Document:

EXHIBIT 4.3

EXHIBIT 4.3

THE PEPSICO
401(k) PLAN
FOR HOURLY EMPLOYEES

                                                             As Effective

                                              January 1, 2002 (Except as Otherwise Noted)

TABLE OF
CONTENTS

 

PREAMBLE

ARTICLE I - DEFINITIONS

ARTICLE II - PARTICIPATION

		2.1		COMMENCING PARTICIPATION	
		2.2		BREAK IN SERVICE	

ARTICLE III - CONTRIBUTIONS AND ALLOCATIONS

		3.1		CONTRIBUTION ELECTIONS	
		3.2		PRE-TAX CONTRIBUTIONS	
		3.3		AFTER-TAX CONTRIBUTIONS	
		3.4		ROLLOVER CONTRIBUTIONS	
		3.5		QNECS	
		3.6		MILITARY LEAVE	
		3.7		CONTRIBUTIONS SUBJECT TO DEDUCTIBILITY	
		3.8		ALLOCATION OF CONTRIBUTIONS	
		3.9		VALUATION; EARNINGS AND LOSSES	
		3.10		RETURN OF CONTRIBUTIONS	

ARTICLE IV - INVESTMENTS

		4.1		PARTICIPANT INVESTMENT PROVISIONS	
		4.2		INVESTMENT ELECTIONS	
		4.3		INVESTMENT FUNDS	
		4.4		INVESTMENT OF LOAN REPAYMENTS AND RESTORATION OF FORFEITURES	
		4.5		PEPSICO COMMON STOCK FUND	

ARTICLE V - VESTING

		5.1		PRE-TAX CONTRIBUTIONS, AFTER-TAX CONTRIBUTIONS, AND ROLLOVER CONTRIBUTIONS	
		5.2		MATCHING CONTRIBUTIONS	
		5.3		VESTING UPON REEMPLOYMENT AFTER A BREAK IN SERVICE	
		5.4		FORFEITURES	
		5.5		ALLOCATION OF FORFEITURES	
		5.6		RESTORATION OF FORFEITED ACCOUNT	

ARTICLE VI - IN-SERVICE WITHDRAWALS

		6.1		WITHDRAWAL OF AFTER-TAX CONTRIBUTIONS	
		6.2		WITHDRAWAL OF ROLLOVER CONTRIBUTIONS	
		6.3		WITHDRAWAL OF MATCHING CONTRIBUTIONS	
		6.4		WITHDRAWALS OF PRE-TAX CONTRIBUTIONS AND QNECS	
		6.5		WITHDRAWALS AFTER ATTAINING AGE 59-1/2	
		6.6		HARDSHIP WITHDRAWALS	
		6.7		IN-SERVICE WITHDRAWAL PROCEDURES AND RESTRICTIONS	

ARTICLE VII - LOANS

		7.1		GENERAL RULE	
		7.2		AMOUNT OF LOAN	
		7.3		INTEREST RATE AND SECURITY	
		7.4		SOURCE OF LOANS	
		7.5		REPAYMENT AND TERM	
		7.6		DEEMED DISTRIBUTIONS	
		7.7		ADDITIONAL RULES	

ARTICLE VIII - DISTRIBUTIONS

		8.1		ELIGIBILITY FOR DISTRIBUTION UPON SEPARATION FROM SERVICE	
		8.2		DISTRIBUTIONS UPON RETIREMENT OR DISABILITY	
		8.3		INSTALLMENT OPTION BEFORE JANUARY 1, 2003 FOR CERTAIN EMPLOYEES	
		8.4		DISTRIBUTION UPON DEATH	
		8.5		COMMENCEMENT OF PAYMENTS	
		8.6		FORM OF PAYMENT	
		8.7		AMOUNT OF DISTRIBUTION	
		8.8		CASHOUT DISTRIBUTIONS	
		8.9		DIRECT ROLLOVERS	
		8.10		QUALIFIED DOMESTIC RELATIONS ORDERS	
		8.11		BENEFICIARY DESIGNATION	
		8.12		INCOMPETENT OR LOST DISTRIBUTEE	

ARTICLE IX - INVESTMENT OF THE TRUST

		9.1		TRUST AGREEMENT	
		9.2		APPOINTMENT OF INVESTMENT MANAGERS	
		9.3		INVESTMENT MANAGER POWERS	
		9.4		POWER TO DIRECT INVESTMENTS	
		9.5		EXCLUSIVE BENEFIT RULE	

ARTICLE X - PLAN ADMINISTRATION

		10.1		ALLOCATION OF RESPONSIBILITY AMONG FIDUCIARIES FOR PLAN AND TRUST ADMINISTRATION	
		10.2		ADMINISTRATION	
		10.3		CLAIMS PROCEDURE	
		10.4		RECORDS AND REPORTS	
		10.5		ADMINISTRATIVE POWERS AND DUTIES	
		10.6		RULES AND DECISIONS	
		10.7		PROCEDURES	
		10.8		AUTHORIZATION OF BENEFIT DISTRIBUTIONS	
		10.9		APPLICATION AND FORMS FOR DISTRIBUTIONS	

ARTICLE XI - AMENDMENT AND TERMINATION

		11.1		AMENDMENT OF THE PLAN	
		11.2		RIGHT TO TERMINATE THE PLAN OR DISCONTINUE CONTRIBUTIONS	
		11.3		EFFECT OF TERMINATION OR DISCONTINUANCE OF CONTRIBUTIONS	
		11.4		EFFECT OF A PARTIAL TERMINATION	
		11.5		PLAN MERGER	
		11.6		ADDITIONAL PARTICIPATING EMPLOYER	
		11.7		WITHDRAWAL OF A PARTICIPATING EMPLOYER	

ARTICLE XII - MISCELLANEOUS PROVISIONS

		12.1		ACTION BY THE COMPANY	
		12.2		NO RIGHT TO BE RETAINED IN EMPLOYMENT	
		12.3		NON-ALIENATION OF BENEFITS	
		12.4		REQUIREMENT TO PROVIDE INFORMATION TO PLAN ADMINISTRATOR	
		12.5		SOURCE OF BENEFIT PAYMENTS	
		12.6		CONSTRUCTION	
		12.7		GOVERNING LAW	

ARTICLE XIII - LIMITATION ON PRE-TAX CONTRIBUTIONS

		13.1		CODE §402(G) LIMITATION ON PRE-TAX CONTRIBUTIONS	
		13.2		TREATMENT OF EXCESS DEFERRALS	
		13.3		COORDINATION WITH OTHER ARRANGEMENTS IN WHICH SALARY IS DEFERRED	

ARTICLE XIV - NONDISCRIMINATION RULES

		14.1		DEFINITIONS APPLICABLE TO THE NONDISCRIMINATION RULES	
		14.2		ACTUAL DEFERRAL PERCENTAGE TEST	
		14.3		MORE THAN ONE EMPLOYER-SPONSORED PLAN SUBJECT TO THE ADP TEST	
		14.4		RECHARACTERIZATION OF PRE-TAX CONTRIBUTIONS	
		14.5		TREATMENT OF EXCESS CONTRIBUTIONS	
		14.6		QNECS	
		14.7		REQUIRED PLAN AGGREGATION FOR PURPOSES OF THE ADP TEST	
		14.8		REQUIRED PLAN DISAGGREGATION FOR PURPOSES OF THE ADP TEST	

ARTICLE XV - CODE §415 LIMITATION

		15.1		DEFINITIONS APPLICABLE TO THE CODE §415 LIMITATION	
		15.2		CODE §415 LIMITATION ON ANNUAL ADDITIONS	
		15.3		APPLICABLE REGULATIONS	

ARTICLE XVI - TOP HEAVY PROVISIONS

		16.1		DEFINITIONS APPLICABLE TO THE TOP HEAVY PROVISIONS	
		16.2		APPLICATION OF ARTICLE XVI	
		16.3		MINIMUM VESTING	
		16.4		MINIMUM CONTRIBUTIONS	

APPENDIX

ARTICLE A - SPINOFF FROM PEPSICO 401(K) PLAN

		A.1		SCOPE	
		A.2		TRANSFER OF PARTICIPATION, ACCOUNTS AND ELECTIONS	
		A.3		BLACKOUT PERIODS	

ARTICLE B - MERGER OF THE TROPICANA PLANS

		B.1		SCOPE	
		B.2		DEFINITIONS	
		B.3		TRANSFER OF PARTICIPATION, ACCOUNTS AND ELECTIONS	
		B.4		BLACKOUT PERIODS	
		B.5		CONVERSION OF AFTER-TAX CONTRIBUTION ELECTIONS	
		B.6		ELIGIBILITY	
		B.7		INVESTMENT ELECTIONS	
		B.8		VESTING OF PRIOR MATCHING CONTRIBUTIONS UNDER TROPICANA UNION PLAN	
		B.9		HARDSHIP WITHDRAWALS	
		B.10		CERTAIN DISTRIBUTION AND PAYMENT OPTIONS	

 THE PEPSICO
401(k) PLAN
FOR HOURLY EMPLOYEES

PREAMBLE

The PepsiCo 401(k) Plan for
Hourly Employees (“Plan”) permits eligible employees to defer receipt
of a portion of their compensation on a pre-tax basis in order to promote
retirement savings. The Plan provides for distributions in the event of
termination of employment. In addition, withdrawals are permitted in certain
circumstances and loans are available to certain participants. The Plan consists
of a profit-sharing plan containing a cash or deferred arrangement that is
intended to meet the requirements for qualification and tax-exemption under Code
§§ 401(a) and 401(k). The Plan also consists of an employee stock
ownership plan (the “ESOP”) that is intended to qualify as a stock
bonus plan under Code § 401(a) and an employee stock ownership plan under
Code § 4975(e)(7) and ERISA § 407(d)(6). The ESOP shall consist of the
portion of the Plan which, as of any applicable date, is invested in that part
of the PepsiCo Common Stock Fund allocated to the ESOP Subfund. Both the ESOP
portion of the Plan and the profit-sharing portion of the Plan are intended to
constitute a single plan under Treas. Reg. § 1.414(l)-1(b)(1). 

This Plan was originally
created, effective as of the beginning of the day on January 1, 2002 (the
Spinoff Time”), by spinoff (the “Spinoff”) from the PepsiCo
401(k) Plan. Immediately following the Spinoff, the PepsiCo 401(k) Plan was
amended and renamed the PepsiCo 401(k) Plan for Salaried Employees (the
“Salaried Plan”). The PepsiCo 401(k) Plan for Salaried Employees
together with the PepsiCo 401(k) Plan for Hourly Employees shall be referred to
collectively after the Spinoff as the PepsiCo 401(k) Plan. 

The rights and benefits of
individuals who had received a complete distribution of their entire vested Plan
benefit by December 31, 2001 shall be governed by the applicable provisions of
the PepsiCo 401(k) Plan as in effect from time to time prior to the Spinoff. 

Effective immediately after
the Spinoff on January 1, 2002, the Retirement Savings and Investment Plan for
Union Employees of Tropicana Products, Inc. and Affiliates, Plan Number 007,
(the “Tropicana Union Plan”) and the Retirement Savings and Investment
Plan for Union Employees of Tropicana Products, Inc. and Affiliates (Teamsters
Local Union #173), Plan Number 008, (the “Tropicana Teamsters Plan”)
were merged into this Plan. This Plan document reflects the terms of the Plan
immediately after this merger. The determination of the rights of Participants
and Beneficiaries (and of those claiming through or on behalf of such
individuals) as of any time prior to the merger date shall be governed by the
prior documents for the Tropicana Union Plan and the Tropicana Teamsters Plan as
in effect from time to time prior to the merger. 

The rights and benefits of
any individual who ceases to be a participant (and of anyone claiming through or
on behalf of such individual) in this Plan shall be determined in accordance
with the provisions of this Plan in effect not later than the date such
individual ceases to be a participant in this Plan unless otherwise specified in
the Plan or required by law. 

ARTICLE I -
DEFINITIONS

Where the  following,  boldfaced  words and phrases  appear in this Plan with initial  capitals,  they shall have the meaning set forth
below.

	1.1		"Account" means the sum of a Participant's  After-tax  Contributions Account,  Prior Matching  Contributions Account,  Pre-tax
Contributions Account, Rollover Contributions Account and QNECs Account, which sum constitutes
the Participant’s total interest in the Trust.

	1.2		
“After-tax Contributions” means any after-tax contributions
made to the Pre-Spinoff Plan, the Tropicana Union Plan or the Tropicana
Teamsters Plan by a Participant pursuant to an after-tax contribution election
that was allowed under the Pre-Spinoff Plan, the Tropicana Union Plan or the
Tropicana Teamsters Plan.

	1.3		
“After-tax Contributions Account” means the separate subaccount
of a Participant’s Account to which Participant’s After-tax
Contributions and any income, expense, gain or loss thereon are credited.

	1.4		
“Beneficiary” means the person designated by a Participant on
the Beneficiary Designation Form or such other person who becomes entitled to a
benefit under the Plan in accordance with Section 8.11.

	1.5		
“Beneficiary Designation Form” means a form prescribed by the
Plan Administrator for designating Beneficiaries (and any form authorized for
use under any predecessor plan that is accepted by the Plan Administrator).

	1.6		
“Board” means the Board of Directors of the Company.

	1.7		
“Borrower” means a Participant who has made an application for
or who has received a loan from the Plan in accordance with Section 7.1.

	1.8		
“Break in Service” means the period commencing on the
Participant’s Service Cutoff Date and ending on the Participant’s
Reemployment Commencement Date, except that a Break in Service shall not include
any period of time when an individual is not an Employee because he or she is
serving in the uniformed services of the United States if the individual seeks
reinstatement as an Employee while his or her reemployment rights are protected
by law. The defined term “Break in Service” is used solely for
purposes of determining vesting.

	1.9		
“Code” means the Internal Revenue Code of 1986, as amended.

	1.10		
“Company” means  PepsiCo,  Inc., a corporation  organized and existing  under the laws of the State of North  Carolina or its
successor or successors.

	1.11		
“Compensation” means one of the following, depending on the context:

		(a)		For purposes of the Actual Deferral Percentage test in Article XIV, any
definition of compensation permissible under Code § 414(s), as chosen by
the Plan Administrator for each Plan Year.

		(b)		For purposes of determining a Highly Compensated  Employee in Section 1.29,  compensation as defined in Treas. Reg.ss.
                  1.415-2(d)(2) and (d)(3).

		(c)		For all other purposes, an Employee’s W-2 wages as reported or reportable,
but including elective contributions that are made by an Employer that are not
includible in gross income under Code §§ 125, 402(g)(3) and 132(f)(4)
(and determined without regard to any rules that limit the remuneration included
in wages based on the nature or location of the employment or the services
performed).

	 	
Notwithstanding the above, a Participant’s Compensation for a Plan Year shall not exceed:
(i) as of the Effective Date, $200,000 and (ii) notwithstanding the preceding,
such higher dollar amount as may permissibly apply for a Plan Year pursuant to
adjustments in the dollar limitation under Code § 401(a)(17) announced by
the Secretary of the Treasury. In the case of a Plan Year of less than 12
months, the limitation specified in the previous sentence shall be adjusted by
first dividing the limit by 12 and then multiplying the resulting quotient by
the number of months in the Plan Year. An Eligible Employee’s Contribution
Election is expressed as a percentage of “Salary” and not as a
percentage of “Compensation.”

	1.12		“Contribution Election”means the election made by an Eligible
Employee or Participant selecting the percentage of annual Salary to be deferred
and contributed to the Plan by the Employer as a Pre-tax Contribution.

	1.13		
“Disability” means a total physical or mental disability, as
evidenced by (a) receipt of a Social Security disability pension, or (b) receipt
of disability payments under the Employer’s long-term disability program.
With respect to (a) above, the receipt of a Social Security disability pension
shall not be deemed to occur prior to the time the Plan Administrator has
received written notice from the Participant that he or she is receiving such
disability pension.

	1.14		
“Effective Date” means the beginning of the day on January 1,
2002, the time and date this Plan was spunoff from the PepsiCo 401(k) Plan.
Certain identified provisions are effective on different dates, as noted herein.

	1.15		
“Eligible  Employee”means a Hourly  Employee who is described in  subsection  (a) below and who is not excluded  pursuant to
subsection (b) below.

		(a)		Each Hourly  Employee who is  classified  as being in the employ of an Employer and who is paid some or all of his or
her cash remuneration from a U.S. payroll.

		(b)		Notwithstanding the foregoing, the following Employees are excluded from the term "Eligible Employee":

		(i)		Any Salaried Employee, P-Group Employee or Transportation Employee;

		(ii)		Employees included in a unit of employees covered by a collective  bargaining agreement between the Employer
and their employee  representatives,  unless such collective bargaining agreement provides for participation
in the Plan;

		(iii)		Employees who are eligible to participate in one or more employee benefit plans
of a third party with whom an Employer has contracted for the provision of the
Employees’ services; 

		(iv)		Any individual classified by an Employer as a leased employee within the meaning of Code §414(n)(2) or (o); 

		(v)		Any individual classified by an Employer as a student intern or cooperative student;

		(vi)		Employees  assigned to work primarily in the U.S. on an inpatriate  package (unless a U.S. citizen or a U.S.
lawful permanent resident);

		(vii)		Employees  assigned to work  primarily  outside the U.S.  unless-- (A) classified by an Employer as eligible
for U.S. flexible benefits, and (B) either a U.S. citizen or U.S. lawful permanent resident; and

		(viii)		Any individual classified by an Employer as an independent contractor.

	 	
For purposes of subsections (b)(vi) and (b)(vii), whether an Employee is a lawful
permanent resident shall be based on the Plan Administrator’s good faith
determination of the Employee’s status under United States immigration law.
For purposes of this Section, it is expressly intended that individuals whom an
Employer classifies as independent contractors (under subsection (b)(viii)) and
any other individual otherwise not classified as an Eligible Employee under this
Section are not Eligible Employees (and therefore they may not become
Participants) until the Plan Administrator affirmatively changes their
classification. Therefore, an independent contractor or any other individual who
is reclassified by a court, administrative agency, governmental unit, tribunal
or other party as an Eligible Employee will nevertheless not be considered an
Eligible Employee hereunder for periods before the Plan Administrator implements
the reclassification decision, even if the decision applies retroactively.

	1.16		
“Eligible Retirement Plan” means an individual retirement
account described in Code § 408(a), an individual retirement annuity
described in Code § 408(b), an annuity plan described in Code §
403(a), a qualified trust described in Code § 401(a), an annuity contract
described in Code § 403(b) or an eligible plan under Code § 457(b),
which is maintained by a state, political subdivision of a state, or any agency
or instrumentality of a state or political subdivision of a state and which
agrees to separately account for amounts transferred into such plan from this
Plan. The definition of an “Eligible Retirement Plan” shall also apply
in the case of a distribution to a Surviving Spouse, or to a spouse or former
spouse who is the alternate payee under a qualified domestic relations order, as
defined in Code § 414(p).

	1.17		
“Eligible  Rollover  Distribution”means any  distribution  under the Plan of all or any portion of a Participant's  Account,
other than:

		(a)		A distribution  that is one of a series of  substantially  equal periodic  payments  (made not less  frequently  than
annually) made for the life (or life expectancy) of the Participant (or the
Participant’s Surviving Spouse) or the joint lives (or joint life
expectancies) of the Participant (or the Participant’s Surviving Spouse)
and the Participant’s (or the Participant’s Surviving Spouse’s)
designated beneficiary;

		(b)		A distribution for a specified period of ten years or more;

		(c)		A distribution required under Code §401(a)(9);

		(d)		 A hardship distribution described in Code §401(k)(2)(B)(i)(IV); or

		(e)		The portion of any distribution in excess of the amount that would be includible
in gross income were it not rolled over to an Eligible Retirement Plan
(disregarding for this purpose, the exclusion from income applicable to net
unrealized appreciation when employer securities are distributed).

	 	
A portion of a distribution shall not fail to be an “Eligible Rollover
Distribution” merely because the portion consists of After-tax
Contributions which are not includible in gross income. However, such portion
may be transferred only to an individual retirement account or annuity described
in Code § 408(a) or (b), or to a qualified defined contribution plan
described in Code § 401(a) or 403(a) that agrees to separately account for
amounts so transferred, including separately accounting for the portion of such
distribution which is includible in gross income and the portion of such
distribution which is not so includible.

	1.18		
“Employee” means any individual who is employed by an employer
within the PepsiCo Organization regardless of whether the individual is an
Eligible Employee or a leased employee within the meaning of Code §§
414(n)(2) or 414(o) (but excluding persons who are leased employees described in
Code § 414(n)(5)). If a former Employee’s termination of employment
did not constitute a separation from service (separation from employment,
effective as of February 1, 2002), within the meaning of Code
§ 401(k)(2)(B)(i)(I), such individual shall be treated as an Employee
for purposes of the withdrawal provisions of Article VI and the loan provisions
of Article VII.

	1.19		
“Employer” means the Company and any subsidiary which is authorized by the Company to participate herein.

	1.20		
“Employment  Commencement  Date” means the date on which the Employee first performs an hour of service for which the Employee
is paid or entitled to payment for the performance of duties for the Employer or
any other employer within the PepsiCo Organization.

	1.21		
“ERISA”means the Employee Retirement Income Security Act of 1974, as amended.

	1.22		
“Excess Annual Additions” means Annual Additions, as defined in
Section 15.1(a), that exceed the Code § 415 limitation on Annual Additions.

	1.23		
“Excess Contributions” means, with respect to any Plan Year,
the aggregate amount of Pre-tax Contributions paid to the Trustee for a Plan
Year on behalf of Highly Compensated Employees in excess of the limits set forth
in Section 14.2.

	1.24		
“Excess Deferrals” means, with respect to any Plan Year, the
aggregate amount of Pre-tax Contributions contributed on behalf of Participants
in excess of the Code § 402(g) limitation set forth in Section 13.1.

	1.25		
“Fiduciaries” means

		(a)		the
named fiduciaries as defined in § 402 of ERISA who shall be the Company (
but solely with respect to its power to designate other Fiduciaries), the Plan
Administrator and the Trustee; and

		(b)		Other parties designated as fiduciaries, as defined in § 3(21) of ERISA, by
such named fiduciaries in accordance with the terms of the Plan and the Trust
Agreement; 

		
provided that a party shall be a Fiduciary only with respect to its specific
responsibilities in connection with the Plan and Trust.

	1.26		
“Five-percent Owner” means with respect to a corporation, any
person who owns (or is considered as owning within the meaning of Code §
318) more than 5% of the outstanding stock of the corporation, or stock
possessing more than 5% of the total voting power of the corporation.

	1.27		
“Five Year Break in Service” means a Break in Service of 60
consecutive months. The defined term “Five Year Break in Service” is
used solely for purposes of determining vesting.

	1.28		
“Full-Time Employee” means an Employee who is not a Part-Time Employee.

	1.29		
“Highly Compensated  Employee” means any employee of the PepsiCo  Organization  (whether or not eligible for membership in the
Plan) who:

		(a)		Was a five percent owner (as defined in Code §416(i)) for the Plan Year or the prior Plan Year, or

		(b)		Received Compensation in excess of:

		(i)		As of the Effective Date, $85,000 during the preceding Plan Year;

		(ii)		For Plan Years beginning on or after January 1, 2003; $90,000 during the
preceding Plan Year; and

		(iii)		Notwithstanding the above, such other amount as may apply for a Plan Year pursuant to adjustments in the compensation amount under Cods §414(q)(1)(B) announced by the Secretary of Treasury.

		
Notwithstanding the foregoing, employees who are nonresident aliens and who receive no earned
income from any employer within the PepsiCo Organization which constitutes
income from sources within the United States shall be disregarded for all
purposes of this Section.

	1.30		
“Hourly Employee” means any Employee who is not a Salaried Employee, P-Group Employee or Transportation Employee.

	1.31		
“Hour of Service”means, with respect to any applicable computation period,

		(a)		Each hour for which the Employee is paid or entitled to payment for the  performance  of duties for the  Employer or
any other employer within the PepsiCo Organization;

		(b)		Each hour for which the Employee is paid or entitled to payment by the Employer
or any other employer within the PepsiCo Organization on account of a period
during which no duties are performed, whether or not the employment relationship
has terminated, due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence, but not more
than 501 hours for any single continuous period;

		(c)		Each hour for which back pay, irrespective of mitigation of damages, is either
awarded or agreed to by the Employer or any other employer within the PepsiCo
Organization, excluding any hour credited under subsection (a) or (b), which
shall be credited to the computation period or periods to which the award,
agreement or payment pertains rather than to the computation period in which the
award, agreement or payment is made;

		(d)		Solely for purposes of determining whether an Employee has incurred a One Year
Break in Service under Section 1.38(a), each hour for which an Employee would
normally be credited under subsection (a) or (b) above during a period of
parental leave but not more than 501 hours for any single continuous period.
However, the number of hours credited to an Employee under this subsection (d)
during the computation period in which the parental leave began, when added to
the hours credited to an employee under subsections (a) through (c) above during
that computation period, shall not exceed 501. If the number of hours credited
under this subsection (d) for the computation period in which the parental leave
began is zero, the provisions of this subsection (d) shall apply as though the
parental leave began in the immediately following computation period. For this
purpose, a parental leave means a period in which the Employee is absent from
work immediately following his or her active employment because of the
Employee’s pregnancy, the birth of the Employee’s child or the
placement of a child with the Employee in connection with the adoption of that
child by the Employee, or for purposes of caring for that child for a period
beginning immediately following such birth or placement; and

		(e)		Solely for purposes of determining whether an Employee has incurred a One Year
Break in Service under Section 1.38(a), each hour for which an Employee would
normally be credited under subsection (a) or (b) above, and not otherwise
credited under subsection (d) above, during a period of unpaid leave for the
birth, adoption or placement of a child, to care for a spouse or an immediate
family member with a serious illness or for the Employee’s own illness
pursuant to the Family and Medical Leave Act of 1993 and its regulations.

		
Hours of Service to be credited to an individual under subsections (b), (c), (d) and
(e) above will be calculated by the Plan Administrator by reference to the
individual’s most recent work schedule (or at the rate of ten hours per day
in the event the Plan Administrator is unable to establish such schedule). No
hours shall be credited on account of any period during which the Employee
performs no duties and receives payment solely for the purpose of complying with
unemployment compensation, workers’ compensation or disability insurance
laws. The Hours of Service credited shall be determined as required by Title 29
of the Code of Federal Regulations, §§ 2530.200b-2(b) and (c), and the
rules set forth in such Sections are hereby incorporated by reference.

	1.32		
“Investment Committee” means the investment committee named by
the Company’s board of directors (which has fiduciary responsibility for
certain matters as provided in Section 1.48).

	1.33		
“Investment Election” means the election by which a Participant
directs the investment of his or her Account in accordance with Section 4.2.

	1.34		
“Investment Fund”or “Fund” means any of the
funds described in Article IV into which a Participant (or another authorized
party) may direct the Trustee to invest the Participant’s Account.
Following the Participant’s death, the Participant’s Beneficiary shall
be the authorized party. In addition, to the extent provided herein, the Plan
Administrator shall be an authorized party.

	1.35		
“Nonelective Contributions”means a contribution made by the Employer to the Plan that is not a Pre-tax Contribution.

	1.36		
“Non-highly Compensated Employee”means an Employee who is not a Highly Compensated Employee.

	1.37		
“Normal Retirement Age”means age 65.

	1.38		
“One Year Break in Service”means:

		(a)		With respect to determining an Employee’s Years of Eligibility Service and
eligibility to participate, a Plan Year (after the Plan Year containing the
Employee’s Start Date) during which the Employee is credited with 500 or
less Hours of Service, provided that the Employee has a Separation from Service
during such Plan Year or the immediately prior Plan Year; and

		(b)		With respect to determining an Employee's Years of Vesting Service, a Break in Service of 12 consecutive months.

	1.39		
“Participant”means an individual who has commenced  participation in the Plan, but has not terminated  participation as each
is determined under Section 2.1.

	1.40		
“Participant Response System” means the participant response
system established by the Company that permits Participants to manage their
Account and communicate with the Plan Administrator or the Trustee, including,
the ability to change their Contribution Elections (in accordance with
Section 3.1(c)) and Investment Elections (in accordance with Section 4.2),
to apply for a loan in accordance with Article VII, to commence participation in
the Plan (in accordance with Section 2.1), to apply for an in-service withdrawal
(in accordance with Article VI), and to request a distribution (in accordance
with Article VIII). As determined by the Plan Administrator, this system may
take any form, and different forms may be used for different purposes or
different groups of Participants (e.g., an interactive telephone voice
response system, a paper document system, an internet site, an intranet site, or
an e-mail protocol). Unless the Participant uses a form that is specifically
permitted by the Plan Administrator for the purpose in question, the
Participant’s communication shall not be deemed to be made through the
Participant Response System.

	1.41		
“Part-Time Employee” means any Employee who, on the basis of
his or her regular, stated work schedule, is classified as a part-time employee
by his or her Employer.

	1.42		
“PepsiCo 401(k) Plan”means immediately after the Spinoff Time, both this Plan and the Salaried Plan, collectively.

	1.43		
“PepsiCo  Organization”means the controlled  group of organizations of which the Company is a part, as defined by Code §.414
and regulations issued thereunder. An entity shall be considered a member of the
PepsiCo Organization only during the period it is one of the group of
organizations described in the preceding sentence.

	1.44		
“Period of Service” means the period commencing on the
Employee’s Employment Commencement Date or Reemployment Commencement Date
and ending on the next Service Cutoff Date. Periods of Service shall include
years and completed months.

	1.45		
“Period of Severance” means the period of time commencing on an
Employee’s Service Cutoff Date and ending on the date an Employee again
performs an hour of service for which the Employee is paid or entitled to
payment for the performance of duties for the Employer or any other employer
within the PepsiCo Organization. The defined term “Period of
Severance” is used solely for purposes of determining vesting.

	1.46		
“P-Group Employee” means any Employee who is classified by the
Plan Administrator as being employed by an Employer included in the P-Group. For
purposes of this Section, “P-Group” means the Employers that the Plan
Administrator determines, as of any time, are the members of such group based on
the then current organizational structure of the Company. As of January 1, 2002,
the following Employers are included in the P-Group: the Corporate division of
PepsiCo, Inc., Pepsi-Cola North America, Pepsi-Cola International and Frito-Lay
International.

	1.47		
“Plan” means this Plan, the PepsiCo 401(k) Plan for Hourly Employees, as it may be amended and restated from time to time.

	1.48		
“Plan  Administrator”means the  Administration  Committee  appointed by the Company’s  Board of  Directors,  except that the
Investment Committee shall be the Plan Administrator with respect to those matters that are
assigned to the Investment Committee pursuant to the direction of the
Company’s Board (and as reflected in the Investment Committee’s
charter). As Plan Administrator, the Administration Committee and the Investment
Committee shall have authority to administer the Plan as provided in Article X.
If, at any time, the Company’s Board has not named an Administration
Committee or an Investment Committee, and no successor has been named, then the
Company shall be the Plan Administrator for the applicable purpose. The Plan
Administrator may interact with Participants and Beneficiaries through the party
currently designated as recordkeeper for the Plan. Therefore, to the extent
authorized by the Plan Administrator, any communication by a Participant or
Beneficiary with such recordkeeper shall be deemed to be a communication with
the Plan Administrator, and any communication by the recordkeeper with a
Participant and Beneficiary shall be deemed to be a communication by the Plan
Administrator.

	1.49		
“Plan Sponsor” means the Company.

	1.50		
“Plan Year” means the calendar year.

	1.51		
“Pre-Spinoff Plan”means the PepsiCo 401(k) Plan for periods before the Spinoff Time.

	1.52		
“Pre-tax Contributions” means contributions made by an Employer
on behalf of a Participant in accordance with his or her Contribution Election
pursuant to Article III.

	1.53		
“Pre-tax Contributions Account” means the separate subaccount
of a Participant’s Account to which Pre-tax Contributions and any income or
loss thereon are credited.

	1.54		
“Principal Residence Loan” means a loan which is made to a
Participant by the Plan, in accordance with Section 7.5, to acquire or construct
any dwelling unit which, within a reasonable time will be used (such use to be
determined at the time the loan is made) as the principal residence of the
Participant.

	1.55		
“Prior Matching Contributions Account” means the separate
subaccount which reflects the amount attributable to a Participant’s
matching contributions made on behalf of Participants under (a) the Pre-Spinoff
Plan, or (b) the Tropicana Union Plan, together with any income, expense, gain
or loss thereon.

	1.56		
“QNECs” means Nonelective Contributions: (a) in which a
Participant is 100% vested, as of the date they are allocated, (b) which may not
be distributed to a Participant except on account of Participant’s
Retirement, death, Disability or Separation from Service; and (c) which the
Employer chooses to treat as Pre-tax Contributions in accordance with Section
14.6.

	1.57		
“QNECs Account” means the separate subaccount of a
Participant’s Account to which the Participant’s QNECs and any income
or loss thereon are credited.

	1.58		
“Reemployment Commencement Date” means the date on which an
Employee first performs an hour of service (for which the Employee is paid or
entitled to payment for the performance of duties for the Employer or any other
employer within the PepsiCo Organization) following a Period of Severance.

	1.59		
“Retirement” means Separation from Service after a Participant has attained at least age 55.

	1.60		
“Rollover Contribution”means a contribution  made in accordance with Section 3.4, by an Eligible Employee or a Participant
to the Plan:

		(a)		Which consists only of the taxable portion of a cash distribution from -

		(i)		a qualified plan under Code§401(a),

		(ii)		a qualified annuity under Code §403(a),

		(iii)		an annuity contract under Code §403(b), or

		(iv)		an eligible plan under Code § 457(b), which is maintained by a state,
political subdivision of a state, or any agency or instrumentality of a state or
political subdivision of a state;

		(b)		Which is an "eligible rollover distribution" as defined in Code §402(c)(4); and

		(c)		Which (if the distribution was received by the Eligible Employee or Participant)
is contributed to the Plan not later than 60 days after such receipt.

		
Notwithstanding the above, this Plan will accept a Rollover Contribution of a distribution from
an individual retirement account (“IRA”) or an individual retirement
annuity described in Code § 408(a) or 408(b) that is eligible to be rolled
over and would otherwise be includible in gross income.

	1.61		
“Rollover Contributions Account” means the separate subaccount
of a Participant’s Account or an Account established on behalf of an
Eligible Employee to which Rollover Contributions and any income or loss thereon
are credited.

	1.62		
“Salaried Employee” means any Employee (other than a P-Group
Employee) who is determined, as of such time, by the Plan Administrator to be in
a salaried classification.

	1.63		
“Salaried Plan” means immediately after the Spinoff, the
PepsiCo 401(k) Plan for Salaried Employees, as amended and restated from time to
time.

	1.64		
“Salary”means the  compensation  described in subsection (a) or (b) below (whichever  applies),  subject to the special rules
in subsection (c):

		(a)		For all  Tropicana  Employees,  compensation  paid to an employee  that is  designated  as base pay by the  Employer,
increased by (but only to the extent not already included) any salary reduction
pursuant to Section 3.1, Code §132(f)(4) or a cafeteria plan under Code
§125, overtime, commissions, shift differentials, amounts deferred under
any elective deferred compensation arrangement (qualified or nonqualified) for
the Plan Year in which such amount would have been payable, holiday pay,
disability pay (other than long-term disability payments), grievance pay,
funeral pay, jury duty pay, military leave pay, salary adjustment pay,
retro-pay, short-term incentive awards, MIP awards, performance bonuses, PFP
awards, start-up pay, route commissions, supervisor’s overtime, on call
pay, sick leave pay, vacation pay, personal pay, birthday pay, lead pay,
parental pay, but excluding tips, reimbursements or other expense
allowances, fringe benefits (cash and noncash), moving expenses, deferred
compensation, welfare benefits, non-cash remuneration, workers’
compensation accruals, remuneration paid in currency other than U.S. dollars,
severance or separation pay (whether paid before or after a Participant’s
Separation from Service), amounts paid under any long-term incentive plan,
payments from awards or recognition programs and incentive payments not provided
pursuant to a regular incentive plan, tax protection payments or foreign service
over base allowances or premiums, retirement bonuses, contributions (except for
Pre-tax Contributions and contributions to a nonqualified deferred compensation
plan or program) to and benefits and distributions under the Plan or under any
employee benefit plan or any plan or program of deferred compensation, including
without limitation any pension, profit sharing, stock bonus, employee stock
ownership, stock option or stock incentive plan or program, or dividends paid on
any common stock of the Employer included within or issued under any such plan
or program, and stock options or income or gains from the exercise thereof.

		(b)		
For all Snack and Soft Drink Employees, Salary shall mean compensation paid to
an employee that is designated as base pay by the Employer, increased by
(but only to the extent not already included) any salary reduction pursuant to
Section 3.1, Code §132(f)(4) or a cafeteria plan under Code §125,
overtime pay, commission payments, regular bonuses, amounts deferred under any
elective deferred compensation arrangement (qualified or nonqualified) for the
Plan Year in which such amount would have been payable, and for transportation
employees only, production-based compensation as determined by the Plan
Administrator (including amounts paid per mile, carton or item and amounts paid
for loading or other additional duties); but excluding benefits and
distributions under the Plan or under any other employee benefit plan (other
than short-term disability) or any plan or program of deferred compensation,
including any pension, profit sharing, stock bonus, employee stock ownership,
stock option or stock incentive plan or program or dividends paid on any common
stock of the Employer included within or issued under any such plan or program,
stock options or income or gains from the exercise thereof (including
SharePower), any bonuses considered extraordinary by the Employer, award
payments, expense reimbursement and allowances, fringe benefits (cash and
noncash), lump sum payments made in connection with an employee’s
Separation from Service, and noncash remuneration. 

		(c)		
Notwithstanding the foregoing provisions of this Section, the Salary of each
Participant taken into account under the Plan shall not exceed: (A) as of the
Effective Date, $200,000; and (B) notwithstanding the foregoing, such higher
dollar amount as may permissibly apply for a Plan Year pursuant to adjustments
in the dollar limitation under Code § 401(a)(17) announced by the Secretary
of the Treasury. With respect to an Employee’s Contribution Election, the
Plan shall comply fully with the preceding sentence by not permitting a
Participant to make Pre-tax Contributions in any Plan Year that exceed an amount
equal to the applicable dollar limit (specified in the previous sentence) times
the maximum percentage of Salary that may be deferred under Section 3.2. For
purposes of the first sentence of this subsection, such dollar limitation shall
be applied by considering Plan Year Salary relative to the annual limitation. In
the case of Employees who transfer from one Employer to another during the year,
Salary of such Employees shall be redetermined at the time of transfer to the
extent provided for in procedures of the Plan Administrator in effect at such
time. In addition, with respect to the Salary of all Snack and Soft Drink
Employees: 

		(i)		For purposes of subsection (b) above and except for salary
reduction amounts under an Employer’s Benefits Plus
program that are used to buy benefits and amounts contributed under the Plan,
Salary shall not include amounts or the value of benefits received, or deemed
received, in connection with any performance share plan, stock option plan,
long-term incentive plan or any similar plan, or under any pension, welfare
benefit or fringe benefit plan maintained by the Employer, whether such plan is
qualified or non-qualified and whether such amounts are deferred or not
deferred.

		(ii)		
A Participant’s annual Salary shall be converted to Salary for a pay period
by dividing such Salary by the number of pay periods that are scheduled to apply
to the Participant for a year.

	1.65		
“Seagram  Plan” means the  Retirement  Savings  and  Investment  Plan for  Employees  of Joseph E.  Seagram & Sons,  Inc.  and
Affiliates.

	1.66		
“Separation from Service” or “Separates from
Service” means the termination of the Employee’s employment
relationship with the PepsiCo Organization, including by quit, resignation,
discharge, retirement, disability, or layoff. This term shall also include (i)
the cessation of employment in the event of the sale of less than substantially
all of the assets of an Employer, as permitted by Revenue Ruling 2000-27, and
(ii) effective as of February 1, 2002, an Employee’s severance from
employment as provided by Code § 401(k)(2)(B)(i)(I).

	1.67		
“Service Cutoff Date”  means the earlier of:

		(a)		The Employee's Separation from Service date, or

		(b)		
The first anniversary of the date the Employee is absent from employment with
the PepsiCo Organization for any reason other than a Separation from Service,
such as vacation, holiday, sickness, disability, leave of absence or layoff.

		
The following two sentences shall apply notwithstanding subsection (b) above. In the
case of an Employee who is absent from service beyond the first anniversary of
the first day of absence on account of (i) the Employee’s pregnancy, (ii)
the birth of a child of the Employee, (iii) the placement of a child with the
Employee in connection with the adoption of the child by the Employee, or (iv)
an absence due to the need for caring for such child for a period beginning
immediately following the birth or placement, the Service Cutoff Date shall be
the second anniversary of the first day of such absence. In the case of an
Employee whose Service Cutoff Date would otherwise occur during an FMLA Absence,
the Employee’s Service Cutoff Date shall be delayed just to the extent
required so that it does not occur while the Employee’s FMLA Absence
continues. In applying the two preceding sentences, the period after the first
anniversary of the Employee’s absence shall neither be a Period of Service
nor a period that is part of a Break in Service. The defined term “Service
Cutoff Date” is used solely for purposes of determining vesting.

	1.68		
“Snack and Soft Drink Employee” means an Hourly Employee (other
than a Tropicana Employee) who is considered to work in: (i) PepsiCo,
Inc.‘s corporate area, (ii) Frito-Lay’s snack business, or (iii)
Pepsi-Cola’s soft drink business.

	1.69		
“Spinoff” means the transaction occurring at the beginning of
the day on January 1, 2002, pursuant to which this Plan was spun off from the
Pre-Spinoff Plan.

	1.70		
“Spinoff Time” means the time that this Plan was spun off from the  Pre-Spinoff  Plan,  i.e.,  the  beginning  of the day on
January 1, 2002.

	1.71		
“Spouse”  means the person to whom an Employee is lawfully married.

	1.72		
“Start Date”  means:

		(a)		In connection with an Employee's initial hire, his or her Employment Commencement Date; and

		(b)		In connection with determining an Employee’s Plan eligibility after his or
her rehire, the date the Employee is credited following rehire with an Hour of
Service (for which the Employee is paid or entitled to payment for the
performance of duties for the Employer or any other employer within the PepsiCo
Organization). 

	1.73		
“Surviving Spouse” means the Spouse of a Participant on the date of the Participant's death.

	1.74		
“Transfer Date” means the date that a Salaried Employee,
P-Group Employee or Transportation Employee is transferred to a new
classification and thereby becomes a Hourly Employee.

	1.75		
“Transferred Employee” means an Employee who (i) was eligible
for the Salaried Plan and (ii) thereafter is transferred to a new classification
that causes the Employee to be an Eligible Employee under this Plan.

	1.76		
“Transportation Employee” means an Employee who is classified
by the Plan Administrator as a long haul transport driver for the Frito-Lay
businesses, or in a similar or related capacity, and who is typically
compensated other than solely at an hourly rate.

	1.77		
“Tropicana  Employee” means an Hourly Employee of Tropicana Products,  Inc., Tropicana  Manufacturing  Company Inc., Tropicana
Transportation  Corp.  or  another  unit or  working  group of the  PepsiCo  Organization  that is  classified  as part of the
Tropicana businesses.

	1.78		
“Tropicana Teamsters Plan” means the Retirement Savings and
Investment Plan for Union Employees of Tropicana Products, Inc. and Affiliates
(Teamsters Local Union #173), Plan Number 008, that was available to certain
eligible Tropicana Employees prior to the Effective Date, and that was merged
into the Plan immediately after the Effective Date.

	1.79		
“Tropicana Union Plan” means the Retirement Savings and
Investment Plan for Union Employees of Tropicana Products, Inc. and Affiliates,
Plan Number 007, that was available to certain eligible Tropicana Employees
prior to the Effective Date, and that was merged into the Plan immediately after
the Effective Date.

	1.80		
“Trust” means the trust fund or funds which holds the assets of the Plan and are established by the Trust Agreement.

	1.81		
“Trust Agreement” means the trust  agreement or  agreements  entered into between the Company and the Trustee to provide for
holding the Plan assets.

	1.82		
“Trustee” means the individual(s) or corporation(s) appointed
pursuant to the Trust Agreement. The Trustee may be changed from time to time,
including by adoption of a new or amended Trust Agreement. The Trustee may
interact with Participants and Beneficiaries through the party currently
designated as recordkeeper for the Plan. Therefore, to the extent authorized by
the Trustee, any communication by a Participant or Beneficiary with such
recordkeeper shall be deemed to be a communication with the Trustee, and any
communication by the recordkeeper with a Participant and Beneficiary shall be
deemed to be a communication by the Trustee.

	1.83		
“U.S.”or “United States” means the 50 states and the District of Columbia.

	1.84		
“Year of Eligibility  Service” means, with respect to a Part-Time Employee,  the completion of at least 1,000 Hours of Service
in either:

		(a)		The 12-month period of employment with the Employer or any other employer  within the PepsiCo  Organization,  whether
or not as an Eligible Employee, beginning on the Start Date, or

		(b)		Any Plan Year beginning after that date;

		
provided, however, that if an Employee is absent from the service of the Employer or any
other employer within the PepsiCo Organization because of service in the
uniformed services of the United States and he or she returns to service with an
employer within the PepsiCo Organization having applied to return while his or
her reemployment rights were protected by law, the absence shall be included in
his or her Eligibility Service.

	1.85		
“Year of Vesting Service” means a twelve consecutive month
Period of Service. The defined term “Year of Vesting Service” is used
only for purposes of applying Section 8.3 and determining vesting.

ARTICLE II -
PARTICIPATION

	2.1		Commencing Participation.

		(a)		Entry Date for Employees.

				An
Employee (other than a Transferred Employee) shall be eligible to participate in
the Plan as follows:

		(i)		
A Full-Time Employee shall be eligible to participate in the Plan as soon as administratively practicable
following the latest of (A) the date such Employee performs one Hour of Service, or (B)
the date such Employee becomes an Eligible Employee. However, the date that a
Full-Time Employee is eligible to participate in the Plan shall not be later
than three months after such latest date.

		(ii)		
A Part-Time Employee shall be eligible to participate in the Plan upon the first
January 1 or July 1 following the later of: (A) his or her completion
of one Year of Eligibility Service, or (B) his or her becoming an Eligible
Employee. 

		(b)		
Entry Date for Transferred Employees. A Transferred Employee who
qualifies as (1) a Full-Time Employee shall be eligible to participate hereunder
as soon as administratively practicable following his or her Transfer Date, and
(2) a Part-Time Employee shall be eligible to participate in the Plan as of the
later of: (A) as soon as administratively practicable after his or her Transfer
Date, or (B) the first January 1 or July 1 following his or her
completion of one Year of Eligibility Service. The following shall apply to each
Transferred Employee: 

		(i)		A Transferred Employee’s account balance under
the Salaried Plan (including any outstanding loans) shall be
transferredto this Plan as soon as practicable following his or her Transfer Date, and this
shall become the Transferred Employee’s initial Account balance under this
Plan; and

		(ii)		
To the extent required by law, a Transferred Employee’s period of service
under the Salaried Plan shall be transferred to this Plan and shall be
recognized and taken into account under this Plan as of the Transfer Date for
all purposes (including eligibility and vesting) as service under this Plan. 

		(c)		Start of Plan Participation.  The date that an Employee becomes a Participant in this Plan is as follows:

		(i)		An Eligible Employee  (including a Transferred  Employee) shall become a Participant in this Plan once he or
she has submitted a Contribution Election and an amount has been withheld from his
or her Salary under the provisions of the Plan.

		(ii)		
A Transferred Employee whose account balance is transferred from the Salaried
Plan to this Plan pursuant to subsection (b), but who otherwise does not make a
Contribution Election under this Plan, shall only be considered a Plan
Participant with respect to his or her transferred account. 

		(iii)		
An Eligible Employee (other than a Transferred Employee) who makes a Rollover
Contribution in accordance with Section 3.4, but who otherwise does not make a
Contribution Election, shall only be considered a Plan Participant with respect
to his or her Rollover Contribution. 

		(d)		Eligible  Employee  Status. A Participant is permitted to have Pre-tax  Contributions  made to the Plan on his or her
behalf while (and only while) the Participant is employed as an Eligible Employee.

		(e)		
Resumption of Eligible Employee Status. If a Participant or an Eligible
Employee who had met the applicable eligibility requirements under this Section
2.1 ceases to be an Eligible Employee (but without a One Year Break in Service)
and again resumes Eligible Employee status, such Participant or Eligible
Employee, as the case may be, may resume or commence having Pre-tax
Contributions made on his or her behalf by contacting the Participant Response
System following his or her return to Eligible Employee status. If any other
person (i.e., one who has not met the applicable eligibility
requirements) or a former participant in the Salaried Plan is re-employed as an
Eligible Employee and: 

		(i)		
As a Full-Time Employee, he or she shall be eligible to participate under
subsection (a)(i) above by treating the Employee’s first Hour of Service
following rehire as his or her initial Hour of Service under the Plan; or 

		(ii)		
As a Part-Time Employee (but before a One Year Break in Service), he or she
shall be eligible to participate under subsection (a)(ii) above by taking into
account the Employee’s prior service under the Salaried Plan or with an
Employer or any other member of the PepsiCo Organization. 

		
Section 2.2 applies to certain re-employments after a One Year Break in Service. If a
former Participant of this Plan does not recommence participation in this Plan
but rather commences participation upon re-employment in the Salaried Plan, then
subsection (g) below shall apply. 

		(f)		Termination of Participation.  A Participant shall cease to be a Participant in the Plan upon the earliest of:

		(i)		The payment to him or her of all vested benefits due to him or her under the Plan;

		(ii)		His or her Separation from Service with no vested benefits under the Plan;

		(iii)		His or her death; or

		(iv)		The transfer of his or her Account to the Salaried Plan in accordance with subsection (g) below.

		(g)		
Transfer of Accounts and Service to Salaried Plan. If (1) a former
Participant of this Plan commences participation upon re-employment in the
Salaried Plan pursuant to subsection (e) above or (2) a Participant is
transferred to a new classification, thereby making him or her eligible to
participate in the Salaried Plan (and ineligible to participate in this Plan),
then such Participant’s Account balance under this Plan (including any
outstanding loans) shall be transferred to the Salaried Plan as soon as
practicable and shall become such Participant’s initial account balance
under the Salaried Plan.

	2.2		Break in
Service.

			
This Section 2.2 shall apply in the case of an Employee who has a One Year Break in
Service and who is subsequently a Part-Time Employee. In determining such
Employee’s post-break participation in the Plan, the Employee’s
pre-break Years of Eligibility Service shall be restored only after he or she
has a Year of Eligibility Service following his or her rehire (determined as if
his or her employment first commenced on the Employee’s Start Date).

ARTICLE III
- CONTRIBUTIONS AND ALLOCATIONS

	3.1		
Contribution Elections.

		(a)		
An Eligible Employee who wishes to make a Contribution Election shall contact
the Participant Response System and specify the percentage of Salary to be
reduced and contributed to the Plan as Pre-tax Contributions. 

		(b)		
A Contribution Election shall be effective as soon as administratively
practicable following the date the Plan receives the Contribution Election;
provided, however, that no Contribution Election shall be
effective prior to the date the Employee is eligible to participate pursuant to
Section 2.1 (or in the case of a Participant who ceases to be an Eligible
Employee and then again becomes an Eligible Employee, the first date such
Employee again is eligible to participate). While the Plan contemplates that
each Eligible Employee who makes a Contribution Election shall ordinarily have a
valid Investment Election in effect, the Plan will generally accept Contribution
Elections before a valid Investment Election has been submitted (unless
otherwise prohibited by rules adopted by the Plan Administrator). An Eligible
Employee may only make a Contribution Election with respect to Salary that
becomes currently available after the date of such Contribution Election (and
before the date the Participant’s Contribution Election is considered
revoked). Contribution Elections shall be made in whole percentages of Salary
(or in such fractional portions of whole percentages as the Plan Administrator
may specify from time to time). Subject to the foregoing, a Contribution
Election shall be applied to Salary paid to the Participant from time to time.

		(c)		
A Participant may amend (to either increase or decrease the percentage of his or
her annual Salary reduced or contributed to the Plan) or revoke his or her
Contribution Election on a prospective basis by contacting the Participant
Response System. Changes in a Participant’s Contribution Election shall be
made in whole percentages of Salary (unless the Plan Administrator allows
otherwise) and shall be effective as soon as administratively practicable
following the date the Plan receives the Participant’s revised Contribution
Election. 

		(d)		A Participant's  Contribution  Election shall  automatically apply to any increases or decreases in the Participant's
pay-period Salary.

		(e)		
If a Participant with a Contribution Election in effect ceases to be an Eligible
Employee, and then again becomes an Eligible Employee, a new Contribution
Election shall be required unless the return to Eligible Employee status occurs
before the earlier change in status is reflected in the system. If a Participant
with a Contribution election in effect goes on unpaid leave and then again
returns to eligible pay status, the Participant’s Contribution Election
shall be given effect following the return to pay status if the return occurs
while such election is still maintained in the system. 

	3.2		Pre-tax
Contributions.

		(a)		Highly Compensated  Employees.  From time to time, the Plan Administrator will determine whether to cap or reduce the
Pre-tax Contributions of Highly Compensated Employees other than as provided in Articles XIII, XIV and XV.

		(b)		
General Limit. Subject to the limitations of (a) above for Highly
Compensated Employees and Articles XIII and XV, each Participant who is an
Eligible Employee may elect to reduce his or her Salary for a pay period by at
least 1% and not more than 50% of his or her Salary for that pay period and have
that amount contributed to the Plan by the Employer as a Pre-tax Contribution. 

		(c)		
Catch-Up Contributions. Notwithstanding subsections (a) and (b) above,
each Participant who is an Eligible Employee and who has attained age 50 before
the close of the Plan Year shall be eligible to make catch-up contributions in
accordance with, and subject to the limitations of Code section 414(v). Such
catch-up contributions shall not be taken into account for purposes of the
provisions of the Plan implementing the required limitations of Code
§§ 402(g) and 415 (i.e., Sections 13.1 and 15.2). The Plan
shall not be treated as failing to satisfy the provisions of the Plan
implementing the requirements of Code §§ 401(k)(3), 401(k)(11),
401(k)(12), 410(b) or 416, as applicable, by reason of the making of such
catch-up contributions. Catch-up contributions made pursuant to this subsection
and Code § 414(v) shall be treated as Pre-tax Contributions under the Plan.

	3.3		
After-tax Contributions

			
Participants shall not be permitted to make After-tax Contributions to the Plan.

	3.4		
Rollover Contributions

			An Eligible Employee who has met the applicable eligibility requirements under
Section 2.1(a)(i) or (ii) may request that the Plan accept a Rollover
Contribution by submitting a request through the Participant Response System for
such purpose. The Plan Administrator may accept such Rollover Contribution
provided that it determines, in its discretion, the contribution meets all of
the requirements to qualify as a Rollover Contribution, and provided that the
Eligible Employee submits such information as the Plan Administrator shall
require from time to time. Rollover Contributions and any earnings and losses
thereon shall be credited to a Rollover Contributions Account. The Plan
Administrator, pursuant to written guidelines that it establishes, may choose in
its discretion to accept Rollover Contributions that include outstanding loan
balances, provided that this option is available to a classification of
employees that meets the requirements of Treas. Reg. §1.410(b)-4.

	3.5		QNECs.

			For each Plan Year, the Plan Administrator may, in its sole discretion, direct the
Employer to contribute QNECs for the benefit of all Participants who were
Eligible Employees during the year and are employed on the last day of the Plan
Year, other than Highly Compensated Employees. All QNECs will be allocated to
each such Participant on a level dollar basis. At the election of the Plan
Administrator and in accordance with Section 14.6, QNECs may be treated as
Pre-tax Contributions for the purposes of applying the actual deferral
percentage test of Section 14.2.

	3.6		Military Leave

			Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service
credit with respect to qualified military service will be provided in accordance
with Code § 414(u).

	3.7		
Contributions Subject to Deductibility

			The Employer’s obligation to make any contributions under this Plan is
expressly conditioned on its ability to deduct such contributions under Code
§ 404.

	3.8		Allocation
of Contributions.

		(a)		
Pre-tax Contributions shall be allocated to a Participant’s Pre-tax
Contributions Account as soon as practicable after each pay day.

		(b)		
QNECs shall be allocated to a Participant’s QNECs Account no later than the
last day prescribed by law for the filing of the Employer’s federal income
tax return (including extensions thereof) for the taxable year which includes
the last day of the Plan Year. 

		(c)		
Rollover Contributions shall be allocated to a Participant’s Rollover
Contributions Account as soon as practicable after the date such Rollover
Contribution is made.

		(d)		The Employer may pay its contribution for each Plan Year in one or more installments without interest.

		(e)		Subject to the consent of the Trustee,  the Employer may make its contribution in property other than cash,  provided
the contribution of property is not a non-exempt prohibited transaction under the Code or under ERISA.

	3.9		Valuation; Earnings and Losses.

		(a)		Participants' Accounts shall be valued, and earnings and losses allocated, daily except that:

		(i)		
Loans, in-service withdrawals, distributions, and certain repayments shall not
be valued until processed, 

		(ii)		Only days that are normal business days for the
Plan’s recordkeeper shall be considered, and 

		(iii)		The special rules of Section 4.3(d) shall apply.

		
A normal business day shall not include any business day when business is not
conducted (or is otherwise restricted) as determined by the Plan Administrator
due to abnormal conditions (e.g.,an emergency or disruption affecting
the Company, recordkeeper, Trustee, a geographical region, the U.S. or financial
markets), and in such case transfers otherwise allowed under Article IV and
transactions, loans and withdrawals otherwise allowed under this Plan will not
be allowed but shall be pended.

		(b)		
Investment Expenses shall be allocated on the same date as earnings and losses
are allocated as provided in subsection (a), and shall be allocated in
proportion to the final Account balances in the Investment Fund as of the
preceding valuation date. In addition, the Plan Administrator may specify the
rules for charging expenses (other than Investment Expenses) to the Plan. For
purposes of this Section, “Investment Expenses” shall mean all
expenses related to the management and maintained, on a separate basis, of the
individual Investment Funds under the Plan, but shall not include general fees
for management and maintenance of the Trust as a whole.

	3.10		Return of Contributions.

			Upon written demand by the Employer, the Trustee shall return any Pre-tax
Contributions and QNECs contributed by the Employer to this Plan under any one
of the circumstances described in (a), (b) or (c), subject to the special rules of (d):

		(a)		If a contribution was made due to a mistake of fact, the
contribution may be returned, adjusted for losses but not earnings, within one year after it was contributed.

		(b)		
If a contribution is determined not to be deductible under Code § 404, the
portion of the contribution that was disallowed may be returned to the Employer,
adjusted for losses but not earnings, within one year after the disallowance.

		(c)		If a contribution is determined to:

		(i)		
violate Code §415,  such  contribution  (or portion  thereof) may be returned to the Employer to the extent
necessary to satisfy the rules of Code §415 and the applicable Treasury regulations thereunder, and

		(ii)		violate  Code §§401(k)(3)  or  402(g)(1),  such  contribution  (or portion  thereof) may be returned to the
Employer to the extent  necessary to satisfy such Code  sections,  subject to the rules of Code §§401(k)(8)
and 402(g)(2).

		(d)		
If Pre-tax Contributions are returned to the Employer in accordance with
subsections (a), (b) or (c)(i), Participants’ Contribution Elections with
respect to such returned contributions shall be adjusted retroactively to the
beginning of the period for which such contributions were made. As a result,
amounts returned in accordance with subsections (a), (b) and (c)(i) shall not be
counted in determining a Participant’s Actual Deferral Percentage for
purposes of the limitations in Article XIV. The Pre-tax Contributions so
returned shall be distributed in cash to those Participants for whom such
contributions were made. 

ARTICLE IV -
INVESTMENTS

	4.1		
Participant Investment Provisions.

		(a)		
Each Participant shall, in accordance with the procedures set forth in Section
4.2, have the right to direct the Trustee with respect to the investment or
reinvestment of the assets comprising the Participant’s Account among the
Investment Funds. After a Participant’s death, the Participant’s
Beneficiary shall have the right to direct the Trustee with respect to the
investment or reinvestment of the assets comprising the Participant’s
Account to the same extent that the Participant had during his life. As
necessary to accomplish this result, a reference in this Article to a
Participant shall also be deemed to refer to the Participant’s Beneficiary. 

		(b)		
In the event the Participant does not give the Trustee timely direction
regarding the investment or reinvestment of the Participant’s Account, the
Trustee shall invest any new contributions made to the Participant’s
Account in accordance with the Participant’s most recently submitted
Investment Election; provided, however, that if it is not possible
to continue to invest in accordance with the Participant’s Investment
Election (for example, because the Plan has ceased to offer the investment), the
Participant’s Account shall be invested in accordance with Section 4.2(e).
Rules set forth in Sections 4.2 and 4.4 govern investments for Rollover
Contributions, amounts credited to an Account maintained on behalf of an
alternate payee under a qualified domestic relations order, investment of loan
repayments and restoration of forfeitures. 

	4.2		Investment
Elections.

		(a)		
Investment Elections shall specify how the Participant’s Account and new
contributions should be invested in the available Investment Funds. An Eligible
Employee’s or Participant’s initial Investment Election with respect
to a Rollover Contribution shall separately specify how such Rollover
Contributions should be invested in the available Investment Funds. 

		(b)		
An Investment Election with respect to new contributions to the Plan shall be
made in increments of 5%. An Investment Election to reallocate amounts already
in a Participant’s Account shall also be made in increments of 5%. 

		(c)		
Participants may make or change their Investment Elections by contacting the
Participant Response System. A Participant’s change in Investment Election
shall be effective with respect to new contributions only, unless the
Participant also makes a new Investment Election with respect to amounts already
in his or her Account.  

		(d)		
A Participant’s initial or changed Investment Election shall be effective
as soon as administratively practicable following the date the Plan receives the
Participant’s Investment Election. 

		(e)		
Any amounts credited to an Account for which no Investment Election has been
received shall be invested in the Security Plus Fund. In its discretion, the
Plan Administrator may adopt rules intended to avoid amounts becoming subject to
default investment in accordance with this subsection. Under rules to be adopted
by the Plan Administrator from time to time, amounts credited to an Account
maintained on behalf of an alternate payee under a qualified domestic relations
order shall be initially invested pursuant to the Participant’s Investment
Election. Thereafter, the alternate payee may change such Investment Election by
contacting the Participant Response System. 

		(f)		
Each Participant is solely responsible for his or her selection of Investment
Funds. Neither the Trustee, the Plan Administrator, the Company, the Employer or
any of the officers or supervisors of the Employer or the Company are empowered
or authorized to advise a Participant regarding the Participant’s
Investment Election. The fact that an Investment Fund is offered under the Plan
shall not be construed as a recommendation that Participants invest in such
Investment Fund.  

		(g)		
A Transferred Employee’s investment election and beneficiary designation
under the Salaried Plan shall be transferred to this Plan as soon as practicable
following his or her Transfer Date, and shall remain in effect under this Plan
until changed in accordance with the provisions of this Plan. 

	4.3		Investment
Funds.

		(a)		
In General. As of the Effective Date, the Investment Committee has
selected the specific Investment Funds described in this Section and other
Investment Funds. From time to time after the Effective Date, in accordance with
the investment policies and objectives established by the Investment Committee,
the Investment Committee may add, cease offering or make changes in the
operation and management of any Investment Fund at any time, and the Investment
Committee shall have the authority to specify rules and procedures as to how
Investment Elections shall be adjusted to reflect the addition, deletion or
change in the Investment Funds offered under the Plan. Pending allocation to the
Investment Funds, contributions to the Plan may be held uninvested or may, on an
interim basis, be invested, in whole or in part, in cash or cash equivalents.
Except as otherwise provided herein (or in rules adopted by the Investment
Committee from time to time), dividends, interest, and other distributions
received on the assets held by the Trustee in respect of any Investment Fund
shall be reinvested in the respective Investment Fund. 

		(b)		
The PepsiCo Common Stock Fund. One of the investment options available
to Participants is the PepsiCo Common Stock Fund, a Fund which is invested
primarily in Common Stock of the Company (“Company Stock”). This Fund
is governed by the provisions of Section 4.5. 

		(c)		
BrokerageLink. This investment option is provided through Fidelity
Brokerage Services (or any successor designated by the Plan Administrator) and
the agents it uses as securities brokers to execute Participants’ trades.
This option permits certain Participants and Beneficiaries to invest all or a
portion of their interest in the Plan in additional choices for self-directed
investment. 

		(i)		
The Plan Administrator shall publish written rules and procedures for the
election of these additional choices by Participants and Beneficiaries, and may
revise such rules and procedures at any time. These rules shall specify
categories of investments and types of trade practices that are permitted and
those that are prohibited. 

		(ii)		
Each Participant who participates in the Brokerage Option shall have his
interest in the Plan reduced by any brokerage commissions and fees (including
fees charged on account of one or more investments in a mutual fund) payable on
their individual transactions and shall also have his interest in the Plan
reduced by an access fee for each calendar quarter (or part thereof) that the
Participant participates in BrokerageLink. Such access fee will be taken from
the Participant’s Account in accordance with rules of the Plan
Administrator. To the extent necessary, the Plan Administrator, and its agent,
are authorized to sell securities or other assets held within a
Participant’s Account for the purpose of paying the commissions and fees
described in this subsection. 

		(iii)		Investment in BrokerageLink is subject to the following restrictions:

		(A)		
To commence investing under BrokerageLink, a Participant must have at least
$1,000 in his Participant Account, and his initial transfer election into
BrokerageLink must be at least $1,000. Subsequent transfers of prior savings to
and transfers from BrokerageLink must be at least $250, unless such transfer is
to close the Participant’s BrokerageLink account.

		(B)		
No amounts invested in the Security Plus Fund may be directly transferred to
BrokerageLink, nor may they be indirectly transferred to BrokerageLink,
i.e., by first transferring the amounts to some intervening Investment
Fund (or Funds) under the Plan, unless such amounts remain so invested for at
least 90 days.

		(C)		
Except as provided in the last sentence of this subparagraph (C), no security or
investment held by a Participant’s Account within BrokerageLink may be
transferred or distributed directly to the Participant. The Participant must
initially sell the security or investment. The Trustee will place all proceeds
of BrokerageLink sales in a short-term investment fund, designed to generate a
money market rate of return, within BrokerageLink. The proceeds will remain in
such account until the Participant submits an Investment Election redirecting
the proceeds to an available Investment Fund. In-kind distributions are
permitted in the event of a complete distribution of a Participant’s
interest pursuant to Article VIII under procedures established by Fidelity
Brokerage Services and the Plan’s current recordkeeper.

		(d)		
Maintaining Liquidity. For the purpose of providing liquidity in certain
Investment Funds, the Trustee may invest a portion of each such Fund in cash or
short-term securities. If the liquid assets held by these Funds is insufficient
to satisfy the immediate demand for liquidity under the Plan, the Trustee, in
consultation with the Investment Committee, may temporarily limit or suspend
transfers of any type (including withdrawals and distributions) to or from any
affected Investment Fund. In any such case, the Plan Administrator shall
temporarily change the Plan’s valuation cycle (pursuant to Section 3.9) or,
in its discretion, the valuation cycle for a specific Fund. During this period,
contributions to any affected Fund may be redirected to the Security Plus Fund
(or if that is unavailable, another Fund chosen by the Trustee) and instructions
and transfers may be pended.

	4.4		Investment
of Loan Repayments and Restoration of Forfeitures.

			Any loan repayments shall be invested in the Investment Funds that have been
selected by the Participant for new contributions as in effect on the date such
repayments are received. Any repayments in connection with forfeiture
restorations under Section 5.6 shall be invested as specified in the
Participant’s Investment Election described in such Section. If because of
special circumstances investment cannot be carried out in accordance with the
two preceding sentences, Section 4.2(e) shall govern.

	4.5		PepsiCo
Common Stock Fund.

			The PepsiCo Common Stock Fund shall be governed by the provisions of this Section.

		(a)		Definitions.  For purposes of this Section 4.5 the following phrases shall have the meanings ascribed to them below:

		(i)		"Cash  Dividends"  shall mean the cash dividends that are paid on or after the Effective Date by the Company
with respect to the Company Stock in the ESOP Subfund.

		(ii)		
“ESOP Subfund” shall mean the portion of the PepsiCo Common Stock
Fund that constitutes an employee stock ownership plan under Code
§ 4975(e)(7). The ESOP Subfund shall invest primarily in employer
securities, within the meaning of Code § 409(l), and shall consist of the
Company Stock and other assets that are determined by the Plan Administrator to
be a part of such subfund. 

		(iii)		
“401(k) Subfund” shall mean the portion of the PepsiCo Common Stock
Fund that does not constitute an employee stock ownership plan under Code
§ 4975(e)(7), and that shall consist of the Company Stock and other
assets determined by the Plan Administrator to be a part of such subfund. 

		(iv)		
“Payment Election” shall mean a completed election made under
subsection (d) pursuant to which a Participant has affirmatively elected to have
his or her Cash Dividends paid to the Participant in cash outside the Plan. 

		(v)		"Subfunds" shall refer to both the ESOP Subfund and the 401(k) Subfund.

		(b)		
Establishment of ESOP. From and after the Effective Date, interests in
the PepsiCo Common Stock Fund shall be divided between the ESOP Subfund and the
401(k) Subfund. The ESOP Subfund together with the 401(k) Subfund shall
constitute (and may be referred to as) the PepsiCo Common Stock Fund. As of any
time, the portion of the Plan assets consisting of the ESOP Subfund shall be a
stock bonus plan under Code § 401(a), which is intended to qualify as an
employee stock ownership plan under Code § 4975(e)(7) (the “ESOP
Portion”). The ESOP Portion is maintained as a portion of the Plan as
authorized by Treas. Reg. § 54.4975-11(a)(5). The remaining part of the
Plan is intended to be a profit sharing plan which meets the requirements for
qualification under Code §§ 401(a) and 401(k) (the “Profit
Sharing Portion”). Together the ESOP portion and the Profit Sharing Portion
constitute the entire Plan and are intended to be a single plan under Treas.
Reg. § 1.414(l)-1(b)(1). 

		(c)		Description of Subfunds.

		(i)		
The ESOP Subfund and the 401(k) Subfund shall be initially established as of the
Effective Date. The Company Stock and other assets relating to Plan Participants
held in the PepsiCo Common Stock Fund under the Pre-Spinoff Plan as of
immediately prior to the Effective Date shall be transferred to the ESOP Subfund
as of the Effective Date. In connection with this transfer, the Plan
Administrator may prescribe “Blackout Periods” during which
Participants may be restricted from making certain changes to their Plan
elections and/or prohibited from withdrawing and transferring amounts in the
Plan to the extent specified by the Plan Administrator. While a Participant is
restricted from engaging in certain transactions during the Blackout Periods,
amounts in Participants’ Accounts will remain invested in the Funds elected
prior to the Blackout Period (except for any exceptions as specified by the Plan
Administrator) and will remain subject to market fluctuations during the
Blackout Periods. 

		(ii)		
All Pre-tax Contributions, Rollover Contributions and any other contributions
and elective deferrals that are made during a Plan Year that a Participant
elects to invest in the Common Stock Fund shall be added to the 401(k) Subfund.
In addition, any transfers into the Common Stock Fund from another Investment
Fund shall be added to the 401(k) Subfund, and any transfers out of Company
Stock and into another Investment Fund shall first be subtracted from the 401(k)
Subfund (with any remaining balance to be taken from the ESOP Subfund, as
necessary). 

		(iii)		
As of the beginning of the day on the first day of each Plan Year beginning with
the 2003 Plan Year, the balance of the 401(k) Subfund shall be transferred into
the ESOP Subfund pursuant to rules and procedures that the Plan Administrator
shall establish from time to time. 

		(d)		Election to Receive Dividends on ESOP Subfund.

