation of, any applicable law, statute, order, rule, regulation, policy or
guideline promulgated, or judgment entered, by any federal, state, local or
foreign court or governmental authority relating to or affecting the Company or
the Subsidiary, the businesses or properties of the Company or the Subsidiary,
including without limitation, any immigration law, zoning, building, health or
safety, or noise reduction law or ordinance.

                  5.9 Title to and Condition of Assets.

                  (a) The Company and the Subsidiary have good and valid title
to all of their real and personal property and leasehold interests including,
but not limited to, the property and assets reflected in the Financial
Statements (other than property and assets disposed of in the ordinary course of
business since such date) free and clear of all title defects and all liens,
pledges, claims, charges, security interests, and other encumbrances and (in the
case of real property) rights of way, building or use restrictions, exceptions,
variances, reservations or limitations of any nature whatsoever, except, with
respect to all mortgages and liens securing debt which is reflected as a
liability in the Financial Statements. There are no existing claims adverse or
challenges to the title or ownership of any property of the Company or the
Subsidiary.

                                       5
<PAGE>
                  (b) All personal property material to the condition (financial
or otherwise), operations, business or prospects of the Company and the
Subsidiary, and all buildings, structures and fixtures used by the Company in
the conduct of its business are, considering their ages and uses, in good
operating condition (subject to normal maintenance and repair).

                  5.10 Contracts. To the knowledge of the Company and the
Sellers, the Company and the Subsidiary are not in material violation of, or in
default in respect of, any contract, lease, agreement, instrument, arrangement
or understanding, to which it is a party, and there are no facts or
circumstances which would reasonably indicate that the Company or the Subsidiary
will be in violation of or in default in respect of any such contract, lease,
agreement, instrument, arrangement or understanding subsequent to the date
hereof.

                  5.11 Litigation and Compliance with Governmental Rules. Except
as described in Schedule 5.11 or the SEC Reports there are no actions, suits,
proceedings, arbitrations or investigations pending, or to the best of the
Company's and Sellers' knowledge, threatened, in any court or before any
governmental agency or instrumentality or arbitration panel or otherwise, or
judgments, orders, decrees, or governmental restrictions, against, by or
affecting the Company which would interfere with the transactions contemplated
by this Agreement or which have or, if adversely determined would have, a
materially adverse effect on the financial condition, assets, liabilities,
business, operations or prospects of the Company or the Subsidiary.

                  5.12 Insurance. The insurance maintained by the Company with
respect to its property and the conduct of its business is adequate for the
risks facing the Company and has not been and will not be canceled, terminated
or allowed to lapse through the Closing Date. The insurance coverage provided by
such policies of insurance will not in any respect be affected by, and will not
terminate or lapse by reason of, the transactions contemplated by this
Agreement.

                  5.13 Plan Compliance. The Plan in form and in operation, to
the knowledge of the Company and Sellers, satisfies the requirements to be
qualified under Section 401(a) of the Code and constitutes an employee stock
ownership plan within the meaning of Section 4975(e)(7) of the Code, and the
Buyer is exempt from taxation under Section 501(a) of the Code.

SECTION 6.        Representations and Warranties of the Buyer.

                  The Buyer represents and warrants to the Sellers as follows,
which representations and warranties shall continue in full force and effect to
and including the Closing and shall survive the Closing:

                  6.1 Necessary Authority. The Buyer has full power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Buyer and constitutes the legal, valid and binding obligation
of the Buyer, enforceable against the Buyer in accordance with its terms, except
as the same may be limited by bankruptcy, insolvency, reorganization or other
laws

                                       6
<PAGE>
affecting the enforcement of creditors' rights generally now or hereafter in
effect, and subject to the availability of equitable remedies.

                  6.2 No Conflicts. The execution, delivery and performance of
this Agreement by the Buyer and the consummation of the transactions
contemplated herein do not and will not: (i) require the consent or approval of,
or filing with, any person or public authority or (ii) constitute or result in
the breach of any provision of, or constitute a default under, the ESOP or any
agreement indenture or other instrument to which the ESOP is a party or by which
it or its assets may be bound.