		(i)		
The Plan Administrator shall prescribe rules and procedures that allow each
Participant with an interest in the ESOP Subfund to elect to have the Cash
Dividends allocated to him or her paid directly to the electing Participant
rather than having such Cash Dividends paid to the Plan and reinvested in
Company Stock in the ESOP Subfund. Such rules and procedures that are prescribed
by the Plan Administrator shall be in accordance with the terms of the Plan or,
to the extent not specified in the Plan, the requirements that must be satisfied
in order for a federal income tax deduction to be allowed under Code §
404(k) with respect to the amount of Cash Dividends (including the requirement
that the election to receive Cash Dividends be irrevocable for the period to
which it applies). The Plan Administrator shall be allowed to prescribe an
amount of Cash Dividends (after application of any processing fee described in
the following sentence) below which distributions of Cash Dividends to electing
Participants shall not be made, but rather shall be subject to the default rules
of paragraph (ii) below. In addition, the Plan Administrator shall be allowed to
prescribe a processing fee for processing and paying Cash Dividends to electing
Participants. As of the Effective Date, the minimum amount of dividends which
will be distributed to electing Participants shall be $10.00 and the processing
fee for such distribution shall be $3.00, such amounts to be subject to increase
by the Plan Administrator in its sole discretion (provided that any such
increase does not cause either to exceed the level that would permit the Company
to deduct such dividends). 

		(ii)		
In the event (A) a Participant does not complete a Payment Election, or (B) the
amount of a Participant’s Cash Dividends are less than the amount
established by the Plan Administrator under the last three sentences of
paragraph (i) above, such amount of Cash Dividends shall be automatically paid
to the Plan, allocated to the ESOP Subfund and reinvested in Company Stock.
Participants may make a Payment Election by contacting the Participant Response
System. A Payment Election shall be irrevocable once accepted by the Plan
Administrator and only valid for the quarter (or other time period consisting of
not more than one year as prescribed by the Plan Administrator) to which it
applies. A Participant’s Payment Election shall be effective as soon as
administratively practicable following the date the Plan receives the
Participant’s Payment Election. A Payment Election must be completed by the
Participant within the time proscribed for such purpose and pursuant to the
rules and procedures adopted by the Plan Administrator from time to time. Any
Payment Election that is not completed as required by the Plan Administrator
shall be considered null and void.  

		(iii)		
Cash Dividends that are paid or reinvested pursuant to Code §
404(k)(2)(A)(iii) and the provisions of this Section shall not be considered to
be Annual Additions for purposes of Code § 415(c), Pre-tax Contributions
for purposes of Code § 402(g), elective contributions for purposes of Code
§ 401(k) or employee contributions for purposes of Code § 401(m).

		(e)		General  Rules.  Both the 401(k) Subfund and the ESOP Subfund shall be governed by the following  paragraphs,  unless
otherwise noted:

		(i)		Investments  in the Subfunds will be  denominated as "units." The value of a unit will fluctuate in response
to various factors, including the price of and dividends paid on Company Stock,
earnings and losses on other investments in the Subfunds and Subfund expenses.

		(ii)		
Shares of Company Stock held in the Subfunds and dividends and other
distributions on Company Stock are not specifically allocated to Participant
Accounts. Each Participant’s interest in the Fund will be based on the
proportion of his investment in the Fund to the total investment in the Fund of
all Participants. 

		(iii)		
All dividends on shares of Company Stock in the 401(k) Subfund are paid to the
401(k) Subfund, treated as earnings and used to purchase additional units in the
401(k) Subfund. Any Company Stock received by the Trustee as a stock split or
dividend, or as a result of a reorganization or other recapitalization with
respect to the Company Stock in the 401(k) Subfund, will be unitized and added
to the 401(k) Subfund. Any other property (other than shares of Company Stock)
received by the Trustee with respect to the Company Stock in the 401(k) Subfund
may be sold by the Trustee and the proceeds added to the 401(k) Subfund. In the
event of a significant distribution of such other property, the Plan
Administrator may implement special arrangements for the holding or disposition
of such other property by the Plan. Any rights to subscribe to additional shares
of Company Stock shall be sold by the Trustee and the proceeds credited to the
401(k) Subfund. 

		(iv)		
All Cash Dividends on shares of Company Stock in the ESOP Subfund that a
Participant does not elect to have paid outside the Plan pursuant to subsection
(d) above are paid to the ESOP Subfund and are used to purchase additional units
in the ESOP Subfund. Any Company Stock received by the Trustee as a stock split
or dividend, or as a result of a reorganization or other recapitalization with
respect to the Company Stock in the ESOP Subfund, will be unitized and added to
the ESOP Subfund. Any other property (other than shares of Company Stock)
received by the Trustee with respect to the Company Stock in the ESOP Subfund
may be sold by the Trustee and the proceeds added to the ESOP Subfund. In the
event of a significant distribution of such other property, the Plan
Administrator may implement special arrangements for the holding or disposition
of such other property by the Plan. Any rights to subscribe to additional shares
of Company Stock shall be sold by the Trustee and the proceeds credited to the
ESOP Subfund. 

		(v)		
Participants who have invested in the Subfunds may direct the Trustee how to
vote (or tender, if applicable) Company Stock. The Trustee will determine each
Participant’s proportional share of the Company Stock in the Subfunds
(based on the number of units allocated to the Participant’s Accounts) and
solicit the Participant’s instructions. The Trustee shall vote (and/or
tender) this stock according to the Participant’s directions. The Trustee
shall not vote stock in the Subfunds for which it does not receive directions. 

		(vi)		
Shares of Company Stock will be purchased or sold for the Subfunds in the open
market or in privately negotiated transactions. The Trustee, or its designated
agent, may limit the daily volume of purchases and sales to the extent it
believes it will be in the interest of Participants to do so. 

ARTICLE V -
VESTING

	5.1		Pre-tax Contributions, After-tax Contributions, and Rollover Contributions.

			A Participant shall be at all times 100% vested in amounts credited to his or her
Pre-tax Contributions Account, After-tax Contributions Account, Rollover
Contributions Account and QNECs Account.

	5.2		Matching
Contributions.

		(a)		General  Vesting  Schedule.  Subject to subsection  (b) below,  amounts  credited to a  Participant's  Prior Matching
Contributions Account shall become vested in accordance with the following schedule:

		Years of Vesting Service		Vested Percentage	

		Less than 1  		0%	

		At least 1, but less than 2		20%	

		At least 2, but less than 3		40%	

		At least 3, but less than 4		60%	

		At least 4, but less than 5		80%	

		5 or more		100%	

		(b)		
Special Vesting Provisions for Certain Employees. Notwithstanding
anything in this Section 5.2 to the contrary, a Participant shall be 100% vested
in his or her Prior Matching Contributions Account upon the Participant’s
death, Disability, or attainment of age 60 while the Participant is an Employee.

	5.3		Vesting
Upon Reemployment After a Break in Service.

			
If a Participant or former Participant, who had a Separation from Service prior to
the time he or she was 100% vested in his or her Account, becomes an Employee
under this Plan prior to incurring a Five Year Break in Service, such
Employee’s prior Years of Vesting Service shall be taken into account for
purposes of determining his or her vested percentage in his or her (i) restored
Account balance, provided such Employee’s Account is restored in accordance
with Section 5.6, or (ii) existing Account balance, provided no distributions
have been made. Under such circumstances, an Employee’s vested percentage
in his or her existing or restored Account balance upon reemployment shall not
be lower than the Employee’s vested percentage in his or her Account upon
Separation from Service. After a six month Period of Service that began after
1999 and after a Reemployment Commencement Date, a Participant will be 100%
vested in his or her Account.

	5.4		
Forfeitures.

		(a)		
If a Participant Separates from Service prior to the time he or she is 100%
vested in his or her Account, and such Participant does not receive a
distribution from the Plan, the non-vested portion of the Participant’s
Account shall be forfeited upon the Participant’s incurring a Five Year
Break in Service. 

		(b)		
If a Participant Separates from Service and receives a distribution from the
Plan of the vested portion of his or her Account prior to incurring a Five Year
Break in Service at a time when the Participant was not 100% vested in his or
her Account, the non-vested portion of the Participant’s Account shall be
forfeited upon the date of the distribution.  

		(c)		
For purposes of this Section 5.4, a Participant who Separates from Service at a
time when he or she is 0% vested in his or her Prior Matching Contributions
Account shall be deemed to have received a distribution upon Separation from
Service. 

	5.5		Allocation
of Forfeitures.

			Subject to any required restoration under Section 5.6 and Section 8.12, any amount
forfeited under Section 5.4 shall be used to pay any administrative expenses of
the Plan (including the cost of restoring any forfeitures). Except in the case
of a Participant whose Account is restored in the Plan Year of the forfeiture, a
Participant shall not be entitled to an allocation of a forfeiture of any
portion of his or her Account.

	5.6		
Restoration of Forfeited Account.

		(a)		
A Participant or former Participant who received a distribution from the Plan of
the vested portion of his or her Account who again becomes an Employee before
incurring a Five Year Break in Service may restore the non-vested portion
forfeited in accordance with Section 5.4, by repaying the full amount of the
distribution (excluding amounts attributable to the Participant’s After-tax
Contributions and Rollover Contributions, except that the Participant may elect
to repay to the Plan all or part of those amounts as well). Any repayment must
be in cash and paid to the Trustee in a lump sum within five years after the
Participant’s Reemployment Commencement Date. It is intended that any
repayment be accepted only if it is accompanied by an Investment Election
specifying how the repayment is to be invested under the Plan (or if the
Participant otherwise has an Investment Election in effect). If a Participant
does not make an Investment Election and does not have an Investment Election in
effect, then the last sentence of Section 4.4 shall apply. 

		(b)		
If a former Participant who Separated from Service (at a time when he or she was
0% vested in his or her Prior Matching Contributions Account) again becomes an
Employee prior to incurring a Five Year Break in Service, the former
Participant’s forfeited Account shall be restored on the date he or she
once again becomes an Employee without the need for any repayment. 

		(c)		
Any nonvested amounts restored pursuant to this Section 5.6 shall be restored as
of the last day of the month coincident with or immediately following the date
of repayment or reemployment, as the case may be. 

		(d)		
Amounts restored pursuant to this Section shall generally be allocated to a
Participant’s After-tax Contributions Account; provided,
however, if the distribution has not been included in the
Participant’s gross income for federal income taxes, the Participant’s
repayment shall be allocated to the accounts from which they were distributed.
Restored amounts shall be reinvested as provided in Section 4.4. 

		(e)		
The Plan Administrator shall restore the forfeited portion of a
Participant’s Account from the amount of forfeitures available under the
Plan. To the extent the amount of available forfeitures is insufficient to
enable the Plan Administrator to make the required restoration, the Employer
must contribute, without regard to any requirement or condition of Articles XIII
through XVI, the additional amount necessary to enable the Plan Administrator to
make the required restoration. 

ARTICLE VI -
IN-SERVICE WITHDRAWALS

	6.1		Withdrawal of
After-tax Contributions.

			
Participant who is an Employee may elect to withdraw all or a portion of the
amounts credited to his or her After-tax Contributions Account, including
earnings. Notwithstanding the preceding sentence, a Participant may not withdraw
any matched After-tax Contributions which were contributed within the 6-month
period preceding the date of withdrawal. 

	6.2		Withdrawal
of Rollover Contributions.

			
A Participant who is an Employee and has withdrawn all of the amounts credited to
his or her After-tax Contributions Account, may withdraw all or a portion of the
amounts which have been credited to his or her Rollover Contributions Account.

	6.3		Withdrawal
of Matching Contributions.

			A Participant who (i) is an Employee, (ii) is vested in all or a portion of his or
her Prior Matching Contribution Account, and (iii) has withdrawn the entire
amount available under Sections 6.1 and 6.2, may withdraw all or a portion of
the vested portion of his or her Prior Matching Contributions Account, including
any earnings, to the extent contributed at least two years prior to the date of
the withdrawal.

	6.4		
Withdrawals of Pre-tax Contributions and QNECs

			Except as provided in Sections 6.5 and 6.6, a Participant who is an Employee shall not be        entitled  to   withdraw   any
Pre-tax Contributions or QNECs from the Plan.

	6.5		Withdrawals
After Attaining Age 59-1/2.

			
If a Participant attains age 59-1/2, such Participant may elect to withdraw
all or a portion of the following portions of his or her Account in the
following order of priority:

		(a)		The Participant’s After-tax Contributions
Account, excluding any matched After-tax Contributions made within the
6-month period preceding the date of withdrawal.

		(b)		The Participant's Rollover Contributions Account.

		(c)		The vested portion of the Participant's Prior Matching Contributions Account.

		(d)		The Participant's Pre-tax Contributions Account and QNECs Account.

	6.6		Hardship
Withdrawals.

		(a)		
A Participant who has withdrawn the total amount available for withdrawal under
Sections 6.1 through 6.5 may receive a hardship withdrawal of all or a portion
of his or her (i) Pre-tax Contributions Account (other than any post-1988
earnings on such account), (ii) Prior Matching Contribution Account to the
extent of amounts contributed less than two years prior to the date of the
withdrawal (and related earnings) and (iii) matched After-tax Contributions
which have been credited to his or her After-tax Contributions Account within
six months prior to the date of the withdrawal (and related earnings),
provided the Participant furnishes proof, satisfactory to the Plan
Administrator, that the withdrawal is necessary to alleviate an immediate and
heavy financial need (as determined in accordance with Section 6.6(b) below) and
that the amount of the withdrawal does not exceed the amount necessary to
satisfy such financial need (as determined in accordance with Section 6.6(c)
below). In addition, for Plan Years beginning on or after January 1, 2002, a
Participant who has an interest in the PepsiCo Common Stock Fund may not
receive a hardship withdrawal under this Section unless he or she has elected to
receive outside the Plan all Cash Dividends to the extent such dividends are
currently available to the Participant. The determination by the Plan
Administrator of the existence of an immediate and heavy financial need and of
the amount necessary to meet such need shall be made in a nondiscriminatory and
uniform manner. The Plan Administrator shall not allow a hardship withdrawal to
be made to a Participant unless the requirements of this Section 6.6 are
satisfied. 

		(b)		Subject to Section  6.6(c),  a  Participant  shall be deemed to have an  immediate  and heavy  financial  need if the
Participant needs the hardship withdrawal for one of the following reasons:

		(i)		Medical expenses described in Code §213(d) which are incurred by the Participant,  the Participant's Spouse
or dependents (as defined in Code § 152), or necessary for such persons to
obtain medical care described in Code § 213(d);

		(ii)		
Costs directly  related to the purchase of a principal  residence for the  Participant  (excluding  mortgage
payments);

		(iii)		
Payment of tuition and related educational fees for the next 12 months of
post-secondary education for the Participant or for the Participant’s
Spouse or dependents (as defined in Code § 152); 

		(iv)		Payments  necessary to prevent the eviction of the  Participant  from his or her  principal  residence or to
prevent foreclosure on the mortgage of the Participant's principal residence;

		(v)		
Any need prescribed by the Internal Revenue Service in a revenue ruling, notice
or other document of general applicability which satisfies the safe harbor
definition of hardship; or 

		(vi)		
Any need determined by the Plan Administrator to constitute the type of need
which would authorize a hardship distribution under Code § 401(k) and
applicable regulations. 

		The determination of whether a Participant has met the requirements for a hardship
withdrawal shall be made on the basis of all the relevant facts and
circumstances. Notwithstanding the foregoing, a financial need shall not fail to
qualify as immediate and heavy merely because such need was reasonably
foreseeable or voluntarily incurred by the Participant.

		(c)		In making its
determination that a hardship withdrawal is necessary to satisfy an immediate
and heavy financial need, the Plan Administrator may, unless it has actual knowledge to the contrary, rely
on a written statement by the Participant that the need cannot be reasonably
relieved: (i) through the reimbursement or compensation by insurance or
otherwise, (ii) by liquidation of the Participant’s assets, (iii) by
cessation of deferrals or contributions to the Plan, or (iv) by other
distribution or nontaxable (at the time of the loan) loans from plans maintained
by the Employer or by any other employer (or by borrowing from commercial
sources on reasonable commercial terms) in an amount sufficient to satisfy the
need. For purposes of this Section, taking any of the foregoing actions shall
not be deemed to reasonably relieve a need if the effect of taking any such
action would be to increase the amount of the need. In addition, in determining
whether the withdrawal is not in excess of the amount required to relieve the
need, the Plan Administrator shall take into account any taxes that the
Participant will be required to pay on the withdrawal.

		(d)		
A Participant who received a hardship withdrawal from the Tropicana Teamsters
Plan or the Tropicana Union Plan prior to January 1, 2002 shall not be permitted
to have Pre-tax Contributions made on his or her behalf for a period of 6 months
following the date the Tropicana Teamsters Plan or the Tropicana Union Plan
distributed the hardship withdrawal. In the year following a year a Participant
received such a hardship withdrawal, a Participant shall not be permitted to
have Pre-tax Contributions made on his or her behalf exceeding an amount equal
to $11,000 (or such higher amount as applies under Code § 402(g) for the
Plan Year) less the amount of Pre-tax Contributions made on behalf of the
Participant in the year of the hardship withdrawal. 

	6.7		In-Service
Withdrawal Procedures and Restrictions.

		(a)		
Participants shall request an in-service withdrawal from the Plan by contacting
the Participant Response System and submitting a request that complies with
guidelines established by the Plan Administrator. 

		(b)		
In-service withdrawals shall be distributed as soon as administratively
practicable following the date the Plan Administrator: (i) receives a request
for an in-service withdrawal referred to in subsection (a) above (which meets
the Plan Administrator’s guidelines regarding form and content), and (ii)
determines the applicable requirements for the withdrawal are met. 

		(c)		
In-service withdrawals shall be taken on a pro rata basis from the Investment
Funds in which the affected subaccounts are invested. All withdrawals shall be
paid in a single lump sum. All withdrawals shall be paid in cash except for
withdrawals described in Section 6.5 (relating to withdrawals after attaining
age 59-1/2), which may be paid in-kind in accordance with the procedures
specified in Section 8.6. 

		(d)		
The minimum amount or value of an in-service withdrawal is $100 or, if less, the
total amount or value available for withdrawal. 

		(e)		
A Participant shall be limited to two in-service withdrawals, per calendar year,
under each of the following sections: Section 6.1, Section 6.2, Section 6.3 and
Section 6.5. No numerical, per-year limit applies to hardship withdrawals. 

ARTICLE VII
- LOANS

	7.1		General
Rule.

			
A Participant who is an Employee of the PepsiCo Organization may borrow a portion
of his or her vested Account by submitting an application to the Plan
Administrator; provided, that a Participant is not permitted to have more
than two loans from the Plan outstanding at any time, of which only one loan can
be a Principal Residence Loan. In addition, no more than two loans shall be
initiated in any one Plan Year. Loans shall be made available to all eligible
Participants on a reasonably equivalent basis and shall not be made available to
Highly Compensated Employees, officers or shareholders in an amount greater than
is made available to other Participants. Each loan shall be evidenced by a
written promissory note signed by the Borrower. A Participant may initiate the
loan process by contacting the Participant Response System.

	7.2		Amount of
Loan.

			A loan may be made in an amount (not less than $1,000) which, when added to the
outstanding balance of all prior loans (including interest) to the Borrower
under the Plan, does not exceed the lesser of (i) $50,000 reduced by the excess,
if any, of (A) the highest outstanding balance of loans from the Plan during the
one-year period ending on the day before the date such loan was made, over (B)
the outstanding balance of loans from the Plan on the date on which such loan
was made; or (ii) one-half of the present value of the Borrower’s
non-forfeitable accrued benefit under the Plan. For purposes of applying the
limitation in (i) above, the Plan and all other “qualified employer
plans” (as defined in Code § 72(p)(4)) maintained by an employer
within the PepsiCo Organization shall be treated as a single plan, and any loan
that has been deemed distributed pursuant to Section 7.6 but has not been repaid
(whether by plan loan offset or otherwise) shall be considered outstanding.

	7.3		Interest
Rate and Security.

		(a)		
Loans shall be made at the prime rate plus one percentage point, or such other
interest rate as may later be designated by the Plan Administrator for
subsequent loans. The prime rate shall be determined as of the last normal
business day of the month before such loan is made, as announced in the Wall
Street Journal (or to the extent the Wall Street Journal ceases to be published,
such other newspaper as is selected by the Plan Administrator). 

		(b)		
Loans shall be secured by the vested portion of the Borrower’s Account.
Immediately after the origination of each loan no more than 50% of the
Participant’s vested Account may be used as security for the loan. In
addition, if a Participant’s loan has been deemed distributed pursuant to
Section 7.6 but has not been repaid (whether by plan loan offset or otherwise),
the Plan Administrator shall require any new loan issued to such Participant to
include such enhanced security for the Plan as it deems appropriate, determined
in light of the prior default (e.g., a requirement for payroll deductions
that will not be waived). 

	7.4		Source of
Loans.

		(a)		Amounts borrowed shall be taken from the Borrower's subaccounts on a pro rata basis.

		(b)		After taking amounts borrowed from the Borrower’s subaccounts pursuant to
subsection (a) above, thereafter such amounts shall be taken from the Investment
Funds in which the amounts borrowed are invested on a pro rata basis. 

	7.5		Repayment
and Term.

		(a)		
Loans shall be amortized in substantially level payments, made not less
frequently than quarterly, for a period of not less than twelve months and not
more than five years; provided, however, that a Principal
Residence Loan may be amortized over a period not to exceed fifteen years and,
provided, further, that loan repayments will be suspended under
the Plan as permitted under Code § 414(u)(4). A Participant requesting a
Principal Residence Loan shall provide copies of any documents relating to the
purchase of such principal residence which the Plan Administrator may deem
necessary to verify that the proceeds of such loan will be used to acquire or
construct a principal residence. 

		(b)		
Loans shall be repaid by means of payroll deduction from the Borrower’s
Salary; provided, however, that if at any time a Participant is
not receiving Salary from an employer within the PepsiCo Organization, the loan
repayment shall be made in accordance with the terms and procedures established
by the Plan Administrator and applied on a uniform, nondiscriminatory basis. A
Participant may repay an outstanding loan in full at any time without penalty. 

		(c)		
Amounts repaid shall be returned to the subaccount from which they are borrowed
in the reverse order from the order in which they were borrowed and shall be
reinvested as provided in Section 4.4. 

		(d)		Loan repayments  suspended under Code §414(u)(4) shall, upon the Participant's  completion of the period of military
service, resume under the following rules:

		(i)		The frequency of the installment  payments and the amount of each installment payment shall not be less than
the frequency and amount of the installments required under the terms of the
original loan before entering military service.

		(ii)		
The loan must be repaid in full (including interest that accrues during the
period of military service) not later than the end of the period that is equal
to: (A) the original term of the loan, plus (B) the period of military
service. 

	7.6		Deemed
Distributions.

		(a)		
If the Plan Administrator determines that a Borrower’s loan has not
satisfied the written procedures that the Plan Administrator shall establish
from time to time regarding deemed distributions of loans, then the amount of
such loan (plus any accrued interest) shall be deemed distributed, and the value
of the Borrower’s Account reduced accordingly as of the date of deemed
distribution. However, if the amount borrowed was from the Participant’s
Pre-tax Contributions Account or QNECs Account, the amount of the deemed
distribution shall not actually be offset against the Participant’s Account
until the earlier of the date the Participant Separates from Service or attains
age 59-1/2. If a loan is deemed to be distributed, additional interest shall
accrue following the deemed distribution date on the portion of the loan that
was not repaid as of that date. This additional interest shall not be considered
an additional deemed distribution, but it shall be taken into account in
determining the amount of the Participant’s outstanding indebtedness to the
Plan. 

		(b)		
The provisions of this Section (and the first sentence of Section 7.1) reflect
how Plan loans are intended to be administered for purposes of determining their
taxability under the Code. These provisions are not requirements for purposes of
the prohibited transaction rules of the Code and ERISA or for purposes of the
qualification rules of the Code. 

		(c)		
The determination of when a deemed distribution occurs under subsection (a)
shall be made by the Plan Administrator applying reasonable commercial
principles and with the object of providing adequate protection for the
Plan’s interest based on all the facts and circumstances. 

		(d)		
Plan loan repayments shall not be suspended for a Participant who is on a leave
of absence; provided, however, notwithstanding the above or any written
procedures issued by the Plan Administrator, Plan loan repayments shall be
suspended while a Participant is performing services in the uniformed services
as defined in Code §414(u)(4). 

	7.7		Additional
Rules.

			The Plan Administrator may establish rules and procedures regarding loans to
Participants which may be more restrictive than the rules and procedures set
forth in this Article VII. Any such rules and procedures must be in writing and
be applied on a uniform, nondiscriminatory basis. In addition, they shall be
deemed to be a part of the Plan for purposes of the loan regulations issued by
the Department of Labor

ARTICLE VIII
- DISTRIBUTIONS

	8.1		
Eligibility for Distribution Upon Separation From Service.

			
A Participant who Separates from Service shall be entitled to receive a lump sum
distribution of the vested portion of his or her Account. Subject to the cashout
rules in Section 8.8, the Participant may elect to defer receipt of the lump sum
distribution until the April 1st following the calendar year he or she attains
age 701⁄2.

	8.2		
Distributions Upon Retirement or Disability.

		(a)		
A Participant who incurs a Disability or has attained his or her Retirement
shall be entitled to receive a distribution of 100% of his or her Account.
Subject to the cashout rules in Section 8.8: 

		(1)		
Such Participant may elect to receive his or her Account in a lump sum or in
variable annual, quarterly or monthly installments over a period of years
ranging from 1 year to the Participant’s life expectancy in whole years
(referred to as “periodic installments”); and

		(2)		
The Participant may elect to defer commencement of periodic installments until
the April 1st following the calendar year he or she attains age 701⁄2. 

		
If such Participant elects to receive a distribution in periodic installments, the
Participant shall designate the period (annual, quarterly or monthly), and the
amount distributed each period shall be an amount determined by multiplying the
value of the Participant’s Account by a fraction, the numerator of which is
one and the denominator of which is the total number of periodic installments
yet unpaid (but such distribution shall not be less than is required to be
distributed under Code § 401(a)(9)). A Participant who elects to receive
periodic installments or to defer commencement of a distribution may revoke such
election at any time and in lieu thereof elect to receive a current lump sum
distribution of the balance of his or her Account.

		(b)		
A Participant who (i) has attained his or her Retirement (a “Retiree”)
or has incurred a Disability and (ii) has not elected to receive a distribution
as provided in subsection (a) may elect up to two times per calendar year to
receive a distribution of a portion of his or her Account. Such a partial
distribution may be requested by contacting the Participant Response System and
following the procedures set forth by the Plan Administrator for this purpose
from time to time. 

		
The right to commence a distribution under subsection (a) shall be independent of
the right to take a partial distribution under subsection (b). Accordingly,
Participants who have taken two distributions in a calendar year under
subsection (b) may choose to commence the complete distribution of his or her
remaining Account balance under subsection (a) during the same calendar year
(either as a single lump sum or in periodic installments).

	8.3		Installment Option Before January 1, 2003 for Certain Employees.

		(a)		
This Section 8.3 only applies to Participants who are qualified under this
Section, and who elect a distribution under this Section that has a scheduled
commencement date prior to January 1, 2003. 

		(b)		
A Participant who (i) Separates from Service before attaining age 55, (ii) has
not incurred a Disability, (iii) was a member of the Seagram Plan and had his
account balance under the Seagram Plan transferred to the Pre-Spinoff Plan (and
then this Plan pursuant to the Spinoff) in connection with the acquisition of
Tropicana, and (iv) at the time of his termination of employment with the
PepsiCo Organization has attained age 50 and completed 20 Years of Vesting
Service or completed 25 Years of Vesting Service and the sum of his years of age
and Years of Vesting Service equal at least 80, may elect to receive that
portion of his Accounts credited as of August 25, 1998 under the Seagram Plan in
the form of variable periodic installments (determined in the same manner as
described in Section 8.2). The remainder of the Participant’s Account shall
be paid in one lump sum. 

	8.4		
Distribution Upon Death.

		(a)		
Except as otherwise provided in Section 8.4(b), if a Participant dies prior to
the time distribution of his or her Account has commenced, 100% of the
Participant’s Account shall be paid to his or her Beneficiary in one lump
sum following notice to the Plan Administrator of the Participant’s death. 

		(b)		
Subject to the cashout rules in Section 8.8 and the provisions of Code §
401(a)(9), the Participant’s Beneficiary (who is not a Surviving Spouse)
may elect within 30 days of when the Plan notifies the Beneficiary that he or
she is recognized as a Beneficiary (or such later time as the Plan Administrator
shall prescribe) to defer receipt of a lump sum distribution until the fifth
anniversary of the Participant’s death. If the Beneficiary is the
Participant’s Surviving Spouse, then the Beneficiary may elect (within the
period of time described in the sentence above) either to defer receipt of a
lump sum distribution or the commencement of periodic installment payments
(under the provisions of Section 8.2(a)) until the April 1st following the date
the Participant would have attained age 70-1/2. A Surviving Spouse who has
elected to defer the receipt of a lump sum distribution and the commencement of
periodic installments pursuant to the prior sentence shall be eligible to take
up to two partial distributions per calendar year from his or her Account
pursuant to the terms and conditions of Section 8.2(b). Further, if a Surviving
Spouse elects to receive periodic installment payments, such payments may not be
paid over a period that is longer than his or her life expectancy. A Beneficiary
who elects to receive periodic installments or to defer the receipt of a
distribution may revoke such election at any time and in lieu thereof elect to
receive a lump sum distribution of the balance of his or her Account. 

		(c)		
If a Participant dies after distribution of his or her Account has commenced,
the remaining portion of such Participant’s Account shall be distributed to
the Participant’s Beneficiary no less rapidly than under the form of
distribution elected by the Participant; provided, that the Beneficiary
may, by submitting a request to the Plan Administrator through the Participant
Response System, elect to receive all or a portion of the distribution or the
remainder thereof in a lump sum. 

		(d)		
The Plan Administrator may require and rely upon such proof of death and such
evidence of the right of any Beneficiary or other person to receive the value of
a deceased Participant’s Account as the Plan Administrator may deem proper
and its determination of death and of the right of that Beneficiary or other
person to receive payment shall be conclusive. 

	8.5		
Commencement of Payments.

		(a)		General  Time of  Commencement.  Subject to the  remaining  provisions  of this  Section,  following a  Participant's
Separation from Service,  the distribution of the  Participant's  Account shall commence as soon as practicable after
the earlier of:

		(i)		
The receipt of a distribution request from the Participant (or his or her
Beneficiary, in the case of a distribution at death) that meets all the
requirements applied by the Plan Administrator (including any requirement for
Participant consent applicable under subsection (b)); or 

		(ii)		
In the case of a distribution that is made pursuant to the cashout rules of
Section 8.8, as soon as practicable following the quarterly review date
applicable under Section 8.8.  

		
Participants may request a distribution by contacting the Participant Response System and
submitting a request that complies with guidelines established by the Plan
Administrator. If a Participant has a Separation from Service and again becomes
an Employee prior to the date the distribution is deemed to be processed by the
Plan’s current recordkeeper, the Participant shall not receive a
distribution.

		(b)		Participant Consent.

		(i)		
Participant consent is a pre-condition for commencing distributions unless the
distribution is made: (A) pursuant to the cashout rules of Section 8.8, (B) in
connection with a Participant’s death, or (C) pursuant to the Code §
401(a)(9) requirements of subsection (d) below 

		(ii)		Except as provided in paragraph (iii) below, a Participant's  consent to receive a distribution shall not be
valid unless the  Participant  gives consent:  (A) after the  Participant  has received the notice  required
under Treas.  Reg.ss. 1.411(a)-11(c),  and  (B) within a reasonable  time before the  effective  date of the
commencement of the  distribution  as prescribed by such  regulations.  A Participant's  consent shall be in
 writing or, if authorized by the Plan  Administrator,  provided through an electronic  medium that meets the
requirements of Treas. Reg.ss.1.411(a)-11(f).

		(iii)		
Once a Participant or Beneficiary has made an appropriate distribution request
through the Participant Response System and the Plan Administrator has received
notice of the Participant’s death (if applicable), such distribution may
commence less than 30 days after the notice required under Treas. Reg. §
1.411(a)-11(c) is given, provided that: (A) the Plan Administrator clearly
informs the Participant that he or she has a right to a period of at least 30
days after receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution option), and
(B) the Participant, after receiving the notice, affirmatively elects a
distribution. 

		(c)		Code § 401(a)(14)  Provisions:  In the case of a Participant who has filed a claim to commence benefits in accordance
with applicable regulations under Code § 401(a)(14),  including Treas. Reg.ss.1.401(a)-14(a) thereof, distribution of
the  Participant's  interest  in the Plan shall  commence no later than the 60th day after the close of the latest of
the following:

		(i)		the Plan Year in which the Participant attains age 65,

		(ii)		
the Plan Year in which occurs the tenth anniversary of the date his
participation commenced, or 

		(iii)		
the Plan Year in which occurs the
Participant’s Separation from Service.

		(d)		
Code § 401(a)(9) Provisions. Notwithstanding anything in the Plan to
the contrary, the distribution of a Participant’s benefits hereunder shall
comply with Code § 401(a)(9) and any regulations that are effective
thereunder. In addition, the provisions of this subsection and any other
provisions of the Plan that reflect Code § 401(a)(9) override any other
distribution provisions in the Plan that are inconsistent with Code §
401(a)(9). 

		(i)		A Participant who is a Five-percent Owner must begin receiving
distributions from his or her Account no later than the April 1st following the calendar year in which the Participant attains
age 70-1/2. If a Participant who has attained age 70-1/2 elects to commence
receipt of his or her Account in periodic installments, the Plan Administrator
shall direct the Trustee to distribute to the Participant the greater of:
(i) the amount determined using the methodology set forth in Section 8.2,
or (ii) the amount required to be distributed under Code § 401(a)(9).

		(ii)		
In the event a Participant, other than a Participant described in paragraph (i)
above, is receiving payments while in service with the PepsiCo Organization
(because distributions commenced in accordance with the pre-1997 provisions of
Code § 401(a)(9)) the Participant may elect to suspend payments while he or
she remains in service in accordance with such uniform rules as the Plan
Administrator shall adopt. 

		(iii)		
With respect to distributions under the Plan made for calendar years beginning
on or after January 1, 2002, the Plan will apply the minimum distribution
requirements of Code § 401(a)(9) in accordance with the regulations under
Code § 401(a)(9) that were proposed on January 17, 2001, notwithstanding
any provision of the Plan to the contrary. This shall continue in effect until
the end of the last calendar year beginning before the effective date of final
regulations under Code § 401(a)(9) or such other date as may be specified
in guidance published by the Internal Revenue Service. 

	8.6		Form of
Payment.

			Distributions shall be in one lump sum payment, except as otherwise provided in this Article
VIII. Further, all distributions shall be in cash, except as provided in
subsections (a) and (b) below with respect to a “qualified
Participant,” i.e., a Participant receiving a withdrawal under
Section 6.5 (relating to withdrawals after attaining age 59-1/2), a Participant
or Surviving Spouse receiving a partial distribution under Section 8.2(b)
(relating to partial distributions to certain retirees, Participants with
Disabilities and Surviving Spouses) or a lump sum distribution under this
Article VIII (other than a distribution subject to the cashout rules of Section
8.8). 

		(a)		A qualified Participant may elect to receive his entire interest in
the PepsiCo Common Stock Fund in whole shares of PepsiCo Common Stock (but with cash paid for any fractional shares, uninvested
cash or amounts invested for liquidity purposes).

		(b)		
A qualified Participant may elect to receive his entire interest in the
BrokerageLink in the form of those investments maintained for him or her under
the BrokerageLink at the time payment of the Participant’s distribution is
processed (but such a distribution shall be subject to procedures established by
the recordkeeper). 

		A qualified Participant may make an election under subsection (a) or (b), or under
both subsections (a) and (b). To be effective, any election under this Section
shall be made in the manner and form specified by the Plan Administrator from
time to time.

	8.7		Amount of
Distribution.

			The amount of any distribution to be made based on the value of a Participant’s
Account, or a portion thereof, shall be determined with reference to the value
of such Account (or portion thereof) as of the time the payment of the
distribution is processed.

	8.8		Cashout
Distributions.

			
If the vested portion of the Account of a Participant who has had a Separation from
Service does not exceed $5,000 on the date payment of the distribution is
processed, the Participant’s Account shall be distributed in a lump sum to
the Participant (or, if the Participant’s Separation from Service occurred
on account of the Participant’s death, to the Participant’s
Beneficiary); provided, however, this rule shall not apply to
Participants who are receiving installment distributions. The Plan recordkeeper
shall review the Account balances of Participants on a quarterly basis to make
this determination. In addition, the vested portion of a Participant’s
Account for purposes of the first sentence of this Section shall be determined
without regard to that portion of the Account that is attributable to Rollover
Contributions.

	8.9		Direct
Rollovers.

			A Participant (or an alternate payee or a Beneficiary that is the
Participant’s Surviving Spouse) may elect to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible Retirement Plan by
submitting a request through the Participant Response System.

	8.10		Qualified
Domestic Relations Orders.

			The
Plan Administrator shall establish reasonable procedures to determine the
qualified status of a domestic relations order in accordance with the
requirements of Code § 414(p) and ERISA § 206(d). An alternate payee
under a qualified domestic relations order may receive a distribution from this
Plan prior to the date the Participant to whom the order relates attains the
earliest retirement age under the Plan, even if this precedes the
Participant’s Separation from Service. An alternate payee will be eligible
for periodic installments under Sections 8.2 and 8.3 if the Participant would be
eligible for such installments by separating from service and receiving a payout
on the proposed distribution date selected by the alternate payee. For purposes
of Code § 401(a)(9), an alternate payee’s separate interest in the
Plan shall be distributed beginning not later than the Participant’s
required beginning date and shall be paid out based on the life expectancy of
the alternate payee.

	8.11		
Beneficiary Designation.

		(a)		
A Participant may from time to time designate a Beneficiary to receive the value
of his or her Account following the Participant’s death by properly
completing a Beneficiary Designation Form and filing it with the Plan
Administrator. Notwithstanding the preceding sentence, if a Participant dies
leaving a Surviving Spouse before the complete distribution of his or her
Account, the Participant’s Beneficiary shall be the Participant’s
Surviving Spouse, unless such Surviving Spouse has consented to the designation
of another Beneficiary (in a writing that acknowledges the effect of such
consent and that is: (A) witnessed by a notary public, (B) for consents executed
before the Effective Date, before a Plan representative, or (C) as otherwise
provided by applicable law and permitted by the Plan Administrator)
provided, the Spouse’s consent shall not be required if: 

		(i)		The
Plan Administrator is unable to locate the Participant’s Spouse; 

		(ii)		The
Participant is legally separated or the spouse has abandoned the Participant and
the Participant has a court order to that effect; or 

		(iii)		
Other circumstances exist under which the Secretary of the Treasury will excuse
the consent requirement.  

		
If the Participant’s Spouse is legally incompetent
to give consent, the Spouse’s legal guardian may give consent (even if the
Participant is the legal guardian). Consent by a Spouse, or establishment that a
Spouse’s consent cannot be obtained, shall only be effective with respect
to such individual Spouse.

		(b)		
If a Participant does not have a Beneficiary or if the Beneficiary predeceases
the Participant, then the Plan Administrator shall direct the Trustee to pay the
Participant’s Account to the Participant’s estate. 

		(c)		
If the Beneficiary survives the Participant, but dies prior to the complete
distribution of the Participant’s Account, the Plan Administrator shall
direct the Trustee to pay the amounts remaining in the Participant’s
Account to the Beneficiary’s estate (unless the Plan Administrator
establishes written rules that allow a Beneficiary to name another Beneficiary,
in which case amounts remaining in the Participant’s Account shall be paid
to such Beneficiary if so designated through a Beneficiary Designation Form). 

		(d)		
If the Plan Administrator, after reasonable inquiry, is unable within one year
to determine whether or not any designated Beneficiary survived the event that
entitled him or her to receive a distribution of any benefit under the Plan, the
Plan Administrator shall conclusively presume that such Beneficiary died prior
to the date he or she was entitled to a distribution. 

		(e)		If the Participant  designates  more than one Beneficiary  (whether such  individuals  are primary  Beneficiaries  or
contingent Beneficiaries), the following rules shall apply regarding distributions:

		(i)		If  the  Participant  has  designated  one  or  more  primary  Beneficiaries  and  one  or  more  contingent
Beneficiaries, no contingent Beneficiary shall be entitled to any portion of a distribution if
the Participant is survived by any person designated as a primary Beneficiary.

		(ii)		
If the Participant has designated two primary Beneficiaries and only one of the
primary Beneficiaries survives the Participant, the surviving primary
Beneficiary shall be entitled to 100% of the Participant’s Account upon the
death of the Participant, regardless of whether any contingent Beneficiaries
have been designated. 

		(iii)		
If the Participant designates three or more primary Beneficiaries, and any of
the primary Beneficiaries predecease the Participant, then upon the death of the
Participant: 

		(A)		in the case where the Beneficiary Designation Form used to
designate the Beneficiaries states that the surviving primary Beneficiaries shall share equally in the portion of the
Account that would have been allocated to the deceased primary Beneficiary, then
the Beneficiary Designation Form shall govern, and

		(B)		
in all other cases, the deceased primary Beneficiary’s share of the
Participant’s Account shall be allocated to the surviving primary
Beneficiaries in a pro rata fashion based upon the allocations made to the
surviving primary Beneficiaries. For example, if primary Beneficiaries A, B, and
C have been allocated 60%, 20%, and 20% of the Participant’s Account,
respectively, and C predeceases the Participant, then A and B shall be entitled
to 75% and 25% of the Account, respectively.

		
If all primary Beneficiaries predecease the Participant and contingent
Beneficiaries have been designated, then the rules in paragraphs (ii) and (iii)
above shall apply with respect to allocating the Participant’s Account
among the contingent Beneficiaries.

	8.12		
Incompetent or Lost Distributee.

		(a)		
If the Plan Administrator determines that a Participant or Beneficiary entitled
to a distribution hereunder is unable to care for his or her affairs because of
illness or accident or because he or she is a minor, then, unless a claim is
made for the benefit by a duly appointed legal representative, the Plan
Administrator may direct that such distribution be paid to such
distributee’s spouse, child, parent or other blood relative, or to a person
with whom such distributee resides. Any such payment, when made, shall be a
complete discharge of the liabilities of the Plan therefore. 

		(b)		
In the event that the Plan Administrator, after reasonable and diligent effort,
cannot locate any person to whom a payment or distribution is due under the
Plan, and no other distributee has become entitled to such distribution pursuant
to any provision of the Plan, the Participant’s Account in respect of which
such payment or distribution is to be made shall be forfeited six months after
the date in which such payment or distribution first becomes due or such later
date as the Plan Administrator prescribes (but in all events prior to the time
such Account would otherwise escheat under any applicable State law);
provided, however, that any Account so forfeited shall be
reinstated, in accordance with subsection (e) of this Section, if such person
subsequently makes a valid claim for such benefit.

		(c)		
The Plan Administrator shall be deemed to have made a reasonable and diligent
effort to locate a person if it has sent notification describing the relative
values of the optional forms of benefit available under the Plan (including any
right to defer such distribution) and the risk of forfeiture of such benefit by
certified or registered mail to the last known address of such person. 

		(d)		
If a Participant or Beneficiary whose Account is forfeited pursuant to
subsection (b) of this Section makes a valid claim for benefits, the Plan
Administrator shall restore the Participant’s Account to the same dollar
amount as the dollar amount forfeited, unadjusted for any gains or losses
occurring subsequent to the date of the forfeiture. Such amounts shall be
restored from the amount of forfeitures that the Employer would have otherwise
allocated to Participants. To the extent the amount of available forfeitures is
insufficient to enable the Plan Administrator to make the required restoration,
the Employer must contribute, without regard to any requirement or condition of
Articles XIII through XVI the additional amount necessary to enable the Plan
Administrator to make the required restoration.

		(e)		
Accounts restored under this Section 8.12 shall be distributed no later than 60
days after the close of the Plan Year in which the Account is restored (provided
the Participant is not employed by the PepsiCo Organization at such time).

ARTICLE IX -
INVESTMENT OF THE TRUST

	9.1		Trust
Agreement.

			The
assets of the Plan shall be held in the Trust by one or more Trustees selected
by the Company and pursuant to the terms of a Trust Agreement. The Trust
Agreement shall provide that:

		(a)		Subject to Participants’ Investment
Elections and the terms of the Plan, the assets of the Trust shall be invested
and reinvested in such investments as either the Trustee or investment managers
appointed by the Investment Committee deem advisable from time to time; and

		(b)		
The Investment Committee has concurrent authority, exercisable at its sole
discretion, to direct the Trustee as to the sale or purchase of particular
assets. 

	9.2		
Appointment of Investment Managers.

			The Investment Committee shall have authority to appoint investment managers to
manage all or a portion of the Trust. Any investment manager appointed by the
Investment Committee shall be: 

		(a)		An investment adviser under the Investment
Advisers Act of 1940; 

		(b)		A bank as defined in the Investment Advisors Act of
1940; or 

		(c)		An insurance company qualified to perform investment management
services under the laws of more than one State, and must acknowledge in writing that it is a fiduciary with respect to the Plan.

	9.3		Investment
Manager Powers.

			Subject to the Investment Elections made by Participants and to the terms of the Plan
and the investment management agreement, an investment manager shall have the
power to invest and reinvest the Trust assets (including the authority to
acquire and dispose of Plan assets) for which it has been given discretionary
authority, as it deems advisable.

	9.4		Power to
Direct Investments.

			The Company retains no authority or responsibility over the management, acquisition
or disposition of Plan assets except with respect to the Company’s power to
select, retain and replace Trustees, investment managers and the Investment
Committee.

	9.5		Exclusive
Benefit Rule.

			Except
as otherwise provided in the Plan, no part of the corpus or income of the funds
of the Plan shall be used for, or diverted to, purposes other than for the
exclusive benefit of Participants and other persons entitled to benefits under
the Plan. No person shall have any interest in or right to any part of the
assets held under the Plan, or any right in, or to, any part of the assets held
under the Plan, except to the extent expressly provided by the Plan.

ARTICLE X -
PLAN ADMINISTRATION

	10.1		Allocation of Responsibility Among Fiduciaries for Plan and Trust Administration.

			The
Fiduciaries shall have only those specific powers, duties, responsibilities, and
obligations as are specifically given them under this Plan or the Trust
Agreement. The Plan Administrator shall have the sole responsibility for the
administration of the Plan, which responsibility is specifically described in
this Plan and the Trust Agreement, except where an agent is appointed to perform
administrative duties as specifically agreed to by the Plan Administrator and
the agent. Subject to Article IX, the Trustee shall have the sole responsibility
for the administration of the Trust and the management of the assets held under
the Trust as specifically provided in the Trust Agreement, except where an
investment manager has been appointed or as provided otherwise in the Trust
Agreement. Each Fiduciary warrants that any direction given, information
furnished, or action taken by it shall be in accordance with the provisions of
the Plan or the Trust Agreement, as the case may be, authorizing or providing
for such direction, information or action. Furthermore, each Fiduciary may rely
upon any direction, information or action of another Fiduciary as being proper
under this Plan or the Trust, and is not required under this Plan or the Trust
Agreement to inquire into the propriety of any direction, information or action.
It is intended under this Plan and the Trust Agreement that each Fiduciary shall
be responsible for the proper exercise of its own powers, duties,
responsibilities and obligations under this Plan and the Trust Agreement and
shall not be responsible for any act or failure to act of another Fiduciary. No
Fiduciary guarantees the Trust in any manner against investment loss or
depreciation in asset value.

	10.2		
Administration.

			The
Plan shall be administered by the Plan Administrator which may appoint or employ
individuals to assist in the administration of the Plan and which may appoint or
employ any other agents it deems advisable, including legal counsel, actuaries
and auditors to serve at the Plan Administrator’s direction. All usual and
reasonable expenses of maintaining, operating and administering the Plan and the
Trust, including the expenses of the Plan Administrator and the Trustee (and
their agents), shall be paid from the Trust (whether directly or by
reimbursement to the Company), except to the extent the Company or the Employer
pays such expenses and a final decision is made not to request reimbursement
from the Trust.

	10.3		Claims
Procedure.

		(a)		
Discretionary Authority. The Plan Administrator, or a party designated by
the Plan Administrator, shall have the exclusive discretionary authority to
construe and to interpret the Plan, to decide all questions of eligibility for
benefits and to determine the amount of such benefits, and its decisions on such
matters are final and conclusive. As a result, benefits under this Plan will be
paid only if the Plan Administrator decides in its discretion that the
Participant (or other claimant) is entitled to them. The Plan
Administrator’s discretionary authority is intended to be absolute, and in
any case where the extent of this discretion is in question, the Plan
Administrator is to be accorded the maximum discretion possible. Any exercise of
this discretionary authority shall be reviewed by a court under the arbitrary
and capricious standard (i.e., the abuse of discretion standard). 

		(b)		
Procedures for Claims. If, pursuant to the discretionary authority
provided for above, an assertion of any right to a benefit that is filed by or
on behalf of a Participant or Beneficiary is wholly or partially denied, the
Plan Administrator, or a party designated by the Plan Administrator, will
provide such claimant the claims review process described in this Subsection.
The Plan Administrator has the discretionary right to modify the claims process
described in this Section in any manner so long as the claims review process, as
modified, includes the steps described below: Within a 90-day response period
following the receipt of the claim by the Plan Administrator, the Plan
Administrator will provide a comprehensible written notice setting forth: 

		(i)		The specific reason or reasons for the denial;

		(ii)		Specific reference to pertinent Plan provisions on which the denial is based;

		(iii)		
A description of any additional material or information necessary for the
claimant to submit to perfect the claim and an explanation of why such material
or information is necessary; and

		(iv)		
A description of the claims review process (including the time limits applicable
to such process and a statement of the claimant’s right to bring a civil
action under ERISA following a further denial on review).

		
If the Plan Administrator determines that special circumstances require an
extension of time for processing the claim, it may extend the response period
from 90 to 180 days. If this occurs, written notice of the extension will be
furnished to the claimant before the end of the initial 90-day period,
indicating the special circumstances requiring the extension and the date by
which the Administrator expects to make the final decision. Further review of a
claim is available upon written request by the claimant to the Plan
Administrator within 60 days after receipt by the claimant of written notice of
the denial of the claim. Upon review, the Plan Administrator shall provide the
claimant a full and fair review of the claim, including the opportunity to
submit to the Plan Administrator written comments, documents, records and other
information relevant to the claim and the Plan Administrator’s review shall
take into account such comments, documents, records and information regardless
of whether it was submitted or considered at the initial determination. The
decision on review shall be made within 60 days after receipt of the request for
review, unless circumstances warrant an extension of time not to exceed an
additional 60 days. If this occurs, written notice of the extension will be
furnished to the claimant before the end of the initial 60-day period,
indicating the special circumstances requiring the extension and the date by
which the Plan Administrator expects to make the final decision. The final
decision shall be in writing and drafted in a manner calculated to be understood
by the claimant, and shall include the specific reasons for the decision with
references to the specific Plan provisions on which the decision is based.

		(c)		
Review in Court. Any claim referenced in this Section that is reviewed by
a court, arbitrator, or any other tribunal shall be reviewed solely on the basis
of the record before the Plan Administrator. In addition, any such review shall
be conditioned on the claimants having fully exhausted all rights under this
Section.

	10.4		Records
and Reports.

			The Plan Administrator shall exercise such authority and responsibility as it deems
appropriate in order to comply with ERISA and government regulations issued
thereunder relating to records of Participants’ service and benefits,
notifications to Participants; reports to, or registration with, the Internal
Revenue Service; reports to the Department of Labor; and such other documents
and reports as may be required by ERISA.

	10.5		
Administrative Powers and Duties.

			The
Plan Administrator shall have such powers and duties as may be necessary or
desirable to discharge its functions hereunder, including:

		(a)		To exercise its
discretionary authority to construe and interpret the Plan, decide all questions
of eligibility and determine the amount, manner and time of payment of any benefits hereunder;

		(b)		To prescribe procedures to be followed by Participants or Beneficiaries filing applications for benefits;

		(c)		To prepare and  distribute,  in such  manner as the Plan  Administrator  determines  to be  appropriate,  information
explaining the Plan;

		(d)		To receive from  employees and agents and from  Participants  such  information  as shall be necessary for the proper
administration of the Plan;

		(e)		To receive,  review and keep on file (as it deems  convenient or proper) reports of the financial  condition,  and of
                  the receipts and disbursements, of the Trust from the Trustee;

		(f)		
To appoint or employ individuals or other parties to assist in the
administration of the Plan and any other agents it deems advisable, including
accountants, actuaries and legal counsel (which may be legal counsel for the
Company); and 

		(g)		
To delegate to other persons or entities, or to designate or employ persons to
carry out any of the Plan Administrator’s fiduciary duties or
responsibilities or other functions under the Plan. 

	10.6		Rules and
Decisions.

			The
Plan Administrator may adopt such rules and procedures as it deems necessary,
desirable, or appropriate. To the extent practicable and as of any time, all
rules and decisions of the Plan Administrator shall be uniformly and
consistently applied to Participants in the same circumstances. When making a
determination or calculation, the Plan Administrator shall be entitled to rely
upon information furnished by a Participant or beneficiary, the legal counsel of
the Plan Administrator, or the Trustee.

	10.7		
Procedures.

			The
Plan Administrator shall keep all necessary records and forward all necessary
communications to the Trustee. The Plan Administrator may adopt such regulations
as it deems desirable for the administration of the Plan.

	10.8		
Authorization of Benefit Distributions.

			The
Plan Administrator shall issue directions to the Trustee concerning all benefits
which are to be paid from the Trust pursuant to the provisions of the Plan, and
shall warrant that all such directions are in accordance with this Plan.

	10.9		
Application and Forms for Distributions.

			The
Plan Administrator may require a Participant to complete and file with the Plan
Administrator an application for a distribution and all other forms (or other
methods for receiving information) approved by the Plan Administrator, and to
furnish all pertinent information requested by the Plan Administrator. The Plan
Administrator may rely upon all such information so furnished it, including the
Participant’s current mailing address, age and marital status.

ARTICLE XI -
AMENDMENT AND TERMINATION

	11.1		Amendment of
the Plan.

			The
Company shall have the right in its discretion at any time by instrument in
writing, duly executed, to modify, alter or amend this Plan in whole or in part.
However, except as permissible under the Code and ERISA, no amendment shall:

		(a)		
Reduce the amounts in any Participant’s Account because of forfeiture or
reduce the vested right or interest to which any Participant or Beneficiary is then entitled under this Plan;

		(b)		
Eliminate an optional form of benefit with respect to a Participant’s
Account as of the date of the amendment; 

		(c)		Cause or authorize any part of the
Trust Fund to revert or be refunded to the Employer, or 

		(d)		Cause any assets of
the Trust to be used for, or diverted to, purposes other than for the exclusive
benefit of Participants and their Beneficiaries (other than such part as is required to pay taxes and
expenses of administration).

		
To the extent permitted under the Code, the Company shall have the right to amend
the Plan at any time, retroactively or otherwise, in such respects and to such
extent as may be necessary to qualify it under existing and applicable laws and
regulations in order to make available to the Employers the tax benefits
associated with qualified plans, including the full deduction for tax purposes
of the Employer contributions made hereunder. A participating Employer shall not
have the right to amend the Plan. Notwithstanding any provision herein to the
contrary, the Company may by such amendment decrease or otherwise affect the
rights of Participants hereunder if, and to the extent, necessary to accomplish
such purpose.

	11.2		Right to
Terminate the Plan or Discontinue Contributions.

			
The Company reserves the right to terminate the Plan or completely discontinue
contributions under the Plan for any reason, at any time. Action taken by the
Company to terminate the Plan or discontinue contributions shall be in writing
and shall be effective as of the date set forth in such writing.

	11.3		Effect of
Termination or Discontinuance of Contributions.

			As
of the date of a complete termination of the Plan or the complete discontinuance
of contributions to the Plan, each Participant who is then an Employee shall
become 100% vested in his or her Account. Upon termination, all Accounts shall
be distributed to or for the benefit of the Participant or continued in trust
for his or her benefit, as the Plan Administrator shall direct. After
distribution of all Accounts under the Plan, any amounts remaining in the
suspense account established under Section 15.2(b) shall revert to the Employer,
as permitted by the Code.

	11.4		Effect of
a Partial Termination.

			As
of the date of a partial termination, each affected Participant who is then an
Employee shall become 100% vested in his or her Account and the Accounts of
Participants affected by the partial termination shall be distributed to or for
the benefit of such Participants or continued in trust for their benefit, as the
Plan Administrator shall direct.

	11.5		Plan
Merger.

			The
Company may not merge or consolidate the Plan with, or transfer any assets or
liabilities to, any other plan, unless each Participant would (if the Plan then
terminated) receive a benefit immediately after the merger, consolidation or
transfer, which is equal to or greater than the benefit he or she would have
been entitled to receive immediately before the merger, consolidation or
transfer if the Plan had then terminated.

	11.6		
Additional Participating Employers.

			With
the consent of the Plan Sponsor, any other corporation may become a
participating Employer under the Plan for the benefit of its Eligible Employees,
with such changes and variations in Plan terms as the Plan Sponsor approves. Any
such inclusion shall be contingent upon the Internal Revenue Service not making
a determination that it adversely affects the qualified status of the Plan and
Trust. A corporation that becomes a participating Employer under the Plan shall
compile and submit all information required by the Plan Sponsor with reference
to its Eligible Employees.

	11.7		
Withdrawal of a Participating Employer.

			A
participating Employer may withdraw from the Plan upon six month’s prior
written notice to the Plan Administrator (unless the Plan Administrator approves
a shorter notice period). If a participating Employer discontinues or suspends
contributions to the Plan upon behalf of its employees or if a participating
Employer shall become insolvent or bankrupt, or be dissolved, such participating
Employer shall be deemed to have withdrawn from the Plan (unless otherwise
provided by the Plan Sponsor). If a participating Employer ceases to be a member
of the PepsiCo Organization, such participating Employer shall only continue to
be a participating Employer to the extent expressly permitted by the Plan
Sponsor.

ARTICLE XII
- MISCELLANEOUS PROVISIONS

	12.1		Action by
the Company.

			Any
action by the Company, including any amendment authorized to be made under
Section 11.1, shall be made in accordance with procedures authorized by the
Company’s Board of Directors from time to time. In addition, any person or
persons authorized by the Board may take action on behalf of the Company. Any
action taken by any such person or persons shall be effective provided it is
executed in accordance with the authorization of the Board.

	12.2		No Right
to Be Retained in Employment.

			Nothing
contained in this Plan shall give any Participant or Employee the right to be
retained in the employment of the Employer or affect the right of any Employer
to dismiss any Participant or Employee.

	12.3		
Non-Alienation of Benefits.

		(a)		
In General. Except as provided in subsections (b) and (c) below, and to
the extent permitted by law, the right of any Participant or Beneficiary to any
benefit or to any payment hereunder shall not be subject in any manner to
anticipation, assignment, alienation, attachment, sale, transfer, pledge,
encumbrance, charge, garnishment, execution, levy or other legal, equitable, or
other process of any kind, either voluntary or involuntary, and any attempt to
anticipate, assign, alienate, attach, sell, transfer, pledge, encumber, charge,
garnish, execute, levy or otherwise dispose of any right to a benefit or payment
hereunder shall be void. The Trust shall not in any manner be liable for, or
subject to, the debts, contracts, liabilities, engagements or torts of any
person entitled to benefits hereunder. 

		(b)		
Qualified Domestic Relations Orders. Notwithstanding subsection (a)
above, payment of Plan benefits shall be made in accordance with a
“qualified domestic relations order” that meets the requirements of
Code § 414(p) and ERISA § 206(d), under the procedures developed in
accordance with Section 8.10. Neither the Plan, the Company, an Employer, the
Plan Administrator nor the Trustee shall be liable in any manner to any person,
including any Participant or Beneficiary, for complying with a domestic
relations order that is considered a qualified domestic relations order in
accordance with Code §414(p) and ERISA §206(d). 

		(c)		Crimes and Fiduciary  Violations.  The nonalienation  provisions set forth in subsection (a) above shall not apply in
the case of a Participant's liability to the Plan due to:

		(i)		The Participant's conviction of a crime involving the Plan;

		(ii)		
A judgment, consent order or decree entered by a court in an action for
violation of fiduciary standards; or 

		(iii)		A settlement agreement involving the
Department of Labor or Pension Benefits Guaranty Corporation in connection with a violation of fiduciary standards.

	12.4		
Requirement to Provide Information to Plan Administrator.

			
Prior to the time any amount shall be distributed under the Plan, a Participant or
other person entitled to benefits must file with the Plan Administrator such
information as the Plan Administrator shall require to establish his or her
rights and benefits under the Plan

	12.5		Source of
Benefit Payments.

			Benefits
provided under the Plan shall be paid or provided for solely from the Trust, and
neither the Company, an Employer, the Plan Administrator, the Trustee, or any
investment manager shall assume any liability therefor

	12.6		
Construction.

			The terms of this Plan shall be construed in accordance with this Section.

		(a)		References:  Singular  references may include the plural, and plural references may include the singular,  unless the
context clearly indicates to the contrary.

		(b)		
Compounds of the Word “Here”: The words “herein”,
“hereof”, “hereunder” and other similar compounds of the
word “here” shall mean and refer to the entire Plan, not to any
particular provision or section. 

		(c)		
Examples: Whenever an example is provided or the text uses the term
“including” followed by a specific item or items, or there is a
passage having similar effect, such passages of the Plan shall be construed as
if the phrase “without limitation” followed such example or term (or
otherwise applied to such passage in a manner that avoids limits on its breadth
of application). 

		(d)		
Effect of Specific References: Specific references in the Plan to the
Plan Administrator’s discretion shall create no inference that the Plan
Administrator’s discretion in any other respect, or in connection with any
other provisions, is less complete or broad. 

		(e)		
Subdivisions of the Plan Document: This Plan document is divided and
subdivided using the following progression: articles, sections, subsections,
paragraphs and subparagraphs. Articles are designated by capital roman numerals.
Sections are designated by Arabic numerals containing a decimal point.
Subsections are designated by lower-case letters in parentheses. Paragraphs are
designated by lower-case roman numerals. Subparagraphs are designated by
upper-case letters in parentheses. Any reference in a section to a subsection
(with no accompanying section reference) shall be read as a reference to the
subsection with the specified designation contained in that same section. A
similar reading shall apply with respect to paragraph references within a
subsection and subparagraph references within a paragraph.  

		(f)		Invalid  Provisions:  If any  provision of this Plan is, or is hereafter  declared to be void,  voidable,  invalid or
otherwise unlawful, the remainder of the Plan shall not be affected thereby. 

		(g)		
Interpreting Article XI: In all circumstances, the provisions of Article
XI shall be interpreted in the manner which imposes the least limitation on the
Company’s claimed right of amendment. In this regard, it is specifically
intended that any ambiguities in the Plan are to be resolved in the manner which
minimizes the limitation on any right of amendment that is claimed directly or
indirectly against one or more Employees or Participants. Notwithstanding any
other provision of the Plan, it is expressly permissible for the Company to
clarify the terms of this document, even retroactively, by an amendment
accomplishing a good faith correction of any typographical error or inadvertent
scrivener’s error. 

	12.7		Governing
Law.

			The
Plan is intended to qualify under Code §§ 401(a) and 401(k) and to
comply with ERISA and shall be construed and interpreted in a manner consistent
with the requirements of these laws. The Plan and the rights of all persons
under the Plan shall be further construed and administered in accordance with
the laws of the State of New York, in the event that ERISA does not preempt
state law in a particular circumstance.

ARTICLE XIII
- LIMITATION ON PRE-TAX CONTRIBUTIONS

	13.1		Code § 402(g) Limitation on Pre-tax Contributions.

			An
Employee’s Pre-tax Contributions plus elective deferrals made under any
other Plan of the Employer for a calendar year may not exceed:

		(a)		
As of the Effective Date, $11,000; and 

		(b)		
Notwithstanding the above, such higher amount
as may permissibly apply for a Plan Year pursuant to Code §402(g);

		
provided, however, an Employee’s Pre-Tax Contributions may
include such higher dollar amounts to the extent permitted under Section 3.2(c)
and Code § 414(v).

	13.2		Treatment
of Excess Deferrals.

		(a)		
If, during the Plan Year, the Plan Administrator determines that continued
contribution of Pre-tax Contributions for the Plan Year on behalf of an Employee
would exceed the Code § 402(g) limitation, the Employer shall not make any
additional Pre-tax Contributions with respect to such Employee for the remainder
of that Plan Year. 

		(b)		
If, during the Plan Year, the Plan Administrator determines that Pre-tax
Contributions made on behalf of an Employee exceed the Code § 402(g)
limitation, the Plan Administrator shall distribute the amount of such Excess
Deferral, adjusted for allocable income and losses, no later than the April 15th
following the Plan Year in which such Excess Deferrals were made. If the amount
of such Excess Deferrals are not distributed within the time period provided in
the prior sentence, the amount of the Excess Deferrals shall be treated as
Annual Additions under Section 15.1(a). 

		(c)		
The Plan Administrator shall reduce the amount of Excess Deferrals for a Plan
Year distributable to the Employee by the amount of Excess Contributions if any,
previously distributed to the Employee with respect to the Plan Year for which
such Excess Deferrals and Excess Contributions were made. 

		(d)		
Excess Deferrals shall be adjusted for any income or loss for the taxable year
to which they relate, using either the method in Treas. Reg. §
1.402(g)-1(e)(5)(iii) or any other reasonable method for computing the income or
loss allocable to Excess Deferrals; provided such other reasonable method
is used consistently for all Participants and for all corrective distributions
under the Plan for the Plan Year, and is used by the Plan for allocating income
or loss to Participants’ accounts. Income or loss allocable to the period
between the end of the taxable year and the date of distribution shall be
disregarded in determining income or loss. 

	13.3		
Coordination With Other Arrangements In Which Salary Is Deferred.

			If
an Employee participates in another plan under which he or she makes elective
deferrals pursuant to a Code § 401(k) arrangement, elective deferrals under
a simplified employee pension, or salary reduction contributions to a
tax-sheltered annuity, he or she may submit a request to the Plan Administrator
through the Participant Response System for Excess Deferrals made to this Plan
with respect to the calendar year. Any such claim must be submitted by the
Employee no later than the March 1st following the close of the particular
calendar year in which such elective deferrals were made and must specify the
amount of the Employee’s Pre-tax Contributions under this Plan which are
Excess Deferrals. If the Plan Administrator receives a timely claim, it shall
distribute the Excess Deferrals the Employee has assigned to this Plan (as
adjusted for allocable income or loss), in accordance with Section 13.2.

ARTICLE XIV
- NONDISCRIMINATION RULES

	14.1		
Definitions Applicable to the Nondiscrimination Rules.

			For purposes of this Article XIV, the following terms when capitalized and used in
this Article XIV shall have the meaning ascribed to them in this Section 14.1.

		(a)		
“Actual Deferral Percentage” means the ratio (expressed as
a percentage) of Pre-tax Contributions made on behalf of
an Eligible Employee for the Plan Year to the Eligible Employee’s Compensation
for the Plan Year. A Non-highly Compensated Employee’s Actual Deferral
Percentage does not include elective deferrals made to this Plan or to any other
Plan maintained by the Employer, to the extent such Pre-tax Contributions exceed
the limitation on Pre-tax Contributions set forth in Article XIII. However, a
Highly Compensated Employee’s Actual Deferral Percentage does include
elective deferrals made to this Plan or to any other Plan maintained by the
Employer, to the extent such Pre-tax Contributions exceed the limitation on
Pre-tax Contributions set forth in Article XIII.

		(b)		
“Average Actual Deferral Percentage” means, for any group of
Eligible Employees who are Participants or eligible to be Participants, the
average (expressed as a percentage) of the Actual Deferral Percentages for each
of the Eligible Employees in that group, including those for whom no Pre-tax
Contributions were made.

		If the Plan Administrator elects to: (i) calculate the Average Actual Deferral
Percentage for Employees who have not met the minimum age and service
requirements of Code § 410(a)(1)(A) separately for coverage pursuant to
Code § 410(b)(4)(B), and (ii) exclude from the Average Actual Deferral
Percentage calculation all Non-highly Compensated Employees who have not met
such minimum age and service requirements pursuant to Code § 401(k)(3)(F),
the Plan is not required to use the same method for crediting service
(e.g., elapsed time or actual counting of hours) for both of these tests.

	14.2		Actual
Deferral Percentage Test.

		(a)		With respect to each Plan Year, the Average Actual Deferral  Percentage for Eligible  Employees who are  Participants
or eligible to be Participants must satisfy one of the following tests:

		(i)		The  Average  Actual  Deferral  Percentage  for the  Plan  Year for  Highly  Compensated  Employees  who are
Participants or eligible to be Participants for the Plan Year shall not exceed the Average
Actual Deferral Percentage for the preceding Plan Year for Non-highly
Compensated Employees who are Participants or eligible to be Participants for
the preceding Plan Year multiplied by 1.25; or

		(ii)		
The Average Actual Deferral Percentage for the Plan Year for Highly Compensated
Employees who are Participants or eligible to be Participants for the Plan Year
shall not exceed the Average Actual Deferral Percentage for the preceding Plan
Year for Non-highly Compensated Employees who are Participants or eligible to be
Participants for the preceding Plan Year multiplied by two; provided that the
Average Actual Deferral Percentage for such Highly Compensated Employees does
not exceed the Average Actual Deferral Percentage for such Non-highly
Compensated Employees by more than two percentage points. 

		(b)		
The Plan Administrator may elect to calculate the Average Actual Deferral
Percentage in subsection (a) pursuant to Code § 401(k)(3)(F) by excluding
the Non-highly Compensated Employees who have not met the minimum age and
service requirements of Code section 410(a)(1)(A). 

		(c)		
The portion of the Plan that covers collectively bargained Employees shall be
tested separately under subsection (a) from the portion of the Plan that covers
other Employees, except that the Plan Administrator may elect to test
collectively bargained Employees – (1) separately by each collective
bargaining unit, (2) by aggregating collective bargaining units into two or more
groups, on a basis that is reasonable and reasonably consistent from Plan Year
to Plan Year, or (3) by a combination of these methods.

		Notwithstanding the above, the Employer may elect to use the Average Actual Deferral Percentage
for Non-highly Compensated Employees for the Plan Year being tested rather than
the preceding Plan Year provided such election must be evidenced by a Plan
amendment and once made may not be changed except as provided by the Secretary
of the Treasury.

	14.3		More Than One Employer-Sponsored Plan Subject to the ADP Test.

			For purposes of this Article XIV, the Actual Deferral Percentage for any Highly
Compensated Employee who is a participant under two or more arrangements
described in Code § 401(k) sponsored by any employer within the PepsiCo
Organization shall be determined as if all such arrangements (other than
arrangements that may not be aggregated under applicable regulations) were one
Code § 401(k) arrangement. If the Code § 401(k) arrangements in which
the Highly Compensated Employee participates have different plan years, the
aggregate Actual Deferral Percentage shall be determined by counting the
deferrals made to such arrangements in the plan years ending in the same
calendar year.

	14.4		
Recharacterization of Pre-tax Contributions.

			If
Excess Contributions have been made on behalf of a Highly Compensated Employee
for the Plan Year, the Plan Administrator may recharacterize the Excess
Contributions as After-tax Contributions (or voluntary contributions under
another qualified plan if such plan has the same plan year), provided such
recharacterization occurs within 2-1/2 months of the Plan Year being tested. All
such recharacterized contributions shall be subject to the same requirements and
limitations that apply to Pre-tax Contributions hereunder, in accordance with
the rules set forth in Treas. Reg. § 1.401(k)-1(f)(3)(ii), including all
distribution limitations, vesting requirements, funding requirements,
contribution limitations and top-heavy rules. The Plan Administrator may not
include Pre-tax Contributions (or other elective deferrals) in the Actual
Contribution Percentage test, unless the Plan which includes the Pre-tax
Contributions (or other elective deferrals) satisfies the Actual Deferral
Percentage test both with and without the recharacterized Excess Deferrals
included in the Actual Contribution Percentage test.

	14.5		Treatment
of Excess Contributions.

		(a)		
Excess Contributions (adjusted for allocable income or loss) which are not
recharacterized in accordance with Section 14.4 shall be distributed to the
appropriate Highly Compensated Employee no later than 12 months after the close
of the Plan Year in which such Excess Contribution arose. To the extent deemed
administratively possible and otherwise advisable by the Plan Administrator,
Excess Contributions shall be distributed within 2-1/2 months after the close of
the Plan Year in which such Excess Contributions arose, so as to avoid the
imposition of an excise tax.

		(b)		
Excess Contributions shall be adjusted for any income or loss for the taxable
year to which they relate, using either the method in Treas. Reg. §
1.401(k)-1(f)(4)(ii)(C) or any other reasonable method for computing the income
or loss allocable to Excess Contributions; provided such other reasonable
method is used consistently for all Participants and for all corrective
distributions under the Plan for the Plan Year, and is used by the Plan for
allocating income or loss to Participants’ accounts. Income or loss
allocable to the period between the end of the taxable year and the date of
distribution shall be disregarded in determining income or loss. 

		(c)		
In calculating the amount of Excess Contributions to be distributed, such amount
shall be determined by calculating the amount of Pre-tax Contributions that
would have to be distributed in order for the Plan to pass the Actual Deferral
Percentage test if, hypothetically, Pre-tax Contributions were distributed to
Highly Compensated Employees in order of the Actual Deferral Percentages
beginning with the highest of such percentages. However, after such amount has
been determined, Excess Contributions shall in fact be distributed to Highly
Compensated Employees on the basis of the amount of Pre-tax Contributions by, or
on behalf of, each of such Highly Compensated Employee in order of the amount of
Pre-tax Contributions for each such Highly Compensated Employee, beginning with
the highest of such amounts. 

	14.6		QNECs.

			The
Plan Administrator may determine the Actual Deferral Percentages of Eligible
Employees by taking into account QNECs and may determine the Actual Contribution
Percentages of Eligible Employees by taking into account QNECs (other than QNECs
used in the Actual Deferral Percentage test) made to this Plan or to any other
qualified Plan maintained by the Employer provided that each of the following
requirements are met:

		(a)		
The amount of Nonelective Contributions, including those QNECs treated as
Pre-tax Contributions for purposes of the Actual Deferral Percentage Test,
satisfies Code § 401(a)(4).

		(b)		
The amount of Nonelective Contributions, including those QNECs treated as
Pre-tax Contributions for purposes of the Actual Deferral Percentage Test and
those QNECs treated as Matching Contributions for purposes of the Actual
Contribution Test, satisfies Code § 401(a)(4). 

		(c)		
The QNECs are (i) allocated to the QNECs Account of Eligible Employees who are
Participants as of a date within the Plan Year; (ii) not contingent upon the
Eligible Employee’s continued participation in the Plan subsequent to the
date of the allocation; and (iii) made to the Trust no later than the 12 month
period immediately following the Plan Year to which such contribution relates. 

		(d)		
The Plan Administrator may not include in the Actual Deferral Percentage test
any QNECs under another qualified plan unless that plan has the same plan year
as this Plan.

		(e)		
If, pursuant to this Section, the Plan Administrator has elected to include
QNECs in calculating the Average Actual Deferral Percentage, the Plan
Administrator shall first treat Excess Contributions as attributable
proportionately to Pre-tax Contributions. If the total amount of a Highly
Compensated Employee’s Excess Contributions for the Plan Year exceeds the
Employee’s Pre-tax Contributions, if any, for the Plan Year, the Plan
Administrator shall next treat the remaining portion of his Excess Contributions
as attributable to QNECs, if any. 

		(f)		
The Plan Administrator shall reduce the amount of Excess Contributions for a
Plan Year distributable to a Highly Compensated Employee by the amount of Excess
Deferrals if any, previously distributed to that Employee for the
Employee’s taxable year ending in that Plan Year.  

	14.7		Required Plan Aggregation for Purposes of the ADP Test.

			If
the Employer treats two or more plans as a unit for coverage or
nondiscrimination purposes, the Employer must combine the Code § 401(k)
arrangements for purposes of determining whether each such arrangement satisfies
the Actual Deferral Percentage test and must combine the arrangements under
which matching contributions or Employee contributions are made;
provided, however, that aggregation shall not be required with
respect to arrangements within plans with different plan years; and
provided, further, that an employee stock ownership plan (or the
employee stock ownership plan portion of a plan) shall not be aggregated with a
non-employee stock ownership plan (or non-employee stock ownership plan portion
of a plan).

	14.8		Required Plan Disaggregation for Purposes of the ADP Test.

			If
the Employer operates qualified separate lines of business under Code §
414(r), then to the extent required by law the Employer will disaggregate the
Code § 401(k) arrangements for each Separate Line of Business for purposes
of determining whether each such arrangement satisfies the Actual Deferral
Percentage Test and will disaggregate the arrangements under which employee
contributions are made with respect to each such Separate Line of Business.

ARTICLE XV -
CODE § 415 LIMITATION

	15.1		Definitions Applicable to the Code §415 Limitation.

			For
purposes of this Article XV, the following terms when capitalized and used in
this Article XV shall have the meaning ascribed to them in this Section 15.1.

		(a)		“Annual Additions” means the sum credited to a Participant
for any Limitation Year of (i) Employer contributions, (ii)
Employee contributions, (iii) forfeitures, (iv) amounts allocated to an
individual medical account (as defined in Code § 415(l)(2)), which is part
of a pension or annuity plan maintained by any 415 Affiliate and (v) amounts
derived from contributions that are attributable to post-retirement medical
benefits allocated to the separate account of a key employee (as defined in Code
§ 419A(d)(3)) under a welfare benefit fund (as defined in Code §
419(e)) maintained by any 415 Affiliate. The term Annual Additions shall not
include Rollover Contributions made to the Plan or amounts restored or repaid to
the Plan in accordance with Code §§ 411(a)(7)(B) and (C) and Article V
of the Plan. Except to the extent provided in the Code and Treasury regulations,
Annual Additions include Excess Contributions regardless of whether the Plan
distributes or forfeits such excess amounts. Excess Deferrals are not Annual
Additions unless distributed after the April 15th following the Plan Year in
which such Excess Deferrals were made.

		(b)		
“Defined Contribution Plan” means any plan of the type defined
in Code §414(i) maintained by any 415 Affiliate which is described in Code
§415(k)(1). 

		(c)		
“415 Affiliate” means a member of the PepsiCo Organization, as
defined in Section 1.43; provided, however, that for purposes of
determining whether a corporation is a member of a “controlled group of
corporations” (within the meaning of Code § 414(b) of which the
Company is also a member) the phrase “more than 50 percent” shall be
substituted for the phrase “at least 80 percent” wherever the latter
phrase appears in Code § 1563(a)(1).

		(d)		
“415 Compensation” means Compensation, including (to the extent
not otherwise included) elective contributions that are made by an Employer that
are not includible in gross income under Code §§ 125, 402(e)(3) and
132(f)(4). 

		(e)		"Limitation Year" means the Plan Year.

	15.2		Code §415 Limitation on Annual Additions.

		(a)		
Notwithstanding any other provision of the Plan to the contrary, except to the
extent permitted under Section 3.2(c) and Code § 414(v), Annual Additions
credited under the Plan and all other Defined Contribution Plans maintained by
any 415 Affiliate with respect to each Participant for any Limitation Year shall
not exceed the lesser of: 

		(i)		 (A) As of the Effective Date, $40,000; and
(B) notwithstanding the preceding, such higher amount as may be
determined  from time to time and  announced  by the  Secretary of the  Treasury in  accordance  with Code §
415(d), or

		(ii)		As of the Effective Date, 100% of the Participant's 415 Compensation for such Limitation Year.

		(b)		If the Plan  Administrator  determines  during a Plan Year that a Participant will likely exceed the limit imposed by
Section 15.2(a) (assuming that a Participant’s Contribution Election remains in
effect for the remainder of the Limitation Year, and based on the Plan
Administrator’s estimate of a Participant’s 415 Compensation for the
Limitation Year), the Plan Administrator may reduce or eliminate the
Participant’s unmatched Pre-tax Contributions. If an allocation of Employer
contributions would result in an Excess Annual Addition to the
Participant’s Account (other than an Excess Annual Addition which results
from the application of the nondiscrimination rules under Article XIV), the Plan
Administrator may reallocate the Excess Annual Addition to the remaining
Participants who are eligible for an allocation of Employer contributions for
the Plan Year in which the Limitation Year ends. The Plan Administrator shall
reallocate the Excess Annual Additions pursuant to the allocation method under
the Plan as if the Participant whose Account otherwise would receive such Excess
Annual Addition were not eligible for an allocation of Employer contributions.
As soon as administratively feasible after the end of the Plan Year, the Plan
Administrator shall determine the actual limit which should have applied to the
Participant under Section 15.2(a) based on the Participant’s actual 415
Compensation for such Limitation Year.

		
If after the end of a Plan Year, the Plan Administrator determines that the Annual
Additions credited under the Plan with respect to a Participant for any
Limitation Year exceed the limitations of Section 15.2(a) as a result of (i) the
allocation of forfeitures, (ii) a reasonable error in estimating the
Participant’s 415 Compensation for the Limitation Year, (iii) a reasonable
error in determining the amount of Pre-tax Contributions that the Participant
may contribute or (iv) any other circumstance permitted pursuant to the
regulations and rulings promulgated under Code § 415, then the amount of
contributions credited to the Participant’s Accounts in that Plan Year
shall be adjusted to the extent necessary to satisfy that limitation in
accordance with the following order of priority:

		(i)		
The Participant’s Pre-tax Contributions shall be reduced to the extent
necessary. The amount of the reduction shall be returned to the Participant,
together with any earnings on the contributions to be returned. 

		(ii)		
The Participant’s Employer contributions shall be forfeited and used to
reduce Employer contributions for the Participant for the next Limitation Year
(and succeeding Limitation Years, as necessary) if the Participant is covered by
the Plan at the end of the Limitation Year. If the Participant is not covered by
the Plan as of the end of the Limitation Year, then the excess Annual Additions
shall be held unallocated in a suspense account for the Limitation Year and
allocated and reallocated in the next Limitation Year to all of the remaining
Participants entitled to allocation of Contributions, but only to the extent
that such allocation or reallocation would not cause the Annual Additions to
such Participants to violate the limitations of Code § 415 for such
Limitation Year. If a suspense account is in existence at any time during a
Limitation Year, all amounts in the suspense account must be allocated or
reallocated before any Employer contributions or Employee contributions which
would constitute Annual Additions may be made to the Plan for the Limitation
Year (and succeeding Limitation Years, as necessary) in accordance with the
rules set forth in Treas. Reg. § 1.415-6(b)(6)(i). If a suspense account is
in effect, it shall not share in investment gains or losses. 

		(c)		
If a Participant also participates in any other Defined Contribution Plan which
is subject to the limitation set forth in Section 15.2(a) above and, as a
result, such limitation would be exceeded with respect to the Participant in any
Limitation Year, any reduction or other permissible method necessary to ensure
compliance with such limitation first shall be made under this Plan in
accordance with the terms hereof. If after such correction a further reduction
is necessary to ensure that the limitation set forth in Section 15.2(a) is not
exceeded, Annual Additions credited under such other plan or plans with respect
to the Participant shall be reduced in accordance with the provisions of such
plan or plans.

	15.3		
Applicable Regulations.

			
Notwithstanding
anything contained in this Article XV to the contrary, the Plan Administrator,
in its sole discretion, may determine the amounts required to be taken into
account under Article XV by such alternative methods as shall be permitted under
applicable regulations or rulings.

ARTICLE XVI
- TOP HEAVY PROVISIONS

	16.1		
Definitions Applicable to the Top Heavy Provisions.

			For
purposes of this Article XVI, the following terms when capitalized and used in
this Article XVI shall have the meaning ascribed to them in this Section 16.1.

		(a)		“Aggregation Group” means in the case of a Plan that is not
part of either a Required Aggregation Group or a Permissive Aggregation Group, the Employer. In the case of a Plan that is part of a
Required Aggregation Group but not part of a Permissive Aggregation Group, the
Required Aggregation Group. In the case of a Plan that is part of a Required
Aggregation Group and part of Permissive Aggregation Group, either the Required
Aggregation Group or the Permissive Aggregation Group, as determined by the Plan
Administrator.

		(b)		
“Determination Date” means, with respect to a Plan Year, the
last day of the preceding Plan Year or, in the case of the first Plan Year, the
last day of the Plan Year. 

		(c)		
“Key Employee” means, as of any Determination Date, any
Employee or former Employee (including any deceased Employee) who at any time
during the Plan Year that includes the Determination Date was: 

		(i)		an officer of the Employer having annual Compensation greater than $130,000 (as adjusted under
Code § 416(i)(1) for Plan Years beginning after December 31, 2002);

		(ii)		
a Five-percent Owner of the Employer; or

		(iii)		
a One-percent Owner of the Employer having annual Compensation of more than $150,000.

		
For purposes of this subsection (c), the term “Key Employee” shall also
include the Beneficiary of a Key Employee. The Plan Administrator shall
determine who is a Key Employee in accordance with Code § 416(i)(1) and the
applicable regulations and other guidance of general applicability issued
thereunder.

		(d)		"Non-Key Employee" means an Employee who is not a Key Employee.

		(e)		
“One-percent Owner” means with respect to a corporation, any
person who owns (or is considered as owning within the meaning of Code §
318) more than 1% of the outstanding stock of the corporation, or stock
possessing more than 1% of the total voting power of the corporation. 

		(f)		"Participant" includes an Eligible Employee of the Plan who does not participate in the Plan.

		(g)		
“Permissive Aggregation Group” means each plan in the Required
Aggregation Group and any other qualified plan or plans maintained by an
employer within the PepsiCo Organization if such group of plans, when considered
together, would meet the requirements of Code §§ 401(a)(4) and 410. 

		(h)		
“Required Aggregation Group” means, with respect to a Plan Year
for which a determination is being made, (i) this Plan, (ii) each other
qualified plan of an employer within the PepsiCo Organization in which at least
one Key Employee is a participant, and (iii) any other qualified plan of an
employer within the PepsiCo Organization which enables any plan described in
subparagraphs (i) and (ii) above to meet the requirements of Code §§
401(a)(4) or 410. 

		(i)		"Top Heavy Plan" means the Plan, if any of the following conditions exists:

		(i)		The Top Heavy Ratio for the Plan exceeds 60% and the Plan is not part of any Required  Aggregation  Group or
Permissive Aggregation Group;

		(ii)		
If the Plan is a part of a Required Aggregation Group but is not part of a
Permissive Aggregation Group, the Top Heavy Ratio for the Required Aggregation
Group exceeds 60%; 

		(iii)		
If the Plan is a part of a Required Aggregation Group and part of a Permissive
Aggregation Group, the Top Heavy Ratio for the Permissive Aggregation Group
exceeds 60%. 

		(j)		
“Top Heavy Ratio” means, with respect to the plans taken into
consideration, a fraction, the numerator of which is the present value of the
accrued benefits for all Key Employees under the Defined Benefit Plans of the
Aggregation Group as of the Determination Date for each plan plus the sum of
account balances for all Key Employees under the Defined Contribution Plans of
the Aggregation Group, in each case as of the respective Determination Date
(including any part of any accrued benefit or account balance distributed in the
five-year period ending on the Determination Date), and the denominator of which
is the sum of the present value of all accrued benefits for all Non-Key
Employees under the Defined Benefit Plans of the Aggregation Group plus the sum
of all account balances of all Non-Key Employees under Defined Contribution
Plans of the Aggregation Group, in each case as of the respective Determination
Date for each plan (including any part of any accrued benefit or account balance
distributed in the five-year period ending on the Determination Date), all
determined in accordance with Code § 416.

		
For purposes of this subsection (j):

		
The present values of accrued benefits and the amounts of account balances of an
Employee as of the Determination Date shall be increased by the distributions
made with respect to the Employee under the Plan or any plan aggregated with the
Plan under Code § 416(g)(2) during the one-year period ending on the
Determination Date. The preceding sentence shall also apply to distributions
under a terminated plan which, had it not been terminated, would have been
aggregated with the Plan under Code § 416(g)(2)(A)(i). In the case of a
distribution made for a reason other than Separation from Service, death and
Disability, this provision shall be applied by substituting “five-year
period” for “one-year period.” In addition, the accrued benefits
and accounts of any individual who has not performed services for the Employer
during the one-year period ending on the Determination Date shall not be taken
into account.

		
Generally,
the Plan Administrator shall calculate the present value of accrued benefits
under Defined Benefit Plans or simplified employee pension plans included within
the group in accordance with the terms of those plans and Code § 416. If a
Participant in a defined benefit plan is a Non-Key Employee, however, the Plan
Administrator shall determine such Non-Key Employee’s accrued benefit under
the accrual method, if any, which is applicable uniformly to all Defined Benefit
Plans or, if there is no uniform method, in accordance with the slowest accrual
rate permitted under the fractional rule accrual method described in Code §
411(b)(1)(C).

		
To calculate the present value of benefits under a Defined Benefit Plan, the Plan
Administrator shall use the interest and mortality assumptions prescribed by the
Defined Benefit Plans to value benefits for top heavy purposes. 

		
If an aggregated plan does not have a valuation date coinciding with the Determination Date, the
Plan Administrator shall value the accrued benefit or account balance under such
aggregated plan as of the most recent valuation date falling within the
twelve-month period ending on the Determination Date, except as Code § 416
and applicable Treasury regulations require for the first and second plan year
of a Defined Benefit Plan.

		
The Plan Administrator shall calculate the value of account balances and accrued
benefits with reference to the Determination Dates for the respective aggregated
plans that fall within the same calendar year.

	16.2		
Application of Article XVI.

			If
the Plan is determined to be a Top Heavy Plan as of any Determination Date, then
it shall be subject to the rules set forth in the balance of this Article XVI,
beginning with the first Plan Year commencing after such Determination Date.

	16.3		Minimum
Vesting.

		(a)		
If the Plan is determined to be a Top Heavy Plan for a Plan Year, then with
respect to each Participant who completes an Hour of Service during such Plan
Year, such Participant’s vested interest in his Account, determined at any
time that the Plan continues to be a Top Heavy Plan, shall be no less than as
determined under the following table: 

		Years of Vesting Service		Vested Percentage	

		Less than 3 years		0%	

		3 years or more		100%	

		(b)		
If the Plan subsequently is determined to no longer be a Top Heavy Plan, then
the above minimum vesting schedule shall not apply to any portion of a
Participant’s Account which is accrued on or after the first day of the
first Plan Year in which the Plan is no longer a Top Heavy Plan, provided that
any Participant with three or more Years of Vesting Service as of the first date
on which the Plan is no longer a Top Heavy Plan may elect to continue to be
vested in accordance with the above minimum vesting schedule during the period
that the Plan is not a Top Heavy Plan. 

	16.4		
Minimum Contributions.

		(a)		
Subject to subsection (b) of this Section, if the Plan is determined to be a Top
Heavy Plan for a Plan Year, minimum Employer contributions (including
forfeitures but excluding any Pre-Tax Contributions and any Employer Matching
Contributions necessary to satisfy the nondiscrimination requirements of Code
§ 401(k) or of Code § 401(m)) shall be made on behalf of each
Participant who has not Separated from Service as of the end of the Plan Year
and who is not a Key Employee, of not less than the lesser of the following
percentage of the Key Employee’s 415 Compensation for the Plan Year, as
defined in Section 15.1(g): 

		(i)		
3%, or

		(ii)		
the highest percentage of Employer contributions (including forfeitures and
amounts contributed pursuant to a salary reduction agreement) made under the
Plan for the Plan Year on behalf of a Key Employee.

		However,
if a Defined Benefit Plan which benefits a Key Employee depends on this Plan to
satisfy the nondiscrimination rules of Code § 401(a)(4) or the coverage
rules of Code § 410 (or another plan benefiting the Key Employee so depends
on such defined benefit plan), the allocation is 3% of the Non-Key
Employee’s Compensation for the Plan Year regardless of the contribution
rate for the Key Employees.

		(b)		
If, for a Plan Year, there are no allocations of Employer contributions,
forfeitures or Pre-tax Contributions for any Key Employee to the Plan, no
minimum allocation shall be required with respect to the Plan Year, except as
otherwise may be required because of another plan in the Aggregation Group.

		(c)		
The minimum allocation required under this Section 16.4 shall be made after
Employer contributions and forfeitures are made.

		(d)		
Notwithstanding subsection (a) above, for a Plan Year, a Participant covered
under this Plan, which is determined to be Top Heavy, and a Top Heavy defined
benefit plan, shall receive the defined benefit minimum from the Top Heavy
defined benefit plan. 

		
Notwithstanding subsection (a) above, for a Plan Year, a Participant covered under this Plan,
which is determined to be Top Heavy, and another Top Heavy defined contribution
plan, shall receive the defined contribution minimum from the other Top Heavy
defined contribution plan.

APPENDIX

Foreword

This Appendix sets forth
additional provisions applicable to individuals specified in the Articles of
this Appendix. The provisions of this Appendix govern over the provisions of the
Plan that may conflict or be inconsistent with the provisions of the Appendix. 

ARTICLE A
– SPINOFF FROM PEPSICO 401(K) PLAN

	A.1		
Scope.

			
This article supplements the main portion of the Plan document in connection with the
Spinoff of this Plan from the Pre-Spinoff Plan.

	A.2		
Transfer of Participation, Accounts and Elections.

		(a)		
All Participants who are classified as current or former Hourly Employees
(determined immediately prior to the Spinoff Time) shall have their
participation and Pre-Spinoff Plan interest transferred to this Plan as of the
Spinoff Time. For this purpose, it is intended that a Participant shall be
considered a former Hourly Employee if the Plan Administrator determines (based
on the available records) that he or she was classified as an Hourly Employee
when last employed by an Employer prior to the Spinoff Time. A
Beneficiary’s interest in this Plan that is derived from an individual
described in the two preceding sentences shall also be transferred, and any
reference to a Participant or Participant’s interest in this Article A
shall also refer to any Beneficiary and Beneficiary’s interest related
thereto. A Participant whose participation and Pre-Spinoff Plan interest is
transferred pursuant to this subsection may be referred to as a
“Transferred Hourly Employee.”

		(b)		
All elections of Transferred Hourly Employees in effect under the Pre-Spinoff
Plan immediately prior to the Spinoff Time, including contribution rate
elections, investment elections, beneficiary designations and distribution
elections, shall be transferred to this Plan as of the Spinoff Time. Such
elections shall remain in effect under this Plan, until changed in accordance
with its terms.

		(c)		
Effective as of the Spinoff Time, each Transferred Hourly Employee’s
account balance under the Pre-Spinoff Plan (including all interests in
investment funds and any outstanding loans) shall be transferred to this Plan
and shall become the Hourly Employee’s initial Account balance under this
Plan. The actual transfer shall occur as soon as practicable following the
Spinoff Time. In the case of any loan, the promissory note and documentation
related to the loan shall be transferred to this Plan, and this Plan shall
succeed to all of the rights that the Pre-Spinoff Plan had with respect to such
loan immediately prior to the Spinoff Time.

		(d)		
To the extent required by law, a Transferred Hourly Employee’s service
under the Pre-Spinoff Plan shall be transferred to this Plan and shall be
recognized and taken into account under this Plan as of the Spinoff Time for all
purposes (including eligibility and vesting) as service under this Plan.

		(e)		
The rights and benefits of Transferred Hourly Employees and their Beneficiaries
(and of those claiming through or on behalf of such individuals) on and after
the Spinoff Time shall be governed exclusively by the terms of this Plan.
Following the Spinoff, such individuals shall look solely to this Plan for any
benefits or rights that are claimed to derive from the Pre-Spinoff Plan.

	A.3		
Blackout Periods.

			
To effectuate the transfer of the Hourly Employees into this Plan, the plan
administrator of the Pre-Spinoff Plan shall declare certain “Blackout
Periods” during which certain participants shall be restricted from making
certain changes to their Pre-Spinoff Plan elections and/or prohibited from
withdrawing and transferring amounts in the Pre-Spinoff Plan to the extent
specified by such plan administrator. While a participant is restricted from
engaging in certain transactions during the Blackout Periods, amounts in
participants’ accounts will remain invested in the investment funds elected
prior to the Blackout Period (except for any exceptions as disclosed by the plan
administrator of the Pre-Spinoff Plan) and will remain subject to market
fluctuations during the Blackout Periods. The scope and duration of the Blackout
Periods are entirely subject to the discretion of the plan administrator of the
Pre-Spinoff Plan and may be different for various groups of participants and/or
various investment funds, all as determined by such plan administrator.

ARTICLE B
– MERGER OF THE TROPICANA PLANS

	B.1		
Scope.

			
This article supplements the main portion of the Plan document in connection with the
merger of the Tropicana Teamsters Plan and the Tropicana Union Plan with and
into this Plan.

	B.2		
Definitions.

			
When used in this Article B, the following phrases shall have the meanings set forth
below. Except as otherwise provided in this Article B, all terms that are
defined in Article I shall have the meaning assigned to them in Article I. 

		(a)		
“Merger Time” means immediately after the occurrence of the
Spinoff on January 1, 2002. 

		(b)		
“Transferred Tropicana Participant”
shall have the meaning given to it in Section C.3(a) below. 

		(c)		
“Tropicana Plans” means the Tropicana Union Plan, the
Tropicana Teamsters Plan or both as the context requires.

	B.3		
Transfer of Participation, Accounts and Elections.

		(a)		
All participants of the Tropicana Plans shall have their participation and plan
interest transferred to this Plan as of the Merger Time. A Beneficiary’s
interest in this Plan that is derived from an individual described in the
preceding sentence shall also be transferred, and any reference to a participant
or participant’s interest in this Article B shall also refer to any
Beneficiary and Beneficiary’s interest related thereto. A participant whose
participation and plan interest is transferred pursuant to this subsection may
be referred to as a “Transferred Tropicana Participant.” 

		(b)		
Except as provided in Section B.5, all elections of Transferred Tropicana
Participants in effect under the respective Tropicana Plan immediately prior to
the Merger Time, including, contribution rate elections, investment elections,
beneficiary designations and distribution elections, shall be transferred to
this Plan as of the Merger Time. Such elections shall remain in effect under
this Plan, until changed in accordance with the terms of this Plan. In the case
of investment elections, such elections shall be transferred to this Plan in
accordance with the mapping rules as established by the Plan Administrator. 

		(c)		
Effective as of the Merger Time, each Transferred Tropicana Participant’s
account in the respective Tropicana Plan (including any outstanding loans) shall
be transferred to this Plan and shall become such participant’s initial
Account balance under this Plan. The actual transfer shall occur as soon as
practicable following the Merger Time. In the case of any loan, the promissory
note and documentation related to the loan shall be transferred to this Plan,
and this Plan shall succeed to all of the rights that the respective Tropicana
Plan had with respect to such loan immediately prior to the Merger Time. 

		(d)		
To the extent required by law, a Transferred Tropicana Participant’s
service under the respective Tropicana Plan shall be transferred to this Plan
and shall be recognized and taken into account under this Plan as of the Merger
Time for all purposes (including eligibility and vesting) as service under this
Plan.

		(e)		
The rights and benefits of Transferred Tropicana Participants and their
beneficiaries (and of those claiming through or on behalf of such individuals)
before the Merger Time shall be governed exclusively by the terms of the
Tropicana Plan in which they participated. 

	B.4		
Blackout Periods.

			
To effectuate the merger of the Tropicana Plans with and into this Plan, the Plan
Administrator shall declare certain “Blackout Periods” during which
Transferred Tropicana Participants shall be restricted from making certain
changes to their elections and/or prohibited from withdrawing and transferring
amounts to the extent specified by the Plan Administrator. While a Transferred
Tropicana Participant is restricted from engaging in certain transactions during
the Blackout Periods, amounts in their accounts will remain invested in the
investment funds elected prior to the Blackout Period (including those
investment funds which the Plan Administrator has provided mapping rules) and
will remain subject to market fluctuations during the Blackout Periods. The
scope and duration of the Blackout Periods are entirely subject to the
discretion of the Plan Administrator and may be different for various groups of
participants and/or various investment funds, all as determined by the Plan
Administrator.

	B.5		
Conversion of After-Tax Contribution Elections.

			
A Transferred Tropicana Participant who had an election to make an After-tax
Contribution to a Tropicana Plan in effect immediately prior to the Merger Time
shall have such election (or portion thereof) converted to an election to make a
Pre-tax Contribution to this Plan as of the Merger Time. Any portion of such
After-tax Contribution election not converted to a Pre-tax Contribution shall be
cancelled and considered null and void under this Plan. The conversion of
After-tax Contribution elections (including the election percentage) shall be at
the sole discretion of the Plan Administrator and may be different for various
individuals or groups of individuals as determined by the Plan Administrator.
Any subsequent Contribution Elections by Transferred Tropicana Participants
shall be in accordance with Article III.

	B.6		
Eligibility.

		(a)		
Transferred  Tropicana  Participants.  As of the  Merger  Time,  a  Transferred  Tropicana  Participant  who  has not
satisfied the service  requirement  under the applicable  Tropicana Plan to participate  therein shall be eligible to
participate in this Plan as follows:

		(i)		
If the Transferred  Tropicana Participant is considered a Full-Time Employee, he or she shall be eligible to
participate in this Plan as provided in Section 2.1(a)(i); and 

		(ii)		
If the Transferred Tropicana Participant is considered a Part-Time Employee, he
or she shall be eligible to participate in this Plan as of the first day of the
month following completion of one month of service and the first day of every
month thereafter. 

	 	
For purposes of determining service under paragraph (ii) above, the Plan shall use
the “elapsed time” method of determining service, i.e., the
Plan shall use the rules it ordinarily uses only for determining an
Employee’s vesting service.

		(b)		
Tropicana  Employees.  Any Tropicana  Employee (other than a Transferred  Tropicana  Participant)  whose hire date is
considered to be after the Merger Time shall be eligible to participate in this Plan as follows:

		(i)		
To the extent  permissible under any applicable  collective  bargaining  agreement,  such Tropicana Employee
shall be eligible to participate in this Plan in accordance with the rules set forth in Article II; and

		(ii)		
In all other circumstances, the eligibility rules of Section B.6(a) shall apply
to such Tropicana Employee.

	B.7		
Investment Elections.

			
Investment elections of Transferred Tropicana Participants will be transferred to this Plan
pursuant to Section B.3(b) above in accordance with the percentage increments in
effect under the Tropicana Plans immediately prior to the Merger Time. However,
any changes to such investment elections under this Plan after the Merger Time
shall only be made in increments of 5% as provided by Section 4.2. In addition,
the Plan Administrator shall have the authority to specify mapping rules and
procedures as to how investment elections of Transferred Tropicana Participants
shall be mapped to this Plan.

	B.8		
Vesting of Prior Matching Contributions under Tropicana Union Plan.

		(a)		
General Vesting Schedule. Subject to subsection (b) below, any
Transferred Tropicana Participant who participated in the Tropicana Union Plan
shall vest in the matching contributions (“Matching Contributions”)
that were credited to his or her Tropicana Union Plan account (and subsequently
transferred to his or her Prior Matching Contributions Account as of the Merger
Time) in accordance with the following schedule: 

		Years of Vesting Service		Vested Percentage	

		Less than 1		0%	

		At least 1, but less than 2		20%	

		At least 2, but less than 3		40%	

		At least 3, but less than 4		60%	

		At least 4, but less than 5		80%	

		5 or more		100%	

		
“Years of Vesting Service” as used in this subsection shall have the same meaning
given to it in Article I. In addition, the provisions of Sections 5.3 through
5.6 shall apply for purposes of this subsection, except that the last sentence
of Section 5.3 shall be replaced with the following: “After a six month
Period of Service that began after December 31, 2001 and after a Reemployment
Commencement Date, a Participant will be 100% vested in his or her
Account.”

		(b)		
Special Vesting Provisions. Notwithstanding subsection (a) above, a
Transferred Tropicana Participant who participated in the Tropicana Union Plan
(i) and that is actively employed by an Employer (or on a leave of absence from
an Employer) as of the Merger Time shall become 100% vested in his or her
Matching Contributions as of the Merger Time and (ii) shall become 100% vested
in his or her Matching Contributions upon his or her death, Disability, or
attainment of age 65 while the Transferred Tropicana Participant is an Employee. 

	B.9		
Hardship Withdrawals.

			
Transferred Tropicana Participants who received a hardship withdrawal under a Tropicana Plan
prior to the Merger Time shall not be permitted to have Pre-tax Contributions
made to this Plan in accordance with Section 6.6(d). Any Transferred Tropicana
Participant who has already been suspended from making Pre-tax Contributions to
a Tropicana Plan for a period of at least 6 months prior to the Merger Time
shall be able to make Pre-tax Contributions to this Plan from and after the
Merger Time subject to the limitations of the second sentence of Section 6.6(d).

	B.10		
Certain Distribution and Payment Options.

			
The Tropicana Plans had certain distribution and payment options for its
participants and beneficiaries which are not offered under this Plan.
Notwithstanding the provisions of Article VIII, such distribution and payment
options under the Tropicana Plans shall be available to Transferred Tropicana
Participants and their beneficiaries. However, to the extent permissible under
any applicable collective bargaining agreement, those distribution and payment
options offered under the Tropicana Plans shall not be available to Transferred
Tropicana Participants and their beneficiaries for distributions or payments
with a scheduled commencement date on or after January 1, 2003, and the
provisions of Article VIII shall govern.SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

                                    Depositor

                            LITTON LOAN SERVICING LP

                                    Servicer

                         U. S. BANK NATIONAL ASSOCIATION

                                     Trustee

                                       and

                                 CITIBANK, N.A.

                               Trust Administrator

                         POOLING AND SERVICING AGREEMENT
                          Dated as of October 19, 2001

                  Salomon Home Equity Loan Trust, Series 2001-1
                     Asset Backed Pass-Through Certificates

                                  Series 2001-1

<PAGE>

<TABLE>
<CAPTION>
                                                 TABLE OF CONTENTS

                                                     ARTICLE I

                                                    DEFINITIONS
<S>                                                                                                            <C>
         SECTION 1.01.     Defined Terms........................................................................-1-
         SECTION 1.02.     Allocation of Certain Interest Shortfalls...........................................-52-

                                                    ARTICLE II

                                           CONVEYANCE OF MORTGAGE LOANS;
                                         ORIGINAL ISSUANCE OF CERTIFICATES
         SECTION 2.01.     Conveyance of the Mortgage Loans....................................................-54-
         SECTION 2.02.     Acceptance of REMIC I-A and REMIC I-B by Trustee....................................-56-
         SECTION 2.03.     Repurchase or Substitution of Mortgage Loans by the Seller..........................-57-
         SECTION 2.04.     Reserved............................................................................-59-
         SECTION 2.05.     Representations, Warranties and Covenants of the Servicer...........................-59-
         SECTION 2.06.     Issuance of the REMIC I-A Regular Interests, REMIC I-B
                           Regular Interests and the Class R-I Interest........................................-61-
         SECTION 2.07.     Conveyance of the REMIC I-A Regular Interests and the
                           REMIC I-B Regular Interests; Acceptance of REMIC II
                           by the Trustee......................................................................-62-
         SECTION 2.08.     Issuance of Class R-II Certificates.................................................-62-

                                                    ARTICLE III

                                           ADMINISTRATION AND SERVICING
                                               OF THE MORTGAGE LOANS
         SECTION 3.01.     Servicer to Act as Servicer.........................................................-63-
         SECTION 3.02.     Sub-Servicing Agreements Between Servicer and
                           Sub-Servicers.......................................................................-65-
         SECTION 3.03.     Successor Sub-Servicers.............................................................-66-
         SECTION 3.04.     No Contractual Relationship Between Sub-Servicer,
                           Trust Administrator, Trustee or the Certificateholders..............................-66-
         SECTION 3.05.     Assumption or Termination of Sub-Servicing Agreement
                           by Trust Administrator..............................................................-66-
         SECTION 3.06.     [Reserved]..........................................................................-66-
         SECTION 3.07.     Collection of Certain Mortgage Loan Payments........................................-66-
         SECTION 3.08.     [Reserved]..........................................................................-67-
         SECTION 3.09.     Collection of Taxes, Assessments and Similar Items;
                           Servicing Accounts..................................................................-67-
         SECTION 3.10.     Collection Account, Distribution Account and Initial
                           Deposit Accounts....................................................................-68-
         SECTION 3.11.     Withdrawals from the Collection Account and
                           Distribution Account................................................................-71-
         SECTION 3.12.     Investment of Funds in the Investment Accounts......................................-72-

                                                       -ii-

<PAGE>

         SECTION 3.13.     [Reserved]..........................................................................-74-
         SECTION 3.14.     Maintenance of Hazard Insurance and Errors and
                           Omissions and Fidelity Coverage.....................................................-74-
         SECTION 3.15.     Enforcement of Due-on-Sale Clauses; Assumption
                           Agreements.................................................................-75-
         SECTION 3.16.     Realization Upon Defaulted Mortgage Loans...........................................-76-
         SECTION 3.17.     Trustee to Cooperate; Release of Mortgage Files.....................................-78-
         SECTION 3.18.     Servicing Compensation..............................................................-79-
         SECTION 3.19.     Reports to the Trust Administrator and the Trustee;
                           Collection Account Statements..............................................-79-
         SECTION 3.20.     Statement as to Compliance..........................................................-80-
         SECTION 3.21.     Independent Public Accountants' Servicing Report....................................-80-
         SECTION 3.22.     Access to Certain Documentation.....................................................-80-
         SECTION 3.23.     Title, Management and Disposition of REO Property...................................-81-
         SECTION 3.24.     Obligations of the Servicer in Respect of Prepayment
                           Interest Shortfalls........................................................-84-
         SECTION 3.25.     [Reserved]..........................................................................-84-
         SECTION 3.26.     Obligations of the Servicer in Respect of Mortgage
                           Rates and  Monthly Payments................................................-84-
         SECTION 3.27.     Reserve Fund........................................................................-84-
         SECTION 3.28.     Advance Facility....................................................................-86-

                                                    ARTICLE IV

                                          PAYMENTS TO CERTIFICATEHOLDERS
         SECTION 4.01.     Distributions.......................................................................-87-
         SECTION 4.02.     Statements to Certificateholders....................................................-97-
         SECTION 4.03.     Remittance Reports; Advances.......................................................-100-
         SECTION 4.04.     Allocation of Realized Losses......................................................-102-
         SECTION 4.05.     Compliance with Withholding Requirements...........................................-104-

                                                     ARTICLE V

                                                 THE CERTIFICATES
         SECTION 5.01.     The Certificate....................................................................-105-
         SECTION 5.02.     Registration of Transfer and Exchange of Certificates..............................-107-
         SECTION 5.03.     Mutilated, Destroyed, Lost or Stolen Certificates..................................-111-
         SECTION 5.04.     Persons Deemed Owners..............................................................-112-
         SECTION 5.05.     Certain Available Information......................................................-112-

                                                    ARTICLE VI

                                          THE DEPOSITOR AND THE SERVICER
         SECTION 6.01.     Liability of the Depositor and the Servicer........................................-113-
         SECTION 6.02.     Merger or Consolidation of the Depositor or the Servicer...........................-113-
         SECTION 6.03.     Limitation on Liability of the Depositor, the Servicer and

                                                       -iii-

<PAGE>

                           Others....................................................................-113-
         SECTION 6.04.     Limitation on Resignation of the Servicer..........................................-114-
         SECTION 6.05.     Rights of the Depositor in Respect of the Servicer.................................-115-

                                                    ARTICLE VII

                                                      DEFAULT
         SECTION 7.01.     Servicer Events of Default.........................................................-116-
         SECTION 7.02.     Trust Administrator or Trustee to Act; Appointment of
                           Successor.................................................................-118-
         SECTION 7.03.     Notification to Certificateholders.................................................-119-
         SECTION 7.04.     Waiver of Servicer Events of Default...............................................-120-

                                                   ARTICLE VIII

                                CONCERNING THE TRUSTEE AND THE TRUST ADMINISTRATOR
         SECTION 8.01.     Duties of Trustee and Trust Administrator..........................................-121-
         SECTION 8.02.     Certain Matters Affecting the Trustee and the Trust
                           Administrator.............................................................-122-
         SECTION 8.04.     Trustee and Trust Administrator May Own Certificates. .............................-123-
         SECTION 8.05.     Trustee's and Trust Administrator's Fees and Expenses. ............................-124-
         SECTION 8.06.     Eligibility Requirements for Trustee and Trust
                           Administrator.............................................................-124-
         SECTION 8.07.     Resignation and Removal of the Trustee and the Trust
                           Administrator ............................................................-125-
         SECTION 8.08.     Successor Trustee or Trust Administrator...........................................-126-
         SECTION 8.09.     Merger or Consolidation of Trustee.................................................-127-
         SECTION 8.10.     Appointment of Co-Trustee or Separate Trustee......................................-127-
         SECTION 8.11.     Appointment of Office or Agency....................................................-128-
         SECTION 8.12.     Representations and Warranties.....................................................-128-

                                                    ARTICLE IX

                                                    TERMINATION
         SECTION 9.01      Termination Upon Repurchase or Liquidation of All Mortgage
                           Loans..............................................................................-130-
         SECTION 9.02      Additional Termination Requirements................................................-132-

                                                     ARTICLE X

                                                 REMIC PROVISIONS
         SECTION 10.01.    REMIC Administration...............................................................-134-
         SECTION 10.02.    Prohibited Transactions and Activities.............................................-136-
         SECTION 10.03.    Servicer and Trustee and Trust
                           Administrator Indemnification......................................................-137-

                                                       -iv-

<PAGE>

                                                    ARTICLE XI

                                             MISCELLANEOUS PROVISIONS
         SECTION 11.01.    Amendment..........................................................................-138-
         SECTION 11.02.    Recordation of Agreement; Counterparts.............................................-139-
         SECTION 11.03.    Limitation on Rights of Certificateholders.........................................-139-
         SECTION 11.04.    Governing Law......................................................................-140-
         SECTION 11.05.    Notices............................................................................-140-
         SECTION 11.06.    Severability of Provisions.........................................................-141-
         SECTION 11.07.    Notice to Rating Agencies..........................................................-141-
         SECTION 11.08.    Article and Section References.....................................................-142-
         SECTION 11.09.    Grant of Security Interest.........................................................-142-
</TABLE>

                                       -v-

<PAGE>

<TABLE>
<CAPTION>
Exhibits

<S>               <C>
Exhibit A-1       Form of Class AF-1 Certificate
Exhibit A-2       Form of Class AF-2 Certificate
Exhibit A-3       Form of Class AF-3 Certificate
Exhibit A-4       Form of Class AV-1 Certificate
Exhibit A-5       Form of Class MF-1 Certificate
Exhibit A-6       Form of Class MF-2 Certificate
Exhibit A-7       Form of Class MF-3 Certificate
Exhibit A-8       Form of Class MV-1 Certificate
Exhibit A-9       Form of Class MV-2 Certificate
Exhibit A-10      Form of Class MV-3 Certificate
Exhibit A-11      Form of Class MV-4 Certificate
Exhibit A-12      Form of Class OCF Certificate
Exhibit A-13      Form of Class OCV Certificate
Exhibit A-14      Form of Class PF Certificate
Exhibit A-15      Form of Class PV Certificate
Exhibit A-16      Form of Class R Certificate
Exhibit B         [Reserved]
Exhibit C-1       Form of Trust Administrator's Initial Certification
Exhibit C-2       Form of Trust Administrator's Final Certification
Exhibit D         Form of Mortgage Loan Purchase Agreement
Exhibit E-1       Request for Release
Exhibit E-2       Request for Release Mortgage Loans paid in full
Exhibit F-1       Form of Transferor Representation Letter and Form of Transferee Representation
                  Letter in Connection with Transfer of the Private Certificates Pursuant to Rule 144A
                  Under the 1933 Act
Exhibit F-2       Form of Transfer Affidavit and Agreement and Form of Transferor Affidavit in
                  Connection with Transfer of Class R Certificates
Exhibit G         Form of Certification with respect to ERISA and the Code
Exhibit H         Form of Report Pursuant to Section 4.06
Exhibit I         [Reserved]
Exhibit J         Officer's Certificate with respect to Prepayments
Exhibit K         Form of Lost Note Affidavit
Schedule 1        Mortgage Loan Schedule
Schedule 2        Prepayment Charge Schedule
</TABLE>

                                      -vi-

<PAGE>

                  This Pooling and Servicing Agreement, is dated and effective
as of October 19, 2001, among SALOMON BROTHERS MORTGAGE SECURITIES VII, INC. as
Depositor, LITTON LOAN SERVICING LP as Servicer, U. S. BANK NATIONAL ASSOCIATION
as Trustee and CITIBANK N.A. as Trust Administrator.

                             PRELIMINARY STATEMENT:

                  The Depositor intends to sell pass-through certificates to be
issued hereunder in multiple classes, which in the aggregate will evidence the
entire beneficial ownership interest in each REMIC (as defined herein) created
hereunder. The Trust Fund will consist of a segregated pool of assets comprised
of the Mortgage Loans and certain other related assets subject to this
Agreement.

                                    REMIC I-A

                  As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the Group I Mortgage Loans and certain
other related assets (other than the Servicer Prepayment Charge Payment Amount
and the Group I Initial Deposit Account) subject to this Agreement as a REMIC
for federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC I-A." The Class R-IA Interest will be the sole class of
"residual interests" in REMIC I-A for purposes of the REMIC Provisions (as
defined herein). The following table irrevocably sets forth the designation, the
REMIC I-A Remittance Rate, the initial Uncertificated Balance and, solely for
purposes of satisfying Treasury regulation section 1.860G-1(a)(4)(iii), the
"latest possible maturity date" for each of the REMIC I-A Regular Interests (as
defined herein). None of the REMIC I-A Regular Interests will be certificated.

<TABLE>
<CAPTION>
                                        REMIC I-A                      Initial                   Latest Possible
         Designation                 Remittance Rate           Uncertificated Balance           Maturity Date(1)
         -----------                 ---------------           ----------------------           ----------------

<S>                                  <C>                       <C>                              <C>
           IA-LTAA                     Variable(2)                 $69,589,019.70                August 25, 2031
          IA-LTAF1                     Variable(2)                 $   343,840.00                August 25, 2031
          IA-LTAF2                     Variable(2)                 $   122,910.00                August 25, 2031
          IA-LTAF3                     Variable(2)                 $   168,780.00                August 25, 2031
          IA-LTMF1                     Variable(2)                 $    42,600.00                August 25, 2031
          IA-LTMF2                     Variable(2)                 $    15,980.00                August 25, 2031
          IA-LTMF3                     Variable(2)                 $     8,880.00                August 25, 2031
           IA-LTZZ                     Variable(2)                 $   717,194.08                August 25, 2031
           IA-LTPF                     Variable(2)                 $       100.00                August 25, 2031
</TABLE>
---------------
(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date immediately following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each REMIC I-A
         Regular Interest.
(2)      Calculated in accordance with the definition of "REMIC I-A Remittance
         Rate" herein.

                                      -vii-

<PAGE>

                                    REMIC I-B
                                    ---------

                  As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the Group II Mortgage Loans and certain
other related assets (other than the Servicer Prepayment Charge Payment Amount,
the Reserve Fund and the Group II Initial Deposit Account) subject to this
Agreement as a REMIC for federal income tax purposes, and such segregated pool
of assets will be designated as "REMIC I-B." The Class R-IB Interest will be the
sole class of "residual interests" in REMIC I-B for purposes of the REMIC
Provisions (as defined herein). The following table irrevocably sets forth the
designation, the REMIC I-B Remittance Rate, the initial Uncertificated Balance
and, solely for purposes of satisfying Treasury regulation section 1.860G-
1(a)(4)(iii), the "latest possible maturity date" for each of the REMIC I-B
Regular Interests (as defined herein). None of the REMIC I-B Regular Interests
will be certificated.

<TABLE>
<CAPTION>
                                        REMIC I-B                      Initial                   Latest Possible
         Designation                 Remittance Rate           Uncertificated Balance           Maturity Date(1)
         -----------                 ---------------           ----------------------           ----------------
<S>                                  <C>                       <C>                              <C>
           IB-LTAA                     Variable(2)                 $24,789,993.62                August 25, 2031
          IB-LTAV1                     Variable(2)                 $   202,360.00                August 25, 2031
          IB-LTMV1                     Variable(2)                 $    21,500.00                August 25, 2031
          IB-LTMV2                     Variable(2)                 $    11,390.00                August 25, 2031
          IB-LTMV3                     Variable(2)                 $     3,790.00                August 25, 2031
          IB-LTMV4                     Variable(2)                 $     5,060.00                August 25, 2031
           IB-LTZZ                     Variable(2)                 $   261,816.24                August 25, 2031
           IB-LTPV                     Variable(2)                 $       100.00                August 25, 2031
</TABLE>
---------------
(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date immediately following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each REMIC I-B
         Regular Interest.
(2)      Calculated in accordance with the definition of "REMIC I-B Remittance
         Rate" herein.

                                     -viii-

<PAGE>

                                    REMIC II

                  As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC I-A Regular Interests and the
REMIC I-B Regular Interests as a REMIC for federal income tax purposes, and such
segregated pool of assets will be designated as "REMIC II." The Class R-II
Interest will evidence the sole class of "residual interests" in REMIC II for
purposes of the REMIC Provisions under federal income tax law. The following
table irrevocably sets forth the designation, the Pass-Through Rate, the initial
aggregate Certificate Principal Balance and, solely for purposes of satisfying
Treasury regulation section 1.860G-1(a)(4)(iii), the "latest possible maturity
date" for the indicated Classes of Certificates.

<TABLE>
<CAPTION>
                                                                  Initial Aggregate              Latest Possible
         Designation                Pass-Through Rate       Certificate Principal Balance       Maturity Date(1)
         -----------                -----------------       -----------------------------       ----------------
<S>                                 <C>                     <C>                                 <C>
         Class AF-1                    Variable(2)                 $34,384,000.00                August 25, 2031
         Class AF-2                    Variable(2)                 $12,291,000.00                August 25, 2031
         Class AF-3                    Variable(2)                 $16,878,000.00                August 25, 2031
         Class MF-1                    Variable(2)                 $ 4,260,000.00                August 25, 2031
         Class MF-2                    Variable(2)                 $ 1,598,000.00                August 25, 2031
         Class MF-3                    Variable(2)                 $   888,000.00                August 25, 2031
          Class OCF                    Variable(3)                 $   710,203.78                August 25, 2031
          Class PF                       N/A(4)                    $       100.00                August 25, 2031
         Class AV-1                    Variable(2)                 $20,236,000.00                August 25, 2031
         Class MV-1                    Variable(2)                 $ 2,150,000.00                August 25, 2031
         Class MV-2                    Variable(2)                 $ 1,139,000.00                August 25, 2031
         Class MV-3                    Variable(2)                 $   379,000.00                August 25, 2031
         Class MV-4                    Variable(2)                 $   506,000.00                August 25, 2031
          Class OCV                    Variable(5)                 $   885,811.86                August 25, 2031
          Class PV                       N/A(4)                    $       100.00                August 25, 2031
</TABLE>
---------------
(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date immediately following the maturity
         date for the Mortgage Loans with the latest maturity date has been
         designated as the "latest possible maturity date" for each Class of
         Certificates.
(2)      Calculated in accordance with the definition of "Pass-Through Rate"
         herein.
(3)      The Class OCF Certificates will accrue interest at their variable
         Pass-Through Rate on the Notional Amount of the Class OCF Certificates
         outstanding from time to time which shall equal the Uncertificated
         Balance of the REMIC I-A Regular Interests. The Class OCF Certificates
         will not accrue interest on their Certificate Principal Balance.
(4)      The Class PF Certificates and the Class PV Certificates will not accrue
         interest.
(5)      The Class OCV Certificates will accrue interest at their variable
         Pass-Through Rate on the Notional Amount of the Class OCV Certificates
         outstanding from time to time which shall equal the Uncertificated
         Balance of the REMIC I-B Regular Interests. The Class OCV Certificates
         will not accrue interest on their Certificate Principal Balance.

                  As of the Cut-off Date, the Group I Mortgage Loans had an
aggregate principal balance equal to $71,009,303.78 and the Group II Mortgage
Loans had an aggregate principal balance equal to $25,295,911.86.

                                      -ix-

<PAGE>

                  In consideration of the mutual agreements herein contained,
the Depositor, the Servicer, the Trustee and the Trust Administrator agree as
follows:

                                    ARTICLE I

                                   DEFINITIONS

                  SECTION 1.01.             Defined Terms.

                  Whenever used in this Agreement, including, without
limitation, in the Preliminary Statement hereto, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article. Unless otherwise specified, all calculations
described herein shall be made on the basis of a 360-day year consisting of
twelve 30-day months.

                  "Accepted Servicing Practices": The servicing standards set
forth in Section 3.01.

                  "Accrued Certificate Interest": With respect to any Class A
Certificate, Mezzanine Certificate, Class OCF Certificate or Class OCV
Certificate and each Distribution Date, interest accrued during the related
Interest Accrual Period at the Pass-Through Rate for such Certificate for such
Distribution Date on the Certificate Principal Balance, in the case of the Class
A Certificates and the Mezzanine Certificates, or on the Notional Amount, in the
case of the Class OCF Certificates and the Class OCV Certificates, of such
Certificate immediately prior to such Distribution Date. The Class P
Certificates are not entitled to distributions in respect of interest and,
accordingly, will not accrue interest. All distributions of interest on the
Class AV-1 Certificates and the Group II Mezzanine Certificates will be
calculated on the basis of a 360-day year and the actual number of days in the
applicable Interest Accrual Period. All distributions of interest on the Class
AF Certificates, the Group I Mezzanine Certificates, the Class OCF Certificates
and the Class OCV Certificates will be based on a 360-day year consisting of
twelve 30-day months. Accrued Certificate Interest with respect to each
Distribution Date, as to any Class A Certificate, Mezzanine Certificate, Class
OCF Certificate or Class OCV Certificate, shall be reduced by an amount equal to
the portion allocable to such Certificate pursuant to Section 1.02 hereof of the
sum of (a) the aggregate Prepayment Interest Shortfall, if any, for such
Distribution Date to the extent not covered by payments pursuant to Section 3.24
and (b) the aggregate amount of any Relief Act Interest Shortfall, if any, for
such Distribution Date. In addition, Accrued Certificate Interest with respect
to each Distribution Date, as to any Class OCF Certificate or Class OCV
Certificate, shall be reduced by an amount equal to the portion allocable to
such Class OCF Certificate or Class OCV Certificate, as applicable, of Realized
Losses, if any, pursuant to Section 4.04 hereof.

                  "Actuarial Mortgage Loan": Any Mortgage Loan other than a
Simple Interest Mortgage Loan.

                  "Adjustment Date": With respect to each Group II Mortgage
Loan, the first day of the month in which the Mortgage Rate of such Mortgage
Loan changes pursuant to the related Mortgage Note. The first Adjustment Date
following the Cut-off Date as to each Group II Mortgage Loan is set forth in the
Mortgage Loan Schedule.

                  "Administration Fee": The amount payable to the Trust
Administrator on each

<PAGE>

Distribution Date pursuant to Section 8.05 as compensation for all services
rendered by it or the Trustee in the execution of the trust hereby created and
in the exercise and performance of any of the powers and duties of the Trust
Administrator and the Trustee hereunder, which amount shall equal the product of
(i) the Administration Fee Rate, multiplied by (ii) the aggregate Stated
Principal Balance of the Mortgage Loans and any REO Properties. The fee payable
to the Trustee for all services rendered by it in the execution of the trust
hereby created and the exercise and performance of any of the powers and duties
of the Trustee hereunder will be paid by the Trust Administrator out of the
Trust Administrator's own funds or out of the Administration Fee received by the
Trust Administrator.

                  "Administration Fee Rate":  0.03% per annum.

                  "Advance": As to any Mortgage Loan, any advance made by the
Servicer in respect of any Distribution Date pursuant to Section 4.03.

                  "Advancing Person": As defined in Section 3.28 hereof.

                  "Affiliate": With respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

                  "Aggregate Loss Severity Percentage": With respect to any
Distribution Date, the percentage equivalent of a fraction, the numerator of
which is the aggregate amount of Realized Losses incurred on any Mortgage Loans
from the Cut-off Date to the last day of the preceding calendar month and the
denominator of which is the aggregate principal balance of such Mortgage Loans
immediately prior to the liquidation of such Mortgage Loans.

                  "Agreement": This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.

                  "Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form (excepting therefrom, if applicable,
the mortgage recordation information which has not been required pursuant to
Section 2.01 hereof or returned by the applicable recorder's office), which is
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect of record the sale of the Mortgage, which
assignment, notice of transfer or equivalent instrument may be in the form of
one or more blanket assignments covering Mortgages secured by Mortgaged
Properties located in the same county, if permitted by law.

                  "Balloon Mortgage Loan": A Mortgage Loan that provides for the
payment of the unamortized principal balance of such Mortgage Loan in a single
payment at the maturity of such Mortgage Loan that is substantially greater than
the preceding monthly payment.

                  "Balloon Payment": A payment of the unamortized principal
balance of a Mortgage

                                       -2-

<PAGE>

Loan in a single payment at the maturity of such Mortgage Loan that is
substantially greater than the preceding Monthly Payment.

                  "Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11
of the United States Code), as amended.

                  "Bankruptcy Loss": With respect to any Mortgage Loan, a
Realized Loss resulting from a Deficient Valuation or Debt Service Reduction.

                  "Book-Entry Certificate": The Class A Certificates and the
Mezzanine Certificates for so long as the Certificates of such Class shall be
registered in the name of the Depository or its nominee.

                  "Book-Entry Custodian": The custodian appointed pursuant to
Section 5.01.

                  "Business Day": Any day other than a Saturday, a Sunday or a
day on which banking or savings and loan institutions in the State of New York
or in the city in which the Corporate Trust Office of the Trust Administrator or
the Corporate Trust Office of the Trustee is located, are authorized or
obligated by law or executive order to be closed.

                  "Cash-Out Refinancing": A Refinanced Mortgage Loan the
proceeds of which are more than a nominal amount in excess of the principal
balance of any existing first mortgage or subordinate mortgage on the related
Mortgaged Property and related closing costs.

                  "Certificate": Any one of the Asset Backed Pass-Through
Certificates, Series 2001-1, Class AF-1, Class AF-2, Class AF-3, Class MF-1,
Class MF-2, Class MF-3, Class OCF, Class PF, Class AV-1, Class MV-1, Class MV-2,
Class MV-3, Class MV-4, Class OCV, Class PV and Class R issued under this
Agreement.

                  "Certificate Factor": With respect to any Class of Regular
Certificates as of any Distribution Date, a fraction, expressed as a decimal
carried to six places, the numerator of which is the aggregate Certificate
Principal Balance (or the Notional Amount, in the case of the Class OCF
Certificates and the Class OCV Certificates) of such Class of Certificates on
such Distribution Date (after giving effect to any distributions of principal
and in the case of the Mezzanine Certificates, the Class OCF Certificates and
the Class OCV Certificates the allocations of Realized Losses in reduction of
the Certificate Principal Balance (or the Notional Amount, in the case of the
Class OCF Certificates and the Class OCV Certificates) of such Class of
Certificates to be made on such Distribution Date, and the denominator of which
is the initial aggregate Certificate Principal Balance (or the Notional Amount,
in the case of the Class OCF Certificates and the Class OCV Certificates) of
such Class of Certificates as of the Closing Date.

                  "Certificate Margin": With respect to the Class AV-1
Certificates and, for purposes of the definition of Group II Marker Rate, REMIC
I-B Regular Interest IB-LTAV1, 0.35% in the case of each Distribution Date
through and including the Distribution Date on which the aggregate principal
balance of the Group II Mortgage Loans (and properties acquired in respect
thereof) remaining in the Trust Fund is reduced to less than 10% of the
aggregate principal balance of the

                                       -3-

<PAGE>

Group II Mortgage Loans as of the Cut-off Date and 0.70% in the case of each
Distribution Date thereafter.

                  With respect to the Class MV-1 Certificates and, for purposes
of the definition of Group II Marker Rate, REMIC I-B Regular Interest IB-LTMV1,
0.70% in the case of each Distribution Date through and including the
Distribution Date on which the aggregate principal balance of the Group II
Mortgage Loans (and properties acquired in respect thereof) remaining in the
Trust Fund is reduced to less than 10% of the aggregate principal balance of the
Group II Mortgage Loans as of the Cut-off Date and 1.05% in the case of each
Distribution Date thereafter.

                  With respect to the Class MV-2 Certificates and, for purposes
of the definition of Group II Marker Rate, REMIC I-B Regular Interest IB-LTMV2,
1.30% in the case of each Distribution Date through and including the
Distribution Date on which the aggregate principal balance of the Group II
Mortgage Loans (and properties acquired in respect thereof) remaining in the
Trust Fund is reduced to less than 10% of the aggregate principal balance of the
Group I Mortgage Loans as of the Cut-off Date and 1.95% in the case of each
Distribution Date thereafter.

                  With respect to the Class MV-3 Certificates and, for purposes
of the definition of Group II Marker Rate, REMIC I-B Regular Interest IB-LTMV3,
2.25% in the case of each Distribution Date through and including the
Distribution Date on which the aggregate principal balance of the Group II
Mortgage Loans (and properties acquired in respect thereof) remaining in the
Trust Fund is reduced to less than 10% of the aggregate principal balance of the
Group II Mortgage Loans as of the Cut-off Date and 3.375% in the case of each
Distribution Date thereafter.

                  With respect to the Class MV-4 Certificates and REMIC I-B
Regular Interest IB- LTMV4, 2.25% in the case of each Distribution Date through
and including the Distribution Date on which the aggregate principal balance of
the Group II Mortgage Loans (and properties acquired in respect thereof)
remaining in the Trust Fund is reduced to less than 10% of the aggregate
principal balance of the Group II Mortgage Loans as of the Cut-off Date and
3.375% in the case of each Distribution Date thereafter.

                  "Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, except that a
Disqualified Organization or a Non-United States Person shall not be a Holder of
a Class R Certificate for any purposes hereof and, solely for the purposes of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of the Depositor or the Servicer or any Affiliate thereof shall be deemed
not to be outstanding and the Voting Rights to which it is entitled shall not be
taken into account in determining whether the requisite percentage of Voting
Rights necessary to effect any such consent has been obtained, except as
otherwise provided in Section 11.01. The Trustee and the Trust Administrator may
conclusively rely upon a certificate of the Depositor or the Servicer in
determining whether a Certificate is held by an Affiliate thereof. All
references herein to "Holders" or "Certificateholders" shall reflect the rights
of Certificate Owners as they may indirectly exercise such rights through the
Depository and participating members thereof, except as otherwise specified
herein; provided, however, that the Trustee and the Trust Administrator shall be
required to recognize as a "Holder" or "Certificateholder" only the Person in
whose name a Certificate is registered in the Certificate

                                       -4-

<PAGE>

Register.

                  "Certificate Owner": With respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Certificate as reflected on the
books of the Depository or on the books of a Depository Participant or on the
books of an indirect participating brokerage firm for which a Depository
Participant acts as agent.

                  "Certificate Principal Balance": With respect to each Class A
Certificate, Mezzanine Certificate or Class P Certificate as of any date of
determination, the Certificate Principal Balance of such Certificate on the
Distribution Date immediately prior to such date of determination, minus all
distributions allocable to principal made thereon and Realized Losses allocated
thereto on such immediately prior Distribution Date (or, in the case of any date
of determination up to and including the first Distribution Date, the initial
Certificate Principal Balance of such Certificate, as stated on the face
thereof). With respect to each Class OCF Certificate as of any date of
determination, an amount equal to the Percentage Interest evidenced by such
Certificate times the excess, if any, of (A) the then aggregate Uncertificated
Balances of the REMIC I-A Regular Interests over (B) the then aggregate
Certificate Principal Balances of the Class AF-1 Certificates, the Class AF-2
Certificates, the Class AF-3 Certificates, the Group I Mezzanine Certificates
and the Class PF Certificates then outstanding. With respect to each Class OCV
Certificate as of any date of determination, an amount equal to the Percentage
Interest evidenced by such Certificate times the excess, if any, of (A) the then
aggregate Uncertificated Balances of REMIC I-B Regular Interests over (B) the
then aggregate Certificate Principal Balances of the Class AV-1 Certificates,
the Group II Mezzanine Certificates and the Class PV Certificates then
outstanding.

                  "Certificate Register": The register maintained pursuant to
Section 5.02.

                  "Class": Collectively, all of the Certificates bearing the
same class designation.

                  "Class A Certificate": Any Class AF-1 Certificate, Class AF-2
Certificate, Class AF- 3 Certificate or Class AV-1 Certificate.

                  "Class AF Certificate": Any Class AF-1 Certificate, Class AF-2
Certificate or Class AF-3 Certificate.

                  "Class AF-1 Certificate": Any one of the Class AF-1
Certificates executed, authenticated and delivered by the Trustee or the Trust
Administrator, substantially in the form annexed hereto as Exhibit A-1 and
evidencing a Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class AF-2 Certificate": Any one of the Class AF-2
Certificates executed, authenticated and delivered by the Trustee or the Trust
Administrator, substantially in the form annexed hereto as Exhibit A-2 and
evidencing a Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class AF-3 Certificate": Any one of the Class AF-3
Certificates executed, authenticated and delivered by the Trustee or the Trust
Administrator, substantially in the form

                                       -5-

<PAGE>

annexed hereto as Exhibit A-3 and evidencing a Regular Interest in REMIC II for
purposes of the REMIC Provisions.

                  "Class AF Principal Distribution Amount": With respect to any
Distribution Date, the excess of (x) the Certificate Principal Balance of the
Class AF Certificates immediately prior to such Distribution Date over (y) the
lesser of (A) the product of (i) 79.00% and (ii) the aggregate Stated Principal
Balance of the Group I Mortgage Loans as of the last day of the related Due
Period and (B) the aggregate Stated Principal Balance of the Group I Mortgage
Loans as of the last day of the related Due Period minus $355,046.51.

                  "Class AV-1 Certificate": Any one of the Class AV-1
Certificates executed, authenticated and delivered by the Trustee or the Trust
Administrator, substantially in the form annexed hereto as Exhibit A-4 and
evidencing a Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class AV-1 Principal Distribution Amount": With respect to
any Distribution Date, the excess of (x) the Certificate Principal Balance of
the Class AV-1 Certificates immediately prior to such Distribution Date over (y)
the lesser of (A) the product of (i) 60.00% and (ii) the aggregate Stated
Principal Balance of the Group II Mortgage Loans as of the last day of the
related Due Period and (B) the aggregate Stated Principal Balance of the Group
II Mortgage Loans as of the last day of the related Due Period minus
$126,479.56.

                  "Class MF-1 Certificate": Any one of the Class MF-1
Certificates executed, authenticated and delivered by the Trustee or the Trust
Administrator, substantially in the form annexed hereto as Exhibit A-5 and
evidencing a Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class MF-1 Principal Distribution Amount": With respect to
any Distribution Date, the excess of (x) the sum of (i) the Certificate
Principal Balance of the Class AF Certificates (after taking into account the
payment of the Class AF Principal Distribution Amount on such Distribution Date)
and (ii) the Certificate Principal Balance of the Class MF-1 Certificates
immediately prior to such Distribution Date over (y) the lesser of (A) the
product of (i) 91.00% and (ii) the aggregate Stated Principal Balance of the
Group I Mortgage Loans as of the last day of the related Due Period and (B) the
aggregate Stated Principal Balance of the Group I Mortgage Loans as of the last
day of the related Due Period minus $355,046.51.

                  "Class MF-2 Certificate": Any one of the Class MF-2
Certificates executed, authenticated and delivered by the Trustee or the Trust
Administrator, substantially in the form annexed hereto as Exhibit A-6 and
evidencing a Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class MF-2 Principal Distribution Amount": With respect to
any Distribution Date, the excess of (x) the sum of (i) the Certificate
Principal Balance of the Class AF Certificates (after taking into account the
payment of the Class AF Principal Distribution Amount on such Distribution
Date), (ii) the Certificate Principal Balance of the Class MF-1 Certificates
(after taking into account the payment of the Class MF-1 Principal Distribution
Amount on such Distribution Date) and (iii)

                                       -6-

<PAGE>

the Certificate Principal Balance of the Class MF-2 Certificates immediately
prior to such Distribution Date over (y) the lesser of (A) the product of (i)
95.50% and (ii) the aggregate Stated Principal Balance of the Group I Mortgage
Loans as of the last day of the related Due Period and (B) the aggregate Stated
Principal Balance of the Group I Mortgage Loans as of the last day of the
related Due Period minus $355,046.51.

                  "Class MF-3 Certificate": Any one of the Class MF-3
Certificates executed, authenticated and delivered by the Trustee or the Trust
Administrator, substantially in the form annexed hereto as Exhibit A-7 and
evidencing a Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class MF-3 Principal Distribution Amount": With respect to
any Distribution Date, the excess of (x) the sum of (i) the Certificate
Principal Balance of the Class AF Certificates (after taking into account the
payment of the Class AF Principal Distribution Amount on such Distribution
Date), (ii) the Certificate Principal Balance of the Class MF-1 Certificates
(after taking into account the payment of the Class MF-1 Principal Distribution
Amount on such Distribution Date), (iii) the Certificate Principal Balance of
the Class MF-2 Certificates (after taking into account the payment of the Class
MF-2 Principal Distribution Amount on such Distribution Date) and (iv) the
Certificate Principal Balance of the Class MF-3 Certificates immediately prior
to such Distribution Date over (y) the lesser of (A) the product of (i) 98.00%
and (ii) the aggregate Stated Principal Balance of the Group I Mortgage Loans as
of the last day of the related Due Period and (B) the aggregate Stated Principal
Balance of the Group I Mortgage Loans as of the last day of the related Due
Period minus $355,046.51.

                  "Class MV-1 Certificate": Any one of the Class MV-1
Certificates executed, authenticated and delivered by the Trustee or the Trust
Administrator, substantially in the form annexed hereto as Exhibit A-8 and
evidencing a Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class MV-1 Principal Distribution Amount": With respect to
any Distribution Date, the excess of (x) the sum of (i) the Certificate
Principal Balance of the Class AV-1 Certificates (after taking into account the
payment of the Class AV-1 Principal Distribution Amount on such Distribution
Date) and (ii) the Certificate Principal Balance of the Class MV-1 Certificates
immediately prior to such Distribution Date over (y) the lesser of (A) the
product of (i) 77.00% and (ii) the aggregate Stated Principal Balance of the
Group II Mortgage Loans as of the last day of the related Due Period and (B) the
aggregate Stated Principal Balance of the Group II Mortgage Loans as of the last
day of the related Due Period minus $126,479.56.

                  "Class MV-2 Certificate": Any one of the Class MV-2
Certificates executed, authenticated and delivered by the Trustee or the Trust
Administrator, substantially in the form annexed hereto as Exhibit A-9 and
evidencing a Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class MV-2 Principal Distribution Amount": With respect to
any Distribution Date, the excess of (x) the sum of (i) the Certificate
Principal Balance of the Class AV-1 Certificates (after taking into account the
payment of the Class AV-1 Principal Distribution Amount on such

                                       -7-

<PAGE>

Distribution Date), (ii) the Certificate Principal Balance of the Class MV-1
Certificates (after taking into account the payment of the Class MV-1 Principal
Distribution Amount on such Distribution Date) and (iii) the Certificate
Principal Balance of the Class MV-2 Certificates immediately prior to such
Distribution Date over (y) the lesser of (A) the product of (i) 86.00% and (ii)
the aggregate Stated Principal Balance of the Group II Mortgage Loans as of the
last day of the related Due Period and (B) the aggregate Stated Principal
Balance of the Group II Mortgage Loans as of the last day of the related Due
Period minus $126,479.56.