                  6.3 Shares Not Registered. Buyer acknowledges that the Common
Shares are not registered under the provisions of the Securities Act of 1933.

                  6.4 Securities Law Representations.

                  (a) Buyer is an "accredited investor" as such term is defined
         in Regulation D promulgated under the Securities Act. Buyer has
         received a copy of (i) the Company's Annual Report on Form 10-K for the
         year ended December 31, 1997 and (ii) Quarterly Reports on Form 10-Q
         for the quarters ended March 31, 1998, June 30, 1998 and September 30,
         1998 (collectively, the "SEC Reports").

                  (b) Buyer (i) has been provided the opportunity to ask
         questions of and receive answers from the Company and Sellers, or their
         respective representatives, concerning the operations, business and
         financial condition of the Company, and all such questions have been
         answered to Buyers full satisfaction and any information necessary to
         verify such responses has been made available to Buyer; (ii) confirms
         that Buyer has carefully read and understands the SEC Reports and is
         relying on the accuracy and completeness of the SEC Reports without
         independent certification thereof; (iii) confirms that the Common
         Shares have not been offered to him by any means of general
         solicitation or general advertising; (iv) has such knowledge and
         experience in financial and business matters that Buyer is capable of
         evaluating the merits and risks of an investment in the Common Shares;
         (v) is acquiring the Common Shares for its own account, for investment
         purposes only, and not with a view towards the sale or other
         distribution thereof, in whole or in part; and (vi) understands that
         there are restrictions on the transferability of the Common Shares.

                  (c) Buyer agrees with the Company and Sellers that the Common
         Shares will not be sold or otherwise disposed of except pursuant to (i)
         an exemption or exclusion from the registration requirements under the
         Securities Act of 1933, as amended (the "Securities Act"), which does
         not require the filing by the Company with the Commission of any
         registration statement, offering circular or other document, in which
         case Buyer shall first supply to the Company an opinion of counsel
         (which opinion and counsel shall be reasonably satisfactory to the
         Company) that such exemption or exclusion is available, (iii) a
         registration statement filed by the Company with the Commission under
         the Securities Act.

                                       7
<PAGE>
                  (d) Buyer agrees that the certificates for the Common Shares
         shall bear the following legend:

                           THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
                           TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
                           OR RESOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE
                           REGISTRATION STATEMENT UNDER THE ACT; (ii) PURSUANT
                           TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE
                           SECURITIES ACT OF 1933, PROVIDED THAT AN OPINION OF
                           COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE
                           ISSUER, HAS BEEN GIVEN BY COUNSEL SATISFACTORY TO THE
                           ISSUER TO THE EFFECT THAT REGISTRATION IS NOT
                           REQUIRED; or (iii) IN ACCORDANCE WITH THE TERMS OF
                           THE TAYLOR CAPITAL GROUP, INC., PROFIT SHARING AND
                           EMPLOYEE STOCK OWNERSHIP PLAN.

SECTION 7.        Closing Conditions for the Benefit of the Buyer

                  Each and every obligation of the Buyer under this Agreement
shall be subject to the satisfaction, on or prior to the Closing, of each of the
following conditions, any of which may be waived in writing by the Trustee on
behalf of the Buyer (except that the conditions set forth in Sections 7.5 and
7.6 shall not be waived by the Buyer):

                  7.1 Representations and Warranties True. The representations
and warranties of the Sellers and the Company contained in this Agreement shall
be true, correct and complete in all material respects as of the date hereof and
shall be deemed to have been made again at and as of the Closing and shall then
be true in all material respects (except as otherwise contemplated by this
Agreement).

                  7.2 Performance. Each of the obligations of the Sellers and
the Company to be performed by them on or before the Closing pursuant to the
terms hereof shall have been duly performed and complied with in all material
respects by the Closing.

                  7.3 Opinion of Valuation Consultants. The Trustee shall have
been furnished with an opinion of Sheshunoff to the effect that the Purchase
Price to be paid by the Buyer for the Shares is not in excess of "Adequate
Consideration" within the meaning of Section 3(18)(B) of ERISA, and such opinion
shall remain in effect and shall not have been withdrawn by such valuation
consulting firm prior to the Closing.

                  7.4 Trustee Approval. The Trustee shall not have determined
that the purchase of the Common Shares is imprudent or that such purchases would
result in a prohibited transaction under Section 406 of ERISA or Section 4975 of
the Code or otherwise violate the provisions of applicable law.

                                       8
<PAGE>
                  7.5. ESOP Loan Agreement. The Company and the Buyer shall have
entered into the ESOP Loan and Pledge Agreement dated as of the date hereof and
the Buyer shall have received the proceeds of such loan extended to Buyer
pursuant thereto.

                  7.6 Deliveries by Sellers. The Sellers shall have made the
deliveries required by Section 3.2.

SECTION 8.        Closing Conditions for the Benefit of the Selling Stockholder
                  and the Company

                  Each and every obligation of the Sellers and the Company under
this Agreement shall be subject to the satisfaction, on or prior to the Closing,
of each of the following conditions, any of which may be waived in writing by
the Selling Stockholder and the Company:

                  8.1 Representations and Warranties True. The representations
and warranties of the Trustee on behalf of the Buyer contained in this Agreement
shall be true and correct in all material respects as of the date hereof and
shall be deemed to have been made again at and as of the Closing and shall then
be true in all material respects (except as otherwise contemplated by this
Agreement).

                  8.2. The Buyer's Performance. Each of the obligations of the
Trustee on behalf of the Buyer to be performed by it on or before the Closing
pursuant to the terms hereof shall have been duly performed and complied with in
all material respects by the Closing.

                  8.3 ESOP Loan Agreement. The Company and the Buyer shall have
entered into the ESOP Loan and Pledge Agreement and the Buyer shall have
received the proceeds of the loan extended thereunder.

                  8.4 Deliveries by the Buyer. The Buyer shall have made the
deliveries required by Section 3.2.

SECTION 9.        Restriction on the Disposition of the Common Shares.

                  Until such time as the Common Shares are registered pursuant
to the provision of the 1933 Securities Act, any certificate or certificates
representing the Common Shares delivered pursuant to Section 3.2, or thereafter
upon transfer, exchange or substitution, will bear a legend in substantially the
following form:

                           "THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
                           TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
                           OR RESOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE
                           REGISTRATION STATEMENT UNDER THE ACT; (ii) PURSUANT
                           TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE
                           SECURITIES ACT OF 1933,

                                       9
<PAGE>
                           PROVIDED THAT AN OPINION OF COUNSEL, IN FORM AND
                           SUBSTANCE SATISFACTORY TO THE ISSUER, HAS BEEN GIVEN
                           BY COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT
                           THAT REGISTRATION IS NOT REQUIRED; or (iii) IN
                           ACCORDANCE WITH THE TERMS OF THE TAYLOR CAPITAL
                           GROUP, INC., PROFIT SHARING AND EMPLOYEE STOCK
                           OWNERSHIP PLAN."

SECTION 10.       Survival of Representations and Warranties; Indemnification

                  10.1 Survival of Representations and Warranties. The
representations and warranties made under this Agreement shall survive the
Closing for a period of two years from the date hereof.

                  10.2 Indemnification. The Sellers agree to defend, indemnify
and hold Buyer harmless against and shall reimburse Buyer for any actions,
claims, proceedings, losses, liabilities and damages, including reasonable
attorneys' fees) (collectively, "Damages") incurred by the Buyer on or after the
Closing Date arising out of the breach of any representation, warranty,
covenant, or agreement of the Company and the Sellers pursuant to this
Agreement. Notwithstanding anything contained in this Agreement or in this
Section 10.2 to the contrary, the liability of Sellers for any action pertaining
to the breach of any covenant, representation or warranty or for any action for
indemnification with respect to any of the foregoing under this Agreement shall
be strictly limited to the Purchase Price paid by the Buyer hereunder.