                  "Class MV-3 Certificate": Any one of the Class MV-3
Certificates executed, authenticated and delivered by the Trustee or the Trust
Administrator, substantially in the form annexed hereto as Exhibit A-10 and
evidencing a Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class MV-3 Principal Distribution Amount": With respect to
any Distribution Date, the excess of (x) the sum of (i) the Certificate
Principal Balance of the Class AV-1 Certificates (after taking into account the
payment of the Class AV-1 Principal Distribution Amount on such Distribution
Date), (ii) the Certificate Principal Balance of the Class MV-1 Certificates
(after taking into account the payment of the Class MV-1 Principal Distribution
Amount on such Distribution Date), (iii) the Certificate Principal Balance of
the Class MV-2 Certificates (after taking into account the payment of the Class
MV-2 Principal Distribution Amount on such Distribution Date) and (iv) the
Certificate Principal Balance of the Class MV-3 Certificates immediately prior
to such Distribution Date over (y) the lesser of (A) the product of (i) 89.00%
and (ii) the aggregate Stated Principal Balance of the Group II Mortgage Loans
as of the last day of the related Due Period and (B) the aggregate Stated
Principal Balance of the Group II Mortgage Loans as of the last day of the
related Due Period minus $126,479.56.

                  "Class MV-4 Certificate": Any one of the Class MV-4
Certificates executed, authenticated and delivered by the Trustee or the Trust
Administrator, substantially in the form annexed hereto as Exhibit A-11 and
evidencing a Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class MV-4 Principal Distribution Amount": With respect to
any Distribution Date, the excess of (x) the sum of (i) the Certificate
Principal Balance of the Class AV-1 Certificates (after taking into account the
payment of the Class AV-1 Principal Distribution Amount on such Distribution
Date), (ii) the Certificate Principal Balance of the Class MV-1 Certificates
(after taking into account the payment of the Class MV-1 Principal Distribution
Amount on such Distribution Date), (iii) the Certificate Principal Balance of
the Class MV-2 Certificates (after taking into account the payment of the Class
MV-2 Principal Distribution Amount on such Distribution Date), (iv) the
Certificate Principal Balance of the Class MV-3 Certificates (after taking into
account the payment of the Class MV-3 Principal Distribution Amount on such
Distribution Date) and (v) the Certificate Principal Balance of the Class MV-4
Certificates immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 93.00% and (ii) the aggregate Stated Principal Balance of
the Group II Mortgage Loans as of the last day of the related Due Period and (B)
the aggregate Stated Principal Balance of the Group II Mortgage Loans as of the
last day of the related Due Period minus $126,479.56.

                                       -8-

<PAGE>

                  "Class OCF Certificate": Any one of the Class OCF Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-12 and evidencing a
Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class OCV Certificate": Any one of the Class OCV Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-13 and evidencing a
Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class PF Certificate": Any one of the Class PF Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-14 and evidencing a
Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class PV Certificate": Any one of the Class PF Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-15 and evidencing a
Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class R Certificate": Any one of the Class R Certificates
executed, authenticated and delivered by the Trustee or the Trust Administrator,
substantially in the form annexed hereto as Exhibit A-16 and evidencing the
ownership of the Class R-IA Interest, the Class R-IB Interest and the Class R-II
Interest.

                  "Class R-IA Interest": The uncertificated Residual Interest in
REMIC I-A.

                  "Class R-IB Interest": The uncertificated Residual Interest in
REMIC I-B.

                  "Class R-II Interest": The uncertificated Residual Interest in
REMIC II.

                  "Closing Date": November 9, 2001.

                  "Code": The Internal Revenue Code of 1986.

                  "Collection Account": The account or accounts created and
maintained, or caused to be created and maintained, by the Servicer pursuant to
Section 3.10(a), which shall be entitled "Litton Loan Servicing LP, as Servicer
for U. S. Bank National Association, as Trustee, in trust for the registered
holders of Salomon Brothers Mortgage Securities VII, Inc., Salomon Home Equity
Loan Trust, Series 2001-1, Asset Backed Pass-Through Certificates." The
Collection Account must be an Eligible Account.

                  "Commission": The Securities and Exchange Commission.

                  "Corporate Trust Office": The principal corporate trust office
of the Trust Administrator or the Trustee, as the case may be, at which at any
particular time its corporate trust business in connection with this Agreement
shall be administered, which office, with respect to the Trust Administrator, at
the date of the execution of this instrument is located at 111 Wall Street, 14th

                                       -9-

<PAGE>

Floor, New York New York 10005, or such other address as the Trust Administrator
may designate from time to time by notice to the Certificateholders, the
Depositor, the Servicer and the Trustee and, with respect to the Trustee, at the
date of the execution of this instrument is located at 180 East Fifth Street,
St. Paul, Minnesota 55101, or such other address as the Trustee may designate
from time to time by notice to the Certificateholders, the Depositor, the
Servicer and the Trust Administrator.

                  "Corresponding Certificate": With respect to (i) REMIC I-A
Regular Interest IA- LTAF1, (ii) REMIC I-A Regular Interest IA-LTAF2, (iii)
REMIC I-A Regular Interest IA-LTAF3, (iv) REMIC I-A Regular Interest IA-LTMF1,
(v) REMIC I-A Regular Interest IA-LTMF2, (vi) REMIC I-A Regular Interest
IA-LTMF3, (vii) REMIC I-A Regular Interest IA-LTPF, (viii) REMIC I-B Regular
Interest IB-LTAV1, (ix) REMIC I-B Regular Interest IB-LTMV1, (x) REMIC I-B
Regular Interest IB-LTMV2, (xi) REMIC I-B Regular Interest IB-LTMV3, (xii) REMIC
I-B Regular Interest IB-LTMV4 and (xiii) REMIC I-B Regular Interest IB-LTPV, (i)
the Class AF-1 Certificates, (ii) the Class AF-2 Certificates, (iii) the Class
AF-3 Certificates, (iv) the Class MF-1 Certificates, (v) the Class MF-2
Certificates, (vi) the Class MF-3 Certificates, (vii) the Class PF Certificates,
(viii) the Class AV-1 Certificates, (ix) the Class MV-1 Certificates, (x) the
Class MV-2 Certificates, (xi) the Class MV-3 Certificates, (xii) the Class MV-4
Certificates and (xiii) the Class PV Certificates, respectively.

                  "Credit Enhancement Percentage": For any Distribution Date and
the Group I Certificates, the percentage equivalent of a fraction, the numerator
of which is the sum of the aggregate Certificate Principal Balances of the Group
I Mezzanine Certificates and the Class OCF Certificates, and the denominator of
which is the aggregate Stated Principal Balance of the Group I Mortgage Loans,
calculated after taking into account distributions of principal on the Group I
Mortgage Loans and distribution of the Principal Distribution Amount to the
Group I Certificates then entitled to distributions of principal on such
Distribution Date. For any Distribution Date and the Group II Certificates, the
percentage equivalent of a fraction, the numerator of which is the sum of the
aggregate Certificate Principal Balances of the Group II Mezzanine Certificates
and the Class OCV Certificates, and the denominator of which is the aggregate
Stated Principal Balance of the Group II Mortgage Loans, calculated after taking
into account distributions of principal on the Group II Mortgage Loans and
distribution of the Principal Distribution Amount to the Group II Certificates
then entitled to distributions of principal on such Distribution Date.

                  "Cumulative Loss Percentage": With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
aggregate amount of Realized Losses incurred from the Cut-off Date to the last
day of the preceding calendar month and the denominator of which is the sum of
the aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off
Date.

                  "Cut-off Date": With respect to each Original Mortgage Loan,
October 19, 2001. With respect to all Qualified Substitute Mortgage Loans, their
respective dates of substitution. References herein to the "Cut-off Date," when
used with respect to more than one Mortgage Loan, shall be to the respective
Cut-off Dates for such Mortgage Loans.

                  "Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient

                                      -10-

<PAGE>

Valuation.

                  "Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.

                  "Definitive Certificates": As defined in Section 5.01(b).

                  "Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.

                  "Delinquency Percentage": With respect to either Loan Group,
as of the last day of the related Due Period, the percentage equivalent of a
fraction, the numerator of which is the aggregate Stated Principal Balance of
all Mortgage Loans in that Loan Group that, as of the last day of the previous
calendar month, are 60 or more days delinquent, are in foreclosure, have been
converted to REO Properties or have been discharged by reason of bankruptcy, and
the denominator of which is the aggregate Stated Principal Balance of the
Mortgage Loans and REO Properties in that Loan Group as of the last day of such
calendar month; provided, however, that any Mortgage Loan purchased by the
Servicer pursuant to Section 3.16(c) shall not be included in either the
numerator or the denominator for purposes of calculating the Delinquency
Percentage.

                  "Depositor": Salomon Brothers Mortgage Securities VII, Inc., a
Delaware corporation, or its successor in interest.

                  "Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.

                  "Depository Institution": Any depository institution or trust
company, including the Trustee and the Trust Administrator, that (a) is
incorporated under the laws of the United States of America or any State
thereof, (b) is subject to supervision and examination by federal or state
banking authorities and (c) has outstanding unsecured commercial paper or other
short-term unsecured debt obligations (or, in the case of a depository
institution that is the principal subsidiary of a holding company, such holding
company has unsecured commercial paper or other short-term unsecured debt
obligations) that are rated F-1 by Fitch and A-1+ by S&P (or comparable ratings
if Fitch and S&P are not the Rating Agencies).

                  "Depository Participant": A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.

                  "Determination Date": With respect to each Distribution Date,
the 15th day of the

                                      -11-

<PAGE>

calendar month in which such Distribution Date occurs or, if such 15th day is
not a Business Day, the Business Day immediately preceding such 15th day.

                  "Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to customers, the performance of any construction work thereon or any use
of such REO Property in a trade or business conducted by REMIC I-A or REMIC I-B
other than through an Independent Contractor; provided, however, that the
Trustee (or the Servicer on behalf of the Trustee) shall not be considered to
Directly Operate an REO Property solely because the Trustee (or the Servicer on
behalf of the Trustee) establishes rental terms, chooses tenants, enters into or
renews leases, deals with taxes and insurance, or makes decisions as to repairs
or capital expenditures with respect to such REO Property.

                  "Disqualified Organization": Any of the following: (i) the
United States, any State or political subdivision thereof, any possession of the
United States, or any agency or instrumentality of any of the foregoing (other
than an instrumentality which is a corporation if all of its activities are
subject to tax and, except for Freddie Mac, a majority of its board of directors
is not selected by such governmental unit), (ii) any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (including the tax imposed by Section 511 of the Code on
unrelated business taxable income), (iv) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code, (v) an "electing
large partnership" and (vi) any other Person so designated by the Trustee or the
Trust Administrator based upon an Opinion of Counsel that the holding of an
Ownership Interest in a Class R Certificate by such Person may cause any Trust
REMIC or any Person having an Ownership Interest in any Class of Certificates
(other than such Person) to incur a liability for any federal tax imposed under
the Code that would not otherwise be imposed but for the Transfer of an
Ownership Interest in a Class R Certificate to such Person. The terms "United
States," "State" and "international organization" shall have the meanings set
forth in Section 7701 of the Code or successor provisions.

                  "Distribution Account": The trust account or accounts created
and maintained by the Trust Administrator pursuant to Section 3.10(b), which
shall be entitled "Citibank, N.A., as Trust Administrator for U.S. Bank National
Association, as Trustee, in trust for the registered holders of Salomon Brothers
Mortgage Securities VII, Inc., Salomon Home Equity Loan Trust, Series 2001-1,
Asset Backed Pass-Through Certificates." The Distribution Account must be an
Eligible Account.

                  "Distribution Date": The 25th day of any month, or if such
25th day is not a Business Day, the Business Day immediately following such 25th
day, commencing in November 2001.

                  "Due Date": With respect to each Mortgage Loan and any
Distribution Date, the first day of the calendar month in which such
Distribution Date occurs on which the Monthly Payment for such Mortgage Loan was
due (or, in the case of any Mortgage Loan under terms of which the Monthly
Payment for such Mortgage Loan was due on a day other than the first day of the
calendar month in which such Distribution Date occurs, the day during the
related Due Period on which such Monthly Payment was due), in each case
exclusive of any days of grace.

                                      -12-

<PAGE>

                  "Due Period": With respect to any Distribution Date, the
period commencing on the 12th day of the month immediately preceding the month
in which such Distribution Date occurs (or in the case of the first Distribution
Date, the Cut-off Date) and ending on the 11th day of the month in which such
Distribution Date occurs.

                  "Eligible Account": Any of (i) an account or accounts
maintained with a Depository Institution, (ii) an account or accounts the
deposits in which are fully insured by the FDIC or (iii) a trust account or
accounts maintained with the corporate trust department of a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity. Eligible Accounts may bear interest.

                  "ERISA": The Employee Retirement Income Security Act of 1974,
as amended.

                  "Estate in Real Property": A fee simple estate in a parcel of
land.

                  "Excess Overcollateralized Amount": With respect to the Class
AF Certificates and the Group I Mezzanine Certificates and any Distribution
Date, the excess, if any, of (i) the Overcollateralized Amount for the Group I
Certificates for such Distribution Date over (ii) the Required
Overcollateralized Amount for the Group I Certificates for such Distribution
Date. With respect to the Class AV-1 Certificates and the Group II Mezzanine
Certificates and any Distribution Date, the excess, if any, of (i) the
Overcollateralized Amount for the Group II Certificates for such Distribution
Date over (ii) the Required Overcollateralized Amount for the Group II
Certificates for such Distribution Date.

                  "Expense Adjusted Mortgage Rate": With respect to any Mortgage
Loan (or the related REO Property), as of any date of determination, a per annum
rate of interest equal to the applicable Mortgage Rate thereon as of the first
day of the related Due Period minus the sum of (i) the Administration Fee Rate
and (ii) the Servicing Fee Rate.

                  "Expense Adjusted Maximum Mortgage Rate": With respect to any
Mortgage Loan (or the related REO Property), as of any date of determination, a
per annum rate of interest equal to the applicable Maximum Mortgage Rate thereon
as of the first day of the related Due Period minus the sum of (i) the
Administration Fee Rate and (ii) the Servicing Fee Rate.

                  "Extraordinary Trust Fund Expense": Any amounts reimbursable
to the Trustee or the Trust Administrator, or any director, officer, employee or
agent of the Trustee or the Trust Administrator from the Trust Fund pursuant to
Section 8.05 or Section 10.01(c) and any amounts payable from the Distribution
Account in respect of taxes pursuant to Section 10.01(g)(iii).

                  "Fannie Mae": Fannie Mae, formally known as the Federal
National Mortgage Association, or any successor thereto.

                  "FDIC": Federal Deposit Insurance Corporation or any successor
thereto.

                  "Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any

                                      -13-

<PAGE>

REO Property (other than a Mortgage Loan or REO Property purchased by the
Seller, the Depositor or the Servicer pursuant to or as contemplated by Section
2.03, Section 3.16(c) or Section 9.01), a determination made by the Servicer
that all Insurance Proceeds, Liquidation Proceeds and other payments or
recoveries which the Servicer, in its reasonable good faith judgment, expects to
be finally recoverable in respect thereof have been so recovered. The Servicer
shall maintain records, prepared by a Servicing Officer, of each Final Recovery
Determination made thereby.

                  "Fitch": Fitch, Inc., or its successor in interest.

                  "Formula Rate": For any Distribution Date and the Class AV-1
Certificates, the Group II Mezzanine Certificates and the REMIC I-B Regular
Interests (other than REMIC I-B Regular Interest IB-LTAA, REMIC I-B Regular
Interest IB-LTZZ and REMIC I-B Regular Interest IB-LTPV) the lesser of (i)
One-Month LIBOR plus the related Certificate Margin and (ii) the Maximum Cap
Rate.

                  "Freddie Mac": Freddie Mac, formally known as the Federal Home
Loan Mortgage Corporation, or any successor thereto.

                  "Gross Margin": With respect to each Group II Mortgage Loan,
the fixed percentage set forth in the related Mortgage Note that is added to the
Index on each Adjustment Date in accordance with the terms of the related
Mortgage Note used to determine the Mortgage Rate for such Group II Mortgage
Loan.

                  "Group I Available Distribution Amount": With respect to any
Distribution Date and the Group I Mortgage Loans, an amount equal to (1) the sum
of (a) the aggregate of the amounts on deposit in the Collection Account and
Distribution Account attributable to such Mortgage Loans as of the close of
business on the related Determination Date, (b) the aggregate of any amounts
received in respect of an REO Property withdrawn from any REO Account and
deposited in the Distribution Account for such Distribution Date pursuant to
Section 3.23, (c) the aggregate of any amounts deposited in the Distribution
Account by the Servicer in respect of Prepayment Interest Shortfalls
attributable to such Mortgage Loans for such Distribution Date pursuant to
Section 3.24, (d) the aggregate of any Advances attributable to such Mortgage
Loans made by the Servicer for such Distribution Date pursuant to Section 4.03,
(e) the aggregate of any advances attributable to such Mortgage Loans made by
the Trust Administrator or the Trustee, as applicable, for such Distribution
Date pursuant to Section 7.02(b) and (f) with respect to the first Distribution
Date, the Group I Initial Deposit, reduced (to not less than zero), by (2) the
sum of (x) the portion of the amount described in clause (1)(a) above that
represents (i) Monthly Payments on the Group I Mortgage Loans received from a
Mortgagor on or prior to the Determination Date but due during any Due Period
subsequent to the related Due Period, (ii) Principal Prepayments on the Group I
Mortgage Loans received after the related Prepayment Period (together with any
interest payments received with such Principal Prepayments to the extent they
represent the payment of interest accrued on the Group I Mortgage Loans during a
period subsequent to the related Prepayment Period), (iii) Liquidation Proceeds
and Insurance Proceeds received in respect of the Group I Mortgage Loans after
the related Prepayment Period, (iv) amounts reimbursable or payable to the
Depositor, the Servicer, the Trustee, the Trust Administrator, the Seller or any
Sub-Servicer pursuant to Section 3.11 or Section 3.12 or otherwise payable in
respect of Extraordinary Trust Fund Expenses attributable to such Mortgage
Loans, (v)

                                      -14-

<PAGE>

Stayed Funds, (vi) the Administration Fee attributable to such Mortgage Loans
payable from the Distribution Account pursuant to Section 8.05, (vii) amounts
deposited in the Collection Account or the Distribution Account in error and
(viii) the amount of any Prepayment Charges collected by the Servicer in
connection with the Principal Prepayment of any of the Group I Mortgage Loans or
any Servicer Prepayment Charge Payment Amount with respect to the Group I
Mortgage Loans, and (y) amounts reimbursable to the Trustee or the Trust
Administrator, as applicable, for an advance made pursuant to Section 7.02(b)
which advance the Trustee or Trust Administrator, as applicable, has determined
to be nonrecoverable from the Stayed Funds in respect of which it was made.

                  "Group I Certificates": The Class AF Certificates, the Group I
Mezzanine Certificates, the Class OCF Certificates and the Class PF
Certificates.

                  "Group I Initial Deposit": $82,838.77 in cash to be deposited
by the Depositor with the Trust Administrator for deposit into the Group I
Initial Deposit Account on or before the Closing Date, relating to the Group I
Mortgage Loans having a Due Date prior to the beginning of the first Due Period.

                  "Group I Initial Deposit Account": The Group I Initial Deposit
Account established in accordance with Section 3.10(b) hereof and maintained by
the Trust Administrator, which shall be entitled "Citibank, N.A., as Trust
Administrator for U.S. Bank National Association, as Trustee, in trust for the
registered holders of Salomon Brothers Mortgage Securities VII, Inc., Salomon
Home Equity Loan Trust, Series 2001-1, Asset Backed Pass-Through Certificates,
Group I Initial Deposit Account," which must be an Eligible Account.

                  "Group I Interest Remittance Amount ": For any Distribution
Date, that portion of the Group I Available Distribution Amount for such
Distribution Date that represents interest received or advanced on the Group I
Mortgage Loans (other than related Net Simple Interest Excess, if applicable).

                  "Group I Marker Rate": With respect to the Class OCF
Certificates and any Distribution Date, a per annum rate equal to two (2) times
the weighted average of the REMIC I-A Remittance Rate for the REMIC I-A Regular
Interests (other than REMIC I-A Regular Interest IA- LTAA and REMIC I Regular
Interest IA-LTPV), with the rate on REMIC I-A Regular Interest IA- LTAF1 subject
to a cap equal to 2.868% per annum in the case of each Distribution Date through
and including the Distribution Date on which the aggregate principal balance of
the Group I Mortgage Loans (and properties acquired in respect thereof)
remaining in the Trust Fund is reduced to less than 10% of the aggregate
principal balance of the Group I Mortgage Loans as of the Cut-off Date and
3.368% per annum in the case of each Distribution Date thereafter; with the rate
on REMIC I-A Regular Interest IA-LTAF2 subject to a cap equal to 4.071% per
annum in the case of each Distribution Date through and including the
Distribution Date on which the aggregate principal balance of the Group I
Mortgage Loans (and properties acquired in respect thereof) remaining in the
Trust Fund is reduced to less than 10% of the aggregate principal balance of the
Group I Mortgage Loans as of the Cut-off Date and 4.571% per annum in the case
of each Distribution Date thereafter; with the rate on REMIC I-A Regular
Interest IA-LTAF3 subject to a cap equal to 5.378% per annum in the case of each
Distribution Date through and including the Distribution Date on which the
aggregate principal balance of the Group I Mortgage Loans (and properties
acquired in respect

                                      -15-

<PAGE>

thereof) remaining in the Trust Fund is reduced to less than 10% of the
aggregate principal balance of the Group I Mortgage Loans as of the Cut-off Date
and 5.878% per annum in the case of each Distribution Date thereafter; with the
rate on REMIC I-A Regular Interest IA-LTMF1 subject to a cap equal to 5.671% per
annum in the case of each Distribution Date through and including the
Distribution Date on which the aggregate principal balance of the Group I
Mortgage Loans (and properties acquired in respect thereof) remaining in the
Trust Fund is reduced to less than 10% of the aggregate principal balance of the
Group I Mortgage Loans as of the Cut-off Date and 6.171% per annum in the case
of each Distribution Date thereafter; with the rate on REMIC I-A Regular
Interest IA-LTMF2 subject to a cap equal to 6.310% per annum in the case of each
Distribution Date through and including the Distribution Date on which the
aggregate principal balance of the Group I Mortgage Loans (and properties
acquired in respect thereof) remaining in the Trust Fund is reduced to less than
10% of the aggregate principal balance of the Group I Mortgage Loans as of the
Cut-off Date and 6.810% per annum in the case of each Distribution Date
thereafter; with the rate on REMIC I-A Regular Interest IA-LTMF3 subject to a
cap equal to 6.706% per annum in the case of each Distribution Date through and
including the Distribution Date on which the aggregate principal balance of the
Group I Mortgage Loans (and properties acquired in respect thereof) remaining in
the Trust Fund is reduced to less than 10% of the aggregate principal balance of
the Group I Mortgage Loans as of the Cut-off Date and 7.206% per annum in the
case of each Distribution Date thereafter; and with the rate on REMIC I-A
Regular Interest IA-LTZZ subject to a cap of zero for the purpose of this
calculation.

                  "Group I Mezzanine Certificates": The Class MF-1 Certificates,
the Class MF-2 Certificates and the Class MF-3 Certificates.

                  "Group I Mortgage Loan": Each of the Mortgage Loans identified
on the Mortgage Loan Schedule as having a fixed Mortgage Rate.

                  "Group I Net Monthly Excess Cashflow": With respect to any
Distribution Date, the sum of (i) any Overcollateralization Reduction Amount
relating to the Group I Certificates for such Distribution Date and (ii) the
excess of (x) the Group I Available Distribution Amount for such Distribution
Date over (y) the sum for such Distribution Date of (A) the Senior Interest
Distribution Amount payable to the holders of the Class AF Certificates and the
Interest Distribution Amount payable to the holders of the Group I Mezzanine
Certificates and (B) the sum of the amounts described in clauses (b)(i) through
(iii) of the definition of Group I Principal Distribution Amount.

                  "Group I Principal Distribution Amount ": With respect to any
Distribution Date, the sum of:

                  (i) the principal portion of each Monthly Payment on the Group
         I Mortgage Loans due during the related Due Period and received on or
         prior to the related Determination Date;

                  (ii) the Stated Principal Balance of any Group I Mortgage Loan
         that was purchased during the related Prepayment Period pursuant to or
         as contemplated by Section 2.03, Section 3.16(c) or Section 9.01 and
         the amount of any shortfall deposited in the Collection Account in
         connection with the substitution of a Deleted Mortgage Loan in Loan

                                      -16-

<PAGE>

         Group I pursuant to Section 2.03 during the related Prepayment Period;

                  (iii) the principal portion of all other unscheduled
         collections (including, without limitation, Principal Prepayments,
         Insurance Proceeds, Liquidation Proceeds and REO Principal
         Amortization) received with respect to the Group I Mortgage Loans
         during the related Prepayment Period;

                  (iv) the principal portion of any Realized Losses incurred on
         any of the Group I Mortgage Loans in the calendar month preceding such
         Distribution Date; and

                  (v) the amount of any Overcollateralization Increase Amount
         relating to the Group I Mortgage Loans for such Distribution Date;

                  minus:

                  (vi) the amount of any Overcollateralization Reduction Amount
         relating to the Group I Mortgage Loans for such Distribution Date.

                  "Group II Available Distribution Amount": With respect to any
Distribution Date and the Group II Mortgage Loans, an amount equal to (1) the
sum of (a) the aggregate of the amounts on deposit in the Collection Account and
Distribution Account attributable to such Mortgage Loans as of the close of
business on the related Determination Date, (b) the aggregate of any amounts
received in respect of an REO Property withdrawn from any REO Account and
deposited in the Distribution Account for such Distribution Date pursuant to
Section 3.23, (c) the aggregate of any amounts deposited in the Distribution
Account by the Servicer in respect of Prepayment Interest Shortfalls
attributable to such Mortgage Loans for such Distribution Date pursuant to
Section 3.24, (d) the aggregate of any Advances attributable to such Mortgage
Loans made by the Servicer for such Distribution Date pursuant to Section 4.03
and (e) the aggregate of any advances attributable to such Mortgage Loans made
by the Trust Administrator or the Trustee, as applicable, for such Distribution
Date pursuant to Section 7.02(b) and (f) with respect to the first Distribution
Date, the Group II Initial Deposit reduced (to not less than zero), by (2) the
sum of (x) the portion of the amount described in clause (1)(a) above that
represents (i) Monthly Payments on the Group II Mortgage Loans received from a
Mortgagor on or prior to the Determination Date but due during any Due Period
subsequent to the related Due Period, (ii) Principal Prepayments on the Group II
Mortgage Loans received after the related Prepayment Period (together with any
interest payments received with such Principal Prepayments to the extent they
represent the payment of interest accrued on the Group II Mortgage Loans during
a period subsequent to the related Prepayment Period), (iii) Liquidation
Proceeds and Insurance Proceeds received in respect of the Group II Mortgage
Loans after the related Prepayment Period, (iv) amounts reimbursable or payable
to the Depositor, the Servicer, the Trustee, the Trust Administrator, the Seller
or any Sub-Servicer pursuant to Section 3.11 or Section 3.12 or otherwise
payable in respect of Extraordinary Trust Fund Expenses attributable to such
Mortgage Loans, (v) Stayed Funds, (vi) the Administration Fee attributable to
such Mortgage Loans payable from the Distribution Account pursuant to Section
8.05, (vii) amounts deposited in the Collection Account or the Distribution
Account in error and (viii) the amount of any Prepayment Charges collected by
the Servicer in connection with the Principal Prepayment of any of the Group II
Mortgage Loans or any Servicer Prepayment Charge Payment Amount with respect

                                      -17-

<PAGE>

to the Group II Mortgage Loans, and (y) amounts reimbursable to the Trustee or
the Trust Administrator, as applicable, for an advance made pursuant to Section
7.02(b) which advance the Trustee or Trust Administrator, as applicable, has
determined to be nonrecoverable from the Stayed Funds in respect of which it was
made.

                  "Group II Certificates": The Class AV-1 Certificates, the
Group II Mezzanine Certificates, the Class OCV Certificates and the Class PV
Certificates.

                  "Group II Initial Deposit": $16,759.01 in cash to be deposited
by the Depositor with the Trust Administrator for deposit into the Group II
Initial Deposit Account on or before the Closing Date, relating to the Group II
Mortgage Loans having a Due Date prior to the beginning of the first Due Period.

                  "Group II Initial Deposit Account": The Group II Initial
Deposit Account established in accordance with Section 3.10(b) hereof and
maintained by the Trust Administrator, which shall be entitled "Citibank, N.A.,
as Trust Administrator for U.S. Bank National Association, as Trustee, in trust
for the registered holders of Salomon Brothers Mortgage Securities VII, Inc.,
Salomon Home Equity Loan Trust, Series 2001-1, Asset Backed Pass-Through
Certificates, Group II Initial Deposit Account," which must be an Eligible
Account.

                  "Group II Interest Remittance Amount ": For any Distribution
Date, that portion of the Group II Available Distribution Amount for such
Distribution Date that represents interest received or advanced on the Group II
Mortgage Loans (other than related Net Simple Interest Excess, if applicable).

                  "Group II Marker Rate": With respect to the Class OCV
Certificates and any Distribution Date, a per annum rate equal to two (2) times
the weighted average of the REMIC I-B Remittance Rate for each of the REMIC I-B
Regular Interests (other than REMIC I-B Regular Interest IB-LTAA and REMIC I
Regular Interest IB-LTPV), with the rate on each such REMIC I-B Regular Interest
subject to a cap equal to the related Formula Rate for the purpose of this
calculation for such Distribution Date and with the rate on REMIC I-B Regular
Interest IB-LTZZ subject to a cap of zero for the purpose of this calculation;
provided however, each cap and the REMIC I-B Remittance Rate shall be multiplied
by a fraction, the numerator of which is the actual number days in the related
Interest Accrual Period and the denominator of which is 30.

                  "Group II Mezzanine Certificates": The Class MV-1
Certificates, the Class MV-2 Certificates, the Class MV-3 Certificates and the
Class MV-4 Certificates.

                  "Group II Mortgage Loan": Each of the Mortgage Loans
identified on the Mortgage Loan Schedule as having a Mortgage Rate that is
subject to adjustment.

                  "Group II Net Monthly Excess Cashflow": With respect to any
Distribution Date, the sum of (i) any Overcollateralization Reduction Amount
relating to the Group II Certificates for such Distribution Date and (ii) the
excess of (x) the Group II Available Distribution Amount for such Distribution
Date over (y) the sum for such Distribution Date of (A) the Senior Interest
Distribution Amount payable to the holders of the Class AV-1 Certificates and
the Interest Distribution Amount

                                      -18-

<PAGE>

payable to the holders of the Group II Mezzanine Certificates and (B) the sum of
the amounts described in clauses (b)(i) through (iii) of the definition of Group
II Principal Distribution Amount.

                  "Group II Principal Distribution Amount ": With respect to any
Distribution Date, the sum of:

                  (i) the principal portion of each Monthly Payment on the Group
         II Mortgage Loans due during the related Due Period and received on or
         prior to the related Determination Date;

                  (ii) the Stated Principal Balance of any Group II Mortgage
         Loan that was purchased during the related Prepayment Period pursuant
         to or as contemplated by Section 2.03, Section 3.16(c) or Section 9.01
         and the amount of any shortfall deposited in the Collection Account in
         connection with the substitution of a Deleted Mortgage Loan in Loan
         Group II pursuant to Section 2.03 during the related Prepayment Period;

                  (iii) the principal portion of all other unscheduled
         collections (including, without limitation, Principal Prepayments,
         Insurance Proceeds, Liquidation Proceeds and REO Principal
         Amortization) received with respect to the Group II Mortgage Loans
         during the related Prepayment Period;

                  (iv) the principal portion of any Realized Losses incurred on
         any of the Group II Mortgage Loans in the calendar month preceding such
         Distribution Date; and

                  (v) the amount of any Overcollateralization Increase Amount
         relating to the Group II Mortgage Loans for such Distribution Date;

                  minus:

                  (vi) the amount of any Overcollateralization Reduction Amount
         relating to the Group II Mortgage Loans for such Distribution Date.

                  "Independent": When used with respect to any specified Person,
any such Person who (a) is in fact independent of the Depositor, the Servicer,
the Seller and their respective Affiliates, (b) does not have any direct
financial interest in or any material indirect financial interest in the
Depositor, the Servicer, the Seller or any Affiliate thereof, and (c) is not
connected with the Depositor, the Servicer, the Seller or any Affiliate thereof
as an officer, employee, promoter, underwriter, trustee, trust administrator,
partner, director or Person performing similar functions; provided, however,
that a Person shall not fail to be Independent of the Depositor, the Servicer,
the Seller or any Affiliate thereof merely because such Person is the beneficial
owner of 1% or less of any class of securities issued by the Depositor, the
Servicer, the Seller or any Affiliate thereof, as the case may be.

                  "Independent Contractor": Either (i) any Person (other than
the Servicer) that would be an "independent contractor" with respect to REMIC
I-A and REMIC I-B within the meaning of Section 856(d)(3) of the Code if REMIC
I-A or REMIC I-B were a real estate investment trust

                                      -19-

<PAGE>

(except that the ownership tests set forth in that section shall be considered
to be met by any Person that owns, directly or indirectly, 35% or more of any
Class of Certificates), so long as neither REMIC I-A nor REMIC I-B receives or
derives any income from such Person and provided that the relationship between
such Person and REMIC I-A or REMIC I-B is at arm's length, all within the
meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any other Person
(including the Servicer) if the Trustee and the Trust Administrator have
received an Opinion of Counsel to the effect that the taking of any action in
respect of any REO Property by such Person, subject to any conditions therein
specified, that is otherwise herein contemplated to be taken by an Independent
Contractor will not cause such REO Property to cease to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code (determined
without regard to the exception applicable for purposes of Section 860D(a) of
the Code), or cause any income realized in respect of such REO Property to fail
to qualify as Rents from Real Property.

                  "Index": With respect to each Group II Mortgage Loan and each
related Adjustment Date, the index specified in the related Mortgage Note.

                  "Insurance Proceeds": Proceeds of any title policy, hazard
policy or other insurance policy covering a Mortgage Loan, to the extent such
proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the procedures that the
Servicer would follow in servicing mortgage loans held for its own account,
subject to the terms and conditions of the related Mortgage Note and Mortgage.

                  "Interest Accrual Period": With respect to any Distribution
Date and the Group I Certificates (other than the Class PF Certificates), the
Class OCV Certificates, the REMIC I-A Regular Interests and the REMIC I-B
Regular Interests, the period commencing on the 15th day of the month
immediately preceding the month in which such Distribution Date occurs and
ending on the 14th day of the month in which such Distribution Date occurs. Each
such Interest Accrual Period shall be deemed to be 30 days long regardless of
its actual length.

                  With respect to any Distribution Date and the Class AV-1
Certificates and the Group II Mezzanine Certificates, the period commencing on
the Distribution Date of the month immediately preceding the month in which such
Distribution Date occurs (or, in the case of the first Distribution Date,
commencing on the Closing Date) and ending on the day preceding such
Distribution Date.

                  "Interest Carry Forward Amount": With respect to any
Distribution Date and the Class A Certificates or the Mezzanine Certificates,
the sum of (i) the amount, if any, by which (a) the Interest Distribution Amount
for such Class of Certificates as of the immediately preceding Distribution Date
exceeded (b) the actual amount distributed on such Class of Certificates in
respect of interest on such immediately preceding Distribution Date, (ii) the
amount of any Interest Carry Forward Amount for such Class of Certificates
remaining unpaid from the previous Distribution Date and (iii) accrued interest
on the sum of (i) and (ii) above calculated at the related Pass-Through Rate for
the most recently ended Interest Accrual Period.

                  "Interest Determination Date": With respect to the Class AV-1
Certificates and the Group II Mezzanine Certificates, and, for purposes of the
definition of the Group I Marker Rate or

                                      -20-

<PAGE>

the REMIC I-B Regular Interest IB-LTAV1, REMIC I-B Regular Interest IB-LTMV1,
REMIC I-B Regular Interest IB-LTMV2, REMIC I-B Regular IB-LTMV3, REMIC I-B
Regular Interest IB- LTMV4 and any Interest Accrual Period therefor, the second
London Business Day preceding the commencement of such Interest Accrual Period.

                  "Interest Distribution Amount": With respect to any
Distribution Date and any Class A Certificates, any Mezzanine Certificates, any
Class OCF Certificates and any Class OCV Certificates, the aggregate Accrued
Certificate Interest on the Certificates of such Class for such Distribution
Date.

                  "Late Collections": With respect to any Mortgage Loan and any
Due Period, all amounts received subsequent to the Determination Date
immediately following such Due Period, whether as late payments of Monthly
Payments or as Insurance Proceeds, Liquidation Proceeds or otherwise, which
represent late payments or collections of principal and/or interest due (without
regard to any acceleration of payments under the related Mortgage and Mortgage
Note) but delinquent for such Due Period and not previously recovered.

                  "Liquidation Event": With respect to any Mortgage Loan, any of
the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is removed from REMIC I-A or REMIC I-B, as applicable, by reason of its
being purchased, sold or replaced pursuant to or as contemplated by Section
2.03, Section 3.16(c) or Section 9.01. With respect to any REO Property, either
of the following events: (i) a Final Recovery Determination is made as to such
REO Property; or (ii) such REO Property is removed from REMIC I-A or REMIC I-B,
as applicable, by reason of its being purchased pursuant to Section 9.01.

                  "Liquidation Proceeds": The amount (other than Insurance
Proceeds or amounts received in respect of the rental of any REO Property prior
to REO Disposition) received by the Servicer in connection with (i) the taking
of all or a part of a Mortgaged Property by exercise of the power of eminent
domain or condemnation, (ii) the liquidation of a defaulted Mortgage Loan
through a trustee's sale, foreclosure sale or otherwise, or (iii) the
repurchase, substitution or sale of a Mortgage Loan or an REO Property pursuant
to or as contemplated by Section 2.03, Section 3.16(c), Section 3.23 or Section
9.01.

                  "Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at such date and the denominator of which
is the Value of the related Mortgaged Property.

                  "Loan Group": The Group I Mortgage Loans or the Group II
Mortgage Loans, as applicable.

                  "London Business Day": Any day on which banks in the City of
London are open and conducting transactions in United States dollars.

                  "Loss Severity Percentage": With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
amount of Realized Losses incurred on a

                                      -21-

<PAGE>

Mortgage Loan and the denominator of which is the principal balance of such
Mortgage Loan immediately prior to the liquidation of such Mortgage Loan.

                  "Maximum Cap Rate": For any Distribution Date and the Class
AV-1 Certificates and the Group II Mezzanine Certificates, a per annum rate
equal to the product of (x) the weighted average of the Expense Adjusted Maximum
Mortgage Rates of the Group II Mortgage Loans, weighted based on their Principal
Balances as of the first day of the related Due Period and (y) a fraction, the
numerator of which is 30 and the denominator of which is the actual number of
days elapsed in the related Interest Accrual Period.

                  "Maximum IA-LTZZ Uncertificated Interest Deferral Amount":
With respect to any Distribution Date, the excess of (i) accrued interest at the
REMIC I-A Remittance Rate applicable to REMIC I-A Regular Interest IA-LTZZ for
such Distribution Date on a balance equal to the Uncertificated Balance of REMIC
I-A Regular Interest IA-LTZZ minus the REMIC I-A Overcollateralization Amount,
in each case for such Distribution Date, over (ii) Uncertificated Interest on
the REMIC I-A Regular Interests (other than REMIC I-A Regular Interest IA-LTAA,
REMIC I Regular Interest IA-LTZZ and REMIC I-A Regular Interest IA-LTPF) for
such Distribution Date, with the rate on REMIC I-A Regular Interest IA-LTAF1
subject to a cap equal to 2.868% per annum in the case of each Distribution Date
through and including the Distribution Date on which the aggregate principal
balance of the Group I Mortgage Loans (and properties acquired in respect
thereof) remaining in the Trust Fund is reduced to less than 10% of the
aggregate principal balance of the Group I Mortgage Loans as of the Cut-off Date
and 3.368% per annum in the case of each Distribution Date thereafter; with the
rate on REMIC I-A Regular Interest IA-LTAF2 subject to a cap equal to 4.071% per
annum in the case of each Distribution Date through and including the
Distribution Date on which the aggregate principal balance of the Group I
Mortgage Loans (and properties acquired in respect thereof) remaining in the
Trust Fund is reduced to less than 10% of the aggregate principal balance of the
Group I Mortgage Loans as of the Cut-off Date and 4.571% per annum in the case
of each Distribution Date thereafter; with the rate on REMIC I-A Regular
Interest IA-LTAF3 subject to a cap equal to 5.378% per annum in the case of each
Distribution Date through and including the Distribution Date on which the
aggregate principal balance of the Group I Mortgage Loans (and properties
acquired in respect thereof) remaining in the Trust Fund is reduced to less than
10% of the aggregate principal balance of the Group I Mortgage Loans as of the
Cut-off Date and 5.878% per annum in the case of each Distribution Date
thereafter; with the rate on REMIC I-A Regular Interest IA-LTMF1 subject to a
cap equal to 5.671% per annum in the case of each Distribution Date through and
including the Distribution Date on which the aggregate principal balance of the
Group I Mortgage Loans (and properties acquired in respect thereof) remaining in
the Trust Fund is reduced to less than 10% of the aggregate principal balance of
the Group I Mortgage Loans as of the Cut-off Date and 6.171% per annum in the
case of each Distribution Date thereafter; with the rate on REMIC I-A Regular
Interest IA-LTMF2 subject to a cap equal to 6.310% per annum in the case of each
Distribution Date through and including the Distribution Date on which the
aggregate principal balance of the Group I Mortgage Loans (and properties
acquired in respect thereof) remaining in the Trust Fund is reduced to less than
10% of the aggregate principal balance of the Group I Mortgage Loans as of the
Cut-off Date and 6.810% per annum in the case of each Distribution Date
thereafter; with the rate on REMIC I-A Regular Interest IA-LTMF3 subject to a
cap equal to 6.706% per annum in the case of each Distribution Date through and
including the Distribution Date on which the aggregate principal balance of the
Group I Mortgage Loans (and

                                      -22-

<PAGE>

properties acquired in respect thereof) remaining in the Trust Fund is reduced
to less than 10% of the aggregate principal balance of the Group I Mortgage
Loans as of the Cut-off Date and 7.206% per annum in the case of each
Distribution Date thereafter.

                  "Maximum IB-LTZZ Uncertificated Interest Deferral Amount":
With respect to any Distribution Date, the excess of (i) accrued interest at the
REMIC I-B Remittance Rate applicable to REMIC I-B Regular Interest IB-LTZZ for
such Distribution Date on a balance equal to the Uncertificated Balance of REMIC
I-B Regular Interest IB-LTZZ minus the REMIC I-B Overcollateralization Amount,
in each case for such Distribution Date, over (ii) Uncertificated Interest on
the REMIC I-B Regular Interests (other than REMIC I-B Regular Interest IB-LTAA,
REMIC I-B Regular Interest IB-LTZZ and REMIC I-B Regular Interest IB-LTPV) for
such Distribution Date, with the rate on each REMIC I-B Regular Interest subject
to a cap equal to the related Formula Rate for the purpose of this calculation
for such Distribution Date; provided however, each cap and the REMIC I-B
Remittance Rate shall be multiplied by a fraction, the numerator of which is the
actual number days in the related Interest Accrual Period and the denominator of
which is 30.

                  "Maximum Mortgage Rate": With respect to each Group II
Mortgage Loan, the percentage set forth in the related Mortgage Note as the
maximum Mortgage Rate thereunder.

                  "Mezzanine Certificate": Any Group I Mezzanine Certificate or
Group II Mezzanine Certificate.

                  "Minimum Mortgage Rate": With respect to each Group II
Mortgage Loan, the percentage set forth in the related Mortgage Note as the
minimum Mortgage Rate thereunder.

                  "Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined: (a) after giving effect to (i) any Deficient Valuation and/or
Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction
in the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Servicer pursuant to Section 3.07 and (c) on the assumption that all other
amounts, if any, due under such Mortgage Loan are paid when due.

                  "Mortgage": The mortgage, deed of trust or other instrument
creating a first lien or second lien on, or first priority or second priority
security interest in, a Mortgaged Property securing a Mortgage Note.

                  "Mortgage File": The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.

                  "Mortgage Loan": Each mortgage loan transferred, assigned and
delivered to the Trustee pursuant to Section 2.01 or Section 2.03(b) of this
Agreement, as held from time to time as a part of the Trust Fund, the Mortgage
Loans so held being identified on the Mortgage Loan

                                      -23-

<PAGE>

Schedule.

                  "Mortgage Loan Purchase Agreement": The agreement between the
Seller and the Depositor, regarding the sale of the Mortgage Loans by the Seller
to the Depositor, substantially in the form of Exhibit D annexed hereto.

                  "Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans included in REMIC I-A and REMIC I-B on such date, attached hereto as
Schedule 1. The Mortgage Loan Schedule shall set forth the following information
with respect to each Mortgage Loan:

                  (i)      the Mortgage Loan identifying number;

                  (ii)     the Mortgagor's name;

                  (iii)    the street address of the Mortgaged Property
                           including the state and zip code;

                  (iv)     a code indicating whether the Mortgaged Property is
         owner-occupied;

                  (v)      the type of Residential Dwelling constituting the
         Mortgaged Property;

                  (vi)     the original months to maturity;

                  (vii)    the stated remaining months to maturity from the
         Cut-off Date based on the original amortization schedule;

                  (viii)   the Loan-to-Value Ratio at origination;

                  (ix)     the Mortgage Rate in effect immediately following
         the Cut-off Date;

                  (x)      (A) the date on which the first Monthly Payment was
         due on the Mortgage Loan and (B) if such date is not consistent with
         the Due Date currently in effect, such Due Date;

                  (xi)     the stated maturity date;

                  (xii)    the amount of the Monthly Payment at origination;

                  (xiii)   the amount of the Monthly Payment due on the first
         Due Date after the Cut- off Date;

                  (xiv)    the last Due Date on which a Monthly Payment was
         actually applied to the unpaid Stated Principal Balance;

                  (xv)     the original principal amount of the Mortgage Loan;

                  (xvi)    the principal balance of the Mortgage Loan as of the
         close of business on the

                                      -24-

<PAGE>

         Cut-off Date;

                  (xvii) a code indicating the purpose of the Mortgage Loan (i.
         e., purchase financing, Rate/Term Refinancing, Cash-Out Refinancing);

                  (xviii) with respect to each Group II Mortgage Loan, the
         Adjustment Dates, the Gross Margin, the Maximum Mortgage Rate, the
         Minimum Mortgage Rate, the Periodic Rate Cap, the maximum first
         Adjustment Date Mortgage Rate adjustment and the first Adjustment Date
         immediately following the Cut-off Date;

                  (xix) the Mortgage Rate at origination;

                  (xx) a code indicating the documentation program (i. e., Full
         Documentation, Limited Documentation, Stated Income Documentation);

                  (xxi) the risk grade;

                  (xxii) the Value of the Mortgaged Property;

                  (xxiii) the sale price of the Mortgaged Property, if
         applicable;

                  (xxiv) the actual unpaid principal balance of the Mortgage
         Loan as of the Cut-off Date;

                  (xxv) the type and term of the related Prepayment Charge;

                  (xxvi) with respect to each Group II Mortgage Loan, the
         rounding code (i. e., nearest 0.125%, next highest 0.125%);

                  (xxvii) the program code;

                  (xxviii) whether such Mortgage Loan is a Group I Mortgage Loan
         or a Group II Mortgage Loan; and

                  (xxix) a code indicating whether the Mortgage Loan is a Simple
         Interest Mortgage Loan or an Actuarial Mortgage Loan.

                  The Mortgage Loan Schedule shall set forth the following
information with respect to the Mortgage Loans in the aggregate, and for each
Loan Group in the aggregate, as of the Cut-off Date: (1) the number of Mortgage
Loans; (2) the current principal balance of the Mortgage Loans; (3) the weighted
average Mortgage Rate of the Mortgage Loans and (4) the weighted average
maturity of the Mortgage Loans. The Mortgage Loan Schedule shall be amended from
time to time by the Depositor in accordance with the provisions of this
Agreement. With respect to any Qualified Substitute Mortgage Loan, the Cut-off
Date shall refer to the related Cut-off Date for such Mortgage Loan, determined
in accordance with the definition of Cut-off Date herein.

                                      -25-

<PAGE>

                  "Mortgage Note": The original executed note or other evidence
of the indebtedness of a Mortgagor under a Mortgage Loan.

                  "Mortgage Pool": The pool of Mortgage Loans, identified on
Schedule 1 and existing from time to time thereafter, and any REO Properties
acquired in respect thereof.

                  "Mortgage Rate": With respect to each Mortgage Loan, the
annual rate at which interest accrues on such Mortgage Loan from time to time in
accordance with the provisions of the related Mortgage Note, which rate with
respect to the Group II Mortgage Loans, (A) as of any date of determination
until the first Adjustment Date following the Cut-off Date shall be the rate set
forth in the Mortgage Loan Schedule as the Mortgage Rate in effect immediately
following the Cut-off Date and (B) as of any date of determination thereafter
shall be the rate as adjusted on the most recent Adjustment Date equal to the
sum, rounded to the nearest 0.125% as provided in the Mortgage Note, of the
Index, as most recently available as of a date prior to the Adjustment Date as
set forth in the related Mortgage Note, plus the related Gross Margin; provided
that the Mortgage Rate on such Group II Mortgage Loan on any Adjustment Date
shall never be more than the lesser of (i) the sum of the Mortgage Rate in
effect immediately prior to the Adjustment Date plus the related Periodic Rate
Cap, if any, and (ii) the related Maximum Mortgage Rate, and shall never be less
than the greater of (i) the Mortgage Rate in effect immediately prior to the
Adjustment Date less the Periodic Rate Cap, if any, and (ii) the related Minimum
Mortgage Rate. With respect to each Mortgage Loan that becomes an REO Property,
as of any date of determination, the annual rate determined in accordance with
the immediately preceding sentence as of the date such Mortgage Loan became an
REO Property.

                  "Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property improved by a Residential Dwelling.

                  "Mortgagor": The obligor on a Mortgage Note.

                  "Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property) as of any date of determination, a per annum rate of
interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus
the Servicing Fee Rate.

                  "Net Simple Interest Excess": As of any As of any Distribution
Date, the excess, if any, of the aggregate amount of Simple Interest Excess over
the amount of Simple Interest Shortfall.

                  "Net Simple Interest Shortfall": As of any Distribution Date,
the excess, if any, of the aggregate amount of Simple Interest Shortfall over
the amount of Simple Interest Excess.

                  "Net WAC Pass-Through Rate": With respect to each REMIC I-A
Regular Interest, a rate per annum equal to the product of (x) the weighted
average of the Expense Adjusted Mortgage Rates of the Group I Mortgage Loans,
weighted based on their Stated Principal Balances as of the first day of the
related Due Period and (y) a fraction, the numerator of which is 30 and the
denominator of which is the actual number of days elapsed in the related
Interest Accrual Period.

                  With respect to each REMIC I-B Regular Interest, the Class
AV-1 Certificates and

                                      -26-

<PAGE>

the Group II Mezzanine Certificates and any Distribution Date, a rate per annum
equal to the product of (x) the weighted average of the Expense Adjusted
Mortgage Rates of the Group II Mortgage Loans, weighted based on their Stated
Principal Balances as of the first day of the related Due Period and (y) a
fraction, the numerator of which is 30 and the denominator of which is the
actual number of days elapsed in the related Interest Accrual Period.

                  "Net WAC Rate Carryover Amount": With respect to the Class
AV-1 Certificates and the Group II Mezzanine Certificates and any Distribution
Date, the sum of (A) the positive excess of (i) the amount of interest payable
to such Class of Certificates on such Distribution Date calculated at the
related Pass-Through Rate for such Distribution Date and (B) the related Net WAC
Rate Carryover Amount for the previous Distribution Date not previously paid,
together with interest thereon at a rate equal to the related Pass-Through Rate
for such Class of Certificates for such Distribution Date.

                  "New Lease": Any lease of REO Property entered into on behalf
of REMIC I-A or REMIC I-B, including any lease renewed or extended on behalf of
REMIC I-A or REMIC I-B, if REMIC I-A or REMIC I-B, as applicable, has the right
to renegotiate the terms of such lease.

                  "Nonrecoverable Advance": Any Advance previously made or
proposed to be made in respect of a Mortgage Loan or REO Property that, in the
good faith business judgment of the Servicer, will not or, in the case of a
proposed Advance, would not be ultimately recoverable from related Late
Collections, Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or
REO Property as provided herein.

                  "Nonrecoverable Servicing Advance": Any Servicing Advance
previously made or proposed to be made in respect of a Mortgage Loan or REO
Property that, in the good faith business judgment of the Servicer, will not or,
in the case of a proposed Servicing Advance, would not be ultimately recoverable
from related Late Collections, Insurance Proceeds or Liquidation Proceeds on
such Mortgage Loan or REO Property as provided herein.

                  "Non-United States Person": Any Person other than a United
States Person.

                  "Officers' Certificate": A certificate signed by the Chairman
of the Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), and by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Servicer, the Seller or the
Depositor, as applicable.

                  "One-Month LIBOR": With respect to the Class AV-1
Certificates, the Group II Mezzanine Certificates, and for purposes of the
definition of Group I Market Rate or Group II Marker Rate, REMIC I-B Regular
Interest IB-LTAV1, REMIC I-B Regular Interest IB-LTMV1, REMIC I-B Regular
Interest IB-LTMV2, REMIC I-B Regular Interest IB-LTMV3 and REMIC I-B Regular
Interest IB-LTMV4 and any Interest Accrual Period therefor, the rate determined
by the Trust Administrator on the related Interest Determination Date on the
basis of the offered rate for one-month U. S. dollar deposits, as such rate
appears on Telerate Page 3750 as of 11:00 a.m. (London time) on such Interest
Determination Date; provided that if such rate does not appear on Telerate Page
3750, the rate for such date will be determined on the basis of the offered
rates of the

                                      -27-

<PAGE>

Reference Banks for one-month U. S. dollar deposits, as of 11: 00 a. m. (London
time) on such Interest Determination Date. In such event, the Trust
Administrator will request the principal London office of each of the Reference
Banks to provide a quotation of its rate. If on such Interest Determination
Date, two or more Reference Banks provide such offered quotations, One-Month
LIBOR for the related Interest Accrual Period shall be the arithmetic mean of
such offered quotations (rounded upwards if necessary to the nearest whole
multiple of 1/16%). If on such Interest Determination Date, fewer than two
Reference Banks provide such offered quotations, One-Month LIBOR for the related
Interest Accrual Period shall be the higher of (i) LIBOR as determined on the
previous Interest Determination Date and (ii) the Reserve Interest Rate.
Notwithstanding the foregoing, if, under the priorities described above, LIBOR
for an Interest Determination Date would be based on LIBOR for the previous
Interest Determination Date for the third consecutive Interest Determination
Date, the Trust Administrator shall select an alternative comparable index (over
which the Trust Administrator has no control), used for determining one-month
Eurodollar lending rates that is calculated and published (or otherwise made
available) by an independent party.

                  "Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Depositor or the Servicer,
acceptable to the Trustee, if such opinion is delivered to the Trustee, or
acceptable to the Trust Administrator, if such opinion is delivered to the Trust
Administrator, except that any opinion of counsel relating to (a) the
qualification of any Trust REMIC as a REMIC or (b) compliance with the REMIC
Provisions must be an opinion of Independent counsel.

                  "Original Mortgage Loan": Any of the Mortgage Loans included
in REMIC I-A or REMIC I-B as of the Closing Date.

                  "Overcollateralized Amount": With respect to any Distribution
Date and the Group I Certificates, the excess, if any, of (a) the aggregate
Stated Principal Balances of the Group I Mortgage Loans and REO Properties
immediately following such Distribution Date over (b) the sum of the aggregate
Certificate Principal Balances of the Class AF Certificates, the Group I
Mezzanine Certificates and the Class PF Certificates as of such Distribution
Date (after taking into account the payment of the amounts described in clauses
(b)(i) through (iv) of the definition of Group I Principal Distribution Amount
on such Distribution Date). With respect to any Distribution Date and the Group
II Certificates, the excess, if any, of (a) the aggregate Stated Principal
Balances of the Group II Mortgage Loans and REO Properties immediately following
such Distribution Date over (b) the sum of the aggregate Certificate Principal
Balances of the Class AV-1 Certificates, the Group II Mezzanine Certificates and
the Class PV Certificates as of such Distribution Date (after taking into
account the payment of the amounts described in clauses (b)(i) through (iv) of
the definition of Group II Principal Distribution Amount on such Distribution
Date).

                  "Overcollateralization Deficiency Amount": With respect to any
Distribution Date and the Group I Certificates or the Group II Certificates, as
applicable, the excess, if any, of (a) the Required Overcollateralized Amount
for such Certificates applicable to such Distribution Date over (b) the
Overcollateralized Amount for such Certificates applicable to such Distribution
Date prior to taking into account the payment of any Overcollateralization
Increase Amount for such Certificates on such Distribution Date.

                                      -28-

<PAGE>

                  "Overcollateralization Increase Amount": With respect to any
Distribution Date and the Group I Certificates or the Group II Certificates, as
applicable, the lesser of (a) the Overcollateralization Deficiency Amount for
such Certificates as of such Distribution Date (after taking into account the
payment of the Group I Principal Distribution Amount or the Group II Principal
Distribution Amount, as applicable, on such Distribution Date, exclusive of the
payment of any related Overcollateralization Increase Amount) and (b) the amount
of Accrued Certificate Interest for the Class OCF Certificates (in the case of
the Group I Certificates) or the Class OCV Certificates (in the case of the
Group II Certificates) for such Distribution Date as reduced by Realized Losses
allocated thereto with respect to such Distribution Date pursuant to Section
4.04.

                  "Overcollateralization Reduction Amount": With respect to any
Distribution Date and the Group I Certificates or the Group II Certificates, as
applicable, an amount equal to the lesser of (a) the related Excess
Overcollateralized Amount and (b) the sum of the amounts available for
distribution specified in clauses (b)(i) through (iii) of the definition of
Group I Principal Distribution Amount or Group II Principal Distribution Amount,
as applicable.

                  "Ownership Interest": As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.

                  "Pass-Through Rate": With respect to the Class AF-1
Certificates and, for purposes of the Group I Marker Rate, REMIC I-A Regular
Interest IA-LTAF1, 2.868% per annum in the case of each Distribution Date
through and including the Distribution Date on which the aggregate principal
balance of the Group I Mortgage Loans (and properties acquired in respect
thereof) remaining in the Trust Fund is reduced to less than 10% of the
aggregate principal balance of the Group I Mortgage Loans as of the Cut-off Date
and 3.368% per annum in the case of each Distribution Date thereafter.

                  With respect to the Class AF-2 Certificates and, for purposes
of the Group I Marker Rate, REMIC I-A Regular Interest IA-LTAF2, 4.071% per
annum in the case of each Distribution Date through and including the
Distribution Date on which the aggregate principal balance of the Group I
Mortgage Loans (and properties acquired in respect thereof) remaining in the
Trust Fund is reduced to less than 10% of the aggregate principal balance of the
Group I Mortgage Loans as of the Cut-off Date and 4.571% per annum in the case
of each Distribution Date thereafter.

                  With respect to the Class AF-3 Certificates and, for purposes
of the Group I Marker Rate, REMIC I-A Regular Interest IA-LTAF3, 5.378% per
annum in the case of each Distribution Date through and including the
Distribution Date on which the aggregate principal balance of the Group I
Mortgage Loans (and properties acquired in respect thereof) remaining in the
Trust Fund is reduced to less than 10% of the aggregate principal balance of the
Group I Mortgage Loans as of the Cut-off Date and 5.878% per annum in the case
of each Distribution Date thereafter.

                  With respect to the Class MF-1 Certificates and, for purposes
of the Group I Marker Rate, REMIC I-A Regular Interest IA-LTMF1, 5.671% per
annum in the case of each Distribution Date through and including the
Distribution Date on which the aggregate principal balance of the Group I
Mortgage Loans (and properties acquired in respect thereof) remaining in the
Trust Fund

                                      -29-

<PAGE>

is reduced to less than 10% of the aggregate principal balance of the Group I
Mortgage Loans as of the Cut-off Date and 6.171% per annum in the case of each
Distribution Date thereafter.

                  With respect to the Class MF-2 Certificates and, for purposes
of the Group I Marker Rate, REMIC I-A Regular Interest IA-LTMF2, 6.310% per
annum in the case of each Distribution Date through and including the
Distribution Date on which the aggregate principal balance of the Group I
Mortgage Loans (and properties acquired in respect thereof) remaining in the
Trust Fund is reduced to less than 10% of the aggregate principal balance of the
Group I Mortgage Loans as of the Cut-off Date and 6.810% per annum in the case
of each Distribution Date thereafter.

                  With respect to the Class MF-3 Certificates and, for purposes
of the Group I Marker Rate, REMIC I-A Regular Interest IA-LTMF3, 6.706% per
annum in the case of each Distribution Date through and including the
Distribution Date on which the aggregate principal balance of the Group I
Mortgage Loans (and properties acquired in respect thereof) remaining in the
Trust Fund is reduced to less than 10% of the aggregate principal balance of the
Group I Mortgage Loans as of the Cut-off Date and 7.206% per annum in the case
of each Distribution Date thereafter.

                  With respect to the Class OCF Certificates and any
Distribution Date, a rate per annum equal to the percentage equivalent of a
fraction, the numerator of which is the sum of the amounts calculated pursuant
to clauses (A) through (I) below, and the denominator of which is the
Uncertificated Balance of the REMIC I-A Regular Interests. For purposes of
calculating the Pass- Through Rate for the Class OCF Certificates, the numerator
is equal to the sum of the following components:

                  (A) the Uncertificated REMIC I-A Pass-Through Rate for REMIC
         I-A Regular Interest IA-LTAA minus the Group I Marker Rate, applied to
         an amount equal to the Uncertificated Principal Balance of REMIC I-A
         Regular Interest IA-LTAA;

                  (B) the Uncertificated REMIC I-A Pass-Through Rate for REMIC
         I-A Regular Interest IA-LTAF1 minus the Group I Marker Rate, applied to
         an amount equal to the Uncertificated Principal Balance of REMIC I-A
         Regular Interest IA-LTAF1;

                  (C) the Uncertificated REMIC I-A Pass-Through Rate for REMIC
         I-A Regular Interest IA-LTAF2 minus the Group I Marker Rate, applied to
         an amount equal to the Uncertificated Principal Balance of REMIC I-A
         Regular Interest IA-LTAF2;

                  (D) the Uncertificated REMIC I-A Pass-Through Rate for REMIC
         I-A Regular Interest IA-LTAF3 minus the Group I Marker Rate, applied to
         an amount equal to the Uncertificated Principal Balance of REMIC I-A
         Regular Interest IA-LTAF3;

                  (E) the Uncertificated REMIC I-A Pass-Through Rate for REMIC
         I-A Regular Interest IA-LTMF1 minus the Group I Marker Rate, applied to
         an amount equal to the Uncertificated Principal Balance of REMIC I-A
         Regular Interest IA-LTMF1;

                  (F) the Uncertificated REMIC I-A Pass-Through Rate for REMIC
         I-A Regular Interest IA-LTMF2 minus the Group I Marker Rate, applied to
         an amount equal to the

                                      -30-

<PAGE>

         Uncertificated Principal Balance of REMIC I-A Regular Interest
         IA-LTMF2;

                  (G) the Uncertificated REMIC I-A Pass-Through Rate for REMIC
         I-A Regular Interest IA-LTMF3 minus the Group I Marker Rate, applied to
         an amount equal to the Uncertificated Principal Balance of REMIC I-A
         Regular Interest IA-LTMF3;

                  (H) the Uncertificated REMIC I-A Pass-Through Rate for REMIC
         I-A Regular Interest IA-LTZZ minus the Group I Marker Rate, applied to
         an amount equal to the Uncertificated Principal Balance of REMIC I-A
         Regular Interest IA-LTZZ; and

                  (I) 100% of the interest on REMIC I-A Regular Interest
         IA-LTPF.

                  With respect to the Class AV-1 Certificates and the Group II
Mezzanine Certificates and any Distribution Date, a rate per annum equal to the
lesser of (i) the related Formula Rate for such Distribution Date and (ii) the
related Net WAC Pass-Through Rate for such Distribution Date. With respect to
the Class OCV Certificates and any Distribution Date, a rate per annum equal to
the percentage equivalent of a fraction, the numerator of which is the sum of
the amounts calculated pursuant to clauses (A) through (H) below, and the
denominator of which is the Uncertificated Balance of the REMIC I-B Regular
Interests. For purposes of calculating the Pass-Through Rate for the Class OCV
Certificates, the numerator is equal to the sum of the following components:

                  (A) the Uncertificated REMIC I-B Pass-Through Rate for REMIC
         I-B Regular Interest IB-LTAA minus the Group II Marker Rate, applied to
         an amount equal to the Uncertificated Principal Balance of REMIC I-B
         Regular Interest IB-LTAA;

                  (B) the Uncertificated REMIC I-B Pass-Through Rate for REMIC
         I-B Regular Interest IB-LTAV1 minus the Group II Marker Rate, applied
         to an amount equal to the Uncertificated Principal Balance of REMIC I-B
         Regular Interest IB-LTAV1;

                  (C) the Uncertificated REMIC I-B Pass-Through Rate for REMIC
         I-B Regular Interest IB-LTMV1 minus the Group II Marker Rate, applied
         to an amount equal to the Uncertificated Principal Balance of REMIC I-B
         Regular Interest IB-LTMV1;

                  (D) the Uncertificated REMIC I-B Pass-Through Rate for REMIC
         I-B Regular Interest IB-LTMV2 minus the Group II Marker Rate, applied
         to an amount equal to the Uncertificated Principal Balance of REMIC I-B
         Regular Interest IB-LTMV2;

                  (E) the Uncertificated REMIC I-B Pass-Through Rate for REMIC
         I-B Regular Interest IB-LTMV3 minus the Group II Marker Rate, applied
         to an amount equal to the Uncertificated Principal Balance of REMIC I-B
         Regular Interest IB-LTMV3;

                  (F) the Uncertificated REMIC I-B Pass-Through Rate for REMIC
         I-B Regular Interest IB-LTMV4 minus the Group II Marker Rate, applied
         to an amount equal to the Uncertificated Principal Balance of REMIC I-B
         Regular Interest IB-LTMV4;

                  (G) the Uncertificated REMIC I-B Pass-Through Rate for REMIC
         I-B Regular

                                      -31-

<PAGE>

         Interest IB-LTZZ minus the Group II Marker Rate, applied to an amount
         equal to the Uncertificated Principal Balance of REMIC I-B Regular
         Interest IB-LTZZ; and

                  (H) 100% of the interest on REMIC I-B Regular Interest
         IB-LTPV.

                  "Percentage Interest": With respect to any Class of
Certificates (other than the Class R Certificates), the undivided percentage
ownership in such Class evidenced by such Certificate, expressed as a
percentage, the numerator of which is the initial Certificate Principal Balance
or Notional Amount represented by such Certificate and the denominator of which
is the aggregate initial Certificate Principal Balance or initial Notional
Amount of all of the Certificates of such Class. The Class A Certificates and
the Mezzanine Certificates are issuable only in minimum Percentage Interests
corresponding to minimum initial Certificate Principal Balances of $100,000 and
integral multiples of $1.00 in excess thereof. The Class PF Certificates and the
Class PV Certificates are issuable only in Percentage Interests corresponding to
initial Certificate Principal Balances of $20 and integral multiples thereof.
The Class OCF Certificates and the Class OCV are issuable only in minimum
Percentage Interests corresponding to minimum initial Certificate Principal
Balances of $100,000 and integral multiples of $1.00 in excess thereof;
provided, however, that a single Certificate of each such Class of Certificates
may be issued having a Percentage Interest corresponding to the remainder of the
aggregate initial Certificate Principal Balance or Notional Amount of such Class
or to an otherwise authorized denomination for such Class plus such remainder.
With respect to any Class R Certificate, the undivided percentage ownership in
such Class evidenced by such Certificate, as set forth on the face of such
Certificate. The Class R Certificates are issuable in Percentage Interests of
20% and multiples thereof.

                  "Periodic Rate Cap": With respect to each Group II Mortgage
Loan and any Adjustment Date therefor, the fixed percentage set forth in the
related Mortgage Note, which is the maximum amount by which the Mortgage Rate
for such Mortgage Loan may increase or decrease (without regard to the Maximum
Mortgage Rate or the Minimum Mortgage Rate) on such Adjustment Date from the
Mortgage Rate in effect immediately prior to such Adjustment Date.

                  "Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, the Servicer, the Trustee, the
Trust Administrator or any of their respective Affiliates:

                  (i) direct obligations of, or obligations fully guaranteed as
         to timely payment of principal and interest by, the United States or
         any agency or instrumentality thereof, provided such obligations are
         backed by the full faith and credit of the United States;

                  (ii) demand and time deposits in, certificates of deposit of,
         or bankers' acceptances issued by, any Depository Institution;

                  (iii) repurchase obligations with respect to any security
         described in clause (i) above entered into with a Depository
         Institution (acting as principal);

                  (iv) securities bearing interest or sold at a discount that
         are issued by any corporation incorporated under the laws of the United
         States of America or any state thereof

                                      -32-

<PAGE>

         and that are rated by each Rating Agency that rates such securities in
         its highest long-term unsecured rating categories at the time of such
         investment or contractual commitment providing for such investment;

                  (v) commercial paper (including both non-interest-bearing
         discount obligations and interest-bearing obligations payable on demand
         or on a specified date not more than 30 days after the date of
         acquisition thereof) that is rated by each Rating Agency that rates
         such securities in its highest short-term unsecured debt rating
         available at the time of such investment;

                  (vi) units of money market funds that have been rated "AAA" by
         Fitch (if rated by Fitch) and "AAAm" or "AAAm-G" by S&P or "Aaa" by
         Moody's Investors Service, Inc.; and

                  (viii) if previously confirmed in writing to the Trustee and
         the Trust Administrator, any other demand, money market or time
         deposit, or any other obligation, security or investment, as may be
         acceptable to the Rating Agencies as a permitted investment of funds
         backing securities having ratings equivalent to its highest initial
         rating of the Class A Certificates;

provided, however, that no instrument described hereunder shall evidence either
the right to receive (a) only interest with respect to the obligations
underlying such instrument or (b) both principal and interest payments derived
from obligations underlying such instrument and the interest and principal
payments with respect to such instrument provide a yield to maturity at par
greater than 120% of the yield to maturity at par of the underlying obligations.

                  "Permitted Transferee": Any Transferee of a Class R
Certificate other than a Disqualified Organization or Non-United States Person.

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

                  "Plan": Any employee benefit plan or certain other retirement
plans and arrangements, including individual retirement accounts and annuities,
Keogh plans and bank collective investment funds and insurance company general
or separate accounts in which such plans, accounts or arrangements are invested,
that are subject to ERISA and Section 4975 of the Code.

                  "Prepayment Assumption": A prepayment rate for (i) the Group I
Mortgage Loans of 25% CPR and (ii) the Group II Mortgage Loans of 30% CPR. The
Prepayment Assumption is used solely for determining the accrual of original
issue discount on the Certificates for federal income tax purposes. A CPR (or
Constant Prepayment Rate) represents an annualized constant assumed rate of
prepayment each month of a pool of mortgage loans relative to its outstanding
principal balance for the life of such pool.

                                      -33-

<PAGE>

                  "Prepayment Charge": With respect to any Prepayment Period,
any prepayment premium, penalty or charge payable by a Mortgagor in connection
with any Principal Prepayment on a Mortgage Loan pursuant to the terms of the
related Mortgage Note (other than any Servicer Prepayment Charge Payment
Amount).

                  "Prepayment Charge Schedule": As of any date, the list of
Prepayment Charges on the Mortgage Loans included in REMIC I-A or REMIC I-B on
such date, attached hereto as Schedule 2 (including the Prepayment Charge
Summary attached thereto). The Prepayment Charge Schedule shall set forth the
following information with respect to each related Mortgage Loan:

                  (i)      the Mortgage Loan identifying number;

                  (ii)     a code indicating the type of Prepayment Charge;

                  (iii)    the state of origination of the related Mortgage
                           Loan;

                  (iv)     the date on which the first monthly payment was due
                           on the related Mortgage Loan;

                  (v)      the term of the related Mortgage Loan; and

                  (vi)     the principal balance of the related Mortgage Loan as
                           of the Cut-off Date.

                  The Prepayment Charge Schedule shall be amended from time to
time by the Depositor in accordance with the provisions of this Agreement.

                  "Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Mortgage Loan that was during the related Prepayment
Period the subject of a Principal Prepayment in full or in part that was applied
by the Servicer to reduce the outstanding principal balance of such loan on a
date preceding the Due Date in the succeeding Prepayment Period, an amount equal
to interest at the applicable Net Mortgage Rate on the amount of such Principal
Prepayment for the number of days commencing on the date on which the prepayment
is applied and ending on the last day of the related Prepayment Period. The
obligations of the Servicer in respect of any Prepayment Interest Shortfall are
set forth in Section 3.24.

                  "Prepayment Period": With respect to any Distribution Date,
the period commencing on the 12th day of the month immediately preceding the
month in which such Distribution Date occurs (or in the case of the first
Distribution Date, the Cut-off Date) and ending on the 11th day of the month in
which such Distribution Date occurs.

                  "Principal Balance": As to any Mortgage Loan other than a
Liquidated Mortgage Loan, and any day, the related Principal Balance as of the
Cut-off Date, MINUS all collections credited against the Principal Balance of
any such Mortgage Loan. For purposes of this definition, a Liquidated Mortgage
Loan shall be deemed to have a Principal Balance equal to the Principal Balance
of the related Mortgage Loan as of the final recovery of related Liquidation
Proceeds and a Principal Balance of zero thereafter. As to any REO Property and
any day, the Principal Balance

                                      -34-

<PAGE>

of the related Mortgage Loan immediately prior to such Mortgage Loan becoming
REO Property minus any REO Principal Amortization received with respect thereto
on or prior to such day.

                  "Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the full
amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.

                  "Private Certificates":  As defined in Section 5.02(b).

                  "PTCE": A Prohibited Transaction Class Exemption issued by the
United States Department of Labor which provides that exemptive relief is
available to any party to any transaction which satisfies the conditions of the
exemption.

                  "Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.03, Section
3.16(c) or Section 9.01, and as confirmed by a certification from a Servicing
Officer to the Trustee and the Trust Administrator, an amount equal to the sum
of (i) 100% of the Stated Principal Balance thereof as of the date of purchase
(or such other price as provided in Section 9.01), (ii) in the case of (x) a
Mortgage Loan, accrued interest on such Stated Principal Balance at the
applicable Net Mortgage Rate in effect from time to time from the Due Date as to
which interest was last covered by a payment by the Mortgagor or an Advance by
the Servicer, which payment or Advance had as of the date of purchase been
distributed pursuant to Section 4.01, through the end of the calendar month in
which the purchase is to be effected and (y) an REO Property, the sum of (1)
accrued interest on such Stated Principal Balance at the applicable Net Mortgage
Rate in effect from time to time from the Due Date as to which interest was last
covered by a payment by the Mortgagor or an Advance by the Servicer through the
end of the calendar month immediately preceding the calendar month in which such
REO Property was acquired, plus (2) REO Imputed Interest for such REO Property
for each calendar month commencing with the calendar month in which such REO
Property was acquired and ending with the calendar month in which such purchase
is to be effected, net of the total of all net rental income, Insurance
Proceeds, Liquidation Proceeds and Advances that as of the date of purchase had
been distributed as or to cover REO Imputed Interest pursuant to Section 4.01,
(iii) any unreimbursed Servicing Advances and Advances (including Nonrecoverable
Advances and Nonrecoverable Servicing Advances) and any unpaid Servicing Fees
allocable to such Mortgage Loan or REO Property, (iv) any amounts previously
withdrawn from the Collection Account in respect of such Mortgage Loan or REO
Property pursuant to Section 3.11(a)(ix) and Section 3.16(b), and (v) in the
case of a Mortgage Loan required to be purchased pursuant to Section 2.03,
expenses reasonably incurred or to be incurred by the Servicer, the Trustee or
the Trust Administrator in respect of the breach or defect giving rise to the
purchase obligation.

                  "Qualified Substitute Mortgage Loan": A mortgage loan
substituted for a Deleted Mortgage Loan pursuant to the terms of this Agreement
which must, on the date of such substitution, (i) have an outstanding principal
balance, after application of all scheduled payments of principal and interest
due during or prior to the month of substitution, not in excess of the Stated
Principal Balance of the Deleted Mortgage Loan as of the Due Date in the
calendar month during which the substitution occurs, (ii) have a Mortgage Rate
not less than (and not more than one percentage point

                                      -35-

<PAGE>

in excess of) the Mortgage Rate of the Deleted Mortgage Loan, (iii) with respect
to any Group II Mortgage Loan, have a Maximum Mortgage Rate not less than the
Maximum Mortgage Rate on the Deleted Mortgage Loan, (iv) with respect to any
Group II Mortgage Loan, have a Minimum Mortgage Rate not less than the Minimum
Mortgage Rate of the Deleted Mortgage Loan, (v) with respect to any Group II
Mortgage Loan, have a Gross Margin equal to the Gross Margin of the Deleted
Mortgage Loan, (vi) with respect to any Group II Mortgage Loan, have a next
Adjustment Date not more than two months later than the next Adjustment Date on
the Deleted Mortgage Loan, (vii) have a remaining term to maturity not greater
than (and not more than one year less than) that of the Deleted Mortgage Loan,
(viii) have the same Due Date as the Due Date on the Deleted Mortgage Loan, (ix)
have a Loan-to-Value Ratio as of the date of substitution equal to or lower than
the Loan-to-Value Ratio of the Deleted Mortgage Loan as of such date, (x) have a
risk grading determined by the originator of the Mortgage Loan at least equal to
the risk grading assigned on the Deleted Mortgage Loan and (xi) conform to each
representation and warranty set forth in Section 6 of the Mortgage Loan Purchase
Agreement applicable to the Deleted Mortgage Loan. In the event that one or more
mortgage loans are substituted for one or more Deleted Mortgage Loans, the
amounts described in clause (i) hereof shall be determined on the basis of
aggregate principal balances, the Mortgage Rates described in clause (ii) hereof
shall be determined on the basis of weighted average Mortgage Rates, the terms
described in clause (vii) hereof shall be determined on the basis of weighted
average remaining term to maturity, the Loan-to-Value Ratios described in clause
(ix) hereof shall be satisfied as to each such mortgage loan, the risk gradings
described in clause (x) hereof shall be satisfied as to each such mortgage loan
and, except to the extent otherwise provided in this sentence, the
representations and warranties described in clause (xi) hereof must be satisfied
as to each Qualified Substitute Mortgage Loan or in the aggregate, as the case
may be.

                  "Rate/Term Refinancing": A Refinanced Mortgage Loan, the
proceeds of which are not more than a nominal amount in excess of the existing
first mortgage loan and any subordinate mortgage loan on the related Mortgaged
Property and related closing costs, and were used exclusively (except for such
nominal amount) to satisfy the then existing first mortgage loan and any
subordinate mortgage loan of the Mortgagor on the related Mortgaged Property and
to pay related closing costs.

                  "Rating Agency or Rating Agencies": Fitch and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor, notice of
which designation shall be given to the Trustee, the Trust Administrator and the
Servicer.

                  "Realized Loss": With respect to each Mortgage Loan as to
which a Final Recovery Determination has been made, an amount (not less than
zero) equal to (i) the unpaid principal balance of such Mortgage Loan as of the
commencement of the calendar month in which the Final Recovery Determination was
made, plus (ii) accrued interest from the Due Date as to which interest was last
paid by the Mortgagor through the end of the calendar month in which such Final
Recovery Determination was made, calculated in the case of each calendar month
during such period (A) at an annual rate equal to the annual rate at which
interest was then accruing on such Mortgage Loan and (B) on a principal amount
equal to the Stated Principal Balance of such Mortgage Loan as of the close of
business on the Distribution Date during such calendar month, plus (iii) any
amounts previously withdrawn from the Collection Account in respect of such
Mortgage Loan pursuant to

                                      -36-

<PAGE>

Section 3.11(a)(ix) and Section 3.16(b), minus (iv) the proceeds, if any,
received in respect of such Mortgage Loan during the calendar month in which
such Final Recovery Determination was made, net of amounts that are payable
therefrom to the Servicer with respect to such Mortgage Loan pursuant to Section
3.11(a)(iii).

                  With respect to any REO Property as to which a Final Recovery
Determination has been made, an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of REMIC I-A or REMIC I-B, plus (ii)
accrued interest from the Due Date as to which interest was last paid by the
Mortgagor in respect of the related Mortgage Loan through the end of the
calendar month immediately preceding the calendar month in which such REO
Property was acquired, calculated in the case of each calendar month during such
period (A) at an annual rate equal to the annual rate at which interest was then
accruing on the related Mortgage Loan and (B) on a principal amount equal to the
Stated Principal Balance of the related Mortgage Loan as of the close of
business on the Distribution Date during such calendar month, plus (iii) REO
Imputed Interest for such REO Property for each calendar month commencing with
the calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to Section 3.11(a)(ix) and Section 3.16(b), minus
(v) the aggregate of all Advances and Servicing Advances (in the case of
Servicing Advances, without duplication of amounts netted out of the rental
income, Insurance Proceeds and Liquidation Proceeds described in clause (vi)
below) made by the Servicer in respect of such REO Property or the related
Mortgage Loan for which the Servicer has been or, in connection with such Final
Recovery Determination, will be reimbursed pursuant to Section 3.23 out of
rental income, Insurance Proceeds and Liquidation Proceeds received in respect
of such REO Property, minus (vi) the total of all net rental income, Insurance
Proceeds and Liquidation Proceeds received in respect of such REO Property that
has been, or in connection with such Final Recovery Determination, will be
transferred to the Distribution Account pursuant to Section 3.23.

                  With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation.

                  With respect to each Mortgage Loan which has become the
subject of a Debt Service Reduction, the portion, if any, of the reduction in
each affected Monthly Payment attributable to a reduction in the Mortgage Rate
imposed by a court of competent jurisdiction. Each such Realized Loss shall be
deemed to have been incurred on the Due Date for each affected Monthly Payment.

                  "Record Date": With respect to each Distribution Date and any
Book-Entry Certificate, the Business Day immediately preceding such Distribution
Date. With respect to each Distribution Date and any other Certificates,
including any Definitive Certificates, the last Business Day of the month
immediately preceding the month in which such Distribution Date occurs except
that the Record Date for the first Distribution Date shall be the Closing Date.

                  "Reference Banks": Bankers Trust Company, Barclays' Bank PLC,
The Tokyo

                                      -37-

<PAGE>

Mitsubishi Bank and National Westminster Bank PLC and their successors in
interest; provided, however, that if any of the foregoing banks are not suitable
to serve as a Reference Bank, then any leading banks selected by the Trust
Administrator which are engaged in transactions in Eurodollar deposits in the
international Eurocurrency market (i) with an established place of business in
London, (ii) not controlling, under the control of or under common control with
the Depositor or any Affiliate thereof and (iii) which have been designated as
such by the Trust Administrator.

                  "Refinanced Mortgage Loan": A Mortgage Loan the proceeds of
which were not used to purchase the related Mortgaged Property.

                  "Regular Certificate": Any Class A Certificate, Mezzanine
Certificate, Class OCF Certificate, Class OCV Certificate, Class PF Certificate
or Class PV Certificate.

                  "Regular Interest": A "regular interest" in a REMIC within the
meaning of Section 860G(a)(1) of the Code.

                  "Relief Act": The Soldiers' and Sailors' Civil Relief Act of
1940, as amended.

                  "Relief Act Interest Shortfall": With respect to any
Distribution Date and any Mortgage Loan, any reduction in the amount of interest
collectible on such Mortgage Loan for the most recently ended calendar month as
a result of the application of the Relief Act.

                  "REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.

                  "REMIC I-A": The segregated pool of assets subject hereto,
constituting one of the primary trusts created hereby and to be administered
hereunder, with respect to which a REMIC election is to be made, consisting of:
(i) such Group I Mortgage Loans and Prepayment Charges related thereto as from
time to time are subject to this Agreement, together with the Mortgage Files
relating thereto, and together with all collections thereon and proceeds
thereof; (ii) any REO Property, together with all collections thereon and
proceeds thereof; (iii) the Trustee's rights with respect to the Group I
Mortgage Loans under all insurance policies required to be maintained pursuant
to this Agreement and any proceeds thereof; (iv) the Depositor's rights under
the Mortgage Loan Purchase Agreement relating to the Group I Mortgage Loans
(including any security interest created thereby); (v) to the extent
attributable to the Group I Mortgage Loans, the Collection Account (other than
any amounts representing any Servicer Prepayment Charge Payment Amount), the
Distribution Account (other than any amounts representing any Servicer
Prepayment Charge Payment Amount) and any REO Account, and such assets that are
deposited therein from time to time and any investments thereof, together with
any and all income, proceeds and payments with respect thereto. Notwithstanding
the foregoing, however, REMIC I-A specifically excludes all payments and other
collections of principal and interest due on the Group I Mortgage Loans on or
before the Cut-off Date and all Prepayment Charges payable in connection with
Principal Prepayments on the Group I Mortgage Loans made before the Cut-off
Date.

                  "REMIC I-A Interest Loss Allocation Amount": With respect to
any Distribution Date, an amount (subject to adjustment based on the actual
number of days elapsed in the respective

                                      -38-

<PAGE>

Interest Accrual Periods for the indicated Regular Interests for such
Distribution Date) equal to (a) the product of (i) the aggregate Stated
Principal Balance of the Group I Mortgage Loans and REO Properties then
outstanding and (ii) the REMIC I-A Remittance Rate for REMIC I-A Regular
Interest IA-LTAA minus the Group I Marker Rate, divided by (b) 12.

                  "REMIC I-A Overcollateralized Amount": With respect to any
date of determination, (i) 1% of the aggregate Uncertificated Balances of the
REMIC I-A Regular Interests minus (ii) the aggregate of the Uncertificated
Balances of the REMIC I-A Regular Interests, in each case as of such date of
determination.

                  "REMIC I-A Principal Loss Allocation Amount": With respect to
any Distribution Date, an amount equal to the product of (i) the aggregate
Stated Principal Balance of the Group I Mortgage Loans and REO Properties then
outstanding and (ii) 1 minus a fraction, the numerator of which is two times the
aggregate of the Uncertificated Balances of the REMIC I-A Regular Interests
(other than REMIC I-A Regular Interest IA-LTZZ and REMIC I-A Regular Interest
IA-LTPF) and the denominator of which is the aggregate of the Uncertificated
Balances of the REMIC I-A Regular Interests (other than REMIC I-A Regular
InterestIA-LTAA and REMIC I-A Regular Interest IA- LTPF).

                  "REMIC I-A Regular Interest": Any of the separate
non-certificated beneficial ownership interests in REMIC I-A issued hereunder
and designated as a "regular interest" in REMIC I-A. Each REMIC I-A Regular
Interest shall accrue interest at the related REMIC I-A Remittance Rate in
effect from time to time or shall otherwise be entitled to interest as set forth
herein, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto. The
designations for the respective REMIC I-A Regular Interests are set forth in the
Preliminary Statement hereto.

                  "REMIC I-A Regular Interest IA-LTAA": One of the separate
non-certificated beneficial ownership interests in REMIC I-A issued hereunder
and designated as a Regular Interest in REMIC I-A. REMIC I-A Regular Interest
IA-LTAA shall accrue interest at the related REMIC I-A Remittance Rate in effect
from time to time, and shall be entitled to distributions of principal, subject
to the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-A Regular Interest IA-LTAF1": One of the separate
non-certificated beneficial ownership interests in REMIC I-A issued hereunder
and designated as a Regular Interest in REMIC I-A. REMIC I-A Regular Interest
IA-LTAF1 shall accrue interest at the related REMIC I-A Remittance Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-A Regular Interest IA-LTAF2": One of the separate
non-certificated beneficial ownership interests in REMIC I-A issued hereunder
and designated as a Regular Interest in REMIC I-A. REMIC I-A Regular Interest
IA-LTAF2 shall accrue interest at the related REMIC I-A Remittance Rate in
effect from time to time, and shall be entitled to distributions of principal,

                                      -39-

<PAGE>

subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-A Regular Interest IA-LTAF3": One of the separate
non-certificated beneficial ownership interests in REMIC I-A issued hereunder
and designated as a Regular Interest in REMIC I-A. REMIC I-A Regular Interest
IA-LTAF3 shall accrue interest at the related REMIC I-A Remittance Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-A Regular Interest IA-LTMF1": One of the separate
non-certificated beneficial ownership interests in REMIC I-A issued hereunder
and designated as a Regular Interest in REMIC I-A. REMIC I-A Regular Interest
IA-LTMF1 shall accrue interest at the related REMIC I-A Remittance Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-A Regular Interest IA-LTMF2": One of the separate
non-certificated beneficial ownership interests in REMIC I-A issued hereunder
and designated as a Regular Interest in REMIC I-A. REMIC I-A Regular Interest
IA-LTMF2 shall accrue interest at the related REMIC I-A Remittance Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-A Regular Interest IA-LTMF3": One of the separate
non-certificated beneficial ownership interests in REMIC I-A issued hereunder
and designated as a Regular Interest in REMIC I-A. REMIC I-A Regular Interest
IA-LTMF3 shall accrue interest at the related REMIC I-A Remittance Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-A Regular Interest IA-LTPF": One of the separate
non-certificated beneficial ownership interests in REMIC I-A issued hereunder
and designated as a Regular Interest in REMIC I-A. REMIC I-A Regular Interest
IA-LTPF shall be entitled to any Prepayment Charges collected by the Servicer
with respect to the Group I Mortgage Loans and to a distribution of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-A Regular Interest IA-LTZZ": One of the separate
non-certificated beneficial ownership interests in REMIC I-A issued hereunder
and designated as a Regular Interest in REMIC I-A. REMIC I-A Regular Interest
IA-LTZZ shall accrue interest at the related REMIC I-A Remittance Rate in effect
from time to time, and shall be entitled to distributions of principal, subject
to the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-A Remittance Rate": With respect to the REMIC I-A
Regular Interests and

                                      -40-

<PAGE>

any Distribution Date, the related Net WAC Pass-Through Rate.

                  "REMIC I-A Required Overcollateralized Amount": 1% of the
Required Overcollateralization Amount for the Group I Certificates.

                  "REMIC I-B": The segregated pool of assets subject hereto,
constituting one of the primary trusts created hereby and to be administered
hereunder, with respect to which a REMIC election is to be made, consisting of:
(i) such Group II Mortgage Loans and Prepayment Charges related thereto as from
time to time are subject to this Agreement, together with the Mortgage Files
relating thereto, and together with all collections thereon and proceeds
thereof; (ii) any REO Property, together with all collections thereon and
proceeds thereof; (iii) the Trustee's rights with respect to the Group II
Mortgage Loans under all insurance policies required to be maintained pursuant
to this Agreement and any proceeds thereof; (iv) the Depositor's rights under
the Mortgage Loan Purchase Agreement relating to the Group II Mortgage Loans
(including any security interest created thereby); (v) to the extent
attributable to the Group II Mortgage Loans, the Collection Account (other than
any amounts representing any Servicer Prepayment Charge Payment Amount), the
Distribution Account (other than any amounts representing any Servicer
Prepayment Charge Payment Amount) and any REO Account, and such assets that are
deposited therein from time to time and any investments thereof, together with
any and all income, proceeds and payments with respect thereto. Notwithstanding
the foregoing, however, REMIC I-B specifically excludes all payments and other
collections of principal and interest due on the Group II Mortgage Loans on or
before the Cut-off Date and all Prepayment Charges payable in connection with
Principal Prepayments on the Group II Mortgage Loans made before the Cut-off
Date.

                  "REMIC I-B Interest Loss Allocation Amount": With respect to
any Distribution Date, an amount (subject to adjustment based on the actual
number of days elapsed in the respective Interest Accrual Periods for the
indicated Regular Interests for such Distribution Date) equal to (a) the product
of (i) the aggregate Stated Principal Balance of the Group II Mortgage Loans and
REO Properties then outstanding and (ii) the REMIC I-B Remittance Rate for REMIC
I-B Regular Interest IB-LTAA minus the Group II Marker Rate, divided by (b) 12.

                  "REMIC I-B Overcollateralized Amount": With respect to any
date of determination, (i) 1% of the aggregate Uncertificated Balances of the
REMIC I-B Regular Interests minus (ii) the aggregate of the Uncertificated
Balances of the REMIC I-B Regular Interests other than REMIC I-B Regular
Interest I-B-LTAA, REMIC I-B Regular Interest I-B-LTZZ and REMIC I-B Regular
Interest I-B-PV, in each case as of such date of determination.

                  "REMIC I-B Principal Loss Allocation Amount": With respect to
any Distribution Date, an amount equal to the product of (i) the aggregate
Stated Principal Balance of the Group II Mortgage Loans and REO Properties then
outstanding and (ii) 1 minus a fraction, the numerator of which is two times the
aggregate of the Uncertificated Balances of the REMIC I-B Regular Interests
(other than REMIC I-B Regular Interest IB-LTZZ and REMIC I-B Regular Interest
IB-LTPV) and the denominator of which is the aggregate of the Uncertificated
Balances of the REMIC I-B Regular Interests (other than REMIC I-B Regular
Interest I-B- LTAA and REMIC I-B Regular Interest IB- LTPV).

                                      -41-

<PAGE>

                  "REMIC I-B Regular Interest": Any of the separate
non-certificated beneficial ownership interests in REMIC I-B issued hereunder
and designated as a "regular interest" in REMIC I-B. Each REMIC I-B Regular
Interest shall accrue interest at the related REMIC I-B Remittance Rate in
effect from time to time or shall otherwise be entitled to interest as set forth
herein, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto. The
designations for the respective REMIC I-B Regular Interests are set forth in the
Preliminary Statement hereto.

                  "REMIC I-B Regular Interest IB-LTAA": One of the separate
non-certificated beneficial ownership interests in REMIC I-B issued hereunder
and designated as a Regular Interest in REMIC I-B. REMIC I-B Regular Interest
IB-LTAA shall accrue interest at the related REMIC I-B Remittance Rate in effect
from time to time, and shall be entitled to distributions of principal, subject
to the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-B Regular Interest IB-LTAV1": One of the separate
non-certificated beneficial ownership interests in REMIC I-B issued hereunder
and designated as a Regular Interest in REMIC I-B. REMIC I-B Regular Interest
IB-LTAV1 shall accrue interest at the related REMIC I-B Remittance Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-B Regular Interest IB-LTMV1": One of the separate
non-certificated beneficial ownership interests in REMIC I-B issued hereunder
and designated as a Regular Interest in REMIC I-B. REMIC I-B Regular Interest
IB-LTMV1 shall accrue interest at the related REMIC I-B Remittance Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-B Regular Interest IB-LTMV2": One of the separate
non-certificated beneficial ownership interests in REMIC I-B issued hereunder
and designated as a Regular Interest in REMIC I-B. REMIC I-B Regular Interest
IB-LTMV2 shall accrue interest at the related REMIC I-B Remittance Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-B Regular Interest IB-LTMV3": One of the separate
non-certificated beneficial ownership interests in REMIC I-B issued hereunder
and designated as a Regular Interest in REMIC I-B. REMIC I-B Regular Interest
IB-LTMV3 shall accrue interest at the related REMIC I-B Remittance Rate in
effect from time to time, and shall be entitled to distributions of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-B Regular Interest IB-LTMV4": One of the separate
non-certificated beneficial ownership interests in REMIC I-B issued hereunder
and designated as a Regular Interest

                                      -42-

<PAGE>

in REMIC I-B. REMIC I-B Regular Interest IB-LTMV4 shall accrue interest at the
related REMIC I-B Remittance Rate in effect from time to time, and shall be
entitled to distributions of principal, subject to the terms and conditions
hereof, in an aggregate amount equal to its initial Uncertificated Balance as
set forth in the Preliminary Statement hereto.

                  "REMIC I-B Regular Interest IB-LTPV": One of the separate
non-certificated beneficial ownership interests in REMIC I-B issued hereunder
and designated as a Regular Interest in REMIC I-B. REMIC I-B Regular Interest
IB-LTPV shall be entitled to any Prepayment Charges collected by the Servicer
with respect to the Group II Mortgage Loans and to a distribution of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-B Regular Interest IB-LTZZ": One of the separate
non-certificated beneficial ownership interests in REMIC I-B issued hereunder
and designated as a Regular Interest in REMIC I-B. REMIC I-B Regular Interest
IB-LTZZ shall accrue interest at the related REMIC I-B Remittance Rate in effect
from time to time, and shall be entitled to distributions of principal, subject
to the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I-B Remittance Rate": With respect to the REMIC I-B
Regular Interests and any Distribution Date, the Net WAC Pass-Through Rate with
respect to the Group II Certificates.

                  "REMIC I-B Required Overcollateralized Amount": 1% of the
Required Overcollateralization Amount for the Group II Certificates.

                  "REMIC II": The segregated pool of assets consisting of all of
the REMIC I-A Regular Interests and the REMIC I-B Regular Interests conveyed in
trust to the Trustee, for the benefit of the REMIC II Certificates, pursuant to
Section 2.09, and all amounts deposited therein, with respect to which a
separate REMIC election is to be made.

                  "REMIC II Certificate": Any Regular Certificate or Class R
Certificate.

                  "REMIC II Certificateholder": The Holder of any REMIC II
Certificate.

                  "REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of the Code, and related provisions, and proposed, temporary
and final regulations and published rulings, notices and announcements
promulgated thereunder, as the foregoing may be in effect from time to time.

                  "Remittance Report": A report in form and substance acceptable
to the Trust Administrator on an electronic data file or tape prepared by the
Servicer pursuant to Section 4.03 with such additions, deletions and
modifications as agreed to by the Trust Administrator and the Servicer.

                  "Rents from Real Property": With respect to any REO Property,
gross income of the

                                      -43-

<PAGE>

character described in Section 856(d) of the Code as being included in the term
"rents from real property."

                  "REO Account": The account or accounts maintained, or caused
to be maintained, by the Servicer in respect of an REO Property pursuant to
Section 3.23.

                  "REO Disposition": The sale or other disposition of an REO
Property on behalf of REMIC I-A or REMIC I-B, as applicable.

                  "REO Imputed Interest": As to any REO Property, for any
calendar month during which such REO Property was at any time part of REMIC I-A
or REMIC I-B, one month's interest at the applicable Net Mortgage Rate on the
Stated Principal Balance of such REO Property (or, in the case of the first such
calendar month, of the related Mortgage Loan, if appropriate) as of the close of
business on the Distribution Date in such calendar month.

                  "REO Principal Amortization": With respect to any REO
Property, for any calendar month, the excess, if any, of (a) the aggregate of
all amounts received in respect of such REO Property during such calendar month,
whether in the form of rental income, sale proceeds (including, without
limitation, that portion of the Termination Price paid in connection with a
purchase of all of the Mortgage Loans and REO Properties pursuant to Section
9.01 that is allocable to such REO Property) or otherwise, net of any portion of
such amounts (i) payable pursuant to Section 3.23(c) in respect of the proper
operation, management and maintenance of such REO Property or (ii) payable or
reimbursable to the Servicer pursuant to Section 3.23(d) for unpaid Servicing
Fees in respect of the related Mortgage Loan and unreimbursed Servicing Advances
and Advances in respect of such REO Property or the related Mortgage Loan, over
(b) the REO Imputed Interest in respect of such REO Property for such calendar
month.

                  "REO Property": A Mortgaged Property acquired by the Servicer
on behalf of REMIC I-A or REMIC I-B through foreclosure or deed-in-lieu of
foreclosure, as described in Section 3.23.

                  "Request for Release": A release signed by a Servicing
Officer, in the form of Exhibit E-1 or Exhibit E-2 attached hereto.

                  "Required Overcollateralized Amount": With respect to any
Distribution Date and the Group I Certificates, (i) prior to the related
Stepdown Date, $710,203.78, (ii) on or after the related Stepdown Date provided
a related Trigger Event is not in effect, the greater of (x) 1.00% of the
aggregate Stated Principal Balance of the Group I Mortgage Loans as of the last
day of the related Due Period and (y) $355,046.51, and (iii) on or after the
related Stepdown Date if a related Trigger Event is in effect, the Required
Overcollateralized Amount for the immediately preceding Distribution Date. With
respect to any Distribution Date and the Group II Certificates, (i) prior to the
related Stepdown Date, $885,811.86, (ii) on or after the related Stepdown Date
provided a related Trigger Event is not in effect, the greater of (x) 3.50% of
the aggregate Stated Principal Balance of the Group II Mortgage Loans as of the
last day of the related Due Period and (y) $126,479.56, and (iii) on or after
the related Stepdown Date if a related Trigger Event is in effect, the Required
Overcollateralized Amount for the immediately preceding Distribution Date

                                      -44-

<PAGE>

                  "Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Trust Administrator determines
to be either (i) the arithmetic mean (rounded upwards if necessary to the
nearest whole multiple of 1/16%) of the one-month U. S. dollar lending rates
which New York City banks selected by the Trust Administrator are quoting on the
relevant Interest Determination Date to the principal London offices of leading
banks in the London interbank market or (ii) in the event that the Trust
Administrator can determine no such arithmetic mean, the lowest one-month U. S.
dollar lending rate which New York City banks selected by the Trust
Administrator are quoting on such Interest Determination Date to leading
European banks.

                  "Residential Dwelling": Any one of the following: (i) an
attached, detached or semi- detached one-family dwelling, (ii) an attached,
detached or semi-detached two-to four-family dwelling, (iii) a one-family
dwelling unit in a Fannie Mae eligible condominium project, or (iv) an attached,
detached or semi-detached one-family dwelling in a planned unit development,
none of which is a co-operative, mobile or manufactured home (as defined in 42
United States Code, Section 5402(6)).

                  "Residual Interest": The sole class of "residual interests" in
a REMIC within the meaning of Section 860G(a)(2) of the Code.

                  "Responsible Officer": When used with respect to the Trustee
or the Trust Administrator, the Chairman or Vice Chairman of the Board of
Directors or Trustees, the Chairman or Vice Chairman of the Executive or
Standing Committee of the Board of Directors or Trustees, the President, the
Chairman of the Committee on Trust Matters, any vice president, any assistant
vice president, the Secretary, any assistant secretary, the Treasurer, any
assistant treasurer, the Cashier, any assistant cashier, any trust officer or
assistant trust officer, the Controller and any assistant controller or any
other officer of the Trustee or the Trust Administrator, as the case may be,
customarily performing functions similar to those performed by any of the above
designated officers and, with respect to a particular matter, to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.

                  "S&P": Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., or its successor in interest.

                  "Seller": Salomon Brothers Realty Corp. or its successor in
interest, in its capacity as seller under the Mortgage Loan Purchase Agreement.

                  "Senior Interest Distribution Amount": With respect to any
Distribution Date and Loan Group, an amount equal to the sum of (i) the Interest
Distribution Amount for such Distribution Date for the related Class A
Certificates and (ii) the Interest Carry Forward Amount, if any, for such
Distribution Date for the related Class A Certificates.

                  "Servicer": Litton Loan Servicing LP or any successor servicer
appointed as herein provided, in its capacity as Servicer hereunder.

                  "Servicer Event of Default": One or more of the events
described in Section 7.01.

                                      -45-

<PAGE>

                  "Servicer Prepayment Charge Payment Amount": The amounts
payable by the Servicer in respect of any waived Prepayment Charges pursuant to
Section 3.01.

                  "Servicer Remittance Date": With respect to any Distribution
Date, by 3:00 p.m. New York time on the Business Day preceding the related
Distribution Date.

                  "Servicer Termination Trigger": Either (i) the Delinquency
Percentage for both Loan Groups (excluding for purposes of this test, any
Mortgage Loans that are current and under a forbearance plan) equals or exceeds
20% with respect to such Distribution Date or (ii) the Cumulative Realized
Losses incurred since the Cut-off Date through the last day of the related Due
Period exceeds the applicable percentages set forth below with respect to such
Distribution Date:

      DISTRIBUTION DATE OCCURRING IN                    PERCENTAGE
-------------------------------------------------------------------------------
October 2001 through September 2005                       3.00%
October 2005 through September 2006                       3.75%
October 2006 through September 2007                       4.25%
October 2007 and thereafter                               4.75%

                  "Servicing Account": The account or accounts created and
maintained pursuant to Section 3.09.

                  "Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Servicer in connection with a default, delinquency or
other unanticipated event by the Servicer in the performance of its servicing
obligations, including, but not limited to, the cost of (i) the preservation,
restoration and protection of a Mortgaged Property, (ii) any enforcement or
judicial proceedings, including but not limited to foreclosures, in respect of a
particular Mortgage Loan, (iii) the management (including reasonable fees in
connection therewith) and liquidation of any REO Property and (iv) the
performance of its obligations under Section 3.01, Section 3.09, Section 3.14,
Section 3.16 and Section 3.23. The Servicer shall not be required to make any
Nonrecoverable Servicing Advances.

                  "Servicing Fee": With respect to each Mortgage Loan and for
any calendar month, an amount equal to the Servicing Fee Rate accrued for one
month (or in the event of any payment of interest which accompanies a Principal
Prepayment in full or in part made by the Mortgagor during such calendar month,
interest for the number of days covered by such payment of interest) on the same
principal amount on which interest on such Mortgage Loan accrues for such
calendar month, calculated on the basis of a 360-day year consisting of twelve
30-day months. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation.

                  "Servicing Fee Rate": 0.50% per annum.

                  "Servicing Officer": Any officer of the Servicer involved in,
or responsible for, the administration and servicing of Mortgage Loans, whose
name and specimen signature appear on a list of Servicing Officers furnished by
the Servicer to the Trust Administrator, the Trustee and the Depositor on the
Closing Date, as such list may from time to time be amended.

                                      -46-

<PAGE>

                  "Servicing Rights Pledgee": One or more lenders, selected by
the Servicer, to which the Servicer will pledge and assign all of its right,
title and interest in, to and under this Agreement, including First Union
National Bank, as the representative of certain lenders.

                  "Simple Interest Excess": As of any Distribution Date for each
Simple Interest Qualifying Loan, the excess, if any, of (i) the portion of the
monthly payment received from the Mortgagor for such Mortgage Loan allocable to
interest with respect to the related Due Period, over (ii) 30 days' interest on
the Stated Principal Balance of such Mortgage Loan at the Mortgage Rate.

                  "Simple Interest Excess Sub-Account": The sub-account of the
Collection Account established by the Servicer pursuant to Section 3.10. The
Simple Interest Excess Sub-Account shall be an Eligible Account.

                  "Simple Interest Method": The method of allocating a payment
to principal and interest, pursuant to which the portion of such payment that is
allocated to interest is equal to the product of the fixed rate of interest
multiplied by the unpaid principal balance multiplied by the period of time
elapsed since the preceding payment of interest was made and divided by either
360 or 365, as specified in the related Mortgage Note, and the remainder of such
payment is allocated to principal.

                  "Simple Interest Mortgage Loan": Any Mortgage Loan under which
the portion of a payment allocable to interest and the portion of such payment
allocable to principal is determined in accordance with the Simple Interest
Method.

                  "Simple Interest Qualifying Loan": As of any Determination
Date, any Simple Interest Mortgage Loan that was neither prepaid in full during
the related Due Period, nor delinquent with respect to a payment that became due
during the related Due Period as of the close of business on the Determination
Date following such Due Period.

                  "Simple Interest Shortfall": As of any Distribution Date for
each Simple Interest Qualifying Loan, the excess, if any, of (i) 30 days'
interest on the Stated Principal Balance of all such Mortgage Loans at the
Mortgage Rate, over (ii) the portion of the monthly payment received from the
Mortgagor for such Mortgage Loan allocable to interest with respect to the
related Due Period.

                  "Single Certificate": With respect to any Class of
Certificates (other than the Class PF Certificates, the Class PV Certificates
and the Class R Certificates), a hypothetical Certificate of such Class
evidencing a Percentage Interest for such Class corresponding to an initial
Certificate Principal Balance of $1,000. With respect to the Class PF
Certificates, the Class PV Certificates and the Class R Certificates, a
hypothetical Certificate of such Class evidencing a 100% Percentage Interest in
such Class.

                  "Special Servicing Fee": With respect to each Mortgage Loan
(except any second lien Mortgage Loan) that is delinquent 90 or more days, $150
per month payable until the earlier of (i) 18 consecutive months and (ii) the
delinquency status of such Mortgage Loan has been reduced to less than 90 days.

                                      -47-

<PAGE>

                  'Startup Day": With respect to each of REMIC I-A, REMIC I-B
and REMIC II, the day designated as such pursuant to Section 10.01(b) hereof.

                  "Stated Principal Balance": With respect to any Mortgage Loan:
(a) as of any date of determination up to but not including the Distribution
Date on which the proceeds, if any, of a Liquidation Event with respect to such
Mortgage Loan would be distributed, the Principal Balance of such Mortgage Loan
as of the Cut-off Date, as shown in the Mortgage Loan Schedule, minus the sum of
(i) the principal portion of each Monthly Payment due on a Due Date subsequent
to the Cut- off Date, to the extent received from the Mortgagor and distributed
pursuant to Section 4.01 on or before such date of determination, (ii) all
Principal Prepayments received after the Cut-off Date, to the extent distributed
pursuant to Section 4.01 on or before such date of determination, (iii) all
Liquidation Proceeds and Insurance Proceeds applied by the Servicer as
recoveries of principal in accordance with the provisions of Section 3.16, to
the extent distributed pursuant to Section 4.01 on or before such date of
determination, and (iv) any Realized Loss incurred with respect thereto as a
result of a Deficient Valuation made during or prior to the Prepayment Period
for the most recent Distribution Date coinciding with or preceding such date of
determination; and (b) as of any date of determination coinciding with or
subsequent to the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such Mortgage Loan would be distributed, zero.
With respect to any REO Property: (a) as of any date of determination up to but
not including the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such REO Property would be distributed, an
amount (not less than zero) equal to the Stated Principal Balance of the related
Mortgage Loan as of the date on which such REO Property was acquired on behalf
of REMIC I-A or REMIC I-B, minus the sum of (i) if such REO Property was
acquired before the Distribution Date in any calendar month, the principal
portion of the Monthly Payment due on the Due Date in the calendar month of
acquisition, to the extent distributed pursuant to Section 4.01 on or before
such date of determination, and (ii) the aggregate amount of REO Principal
Amortization in respect of such REO Property for all previously ended calendar
months, to the extent distributed pursuant to Section 4.01 on or before such
date of determination; and (b) as of any date of determination coinciding with
or subsequent to the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such REO Property would be distributed, zero.

                  "Stayed Funds": If the Servicer is the subject of a proceeding
under the federal Bankruptcy Code and the making of a Remittance (as defined in
Section 7.02(b)) is prohibited by Section 362 of the federal Bankruptcy Code,
funds that are in the custody of the Servicer, a trustee in bankruptcy or a
federal bankruptcy court and should have been the subject of such Remittance
absent such prohibition.

                  "Stepdown Date": With respect to the Group I Certificates, the
earlier to occur of (i) the Distribution Date on which the Certificate Principal
Balance of the Class AF Certificates has been reduced to zero and (ii) the later
to occur of (a) the Distribution Date occurring in November 2004 and (ii) the
first Distribution Date on which the Credit Enhancement Percentage (calculated
for this purpose only after taking into account distributions of principal on
the Group I Mortgage Loans but prior to any distribution of the Group I
Principal Distribution Amount to the Certificates then entitled to distributions
of principal on such Distribution Date) is equal to or greater than 21.00%. With
respect to the Group II Certificates, the earlier to occur of (i) the
Distribution Date on which the Certificate Principal Balance of the Class AV-1
Certificates has been reduced to zero

                                      -48-

<PAGE>

and (ii) the later to occur of (a) the Distribution Date occurring in November
2004 and (ii) the first Distribution Date on which the Credit Enhancement
Percentage (calculated for this purpose only after taking into account
distributions of principal on the Group II Mortgage Loans but prior to any
distribution of the Group II Principal Distribution Amount to the Certificates
then entitled to distributions of principal on such Distribution Date) is equal
to or greater than 40.00%.

                  "Sub-Servicer": Any Person with which the Servicer has entered
into a Sub-Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02.

                  "Sub-Servicing Agreement": The written contract between the
Servicer and a Sub- Servicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02.

                  "Substitution Shortfall Amount": As defined in Section
2.03(b).

                  "Tax Returns": The federal income tax return on Internal
Revenue Service Form 1066, U. S. Real Estate Mortgage Investment Conduit Income
Tax Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to the classification of portions
thereof as REMICs under the REMIC Provisions, together with any and all other
information reports or returns that may be required to be furnished to the
Certificateholders or filed with the Internal Revenue Service or any other
governmental taxing authority under any applicable provisions of federal, state
or local tax laws.

                  "Telerate Page 3750": The display designated as page "3750" on
the Dow Jones Telerate Capital Markets Report (or such other page as may replace
page 3750 on that report for the purpose of displaying London interbank offered
rates of major banks).

                  "Termination Price": As defined in Section 9.01.

                  "Terminator": As defined in Section 9.01.

                  "Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate.

                  "Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.

                  "Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.

                  "Trigger Event": With respect to the Group I Certificates or
the Group II Certificates, a Trigger Event has occurred with respect to a
Distribution Date if the Delinquency Percentage for the related Loan Group
exceeds 15.00%.

                  "Trust Administrator": Citibank, N.A., a national banking
association, or its

                                      -49-

<PAGE>

successor in interest, or any successor trust administrator appointed as herein
provided.

                  "Trust Fund": Collectively, all of the assets of REMIC I-A,
REMIC I-B and REMIC II, and the other assets conveyed by the Depositor to the
Trustee pursuant to Section 2.01.

                  "Trust REMIC":  Any of REMIC I-A, REMIC I-B or REMIC II.

                  "Trustee": U. S. Bank National Association, a national banking
association, or its successor in interest, or any successor trustee appointed as
herein provided.

                  "Uncertificated Balance": The amount of any REMIC I-A Regular
Interest or REMIC I-B Regular Interest outstanding as of any date of
determination. As of the Closing Date, the Uncertificated Balance of each REMIC
I-A Regular Interest and each REMIC I-B Regular Interest shall equal the amount
set forth in the Preliminary Statement hereto as its initial uncertificated
balance. On each Distribution Date, the Uncertificated Balance of each REMIC I-A
Regular Interest and each REMIC I-B Regular Interest shall be reduced by all
distributions of principal made on such REMIC I-A Regular Interest or such REMIC
I-B Regular Interest, as applicable, on such Distribution Date pursuant to
Section 4.01 and, if and to the extent necessary and appropriate, shall be
further reduced on such Distribution Date by Realized Losses as provided in
Section 4.04. The Uncertificated Balances of REMIC I-A Regular Interest IA-LTZZ
and REMIC I-B Regular Interest IB-LTZZ shall be increased by interest deferrals
as provided in Section 4.01(a)(1)(A)(I)(i) and Section 4.01(a)(1)(A)(II)(i),
respectively. The Uncertificated Balance of each REMIC I-A Regular Interest and
each REMIC I-B Regular Interest shall never be less than zero.

                  "Uncertificated Interest": With respect to any REMIC I-A
Regular Interest for any Distribution Date, one month's interest at the REMIC
I-A Remittance Rate applicable to such REMIC I-A Regular Interest for such
Distribution Date, accrued on the Uncertificated Balance thereof immediately
prior to such Distribution Date. With respect to any REMIC I-A Regular Interest
for any Distribution Date, one month's interest at the REMIC I-A Remittance Rate
applicable to such REMIC I-A Regular Interest for such Distribution Date,
accrued on the Uncertificated Balance thereof immediately prior to such
Distribution Date. Uncertificated Interest in respect of any REMIC I-A Regular
Interest or REMIC I-B Regular Interest, shall accrue on the basis of a 360-day
year consisting of twelve 30-day months. Uncertificated Interest with respect to
each Distribution Date, as to any REMIC I-A Regular Interest or REMIC I-B
Regular Interest, shall be reduced by an amount equal to the sum of (a) the
aggregate Prepayment Interest Shortfall, if any, for such Distribution Date to
the extent not covered by payments pursuant to Section 3.24 and (b) the
aggregate amount of any Relief Act Interest Shortfall, if any allocated, in each
case, to such REMIC I-A Regular Interest or REMIC I-B Regular Interest pursuant
to Section 1.02. In addition, Uncertificated Interest with respect to each
Distribution Date, as to any REMIC I-A Regular Interest or REMIC I-B Regular
Interest shall be reduced by Realized Losses, if any, allocated to such REMIC
I-A Regular Interest or REMIC I-B Regular Interest pursuant to Section 1.02 and
Section 4.04.

                  "Underwriters' Exemption": An individual exemption issued by
the United States Department of Labor, Prohibited Transaction Exemption 91-23
(56 Fed. Reg. 15936, April 19, 1991), as amended, to Salomon Smith Barney Inc.
(formerly known as Smith Barney Inc.), for specific offerings in which Salomon
Smith Barney Inc. or any person directly or indirectly, through

                                      -50-

<PAGE>

one or more intermediaries, controlling, controlled by or under common control
with Salomon Smith Barney Inc. is an underwriter, placement agent or a manager
or co-manager of the underwriting syndicate or selling group where the trust and
the offered certificates meet specified conditions. The Underwriters' Exemption,
as amended, provides a partial exemption for transactions involving certificates
representing a beneficial interest in a trust and entitling the holder to
pass-through payments of principal, interest and/or other payments with respect
to the trust's assets.

                  "Uninsured Cause": Any cause of damage to a Mortgaged Property
such that the complete restoration of such property is not fully reimbursable by
the hazard insurance policies required to be maintained pursuant to Section
3.14.

                  "United States Person": A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States, any state thereof or, District of Columbia
(except, in the case of a partnership, to the extent provided in regulations)
provided that, for purposes solely of the restrictions on the transfer of Class
R Certificates, no partnership or other entity treated as a partnership for
United States federal income tax purposes shall be treated as a United States
Person unless all persons that own an interest in such partnership either
directly or through any entity that is not a corporation for United States
federal income tax purposes are required by the applicable operative agreement
to be United States Persons or an estate whose income is subject to United
States federal income tax regardless of its source, or a trust if a court within
the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust. To the extent
prescribed in regulations by the Secretary of the Treasury, which have not yet
been issued, a trust which was in existence on August 20, 1996 (other than a
trust treated as owned by the grantor under subpart E of part I of subchapter J
of chapter 1 of the Code), and which was treated as a United States person on
August 20, 1996 may elect to continue to be treated as a United States person
notwithstanding the previous sentence. The term "United States" shall have the
meaning set forth in Section 7701 of the Code.

                  "Value": With respect to any Mortgaged Property, the value
thereof as determined by an independent appraisal made at the time of the
origination of the related Mortgage Loan or the sale price, if the appraisal is
not available; except that, with respect to any Mortgage Loan that is a purchase
money mortgage loan, the lesser of (i) the value thereof as determined by an
independent appraisal made at the time of the origination of such Mortgage Loan,
if any, and (ii) the sales price of the related Mortgaged Property.

                  "Voting Rights": The portion of the voting rights of all of
the Certificates which is allocated to any Certificate. With respect to any date
of determination, 98% of all Voting Rights will be allocated among the holders
of the Class A Certificates, the Mezzanine Certificates, the Class OCF
Certificates and the Class OCV Certificates in proportion to the then
outstanding Certificate Principal Balances of their respective Certificates, 1/2
of 1% of all Voting Rights will be allocated to the holders of the Class PF
Certificates, 1/2 of 1% of all Voting Rights will be allocated to the holders of
the Class PV Certificates and 1% of all Voting Rights will be allocated among
the holders of the Class R Certificates. The Voting Rights allocated to each
Class of Certificate shall be allocated among Holders of each such Class in
accordance with their respective Percentage Interests as of the most recent
Record Date.

                                      -51-

<PAGE>

                  SECTION 1.02.             Allocation of Certain Interest
                                            Shortfalls.

                  For purposes of calculating the amount of Accrued Certificate
Interest and the amount of the Interest Distribution Amount for the Class AF
Certificates, the Group I Mezzanine Certificates and the Class OCF Certificates
for any Distribution Date, (1) the aggregate amount of any Prepayment Interest
Shortfalls (to the extent not covered by payments by the Servicer pursuant to
Section 3.24) and any Relief Act Interest Shortfall incurred in respect of the
Group I Mortgage Loans for any Distribution Date shall be allocated first, among
the Class OCF Certificates on a PRO RATA basis based on, and to the extent of,
one month's interest at the then applicable respective Pass- Through Rate on the
respective Notional Amount of each such Certificate and, thereafter, among the
Class AF Certificates and the Group I Mezzanine Certificates on a PRO RATA basis
based on, and to the extent of, one month's interest at the then applicable
respective Pass-Through Rate on the respective Certificate Principal Balance of
each such Certificate and (2) the aggregate amount of any Realized Losses
incurred for any Distribution Date shall be allocated among the Class OCF
Certificates on a PRO RATA basis based on, and to the extent of, one month's
interest at the then applicable respective Pass-Through Rate on the respective
Notional Amount of each such Certificate.

                  For purposes of calculating the amount of Accrued Certificate
Interest and the amount of the Interest Distribution Amount for the Class AV-1
Certificates, the Group II Mezzanine Certificates and the Class OCV Certificates
for any Distribution Date, (1) the aggregate amount of any Prepayment Interest
Shortfalls (to the extent not covered by payments by the Servicer pursuant to
Section 3.24) and any Relief Act Interest Shortfall incurred in respect of the
Group II Mortgage Loans for any Distribution Date shall be allocated first,
among the Class OCV Certificates on a PRO RATA basis based on, and to the extent
of, one month's interest at the then applicable respective Pass- Through Rate on
the respective Notional Amount of each such Certificate and, thereafter, among
the Class AV-1 Certificates and the Group II Mezzanine Certificates on a PRO
RATA basis based on, and to the extent of, one month's interest at the then
applicable respective Pass-Through Rate on the respective Certificate Principal
Balance of each such Certificate and (2) the aggregate amount of any Realized
Losses and Net WAC Rate Carryover Amounts incurred for any Distribution Date
shall be allocated among the Class OCV Certificates on a PRO RATA basis based
on, and to the extent of, one month's interest at the then applicable respective
Pass-Through Rate on the respective Notional Amount of each such Certificate.

                  For purposes of calculating the amount of Uncertificated
Interest for the REMIC I-A Regular Interests for any Distribution Date, the
aggregate amount of any Prepayment Interest Shortfalls (to the extent not
covered by payments by the Servicer pursuant to Section 3.24) and any Relief Act
Interest Shortfalls incurred in respect of the Mortgage Loans for any
Distribution Date shall be allocated first, to Uncertificated Interest payable
to REMIC I-A Regular Interest IA-LTAA and REMIC I-A Regular Interest IA-LTZZ up
to an aggregate amount equal to the REMIC I-A Interest Loss Allocation Amount,
98% and 2%, respectively, and thereafter among REMIC I-A Regular Interest
IA-LTAA, REMIC I-A Regular Interest IA-LTAF1, REMIC I-A Regular Interest
IA-LTAF2, REMIC I-A Regular Interest IA-LTAF3, REMIC I-A Regular Interest
IA-LTMF1, REMIC I-A Regular Interest IA-LTMF2, REMIC I-A Regular Interest
IA-LTMF3 and REMIC I-A Regular Interest IA-LTZZ PRO RATA based on, and to the
extent of, one month's interest at the then applicable respective Pass-Through
Rate on the respective Uncertificated Balance of each such REMIC I-A Regular
Interest.

                                      -52-

<PAGE>

                  For purposes of calculating the amount of Uncertificated
Interest for the REMIC I-B Regular Interests and REMIC I-B Regular Interest
IB-LTZZ for any Distribution Date, the aggregate amount of any Prepayment
Interest Shortfalls (to the extent not covered by payments by the Servicer
pursuant to Section 3.24) and any Relief Act Interest Shortfalls incurred in
respect of the Mortgage Loans for any Distribution Date shall be allocated
first, to Uncertificated Interest payable to REMIC I-B Regular Interest IB-LTAA
and REMIC I-B Regular Interest IB-LTZZ up to an aggregate amount equal to the
REMIC I-B Interest Loss Allocation Amount, 98% and 2%, respectively, and
thereafter among REMIC I-B Regular Interest IB-LTAA, REMIC I-B Regular Interest
IB-LTAV1, REMIC I-B Regular Interest IB-LTMV1, REMIC I-B Regular Interest
IB-LTMV2, REMIC I-B Regular Interest IB-LTMV3, REMIC I-B Regular Interest
IB-LTMV4 and REMIC I-B Regular Interest IB-LTZZ PRO RATA based on, and to the
extent of, one month's interest at the then applicable respective Pass- Through
Rate on the respective Uncertificated Balance of each such REMIC I-B Regular
Interest.

                                      -53-

<PAGE>

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                        ORIGINAL ISSUANCE OF CERTIFICATES

                  SECTION 2.01.             Conveyance of the Mortgage Loans.

                  The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse, for the benefit of the Certificateholders, all the
right, title and interest of the Depositor, including any security interest
therein for the benefit of the Depositor, in and to the Mortgage Loans
identified on the Mortgage Loan Schedule, the rights of the Depositor under the
Mortgage Loan Purchase Agreement, and all other assets included or to be
included in REMIC I-A and REMIC I-B. Such assignment includes all interest and
principal received by the Depositor or the Servicer on or with respect to the
Mortgage Loans (other than payments of principal and interest due on such
Mortgage Loans on or before the Cut-off Date). The Depositor herewith delivers
to the Trustee an executed copy of the Mortgage Loan Purchase Agreement.

                  In connection with such transfer and assignment, the Depositor
does hereby deliver to, and deposit with, the Trustee, the following documents
or instruments with respect to each Mortgage Loan so transferred and assigned (a
"Mortgage File"):

                  (i) the original Mortgage Note, endorsed in blank or in the
         following form: "Pay to the order of U. S. Bank National Association,
         as Trustee under the applicable agreement, without recourse," with all
         prior and intervening endorsements showing a complete chain of
         endorsement from the originator to the Person so endorsing to the
         Trustee;

                  (ii) the original Mortgage with evidence of recording thereon,
         and the original recorded power of attorney, if the Mortgage was
         executed pursuant to a power of attorney, with evidence of recording
         thereon;

                  (iii) an original Assignment in blank;

                  (iv) the original recorded Assignment or Assignments showing a
         complete chain of assignment from the originator to the Person
         assigning the Mortgage to the Trustee as contemplated by the
         immediately preceding clause (iii);

                  (v) the original or copies of each assumption, modification,
         written assurance or substitution agreement, if any; and

                  (vi) the original lender's title insurance policy (except with
         respect to any Mortgage Loan originated with a Principal Balance of
         $150,000 or less), together with all endorsements or riders that were
         issued with or subsequent to the issuance of such policy, insuring the
         priority of the Mortgage as a first lien or second lien on the
         Mortgaged Property represented therein as a fee interest vested in the
         Mortgagor, or in the event such original title policy is unavailable, a
         written commitment or uniform binder or preliminary report of title

                                      -54-

<PAGE>

         issued by the title insurance or escrow company.

                  The Trustee, at the expense of the Seller, shall promptly
(within sixty Business Days following the later of the Closing Date and the date
of receipt by the Trustee of the recording information for a Mortgage, but in no
event later than ninety days following the Closing Date) submit or cause to be
submitted for recording, at no expense to the Trust Fund, the Trustee, the Trust
Administrator, the Servicer or the Depositor, in the appropriate public office
for real property records, each Assignment referred to in Sections 2.01(iii) and
(iv) above and the Depositor shall execute each original Assignment in the
following form: "U. S. Bank National Association, as Trustee under the
applicable agreement." In the event that any such Assignment is lost or returned
unrecorded because of a defect therein, the Seller shall promptly prepare or
cause to be prepared a substitute Assignment or cure or cause to be cured such
defect, as the case may be, and thereafter cause each such Assignment to be duly
recorded. If the Seller is unable to pay the cost of recording the Assignments,
such expense will be paid by the Trust Administrator and shall be reimbursable
to the Trust Administrator as an Extraordinary Trust Fund Expense.

                  With respect to a maximum of approximately 2.0% of the
Original Mortgage Loans, by outstanding principal balance of the Original
Mortgage Loans as of the Cut-off Date, if any original Mortgage Note referred to
in Section 2.01(i) above cannot be located, the obligations of the Depositor to
deliver such documents shall be deemed to be satisfied upon delivery to the
Trustee of a photocopy of such Mortgage Note, if available, with a lost note
affidavit substantially in the form of Exhibit I attached hereto. If any of the
original Mortgage Notes for which a lost note affidavit was delivered to the
Trustee is subsequently located, such original Mortgage Note shall be delivered
to the Trustee within three Business Days. If any of the documents referred to
in Sections 2.01(ii), (iii) or (iv) above has, as of the Closing Date, been
submitted for recording but either (x) has not been returned from the applicable
public recording office or (y) has been lost or such public recording office has
retained the original of such document, the obligations of the Depositor to
deliver such documents shall be deemed to be satisfied upon (1) delivery to the
Trustee of a copy of each such document certified by the Seller in the case of
(x) above or the applicable public recording office in the case of (y) above to
be a true and complete copy of the original that was submitted for recording and
(2) if such copy is certified by the Seller, delivery to the Trustee promptly
upon receipt thereof of either the original or a copy of such document certified
by the applicable public recording office to be a true and complete copy of the
original. Notice shall be provided to the Trustee, the Trust Administrator and
the Rating Agencies by the Seller if delivery pursuant to clause (2) above will
be made more than 180 days after the Closing Date. If the original lender's
title insurance policy was not delivered pursuant to Section 2.01(vi) above, the
Depositor shall deliver or cause to be delivered to the Trustee, promptly after
receipt thereof, the original lender's title insurance policy. The Depositor
shall deliver or cause to be delivered to the Trustee promptly upon receipt
thereof any other original documents constituting a part of a Mortgage File
received with respect to any Mortgage Loan, including, but not limited to, any
original documents evidencing an assumption or modification of any Mortgage
Loan.

                  All original documents relating to the Mortgage Loans that are
not delivered to the Trustee are and shall be held by the Seller, the Depositor
or the Servicer, as the case may be, in trust for the benefit of the Trustee on
behalf of the Certificateholders. In the event that any such original document
is required pursuant to the terms of this Section to be a part of a Mortgage
File, such

                                      -55-

<PAGE>

document shall be delivered promptly to the Trustee. Any such original document
delivered to or held by the Depositor that is not required pursuant to the terms
of this Section to be a part of a Mortgage File, shall be delivered promptly to
the Servicer.

                  The Depositor herewith delivers to the Trustee and the Trust
Administrator an executed copy of the Mortgage Loan Purchase Agreement.

                  SECTION 2.02.             Acceptance of REMIC I-A and REMIC
                                            I-B by Trustee.

                  The Trustee, acknowledges receipt, subject to the provisions
of Section 2.01 and subject to any exceptions noted on the exception report
described in the next paragraph below, the documents referred to in Section 2.01
(other than such documents described in Section 2.01(v)) above and all other
assets included in the definition of "REMIC I-A" and "REMIC I-B" under clauses
(i), (iii), (iv) and (v) (to the extent of amounts attributable thereto
deposited into the Distribution Account) and declares that it holds and will
hold such documents and the other documents delivered to it constituting a
Mortgage File, and that it holds or will hold all such assets and such other
assets included in the definition of "REMIC I-A" and "REMIC I-B" in trust for
the exclusive use and benefit of all present and future Certificateholders.

                  The Trustee agrees, for the benefit of the Certificateholders,
to review each Mortgage File on or before the Closing Date and to certify in
substantially the form attached hereto as Exhibit C-1 that, as to each Mortgage
Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or any Mortgage Loan specifically identified in the exception report
annexed thereto as not being covered by such certification), (i) all documents
constituting part of such Mortgage File (other than such documents described in
Section 2.01(v)) required to be delivered to it pursuant to this Agreement are
in its possession, (ii) such documents have been reviewed by it and appear
regular on their face and relate to such Mortgage Loan and (iii) based on its
examination and only as to the foregoing, the information set forth in the
Mortgage Loan Schedule that corresponds to items (i) through (iii), (vi),
(x)(A), (xi), (xii), (xv), (xvii), (xviii), (xx) through (xxiii) and (xxv) of
the definition of "Mortgage Loan Schedule" accurately reflects information set
forth in the Mortgage File. It is herein acknowledged that, in conducting such
review, the Trustee was under no duty or obligation (i) to inspect, review or
examine any such documents, instruments, certificates or other papers to
determine whether they are genuine, enforceable, or appropriate for the
represented purpose or whether they have actually been recorded or that they are
other than what they purport to be on their face or (ii) to determine whether
any Mortgage File should include any of the documents specified in clause (v) of
Section 2.01.

                  Prior to the first anniversary date of this Agreement, the
Trustee shall deliver to the Depositor, the Servicer and the Trust Administrator
a final certification in the form annexed hereto as Exhibit C-2 evidencing the
completeness of the Mortgage Files, with any applicable exceptions noted
thereon, and the Servicer shall forward a copy thereof to any Sub-Servicer.

                  If in the process of reviewing the Mortgage Files and making
or preparing, as the case may be, the certifications referred to above, the
Trustee finds any document or documents constituting a part of a Mortgage File
to be missing or defective in any material respect, at the conclusion of its
review the Trustee shall so notify the Depositor, the Servicer and the Trust

                                      -56-

<PAGE>

Administrator. In addition, upon the discovery by the Depositor, the Servicer,
the Trust Administrator or the Trustee of a breach of any of the representations
and warranties made by the Seller in the Mortgage Loan Purchase Agreement in
respect of any Mortgage Loan which materially adversely affects such Mortgage
Loan or the interests of the related Certificateholders in such Mortgage Loan,
the party discovering such breach shall give prompt written notice to the other
parties.

                  The Trustee shall, at the written request and expense of any
Certificateholder, provide a written report to such Certificateholder of all
Mortgage Files released to the Servicer for servicing purposes.

                  SECTION 2.03.             Repurchase or Substitution of
                                            Mortgage Loans by the Seller.

                  (a) Upon discovery or receipt of notice of any materially
defective document in, or that a document is missing from, a Mortgage File or of
the breach by the Seller of any representation, warranty or covenant under the
Mortgage Loan Purchase Agreement in respect of any Mortgage Loan that materially
adversely affects the value of such Mortgage Loan or the interest therein of the
Certificateholders, the Trustee shall promptly notify the Seller, the Servicer
and the Trustee of such defect, missing document or breach and request that the
Seller deliver such missing document or cure such defect or breach within 60
days from the date the Seller was notified of such missing document, defect or
breach, and if the Seller does not deliver such missing document or cure such
defect or breach in all material respects during such period, the Servicer, in
accordance with Section 3.02(b), shall enforce the obligations of the Seller
under the Mortgage Loan Purchase Agreement to repurchase such Mortgage Loan from
REMIC I-A or REMIC I-B, as applicable, at the Purchase Price within 90 days
after the date on which the Seller was notified (subject to Section 2.03(c)) of
such missing document, defect or breach, if and to the extent that the Seller is
obligated to do so under the Mortgage Loan Purchase Agreement. The Purchase
Price for the repurchased Mortgage Loan shall be deposited in the Collection
Account and the Trustee, upon receipt of written certification from the Servicer
of such deposit, shall release to the Seller the related Mortgage File and the
Trustee shall execute and deliver such instruments of transfer or assignment, in
each case without recourse, as the Seller shall furnish to it and as shall be
necessary to vest in the Seller any Mortgage Loan released pursuant hereto.
Neither the Trustee nor the Trust Administrator shall have any further
responsibility with regard to such Mortgage File. In lieu of repurchasing any
such Mortgage Loan as provided above, if so provided in the Mortgage Loan
Purchase Agreement, the Seller may cause such Mortgage Loan to be removed from
REMIC I-A or REMIC I-B (in which case it shall become a Deleted Mortgage Loan)
and substitute one or more Qualified Substitute Mortgage Loans in the manner and
subject to the limitations set forth in Section 2.03(b). It is understood and
agreed that the obligation of the Seller to cure or to repurchase (or to
substitute for) any Mortgage Loan as to which a document is missing, a material
defect in a constituent document exists or as to which such a breach has
occurred and is continuing shall constitute the sole remedy respecting such
omission, defect or breach available to the Trustee and the Certificateholders.

                  (b) Any substitution of Qualified Substitute Mortgage Loans
for Deleted Mortgage Loans made pursuant to Section 2.03(a) must be effected
prior to the date which is two years after the Startup Day for REMIC I-A and
REMIC I-B.

                                      -57-

<PAGE>

                  As to any Deleted Mortgage Loan for which the Seller
substitutes a Qualified Substitute Mortgage Loan or Loans, such substitution
shall be effected by the Seller delivering to the Trustee, for such Qualified
Substitute Mortgage Loan or Loans, the Mortgage Note, the Mortgage, the
Assignment to the Trustee, and such other documents and agreements, with all
necessary endorsements thereon, as are required by Section 2.01, together with
an Officers' Certificate providing that each such Qualified Substitute Mortgage
Loan satisfies the definition thereof and specifying the Substitution Shortfall
Amount (as described below), if any, in connection with such substitution. The
Trustee shall acknowledge receipt for such Qualified Substitute Mortgage Loan or
Loans and, within ten Business Days thereafter, review such documents as
specified in Section 2.02 and deliver to the Depositor, the Servicer and the
Trust Administrator, with respect to such Qualified Substitute Mortgage Loan or
Loans, a certification substantially in the form attached hereto as Exhibit C-1,
with any applicable exceptions noted thereon. Within one year of the date of
substitution, the Trustee shall deliver to the Depositor, the Servicer and the
Trust Administrator a certification substantially in the form of Exhibit C-2
hereto with respect to such Qualified Substitute Mortgage Loan or Loans, with
any applicable exceptions noted thereon. Monthly Payments due with respect to
Qualified Substitute Mortgage Loans in the month of substitution are not part of
REMIC I-A or REMIC I-B, as applicable, and will be retained by the Seller. For
the month of substitution, distributions to Certificateholders will reflect the
Monthly Payment due on such Deleted Mortgage Loan on or before the Due Date in
the month of substitution, and the Seller shall thereafter be entitled to retain
all amounts subsequently received in respect of such Deleted Mortgage Loan. The
Depositor shall give or cause to be given written notice to the
Certificateholders that such substitution has taken place, shall amend the
Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan from
the terms of this Agreement and the substitution of the Qualified Substitute
Mortgage Loan or Loans and shall deliver a copy of such amended Mortgage Loan
Schedule to the Trustee and the Trust Administrator. Upon such substitution,
such Qualified Substitute Mortgage Loan or Loans shall constitute part of the
Mortgage Pool and shall be subject in all respects to the terms of this
Agreement and the Mortgage Loan Purchase Agreement, including, all applicable
representations and warranties thereof included in the Mortgage Loan Purchase
Agreement.

                  For any month in which the Seller substitutes one or more
Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Servicer will determine the amount (the "Substitution Shortfall Amount"), if
any, by which the aggregate Purchase Price of all such Deleted Mortgage Loans
exceeds the aggregate of, as to each such Qualified Substitute Mortgage Loan,
the Stated Principal Balance thereof as of the date of substitution, together
with one month's interest on such Stated Principal Balance at the applicable Net
Mortgage Rate, plus all outstanding Advances and Servicing Advances (including
Nonrecoverable Advances and Nonrecoverable Servicing Advances) related thereto.
On the date of such substitution, the Seller will deliver or cause to be
delivered to the Servicer for deposit in the Collection Account an amount equal
to the Substitution Shortfall Amount, if any, and the Trustee, upon receipt of
the related Qualified Substitute Mortgage Loan or Loans and certification by the
Servicer of such deposit, shall release to the Seller the related Mortgage File
or Files and the Trustee shall execute and deliver such instruments of transfer
or assignment, in each case without recourse, the Seller shall deliver to it and
as shall be necessary to vest therein any Deleted Mortgage Loan released
pursuant hereto.

                  In addition, the Seller shall obtain at its own expense and
deliver to the Trust

                                      -58-

<PAGE>

Administrator and the Trustee an Opinion of Counsel to the effect that such
substitution will not cause (a) any federal tax to be imposed on any Trust
REMIC, including without limitation, any federal tax imposed on "prohibited
transactions" under Section 860F(a)(1) of the Code or on "contributions after
the startup date" under Section 860G(d)(1) of the Code, or (b) any Trust REMIC
to fail to qualify as a REMIC at any time that any Certificate is outstanding.

                  (c) Upon discovery by the Depositor, the Seller, the Servicer,
the Trustee or the Trust Administrator that any Mortgage Loan does not
constitute a "qualified mortgage" within the meaning of Section 860G(a)(3) of
the Code, the party discovering such fact shall within two Business Days give
written notice thereof to the other parties. In connection therewith, the Seller
shall repurchase or, subject to the limitations set forth in Section 2.03(b),
substitute one or more Qualified Substitute Mortgage Loans for the affected
Mortgage Loan within 90 days of the earlier of discovery or receipt of such
notice with respect to such affected Mortgage Loan. Any such repurchase or
substitution shall be made in the same manner as set forth in Section 2.03(a).
The Trustee and the Trust Administrator shall reconvey to the Seller the
Mortgage Loan to be released pursuant hereto in the same manner, and on the same
terms and conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty.

                  SECTION 2.04.             Reserved.

                  SECTION 2.05.             Representations, Warranties and
                                            Covenants of the Servicer.