                  10.3 Third Party Claims. With respect to claims or demands by
third parties, whenever the Company or the Buyer shall have received notice that
such a claim or demand has been asserted or threatened, which, if valid, would
be subject to indemnity under this Section 10, the Buyer or the Company shall,
as soon as possible, and in any event within thirty (30) days of receipt of such
notice, give written notice to the Sellers of such claim or demand and of all
relevant facts within its knowledge which relate thereto; provided, however,
that the failure to give timely notice hereunder shall not relieve the Sellers
of his or her obligations under this Section 10 unless, and only to the extent
that, such failure prejudiced the Sellers. The Sellers shall have the right at
his or her expense to undertake the defense of any such claims or demands
utilizing counsel selected by the Sellers. In the event that the Sellers should
fail to give notice of her intention to undertake the defense of any such claim
or demand within sixty (60) days after receiving notice that it has been
asserted or threatened, the Buyer or the Company shall have the right to satisfy
and discharge the same by payment, compromise or otherwise. In such case, the
Buyer and/or the Company shall give written notice to the Sellers of its
satisfaction or discharge of the claim or demand by payment, compromise or
otherwise.

SECTION 11.       General.

                                       10
<PAGE>
                 11.1 Actions After the Closing. After the date of Closing, the
parties shall execute and deliver such other and further instruments and perform
such other and further acts as may reasonably be required fully to consummate
the transactions contemplated hereby.

                  11.2 Execution of Counterparts. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same document.

                  11.3 Notices. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if delivered personally or by registered or certified
mail, postage prepaid to the address indicated on the signature page.

                  11.4 Assignment, Successors and Assigns. This Agreement shall
be binding upon the parties hereto, their heirs, personal representatives,
successors and assigns.

                  11.5 Applicable Laws. This Agreement shall be construed and
governed by the internal laws, and not the law of conflicts, of the State of
Illinois applicable to agreements made and to be performed in Illinois, to the
extent that such laws are not preempted by Federal law.

                                       11
<PAGE>
                  11.6 Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto, and no party hereto shall be bound by any
communications between them on the subject matter hereof unless such
communications are in writing and bear a date contemporaneous with or subsequent
to the date hereof. Any prior written agreements or letters of intent among the
parties shall, upon the execution of this Agreement, be null and void.

                  11.7 Reliance by the Buyer Upon Representations and
Warranties. The parties mutually agree that, notwithstanding any right of the
Buyer to fully investigate the affairs of the Sellers and notwithstanding any
knowledge of facts determined or determinable by the Buyer pursuant to such
investigation or right of investigation, the Buyer has the right to fully rely
upon the representations and warranties of the Sellers contained in this
Agreement and on the accuracy of any document or certificate given or delivered
to the Buyer pursuant to this Agreement.

                            [Signature Page Follows]

                                       12
<PAGE>
                  IN WITNESS WHEREOF, each of the parties has executed this
Agreement as of the day and year first above written.

COMPANY:                                BUYER:

TAYLOR CAPITAL GROUP, INC.              THE TAYLOR CAPITAL GROUP, INC.
                                        PROFIT SHARING AND EMPLOYEE STOCK
                                        OWNERSHIP TRUST

By:      /s/ J. Christopher Alstrin     By:  Cole Taylor Bank,
         ------------------------
Title:   CFO                            Not in its corporate capacity but solely
         ------------------------       as Trustee of The Taylor Capital Group,
                                        Inc. Profit Sharing and  Employee
                                        Stock Ownership Trust
Address:
350 East Dundee                         By:      /s/ Thomas S. McCarten
Wheeling, IL 60090                               ------------------------
                                        Title:   Trustee of ESOP
                                                 ------------------------