                  The Servicer hereby represents, warrants and covenants to the
Trust Administrator and the Trustee, for the benefit of each of the Trustee, the
Trust Administrator, the Certificateholders and to the Depositor that as of the
Closing Date or as of such date specifically provided herein:

                  (i) The Servicer is a limited partnership duly formed, validly
         existing and in good standing as a limited partnership under the laws
         of the State of Delaware and is duly authorized and qualified to
         transact any and all business contemplated by this Agreement to be
         conducted by the Servicer in any state in which a Mortgaged Property is
         located or is otherwise not required under applicable law to effect
         such qualification and, in any event, is in compliance with the doing
         business laws of any such State, to the extent necessary to ensure its
         ability to enforce each Mortgage Loan and to service the Mortgage Loans
         in accordance with the terms of this Agreement;

                  (ii) The Servicer has the full power and authority to conduct
         its business as presently conducted by it and to execute, deliver and
         perform, and to enter into and consummate, all transactions
         contemplated by this Agreement. The Servicer has duly authorized the
         execution, delivery and performance of this Agreement, has duly
         executed and delivered this Agreement, and this Agreement, assuming due
         authorization, execution and delivery by the Depositor, the Trust
         Administrator and the Trustee, constitutes a legal, valid and binding
         obligation of the Servicer, enforceable against it in accordance with
         its terms except as the enforceability thereof may be limited by
         bankruptcy, insolvency, reorganization or similar laws affecting the
         enforcement of creditors' rights generally and by general principles of
         equity;

                                      -59-

<PAGE>

                  (iii) The execution and delivery of this Agreement by the
         Servicer, the servicing of the Mortgage Loans by the Servicer
         hereunder, the consummation by the Servicer of any other of the
         transactions herein contemplated, and the fulfillment of or compliance
         with the terms hereof are in the ordinary course of business of the
         Servicer and will not (A) result in a breach of any term or provision
         of the limited partnership agreement of the Servicer or (B) conflict
         with, result in a breach, violation or acceleration of, or result in a
         default under, the terms of any other material agreement or instrument
         to which the Servicer is a party or by which it may be bound, or any
         statute, order or regulation applicable to the Servicer of any court,
         regulatory body, administrative agency or governmental body having
         jurisdiction over the Servicer; and the Servicer is not a party to,
         bound by, or in breach or violation of any indenture or other agreement
         or instrument, or subject to or in violation of any statute, order or
         regulation of any court, regulatory body, administrative agency or
         governmental body having jurisdiction over it, which materially and
         adversely affects or, to the Servicer's knowledge, would in the future
         materially and adversely affect, (x) the ability of the Servicer to
         perform its obligations under this Agreement, (y) the business,
         operations, financial condition, properties or assets of the Servicer
         taken as a whole or (z) the legality, validity or enforceability of
         this Agreement;

                  (iv) The Servicer is a HUD approved mortgagee pursuant to
         Section 203 and Section 211 of the National Housing Act. No event has
         occurred, including but not limited to a change in insurance coverage,
         that would make the Servicer unable to comply with HUD eligibility
         requirements or that would require notification to HUD;

                  (v) The Servicer does not believe, nor does it have any reason
         or cause to believe, that it cannot perform each and every covenant
         made by it and contained in this Agreement;

                  (vi) No litigation is pending against the Servicer that would
         materially and adversely affect the execution, delivery or
         enforceability of this Agreement or the ability of the Servicer to
         service the Mortgage Loans or to perform any of its other obligations
         hereunder in accordance with the terms hereof;

                  (vii) There are no actions or proceedings against, or
         investigations known to it of, the Servicer before any court,
         administrative or other tribunal (A) that might prohibit its entering
         into this Agreement, (B) seeking to prevent the consummation of the
         transactions contemplated by this Agreement or (C) that might prohibit
         or materially and adversely affect the performance by the Servicer of
         its obligations under, or the validity or enforceability of, this
         Agreement;

                  (viii) No consent, approval, authorization or order of any
         court or governmental agency or body is required for the execution,
         delivery and performance by the Servicer of, or compliance by the
         Servicer with, this Agreement or the consummation by it of the
         transactions contemplated by this Agreement, except for such consents,
         approvals, authorizations or orders, if any, that have been obtained
         prior to the Closing Date; and

                  (ix) The Servicer does and will continue to accurately report
         its borrower credit files for each Mortgage Loan to the three major
         credit bureaus in existence as of the Closing

                                      -60-

<PAGE>

         Date in a timely manner.

                  It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.05 shall survive delivery
of the Mortgage Files to the Trustee and shall inure to the benefit of the Trust
Administrator, the Trustee, the Depositor and the Certificateholders. Upon
discovery by any of the Depositor, the Servicer, the Trust Administrator or the
Trustee of a breach of any of the foregoing representations, warranties and
covenants which materially and adversely affects the value of any Mortgage Loan,
Prepayment Charge or the interests therein of the Certificateholders, the party
discovering such breach shall give prompt written notice (but in no event later
than two Business Days following such discovery) to the Trust Administrator and
the Trustee. Subject to Section 7.01, unless such breach shall not be
susceptible of cure within 90 days, the obligation of the Servicer set forth in
Section 2.03(c) to cure breaches shall constitute the sole remedy against the
Servicer available to the Certificateholders, the Depositor or the Trust
Administrator and the Trustee on behalf of the Certificateholders respecting a
breach of the representations, warranties and covenants contained in this
Section 2.05. The foregoing shall not, however, limit any remedies available to
the Certificateholders, the Depositor, the Trust Administrator or the Trustee on
behalf of the Certificateholders, pursuant to the Mortgage Loan Purchase
Agreement, respecting a breach of the representations, warranties and covenants
of the Seller contained in the Mortgage Loan Purchase Agreement.

                  SECTION 2.06.             Issuance of the REMIC I-A
                                            Regular Interests, REMIC I-B Regular
                                            Interests and the Class R-I
                                            Interest.

                  The Trustee acknowledges the assignment to it of the Group I
Mortgage Loans and the delivery to it (or the Trust Administrator on its behalf)
of the Group I Mortgage Files, subject to the provisions of Section 2.01 and
Section 2.02, together with the assignment to it of all other assets included in
REMIC I-A, the receipt of which is hereby acknowledged. Concurrently with such
assignment and delivery and in exchange therefor, the Trust Administrator,
pursuant to the written request of the Depositor executed by an officer of the
Depositor, has executed, authenticated and delivered to or upon the order of the
Depositor, the Class R Certificates (in respect of the Class R-IA Interest) in
authorized denominations. The interests evidenced by the Class R-IA Interest,
together with the REMIC I-A Regular Interests, constitute the entire beneficial
ownership interest in REMIC I-A. The rights of the Class R-IA Interest and REMIC
II (as holder of the REMIC I-A Regular Interest) to receive distributions from
the proceeds of REMIC I-A in respect of the Class R-IA Interest and the REMIC
I-A Regular Interests, and all ownership interests evidenced or constituted by
the Class R-IA Interest and the REMIC I-A Regular Interests, shall be as set
forth in this Agreement.

                  The Trustee acknowledges the assignment to it of the Group II
Mortgage Loans and the delivery to it (or the Trust Administrator on its behalf)
of the Group II Mortgage Files, subject to the provisions of Section 2.01 and
Section 2.02, together with the assignment to it of all other assets included in
REMIC I-B, the receipt of which is hereby acknowledged. Concurrently with such
assignment and delivery and in exchange therefor, the Trust Administrator,
pursuant to the written request of the Depositor executed by an officer of the
Depositor, has executed, authenticated and delivered to or upon the order of the
Depositor, the Class R Certificates (in respect of the Class R-IB Interest) in
authorized denominations. The interests evidenced by the Class R-IB Interest,
together

                                      -61-

<PAGE>

with the REMIC I-B Regular Interests, constitute the entire beneficial ownership
interest in REMIC I-B. The rights of the Class R-IB Interest and REMIC II (as
holder of the REMIC I-B Regular Interest) to receive distributions from the
proceeds of REMIC I-B in respect of the Class R-IB Interest and the REMIC I-B
Regular Interests, and all ownership interests evidenced or constituted by the
Class R-IB Interest and the REMIC I-B Regular Interests, shall be as set forth
in this Agreement.

                  SECTION 2.07.             Conveyance of the REMIC I-A
                                            Regular Interests and the REMIC I-B
                                            Regular Interests; Acceptance of
                                            REMIC II by the Trustee.

                  The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee, without recourse all the right, title and interest of the Depositor in
and to the REMIC I-A Regular Interests and the REMIC I-B Regular Interests for
the benefit of the Class R-II Interest and REMIC II (as holder of the REMIC I-A
Regular Interests and the REMIC I-B Regular Interests). The Trustee acknowledges
receipt of the REMIC I-A Regular Interests and the REMIC I-B Regular Interests
and declares that it holds and will hold the same in trust for the exclusive use
and benefit of all present and future Class R-II Interest and REMIC II (as
holder of the REMIC I-A Regular Interests and the REMIC I-B Regular Interests).
The rights of the Class R-II Interest and REMIC II (as holder of the REMIC I-A
Regular Interests and the REMIC I-B Regular Interests) to receive distributions
from the proceeds of REMIC II in respect of the Class R-II Interest and REMIC II
Regular Interests, respectively, and all ownership interests evidenced or
constituted by the Class R-II Interest and the REMIC II Regular Interests, shall
be as set forth in this Agreement.

                  SECTION 2.08.             Issuance of Class R-II Certificates.

                  The Trustee acknowledges the assignment to it of the REMIC
Regular Interests and, concurrently therewith and in exchange therefor, pursuant
to the written request of the Depositor executed by an officer of the Depositor,
the Trust Administrator has executed, authenticated and delivered to or upon the
order of the Depositor, the Class R Certificates in authorized denominations.

                                      -62-

<PAGE>

                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                              OF THE MORTGAGE LOANS

                  SECTION 3.01.             Servicer to Act as Servicer.

                  The Servicer shall service and administer the Mortgage Loans
on behalf of the Trust and in the best interests of and for the benefit of the
Certificateholders (as determined by the Servicer in its reasonable judgment) in
accordance with the terms of this Agreement and the respective Mortgage Loans
and, to the extent consistent with such terms, in the same manner in which it
services and administers similar mortgage loans for its own portfolio, giving
due consideration to customary and usual standards of practice of prudent
mortgage lenders and loan servicers administering similar mortgage loans but
without regard to:

                  (i) any relationship that the Servicer or any Affiliate of the
         Servicer may have with the related Mortgagor;

                  (ii) the ownership of any Certificate by the Servicer or any
         Affiliate of the Servicer;

                  (iii) the Servicer's obligation to make Advances or Servicing
         Advances; or

                  (iv) the Servicer's right to receive compensation for its
         services hereunder or with respect to any particular transaction.

                  To the extent consistent with the foregoing, the Servicer
shall also seek to maximize the timely and complete recovery of principal and
interest on the Mortgage Notes. Subject only to the above-described servicing
standards and the terms of this Agreement and of the respective Mortgage Loans,
the Servicer shall have full power and authority, to do or cause to be done any
and all things in connection with such servicing and administration which it may
deem necessary or desirable. Without limiting the generality of the foregoing,
the Servicer in its own name is hereby authorized and empowered by the Trustee
when the Servicer believes it appropriate in its best judgment, to execute and
deliver, on behalf of the Trust, the Certificateholders and the Trustee or any
of them, and upon notice to the Trustee and the Trust Administrator, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Mortgage
Loans and the Mortgaged Properties and to institute foreclosure proceedings or
obtain a deed-in-lieu of foreclosure so as to convert the ownership of such
properties, and to hold or cause to be held title to such properties, on behalf
of the Trustee, for the benefit of the Trust and the Certificateholders. The
Servicer shall service and administer the Mortgage Loans in accordance with
applicable state and federal law and shall provide to the Mortgagors any reports
required to be provided to them thereby. The Servicer shall also comply in the
performance of this Agreement with all reasonable rules and requirements of each
insurer under any standard hazard insurance policy. Subject to Section 3.17, the
Trustee shall execute, at the written request of the Servicer, and furnish to
the Servicer any special or limited powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and

                                      -63-

<PAGE>

administrative duties hereunder and the Trustee shall not be liable for the
actions of the Servicer under such powers of attorney.

                  In accordance with the standards of the preceding paragraph,
the Servicer shall make or cause to be made Servicing Advances as necessary for
the purpose of effecting the payment of taxes and assessments on the Mortgaged
Properties, which Servicing Advances shall be reimbursable in the first instance
from related collections from the Mortgagors pursuant to Section 3.09, and
further as provided in Section 3.11; provided, however, the Servicer shall only
make such Servicing Advance if the Mortgagor has made such payment as set forth
in Section 3.09 or if the Mortgagor has not made such payment, if the failure to
make such Servicing Advance would affect the lien position of the Mortgage Loan.
Any cost incurred by the Servicer in effecting the payment of taxes and
assessments on a Mortgaged Property shall not, for the purpose of calculating
the Stated Principal Balance of a Mortgage Loan or distributions to
Certificateholders, be added to the unpaid principal balance of the related
Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so permit.

                  Notwithstanding anything in this Agreement to the contrary,
the Servicer may not make any future advances with respect to a Mortgage Loan
(except as provided in Section 4.03) and the Servicer shall not permit any
modification with respect to any Mortgage Loan that would change the Mortgage
Rate, reduce or increase the principal balance (except for reductions resulting
from actual payments of principal) or change the final maturity date on such
Mortgage Loan (unless, as provided in Section 3.07, the Mortgagor is in default
with respect to the Mortgage Loan or such default is, in the judgment of the
Servicer, reasonably foreseeable) or any modification, waiver or amendment of
any term of any Mortgage Loan that would both (A) effect an exchange or
reissuance of such Mortgage Loan under Section 1001 of the Code (or final,
temporary or proposed Treasury regulations promulgated thereunder) and (B) cause
any of the Trust REMICs created hereunder to fail to qualify as a REMIC under
the Code or the imposition of any tax on "prohibited transactions" or
"contributions after the startup date" under the REMIC Provisions.

                  Notwithstanding anything in this Agreement to the contrary, in
the event of a Principal Prepayment in full of a Mortgage Loan, the Servicer may
not waive any Prepayment Charge or portion thereof required by the terms of the
related Mortgage Note unless (i) the Servicer determines that such waiver would
maximize recovery of Liquidation Proceeds for such Mortgage Loan, taking into
account the value of such Prepayment Charge, or (ii)(A) the enforceability
thereof is limited (1) by bankruptcy, insolvency, moratorium, receivership, or
other similar law relating to creditors' rights generally or (2) due to
acceleration in connection with a foreclosure or other involuntary payment, or
(B) the enforceability is otherwise limited or prohibited by applicable law.

                  In the event of a Principal Prepayment in full with respect to
any Mortgage Loan, the Servicer shall deliver to the Trust Administrator a
certification of a Servicing Officer substantially in the form of Exhibit J no
later than the third Business Day following the immediately succeeding
Determination Date with a copy to the Class OCF Certificateholder (in the case
of a Group I Mortgage Loan) or to the Class OCV Certificateholder (in the case
of a Group II Mortgage Loan).

                  Promptly upon the earlier of discovery by the Servicer or
receipt of notice by the Servicer of the breach of the covenant of the Servicer
set forth above which materially and adversely

                                      -64-

<PAGE>

affects the interests of the Holders of the Class PF Certificates (in the case
of a Group I Mortgage Loan) or the Class PV Certificates (in the case of a Group
II Mortgage Loan) in any Prepayment Charge, the Servicer shall promptly pay the
amount of such waived Prepayment Charge (or such portion thereof as had been
waived), for the benefit of the holders of the Class PF Certificates or the
Class PV Certificates, as applicable, by depositing such amount into the
Collection Account for distribution in accordance with the terms of this
Agreement. The foregoing shall not, however, limit any remedies available to the
Certificateholders, the Depositor or the Trust Administrator on behalf of the
Trust and for the benefit of the Certificateholders, pursuant to the Mortgage
Loan Purchase Agreement, respecting a breach of the representations, warranties
and covenants of the Seller contained in the Mortgage Loan Purchase Agreement.

                  With respect to each Mortgage Loan which is the subject of a
Principal Prepayment in full, which prepayment is not accompanied by the payment
of a Prepayment Charge, the Trust Administrator shall verify that such Mortgage
Loan was identified on the Mortgage Loan Schedule as not being subject to a
Prepayment Charge.

                  The Servicer may delegate its responsibilities under this
Agreement; provided, however, that no such delegation shall release the Servicer
from the responsibilities or liabilities arising under this Agreement.

                  As part of its servicing activities hereunder, the Servicer,
for the benefit of the Trustee, the Trust Administrator and the
Certificateholders, shall enforce the obligations of the Seller under the
Mortgage Loan Purchase Agreement, including, without limitation, any obligation
of the Seller to purchase a Mortgage Loan on account of missing or defective
documentation or on account of a breach of a representation, warranty or
covenant, as described in Section 2.03(a).

                  SECTION 3.02.             Sub-Servicing Agreements Between
                                            Servicer and Sub-Servicers.

                  The Servicer may arrange for the subservicing of any Mortgage
Loan by a Sub- Servicer pursuant to a Sub-Servicing Agreement; provided that
such sub-servicing arrangement and the terms of the related Sub-Servicing
Agreement must provide for the servicing of such Mortgage Loans in a manner
consistent with the servicing arrangements contemplated hereunder.
Notwithstanding the provisions of any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer or a Sub-Servicer or reference to actions taken through a Servicer or
otherwise, the Servicer shall remain obligated and liable to the Depositor, the
Trust, the Trustee, the Trust Administrator and the Certificateholders for the
servicing and administration of the Mortgage Loans in accordance with the
provisions of this Agreement without diminution of such obligation or liability
by virtue of such Sub-Servicing Agreements or arrangements or by virtue of
indemnification from the Sub-Servicer and to the same extent and under the same
terms and conditions as if the Servicer alone were servicing and administering
the Mortgage Loans. Every Sub-Servicing Agreement entered into by the Servicer
shall contain a provision giving the successor Servicer the option to terminate
such agreement in the event a successor Servicer is appointed. All actions of
each Sub-Servicer performed pursuant to the related Sub-Servicing Agreement
shall be performed as an agent of the Servicer with the same force and effect as
if performed directly by the Servicer.

                                      -65-

<PAGE>

                  For purposes of this Agreement, the Servicer shall be deemed
to have received any collections, recoveries or payments with respect to the
Mortgage Loans that are received by a Sub- Servicer regardless of whether such
payments are remitted by the Sub-Servicer to the Servicer.

                  SECTION 3.03.             Successor Sub-Servicers.

                  The Servicer shall be entitled to terminate any Sub-Servicing
Agreement in accordance with the terms and conditions of such Sub-Servicing
Agreement and to either itself directly service the related Mortgage Loans or
enter into a Sub-Servicing Agreement with a successor Sub-Servicer which
qualifies under Section 3.02. Any Sub-Servicing Agreement shall include the
provision that such agreement may be immediately terminated by the Trust
Administrator or the Trustee (if the Trust Administrator or the Trustee is
acting as Servicer) without fee, in accordance with the terms of this Agreement,
in the event that the Servicer (or the Trust Administrator or the Trustee, if it
is then acting as Servicer) shall, for any reason, no longer be the Servicer
(including termination due to a Servicer Event of Default).

                  SECTION 3.04.             No Contractual Relationship Between
                                            Sub-Servicer, Trust Administrator,
                                            Trustee or the Certificateholders.

                  Any Sub-Servicing Agreement and any other transactions or
services relating to the Mortgage Loans involving a Sub-Servicer shall be deemed
to be between the Sub-Servicer and the Servicer alone and the Trust
Administrator, the Trustee and the Certificateholders shall not be deemed
parties thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to any Sub-Servicer except as set forth in Section
3.05.

                  SECTION 3.05.             Assumption or Termination of
                                            Sub-Servicing Agreement by Trust
                                            Administrator.

                  In connection with the assumption of the responsibilities,
duties and liabilities and of the authority, power and rights of the Servicer
hereunder by the Trust Administrator pursuant to Section 7.02 or another
successor Servicer, it is understood and agreed that the Servicer's rights and
obligations under any Sub-Servicing Agreement then in force between the Servicer
and a Sub-Servicer shall be assumed simultaneously by the Trust Administrator or
another successor Servicer without act or deed on the part of the Trust
Administrator; provided, however, that the Trust Administrator or any other
successor Servicer may terminate the Sub-Servicer.

                  The Servicer shall, upon the reasonable request of the Trust
Administrator, but at the expense of the Servicer, deliver to the assuming party
documents and records relating to each Sub-Servicing Agreement and an accounting
of amounts collected and held by it and otherwise use its best reasonable
efforts to effect the orderly and efficient transfer of the Sub-Servicing
Agreements to the assuming party.

                  SECTION 3.06.             [Reserved].

                  SECTION 3.07.             Collection of Certain Mortgage Loan
                                            Payments.

                                      -66-

<PAGE>

                  The Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow such collection procedures as it would follow with respect to mortgage
loans comparable to the Mortgage Loans and held for its own account. Consistent
with the foregoing, the Servicer may in its discretion (i) waive any late
payment charge or, if applicable, penalty interest or (ii) extend the due dates
for the Monthly Payments due on a Mortgage Note for a period of not greater than
180 days; provided that any extension pursuant to this clause shall not affect
the amortization schedule of any Mortgage Loan for purposes of any computation
hereunder. Notwithstanding the foregoing, in the event that any Mortgage Loan is
in default or, in the judgment of the Servicer, such default is reasonably
foreseeable, the Servicer, consistent with the standards set forth in Section
3.01 may waive, modify or vary any term of such Mortgage Loan (including
modifications that change the Mortgage Rate, forgive the payment of principal or
interest or extend the final maturity date of such Mortgage Loan), accept
payment from the related Mortgagor of an amount less than the Stated Principal
Balance in final satisfaction of such Mortgage Loan (such payment, a "Short
Pay-off"), or consent to the postponement of strict compliance with any such
term or otherwise grant indulgence to any Mortgagor if in the Servicer's
determination such waiver, modification, postponement or indulgence is not
materially adverse to the interests of the Certificateholders (taking into
account any estimated Realized Loss that might result absent such action).

                  SECTION 3.08.             [Reserved].

                  SECTION 3.09.             Collection of Taxes, Assessments and
                                            Similar Items; Servicing Accounts.

                  The Servicer shall establish and maintain one or more accounts
(the "Servicing Accounts"), into which all collections from the Mortgagors (or
related advances from Sub-Servicers) for the payment of taxes, assessments,
fire, flood, and hazard insurance premiums, and comparable items for the account
of the Mortgagors ("Escrow Payments") shall be deposited and retained. Servicing
Accounts shall be Eligible Accounts. The Servicer shall deposit in the Servicing
Accounts on a daily basis and in no event later than the second Business Day
after receipt, and retain therein, all Escrow Payments collected on account of
the Mortgage Loans, for the purpose of effecting the timely payment of any such
items as required under the terms of this Agreement. Withdrawals of amounts from
a Servicing Account may be made only to (i) effect timely payment of taxes,
assessments, fire, flood, and hazard insurance premiums, and comparable items;
(ii) reimburse the Servicer out of related collections for any advances made
pursuant to Section 3.01 (with respect to taxes and assessments) and Section
3.14 (with respect to fire, flood and hazard insurance); (iii) refund to
Mortgagors any sums as may be determined to be overages; (iv) pay interest, if
required and as described below, to Mortgagors on balances in the Servicing
Account; or (v) clear and terminate the Servicing Account at the termination of
the Servicer's obligations and responsibilities in respect of the Mortgage Loans
under this Agreement in accordance with Article IX. As part of its servicing
duties, the Servicer shall pay to the Mortgagors interest on funds in Servicing
Accounts, to the extent required by law and, to the extent that interest earned
on funds in the Servicing Accounts is insufficient, to pay such interest from
its or their own funds, without any reimbursement therefor. Notwithstanding the
foregoing, the Servicer shall not be obligated to collect Escrow Payments if the
related Mortgage Loan does not require such payments but the Servicer shall

                                      -67-

<PAGE>

nevertheless be obligated to make Servicing Advances as provided in Section
3.01. In the event the Servicer shall deposit in the Servicing Accounts any
amount not required to be deposited therein, it may at any time withdraw such
amount from the Servicing Accounts, any provision to the contrary
notwithstanding.

                  SECTION 3.10.             Collection Account, Distribution
                                            Account and Initial Deposit
                                            Accounts.

                  (a) On behalf of the Trust Fund, the Servicer shall establish
and maintain one or more accounts (such account or accounts, the "Collection
Account"), held in trust for the benefit of the Trustee, the Trust Administrator
and the Certificateholders. On behalf of the Trust Fund, the Servicer shall
deposit or cause to be deposited in the Collection Account on a daily basis and
in no event later than two Business Days after receipt, as and when received or
as otherwise required hereunder, the following payments and collections received
or made by it on or subsequent to the Cut-off Date:

                  (i) all payments on account of principal, including Principal
         Prepayments, on the Mortgage Loans;

                  (ii) all payments on account of interest (net of the related
         Servicing Fee) on each Mortgage Loan;

                  (iii) all Insurance Proceeds and Liquidation Proceeds (other
         than proceeds collected in respect of any particular REO Property and
         amounts paid by the Servicer in connection with a purchase of Mortgage
         Loans and REO Properties pursuant to Section 9.01);

                  (iv) any amounts required to be deposited pursuant to Section
         3.12 in connection with any losses realized on Permitted Investments
         with respect to funds held in the Collection Account;

                  (v) any amounts required to be deposited by the Servicer
         pursuant to the second paragraph of Section 3.14(a) in respect of any
         blanket policy deductibles;

                  (vi) any Purchase Price or Substitution Shortfall Amount
         delivered to the Servicer and all proceeds (net of amounts payable or
         reimbursable to the Servicer) of Mortgage Loans purchased in accordance
         with Section 9.01; and

                  (vii) any Prepayment Charges or amounts required to be
         deposited by the Servicer in connection with a breach of its
         obligations under Section 3.01 with respect to the waiver of Prepayment
         Charges.

                  The foregoing requirements for deposit in the Collection
Accounts shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of late payment
charges, assumption fees or other similar fees need not be deposited by the
Servicer in the Collection Account. In the event the Servicer shall deposit in
the Collection Account

                                      -68-

<PAGE>

any amount not required to be deposited therein, it may at any time withdraw
such amount from the Collection Account, any provision herein to the contrary
notwithstanding.

                  No later than the Closing Date, the Servicer shall establish
and maintain a sub-account of the Collection Account titled "Litton Loan
Servicing LP, as Servicer for U. S. Bank National Association, as Trustee, in
trust for the registered holders of Salomon Brothers Mortgage Securities VII,
Inc., Salomon Home Equity Loan Trust, Series 2001-1, Asset Backed Pass-Through
Certificates, Simple Interest Excess Sub-Account." The Servicer shall, on each
Determination Date transfer from the Collection Account to the Simple Interest
Excess Sub-Account all Net Simple Interest Excess, if any, and shall maintain a
record of all such deposits. The Servicer shall withdraw amounts on deposit in
the Simple Interest Excess Sub-Account on each Determination Date for remittance
to the Trust Administrator in an amount equal to the lesser of (i) the amount on
deposit therein, and (ii) the Net Simple Interest Shortfall for such
Distribution Date.

                  Amounts on deposit in the Simple Interest Excess Sub-Account
may be invested in Permitted Investments. All income and gain net of any losses
realized from any such balances or investment of funds on deposit in a Simple
Interest Excess Sub-Account shall be for the benefit of the Servicer as
servicing compensation and shall be retained by it. The amount of any losses in
the Simple Interest Excess Sub-Account shall promptly be deposited by the
Servicer in such Simple Interest Excess Sub-Account.

                  (b) On behalf of the Trust Fund, the Trust Administrator, as
agent for the Trustee, shall establish and maintain one or more accounts (such
account or accounts, the "Distribution Account"), held in trust for the benefit
of the Trustee, the Trust and the Certificateholders. On behalf of the Trust
Fund, the Servicer shall deliver to the Trust Administrator in immediately
available funds for deposit in the Distribution Account on or before 3:00 p.m.
New York time (i) on the Servicer Remittance Date, that portion of the Group I
Available Distribution Amount and the Group II Available Distribution Amount
(calculated without regard to the references in clause (2) of the definition
thereof to amounts that may be withdrawn from the Distribution Account) for the
related Distribution Date then on deposit in the Collection Account and the
amount of all Prepayment Charges collected by the Servicer in connection with
the Principal Prepayment of any of the Mortgage Loans (including the amount of
any payment by the Servicer in respect of a waived Prepayment Charge, other than
as permitted in Section 3.01) then on deposit in the Collection Account and the
amount of any funds reimbursable to an Advancing Person pursuant to Section
3.28, and (ii) on each Business Day as of the commencement of which the balance
on deposit in the Collection Account exceeds $75,000 following any withdrawals
pursuant to the next succeeding sentence, the amount of such excess, but only if
the Collection Account constitutes an Eligible Account solely pursuant to clause
(ii) of the definition of "Eligible Account." If the balance on deposit in the
Collection Account exceeds $75,000 as of the commencement of business on any
Business Day and the Collection Account constitutes an Eligible Account solely
pursuant to clause (ii) of the definition of "Eligible Account," the Servicer
shall, on or before 5:00 p.m. New York time on such Business Day, withdraw from
the Collection Account any and all amounts payable or reimbursable to the
Depositor, the Servicer, the Trustee, the Trust Administrator or the Seller
pursuant to Section 3.11 and shall pay such amounts to the Persons entitled
thereto.

                  (c) Funds in the Collection Account and the Distribution
Account may be

                                      -69-

<PAGE>

invested in Permitted Investments in accordance with the provisions set forth in
Section 3.12. The Servicer shall give notice to the Trustee and the Trust
Administrator of the location of the Collection Account maintained by it when
established and prior to any change thereof. The Trust Administrator shall give
notice to the Servicer, the Trustee and the Depositor of the location of the
Distribution Account when established and prior to any change thereof.

                  (d) Funds held in the Collection Account at any time may be
delivered by the Servicer in immediately available funds to the Trust
Administrator for deposit in the Distribution Account. In the event the Servicer
shall deliver to the Trust Administrator for deposit in the Distribution Account
any amount not required to be deposited therein, it may at any time request that
the Trust Administrator withdraw such amount from the Distribution Account and
remit to it any such amount, any provision herein to the contrary
notwithstanding. In no event shall the Trust Administrator incur liability as a
result of withdrawals from the Distribution Account at the direction of the
Servicer in accordance with the immediately preceding sentence. In addition, the
Servicer shall deliver to the Trust Administrator from time to time for deposit
in the Distribution Account the amounts set forth in clauses (i) through (vi)
below:

                  (i) any Advances, as required pursuant to Section 4.03;

                  (ii) any amounts required to be deposited pursuant to Section
         3.23(d) or 3.23(f) in connection with any REO Property;

                  (iii) any amounts to be paid in connection with a purchase of
         Mortgage Loans and REO Properties pursuant to Section 9.01;

                  (iv) any amounts required to be deposited pursuant to Section
         3.24 in connection with any Prepayment Interest Shortfalls;

                  (v) any amounts from the Simple Interest Excess Sub-Account;
         and

                  (vi) any Stayed Funds, as soon as permitted by the federal
         bankruptcy court having jurisdiction in such matters.

                  (e) Promptly upon receipt of any Stayed Funds, whether from
the Servicer, a trustee in bankruptcy, or federal bankruptcy court or other
source, the Trust Administrator shall notify the Servicer of such receipt and
deposit such funds in the Distribution Account, subject to withdrawal thereof as
permitted hereunder. In addition, the Servicer shall deliver to the Trust
Administrator for deposit in the Distribution Account any amounts required to be
deposited pursuant to Section 3.12 in connection with losses realized on
Permitted Investments with respect to funds held in the Collection Account.

                  On behalf of the Trust Fund, the Trust Administrator shall
establish and maintain the Group I Initial Deposit Account and the Group II
Initial Deposit Account, held in trust for the benefit of Certificateholders. On
the Closing Date, the Depositor shall remit or cause to be remitted to the Trust
Administrator, for deposit in the Group I Initial Deposit Account, and the Trust
Administrator shall deposit the Group I Initial Deposit, to the extent received
by it, into the Group I Initial Deposit

                                      -70-

<PAGE>

Account. On the Closing Date, the Depositor shall remit or cause to be remitted
to the Trust Administrator, for deposit in the Group II Initial Deposit Account,
and the Trust Administrator shall deposit the Group II Initial Deposit, to the
extent received by it, into the Group II Initial Deposit Account. Each of the
Group I Initial Deposit Account and the Group II Initial Deposit Account shall
be treated as an "outside reserve fund" under applicable Treasury regulations
and shall not be part of any Trust REMIC. Any investment earnings on funds in
the Group I Initial Deposit Account or the Group II Initial Deposit Account
shall be treated as owned by the Depositor and will be taxable to the Depositor.
The Trust Administrator shall be required to withdraw such earnings from each of
the Group I Initial Deposit Account and the Group II Initial Deposit Account and
remit the same to the Depositor on the first Distribution Date (or as soon as
received if such funds are not available on such Distribution Date), and shall
thereupon terminate such account. Funds on deposit in the Group I Initial
Deposit Account and the Group II Initial Deposit Account may be invested in
Permitted Investments in accordance with the provisions set forth in Section
3.12.

                  SECTION 3.11.             Withdrawals from the Collection
                                            Account and Distribution Account.

                  (a) The Servicer shall, from time to time, make withdrawals
from the Collection Account for any of the following purposes or as described in
Section 4.03:

                  (i) to remit to the Trust Administrator for deposit in the
         Distribution Account the amounts required to be so remitted pursuant to
         Section 3.10(b) or permitted to be so remitted pursuant to the first
         sentence of Section 3.10(d);

                  (ii) subject to Section 3.16(d), to reimburse the Servicer for
         Advances, but only to the extent of amounts received which represent
         Late Collections (net of the related Servicing Fees) of Monthly
         Payments on Mortgage Loans with respect to which such Advances were
         made in accordance with the provisions of Section 4.03;

                  (iii) subject to Section 3.16(d), to pay the Servicer any
         unpaid Servicing Fees and reimburse the Servicer any unreimbursed
         Servicing Advances with respect to each Mortgage Loan, but only to the
         extent of any Liquidation Proceeds and Insurance Proceeds received with
         respect to such Mortgage Loan;

                  (iv) to pay to the Servicer as servicing compensation (in
         addition to the Servicing Fee) on the Servicer Remittance Date any
         interest or investment income earned on funds deposited in the
         Collection Account;

                  (v) to pay to the Servicer or the Seller, as the case may be,
         with respect to each Mortgage Loan that has previously been purchased
         or replaced pursuant to Section 2.03 or Section 3.16(c) all amounts
         received thereon not included in the Purchase Price or the Substitution
         Shortfall Amount;

                  (vi) to reimburse the Servicer for any Advance or Servicing
         Advance previously made which the Servicer has determined to be a
         Nonrecoverable Advance or a Nonrecoverable Servicing Advance in
         accordance with the provisions of Section 4.03;

                                      -71-

<PAGE>

                  (vii) to reimburse the Servicer or the Depositor for expenses
         incurred by or reimbursable to the Servicer or the Depositor, as the
         case may be, pursuant to Section 6.03;

                  (viii) to reimburse the Servicer, the Trust Administrator or
         the Trustee, as the case may be, for expenses reasonably incurred in
         respect of the breach or defect giving rise to the purchase obligation
         under Section 2.03 of this Agreement that were included in the Purchase
         Price of the Mortgage Loan, including any expenses arising out of the
         enforcement of the purchase obligation;

                  (ix) to pay, or to reimburse the Servicer for advances in
         respect of, expenses incurred in connection with any Mortgage Loan
         pursuant to Section 3.16(b);

                  (x) to deposit to the Simple Interest Excess Sub-Account any
         amount required to be deposited therein; and

                  (x) to clear and terminate the Collection Account pursuant to
         Section 9.01.

                  The Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account, to the extent held by or on behalf of
it, pursuant to subclauses (ii), (iii), (v), (vi), (viii) and (ix) above. The
Servicer shall provide written notification to the Trustee and the Trust
Administrator, on or prior to the next succeeding Servicer Remittance Date, upon
making any withdrawals from the Collection Account pursuant to subclauses (vi)
and (vii) above.

                  (b) The Trust Administrator shall, from time to time, make
withdrawals from the Distribution Account, for any of the following purposes,
without priority:

                  (i) to make distributions to Certificateholders in accordance
         with Section 4.01;

                  (ii) to pay to itself and the Trustee amounts to which it is
         entitled pursuant to Section 8.05;

                  (iii) to pay to itself any interest or investment income
         earned on funds deposited in the Distribution Account pursuant to
         Section 3.12(b);

                  (iv) to reimburse itself pursuant to Section 7.02;

                  (v) to pay to an Advancing Person reimbursements for Advances
         and/or Servicing Advances pursuant to Section 3.28;

                  (vi) to pay any amounts in respect of taxes pursuant to
         Section 10.01(g)(iii); and

                  (vii) to clear and terminate the Distribution Account pursuant
         to Section 9.01.

                  SECTION 3.12.             Investment of Funds in the
                                            Investment Accounts.

                                      -72-

<PAGE>

                  (a) The Servicer may direct, by means of written directions
(which may be standing directions), any depository institution maintaining the
Collection Account to invest the funds in the Collection Account, the Trust
Administrator may direct the investment of funds in the Distribution Account and
the Depositor may direct the investment of funds in the Group I Initial Deposit
Account and the Group II Initial Deposit Account (each, for purposes of this
Section 3.12, an "Investment Account") in one or more Permitted Investments
bearing interest or sold at a discount, and maturing, unless payable on demand,
(i) no later than the Business Day immediately preceding the date on which such
funds are required to be withdrawn from such account pursuant to this Agreement,
if a Person other than the Trust Administrator is the obligor thereon, and (ii)
no later than the date on which such funds are required to be withdrawn from
such account pursuant to this Agreement, if the Trust Administrator is the
obligor thereon. All such Permitted Investments shall be held to maturity,
unless payable on demand. Any investment of funds shall be made in the name of
the Trust Administrator (in its capacity as such) or in the name of a nominee of
the Trust Administrator. The Trust Administrator shall be entitled to sole
possession over each such investment (except with respect to investment
direction of funds held in the Collection Account) and, subject to subsection
(b) below, the income thereon, and any certificate or other instrument
evidencing any such investment shall be delivered directly to the Trust
Administrator or its agent, together with any document of transfer necessary to
transfer title to such investment to the Trust Administrator or its nominee. In
the event amounts on deposit in the Collection Account are at any time invested
in a Permitted Investment payable on demand, the Trust Administrator shall at
the direction of the Servicer:

                  (x) consistent with any notice required to be given
         thereunder, demand that payment thereon be made on the last day such
         Permitted Investment may otherwise mature hereunder in an amount equal
         to the lesser of (1) all amounts then payable thereunder and (2) the
         amount required to be withdrawn on such date; and

                  (y) demand payment of all amounts due thereunder promptly upon
         determination by a Responsible Officer of the Trust Administrator that
         such Permitted Investment would not constitute a Permitted Investment
         in respect of funds thereafter on deposit in the Investment Account.

                  (b) All income and gain realized from the investment of funds
deposited in the Collection Account held by or on behalf of the Servicer or the
Trustee, shall be for the benefit of the Servicer and shall be subject to its
withdrawal in accordance with Section 3.11. The Servicer shall deposit in the
Collection Account the amount of any loss incurred in respect of any such
Permitted Investment made with funds in such account immediately upon
realization of such loss. All income and gain realized from the investment of
funds deposited in the Distribution Account shall be for the benefit of the
Trust Administrator. The Trust Administrator shall deposit in the Distribution
Account the amount of any loss incurred in respect of any such Permitted
Investment made with funds in such account immediately upon realization of such
loss. All income and gain realized from the investment of funds deposited in the
Group I Initial Deposit Account and the Group II Initial Deposit Account shall
be for the benefit of the Depositor. The Depositor shall deposit in the Group I
Initial Deposit Account or the Group II Initial Deposit Account, as applicable,
the amount of any loss incurred in respect of any such Permitted Investment made
with funds in such account immediately upon realization of such loss.

                                      -73-

<PAGE>

                  (c) Except as otherwise expressly provided in this Agreement,
if any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Trust Administrator may and, subject to Section 8.01
and Section 8.02(v), shall, at the written direction of the Servicer, take such
action as may be appropriate to enforce such payment or performance, including
the institution and prosecution of appropriate proceedings.

                  SECTION 3.13.             [Reserved].

                  SECTION 3.14.             Maintenance of Hazard Insurance and
                                            Errors and Omissions and Fidelity
                                            Coverage.

                  (a) The terms of each Mortgage Note require the related
Mortgagor to maintain the fire, flood and hazard insurance policies. To the
extent such policies are not maintained, the Servicer shall cause to be
maintained for each Mortgaged Property fire and hazard insurance with extended
coverage as is customary in the area where the Mortgaged Property is located in
an amount which is at least equal to the lesser of the current principal balance
of such Mortgage Loan and the amount necessary to fully compensate for any
damage or loss to the improvements which are a part of such property on a
replacement cost basis, in each case in an amount not less than such amount as
is necessary to avoid the application of any coinsurance clause contained in the
related hazard insurance policy. The Servicer shall also cause to be maintained
fire and hazard insurance on each REO Property with extended coverage as is
customary in the area where the Mortgaged Property is located in an amount which
is at least equal to the lesser of (i) the maximum insurable value of the
improvements which are a part of such property and (ii) the outstanding
principal balance of the related Mortgage Loan at the time it became an REO
Property. The Servicer will comply in the performance of this Agreement with all
reasonable rules and requirements of each insurer under any such hazard
policies. Any amounts to be collected by the Servicer under any such policies
(other than amounts to be applied to the restoration or repair of the property
subject to the related Mortgage or amounts to be released to the Mortgagor in
accordance with the procedures that the Servicer would follow in servicing loans
held for its own account, subject to the terms and conditions of the related
Mortgage and Mortgage Note) shall be deposited in the Collection Account,
subject to withdrawal pursuant to Section 3.11, if received in respect of a
Mortgage Loan, or in the REO Account, subject to withdrawal pursuant to Section
3.23, if received in respect of an REO Property. Any cost incurred by the
Servicer in maintaining any such insurance shall not, for the purpose of
calculating distributions to Certificateholders, be added to the unpaid
principal balance of the related Mortgage Loan, notwithstanding that the terms
of such Mortgage Loan so permit. It is understood and agreed that no earthquake
or other additional insurance is to be required of any Mortgagor other than
pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance. If the Mortgaged Property
or REO Property is at any time in an area identified in the Federal Register by
the Federal Emergency Management Agency as having special flood hazards, the
Servicer will cause to be maintained a flood insurance policy in respect
thereof. Such flood insurance shall be in an amount equal to the lesser of (i)
the unpaid principal balance of the related Mortgage Loan and (ii) the maximum
amount of such insurance available for the related Mortgaged Property under the
national flood insurance program (assuming that the area in which such Mortgaged
Property is located is participating in such program).

                                      -74-

<PAGE>

                  In the event that the Servicer shall obtain and maintain a
blanket policy with an insurer having a General Policy Rating of B:VI or better
in Best's Key Rating Guide insuring against hazard losses on all of the Mortgage
Loans, it shall conclusively be deemed to have satisfied its obligations as set
forth in the first two sentences of this Section 3.14, it being understood and
agreed that such policy may contain a deductible clause, in which case the
Servicer shall, in the event that there shall not have been maintained on the
related Mortgaged Property or REO Property a policy complying with the first two
sentences of this Section 3.14, and there shall have been one or more losses
which would have been covered by such policy, deposit to the Collection Account
from its own funds the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Servicer agrees to prepare
and present, on behalf of itself, the Trustee, the Trust and the
Certificateholders, claims under any such blanket policy in a timely fashion in
accordance with the terms of such policy.

                  (b) The Servicer shall keep in force during the term of this
Agreement a policy or policies of insurance covering errors and omissions for
failure in the performance of its respective obligations under this Agreement,
which policy or policies shall be in such form and amount that would meet the
requirements of Fannie Mae or Freddie Mac if it were the purchaser of the
Mortgage Loans, unless the Servicer, has obtained a waiver of such requirements
from Fannie Mae or Freddie Mac. The Servicer shall each also maintain a fidelity
bond in the form and amount that would meet the requirements of Fannie Mae or
Freddie Mac, unless the Servicer, has obtained a waiver of such requirements
from Fannie Mae or Freddie Mac. The Servicer shall be deemed to have complied
with this provision if an Affiliate of the Servicer, has such errors and
omissions and fidelity bond coverage and, by the terms of such insurance policy
or fidelity bond, the coverage afforded thereunder extends to the Servicer. Any
such errors and omissions policy and fidelity bond shall by its terms not be
cancelable without thirty days' prior written notice to the Trustee and the
Trust Administrator.

                  SECTION 3.15.             Enforcement of Due-on-Sale Clauses;
                                            Assumption Agreements.

                  The Servicer will, to the extent it has knowledge of any
conveyance or prospective conveyance of any Mortgaged Property by any Mortgagor
(whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan
under the "due-on-sale" clause, if any, applicable thereto; provided, however,
that the Servicer shall not exercise any such rights if prohibited by law from
doing so. If the Servicer reasonably believes it is unable under applicable law
to enforce such "due-on-sale" clause, or if any of the other conditions set
forth in the proviso to the preceding sentence apply, the Servicer will enter
into an assumption and modification agreement from or with the person to whom
such property has been conveyed or is proposed to be conveyed, pursuant to which
such person becomes liable under the Mortgage Note and, to the extent permitted
by applicable state law, the Mortgagor remains liable thereon. The Servicer is
also authorized to enter into a substitution of liability agreement with such
person, pursuant to which the original Mortgagor is released from liability and
such person is substituted as the Mortgagor and becomes liable under the
Mortgage Note, provided that no such substitution shall be effective unless such
person satisfies the then current underwriting criteria of

                                      -75-

<PAGE>

the Servicer for mortgage loans similar to the Mortgage Loans. In connection
with any assumption or substitution, the Servicer shall apply such underwriting
standards and follow such practices and procedures as shall be normal and usual
in its general mortgage servicing activities and as it applies to other mortgage
loans owned solely by it. The Servicer shall not take or enter into any
assumption and modification agreement, however, unless (to the extent
practicable in the circumstances) it shall have received confirmation, in
writing, of the continued effectiveness of any applicable hazard insurance
policy. Any fee collected by the Servicer in respect of an assumption or
substitution of liability agreement will be retained by the Servicer as
additional servicing compensation. In connection with any such assumption, no
material term of the Mortgage Note (including but not limited to the related
Mortgage Rate and the amount of the Monthly Payment) may be amended or modified,
except as otherwise required pursuant to the terms thereof. The Servicer shall
notify the Trustee and the Trust Administrator that any such substitution or
assumption agreement has been completed by forwarding to the Trustee (with a
copy to the Trust Administrator) the executed original of such substitution or
assumption agreement, which document shall be added to the related Mortgage File
and shall, for all purposes, be considered a part of such Mortgage File to the
same extent as all other documents and instruments constituting a part thereof.

                  Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption of
a Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.15, the term "assumption" is
deemed to also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution of liability
agreement.

                  SECTION 3.16.             Realization Upon Defaulted Mortgage
                                            Loans.

                  (a) The Servicer shall use its best efforts, consistent with
Accepted Servicing Practices, to foreclose upon or otherwise comparably convert
the ownership of properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 3.07. The Servicer shall
be responsible for all costs and expenses incurred by it in any such
proceedings; provided, however, that such costs and expenses will be recoverable
as Servicing Advances by the Servicer as contemplated in Sections 3.11 and 3.23.
The foregoing is subject to the provision that, in any case in which a Mortgaged
Property shall have suffered damage from an Uninsured Cause, the Servicer shall
not be required to expend its own funds toward the restoration of such property
unless it shall determine in its discretion that such restoration will increase
the proceeds of liquidation of the related Mortgage Loan after reimbursement to
itself for such expenses.

                  (b) Notwithstanding the foregoing provisions of this Section
3.16 or any other provision of this Agreement, with respect to any Mortgage Loan
as to which the Servicer has received actual notice of, or has actual knowledge
of, the presence of any toxic or hazardous substance on the related Mortgaged
Property, the Servicer shall not, on behalf of the Trust Fund, either (i) obtain
title to such Mortgaged Property as a result of or in lieu of foreclosure or
otherwise, or (ii) otherwise acquire possession of, or take any other action
with respect to, such Mortgaged Property, if, as a result of any such action,
the Trust Fund, the Trustee, the Trust Administrator or

                                      -76-

<PAGE>

the Certificateholders would be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or "operator" of such
Mortgaged Property within the meaning of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from time to time,
or any comparable law, unless the Servicer has also previously determined, based
on its reasonable judgment and a prudent report prepared by a Person who
regularly conducts environmental audits using customary industry standards,
that:

                  (1) such Mortgaged Property is in compliance with applicable
         environmental laws or, if not, that it would be in the best economic
         interest of the Trust Fund to take such actions as are necessary to
         bring the Mortgaged Property into compliance therewith; and

                  (2) there are no circumstances present at such Mortgaged
         Property relating to the use, management or disposal of any hazardous
         substances, hazardous materials, hazardous wastes or petroleum-based
         materials for which investigation, testing, monitoring, containment,
         clean-up or remediation could be required under any federal, state or
         local law or regulation, or that if any such materials are present for
         which such action could be required, that it would be in the best
         economic interest of the Trust Fund to take such actions with respect
         to the affected Mortgaged Property.

                  The cost of the environmental audit report contemplated by
this Section 3.16 shall be advanced by the Servicer, subject to the Servicer's
right to be reimbursed therefor from the Collection Account as provided in
Section 3.11(a)(ix), such right of reimbursement being prior to the rights of
Certificateholders to receive any amount in the Collection Account received in
respect of the affected Mortgage Loan or other Mortgage Loans.

                  If the Servicer determines, as described above, that it is in
the best economic interest of the Trust Fund to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials affecting any such Mortgaged Property, then
the Servicer shall take such action as it deems to be in the best economic
interest of the Trust Fund. The cost of any such compliance, containment,
cleanup or remediation shall be advanced by the Servicer, subject to the
Servicer's right to be reimbursed therefor from the Collection Account as
provided in Sections 3.11(a)(iii) or 3.11(a)(ix), such right of reimbursement
being prior to the rights of Certificateholders to receive any amount in the
Collection Account received in respect of the affected Mortgage Loan or other
Mortgage Loans.

                  (c) The Servicer shall have the right to purchase from REMIC
I-A or REMIC I-B any defaulted Mortgage Loan that is 90 days or more delinquent,
which the Servicer determines in good faith will otherwise become subject to
foreclosure proceedings (evidence of such determination to be delivered in
writing to the Trust Administrator and the Trustee, in form and substance
satisfactory to the Servicer, the Trust Administrator and the Trustee prior to
purchase), at a price equal to the Purchase Price. The Purchase Price for any
Mortgage Loan purchased hereunder shall be deposited in the Collection Account,
and the Trustee, upon receipt of written certification from the Servicer of such
deposit, shall release or cause to be released to the Servicer the related
Mortgage File and the Trustee shall execute and deliver such instruments of
transfer or assignment, in each

                                      -77-

<PAGE>

case without recourse, as the Servicer shall furnish and as shall be necessary
to vest in the Servicer title to any Mortgage Loan released pursuant hereto.

                  (d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: first, to reimburse the
Servicer for any related unreimbursed Servicing Advances and Advances, pursuant
to Section 3.11(a)(ii) or (a)(iii); second, to accrued and unpaid interest on
the Mortgage Loan, to the date of the Final Recovery Determination, or to the
Due Date prior to the Distribution Date on which such amounts are to be
distributed if not in connection with a Final Recovery Determination; and third,
as a recovery of principal of the Mortgage Loan. If the amount of the recovery
so allocated to interest is less than the full amount of accrued and unpaid
interest due on such Mortgage Loan, the amount of such recovery will be
allocated by the Servicer as follows: first, to unpaid Servicing Fees; and
second, to the balance of the interest then due and owing. The portion of the
recovery so allocated to unpaid Servicing Fees shall be reimbursed to the
Servicer pursuant to Section 3.11(a)(iii). The portion of the recovery allocated
to interest (net of unpaid Servicing Fees) and the portion of the recovery
allocated to principal of the Mortgage Loan shall be applied as follows: first,
to reimburse the Servicer for any related unreimbursed Advances in accordance
with Section 3.11(a)(ii) and any other amounts reimbursable to the Servicer
pursuant to Section 3.11, and second, as part of the amounts to be transferred
to the Distribution Account in accordance with Section 3.10(b).

                  SECTION 3.17.             Trustee to Cooperate; Release of
                                            Mortgage Files.

                  Upon the payment in full of any Mortgage Loan, or the receipt
by the Servicer of a notification that payment in full shall be escrowed in a
manner customary for such purposes, the Servicer will notify the Trust
Administrator and the Trustee by a certification in the form of Exhibit E-2
(which certification shall include a statement to the effect that all amounts
received or to be received in connection with such payment which are required to
be deposited in the Collection Account pursuant to Section 3.10 have been or
will be so deposited) of a Servicing Officer and shall request delivery to it of
the Mortgage File. Upon receipt of such certification and request, the Trustee
shall promptly release the related Mortgage File to the Servicer. No expenses
incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be chargeable to the Collection Account or the Distribution
Account.

                  From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any insurance policy relating to the Mortgage Loans, the Trustee shall, upon
request of the Servicer and delivery to the Trustee of a Request for Release in
the form of Exhibit E-l, release the related Mortgage File to the Servicer, and
the Trustee or the Servicer as attorney-in-fact of the Trustee shall, at the
direction of the Servicer, execute such documents as shall be necessary to the
prosecution of any such proceedings. Such Request for Release shall obligate the
Servicer to return each and every document previously requested from the
Mortgage File to the Trustee when the need therefor by the Servicer no longer
exists, unless the Mortgage Loan has been liquidated and the Liquidation
Proceeds relating to the Mortgage Loan have been deposited in the Collection
Account or the Mortgage File or such document has been delivered to an attorney,
or to a public trustee or other public official as required by law, for purposes
of

                                      -78-

<PAGE>

initiating or pursuing legal action or other proceedings for the foreclosure of
the Mortgaged Property either judicially or non-judicially, and the Servicer has
delivered to the Trustee a certificate of a Servicing Officer certifying as to
the name and address of the Person to which such Mortgage File or such document
was delivered and the purpose or purposes of such delivery. Upon receipt of a
certificate of a Servicing Officer stating that such Mortgage Loan was
liquidated and that all amounts received or to be received in connection with
such liquidation that are required to be deposited into the Collection Account
have been so deposited, or that such Mortgage Loan has become an REO Property, a
copy of the Request for Release shall be released by the Trustee to the
Servicer.

                  Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Servicer, any court pleadings, requests for
trustee's sale or other documents necessary to the foreclosure or trustee's sale
in respect of a Mortgaged Property or to any legal action brought to obtain
judgment against any Mortgagor on the Mortgage Note or Mortgage or to obtain a
deficiency judgment, or to enforce any other remedies or rights provided by the
Mortgage Note or Mortgage or otherwise available at law or in equity. Each such
certification shall include a request that such pleadings or documents be
executed by the Trustee and a statement as to the reason such documents or
pleadings are required and that the execution and delivery thereof by the
Trustee will not invalidate or otherwise affect the lien of the Mortgage, except
for the termination of such a lien upon completion of the foreclosure or
trustee's sale. So long as no Servicing Termination Event shall have occurred
and be continuing, the Servicer shall have the right to execute any and all such
court pleadings, requests and other documents as attorney-in-fact for, and on
behalf of the Trustee.

                  SECTION 3.18.             Servicing Compensation.

                  As compensation for the activities of the Servicer, hereunder,
the Servicer shall be entitled to the Servicing Fee with respect to each
Mortgage Loan payable solely from payments of interest in respect of such
Mortgage Loan, subject to Section 3.24. In addition, the Servicer shall be
entitled to recover unpaid Servicing Fees out of Insurance Proceeds or
Liquidation Proceeds to the extent permitted by Section 3.11(a)(iii) and out of
amounts derived from the operation and sale of an REO Property to the extent
permitted by Section 3.23. Except as set forth in Section 6.04 hereof, the right
to receive the Servicing Fee may not be transferred in whole or in part except
in connection with the transfer of all of the Servicer's responsibilities and
obligations under this Agreement to the extent permitted herein. In addition,
the Servicer shall be entitled to the Special Servicing Fee pursuant to Section
4.01(a)(4)(A)(x) and 4.01(a)(4)(B)(xiii), if applicable.

                  Additional servicing compensation in the form of assumption
fees, late payment charges and other miscellaneous fees (other than Prepayment
Charges) shall be retained by the Servicer only to the extent such fees or
charges are received by the Servicer. The Servicer shall also be entitled
pursuant to Section 3.11(a)(iv) to withdraw from the Collection Account and
pursuant to Section 3.23(b) to withdraw from any REO Account, as additional
servicing compensation, interest or other income earned on deposits therein,
subject to Section 3.12. The Servicer shall be required to pay all expenses
incurred by it in connection with its servicing activities hereunder and shall
not be entitled to reimbursement therefor except as specifically provided
herein.

                  SECTION 3.19.             Reports to the Trust Administrator
                                            and the Trustee; Collection Account
                                            Statements.

                                      -79-

<PAGE>

                  Not later than fifteen days after each Distribution Date, the
Servicer shall forward to the Trust Administrator, the Trustee and the Depositor
a statement prepared by the institution at which the Collection Account is
maintained setting forth the status of the Collection Account as of the close of
business on such Distribution Date and showing, for the period covered by such
statement, the aggregate amount of deposits into and withdrawals from the
Collection Account of each category of deposit specified in Section 3.10(a) and
each category of withdrawal specified in Section 3.11. Copies of such statement
shall be provided by the Trust Administrator to any Certificateholder and to any
Person identified to the Trust Administrator as a prospective transferee of a
Certificate, upon request at the expense of the requesting party, provided such
statement is delivered by the Servicer to the Trust Administrator.

                  SECTION 3.20.             Statement as to Compliance.

                  The Servicer will deliver to, the Trust Administrator, the
Trustee and the Depositor not later than 120 days following the end of the
fiscal year of the Servicer, which as of the Closing Date ends on the last day
in December, an Officers' Certificate stating, as to each signatory thereof,
that (i) a review of the activities of the Servicer during the preceding year
and of performance under this Agreement has been made under such officers'
supervision and (ii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all of its obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof. Copies of any such statement shall be provided by the
Trust Administrator to any Certificateholder and to any Person identified to the
Trust Administrator as a prospective transferee of a Certificate, upon request
at the expense of the requesting party, provided such statement is delivered by
the Servicer to the Trust Administrator.

                  SECTION 3.21.             Independent Public Accountants'
                                            Servicing Report.

                  Not later than 120 days following the end of each fiscal year
of the Servicer (which, as of the Closing Date, ends on the last day of
December), the Servicer, at its expense, shall cause a nationally recognized
firm of independent certified public accountants to furnish to the Servicer a
report stating that (i) it has obtained a letter of representation regarding
certain matters from the management of the Servicer which includes an assertion
that the Servicer has complied with certain minimum residential mortgage loan
servicing standards, identified in the Uniform Single Attestation Program for
Mortgage Bankers established by the Mortgage Bankers Association of America,
with respect to the servicing of residential mortgage loans during the most
recently completed fiscal year and (ii) on the basis of an examination conducted
by such firm in accordance with standards established by the American Institute
of Certified Public Accountants, such representation is fairly stated in all
material respects, subject to such exceptions and other qualifications that may
be appropriate. Immediately upon receipt of such report, the Servicer shall
furnish a copy of such report to the Trust Administrator, the Trustee and each
Rating Agency. Copies of such statement shall be provided by the Trust
Administrator to any Certificateholder upon request at the Servicer's expense,
provided that such statement is delivered by the Servicer to the Trust
Administrator.

                  SECTION 3.22.             Access to Certain Documentation.

                                      -80-

<PAGE>

                  The Servicer shall provide to the Office of Thrift
Supervision, the FDIC, and any other federal or state banking or insurance
regulatory authority that may exercise authority over any Certificateholder,
access to the documentation regarding the Mortgage Loans required by applicable
laws and regulations. Such access shall be afforded without charge, but only
upon reasonable request and during normal business hours at the offices of the
Servicer designated by it. In addition, access to the documentation regarding
the Mortgage Loans will be provided to any Certificateholder, the Trustee, the
Trust Administrator and to any Person identified to the Servicer, as a
prospective transferee of a Certificate, upon reasonable request during normal
business hours at the offices of the Servicer designated by it at the expense of
the Person requesting such access.

                  SECTION 3.23.             Title, Management and Disposition of
                                            REO Property.

                  (a) The deed or certificate of sale of any REO Property shall
be taken in the name of the Trustee, or its nominee, on behalf of the Trust and
for the benefit of the Certificateholders. The Servicer, on behalf of REMIC I-A
and REMIC I-B, shall either sell any REO Property by the close of the third
calendar year following the calendar year in which REMIC I-A or REMIC I-B, as
applicable, acquires ownership of such REO Property for purposes of Section
860(a)(8) of the Code or request from the Internal Revenue Service, no later
than 60 days before the day on which the three-year grace period would otherwise
expire an extension of the three-year grace period, unless the Servicer had
delivered to the Trust Administrator and the Trustee an Opinion of Counsel,
addressed to the Trust Administrator, the Trustee and the Depositor, to the
effect that the holding by REMIC I-A or REMIC I-B of such REO Property
subsequent to three years after its acquisition will not result in the
imposition on any Trust REMIC created hereunder of taxes on "prohibited
transactions" thereof, as defined in Section 860F of the Code, or cause any
Trust REMIC hereunder to fail to qualify as a REMIC under Federal law at any
time that any Certificates are outstanding. The Servicer shall manage, conserve,
protect and operate each REO Property for the Certificateholders solely for the
purpose of its prompt disposition and sale in a manner which does not cause such
REO Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code or result in the receipt by any Trust REMIC
created hereunder of any "income from non-permitted assets" within the meaning
of Section 860F(a)(2)(B) of the Code, or any "net income from foreclosure
property" which is subject to taxation under the REMIC Provisions.

                  (b) The Servicer shall segregate and hold all funds collected
and received in connection with the operation of any REO Property separate and
apart from its own funds and general assets and shall establish and maintain
with respect to REO Properties an account held in trust for the Trustee, on
behalf of the Trust and for the benefit of the Certificateholders (the "REO
Account"), which shall be an Eligible Account. The Servicer shall be permitted
to allow the Collection Account to serve as the REO Account, subject to separate
ledgers for each REO Property. The Servicer shall be entitled to retain or
withdraw any interest income paid on funds deposited in the REO Account.

                  (c) The Servicer shall have full power and authority, subject
only to the specific requirements and prohibitions of this Agreement, to do any
and all things in connection with any REO Property as are consistent with the
manner in which the Servicer manages and operates similar property owned by the
Servicer or any of its Affiliates, all on such terms and for such period as the
Servicer deems to be in the best interests of Certificateholders. In connection
therewith, the Servicer

                                      -81-

<PAGE>

shall deposit, or cause to be deposited, on a daily basis in the REO Account all
revenues received by it with respect to an REO Property and shall withdraw
therefrom funds necessary for the proper operation, management and maintenance
of such REO Property including, without limitation:

                  (i) all insurance premiums due and payable in respect of such
         REO Property;

                  (ii) all real estate taxes and assessments in respect of such
         REO Property that may result in the imposition of a lien thereon; and

                  (iii) all costs and expenses necessary to maintain such REO
         Property.

                  To the extent that amounts on deposit in the REO Account with
respect to an REO Property are insufficient for the purposes set forth in
clauses (i) through (iii) above with respect to such REO Property, the Servicer
shall advance from its own funds such amount as is necessary for such purposes
if, but only if, the Servicer would make such advances if the Servicer owned the
REO Property and if in the Servicer's judgment, the payment of such amounts will
be recoverable from the rental or sale of the REO Property.

                  Subject to compliance with applicable laws and regulations as
shall at any time be in force, and notwithstanding the foregoing, the Servicer
shall not:

                  (i) permit the Trust Fund to enter into, renew or extend any
         New Lease with respect to any REO Property, if the New Lease by its
         terms will give rise to any income that does not constitute Rents from
         Real Property;

                  (ii) permit any amount to be received or accrued under any New
         Lease other than amounts that will constitute Rents from Real Property;

                  (iii) authorize or permit any construction on any REO
         Property, other than the completion of a building or other improvement
         thereon, and then only if more than ten percent of the construction of
         such building or other improvement was completed before default on the
         related Mortgage Loan became imminent, all within the meaning of
         Section 856(e)(4)(B) of the Code; or

                  (iv) allow any Person to Directly Operate any REO Property on
         any date more than 90 days after its date of acquisition by the Trust
         Fund;

unless, in any such case, the Servicer has obtained an Opinion of Counsel,
provided to the Servicer, the Trust Administrator and the Trustee, to the effect
that such action will not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code at
any time that it is held by REMIC I-A or REMIC I-B, in which case the Servicer
may take such actions as are specified in such Opinion of Counsel.

                  The Servicer may contract with any Independent Contractor for
the operation and management of any REO Property, provided that:

                                      -82-

<PAGE>

                  (i) the terms and conditions of any such contract shall not be
         inconsistent herewith;

                  (ii) any such contract shall require, or shall be administered
         to require, that the Independent Contractor pay all costs and expenses
         incurred in connection with the operation and management of such REO
         Property, including those listed above and remit all related revenues
         (net of such costs and expenses) to the Servicer as soon as
         practicable, but in no event later than thirty days following the
         receipt thereof by such Independent Contractor;

                  (iii) none of the provisions of this Section 3.23(c) relating
         to any such contract or to actions taken through any such Independent
         Contractor shall be deemed to relieve the Servicer of any of its duties
         and obligations to the Trustee on behalf of the Trust and for the
         benefit of the Certificateholders with respect to the operation and
         management of any such REO Property; and

                  (iv) the Servicer shall be obligated with respect thereto to
         the same extent as if it alone were performing all duties and
         obligations in connection with the operation and management of such REO
         Property.

                  The Servicer shall be entitled to enter into any agreement
with any Independent Contractor performing services for it related to its duties
and obligations hereunder for indemnification of the Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Servicer shall be solely liable for all fees
owed by it to any such Independent Contractor, irrespective of whether the
Servicer's compensation pursuant to Section 3.18 is sufficient to pay such fees.

                  (d) In addition to the withdrawals permitted under Section
3.23(c), the Servicer may from time to time make withdrawals from the REO
Account for any REO Property: (i) to pay itself unpaid Servicing Fees in respect
of the related Mortgage Loan; and (ii) to reimburse itself or any Sub-Servicer
for unreimbursed Servicing Advances and Advances made in respect of such REO
Property or the related Mortgage Loan. On the Servicer Remittance Date, the
Servicer shall withdraw from each REO Account maintained by it and deposit into
the Distribution Account in accordance with Section 3.10(d)(ii), for
distribution on the related Distribution Date in accordance with Section 4.01,
the income from the related REO Property received during the prior calendar
month, net of any withdrawals made pursuant to Section 3.23(c) or this Section
3.23(d).

                  (e) Subject to the time constraints set forth in Section
3.23(a), each REO Disposition shall be carried out by the Servicer at such price
and upon such terms and conditions as the Servicer shall deem necessary or
advisable, as shall be normal and usual in its Accepted Servicing Practices.

                  (f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Servicer as provided above, shall
be deposited in the Distribution Account in accordance with Section 3.10(d)(ii)
on the Servicer Remittance Date in the month following the receipt thereof for
distribution on the related Distribution Date in accordance with Section 4.01.
Any

                                      -83-

<PAGE>

REO Disposition shall be for cash only (unless changes in the REMIC Provisions
made subsequent to the Startup Day allow a sale for other consideration).

                  (g) The Servicer shall file information returns with respect
to the receipt of mortgage interest received in a trade or business, reports of
foreclosures and abandonments of any Mortgaged Property and cancellation of
indebtedness income with respect to any Mortgaged Property as required by
Sections 6050H, 6050J and 6050P of the Code, respectively. Such reports shall be
in form and substance sufficient to meet the reporting requirements imposed by
such Sections 6050H, 6050J and 6050P of the Code.

                  SECTION 3.24.             Obligations of the Servicer in
                                            Respect of Prepayment Interest
                                            Shortfalls.

                  The Servicer shall deliver to the Trust Administrator for
deposit into the Distribution Account on or before 5:00 p.m. New York time on
the Servicer Remittance Date from its own funds an amount equal to the lesser of
(i) the aggregate of the Prepayment Interest Shortfalls attributable to
prepayments in full for the related Distribution Date resulting solely from
Principal Prepayments received by the Servicer during the related Prepayment
Period and (ii) 50% of its aggregate Servicing Fee for the most recently ended
Prepayment Period. The Servicer shall not have the right to reimbursement for
any amounts remitted to the Trust Administrator in respect of this Section 3.24.
The Servicer shall not be obligated to pay the amounts set forth in this Section
3.24 with respect to Relief Act Interest Shortfalls.

                  SECTION 3.25.             [Reserved].

                  SECTION 3.26.             Obligations of the Servicer in
                                            Respect of Mortgage Rates and
                                            Monthly Payments.

                  In the event that a shortfall in any collection on or
liability with respect to any Mortgage Loan results from or is attributable to
adjustments to Mortgage Rates, Monthly Payments or Stated Principal Balances
that were made by the Servicer in a manner not consistent with the terms of the
related Mortgage Note and this Agreement, the Servicer, upon discovery or
receipt of notice thereof, immediately shall deliver to the Trust Administrator
for deposit in the Distribution Account from its own funds the amount of any
such shortfall and shall indemnify and hold harmless the Trust Fund, the Trust
Administrator, the Trustee, the Depositor and any successor Servicer in respect
of any such liability. Such indemnities shall survive the termination or
discharge of this Agreement.

                  SECTION 3.27.             Reserve Fund.

                  (a) No later than the Closing Date, the Trust Administrator
shall establish and maintain with itself, as agent for the Trustee, a separate,
segregated trust account titled, "Reserve Fund, Citibank, N.A., as agent for
U.S. Bank National Association, as Trustee, in trust for the registered holders
of Salomon Brothers Mortgage Securities VII, Inc., Salomon Home Equity Loan
Trust, Series 2001-1, Asset Backed Pass-Through Certificates." On the Closing
Date, the Depositor will deposit, or cause to be deposited, into the Reserve
Fund, $1,000.

                                      -84-

<PAGE>

                  (b) On each Distribution Date as to which there is a Net WAC
Rate Carryover Amount payable to the Class AV-1 Certificates or the Group II
Mezzanine Certificates, the Trust Administrator has been directed by the Class
OCV Certificateholders to, and therefore will, deposit into the Reserve Fund the
amounts described in Section 4.01(a)(4)(B)(xii), rather than distributing such
amounts to the Class OCV Certificateholders. On each such Distribution Date, the
Trust Administrator shall hold all such amounts for the benefit of the Holders
of the Class AV-1 Certificates and the Group II Mezzanine Certificates, and will
distribute such amounts to the Holders of the Class AV-1 Certificates and the
Group II Mezzanine Certificates in the amounts and priorities set forth in
Section 4.01(a). If no Net WAC Rate Carryover Amounts are payable on a
Distribution Date, the Trust Administrator shall deposit into the Reserve Fund
on behalf of the Class OCV Certificateholders, from amounts otherwise
distributable to the Class OCV Certificateholders, an amount such that when
added to other amounts already on deposit in the Reserve Fund, the aggregate
amount on deposit therein is equal to $1,000.

                  (c) For federal and state income tax purposes, the Class OCV
Certificateholders will be deemed to be the owners of the Reserve Fund and all
amounts deposited into the Reserve Fund (other than the initial deposit therein
of $1,000) shall be treated as amounts distributed by REMIC II to the Holders of
the Class OCV Certificates. Upon the termination of the Trust Fund, or the
payment in full of the Class AV-1 Certificates and the Group II Mezzanine
Certificates, all amounts remaining on deposit in the Reserve Fund will be
released by the Trust Fund and distributed to the Class OCV Certificateholders
or their designees. The Reserve Fund will be part of the Trust Fund but not part
of any REMIC and any payments to the Holders of the Class AV-1 Certificates or
the Group II Mezzanine Certificates of Net WAC Rate Carryover Amounts will not
be payments with respect to a "regular interest" in a REMIC within the meaning
of Code Section 860(G)(a)(1).

                  (d) By accepting a Class OCV Certificate, each Class OCV
Certificateholder hereby agrees to direct the Trust Administrator, and the Trust
Administrator hereby is directed to deposit into the Reserve Fund the amounts
described above on each Distribution Date as to which there is any Net WAC Rate
Carryover Amount rather than distributing such amounts to the Class OCV
Certificateholders. By accepting a Class OCV Certificate, each Class OCV
Certificateholder further agrees that such direction is given for good and
valuable consideration, the receipt and sufficiency of which is acknowledged by
such acceptance.

                  (e) At the direction of the Holders of a majority in
Percentage Interest in the Class OCV Certificates, the Trust Administrator shall
direct any depository institution maintaining the Reserve Fund to invest the
funds in such account in one or more Permitted Investments bearing interest or
sold at a discount, and maturing, unless payable on demand, (i) no later than
the Business Day immediately preceding the date on which such funds are required
to be withdrawn from such account pursuant to this Agreement, if a Person other
than the Trust Administrator or an Affiliate manages or advises such investment,
and (ii) no later than the date on which such funds are required to be withdrawn
from such account pursuant to this Agreement, if the Trust Administrator or an
Affiliate manages or advises such investment. If no investment direction of the
Holders of a majority in Percentage Interest in the Class OCV Certificates with
respect to the Reserve Fund is received by the Trust Administrator, the Trust
Administrator shall invest the funds in such account in Permitted Investments
managed by the Trust Administrator or an Affiliate of the kind described in
clause (vi) of the definition of Permitted Investments. All income and gain
earned upon such investment shall

                                      -85-

<PAGE>

be deposited into the Reserve Fund.