Attention:  Secretary                   Address:
                                        Cole Taylor Bank
with a copy to                          350 East Dundee Rd.
Helen H. Morrison.                      Wheeling, IL  60090
McDermott, Will & Emery                 Attn:
Suite 4400                                    ----------
Chicago, IL 60606

SELLERS:

/s/
------------------------
Jeffrey W. Taylor

/s/
------------------------
Cindy Taylor Bleil

                                       13
<PAGE>
                                   SCHEDULE 1

<TABLE>
<CAPTION>
    Name of                       No. of Shares                    Allocation
  Stockholder               of Common Stock to be Sold         of Purchase Price

<S>                         <C>                                <C>
Jeffrey W. Taylor            10,000                                $240,000

Cindy Taylor Bleil           14,000                                $336,000
</TABLE>

                                       14
<PAGE>
                                  SCHEDULE 5.11

                                   Litigation

Jeffrey W. Taylor, Chairman of the Board and Chief Executive Officer of the
Company, Bruce W. Taylor, President of the Company, Iris A. Taylor, Sidney J.
Taylor, Cindy Taylor Bleil, related trusts and a related partnership
(collectively, the "Taylor Family") have been named as defendants in the
lawsuits described below relating to (1) the Split-Off Transactions and (2) the
financial and public reporting of Reliance. Certain of the lawsuits also named
other current or former officers and directors of the Company and Reliance,
other stockholders of the Company, Reliance's public accountants at the time of
the Split-Off Transactions, Reliance and the Company as additional defendants.
The filing dates of these lawsuits range from October, 1997 to September, 1998.

The Split-Off Transactions were a series of transactions completed on February
12, 1997 in accordance with the Share Exchange Agreement, dated June 12, 1997
(the "Share Exchange Agreement") between Reliance and the Taylor Family, which
owned approximately 25% of the outstanding common stock of Reliance prior to the
Split-Off Transactions. Pursuant to the Split-Off Transactions, the Taylor
Family and certain other stockholders of Reliance exchanged all of their common
stock of the Company. On February 9, 1998, Reliance filed a voluntary petition
under Chapter 11 of the Bankruptcy code.

In September, 1998, five class actions, brought on behalf of current and former
stockholders of Reliance and pending in Delaware Chancery Court, were
consolidated into one class action. The consolidated class action alleges that
the Taylor Family, certain directors and officers of the Company, and certain
other defendants breached their fiduciary duties in connection with disclosures
made to the stockholders prior to the vote which approved the Split-Off
Transactions. The case seeks relief in the form of unspecified damages,
attorneys' fees and recission of the Split-Off Transactions. On September 9,
1998 the Delaware Chancery Court stayed this consolidated class action
indefinitely pending resolution of the consolidated class action in Texas that
is described below.

In August, 1998, nine class actions, brought on behalf of current and former
stockholders of Reliance and pending in the United States District court for the
Western District of Texas, were consolidated into one class action. One class
action, brought on behalf of current and former stockholders of Reliance, is
pending in the Northern District of Illinois. These cases allege that the Taylor
Family, certain directors and officers of the Company, and certain other
defendants violated the federal securities laws and breached common law
fiduciary duties. In addition, the cases allege that the Company and certain
other defendants violated ERISA and breached certain fiduciary duties including
fiduciary duties owed to a subclass consisting of participants in Reliance's
ESOP and 401(k) Profit Sharing Plan. The Texas and Illinois cases seek
unspecified damages and attorney's fees. Cole Taylor Bank is named as an
additional defendant in the Illinois action. A motion is pending to transfer the
Texas case to Illinois, and a motion is pending to transfer the Illinois case to
Texas.

On August 19, 1998, Irwin Cole and other members of his family, who collectively
owned approximately 25% of the outstanding common stock of Reliance prior to the
Split-Off Transactions, brought suit in Delaware Chancery Court against members
of the Taylor Family, the Company, other current and/or former officers and
directors of Reliance and the company, and other stockholders of the Company.
The suite alleges that the Taylor Family, certain directors and officers of the
Company, and certain other defendants breached their fiduciary duties, committed
fraud and/or engaged in self-dealing in connection with the operation of
Reliance and the Split-Off Transactions. The lawsuit seeks unspecified damages,
attorneys' fees and requests that the Court place all of the shares of the
Company held by the Taylor Family in a constructive trust.

On October 5, 1998, the United States Bankruptcy Court of the District of
Delaware (the "Bankruptcy Court") entered an order preliminarily enjoining the
plaintiffs in most of the above lawsuits from prosecuting their cases on account
of the pending adversary proceedings by the Reliance Estate Representative that
are described below. The Company expects that

                                       15
<PAGE>
the Bankruptcy court's order will be amended in the near future to preliminarily
enjoin the remaining plaintiffs from prosecuting their cases.

On July 6, 1998, the Bankruptcy Court entered a confirmation order that
discharged the liability of Reliance and its subsidiaries in connection with all
of the lawsuits described above and permanently enjoined the filing of similar
new suits against them. The Bankruptcy Court also appointed an Estate
Representative (the "Estate representative") for the Post-Confirmation chapter
11 Estate of Reliance and its subsidiaries. On September 4, 1998, the Estate
Representative filed two adversary proceeding complaints which named as
defendants members of the Taylor Family, certain other directors and officers of
the Company, one of Reliance's former legal counsel and Reliance's former public
accountants (both of whom continue to serve the Company), the Company and Cole
Taylor Bank, as trustee. The complaints allege fraudulent conveyance and
breaches of fiduciary duties and contract with respect to the Taylor family, the
Company, and Cole Taylor Bank, as trustee. The complaints charge certain of the
other defendants with alleged breaches of fiduciary duty, breaches of contract,
malpractice and negligent misrepresentation and aiding and abetting the Taylor
Family's and the Company's alleged breaches. These complaints seek unspecified
damages and attorneys' fees and avoidance of the Split-Off Transactions by the
transfer to the Estate Representative of either the assets exchanged in the
Split-Off Transactions or the value of such assets. One of the complaints
demands monetary damages pursuant to the Taylor Family's obligation under the
Share Exchange Agreement to indemnify Reliance for certain losses resulting from
the Split-Off Transactions, and asks the court to disallow any claims for
indemnification that any of the defendants have against Reliance or, in the
alternative equitably subordinate such claims to all other creditor claims
against Reliance.

In accordance with the terms and conditions of the Share Exchange Agreement
relating to the Split-Off Transactions, the Taylor Family has agreed to
indemnify Reliance for certain loses incurred by Reliance, including certain
losses relating to the Split-Off Transactions ("Taylor Family Indemnification
Obligations"). In accordance with the terms of an agreement dated February 6,
1997 between the Taylor Family and the Company, the Company agreed to indemnify
the Taylor Family for certain losses that the Taylor Family may incur as a
result of the Split-Off Transactions, including a portion of the Taylor Family
Indemnification Obligations under the Share Exchange Agreement. The Company is
unable at this time to predict the extent to which it will be required to pay
amounts under its indemnification obligation to the Taylor Family. The Company
and its subsidiaries have paid and may continue to pay defense and other legal
costs of the lawsuits described above that are not otherwise advanced by
insurance carriers on behalf of the Taylor family and other directors, officers
and stockholders of the Company who are defendants in these lawsuits.

The Company believes that it has meritorious defenses to all of the actions
against the Company, and the company intends to defend itself and its
subsidiaries vigorously. However, the Company is unable to predict, at this
time, the potential impact of the litigation, the indemnification obligations
and the payment of legal fees described above on the management, business,
financial condition, liquidity and operating results of the Company. Even if the
Taylor Family, the Company and the other defendants are successful in defending
themselves in the lawsuits, the Company will incur significant costs with
respect to such lawsuits.

The Company is from time to time a party to various other legal actions arising
in the normal course of business. Management knows of no such other threatened
or pending legal actions against the Company that are likely to have a material
adverse impact on the financial condition of the Company.

                                       16

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