                  (f) For federal tax return and information reporting, the
right of the Class AV-1 Certificateholders and the Group II Mezzanine
Certificateholders to receive payments from the Reserve Fund in respect of any
Net Wac Rate Carryover Amount shall be assigned a value of zero.

                  SECTION 3.28.             Advance Facility.

                  (a) The Trust Administrator on behalf of the Trust Fund, with
the consent of the Servicer, is hereby authorized to enter into a facility with
any Person which provides that such Person (an "Advancing Person") may make all
or a portion of the Advances and/or Servicing Advances to the Trust Fund under
this Agreement, although no such facility shall reduce or otherwise affect the
Servicer's obligation to fund such Advances and/or Servicing Advances. To the
extent that an Advancing Person makes all or a portion of any Advance or any
Servicing Advance and provides the Trust Administrator and the Trustee with
notice acknowledged by the Servicer that such Advancing Person is entitled to
reimbursement, such Advancing Person shall be entitled to receive reimbursement
pursuant to this Agreement for such amount to the extent provided in Section
3.28(b). Such notice from the Advancing Person must specify the amount of the
reimbursement and must specify which Section of this Agreement permits the
applicable Advance or Servicing Advance to be reimbursed. The Trust
Administrator shall have no duty or liability with respect to any calculation of
any reimbursement to be paid to an Advancing Person and shall be entitled to
rely without independent investigation on the Advancing Person's notice provided
pursuant to this Section 3.28. An Advancing Person whose obligations hereunder
are limited to the funding of Advances and/or Servicing Advances shall not be
required to meet the qualifications of a Sub- Servicer pursuant to Section 3.02
hereof.

                  (b) If an Advancing Person is entitled to reimbursement for
any particular Advance or Servicing Advance, then the Servicer shall not be
permitted to reimburse itself therefor under Section 3.11(a)(ii), Section
3.11(a)(iii), Section 3.11(a)(vi) or Section 3.11(a)(ix), but instead the
Servicer shall include such amounts in the applicable remittance to the Trust
Administrator made pursuant to Section 3.10(b) to the extent of amounts on
deposit in the Collection Account on the related Servicer Remittance Date. The
Trust Administrator is hereby authorized to pay to an Advancing Person,
reimbursements for Advances and Servicing Advances from the Distribution Account
to the same extent the Servicer would have been permitted to reimburse itself
for such Advances and/or Servicing Advances in accordance with Section
3.11(a)(ii), Section 3.11(a)(iii), Section 3.11(a)(vi) or Section 3.11(a)(ix),
as the case may be, had the Servicer made such Advance or Servicing Advance.
Notwithstanding the foregoing, an Advancing Person is not entitled to be
reimbursed by the Trust Administrator from the Distribution Account for any
unreimbursed Advances from funds held in the Collection Account for future
distribution.

                                      -86-

<PAGE>

                                   ARTICLE IV

                         PAYMENTS TO CERTIFICATEHOLDERS

                  SECTION 4.01.             Distributions.

                  (a)(1)(I) On each Distribution Date, the following amounts, in
the following order of priority, shall be distributed by REMIC I-A to REMIC II
on account of the REMIC I-A Regular Interests or withdrawn from the Distribution
Account and distributed to the holders of the Class R-IA Interest, as the case
may be:

                         (i) first, to Holders of the REMIC I-A Regular Interest
                  LT-AF1, REMIC I-A Regular Interest LT-AF2, REMIC I-A Regular
                  Interest LT-AF3, REMIC I-A Regular Interest LT-MF1, REMIC I-A
                  Regular Interest LT-MF2 and REMIC I-A Regular Interest LT-MF3,
                  in an amount equal to (A) the Uncertificated Interest for such
                  Distribution Date, plus (B) any amounts in respect thereof
                  remaining unpaid from previous Distribution Dates. Amounts
                  payable as Uncertificated Interest in respect of REMIC I-A
                  Regular Interest IA-LTZZ shall be reduced when the sum of the
                  REMIC I-A Overcollateralization Amount is less than the REMIC
                  I-A Required Overcollateralized Amount, by the lesser of (x)
                  the amount of such difference and (y) the Maximum
                  Uncertificated Interest Deferral Amount. Amounts payable as
                  Uncertificated Interest in respect of REMIC I-A Regular
                  Interest IA-LTZZ shall be reduced when the REMIC I-A
                  Overcollateralized Amount is less than the REMIC I-A Required
                  Overcollateralization Amount, by the lesser of (x) the amount
                  of such difference and (y) the Maximum IA-LTZZ Uncertificated
                  Interest Deferral Amount and such amount will be payable to
                  the Holders of REMIC I-A Regular Interest IA-LTAF1, REMIC I-A
                  Regular Interest IA-LTAF2, REMIC I-A Regular Interest
                  IA-LTAF3, REMIC I-A Regular Interest IA-LTMF1, REMIC I-A
                  Regular Interest IA-LTMF2 and REMIC I-A Regular Interest
                  IA-LTMF3in the same proportion as the Overcollateralization
                  Increase Amount is allocated to the Corresponding
                  Certificates;

                        (ii) second, to the Holders of REMIC I-A Regular
                  Interests, in an amount equal to the remainder of the Group I
                  Available Funds for such Distribution Date after the
                  distributions made pursuant to clause (i) above, allocated as
                  follows:

                           (a) to the Holders of REMIC I-A Regular Interest
                           IA-LTAA, 98.000% of such remainder (less the amount
                           payable in clause (d) below), until the
                           Uncertificated Balance of such REMIC I-A Regular
                           Interest is reduced to zero;

                           (b) to the Holders of REMIC I-A Regular Interest
                           IA-LTAF1, REMIC I- A Regular Interest IA-LTAF2, REMIC
                           I-A Regular Interest IA-LTAF3, REMIC I-A Regular
                           Interest IA-LTMF1, REMIC I-A Regular Interest IA-
                           LTMF2 and REMIC I-A Regular Interest IA-LTMF3, 1.000%
                           of such remainder (less the amount payable in clause
                           (d) below), in the same proportion as principal
                           payments are allocated to the Corresponding

                                      -87-

<PAGE>

                           Certificates, until the Uncertificated Balances of
                           such REMIC I-A Regular Interests are reduced to zero;

                           (c) to the Holders of REMIC I-A Regular Interest
                           IA-LTZZ, 1.000% of such remainder (less the amount
                           payable in clause (d) below), until the
                           Uncertificated Balance of such REMIC I-A Regular
                           Interest is reduced to zero; then

                           (d) to the Holders of REMIC I-A Regular Interest
                           IA-LTPF, on the Distribution Date immediately
                           following the expiration of the latest Prepayment
                           Charge as identified on the Prepayment Charge
                           Schedule or any Distribution Date thereafter until
                           $100 has been distributed pursuant to this clause;
                           and

                           (e) any remaining amount to the Holders of the Class
                           R Certificates (as Holder of the Class R-IA
                           Interest);

provided, however, that 98.000% and 2.000% of any principal payments that are
attributable to an Overcollateralization Reduction Amount shall be allocated to
Holders of REMIC I-A Regular Interest IA-LTAA and REMIC I-A Regular Interest
IA-LTZZ, respectively.

                  (II) On each Distribution Date, the following amounts, in the
following order of priority, shall be distributed by REMIC I-B to REMIC II on
account of the REMIC I-B Regular Interests or withdrawn from the Distribution
Account and distributed to the holders of the Class R- IB Interest, as the case
may be:

                         (i) first, to Holders of the REMIC I-B Regular Interest
                  LT-AV1, REMIC I-B Regular Interest LT-AV2, REMIC I-B Regular
                  Interest LT-MV1, REMIC I-B Regular Interest LT-MV2, REMIC I-B
                  Regular Interest LT-MV3 and REMIC I-A Regular Interest LT-MV4,
                  in an amount equal to (A) the Uncertificated Interest for such
                  Distribution Date, plus (B) any amounts in respect thereof
                  remaining unpaid from previous Distribution Dates. Amounts
                  payable as Uncertificated Interest in respect of REMIC I-B
                  Regular Interest IB-LTZZ shall be reduced when the sum of the
                  REMIC I-B Overcollateralized Amount is less than the REMIC I-B
                  Required Overcollateralization Amount, by the lesser of (x)
                  the amount of such difference and (y) the Maximum
                  Uncertificated Interest Deferral Amount. Amounts payable as
                  Uncertificated Interest in respect of REMIC I-B Regular
                  Interest IB-LTZZ shall be reduced when the REMIC I-B
                  Overcollateralized Amount is less than the REMIC I-B Required
                  Overcollateralization Amount, by the lesser of (x) the amount
                  of such difference and (y) the Maximum IB-LTZZ Uncertificated
                  Interest Deferral Amount and such amount will be payable to
                  the Holders of REMIC I-B Regular Interest IB-LTAV1, REMIC I-B
                  Regular Interest IB-LTAV2, REMIC I-B Regular Interest
                  IB-LTMV1, REMIC I-B Regular Interest IB-LTMV2, REMIC I-B
                  Regular Interest IB-LTM3 and REMIC I-B Regular Interest
                  IB-LTMV4in the same proportion as the Overcollateralization
                  Increase Amount is allocated to the Corresponding
                  Certificates;

                                      -88-

<PAGE>

                        (ii) second, to the Holders of REMIC I-B Regular
                  Interests, in an amount equal to the remainder of the Group II
                  Available Funds for such Distribution Date after the
                  distributions made pursuant to clause (i) above, allocated as
                  follows:

                           (a) to the Holders of REMIC I-B Regular Interest
                           IB-LTAA, 98.000% of such remainder (less the amount
                           payable in clause (d) below), until the
                           Uncertificated Balance of such REMIC I-B Regular
                           Interest is reduced to zero;

                           (b) to the Holders of REMIC I-B Regular Interest
                           IB-LTAV1, REMIC I- B Regular Interest IB-LTMV1, REMIC
                           I-B Regular Interest IB-LTMV2, REMIC I-B Regular
                           Interest IB-LTMV3 and REMIC I-B Regular Interest IB-
                           LTMV4, 1.000% of such remainder (less the amount
                           payable in clause (d) below), in the same proportion
                           as principal payments are allocated to the
                           Corresponding Certificates, until the Uncertificated
                           Balances of such REMIC I-B Regular Interests are
                           reduced to zero;

                           (c) to the Holders of REMIC I-B Regular Interest
                           IB-LTZZ, 1.000% of such remainder (less the amount
                           payable in clause (d) below), until the
                           Uncertificated Balance of such REMIC I-B Regular
                           Interest is reduced to zero; then

                           (d) to the Holders of REMIC I-B Regular Interest
                           IB-LTPV, on the Distribution Date immediately
                           following the expiration of the latest Prepayment
                           Charge as identified on the Prepayment Charge
                           Schedule or any Distribution Date thereafter until
                           $100 has been distributed pursuant to this clause;
                           and

                           (e) any remaining amount to the Holders of the Class
                           R Certificates (as Holder of the Class R-IB
                           Interest);

provided, however, that 98.000% and 2.000% of any principal payments that are
attributable to an Overcollateralization Reduction Amount shall be allocated to
Holders of REMIC I-B Regular Interest IB-LTAA and REMIC I-B Regular Interest
IB-LTZZ, respectively.

                  (2)(A) On the first Distribution Date, the Group I Initial
Deposit will be transferred from the Group I Initial Deposit Account to the
Distribution Account for inclusion in the Group I Available Funds for such
Distribution Date. On each Distribution Date, the Trust Administrator shall
withdraw from the Distribution Account an amount equal to the Group I Interest
Remittance Amount and distribute to the Certificateholders the following
amounts, in the following order of priority:

                  (i) concurrently, to the Holders of the Class AF Certificates,
         an amount equal to the Senior Interest Distribution Amount allocable to
         the Class AF Certificates;

                  (ii) to the Holders of the Class MF-1 Certificates, an amount
         equal to the Interest

                                      -89-

<PAGE>

         Distribution Amount allocable to the Class MF-1 Certificates;

                  (iii) to the Holders of the Class MF-2 Certificates, an amount
         equal to the Interest Distribution Amount allocable to the Class MF-2
         Certificates; and

                  (iv) to the Holders of the Class MF-3 Certificates, an amount
         equal to the Interest Distribution Amount allocable to the Class MF-3
         Certificates.

                  (B) On the first Distribution Date, the Group II Initial
Deposit will be transferred from the Group II Initial Deposit Account to the
Distribution Account for inclusion in the Group II Available Funds for such
Distribution Date, On each Distribution Date, the Trust Administrator shall
withdraw from the Distribution Account an amount equal to the Group II Interest
Remittance Amount and distribute to the Certificateholders the following
amounts, in the following order of priority:

                  (i) to the Holders of the Class AV-1 Certificates, an amount
         equal to the Senior Interest Distribution Amount allocable to the Class
         AV-1 Certificates;

                  (ii) to the Holders of the Class MV-1 Certificates, an amount
         equal to the Interest Distribution Amount allocable to the Class MV-1
         Certificates;

                  (iii) to the Holders of the Class MV-2 Certificates, an amount
         equal to the Interest Distribution Amount allocable to the Class MV-2
         Certificates;

                  (iv) to the Holders of the Class MV-3 Certificates, an amount
         equal to the Interest Distribution Amount allocable to the Class MV-3
         Certificates; and

                  (v) to the Holders of the Class MV-4 Certificates, an amount
         equal to the Interest Distribution Amount allocable to the Class MV-4
         Certificates.

                  (3)(A) On each Distribution Date, the Trust Administrator
shall withdraw from the Distribution Account an amount equal to the Group I
Principal Distribution Amount and distribute to the Certificateholders the
following amounts, in the following order of priority:

                  (i) On each Distribution Date (a) prior to a related Stepdown
         Date or (b) on which a related Trigger Event is in effect, the Group I
         Principal Distribution Amount shall be distributed in the following
         order of priority;

                           FIRST, to the Holders of the Class AF-1 Certificates,
         until the Certificate Principal Balance of such Class has been reduced
         to zero;

                           SECOND, to the Holders of the Class AF-2
         Certificates, until the Certificate Principal Balance of such Class has
         been reduced to zero;

                           THIRD, to the Holders of the Class AF-3 Certificates,
         until the Certificate Principal Balance of such Class has been reduced
         to zero;

                                      -90-

<PAGE>

                           FOURTH, to the Holders of the Class MF-1
         Certificates, until the Certificate Principal Balance of such Class has
         been reduced to zero;

                           FIFTH, to the Holders of the Class MF-2 Certificates,
         until the Certificate Principal Balance of such Class has been reduced
         to zero; and

                           SIXTH, to the Holders of the Class MF-3 Certificates,
         until the Certificate Principal Balance of such Class has been reduced
         to zero.

                  (ii) On each Distribution Date (a) on or after a related
         Stepdown Date and (b) on which a related Trigger Event is not in
         effect, the Group I Principal Distribution Amount shall be distributed
         in the following order of priority;

                           FIRST, the Class AF Principal Distribution Amount
         shall be distributed to the Holders of the Class AF-1 Certificates, the
         Class AF-2 Certificates and the Class AF-3 Certificates, in that order,
         in each case until the respective Certificate Principal Balance of each
         such Class has been reduced to zero;

                           SECOND, the Class MF-1 Principal Distribution Amount
         shall be distributed to the Holders of the Class MF-1 Certificates,
         until the Certificate Principal Balance of such Class has been reduced
         to zero;

                           THIRD, the Class MF-2 Principal Distribution Amount
         shall be distributed to the Holders of the Class MF-2 Certificates,
         until the Certificate Principal Balance of such Class has been reduced
         to zero; and

                           FOURTH, the Class MF-3 Principal Distribution Amount
         shall be distributed to the Holders of the Class MF-3 Certificates,
         until the Certificate Principal Balance of such Class has been reduced
         to zero.

                  (A) On each Distribution Date, the Trust Administrator shall
withdraw from the Distribution Account an amount equal to the Group II Principal
Distribution Amount and distribute to the Certificateholders the following
amounts, in the following order of priority:

                  (i) On each Distribution Date (a) prior to a related Stepdown
         Date or (b) on which a related Trigger Event is in effect, the Group II
         Principal Distribution Amount shall be distributed in the following
         order of priority;

                           FIRST, to the Holders of the Class AV-1 Certificates,
         until the Certificate Principal Balance of such Class has been reduced
         to zero;

                           SECOND, to the Holders of the Class MV-1
         Certificates, until the Certificate Principal Balance of such Class has
         been reduced to zero;

                           THIRD, to the Holders of the Class MV-2 Certificates,
         until the Certificate Principal Balance of such Class has been reduced
         to zero;

                                      -91-

<PAGE>

                           FOURTH, to the Holders of the Class MV-3
         Certificates, until the Certificate Principal Balance of such Class has
         been reduced to zero; and

                           FIFTH, to the Holders of the Class MV-4 Certificates,
         until the Certificate Principal Balance of such Class has been reduced
         to zero.

                  (ii) On each Distribution Date (a) on or after a related
         Stepdown Date and (b) on which a related Trigger Event is not in
         effect, the Group II Principal Distribution Amount shall be distributed
         in the following order of priority;

                           FIRST, the Class AV-1 Principal Distribution Amount
         shall be distributed to the Holders of the Class AV-1 Certificates,
         until the Certificate Principal Balance of such Class has been reduced
         to zero;

                           SECOND, the Class MV-1 Principal Distribution Amount
         shall be distributed to the Holders of the Class MV-1 Certificates,
         until the Certificate Principal Balance of such Class has been reduced
         to zero;

                           THIRD, the Class MV-2 Principal Distribution Amount
         shall be distributed to the Holders of the Class MV-2 Certificates,
         until the Certificate Principal Balance of such Class has been reduced
         to zero;

                           FOURTH, the Class MV-3 Principal Distribution Amount
         shall be distributed to the Holders of the Class MV-3 Certificates,
         until the Certificate Principal Balance of such Class has been reduced
         to zero; and

                           FIFTH, the Class MV-4 Principal Distribution Amount
         shall be distributed to the Holders of the Class MV-4 Certificates,
         until the Certificate Principal Balance of such Class has been reduced
         to zero.

                  (4)(A) On each Distribution Date, the Group I Net Monthly
Excess Cashflow (or, in the case of clause (i) below, the Group I Net Monthly
Excess Cashflow exclusive of any Overcollateralization Reduction Amount with
respect to the Group I Certificates) shall be distributed by the Trust
Administrator as follows:

                           (i) to the Holders of the Class or Classes of Group I
         Certificates then entitled to receive distributions in respect of
         principal, in an amount equal to the principal portion of any Realized
         Losses incurred or deemed to have been incurred on the Group I Mortgage
         Loans, applied to reduce the Certificate Principal Balance of such
         Certificates until the aggregate Certificate Principal Balance of such
         Certificates is reduced to zero;

                           (ii) to the Holders of the Class or Classes of Group
         I Certificates then entitled to receive distributions in respect of
         principal, in an amount equal to the Overcollateralization Increase
         Amount for the Group I Certificates, applied to reduce the Certificate
         Principal Balance of such Certificates until the aggregate Certificate
         Principal Balance of such Certificates is reduced to zero;

                                      -92-

<PAGE>

                           (iii) to the Holders of the Class MF-1 Certificates,
         in an amount equal to the Interest Carry Forward Amount allocable to
         such Class of Certificates;

                           (iv) to the Holders of the Class MF-2 Certificates,
         in an amount equal to the Interest Carry Forward Amount allocable to
         such Class of Certificates;

                           (v) to the Holders of the Class MF-3 Certificates, in
         an amount equal to the Interest Carry Forward Amount allocable to such
         Class of Certificates;

                           (vi) CONCURRENTLY, to the Holders of the Class AF
         Certificates PRO RATA, in an amount equal to the aggregate of any
         Prepayment Interest Shortfalls (to the extent not covered by payments
         pursuant to Section 3.24) and any Relief Act Interest Shortfall on the
         Group I Mortgage Loans allocated to such Certificates;

                           (vii) to the Holders of the Class MF-1 Certificates,
         in an amount equal to the aggregate of any Prepayment Interest
         Shortfalls (to the extent not covered by payments pursuant to Section
         3.24) and any Relief Act Interest Shortfall on the Group I Mortgage
         Loans allocated to such Certificates;

                           (viii) to the Holders of the Class MF-2 Certificates,
         in an amount equal to the aggregate of any Prepayment Interest
         Shortfalls (to the extent not covered by payments pursuant to Section
         3.24) and any Relief Act Interest Shortfall on the Group I Mortgage
         Loans allocated to such Certificates;

                           (ix) to the Holders of the Class MF-3 Certificates,
         in an amount equal to the aggregate of any Prepayment Interest
         Shortfalls (to the extent not covered by payments pursuant to Section
         3.24) and any Relief Act Interest Shortfall on the Group I Mortgage
         Loans allocated to such Certificates;

                           (x) to the Servicer, the Special Servicing Fee with
         respect to the Group I Mortgage Loans;

                           (xi) to the Holders of the Class OCF Certificates the
         Interest Distribution Amount and any remaining Overcollateralization
         Reduction Amount with respect to the Group I Certificates for such
         Distribution Date; and

                           (xii) to the Holders of the Class R Certificates, any
         remaining amounts; provided that if such Distribution Date is the
         Distribution Date immediately following the expiration of the latest
         Prepayment Charge term on a Group I Mortgage Loan as identified on the
         Mortgage Loan Schedule or any Distribution Date thereafter, then any
         such remaining amounts will be distributed first, to the Holders of the
         Class PF Certificates, until the Certificate Principal Balance thereof
         has been reduced to zero; and second, to the Holders of the Class R
         Certificates.

                  (B) On each Distribution Date, the Group II Net Monthly Excess
Cashflow (or, in the case of clause (i) below, the Group II Net Monthly Excess
Cashflow exclusive of any

                                      -93-

<PAGE>

Overcollateralization Reduction Amount with respect to the Group II
Certificates) shall be distributed by the Trust Administrator as follows:

                           (i) to the Holders of the Class or Classes of Group
         II Certificates then entitled to receive distributions in respect of
         principal, in an amount equal to the principal portion of any Realized
         Losses incurred or deemed to have been incurred on the Group II
         Mortgage Loans, applied to reduce the Certificate Principal Balance of
         such Certificates until the aggregate Certificate Principal Balance of
         such Certificates is reduced to zero;

                           (ii) to the Holders of the Class or Classes of Group
         II Certificates then entitled to receive distributions in respect of
         principal, in an amount equal to the Overcollateralization Increase
         Amount for the Group II Certificates, applied to reduce the Certificate
         Principal Balance of such Certificates until the aggregate Certificate
         Principal Balance of such Certificates is reduced to zero;

                           (iii) to the Holders of the Class MV-1 Certificates,
         in an amount equal to the Interest Carry Forward Amount allocable to
         such Class of Certificates;

                           (iv) to the Holders of the Class MV-2 Certificates,
         in an amount equal to the Interest Carry Forward Amount allocable to
         such Class of Certificates;

                           (v) to the Holders of the Class MV-3 Certificates, in
         an amount equal to the Interest Carry Forward Amount allocable to such
         Class of Certificates;

                           (vi) to the Holders of the Class MV-4 Certificates,
         in an amount equal to the Interest Carry Forward Amount allocable to
         such Class of Certificates;

                           (vii) to the Holders of the Class AV-1 Certificates,
         in an amount equal to the aggregate of any Prepayment Interest
         Shortfalls (to the extent not covered by payments pursuant to Section
         3.24) and any Relief Act Interest Shortfall on the Group II Mortgage
         Loans allocated to such Certificates;

                           (viii) to the Holders of the Class MV-1 Certificates,
         in an amount equal to the aggregate of any Prepayment Interest
         Shortfalls (to the extent not covered by payments pursuant to Section
         3.24) and any Relief Act Interest Shortfall on the Group II Mortgage
         Loans allocated to such Certificates;

                           (ix) to the Holders of the Class MV-2 Certificates,
         in an amount equal to the aggregate of any Prepayment Interest
         Shortfalls (to the extent not covered by payments pursuant to Section
         3.24) and any Relief Act Interest Shortfall on the Group II Mortgage
         Loans allocated to such Certificates;

                           (x) to the Holders of the Class MV-3 Certificates, in
         an amount equal to the aggregate of any Prepayment Interest Shortfalls
         (to the extent not covered by payments pursuant to Section 3.24) and
         any Relief Act Interest Shortfall on the Group II Mortgage Loans
         allocated to such Certificates;

                                      -94-

<PAGE>

                           (xi) to the Holders of the Class MV-4 Certificates,
         in an amount equal to the aggregate of any Prepayment Interest
         Shortfalls (to the extent not covered by payments pursuant to Section
         3.24) and any Relief Act Interest Shortfall on the Group II Mortgage
         Loans allocated to such Certificates

                           (xii) to the Reserve Fund, the amount set forth in
         Section 3.27(b);

                           (xiii) to the Servicer, the Special Servicing Fee
         with respect to the Group II Mortgage Loans;

                           (xiv) to the Holders of the Class OCV Certificates
         the Interest Distribution Amount and any remaining
         Overcollateralization Reduction Amount with respect to the Group II
         Certificates for such Distribution Date; and

                           (xv) to the Holders of the Class R Certificates, any
         remaining amounts; provided that if such Distribution Date is the
         Distribution Date immediately following the expiration of the latest
         Prepayment Charge term on a Group II Mortgage Loan as identified on the
         Mortgage Loan Schedule or any Distribution Date thereafter, then any
         such remaining amounts will be distributed first, to the Holders of the
         Class PV Certificates, until the Certificate Principal Balance thereof
         has been reduced to zero; and second, to the Holders of the Class R
         Certificates.

                  On each Distribution Date, after making the distributions of
the Group II Available Funds as set forth above, the Trust Administrator will
FIRST, withdraw from the Reserve Fund all income from the investment of funds in
the Reserve Fund and distribute such amount to the Holders of the Class OCV
Certificates, and SECOND, withdraw from the Reserve Fund, to the extent of
amounts remaining on deposit therein, the amount of any Net WAC Rate Carryover
Amount with respect to the Group II Certificates for such Distribution Date and
distribute such amount first, to the Class AV-1 Certificates; second, to the
Class MV-1 Certificates, third, to the Class MV-2 Certificates, fourth, to the
Class MV-3 Certificates and fifth, to the Class MV-4 Certificates, in each case
to the extent such Net WAC Carryover Amount is allocable to each such Class.

                  (b) On each Distribution Date, the Trust Administrator shall
withdraw any amounts then on deposit in the Distribution Account that represent
Prepayment Charges collected by the Servicer in connection with the Principal
Prepayment of any of the Group I Mortgage Loans or Group II Mortgage Loans or
any Servicer Prepayment Charge Payment Amount and shall distribute such amounts
to the Holders of the Class PF Certificates or the Class PV Certificates, as
applicable. Such distributions shall not be applied to reduce the Certificate
Principal Balance of the Class PF Certificates or Class PV Certificates.

                  (c) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated PRO RATA among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 4.01(e) or
Section 9.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their

                                      -95-

<PAGE>

respective Certificates, and shall be made by wire transfer of immediately
available funds to the account of any such Holder at a bank or other entity
having appropriate facilities therefor, if such Holder shall have so notified
the Trust Administrator in writing at least five Business Days prior to the
Record Date immediately prior to such Distribution Date and is the registered
owner of Certificates having an initial aggregate Certificate Principal Balance
or Notional Amount that is in excess of the lesser of (i) $5,000,000 or (ii)
two-thirds of the initial Certificate Principal Balance or Notional Amount of
such Class of Certificates, or otherwise by check mailed by first class mail to
the address of such Holder appearing in the Certificate Register. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the Corporate Trust Office of
the Trust Administrator or such other location specified in the notice to
Certificateholders of such final distribution.

                  Each distribution with respect to a Book-Entry Certificate
shall be paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trust Administrator,
the Trustee, the Depositor or the Servicer shall have any responsibility
therefor except as otherwise provided by this Agreement or applicable law.

                  (d) The rights of the Certificateholders to receive
distributions in respect of the Certificates, and all interests of the
Certificateholders in such distributions, shall be as set forth in this
Agreement. None of the Holders of any Class of Certificates, the Trust
Administrator, the Trustee or the Servicer shall in any way be responsible or
liable to the Holders of any other Class of Certificates in respect of amounts
properly previously distributed on the Certificates.

                  (e) Except as otherwise provided in Section 9.01, whenever the
Trust Administrator expects that the final distribution with respect to any
Class of Certificates will be made on the next Distribution Date, the Trust
Administrator shall, no later than three (3) days before the related
Distribution Date, mail to each Holder on such date of such Class of
Certificates a notice to the effect that:

                  (i) the Trust Administrator expects that the final
         distribution with respect to such Class of Certificates will be made on
         such Distribution Date but only upon presentation and surrender of such
         Certificates at the office of the Trust Administrator therein
         specified, and

                  (ii) no interest shall accrue on such Certificates from and
         after the end of the related Interest Accrual Period.

                  Any funds not distributed to any Holder or Holders of
Certificates of such Class on such Distribution Date because of the failure of
such Holder or Holders to tender their Certificates shall, on such date, be set
aside and held in trust by the Trust Administrator and credited to the account
of the appropriate non-tendering Holder or Holders. If any Certificates as to
which notice has been given pursuant to this Section 4.01(e) shall not have been
surrendered for cancellation

                                      -96-

<PAGE>

within six months after the time specified in such notice, the Trust
Administrator shall mail a second notice to the remaining non-tendering
Certificateholders to surrender their Certificates for cancellation in order to
receive the final distribution with respect thereto. If within one year after
the second notice all such Certificates shall not have been surrendered for
cancellation, the Trust Administrator shall, directly or through an agent, mail
a final notice to the remaining non-tendering Certificateholders concerning
surrender of their Certificates but shall continue to hold any remaining funds
for the benefit of non-tendering Certificateholders. The costs and expenses of
maintaining the funds in trust and of contacting such Certificateholders shall
be paid out of the assets remaining in such trust fund. If within one year after
the final notice any such Certificates shall not have been surrendered for
cancellation, the Trust Administrator shall pay to Salomon Smith Barney Inc. all
such amounts, and all rights of non-tendering Certificateholders in or to such
amounts shall thereupon cease. No interest shall accrue or be payable to any
Certificateholder on any amount held in trust by the Trust Administrator as a
result of such Certificateholder's failure to surrender its Certificate(s) for
final payment thereof in accordance with this Section 4.01(e). Any such amounts
held in trust by the Trust Administrator shall be held in an Eligible Account
and the Trust Administrator may direct any depository institution maintaining
such account to invest the funds in one or more Permitted Investments. All
income and gain realized from the investment of funds deposited in such accounts
held in trust by the Trust Administrator shall be for the benefit of the Trust
Administrator; provided, however, that the Trust Administrator shall deposit in
such account the amount of any loss of principal incurred in respect of any such
Permitted Investment made with funds in such accounts immediately upon the
realization of such loss.

                  (f) Notwithstanding anything to the contrary herein, (i) in no
event shall the Certificate Principal Balance of a Class A Certificate or a
Mezzanine Certificate be reduced more than once in respect of any particular
amount both (a) allocated to such Certificate in respect of Realized Losses
pursuant to Section 4.04 and (b) distributed to the Holder of such Certificate
in reduction of the Certificate Principal Balance thereof pursuant to this
Section 4.01 from Net Monthly Excess Cashflow and (ii) in no event shall the
Uncertificated Balance of a REMIC I-A Regular Interest or REMIC I-B Regular
Interest be reduced more than once in respect of any particular amount both (a)
allocated to such REMIC I-A Regular Interest or REMIC I-B Regular Interest in
respect of Realized Losses pursuant to Section 4.04 and (b) distributed on such
REMIC I-A Regular Interest or REMIC I-B Regular Interest in reduction of the
Uncertificated Balance thereof pursuant to this Section 4.01.

                  SECTION 4.02.             Statements to Certificateholders.

                  On each Distribution Date, the Trust Administrator shall
prepare and make available on its website at www.sf.citidirect.com for access by
each Holder of the Regular Certificates, a statement as to the distributions
made on such Distribution Date setting forth the following for each Loan Group
and the Certificates related thereto:

                  (i) the amount of the distribution made on such Distribution
         Date to the Holders of the Certificates of each Class allocable to
         principal, and the amount of the distribution made on such Distribution
         Date to the Holders of the Class PF Certificates and the Class PV
         Certificates allocable to Prepayment Charges;

                                      -97-

<PAGE>

                  (ii) the amount of the distribution made on such Distribution
         Date to the Holders of the Certificates of each Class allocable to
         interest;

                  (iii) the aggregate Servicing Fee received by the Servicer
         during the related Due Period and such other customary information as
         the Trust Administrator deems necessary or desirable, or which a
         Certificateholder reasonably requests, to enable Certificateholders to
         prepare their tax returns;

                  (iv) the aggregate amount of Advances for such Distribution
         Date;

                  (v) the aggregate Stated Principal Balance of the Mortgage
         Loans and any REO Properties as of the close of business on such
         Distribution Date;

                  (vi) the number, aggregate principal balance, weighted average
         remaining term to maturity and weighted average Mortgage Rate of the
         Mortgage Loans as of the related Due Date;

                  (vii) the number and aggregate unpaid principal balance of
         Mortgage Loans in each Loan Group (a) delinquent 30 to 59 days, (b)
         delinquent 60 to 89 days, (c) delinquent 90 or more days, in each case,
         as of the last day of the preceding calendar month, (d) as to which
         foreclosure proceedings have been commenced and (e) with respect to
         which the related Mortgagor has filed for protection under applicable
         bankruptcy laws, with respect to whom bankruptcy proceedings are
         pending or with respect to whom bankruptcy protection is in force;

                  (viii) with respect to any Mortgage Loan that became an REO
         Property during the preceding calendar month, the loan number of such
         Mortgage Loan, the unpaid principal balance and the Stated Principal
         Balance of such Mortgage Loan as of the date it became an REO Property;

                  (ix) the book value of any REO Property as of the close of
         business on the last Business Day of the calendar month preceding the
         Distribution Date;

                  (x) the aggregate amount of Principal Prepayments made during
         the related Prepayment Period;

                  (xi) the aggregate amount of Realized Losses incurred during
         the related Prepayment Period (or, in the case of Bankruptcy Losses
         allocable to interest, during the related Due Period), separately
         identifying whether such Realized Losses constituted Bankruptcy Losses
         and the aggregate amount of Realized Losses incurred since the Closing
         Date;

                  (xii) the aggregate amount of Extraordinary Trust Fund
         Expenses withdrawn from the Collection Account or the Distribution
         Account for such Distribution Date;

                  (xiii) the aggregate Certificate Principal Balance and
         Notional Amount, as

                                      -98-

<PAGE>

         applicable, of each Class of Certificates, after giving effect to the
         distributions, and allocations of Realized Losses, made on such
         Distribution Date, separately identifying any reduction thereof due to
         allocations of Realized Losses;

                  (xiv) the Certificate Factor for each such Class of
         Certificates applicable to such Distribution Date;

                  (xv) the Interest Distribution Amount in respect of the Class
         A Certificates, the Mezzanine Certificates, the Class OCF Certificates
         and the Class OCV Certificates for such Distribution Date and the
         Interest Carry Forward Amount, if any, with respect to the Class A
         Certificates and the Mezzanine Certificates on such Distribution Date,
         and in the case of the Class A Certificates, the Mezzanine
         Certificates, the Class OCF Certificates and the Class OCV
         Certificates, separately identifying any reduction thereof due to
         allocations of Realized Losses, Prepayment Interest Shortfalls and
         Relief Act Interest Shortfalls;

                  (xvi) the aggregate amount of any Prepayment Interest
         Shortfall for such Distribution Date, to the extent not covered by
         payments by the Servicer pursuant to Section 3.24;

                  (xvii) the aggregate amount of Relief Act Interest Shortfalls
         for such Distribution Date;

                  (xviii) the Required Overcollateralized Amount for each Loan
         Group and the Credit Enhancement Percentage for each Loan Group for
         such Distribution Date;

                  (xix) the Overcollateralization Increase Amount for each Loan
         Group, if any, for such Distribution Date;

                  (xx) the Overcollateralization Reduction Amount for each Loan
         Group, if any, for such Distribution Date;

                  (xxi) the respective Pass-Through Rates applicable to the
         Class A Certificates, the Mezzanine Certificates, the Class OCF
         Certificates and the Class OCV Certificates for such Distribution Date
         and the Pass-Through Rate applicable to the Class A Certificates and
         the Mezzanine Certificates for the immediately succeeding Distribution
         Date;

                  (xxii) the Loss Severity Percentage with respect to each
         Mortgage Loan;

                  (xxiii) the Aggregate Loss Severity Percentage;

                  (xxiv) the Net WAC Rate Carryover Amount for the Class AV-1
         Certificates and the Group II Mezzanine Certificates, if any, for such
         Distribution Date and the amount remaining unpaid after reimbursements
         therefor on such Distribution Date.

                  In the case of information furnished pursuant to subclauses
(i) through (iii) above, the amounts shall be expressed as a dollar amount per
Single Certificate of the relevant Class.

                                      -99-

<PAGE>

                  Within a reasonable period of time after the end of each
calendar year, the Trust Administrator shall furnish to each Person who at any
time during the calendar year was a Holder of a Regular Certificate a statement
containing the information set forth in subclauses (i) through (iii) above,
aggregated for such calendar year or applicable portion thereof during which
such person was a Certificateholder. Such obligation of the Trust Administrator
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trust Administrator pursuant to
any requirements of the Code as from time to time are in force.

                  On each Distribution Date, the Trust Administrator shall make
available on its website at www.sf.citidirect.com for access by the Depositor,
the Trustee, each Holder of a Class R Certificate and to the Servicer, the
reports available to the Regular Certificateholders on such Distribution Date
and a statement setting forth the amounts, if any, actually distributed with
respect to the Class R Certificates, respectively, on such Distribution Date.

                  Within a reasonable period of time after the end of each
calendar year, the Trust Administrator shall furnish to each Person who at any
time during the calendar year was a Holder of a Class R Certificate a statement
setting forth the amount, if any, actually distributed with respect to the Class
R Certificates, as appropriate, aggregated for such calendar year or applicable
portion thereof during which such Person was a Certificateholder.

                  The Trust Administrator shall, upon request, furnish to each
Certificateholder, during the term of this Agreement, such periodic, special, or
other reports or information, whether or not provided for herein, as shall be
reasonable with respect to the Certificateholder, or otherwise with respect to
the purposes of this Agreement, all such reports or information to be provided
at the expense of the Certificateholder in accordance with such reasonable and
explicit instructions and directions as the Certificateholder may provide. For
purposes of this Section 4.02, the Trust Administrator's duties are limited to
the extent that the Trust Administrator receives timely reports as required from
the Servicer.

                  On each Distribution Date the Trust Administrator shall
provide Bloomberg Financial Markets, L. P. (" Bloomberg") CUSIP level factors
for each class of Certificates as of such Distribution Date, using a format and
media mutually acceptable to the Trust Administrator and Bloomberg.

                  SECTION 4.03.             Remittance Reports; Advances.

                  (a) On the Business Day following each Determination Date, the
Servicer shall deliver to the Trust Administrator by telecopy (or by such other
means as the Servicer, the Trust Administrator or the Trustee, as the case may
be, may agree from time to time) a Remittance Report with respect to the related
Distribution Date. On the same date, the Servicer shall forward to the Trust
Administrator by overnight mail a computer readable magnetic tape or
electronically transmit (in a format acceptable to the Trust Administrator) on
the day thereafter, a data file containing the information set forth in such
Remittance Report with respect to the related Distribution Date. Such Remittance
Report will include (i) the amount of Advances to be made by the Servicer in
respect of the related Distribution Date, the aggregate amount of Advances
outstanding after giving effect to such Advances, and the aggregate amount of
Nonrecoverable Advances in respect of such

                                      -100-

<PAGE>

Distribution Date and (ii) such other information with respect to the Mortgage
Loans as the Trust Administrator may reasonably require to perform the
calculations necessary to make the distributions contemplated by Section 4.01
and to prepare the statements to Certificateholders contemplated by Section
4.02. The Trust Administrator shall not be responsible (except with regard to
any information regarding the Prepayment Charges to the extent set forth below)
to recompute, recalculate or verify any information provided to it by the
Servicer. Notwithstanding the foregoing, in connection with any Principal
Prepayment on any Mortgage Loan listed on Schedule 2 hereto, the Trust
Administrator shall verify that the related Prepayment Charge was delivered to
the Trust Administrator for deposit in the Distribution Account in the amount
set forth on such Schedule 2 or that such Prepayment Charge was waived in
accordance with the terms hereof.

                  (b) With respect to any Mortgage Loan on which a Monthly
Payment was due during the related Due Period and delinquent on the related
Determination Date, the amount of the Servicer's Advance will be equal to the
amount of interest due for such Due Period, net of the Servicing Fee. For
purposes of the preceding sentence, the Monthly Payment on each Balloon Mortgage
Loan with a delinquent Balloon Payment is equal to the assumed Monthly Payment
that would have been due on the related Due Date based on the original principal
amortization schedule for such Balloon Mortgage Loan. The Servicer shall not be
obligated to make any Advance with respect to REO Properties.

                  By 3:00 p.m. New York time on the Servicer Remittance Date,
the Servicer shall remit in immediately available funds to the Trust
Administrator for deposit in the Distribution Account an amount equal to the
aggregate amount of Advances, if any, to be made in respect of the Mortgage
Loans for the related Distribution Date either (i) from its own funds or (ii)
from the Collection Account, to the extent of funds for the related Loan Group
held therein for future distribution (in which case it will cause to be made an
appropriate entry in the records of Collection Account that amounts held for
future distribution have been, as permitted by this Section 4.03, used by the
Servicer in discharge of any such Advance) or (iii) in the form of any
combination of (i) and (ii) aggregating the total amount of Advances to be made
by the Servicer with respect to the Mortgage Loans. Any amounts held for future
distribution and so used shall be appropriately reflected in the Servicer's
records and replaced by the Servicer by deposit in the Collection Account on or
before any future Servicer Remittance Date to the extent that the Group I
Available Distribution Amount or the Group II Available Distribution Amount for
the related Distribution Date (determined without regard to Advances to be made
on the Servicer Remittance Date) shall be less than the total amount that would
be distributed to the Classes of Certificateholders pursuant to Section 4.01 on
such Distribution Date if such amounts held for future distributions had not
been so used to make Advances. The Trust Administrator will provide notice to
the Trustee and the Servicer by telecopy by the close of business on the
Business Day prior to the Distribution Date in the event that the amount
remitted by the Servicer to the Trust Administrator on such date is less than
the Advances required to be made by the Servicer for the related Distribution
Date.

                  (c) The obligation of the Servicer to make such Advances is
mandatory, notwithstanding any other provision of this Agreement but subject to
(d) below, and, with respect to any Mortgage Loan, shall continue until the
earlier of (i) the Mortgaged Property becoming an REO Property and (ii) a Final
Recovery Determination in connection therewith or the removal thereof from the
Trust Fund pursuant to any applicable provision of this Agreement, except as

                                      -101-

<PAGE>

otherwise provided in this Section.

                  (d) Notwithstanding anything herein to the contrary, no
Advance or Servicing Advance shall be required to be made hereunder by the
Servicer if such Advance or Servicing Advance would, if made, constitute a
Nonrecoverable Advance or Nonrecoverable Servicing Advance, respectively. The
determination by the Servicer that it has made a Nonrecoverable Advance or a
Nonrecoverable Servicing Advance or that any proposed Advance or Servicing
Advance, if made, would constitute a Nonrecoverable Advance or Nonrecoverable
Servicing Advance, respectively, shall be evidenced by a certification of a
Servicing Officer delivered to the Depositor, the Trust Administrator and the
Trustee.

                  SECTION 4.04.             Allocation of Realized Losses.

                  (a) Prior to each Determination Date, the Servicer shall
determine as to each Mortgage Loan and REO Property: (i) the total amount of
Realized Losses, if any, incurred in connection with any Final Recovery
Determinations made during the related Prepayment Period; (ii) whether and the
extent to which such Realized Losses constituted Bankruptcy Losses; and (iii)
the respective portions of such Realized Losses allocable to interest and
allocable to principal. Prior to each Determination Date, the Servicer shall
also determine as to each Mortgage Loan: (i) the total amount of Realized
Losses, if any, incurred in connection with any Deficient Valuations made during
the related Prepayment Period; and (ii) the total amount of Realized Losses, if
any, incurred in connection with Debt Service Reductions in respect of Monthly
Payments due during the related Due Period. The information described in the two
preceding sentences that is to be supplied by the Servicer shall be evidenced by
an Officers' Certificate delivered to the Trust Administrator and the Trustee by
the Servicer prior to the Determination Date immediately following the end of
(i) in the case of Bankruptcy Losses allocable to interest, the Due Period
during which any such Realized Loss was incurred, and (ii) in the case of all
other Realized Losses, the Prepayment Period during which any such Realized Loss
was incurred.

                  (b) All Realized Losses on the Group I Mortgage Loans shall be
allocated by the Trust Administrator on each Distribution Date as follows:
first, to Group I Net Monthly Excess Cashflow; second, to the Class OCF
Certificates, until the Certificate Principal Balance thereof has been reduced
to zero; third, to the Class MF-3 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero; fourth, to the Class MF-2
Certificates, until the Certificate Principal Balance thereof has been reduced
to zero; and fifth, to the Class MF-1 Certificates, until the Certificate
Principal Balance thereof has been reduced to zero.

                  All Realized Losses on the Group II Mortgage Loans shall be
allocated by the Trust Administrator on each Distribution Date as follows:
first, to Group II Net Monthly Excess Cashflow; second, to the Class OCV
Certificates, until the Certificate Principal Balance thereof has been reduced
to zero; third, to the Class MV-4 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero, fourth, to the Class MV-3
Certificates, until the Certificate Principal Balance thereof has been reduced
to zero; fifth, to the Class MV-2 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero; and sixth, to the Class MV-1
Certificates, until the Certificate Principal Balance thereof has been reduced
to zero

                                      -102-

<PAGE>

                  All Realized Losses to be allocated to the Certificate
Principal Balances of all Classes on any Distribution Date shall be so allocated
after the actual distributions to be made on such date as provided above. All
references above to the Certificate Principal Balance of any Class of
Certificates shall be to the Certificate Principal Balance of such Class
immediately prior to the relevant Distribution Date, before reduction thereof by
any Realized Losses, in each case to be allocated to such Class of Certificates,
on such Distribution Date.

                  Any allocation of Realized Losses to a Mezzanine Certificate
on any Distribution Date shall be made by reducing the Certificate Principal
Balance thereof by the amount so allocated; any allocation of Realized Losses to
a Class OCF Certificate shall be made by reducing the amount otherwise payable
in respect thereof pursuant to Section 4.01(a)(4)(A)(xi) and any allocation of
Realized Losses to a Class OCV Certificate shall be made by reducing the amount
otherwise payable in respect thereof pursuant to Section 4.01(a)(4)(B)(xiv). No
allocations of any Realized Losses shall be made to the Certificate Principal
Balances of the Class A Certificates, the Class PF Certificates or the Class PV
Certificates.

                  As used herein, an allocation of a Realized Loss on a "PRO
RATA basis" among two or more specified Classes of Certificates means an
allocation on a pro rata basis, among the various Classes so specified, to each
such Class of Certificates on the basis of their then outstanding Certificate
Principal Balances prior to giving effect to distributions to be made on such
Distribution Date. All Realized Losses and all other losses allocated to a Class
of Certificates hereunder will be allocated among the Certificates of such Class
in proportion to the Percentage Interests evidenced thereby.

                  (c) All Realized Losses on the Group I Mortgage Loans shall be
allocated by the Trust Administrator on each Distribution Date to the following
REMIC I-A Regular Interests in the specified percentages, as follows: first, to
Uncertificated Interest payable to the REMIC I-A Regular Interest IA-LTAA and
REMIC I-A Regular Interest IA-LTZZ up to an aggregate amount equal to the REMIC
I-A Interest Loss Allocation Amount, 98% and 2%, respectively; second, to the
Uncertificated Balances of the REMIC I-A Regular Interest IA-LTAA and REMIC I-A
Regular Interest IA-LTZZ up to an aggregate amount equal to the REMIC I-A
Principal Loss Allocation Amount, 98% and 2%, respectively; third, to the
Uncertificated Balances of REMIC I-A Regular Interest IA-LTAA, REMIC I-A Regular
Interest IA-LTMF3 and REMIC I-A Regular Interest IA-LTZZ, 98%, 1% and 1%,
respectively, until the Uncertificated Balance of REMIC I-A Regular Interest
IA-LTMF3 has been reduced to zero; fourth to the Uncertificated Balances of
REMIC I-A Regular Interest IA-LTAA, REMIC I-A Regular Interest IA-LTMF2 and
REMIC I-A Regular Interest IA-LTZZ, 98%, 1% and 1%, respectively, until the
Uncertificated Balance of REMIC I-A Regular Interest IA-LTMF2 has been reduced
to zero; and fifth to the Uncertificated Balances of REMIC I-A Regular Interest
IA-LTAA, REMIC I-A Regular Interest IA-LTMF1 and REMIC I-A Regular Interest
IA-LTZZ, 98%, 1% and 1%, respectively, until the Uncertificated Balance of REMIC
I-A Regular Interest IA-LTMF1 has been reduced to zero.

                  All Realized Losses on the Group I-B Mortgage Loans shall be
allocated by the Trust Administrator on each Distribution Date to the following
REMIC I-B Regular Interests in the specified percentages, as follows: first, to
Uncertificated Interest payable to the REMIC I-B Regular Interest IB-LTAA and
REMIC I-B Regular Interest IB-LTZZ up to an aggregate amount equal to the

                                      -103-

<PAGE>

REMIC I-B Interest Loss Allocation Amount, 98% and 2%, respectively; second, to
the Uncertificated Balances of the REMIC I-B Regular Interest IB-LTAA and REMIC
I-B Regular Interest IB-LTZZ up to an aggregate amount equal to the REMIC I-B
Principal Loss Allocation Amount, 98% and 2%, respectively; third, to the
Uncertificated Balances of REMIC I-B Regular Interest IB-LTAA, REMIC I-B Regular
Interest IB-LTMV4 and REMIC I-B Regular Interest IB-LTZZ, 98%, 1% and 1%,
respectively, until the Uncertificated Balance of REMIC I-B Regular Interest
IB-LTMV4 has been reduced to zero, fourth, to the Uncertificated Balances of
REMIC I-B Regular Interest IB-LTAA, REMIC I-B Regular Interest IB-LTMV3 and
REMIC I-B Regular Interest IB-LTZZ, 98%, 1% and 1%, respectively, until the
Uncertificated Balance of REMIC I-B Regular Interest IB-LTMV3 has been reduced
to zero; fifth to the Uncertificated Balances of REMIC I-B Regular Interest
IB-LTAA, REMIC I-B Regular Interest IB-LTMV2 and REMIC I-B Regular Interest
IB-LTZZ, 98%, 1% and 1%, respectively, until the Uncertificated Balance of REMIC
I-B Regular Interest IB-LTMV2 has been reduced to zero; and sixth to the
Uncertificated Balances of REMIC I-B Regular Interest IB-LTAA, REMIC I-B Regular
Interest IB-LTMV1 and REMIC I-B Regular Interest IB-LTZZ, 98%, 1% and 1%,
respectively, until the Uncertificated Balance of REMIC I-B Regular Interest
IB-LTMV1 has been reduced to zero.

                  SECTION 4.05.             Compliance with Withholding
                                            Requirements

                  Notwithstanding any other provision of this Agreement, the
Trust Administrator shall comply with all federal withholding requirements
respecting payments to Certificateholders of interest or original issue discount
that the Trust Administrator reasonably believes are applicable under the Code.
The consent of Certificateholders shall not be required for such withholding. In
the event the Trust Administrator does withhold any amount from interest or
original issue discount payments or advances thereof to any Certificateholder
pursuant to federal withholding requirements, the Trust Administrator shall
indicate the amount withheld to such Certificateholders.

                  SECTION 4.06.             Exchange Commission; Additional
                                            Information.

                  Within 15 days after each Distribution Date, the Trust
Administrator shall file with the Commission via the Electronic Data Gathering
and Retrieval System, a Form 8-K with a copy of the statement to
Certificateholders for such Distribution Date as an exhibit thereto. Prior to
January 30, 2002, the Trust Administrator shall file a Form 15 Suspension
Notification with respect to the Trust Fund, if applicable. Prior to March 30,
2002, the Trust Administrator shall file a Form 10-K, substantially in the form
attached hereto as Exhibit H, with respect to the Trust Fund. The Depositor
hereby grants to the Trust Administrator a limited power of attorney to execute
and file each such document on behalf of the Depositor. Such power of attorney
shall continue until the earlier of (i) receipt by the Trust Administrator from
the Depositor of written termination of such power of attorney and (ii) the
termination of the Trust Fund. Upon request, the Trust Administrator shall
deliver to the Depositor a copy of any Form 8-K or Form 10-K filed pursuant to
this Section 4.06.

                                      -104-

<PAGE>

                                    ARTICLE V

                                THE CERTIFICATES

                  SECTION 5.01.             The Certificates.

                  (a) The Certificates in the aggregate will represent the
entire beneficial ownership interest in the Mortgage Loans and all other assets
included in REMIC I-A and REMIC I-B.

                  The Certificates will be substantially in the forms annexed
hereto as Exhibits A-1 through A-16. The Certificates of each Class will be
issuable in registered form only, in denominations of authorized Percentage
Interests as described in the definition thereof. Each Certificate will share
ratably in all rights of the related Class.

                  Upon original issue, the Certificates shall be executed by the
Trustee, or by the Trust Administrator on behalf of the Trustee, and
authenticated and delivered by the Trustee or the Trust Administrator to or upon
the order of the Depositor. The Certificates shall be executed by manual or
facsimile signature on behalf of the Trustee or the Trust Administrator by an
authorized signatory. Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Trustee or the Trust
Administrator shall bind the Trustee or the Trust Administrator, as applicable,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Certificates or did not
hold such offices at the date of such Certificates. No Certificate shall be
entitled to any benefit under this Agreement or be valid for any purpose, unless
there appears on such Certificate a certificate of authentication substantially
in the form provided herein executed by the Trustee or the Trust Administrator
by manual signature, and such certificate of authentication shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.

                  (b) The Class A Certificates and the Mezzanine Certificates
shall initially be issued as one or more Certificates held by the Book-Entry
Custodian or, if appointed to hold such Certificates as provided below, the
Depository and registered in the name of the Depository or its nominee and,
except as provided below, registration of such Certificates may not be
transferred by the Trust Administrator except to another Depository that agrees
to hold such Certificates for the respective Certificate Owners with Ownership
Interests therein. The Certificate Owners shall hold their respective Ownership
Interests in and to such Certificates through the book-entry facilities of the
Depository and, except as provided below, shall not be entitled to definitive,
fully registered Certificates (" Definitive Certificates") in respect of such
Ownership Interests. All transfers by Certificate Owners of their respective
Ownership Interests in the Book-Entry Certificates shall be made in accordance
with the procedures established by the Depository Participant or brokerage firm
representing such Certificate Owner. Each Depository Participant shall only
transfer the Ownership Interests in the Book-Entry Certificates of Certificate
Owners it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures. The Trust Administrator is
hereby initially appointed as the Book-Entry Custodian and hereby agrees to act
as such in accordance herewith and in accordance with the agreement that it has
with the Depository authorizing it to act as such. The Book-Entry Custodian may,
and, if it is no longer qualified to act

                                      -105-

<PAGE>

as such, the Book-Entry Custodian shall, appoint, by a written instrument
delivered to the Depositor, the Servicer, the Trustee and, if the Trust
Administrator is not the Book-Entry Custodian, the Trust Administrator, any
other transfer agent (including the Depository or any successor Depository) to
act as Book-Entry Custodian under such conditions as the predecessor Book-Entry
Custodian and the Depository or any successor Depository may prescribe, provided
that the predecessor Book-Entry Custodian shall not be relieved of any of its
duties or responsibilities by reason of any such appointment of other than the
Depository. If the Trust Administrator resigns or is removed in accordance with
the terms hereof, the Trustee, the successor Trust Administrator or, if it so
elects, the Depository shall immediately succeed to its predecessor's duties as
Book-Entry Custodian. The Depositor shall have the right to inspect, and to
obtain copies of, any Certificates held as Book-Entry Certificates by the
Book-Entry Custodian.

                  The Trust Administrator, the Trustee, the Servicer and the
Depositor may for all purposes (including the making of payments due on the
Book-Entry Certificates) deal with the Depository as the authorized
representative of the Certificate Owners with respect to the Book-Entry
Certificates for the purposes of exercising the rights of Certificateholders
hereunder. The rights of Certificate Owners with respect to the Book-Entry
Certificates shall be limited to those established by law and agreements between
such Certificate Owners and the Depository Participants and brokerage firms
representing such Certificate Owners. Multiple requests and directions from, and
votes of, the Depository as Holder of the Book-Entry Certificates with respect
to any particular matter shall not be deemed inconsistent if they are made with
respect to different Certificate Owners. The Trust Administrator may establish a
reasonable record date in connection with solicitations of consents from or
voting by Certificateholders and shall give notice to the Depository of such
record date.

                  If (i)(A) the Depositor advises the Trust Administrator in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities as Depository, and (B) the Depositor is unable to locate a
qualified successor, (ii) the Depositor at its option advises the Trust
Administrator in writing that it elects to terminate the book-entry system
through the Depository or (iii) after the occurrence of a Servicer Event of
Default, Certificate Owners representing in the aggregate not less than 51% of
the Ownership Interests of the Book-Entry Certificates advise the Trust
Administrator through the Depository, in writing, that the continuation of a
book-entry system through the Depository is no longer in the best interests of
the Certificate Owners, the Trust Administrator shall notify all Certificate
Owners, through the Depository, of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Owners requesting the
same. Upon surrender to the Trust Administrator of the Book-Entry Certificates
by the Book-Entry Custodian or the Depository, as applicable, accompanied by
registration instructions from the Depository for registration of transfer, the
Trust Administrator shall cause the Definitive Certificates to be issued. Such
Definitive Certificates will be issued in minimum denominations of $100,000,
except that any beneficial ownership that was represented by a Book-Entry
Certificate in an amount less than $100,000 immediately prior to the issuance of
a Definitive Certificate shall be issued in a minimum denomination equal to the
amount represented by such Book-Entry Certificate. None of the Depositor, the
Servicer, the Trust Administrator or the Trustee shall be liable for any delay
in the delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates all references herein to obligations imposed upon or to be
performed by the Depository shall be deemed to be imposed upon and performed by

                                      -106-

<PAGE>

the Trust Administrator, to the extent applicable with respect to such
Definitive Certificates, and the Trust Administrator shall recognize the Holders
of the Definitive Certificates as Certificateholders hereunder.

                  SECTION 5.02.             Registration of Transfer and
                                            Exchange of Certificates.

                  (a) The Trust Administrator shall cause to be kept at one of
the offices or agencies to be appointed by the Trust Administrator in accordance
with the provisions of Section 8.11, a Certificate Register for the Certificates
in which, subject to such reasonable regulations as it may prescribe, the Trust
Administrator shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided.

                  (b) No transfer of any Class OCF Certificate, Class OCV
Certificate, Class PF Certificate, Class PV Certificate or Class R Certificate
(the "Private Certificates") shall be made unless that transfer is made pursuant
to an effective registration statement under the Securities Act of 1933, as
amended (the "1933 Act"), and effective registration or qualification under
applicable state securities laws, or is made in a transaction that does not
require such registration or qualification. In the event that such a transfer of
a Private Certificate is to be made without registration or qualification (other
than in connection with the initial transfer of any such Certificate by the
Depositor to an affiliate of the Depositor), the Trust Administrator shall
require receipt of: (i) if such transfer is purportedly being made in reliance
upon Rule 144A under the 1933 Act, written certifications from the
Certificateholder desiring to effect the transfer and from such
Certificateholder's prospective transferee, substantially in the forms attached
hereto as Exhibit F-1; and (ii) in all other cases, an Opinion of Counsel
satisfactory to it that such transfer may be made without such registration or
qualification (which Opinion of Counsel shall not be an expense of the Trust
Fund or of the Depositor, the Trust Administrator, the Trustee, the Servicer in
its capacity as such or any Sub-Servicer), together with copies of the written
certification(s) of the Certificateholder desiring to effect the transfer and/or
such Certificateholder's prospective transferee upon which such Opinion of
Counsel is based, if any. None of the Depositor, the Trust Administrator or the
Trustee is obligated to register or qualify any such Certificates under the 1933
Act or any other securities laws or to take any action not otherwise required
under this Agreement to permit the transfer of such Certificates without
registration or qualification. Any Certificateholder desiring to effect the
transfer of any such Certificate shall, and does hereby agree to, indemnify the
Trust Administrator, the Trustee, the Depositor and the Servicer against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.

                  (c) No transfer of a Private Certificate or any interest
therein shall be made to any Plan subject to ERISA or Section 4975 of the Code,
any Person acting, directly or indirectly, on behalf of any such Plan or any
Person acquiring such Certificates with "Plan Assets" of a Plan within the
meaning of the Department of Labor regulation promulgated at 29 C. F. R. ss.
2510.3-101 ("Plan Assets") unless the Depositor, the Trust Administrator, the
Trustee and the Servicer are provided with an Opinion of Counsel which
establishes to the satisfaction of the Depositor, the Trust Administrator, the
Trustee and the Servicer that the purchase of such Certificates is permissible
under applicable law, will not constitute or result in any prohibited
transaction under ERISA or Section 4975 of the Code and will not subject the
Depositor, the Servicer, the Trust Administrator, the Trustee or the Trust Fund
to any obligation or liability (including obligations or liabilities under

                                      -107-

<PAGE>

ERISA or Section 4975 of the Code) in addition to those undertaken in this
Agreement, which Opinion of Counsel shall not be an expense of the Depositor,
the Servicer, the Trust Administrator, the Trustee or the Trust Fund. Any
prospective Transferee of such Certificates not providing the above Opinion of
Counsel must provide a certification in the form of Exhibit G to this Agreement
(or other form acceptable to the Depositor, the Trust Administrator, the Trustee
and the Servicer), which the Trust Administrator may rely upon without further
inquiry or investigation. Neither an Opinion of Counsel nor any certification
will be required in connection with the initial transfer of any such Certificate
by the Depositor to an affiliate of the Depositor (in which case, the Depositor
or any affiliate thereof shall have deemed to have represented that such
affiliate is not a Plan or a Person investing Plan Assets) and the Trust
Administrator shall be entitled to conclusively rely upon a representation
(which, upon the request of the Trust Administrator, shall be a written
representation) from the Depositor of the status of such transferee as an
affiliate of the Depositor.

                  Each beneficial owner of a Mezzanine Certificates or any
interest therein shall be deemed to have represented, by virtue of its
acquisition or holding of that certificate or interest therein, that either (i)
it is not a Plan investor, (ii) it has acquired and is holding such Mezzanine
Certificates in reliance on the Underwriters' Exemption, and that it understands
that there are certain conditions to the availability of the Underwriters'
Exemption, including that the Mezzanine Certificates must be rated, at the time
of purchase, not lower than" BBB-" (or its equivalent) by Fitch, S&P or Moody's
Investors Service, Inc. or (iii) (1) it is an insurance company, (2) the source
of funds used to acquire or hold the certificate or interest therein is an
"insurance company general account," as such term is defined in PTCE 95-60, and
(3) the conditions in Sections I and III of PTCE 95-60 have been satisfied.

                  If any Private Certificate or any interest therein is acquired
or held in violation of the provisions of the preceding paragraph, the next
preceding permitted beneficial owner will be treated as the beneficial owner of
that Certificate retroactive to the date of transfer to the purported beneficial
owner. Any purported beneficial owner whose acquisition or holding of any such
Certificate or interest therein was effected in violation of the provisions of
the preceding paragraph shall indemnify and hold harmless the Depositor, the
Servicer, the Trust Administrator, the Trustee and the Trust Fund from and
against any and all liabilities, claims, costs or expenses incurred by those
parties as a result of that acquisition or holding.

                  (d) (i) Each Person who has or who acquires any Ownership
Interest in a Class R Certificate shall be deemed by the acceptance or
acquisition of such Ownership Interest to have agreed to be bound by the
following provisions and to have irrevocably authorized the Trust Administrator
or its designee under clause (iii)(A) below to deliver payments to a Person
other than such Person and to negotiate the terms of any mandatory sale under
clause (iii)(B) below and to execute all instruments of Transfer and to do all
other things necessary in connection with any such sale. The rights of each
Person acquiring any Ownership Interest in a Class R Certificate are expressly
subject to the following provisions:

                           (A) Each Person holding or acquiring any Ownership
                  Interest in a Class R Certificate shall be a Permitted
                  Transferee and shall promptly notify the Trust Administrator
                  of any change or impending change in its status as a Permitted
                  Transferee.

                                      -108-

<PAGE>

                           (B) In connection with any proposed Transfer of any
                  Ownership Interest in a Class R Certificate, the Trust
                  Administrator shall require delivery to it, and shall not
                  register the Transfer of any Class R Certificate until its
                  receipt of, an affidavit and agreement (a "Transfer Affidavit
                  and Agreement," in the form attached hereto as Exhibit F-2)
                  from the proposed Transferee, in form and substance
                  satisfactory to the Trust Administrator, representing and
                  warranting, among other things, that such Transferee is a
                  Permitted Transferee, that it is not acquiring its Ownership
                  Interest in the Class R Certificate that is the subject of the
                  proposed Transfer as a nominee, trustee or agent for any
                  Person that is not a Permitted Transferee, that for so long as
                  it retains its Ownership Interest in a Class R Certificate, it
                  will endeavor to remain a Permitted Transferee, and that it
                  has reviewed the provisions of this Section 5.02(d) and agrees
                  to be bound by them.

                           (C) Notwithstanding the delivery of a Transfer
                  Affidavit and Agreement by a proposed Transferee under clause
                  (B) above, if a Responsible Officer of the Trust Administrator
                  who is assigned to this transaction has actual knowledge that
                  the proposed Transferee is not a Permitted Transferee, no
                  Transfer of an Ownership Interest in a Class R Certificate to
                  such proposed Transferee shall be effected.

                           (D) Each Person holding or acquiring any Ownership
                  Interest in a Class R Certificate shall agree (x) to require a
                  Transfer Affidavit and Agreement in the form attached hereto
                  as Exhibit F-2 from any other Person to whom such Person
                  attempts to transfer its Ownership Interest in a Class R
                  Certificate and (y) not to transfer its Ownership Interest
                  unless it provides a Transferor Affidavit (in the form
                  attached hereto as Exhibit F-2) to the Trust Administrator
                  stating that, among other things, it has no actual knowledge
                  that such other Person is not a Permitted Transferee.

                           (E) Each Person holding or acquiring an Ownership
                  Interest in a Class R Certificate, by purchasing an Ownership
                  Interest in such Certificate, agrees to give the Trust
                  Administrator written notice that it is a "pass-through
                  interest holder" within the meaning of temporary Treasury
                  regulation Section 1.67-3T(a)(2)(i)(A) immediately upon
                  acquiring an Ownership Interest in a Class R Certificate, if
                  it is, or is holding an Ownership Interest in a Class R
                  Certificate on behalf of, a "pass-through interest holder."

                  (ii) The Trust Administrator will register the Transfer of any
         Class R Certificate only if it shall have received the Transfer
         Affidavit and Agreement and all of such other documents as shall have
         been reasonably required by the Trust Administrator as a condition to
         such registration. In addition, no Transfer of a Class R Certificate
         shall be made unless the Trust Administrator shall have received a
         representation letter from the Transferee of such Certificate to the
         effect that such Transferee is a Permitted Transferee.

                  (iii) (A) If any purported Transferee shall become a Holder of
         a Class R Certificate in violation of the provisions of this Section
         5.02(d), then the last preceding Permitted Transferee shall be
         restored, to the extent permitted by law, to all rights as holder

                                      -109-

<PAGE>

         thereof retroactive to the date of registration of such Transfer of
         such Class R Certificate. The Trust Administrator shall be under no
         liability to any Person for any registration of Transfer of a Class R
         Certificate that is in fact not permitted by this Section 5.02(d) or
         for making any payments due on such Certificate to the holder thereof
         or for taking any other action with respect to such holder under the
         provisions of this Agreement.

                           (B) If any purported Transferee shall become a holder
                  of a Class R Certificate in violation of the restrictions in
                  this Section 5.02(d) and to the extent that the retroactive
                  restoration of the rights of the holder of such Class R
                  Certificate as described in clause (iii)(A) above shall be
                  invalid, illegal or unenforceable, then the Trust
                  Administrator shall have the right, without notice to the
                  holder or any prior holder of such Class R Certificate, to
                  sell such Class R Certificate to a purchaser selected by the
                  Trust Administrator on such terms as the Trust Administrator
                  may choose. Such purported Transferee shall promptly endorse
                  and deliver each Class R Certificate in accordance with the
                  instructions of the Trust Administrator. Such purchaser may be
                  the Trust Administrator itself or any Affiliate of the Trust
                  Administrator. The proceeds of such sale, net of the
                  commissions (which may include commissions payable to the
                  Trust Administrator or its Affiliates), expenses and taxes
                  due, if any, will be remitted by the Trust Administrator to
                  such purported Transferee. The terms and conditions of any
                  sale under this clause (iii)(B) shall be determined in the
                  sole discretion of the Trust Administrator, and the Trust
                  Administrator shall not be liable to any Person having an
                  Ownership Interest in a Class R Certificate as a result of its
                  exercise of such discretion.

                  (iv) The Trust Administrator shall make available to the
         Internal Revenue Service and those Persons specified by the REMIC
         Provisions all information necessary to compute any tax imposed (A) as
         a result of the Transfer of an Ownership Interest in a Class R
         Certificate to any Person who is a Disqualified Organization, including
         the information described in Treasury regulations sections
         1.860D-1(b)(5) and 1.860E-2(a)(5) with respect to the "excess
         inclusions" of such Class R Certificate and (B) as a result of any
         regulated investment company, real estate investment trust, common
         trust fund, partnership, trust, estate or organization described in
         Section 1381 of the Code that holds an Ownership Interest in a Class R
         Certificate having as among its record holders at any time any Person
         which is a Disqualified Organization. Reasonable compensation for
         providing such information may be accepted by the Trust Administrator.

                  (v) The provisions of this Section 5.02(d) set forth prior to
         this subsection (v) may be modified, added to or eliminated, provided
         that there shall have been delivered to the Trust Administrator at the
         expense of the party seeking to modify, add to or eliminate any such
         provision the following:

                           (A) written notification from each Rating Agency to
                  the effect that the modification, addition to or elimination
                  of such provisions will not cause such Rating Agency to
                  downgrade its then-current ratings of any Class of
                  Certificates; and

                           (B) an Opinion of Counsel, in form and substance
                  satisfactory to the Trust

                                      -110-

<PAGE>

                  Administrator, to the effect that such modification of,
                  addition to or elimination of such provisions will not cause
                  any Trust REMIC to cease to qualify as a REMIC and will not
                  cause any Trust REMIC to be subject to an entity-level tax
                  caused by the Transfer of any Class R Certificate to a Person
                  that is not a Permitted Transferee or a Person other than the
                  prospective transferee to be subject to a REMIC-tax caused by
                  the Transfer of a Class R Certificate to a Person that is not
                  a Permitted Transferee.

                  (e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office or agency of the Trust
Administrator maintained for such purpose pursuant to Section 8.11, the Trustee,
or the Trust Administrator on behalf of the Trustee shall execute, and the
Trustee or the Trust Administrator shall authenticate and deliver, in the name
of the designated Transferee or Transferees, one or more new Certificates of the
same Class of a like aggregate Percentage Interest.

                  (f) At the option of the Holder thereof, any Certificate may
be exchanged for other Certificates of the same Class with authorized
denominations and a like aggregate Percentage Interest, upon surrender of such
Certificate to be exchanged at any office or agency of the Trust Administrator
maintained for such purpose pursuant to Section 8.11. Whenever any Certificates
are so surrendered for exchange, the Trustee, or the Trust Administrator on
behalf of the Trustee, shall execute, authenticate and deliver, the Certificates
which the Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for transfer or exchange shall (if so
required by the Trust Administrator) be duly endorsed by, or be accompanied by a
written instrument of transfer in the form satisfactory to the Trust
Administrator duly executed by, the Holder thereof or his attorney duly
authorized in writing.

                  (g) No service charge to the Certificateholders shall be made
for any transfer or exchange of Certificates, but the Trust Administrator may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.

                  (h) All Certificates surrendered for transfer and exchange
shall be canceled and destroyed by the Trust Administrator in accordance with
its customary procedures.

                  SECTION 5.03.             Mutilated, Destroyed, Lost or Stolen
                                            Certificates.

                  If (i) any mutilated Certificate is surrendered to the Trust
Administrator, or the Trust Administrator receives evidence to its satisfaction
of the destruction, loss or theft of any Certificate, and (ii) there is
delivered to each of the Trustee and the Trust Administrator such security or
indemnity as may be required by it to save it harmless, then, in the absence of
actual knowledge by the Trust Administrator or the Trustee that such Certificate
has been acquired by a bona fide purchaser, the Trustee, or the Trust
Administrator on behalf of the Trustee shall execute, and the Trustee or the
Trust Administrator shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate
of the same Class and of like denomination and Percentage Interest. Upon the
issuance of any new Certificate under this Section, the Trust Administrator may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the

                                      -111-

<PAGE>

fees and expenses of the Trustee and the Trust Administrator) connected
therewith. Any replacement Certificate issued pursuant to this Section shall
constitute complete and indefeasible evidence of ownership in the applicable
REMIC created hereunder, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.

                  SECTION 5.04.             Persons Deemed Owners.

                  The Depositor, the Servicer, the Trust Administrator, the
Trustee and any agent of any of them may treat the Person in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 4.01 and for all other purposes
whatsoever, and none of the Depositor, the Servicer, the Trust Administrator,
the Trustee or any agent of any of them shall be affected by notice to the
contrary.

                  SECTION 5.05.             Certain Available Information.

                  On or prior to the date of the first sale of any Private
Certificate to an Independent third party, the Depositor shall provide to the
Trust Administrator ten copies of any private placement memorandum or other
disclosure document used by the Depositor in connection with the offer and sale
of such Certificates. In addition, if any such private placement memorandum or
disclosure document is revised, amended or supplemented at any time following
the delivery thereof to the Trust Administrator, the Depositor promptly shall
inform the Trust Administrator of such event and shall deliver to the Trust
Administrator ten copies of the private placement memorandum or disclosure
document, as revised, amended or supplemented. The Trust Administrator shall
maintain at its Corporate Trust Office and shall make available free of charge
during normal business hours for review by any Holder of a Certificate or any
Person identified to the Trust Administrator as a prospective transferee of a
Certificate, originals or copies of the following items: (i) in the case of a
Holder or prospective transferee of a Private Certificate, the related private
placement memorandum or other disclosure document relating to such Class of
Certificates, in the form most recently provided to the Trust Administrator; and
(ii) in all cases, (A) this Agreement and any amendments hereof entered into
pursuant to Section 11.01, (B) all monthly statements required to be delivered
to Certificateholders of the relevant Class pursuant to Section 4.02 since the
Closing Date, and all other notices, reports, statements and written
communications delivered to the Certificateholders of the relevant Class
pursuant to this Agreement since the Closing Date, (C) all certifications
delivered by a Responsible Officer of the Trust Administrator since the Closing
Date pursuant to Section 10.01(h), (D) any and all Officers' Certificates
delivered to the Trust Administrator by the Servicer since the Closing Date to
evidence the Servicer's determination that any Advance or Servicing Advance was,
or if made, would be a Nonrecoverable Advance or Nonrecoverable Servicing
Advance, respectively, and (E) any and all Officers' Certificates delivered to
the Trust Administrator by the Servicer since the Closing Date pursuant to
Section 4.04(a). Copies and mailing of any and all of the foregoing items will
be available from the Trust Administrator upon request at the expense of the
Person requesting the same.

                                      -112-

<PAGE>

                                   ARTICLE VI

                         THE DEPOSITOR AND THE SERVICER

                  SECTION 6.01.             Liability of the Depositor and the
                                            Servicer.

                  The Depositor and the Servicer each shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
by this Agreement upon them in their respective capacities as Depositor and
Servicer and undertaken hereunder by the Depositor and the Servicer herein.

                  SECTION 6.02.             Merger or Consolidation of the
                                            Depositor or the Servicer.

                  Subject to the following paragraph, the Depositor will keep in
full effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation. Subject to the following paragraph,
the Servicer will keep in full effect its existence, rights and franchises as a
limited partnership under the laws of the jurisdiction of its formation. The
Depositor and the Servicer each will obtain and preserve its qualification to do
business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Certificates or any of the Mortgage Loans
and to perform its respective duties under this Agreement.

                  The Depositor or the Servicer may be merged or consolidated
with or into any Person, or transfer all or substantially all of its assets to
any Person, in which case any Person resulting from any merger or consolidation
to which the Depositor or the Servicer shall be a party, or any Person
succeeding to the business of the Depositor or the Servicer, shall be the
successor of the Depositor or the Servicer, as the case may be, hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding;
provided, however, that the successor or surviving Person to the Servicer shall
be qualified to service mortgage loans on behalf of Fannie Mae or Freddie Mac;
and provided further that the Rating Agencies' ratings of the Class A
Certificates and the Mezzanine Certificates in effect immediately prior to such
merger or consolidation will not be qualified, reduced or withdrawn as a result
thereof (as evidenced by a letter to such effect from the Rating Agencies).

                  SECTION 6.03.             Limitation on Liability of the
                                            Depositor, the Servicer and Others.

                  None of the Depositor, the Servicer or any of the directors,
officers, employees or agents of the Depositor or the Servicer shall be under
any liability to the Trust Fund or the Certificateholders for any action taken
or for refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Depositor, the Servicer or any such person against any
breach of warranties, representations or covenants made herein, or against any
specific liability imposed on the Servicer pursuant hereto, or against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. The Depositor, the Servicer and
any director, officer,

                                      -113-

<PAGE>

employee or agent of the Depositor or the Servicer may rely in good faith on any
document of any kind which, prima facie, is properly executed and submitted by
any Person respecting any matters arising hereunder. The Depositor, the Servicer
and any director, officer, employee or agent of the Depositor or the Servicer
shall be indemnified and held harmless by the Trust Fund against any loss,
liability or expense incurred in connection with any legal action relating to
this Agreement or the Certificates, other than any loss, liability or expense
relating to any specific Mortgage Loan or Mortgage Loans (except as any such
loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) or any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder. Neither the Depositor nor the Servicer shall be under any obligation
to appear in, prosecute or defend any legal action unless such action is related
to its respective duties under this Agreement and, in its good faith reasonable
opinion, does not involve it in any expense or liability; provided, however,
that each of the Depositor and the Servicer may in its discretion undertake any
such action which it may deem necessary or desirable with respect to this
Agreement and the rights and duties of the parties hereto and the interests of
the Certificateholders hereunder. In such event, unless the Depositor or the
Servicer acts without the consent of Holders of Certificates entitled to at
least 51% of the Voting Rights, the legal expenses and costs of such action and
any liability resulting therefrom (except any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder) shall be expenses, costs and liabilities of
the Trust Fund, and the Depositor and the Servicer shall be entitled to be
reimbursed therefor from the Collection Account as and to the extent provided in
Section 3.11, any such right of reimbursement being prior to the rights of the
Certificateholders to receive any amount in the Collection Account.

                  SECTION 6.04.             Limitation on Resignation of the
                                            Servicer.

                  The Servicer shall not resign from the obligations and duties
hereby imposed on it except upon determination that its duties hereunder are no
longer permissible under applicable law. Any such determination pursuant to the
preceding sentence permitting the resignation of the Servicer shall be evidenced
by an Opinion of Counsel to such effect obtained at the expense of the Servicer
and delivered to the Trustee and the Trust Administrator. No resignation of the
Servicer shall become effective until the Trust Administrator, the Trustee or a
successor servicer shall have assumed the Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement.

                  Except as expressly provided herein, the Servicer shall not
assign or transfer any of its rights, benefits or privileges hereunder to any
other Person, or delegate to or subcontract with, or authorize or appoint any
other Person to perform any of the duties, covenants or obligations to be
performed by the Servicer hereunder. The foregoing prohibition on assignment
shall not prohibit the Servicer from designating a Sub-Servicer as payee of any
indemnification amount payable to the Servicer hereunder; provided, however,
that as provided in Section 3.02 hereof, no Sub-Servicer shall be a third-party
beneficiary hereunder and the parties hereto shall not be required to recognize
any Subservicer as an indemnitee under this Agreement.

         The Trust Administrator, the Trustee and the Depositor hereby
specifically (i) consent to the

                                      -114-

<PAGE>

pledge and assignment by the Servicer of all of the Servicer's right, title and
interest in, to and under this Agreement to the Servicing Rights Pledgee, for
the benefit of certain lenders and (ii) provided that no Servicer Event of
Default exists, agree that upon delivery to the Trust Administrator by the
Servicing Rights Pledgee of a letter signed by the Servicer whereunder the
Servicer shall resign as Servicer under this Agreement, the Trust Administrator
shall appoint the Servicing Rights Pledgee or its designee as successor
Servicer, provided that at the time of such appointment, the Servicing Rights
Pledgee or such designee meets the requirements of a successor Servicer pursuant
to Section 7.02(a) hereof and agrees to be subject to the terms of this
Agreement. If, pursuant to any provision hereof, the duties of the Servicer are
transferred to a successor servicer, the entire amount of the Servicing Fee and
other compensation payable to the Servicer pursuant hereto shall thereafter be
payable to such successor servicer.

                  SECTION 6.05.             Rights of the Depositor in Respect
                                            of the Servicer.

                  The Servicer shall afford (and any Sub-Servicing Agreement
shall provide that each Sub-Servicer shall afford) the Depositor, the Trustee
and the Trust Administrator, upon reasonable notice, during normal business
hours, access to all records maintained by the Servicer (and any such
Sub-Servicer) in respect of the Servicer's rights and obligations hereunder and
access to officers of the Servicer (and those of any such Sub-Servicer)
responsible for such obligations. Upon request, the Servicer shall furnish to
the Depositor, the Trustee and the Trust Administrator its (and any such
Sub-Servicer's) most recent financial statements and such other information
relating to the Servicer's capacity to perform its obligations under this
Agreement as it possesses (and that any such Sub- Servicer possesses). To the
extent such information is not otherwise available to the public, the Depositor,
the Trustee and the Trust Administrator shall not disseminate any information
obtained pursuant to the preceding two sentences without the Servicer's written
consent, except as required pursuant to this Agreement or to the extent that it
is appropriate to do so (i) in working with legal counsel, auditors, taxing
authorities or other governmental agencies or (ii) pursuant to any law, rule,
regulation, order, judgment, writ, injunction or decree of any court or
governmental authority having jurisdiction over the Depositor and the Trustee,
the Trust Administrator or the Trust Fund, and in any case, the Depositor, the
Trustee or the Trust Administrator as the case may be, shall use its best
efforts to assure the confidentiality of any such disseminated non-public
information. The Depositor may, but is not obligated to, enforce the obligations
of the Servicer under this Agreement and may, but is not obligated to, perform,
or cause a designee to perform, any defaulted obligation of the Servicer under
this Agreement or exercise the rights of the Servicer under this Agreement;
provided that the Servicer shall not be relieved of any of its obligations under
this Agreement by virtue of such performance by the Depositor or its designee.
The Depositor shall not have any responsibility or liability for any action or
failure to act by the Servicer and is not obligated to supervise the performance
of the Servicer under this Agreement or otherwise.

                                      -115-

<PAGE>

                                   ARTICLE VII

                                     DEFAULT

                  SECTION 7.01.             Servicer Events of Default.

                  (a) "Servicer Event of Default," wherever used herein, means
any one of the following events:

                  (i) any failure by the Servicer to remit to the Trust
         Administrator for distribution to the Certificateholders any payment
         (other than an Advance required to be made from its own funds on any
         Servicer Remittance Date pursuant to Section 4.03) required to be made
         under the terms of the Certificates and this Agreement which continues
         unremedied for a period of one Business Day after the date upon which
         written notice of such failure, requiring the same to be remedied,
         shall have been given to the Servicer by the Depositor, the Trustee or
         the Trust Administrator (in which case notice shall be provided by
         telecopy), or to the Servicer, the Depositor, the Trustee and the Trust
         Administrator by the Holders of Certificates entitled to at least 25%
         of the Voting Rights; or

                  (ii) any failure on the part of the Servicer duly to observe
         or perform in any material respect any other of the covenants or
         agreements on the part of the Servicer contained in this Agreement, or
         the breach by the Servicer of any representation and warranty contained
         in Section 2.05, which continues unremedied for a period of 30 days (or
         if such failure or breach cannot be remedied within 30 days, then such
         remedy shall have been commenced within 30 days and diligently pursued
         thereafter; provided, however, that in no event shall such failure or
         breach be allowed to exist for a period of greater than 90 days) after
         the earlier of (i) the date on which written notice of such failure,
         requiring the same to be remedied, shall have been given to the
         Servicer by the Depositor, the Trustee, the Trust Administrator or to
         the Servicer, the Depositor, the Trustee and the Trust Administrator by
         the Holders of Certificates entitled to at least 25% of the Voting
         Rights and (ii) actual knowledge of such failure by a Servicing
         Officer; or

                  (iii) a decree or order of a court or agency or supervisory
         authority having jurisdiction in the premises in an involuntary case
         under any present or future federal or state bankruptcy, insolvency or
         similar law or the appointment of a conservator or receiver or
         liquidator in any insolvency, readjustment of debt, marshalling of
         assets and liabilities or similar proceeding, or for the winding-up or
         liquidation of its affairs, shall have been entered against the
         Servicer and such decree or order shall have remained in force
         undischarged or unstayed for a period of 90 days; or

                  (iv) the Servicer shall consent to the appointment of a
         conservator or receiver or liquidator in any insolvency, readjustment
         of debt, marshalling of assets and liabilities or similar proceedings
         of or relating to it or of or relating to all or substantially all of
         its property; or

                  (v) the Servicer shall admit in writing its inability to pay
         its debts generally as

                                      -116-

<PAGE>

         they become due, file a petition to take advantage of any applicable
         insolvency or reorganization statute, make an assignment for the
         benefit of its creditors, or voluntarily suspend payment of its
         obligations; or

                  (vi) any failure by the Servicer of the Servicer Termination
         Trigger; or

                  (vii) any failure of the Servicer to make any Advance on any
         Servicer Remittance Date required to be made from its own funds
         pursuant to Section 4.03 which continues unremedied until 3:00 p.m. New
         York time on the second Business Day immediately following the Servicer
         Remittance Date.

                  If a Servicer Event of Default described in clauses (i)
through (vi) of this Section shall occur, then, and in each and every such case,
so long as such Servicer Event of Default shall not have been remedied, the
Depositor or the Trustee may, and at the written direction of the Holders of
Certificates entitled to at least 51% of Voting Rights, the Trustee shall, by
notice in writing to the Servicer (and to the Depositor and the Trust
Administrator if given by the Trustee or to the Trustee and the Trust
Administrator if given by the Depositor), terminate all of the rights and
obligations of the Servicer in its capacity as Servicer under this Agreement, to
the extent permitted by law, and in and to the Mortgage Loans and the proceeds
thereof. If a Servicer Event of Default described in clause (vii) hereof shall
occur, the Trustee shall, by notice in writing to the Servicer, the Trust
Administrator and the Depositor, terminate all of the rights and obligations of
the Servicer in its capacity as Servicer under this Agreement and in and to the
Mortgage Loans and the proceeds thereof. On or after the receipt by the Servicer
of such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Certificates (other than as a Holder of
any Certificate) or the Mortgage Loans or otherwise, shall pass to and be vested
in the Trust Administrator pursuant to and under this Section, and, without
limitation, the Trust Administrator is hereby authorized and empowered, as
attorney-in-fact or otherwise, to execute and deliver, on behalf of and at the
expense of the Servicer, any and all documents and other instruments and to do
or accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement or assignment of the Mortgage Loans and related documents, or
otherwise. The Servicer agrees promptly (and in any event no later than ten
Business Days subsequent to such notice) to provide the Trust Administrator with
all documents and records requested by it to enable it to assume the Servicer's
functions under this Agreement, and to cooperate with the Trust Administrator
and the Trustee in effecting the termination of the Servicer's responsibilities
and rights under this Agreement, including, without limitation, the transfer
within one Business Day to the Trust Administrator for administration by it of
all cash amounts which at the time shall be or should have been credited by the
Servicer to the Collection Account held by or on behalf of the Servicer, the
Distribution Account or any REO Account or Servicing Account held by or on
behalf of the Servicer or thereafter be received with respect to the Mortgage
Loans or any REO Property serviced by the Servicer (provided, however, that the
Servicer shall continue to be entitled to receive all amounts accrued or owing
to it under this Agreement on or prior to the date of such termination, whether
in respect of Advances or otherwise, and shall continue to be entitled to the
benefits of Section 6.03, notwithstanding any such termination, with respect to
events occurring prior to such termination). For purposes of this Section 7.01,
each of the Trustee and the Trust Administrator shall not be deemed to have
knowledge of a Servicer Event of Default unless a Responsible Officer of the
Trustee or the Trust Administrator, as

                                      -117-

<PAGE>

applicable, assigned to and working in the Trustee's or the Trust
Administrator's, as the case may be, Corporate Trust Office has actual knowledge
thereof or unless written notice of any event which is in fact such a Servicer
Event of Default is received by the Trustee or the Trust Administrator, as
applicable, and such notice references the Certificates, the Trust Fund or this
Agreement.

                  SECTION 7.02.             Trust Administrator or Trustee to
                                            Act; Appointment of Successor.

                  (a)(1) On and after the time the Servicer receives a notice of
termination, the Trust Administrator (and in the event the Trust Administrator
fails in its obligation, the Trustee) shall separately assume and become the
successor in all respects to the Servicer in its capacity as Servicer under this
Agreement and the transactions set forth or provided for herein, and all the
responsibilities, duties and liabilities relating thereto and arising thereafter
shall be assumed by the Trust Administrator or the Trustee, as applicable,
(except for any representations or warranties of the Servicer under this
Agreement, the responsibilities, duties and liabilities contained in Section
2.05 and the obligation to deposit amounts in respect of losses pursuant to
Section 3.12) by the terms and provisions hereof including, without limitation,
the Servicer's obligations to make Advances pursuant to Section 4.03; provided,
however, that if the Trust Administrator or the Trustee, as applicable, is
prohibited by law or regulation from obligating itself to make advances
regarding delinquent mortgage loans, then the Trust Administrator or the
Trustee, as applicable, shall not be obligated to make Advances pursuant to
Section 4.03; and provided further, that any failure to perform such duties or
responsibilities caused by the Servicer's failure to provide information
required by Section 7.01 shall not be considered a default by the Trust
Administrator or the Trustee, as applicable, as successor to the Servicer
hereunder. As compensation therefor, the Trust Administrator or the Trustee, as
applicable, shall be entitled to the Servicing Fee and all funds relating to the
Mortgage Loans to which the Servicer would have been entitled if it had
continued to act hereunder. Notwithstanding the above and subject to Section
7.02(a)(2) below, the Trust Administrator or the Trustee, as applicable, may, if
it shall be unwilling to so act, or shall, if it is unable to so act or if it is
prohibited by law from making advances regarding delinquent mortgage loans or if
the Holders of Certificates entitled to at least 51% of the Voting Rights so
request in writing to the Trust Administrator or Trustee, as applicable,
promptly appoint or petition a court of competent jurisdiction to appoint, an
established mortgage loan servicing institution acceptable to each Rating Agency
without qualification, withdrawal or downgrading of the ratings then assigned to
any of the Certificates and having a net worth of not less than $15,000,000, as
the successor to the Servicer under this Agreement in the assumption of all or
any part of the responsibilities, duties or liabilities of the Servicer under
this Agreement.

                  (2) No appointment of a successor to the Servicer under this
Agreement shall be effective until the assumption by the successor of all of the
Servicer's responsibilities, duties and liabilities hereunder. In connection
with such appointment and assumption described herein, the Trust Administrator
or the Trustee, as applicable, may make such arrangements for the compensation
of such successor out of payments on Mortgage Loans as it and such successor
shall agree; provided, however, that no such compensation shall be in excess of
that permitted the Servicer as such hereunder. The Depositor, the Trustee, the
Trust Administrator and such successor shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession. Pending
appointment of a successor to the Servicer under this Agreement, the Trust
Administrator

                                      -118-

<PAGE>

or the Trustee, as applicable, shall act in such capacity as hereinabove
provided.

                  (b) If the Servicer fails to remit to the Trust Administrator
for distribution to the Certificateholders any payment required to be made under
the terms of this Agreement (for purposes of this Section 7.02(b), a
"Remittance") because the Servicer is the subject of a proceeding under the
federal Bankruptcy Code and the making of such Remittance is prohibited by
Section 362 of the federal Bankruptcy Code, the Trust Administrator, upon its
appointment as successor servicer (and in the event the Trust Administrator
fails in its obligation, the Trustee, upon its appointment as successor
servicer), or any other successor servicer appointed pursuant to Section
7.02(a)(1), shall upon notice of such prohibition, regardless of whether it has
received a notice of termination under Section 7.01, advance the amount of such
Remittance by depositing such amount in the Distribution Account on the related
Distribution Date. The Trust Administrator or the Trustee, as applicable, shall
be obligated to make such advance only if (i) such advance, in the good faith
judgment of the Trust Administrator or the Trustee, as applicable, can
reasonably be expected to be ultimately recoverable from Stayed Funds and (ii)
the Trust Administrator or Trustee, as applicable, is not prohibited by law from
making such advance or obligating itself to do so. Upon remittance of the Stayed
Funds to the Trust Administrator or the deposit thereof in the Distribution
Account by the Servicer, a trustee in bankruptcy or a federal bankruptcy court,
the Trust Administrator or the Trustee, as applicable, may recover the amount so
advanced, without interest, by withdrawing such amount from the Distribution
Account; however, nothing in this Agreement shall be deemed to affect the Trust
Administrator's or Trustee's, as applicable, rights to recover from the
Servicer's own funds interest on the amount of any such advance. If the Trust
Administrator or the Trustee, as the case may be, at any time makes an advance
under this Subsection which it later determines in its good faith judgment will
not be ultimately recoverable from the Stayed Funds with respect to which such
advance was made, the Trust Administrator or the Trustee, as applicable, shall
be entitled to reimburse itself for such advance, without interest, by
withdrawing from the Distribution Account, out of amounts on deposit therein, an
amount equal to the portion of such advance attributable to the Stayed Funds.

                  (c) In the event of a Servicer Event of Default,
notwithstanding anything to the contrary above, the Trust Administrator, the
Trustee and the Depositor hereby agree that upon delivery to the Trust
Administrator by the Servicing Rights Pledgee of a letter signed by the Servicer
within ten Business Days of when notification of such event shall have been
provided to the Trust Administrator, whereunder the Servicer shall resign as
Servicer under this Agreement, the Trust Administrator shall appoint the
Servicing Rights Pledgee or its designee as successor Servicer, provided that at
the time of such appointment, the Servicing Rights Pledgee or such designee
meets the requirements of a successor Servicer set forth above and the Servicing
Rights Pledgee or such designee agrees to be subject to the terms of this
Agreement.

                  SECTION 7.03.             Notification to Certificateholders.

                  (a) Upon any termination of the Servicer pursuant to Section
7.01 above or any appointment of a successor to the Servicer pursuant to Section
7.02 above, the Trust Administrator shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register.

                  (b) Not later than the later of 60 days after the occurrence
of any event, which

                                      -119-

<PAGE>

constitutes or which, with notice or lapse of time or both, would constitute a
Servicer Event of Default or five days after a Responsible Officer of the
Trustee or the Trust Administrator becomes aware of the occurrence of such an
event, the Trustee or the Trust Administrator shall transmit (or in the case of
the Trustee, the Trustee shall cause the Trust Administrator to transmit) by
mail to all Holders of Certificates notice of each such occurrence, unless such
default or Servicer Event of Default shall have been cured or waived.

                  SECTION 7.04.             Waiver of Servicer Events of
                                            Default.

                  The Holders representing at least 66% of the Voting Rights
evidenced by all Classes of Certificates affected by any default or Servicer
Event of Default hereunder may waive such default or Servicer Event of Default;
provided, however, that a default or Servicer Event of Default under clause (i)
or (vii) of Section 7.01 may be waived only by all of the Holders of the Regular
Certificates. Upon any such waiver of a default or Servicer Event of Default,
such default or Servicer Event of Default shall cease to exist and shall be
deemed to have been remedied for every purpose hereunder. No such waiver shall
extend to any subsequent or other default or Servicer Event of Default or impair
any right consequent thereon except to the extent expressly so waived.

                                      -120-

<PAGE>

                                  ARTICLE VIII

               CONCERNING THE TRUSTEE AND THE TRUST ADMINISTRATOR

                  SECTION 8.01.             Duties of Trustee and Trust
                                            Administrator

                  Each of the Trustee and the Trust Administrator, prior to the
occurrence of a Servicer Event of Default and after the curing of all Servicer
Events of Default which may have occurred, undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement. During a
Servicer Event of Default, each of the Trustee and the Trust Administrator shall
exercise such of the rights and powers vested in it by this Agreement, and use
the same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs. Any permissive right of the Trustee or the Trust Administrator
enumerated in this Agreement shall not be construed as a duty.

                  Each of the Trustee and the Trust Administrator, upon receipt
of all resolutions, certificates, statements, opinions, reports, documents,
orders or other instruments furnished to it, which are specifically required to
be furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they conform to the requirements of this Agreement. If any
such instrument is found not to conform to the requirements of this Agreement in
a material manner, it shall take such action as it deems appropriate to have the
instrument corrected, and if the instrument is not corrected to its
satisfaction, it will provide notice thereof to the Certificateholders.

                  No provision of this Agreement shall be construed to relieve
the Trustee or the Trust Administrator from liability for its own negligent
action, its own negligent failure to act or its own misconduct; provided,
however, that:

                  (i) Prior to the occurrence of a Servicer Event of Default,
         and after the curing of all such Servicer Events of Default which may
         have occurred, the duties and obligations of each of the Trustee and
         the Trust Administrator shall be determined solely by the express
         provisions of this Agreement, neither the Trustee nor the Trust
         Administrator shall be liable except for the performance of such duties
         and obligations as are specifically set forth in this Agreement, no
         implied covenants or obligations shall be read into this Agreement
         against the Trustee or the Trust Administrator and, in the absence of
         bad faith on the part of the Trustee or the Trust Administrator, as
         applicable, the Trustee or the Trust Administrator, as the case may be,
         may conclusively rely, as to the truth of the statements and the
         correctness of the opinions expressed therein, upon any certificates or
         opinions furnished to the Trustee or the Trust Administrator, as the
         case may be, that conform to the requirements of this Agreement;

                  (ii) Neither the Trustee nor the Trust Administrator shall be
         personally liable for an error of judgment made in good faith by a
         Responsible Officer or Responsible Officers of it unless it shall be
         proved that it was negligent in ascertaining the pertinent facts; and

                  (iii) Neither the Trustee nor the Trust Administrator shall be
         personally liable with respect to any action taken, suffered or omitted
         to be taken by it in good faith in accordance

                                      -121-

<PAGE>

         with the direction of the Holders of Certificates entitled to at least
         25% of the Voting Rights relating to the time, method and place of
         conducting any proceeding for any remedy available to it or exercising
         any trust or power conferred upon it under this Agreement.

                  SECTION 8.02.             Certain Matters Affecting the
                                            Trustee and the Trust Administrator.

                  (a)      Except as otherwise provided in Section 8.01:

                           (i) Each of the Trustee and the Trust Administrator
                  may request and rely upon and shall be protected in acting or
                  refraining from acting upon any resolution, Officers'
                  Certificate, certificate of auditors or any other certificate,
                  statement, instrument, opinion, report, notice, request,
                  consent, order, appraisal, bond or other paper or document
                  reasonably believed by it to be genuine and to have been
                  signed or presented by the proper party or parties;

                           (ii) Each of the Trustee and the Trust Administrator
                  may consult with counsel and any Opinion of Counsel shall be
                  full and complete authorization and protection in respect of
                  any action taken or suffered or omitted by it hereunder in
                  good faith and in accordance with such Opinion of Counsel;

                           (iii) Neither the Trustee nor the Trust Administrator
                  shall be under any obligation to exercise any of the trusts or
                  powers vested in it by this Agreement or to institute, conduct
                  or defend any litigation hereunder or in relation hereto at
                  the request, order or direction of any of the
                  Certificateholders, pursuant to the provisions of this
                  Agreement, unless such Certificateholders shall have offered
                  to the Trustee or the Trust Administrator, as applicable,
                  reasonable security or indemnity against the costs, expenses
                  and liabilities which may be incurred therein or thereby;
                  nothing contained herein shall, however, relieve the Trustee
                  or the Trust Administrator of the obligation, upon the
                  occurrence of a Servicer Event of Default (which has not been
                  cured or waived), to exercise such of the rights and powers
                  vested in it by this Agreement, and to use the same degree of
                  care and skill in their exercise as a prudent person would
                  exercise or use under the circumstances in the conduct of such
                  person's own affairs;

                           (iv) Neither the Trustee nor the Trust Administrator
                  shall be personally liable for any action taken, suffered or
                  omitted by it in good faith and believed by it to be
                  authorized or within the discretion or rights or powers
                  conferred upon it by this Agreement;

                           (v) Prior to the occurrence of a Servicer Event of
                  Default hereunder and after the curing of all Servicer Events
                  of Default which may have occurred, neither the Trustee nor
                  the Trust Administrator shall be bound to make any
                  investigation into the facts or matters stated in any
                  resolution, certificate, statement, instrument, opinion,
                  report, notice, request, consent, order, approval, bond or
                  other paper or document, unless requested in writing to do so
                  by the Holders of Certificates entitled

                                      -122-

<PAGE>

                  to at least 25% of the Voting Rights; provided, however, that
                  if the payment within a reasonable time to the Trustee or the
                  Trust Administrator, as applicable, of the costs, expenses or
                  liabilities likely to be incurred by it in the making of such
                  investigation is, in the opinion of the Trustee or the Trust
                  Administrator, as applicable, not reasonably assured to the
                  Trustee or Trust Administrator, as applicable, by such
                  Certificateholders, the Trustee or the Trust Administrator, as
                  applicable, may require reasonable indemnity against such
                  expense, or liability from such Certificateholders as a
                  condition to taking any such action;

                           (vi) Each of the Trustee and the Trust Administrator
                  may execute any of the trusts or powers hereunder or perform
                  any duties hereunder either directly or by or through agents
                  or attorneys; and

                           (vii) Neither the Trustee nor the Trust Administrator
                  shall be personally liable for any loss resulting from the
                  investment of funds held in the Collection Account at the
                  direction of the Servicer pursuant to Section 3.12.

                  (b) All rights of action under this Agreement or under any of
the Certificates, enforceable by the Trustee or the Trust Administrator, may be
enforced by it without the possession of any of the Certificates, or the
production thereof at the trial or other proceeding relating thereto, and any
such suit, action or proceeding instituted by the Trustee or the Trust
Administrator shall be brought in its name for the benefit of all the Holders of
such Certificates, subject to the provisions of this Agreement.

                  SECTION 8.03.             Neither the Trustee nor Trust
                                            Administrator Liable for
                                            Certificates or Mortgage Loans.

                  The recitals contained herein and in the Certificates (other
than the signature of the Trustee or the Trust Administrator, on behalf of the
Trustee, the authentication of the Trustee or the Trust Administrator on the
Certificates, the acknowledgments of the Trustee and the Trust Administrator
contained in Article II and the representations and warranties of the Trustee
and the Trust Administrator in Section 8.12) shall be taken as the statements of
the Depositor and neither the Trustee nor the Trust Administrator assumes any
responsibility for their correctness. Neither the Trustee nor the Trust
Administrator makes any representations or warranties as to the validity or
sufficiency of this Agreement (other than as specifically set forth in Section
8.12) or of the Certificates (other than the signature of the Trustee, or the
Trust Administrator on behalf of the Trustee, and authentication of the Trustee
or the Trust Administrator on the Certificates) or of any Mortgage Loan or
related document. Neither the Trustee nor the Trust Administrator shall be
accountable for the use or application by the Depositor of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Depositor or the Servicer in respect of the
Mortgage Loans or deposited in or withdrawn from the Collection Account by the
Servicer, other than any funds held by or on behalf of the Trustee or the Trust
Administrator in accordance with Section 3.10.

                  SECTION 8.04.             Trustee and Trust Administrator May
                                            Own Certificates.

                                      -123-

<PAGE>

                  Each of the Trustee and the Trust Administrator in its
individual capacity or any other capacity may become the owner or pledgee of
Certificates with the same rights it would have if it were not Trustee or Trust
Administrator, as applicable.

                  SECTION 8.05.             Trustee's and Trust Administrator's
                                            Fees and Expenses.

                  (a) The Trust Administrator shall withdraw from the
Distribution Account on each Distribution Date and pay to itself the related
portion of the Administration Fee and pay to the Trustee the related portion of
the Administration Fee and, to the extent that the funds therein are at anytime
insufficient for such purpose, the Servicer shall pay such fees. Each of the
Trustee and the Trust Administrator and any director, officer, employee or agent
of the Trustee or the Trust Administrator, as applicable, shall be indemnified
by the Trust Fund and held harmless against any loss, liability or expense (not
including expenses, disbursements and advances incurred or made by the Trustee
or the Trust Administrator, as applicable, including the compensation and the
expenses and disbursements of its agents and counsel, in the ordinary course of
the Trustee's or Trust Administrator's, as the case may be, performance in
accordance with the provisions of this Agreement) incurred by the Trustee or the
Trust Administrator, as applicable, in connection with any claim or legal action
or any pending or threatened claim or legal action arising out of or in
connection with the acceptance or administration of its obligations and duties
under this Agreement, other than any loss, liability or expense (i) resulting
from any breach of the Servicer's obligations in connection with this Agreement
for which the Servicer has performed its obligation to indemnify the Trustee and
the Trust Administrator pursuant to Section 10.03(c) (and in the case of the
Trustee, resulting from any breach of the Trust Administrator's obligations in
connection with this Agreement for which the Trust Administrator has performed
its obligation to indemnify the Trustee pursuant to Section 10.03(b) and in the
case of the Trust Administrator, resulting from any breach of the Trustee's
obligations in connection with this Agreement for which the Trustee has
performed its obligation to indemnify the Trust Administrator pursuant to
Section 10.03(a)), (ii) that constitutes a specific liability of the Trustee or
the Trust Administrator, as applicable, pursuant to Section 10.01(g) or (iii)
any loss, liability or expense incurred by reason of willful misfeasance, bad
faith or negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder or in the case of the
Trust Administrator, as a result of a breach of the Trust Administrator's
obligations under Article X hereof. The Servicer agrees to indemnify the Trustee
and the Trust Administrator, from, and hold it harmless against, any loss,
liability or expense arising in respect of any breach by the Servicer of its
obligations in connection with this Agreement. Such indemnity shall survive the
termination or discharge of this Agreement and the resignation or removal of the
Trustee or the Trust Administrator, as the case may be. Any payment hereunder
made by the Servicer to the Trustee or the Trust Administrator shall be from the
Servicer's own funds, without reimbursement from REMIC I-A or REMIC I-B
therefor.

                  (b) The Depositor shall pay any annual rating agency fees of
the Rating Agencies for ongoing surveillance from its own funds without right of
reimbursement.

                  SECTION 8.06.             Eligibility Requirements for Trustee
                                            and Trust Administrator.

                  Each of the Trustee and the Trust Administrator hereunder
shall at all times be a corporation or an association (other than the Depositor,
the Seller, the Servicer or, in the case of the

                                      -124-

<PAGE>

Trustee, any Affiliate of the foregoing) organized and doing business under the
laws of any state or the United States of America, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000 (or a member of a bank holding company whose capital and
surplus is at least $50,000,000) and subject to supervision or examination by
federal or state authority. If such corporation or association publishes reports
of conditions at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section the combined capital and surplus of such corporation or association
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of conditions so published. In case at any time the Trustee or the
Trust Administrator shall cease to be eligible in accordance with the provisions
of this Section, the Trustee or the Trust Administrator, as the case may be,
shall resign immediately in the manner and with the effect specified in Section
8.07.

                  SECTION 8.07.             Resignation and Removal of the
                                            Trustee and the Trust Administrator

                  Either the Trustee or the Trust Administrator may at any time
resign and be discharged from the trust hereby created by giving written notice
thereof to the Depositor, the Servicer, to the Certificateholders and, if the
Trustee is resigning, to the Trust Administrator, or, if the Trust Administrator
is resigning, to the Trustee. Upon receiving such notice of resignation, the
Depositor shall promptly appoint a successor Trustee or Trust Administrator
(which may be the same Person in the event both the Trustee and the Trust
Administrator resign or are removed) by written instrument, in duplicate, which
instrument shall be delivered to the resigning Trustee or Trust Administrator
and to the successor Trustee or Trust Administrator, as applicable. A copy of
such instrument shall be delivered to the Certificateholders, the Trustee or
Trust Administrator, as applicable, and the Servicer by the Depositor. If no
successor Trustee or Trust Administrator shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee or Trust Administrator, as applicable, may
petition any court of competent jurisdiction for the appointment of a successor
Trustee or Trust Administrator, as applicable.

                  If at any time the Trustee or the Trust Administrator shall
cease to be eligible in accordance with the provisions of Section 8.06 and shall
fail to resign after written request therefor by the Depositor (or in the case
of the Trust Administrator, the Trustee), or if at any time the Trustee or the
Trust Administrator shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or the Trust Administrator
or of its property shall be appointed, or any public officer shall take charge
or control of the Trustee or the Trust Administrator of its property or affairs
for the purpose of rehabilitation, conservation or liquidation, then the
Depositor (or in the case of the Trust Administrator, the Trustee) may remove
the Trustee or the Trust Administrator, as applicable, and appoint a successor
Trustee or Trust Administrator (which may be the same Person in the event both
the Trustee and the Trust Administrator resign or are removed) by written
instrument, in duplicate, which instrument shall be delivered to the Trustee or
Trust Administrator, as the case may be, so removed and to the successor Trustee
or Trust Administrator. A copy of such instrument shall be delivered to the
Certificateholders, the Trustee or the Trust Administrator, as applicable, and
the Servicer by the Depositor.

                                      -125-

<PAGE>

                  The Holders of Certificates entitled to at least 51% of the
Voting Rights may at any time remove the Trustee or the Trust Administrator and
appoint a successor Trustee or Trust Administrator by written instrument or
instruments, in triplicate, signed by such Holders or their attorneys-in-fact
duly authorized, one complete set of which instruments shall be delivered to the
Depositor, one complete set to the Trustee or to the Trust Administrator, as the
case may be, so removed and one complete set to the successor so appointed. A
copy of such instrument shall be delivered to the Certificateholders and the
Servicer by the Depositor. In addition, if the Trustee has knowledge that the
Trust Administrator has breached any of its duties under this Agreement, the
Trustee may remove the Trust Administrator in the same manner as provided in the
prior sentence. For purposes of this Section, the Trustee shall not be deemed to
have knowledge of a breach by the Trust Administrator of any of its duties
hereunder, unless a Responsible Officer of the Trustee , assigned to and working
in the Trustee's Corporate Trust Office has actual knowledge thereof or unless
written notice of any event which is in fact such a breach is received by the
Trustee, and such notice references the Certificates, the Trust Fund or this
Agreement.

                  Any resignation or removal of the Trustee or the Trust
Administrator and appointment of a successor Trustee or Trust Administrator, as
the case may be, pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee or
Trust Administrator as provided in Section 8.08. Notwithstanding the foregoing,
in the event the Trust Administrator advises the Trustee that it is unable to
continue to perform its obligations pursuant to the terms of this Agreement
prior to the appointment of a successor, the Trustee shall be obligated to
perform such obligations until a new Trust Administrator is appointed. Such
performance shall be without prejudice to any claim by a party hereto or
beneficiary hereof resulting from the Trust Administrator's breach of its
obligations hereunder.

                  SECTION 8.08.             Successor Trustee or Trust
                                            Administrator

                  Any successor Trustee or Trust Administrator appointed as
provided in Section 8.07 shall execute, acknowledge and deliver to the
Depositor, the Trustee or the Trust Administrator, as applicable, and its
predecessor Trustee or Trust Administrator an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee or Trust Administrator shall become effective and such
successor Trustee or Trust Administrator, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as Trustee or Trust Administrator herein. The predecessor Trustee or Trust
Administrator shall deliver to the successor Trustee or Trust Administrator all
Mortgage Files and related documents and statements to the extent held by it
hereunder, as well as all moneys, held by it hereunder, and the Depositor and
the predecessor Trustee or Trust Administrator shall execute and deliver such
instruments and do such other things as may reasonably be required for more
fully and certainly vesting and confirming in the successor Trustee or Trust
Administrator all such rights, powers, duties and obligations.

                  No successor Trustee or Trust Administrator shall accept
appointment as provided in this Section unless at the time of such acceptance
such successor Trustee or Trust Administrator shall be eligible under the
provisions of Section 8.06 and the appointment of such successor Trustee or
Trust Administrator shall not result in a downgrading of any Class of
Certificates by either Rating Agency, as evidenced by a letter from each Rating
Agency.

                                      -126-

<PAGE>

                  Upon acceptance of appointment by a successor Trustee or Trust
Administrator as provided in this Section, the Depositor shall mail notice of
the succession of such Trustee or Trust Administrator hereunder to all Holders
of Certificates at their addresses as shown in the Certificate Register. If the
Depositor fails to mail such notice within 10 days after acceptance of
appointment by the successor Trustee or Trust Administrator, the successor
Trustee or Trust Administrator shall cause such notice to be mailed at the
expense of the Depositor.

                  SECTION 8.09.             Merger or Consolidation of Trustee.

                  Any corporation or association into which either the Trustee
or the Trust Administrator may be merged or converted or with which it may be
consolidated or any corporation or association resulting from any merger,
conversion or consolidation to which the Trustee or the Trust Administrator, as
the case may be, shall be a party, or any corporation or association succeeding
to the business of the Trustee or the Trust Administrator, as applicable, shall
be the successor of the Trustee or the Trust Administrator, as the case may be,
hereunder, provided such corporation or association shall be eligible under the
provisions of Section 8.06, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.

                  SECTION 8.10.             Appointment of Co-Trustee or
                                            Separate Trustee.

                  Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of REMIC I-A or REMIC I-B or property securing the same may at the time be
located, the Trustee shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Trustee to act as
co-trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of REMIC I-A or REMIC I-B, and to vest in
such Person or Persons, in such capacity, such title to REMIC I-A and REMIC I-B,
or any part thereof, and, subject to the other provisions of this Section 8.10,
such powers, duties, obligations, rights and trusts as the Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
8.06 hereunder and no notice to Holders of Certificates of the appointment of
co-trustee(s) or separate trustee(s) shall be required under Section 8.08
hereof.

                  In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee (whether as
Trustee hereunder or as successor to a defaulting Servicer hereunder), the
Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the holding
of title to REMIC I-A and REMIC I-B or any portion thereof in any such
jurisdiction) shall be exercised and performed by such separate trustee or
co-trustee at the direction of the Trustee.

                  Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them.

                                      -127-

<PAGE>

Every instrument appointing any separate trustee or co-trustee shall refer to
this Agreement and the conditions of this Article VIII. Each separate trustee
and co-trustee, upon its acceptance of the trust conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Trustee, or separately, as may be provided therein, subject to
all the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Every such instrument shall be filed with
the Trustee.

                  Any separate trustee or co-trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee or co-trustee.

                  SECTION 8.11.             Appointment of Office or Agency.

                  The Trust Administrator hereby appoints its Corporate Trust
Office as the office or agency in the City of New York, New York where the
Certificates may be surrendered for registration of transfer or exchange, and
presented for final distribution, and where notices and demands to or upon the
Trust Administrator in respect of the Certificates and this Agreement may be
served.

                  SECTION 8.12.             Representations and Warranties.

                  Each of the Trustee and the Trust Administrator hereby
represents and warrants to the Servicer, the Depositor and the Trustee or the
Trust Administrator, as applicable, as of the Closing Date, that:

                  (i) It is a national banking association duly organized,
         validly existing and in good standing under the laws of the United
         States of America.

                  (ii) The execution and delivery of this Agreement by it, and
         the performance and compliance with the terms of this Agreement by it,
         will not violate its articles of association or bylaws or constitute a
         default (or an event which, with notice or lapse of time, or both,
         would constitute a default) under, or result in the breach of, any
         material agreement or other instrument to which it is a party or which
         is applicable to it or any of its assets.

                  (iii) It has the full power and authority to enter into and
         consummate all transactions contemplated by this Agreement, has duly
         authorized the execution, delivery and performance of this Agreement,
         and has duly executed and delivered this Agreement.

                  (iv) This Agreement, assuming due authorization, execution and
         delivery by the other parties hereto, constitutes a valid, legal and
         binding obligation of it, enforceable against it in accordance with the
         terms hereof, subject to (A) applicable bankruptcy, insolvency,
         receivership, reorganization, moratorium and other laws affecting the
         enforcement of

                                      -128-

<PAGE>

         creditors' rights generally, and (B) general principles of equity,
         regardless of whether such enforcement is considered in a proceeding in
         equity or at law.

                  (v) It is not in violation of, and its execution and delivery
         of this Agreement and its performance and compliance with the terms of
         this Agreement will not constitute a violation of, any law, any order
         or decree of any court or arbiter, or any order, regulation or demand
         of any federal, state or local governmental or regulatory authority,
         which violation, in its good faith and reasonable judgment, is likely
         to affect materially and adversely either the ability of it to perform
         its obligations under this Agreement or its financial condition.

                  (vi) No litigation is pending or, to the best of its
         knowledge, threatened against it, which would prohibit it from entering
         into this Agreement or, in its good faith reasonable judgment, is
         likely to materially and adversely affect either the ability of it to
         perform its obligations under this Agreement or its financial
         condition.

                                      -129-

<PAGE>

                                   ARTICLE IX

                                   TERMINATION

                  SECTION 9.01              Termination Upon Repurchase or
                                            Liquidation of All Mortgage Loans.

                  (a) Subject to Section 9.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Servicer, the
Trustee and the Trust Administrator (other than the obligations of the Servicer
to the Trustee and the Trust Administrator pursuant to Section 8.05 and of the
Servicer to provide for and the Trust Administrator to make payments in respect
of the REMIC I-A Regular Interests, the REMIC I-B Regular Interests and the
Classes of Certificates as hereinafter set forth) shall terminate upon payment
to the Certificateholders and the deposit of all amounts held by or on behalf of
the Trustee and required hereunder to be so paid or deposited on the
Distribution Date coinciding with or following the earlier to occur of (i) the
purchase by the Terminator (as defined below) of all Mortgage Loans and each REO
Property remaining in REMIC I-A and REMIC I-B and (ii) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in REMIC I-A and REMIC I-B; provided, however,
that in no event shall the trust created hereby continue beyond the expiration
of 21 years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St. James,
living on the date hereof. Subject to Section 3.10 hereof, the purchase by the
Terminator of all Mortgage Loans and each REO Property remaining in REMIC I-A
and REMIC I-B shall be at a price (the "Termination Price") equal to the greater
of (A) the aggregate Purchase Price of all the Group I Mortgage Loans or Group
II Mortgage Loans included in REMIC I-A or REMIC I-B, as applicable, plus the
appraised value of each REO Property, if any, included in REMIC I-A or REMIC
I-B, as applicable, such appraisal to be conducted by an appraiser mutually
agreed upon by the Terminator and the Trustee in their reasonable discretion and
(B) the aggregate fair market value of all of the assets of REMIC I-A or REMIC
I-B, as applicable, (as determined by the Terminator and the Trustee, as of the
close of business on the third Business Day next preceding the date upon which
notice of any such termination is furnished to the related Certificateholders
pursuant to the third paragraph of this Section 9.01).

                  (b) The Servicer shall have the right (the party exercising
such right, the "Terminator"), to purchase (i) all of the Group I Mortgage Loans
and each REO Property remaining in REMIC I-A or (ii) all of the Group II
Mortgage Loans and each REO Property remaining in REMIC I-B, in each case
pursuant to clause (i) of the preceding paragraph no later than the
Determination Date in the month immediately preceding the Distribution Date on
which the Group I Certificates or the Group II Certificates, as applicable, will
be retired; provided, however, that (a) the Terminator may elect to purchase all
of the Group I Mortgage Loans and each REO Property remaining in REMIC I-A
pursuant to clause (i) above only if the aggregate Stated Principal Balance of
the Group I Mortgage Loans and each REO Property remaining in the Trust Fund at
the time of such election is reduced to less than 10% of the aggregate Stated
Principal Balance of the Group I Mortgage Loans as of the Cut-off Date and (b)
the Terminator may elect to purchase all of the Group II Mortgage Loans and each
REO Property remaining in REMIC I-B pursuant to clause (i) above only if the
aggregate Stated Principal Balance of the Group II Mortgage Loans and each REO

                                      -130-

<PAGE>

Property remaining in the Trust Fund at the time of such election is reduced to
less than 10% of the aggregate Stated Principal Balance of the Group II Mortgage
Loans as of the Cut-off Date. By acceptance of the Class R Certificates, the
Holder of the Class R Certificates agrees, in connection with any termination
hereunder, to assign and transfer any amounts in excess of par, and to the
extent received in respect of such termination, to pay any such amounts to the
Holders of the Class OCF Certificates or the Class OCV Certificates, as
applicable.

                  (c) Notice of the liquidation of the Group I Certificates or
the Group II Certificates, as applicable, shall be given promptly by the Trust
Administrator by letter to Certificateholders mailed (a) in the event such
notice is given in connection with the purchase of the Group I Mortgage Loans
and each REO Property or the Group II Mortgage Loans and each REO Property by
the Terminator, not earlier than the 10th day and not later than the 20th day of
the month next preceding the month of the final distribution on the related
Certificates or (b) otherwise during the month of such final distribution on or
before the Determination Date in such month, in each case specifying (i) the
Distribution Date upon which the related Loan Group will terminate and the final
payment in respect of the REMIC I-A Regular Interests or the REMIC I-B Regular
Interests, as applicable and the related Certificates will be made upon
presentation and surrender of the related Certificates at the office of the
Trust Administrator therein designated, (ii) the amount of any such final
payment, (iii) that no interest shall accrue in respect of the REMIC I-A Regular
Interests or the REMIC I-B Regular Interests or the related Certificates from
and after the Interest Accrual Period relating to the final Distribution Date
therefor and (iv) that the Record Date otherwise applicable to such Distribution
Date is not applicable, payments being made only upon presentation and surrender
of the related Certificates at the office of the Trust Administrator. In the
event such notice is given in connection with the purchase of all of the
Mortgage Loans and each REO Property remaining in REMIC I-A or REMIC I-B by the
Terminator, the Terminator shall deliver to the Trust Administrator for deposit
in the Distribution Account not later than the last Business Day of the month
next preceding the month of the final distribution on the related Certificates
an amount in immediately available funds equal to the above-described purchase
price. The Trust Administrator shall remit to the Servicer from such funds
deposited in the Distribution Account (i) any amounts which the Servicer would
be permitted to withdraw and retain from the Collection Account pursuant to
Section 3.11 and (ii) any other amounts otherwise payable by the Trust
Administrator to the Servicer from amounts on deposit in the Distribution
Account pursuant to the terms of this Agreement, in each case prior to making
any final distributions pursuant to Section 10.01(d) below. Upon certification
to the Trust Administrator by a Servicing Officer of the making of such final
deposit, the Trust Administrator shall promptly release to the Terminator the
Mortgage Files for the remaining Mortgage Loans, and the Trustee shall execute
all assignments, endorsements and other instruments necessary to effectuate such
transfer.

                  (d) Upon presentation of the Certificates by the
Certificateholders on the final Distribution Date, the Trust Administrator shall
distribute to each Certificateholder so presenting and surrendering its
Certificates the amount otherwise distributable on such Distribution Date in
accordance with Section 4.01 in respect of the Certificates so presented and
surrendered. Any funds not distributed to any Holder or Holders of Certificates
being retired on such Distribution Date because of the failure of such Holder or
Holders to tender their Certificates shall, on such date, be set aside and held
in trust and credited to the account of the appropriate non-tendering Holder or
Holders. If any Certificates as to which notice has been given pursuant to this
Section 9.01 shall not

                                      -131-

<PAGE>

have been surrendered for cancellation within six months after the time
specified in such notice, the Trust Administrator shall mail a second notice to
the remaining non-tendering Certificateholders to surrender their Certificates
for cancellation in order to receive the final distribution with respect
thereto. If within one year after the second notice all such Certificates shall
not have been surrendered for cancellation, the Trustee shall, directly or
through an agent, mail a final notice to the remaining non-tendering
Certificateholders concerning surrender of their Certificates. The costs and
expenses of maintaining the funds in trust and of contacting such
Certificateholders shall be paid out of the assets remaining in the trust funds.
If within one year after the final notice any such Certificates shall not have
been surrendered for cancellation, the Trust Administrator shall pay to Salomon
Smith Barney Inc. all such amounts, and all rights of non-tendering
Certificateholders in or to such amounts shall thereupon cease. No interest
shall accrue or be payable to any Certificateholder on any amount held in trust
by the Trust Administrator as a result of such Certificateholder's failure to
surrender its Certificate(s) for final payment thereof in accordance with this
Section 9.01. Any such amounts held in trust by the Trust Administrator shall be
held in an Eligible Account and the Trust Administrator may direct any
depository institution maintaining such account to invest the funds in one or
more Permitted Investments. All income and gain realized from the investment of
funds deposited in such accounts held in trust by the Trust Administrator shall
be for the benefit of the Trust Administrator; provided, however, that the Trust
Administrator shall deposit in such account the amount of any loss of principal
incurred in respect of any such Permitted Investment made with funds in such
accounts immediately upon the realization of such loss.

                  Immediately following the deposit of funds in trust hereunder
in respect of the Certificates, the Trust Fund shall terminate.

                  SECTION 9.02              Additional Termination Requirements.

                  (a) In the event that the Terminator purchases all the
Mortgage Loans and each REO Property in either Loan Group or the final payment
on or other liquidation of the last Mortgage Loan or REO Property remaining in
REMIC I-A and REMIC I-B pursuant to Section 9.01, the Trust Fund (or the
applicable Trust REMIC) shall be terminated in accordance with the following
additional requirements:

                           (i) The Trustee shall specify the first day in the
                  90-day liquidation period in a statement attached to the
                  applicable Trust REMIC's final Tax Return pursuant to Treasury
                  regulation Section 1.860F-1 and shall satisfy all requirements
                  of a qualified liquidation under Section 860F of the Code and
                  any regulations thereunder, as evidenced by an Opinion of
                  Counsel obtained at the expense of the Terminator;

                           (ii) During such 90-day liquidation period and, at or
                  prior to the time of making of the final payment on the
                  Certificates, the Trustee shall sell all of the assets of
                  REMIC I-A and/or REMIC I-B, as applicable to the Terminator
                  for cash; and

                           (iii) At the time of the making of the final payment
                  on the Certificates, the Trust Administrator shall distribute
                  or credit, or cause to be distributed or credited, to the
                  Holders of the Class R Certificates in respect of the Class
                  R-IA Interest and/or Class R-IB Interest all cash on hand in
                  the applicable Trust REMIC (other than cash

                                      -132-

<PAGE>

                  retained to meet claims), and such Trust REMIC shall terminate
                  at that time.

                  (b) At the expense of the requesting Terminator (or, if the
Trust Fund is being terminated as a result of the occurrence of the event
described in clause (ii) of the first paragraph of Section 9.01, at the expense
of the Trust Administrator without the right of reimbursement from the Trust
Fund), the Trust Administrator shall prepare or cause to be prepared the
documentation required in connection with the adoption of a plan of liquidation
of each Trust REMIC pursuant to this Section 9.02.

                  (c) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trustee to specify the 90-day liquidation period
for each Trust REMIC, which authorization shall be binding upon all successor
Certificateholders.

                                      -133-

<PAGE>

                                    ARTICLE X

                                REMIC PROVISIONS

                  SECTION 10.01.            REMIC Administration.

                  (a) The Trust Administrator shall elect to treat each Trust
REMIC as a REMIC under the Code and, if necessary, under applicable state law.
Each such election will be made by the Trust Administrator on Form 1066 or other
appropriate federal tax or information return or any appropriate state return
for the taxable year ending on the last day of the calendar year in which the
Certificates are issued. For the purposes of the REMIC election in respect of
REMIC I-A, the REMIC I-A Regular Interests shall be designated as the Regular
Interests in REMIC I-A and the Class R-IA Interest shall be designated as the
Residual Interest in REMIC I-A. The REMIC I-B Regular Interests shall be
designated as the Regular Interests in REMIC I-B and the Class R-IB Interest
shall be designated as the Residual Interest in REMIC I-B. The Class A
Certificates, the Mezzanine Certificates, the Class OCF Certificates, the Class
OCV Certificates, the Class PF Certificates and the Class PV Certificates shall
be designated as the Regular Interests in REMIC II and the Class R-II Interest
shall be designated as the Residual Interest in REMIC II. Neither the Trustee
nor the Trust Administrator shall permit the creation of any "interests" in any
Trust REMIC (within the meaning of Section 860G of the Code) other than the
REMIC I-A Regular Interests, the REMIC I-B Regular Interests and the interests
represented by the Certificates.

                  (b) The Closing Date is hereby designated as the "Startup Day"
of each Trust REMIC within the meaning of Section 860G(a)(9) of the Code.

                  (c) The Trust Administrator shall be reimbursed for any and
all expenses relating to any tax audit of the Trust Fund (including, but not
limited to, any professional fees or any administrative or judicial proceedings
with respect to each Trust REMIC that involve the Internal Revenue Service or
state tax authorities), including the expense of obtaining any tax related
Opinion of Counsel except as specified herein. The Trust Administrator, as agent
for each Trust REMIC's tax matters person shall (i) act on behalf of the Trust
Fund in relation to any tax matter or controversy involving any Trust REMIC and
(ii) represent the Trust Fund in any administrative or judicial proceeding
relating to an examination or audit by any governmental taxing authority with
respect thereto. The holder of the largest Percentage Interest of Class R
Certificates shall be designated, in the manner provided under Treasury
regulations section 1.860F-4(d) and Treasury regulations section
301.6231(a)(7)-1, as the tax matters person of each Trust REMIC created
hereunder. By their acceptance thereof, the holder of the largest Percentage
Interest of the Class R Certificates hereby agrees to irrevocably appoint the
Trust Administrator or an Affiliate as its agent to perform all of the duties of
the tax matters person for the Trust Fund.

                  (d) The Trust Administrator shall prepare, the Trustee shall
sign and the Trust Administrator shall file all of the Tax Returns (including
Form 8811, which must be filed within 30 days following the Closing Date) in
respect of each Trust REMIC created hereunder. The expenses of preparing and
filing such returns shall be borne by the Trust Administrator without any right
of reimbursement therefor.

                                      -134-

<PAGE>

                  (e) The Trust Administrator shall perform on behalf of each
Trust REMIC all reporting and other tax compliance duties that are the
responsibility of such REMIC under the Code, the REMIC Provisions or other
compliance guidance issued by the Internal Revenue Service or any state or local
taxing authority. Among its other duties, as required by the Code, the REMIC
Provisions or other such compliance guidance, the Trust Administrator shall
provide (i) to any Transferor of a Class R Certificate such information as is
necessary for the application of any tax relating to the transfer of a Class R
Certificate to any Person who is not a Permitted Transferee, (ii) to the
Certificateholders such information or reports as are required by the Code or
the REMIC Provisions including reports relating to interest, original issue
discount and market discount or premium (using the Prepayment Assumption as
required) and (iii) to the Internal Revenue Service the name, title, address and
telephone number of the person who will serve as the representative of each
Trust REMIC. The Depositor shall provide or cause to be provided to the Trust
Administrator, within ten (10) days after the Closing Date, all information or
data that the Trust Administrator reasonably determines to be relevant for tax
purposes as to the valuations and issue prices of the Certificates, including,
without limitation, the price, yield, prepayment assumption and projected cash
flow of the Certificates.

                  (f) The Trustee and the Trust Administrator shall take such
action and shall cause each Trust REMIC created hereunder to take such action as
shall be necessary to create or maintain the status thereof as a REMIC under the
REMIC Provisions. The Trustee and the Trust Administrator shall not take any
action or cause the Trust Fund to take any action or fail to take (or fail to
cause to be taken) any action that, under the REMIC Provisions, if taken or not
taken, as the case may be, could (i) endanger the status of each Trust REMIC as
a REMIC or (ii) result in the imposition of a tax upon the Trust Fund (including
but not limited to the tax on prohibited transactions as defined in Section
860F(a)(2) of the Code and the tax on contributions to a REMIC set forth in
Section 860G(d) of the Code) (either such event, an "Adverse REMIC Event")
unless the Trustee and the Trust Administrator have received an Opinion of
Counsel, addressed to the Trustee and the Trust Administrator (at the expense of
the party seeking to take such action but in no event at the expense of the
Trust Administrator or the Trustee) to the effect that the contemplated action
will not, with respect to any Trust REMIC, endanger such status or result in the
imposition of such a tax, nor shall the Servicer take or fail to take any action
(whether or not authorized hereunder) as to which the Trustee or the Trust
Administrator has advised it in writing that it has received an Opinion of
Counsel to the effect that an Adverse REMIC Event could occur with respect to
such action; provided that the Servicer may conclusively rely on such Opinion of
Counsel and shall incur no liability for its action or failure to act in
accordance with such Opinion of Counsel. In addition, prior to taking any action
with respect to any Trust REMIC or the respective assets of each, or causing any
Trust REMIC to take any action, which is not contemplated under the terms of
this Agreement, the Servicer will consult with the Trustee and the Trust
Administrator or its designee, in writing, with respect to whether such action
could cause an Adverse REMIC Event to occur with respect to any Trust REMIC and
the Servicer shall not take any such action or cause any Trust REMIC to take any
such action as to which the Trustee or the Trust Administrator has advised it in
writing that an Adverse REMIC Event could occur; provided that the Servicer may
conclusively rely on such writing and shall incur no liability for its action or
failure to act in accordance with such writing. The Trust Administrator and the
Trustee may consult with counsel to make such written advice, and the cost of
same shall be borne by the party seeking to take the action not permitted by
this Agreement, but in no event shall such cost be an expense of the Trustee or
Trust Administrator,

                                      -135-

<PAGE>

as applicable. At all times as may be required by the Code, the Trust
Administrator will ensure that substantially all of the assets of REMIC I-A and
REMIC I-B will consist of "qualified mortgages" as defined in Section 860G(a)(3)
of the Code and "permitted investments" as defined in Section 860G(a)(5) of the
Code, to the extent such obligations are within the Trust Administrator's
control and not otherwise inconsistent with the terms of this Agreement.

                  (g) In the event that any tax is imposed on "prohibited
transactions" of any Trust REMIC created hereunder as defined in Section
860F(a)(2) of the Code, on the "net income from foreclosure property" of such
REMIC as defined in Section 860G(c) of the Code, on any contributions to any
such REMIC after the Startup Day therefor pursuant to Section 860G(d) of the
Code, or any other tax is imposed by the Code or any applicable provisions of
state or local tax laws, such tax shall be charged (i) to the Trust
Administrator pursuant to Section 10.03 hereof, if such tax arises out of or
results from a breach by the Trust Administrator of any of its obligations under
this Article X, (ii) to the Trustee pursuant to Section 10.03 hereof, if such
tax arises out of or results from a breach by the Trustee of any of its
obligations under this Article X, (iii) to the Servicer pursuant to Section
10.03 hereof, if such tax arises out of or results from a breach by the Servicer
of any of its obligations under Article III or this Article X, or (iv) against
amounts on deposit in the Distribution Account and shall be paid by withdrawal
therefrom.

                  (h) On or before April 15 of each calendar year, commencing
April 15, 2002, the Trust Administrator shall deliver to each Rating Agency an
Officer's Certificate of the Trust Administrator stating the Trust
Administrator's compliance with this Article X.

                  (i) The Trust Administrator shall, for federal income tax
purposes, maintain books and records with respect to each Trust REMIC on a
calendar year and on an accrual basis.

                  (j) Following the Startup Day, none of the Servicer, the
Trustee or the Trust Administrator shall accept any contributions of assets to
any Trust REMIC other than in connection with any Qualified Substitute Mortgage
Loan delivered in accordance with Section 2.03 unless it shall have received an
Opinion of Counsel to the effect that the inclusion of such assets in the Trust
Fund will not cause any Trust REMIC to fail to qualify as a REMIC at any time
that any Certificates are outstanding or subject any Trust REMIC to any tax
under the REMIC Provisions or other applicable provisions of federal, state and
local law or ordinances.

                  (k) None of the Trustee, the Trust Administrator or the
Servicer shall enter into any arrangement by which any Trust REMIC will receive
a fee or other compensation for services nor permit any Trust REMIC to receive
any income from assets other than "qualified mortgages" as defined in Section
860G(a)(3) of the Code or "permitted investments" as defined in Section
860G(a)(5) of the Code.

                  SECTION 10.02.            Prohibited Transactions and
                                            Activities.

                  None of the Depositor, the Servicer, the Trust Administrator
or the Trustee shall sell, dispose of or substitute for any of the Mortgage
Loans (except in connection with (i) the foreclosure of a Mortgage Loan,
including but not limited to, the acquisition or sale of a Mortgaged Property
acquired by deed in lieu of foreclosure, (ii) the bankruptcy of REMIC I-A or
REMIC I-B, (iii) the

                                      -136-

<PAGE>

termination of REMIC I-A or REMIC I-B pursuant to Article IX of this Agreement,
(iv) a substitution pursuant to Article II of this Agreement or (v) a purchase
of Mortgage Loans pursuant to Article II or III of this Agreement), nor acquire
any assets for any Trust REMIC (other than REO Property acquired in respect of a
defaulted Mortgage Loan), nor sell or dispose of any investments in the
Collection Account or the Distribution Account for gain, nor accept any
contributions to any Trust REMIC after the Closing Date (other than a Qualified
Substitute Mortgage Loan delivered in accordance with Section 2.03), unless it
has received an Opinion of Counsel, addressed to the Trustee and the Trust
Administrator (at the expense of the party seeking to cause such sale,
disposition, substitution, acquisition or contribution but in no event at the
expense of the Trustee or Trust Administrator) that such sale, disposition,
substitution, acquisition or contribution will not (a) affect adversely the
status of any Trust REMIC as a REMIC or (b) cause any Trust REMIC to be subject
to a tax on "prohibited transactions" or "contributions" pursuant to the REMIC
Provisions.

                  SECTION 10.03.            Servicer and Trustee and Trust
                                            Administrator Indemnification.

                  (a) The Trustee agrees to indemnify the Trust Fund, the
Depositor, the Servicer and the Trust Administrator for any taxes and costs
including, without limitation, any reasonable attorneys fees imposed on or
incurred by the Trust Fund, the Depositor, the Servicer, or the Trust
Administrator, as a result of a breach of the Trustee's covenants set forth in
this Article X.

                  (b) The Trust Administrator agrees to indemnify the Trust
Fund, the Depositor, the Servicer and the Trustee for any taxes and costs
including, without limitation, any reasonable attorneys fees imposed on or
incurred by the Trust Fund, the Depositor, the Servicer or the Trustee as a
result of a breach of the Trust Administrator's covenants set forth in this
Article X

                  (c) The Servicer agrees to indemnify the Trust Fund, the
Depositor, the Trust Administrator and the Trustee for any taxes and costs
including, without limitation, any reasonable attorneys' fees imposed on or
incurred by the Trust Fund, the Depositor, the Trust Administrator or the
Trustee, as a result of a breach of the Servicer's covenants set forth in
Article III or this Article X.

                                      -137-

<PAGE>

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

                  SECTION 11.01.            Amendment.

                  This Agreement may be amended from time to time by the
Depositor, the Servicer, the Trustee and the Trust Administrator without the
consent of any of the Certificateholders, (i) to cure any ambiguity or defect,
(ii) to correct, modify or supplement any provisions herein (including to give
effect to the expectations of Certificateholders), or (iii) to make any other
provisions with respect to matters or questions arising under this Agreement
which shall not be inconsistent with the provisions of this Agreement, provided
that such action shall not, as evidenced by an Opinion of Counsel delivered to
the Trustee and the Trust Administrator adversely affect in any material respect
the interests of any Certificateholder. No amendment shall be deemed to
adversely affect in any material respect the interests of any Certificateholder
who shall have consented thereto, and no Opinion of Counsel shall be required to
address the effect of any such amendment on any such consenting
Certificateholder.

                  This Agreement may also be amended from time to time by the
Depositor, the Servicer, the Trustee and the Trust Administrator with the
consent of the Holders of Certificates entitled to at least 66% of the Voting
Rights for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of Certificates; provided, however, that no
such amendment shall (i) reduce in any manner the amount of, or delay the timing
of, payments received on Mortgage Loans which are required to be distributed on
any Certificate without the consent of the Holder of such Certificate, (ii)
adversely affect in any material respect the interests of the Holders of any
Class of Certificates in a manner, other than as described in (i), without the
consent of the Holders of Certificates of such Class evidencing at least 66% of
the Voting Rights allocated to such Class, or (iii) modify the consents required
by the immediately preceding clauses (i) and (ii) without the consent of the
Holders of all Certificates then outstanding. Notwithstanding any other
provision of this Agreement, for purposes of the giving or withholding of
consents pursuant to this Section 11.01, Certificates registered in the name of
the Depositor or the Servicer or any Affiliate thereof shall be entitled to
Voting Rights with respect to matters affecting such Certificates.

                  Notwithstanding any contrary provision of this Agreement,
neither the Trustee nor the Trust Administrator shall consent to any amendment
to this Agreement unless it shall have first received an Opinion of Counsel to
the effect that such amendment will not result in the imposition of any tax on
any Trust REMIC pursuant to the REMIC Provisions or cause any Trust REMIC to
fail to qualify as a REMIC at any time that any Certificates are outstanding.

                  Promptly after the execution of any such amendment the Trustee
shall furnish a copy of such amendment to each Certificateholder.

                  It shall not be necessary for the consent of
Certificateholders under this Section 11.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the

                                      -138-

<PAGE>

authorization of the execution thereof by Certificateholders shall be subject to
such reasonable regulations as the Trustee or the Trust Administrator may
prescribe.

                  The cost of any Opinion of Counsel to be delivered pursuant to
this Section 11.01 shall be borne by the Person seeking the related amendment,
but in no event shall such Opinion of Counsel be an expense of the Trustee or
Trust Administrator.

                  Each of the Trustee and the Trust Administrator may, but shall
not be obligated to enter into any amendment pursuant to this Section that
affects its rights, duties and immunities under this Agreement or otherwise.

                  SECTION 11.02.            Recordation of Agreement;
                                            Counterparts.

                  To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer at the expense of the Certificateholders, but only upon
direction of the Trustee or the Trust Administrator accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially affects
the interests of the Certificateholders.

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

                  SECTION 11.03.            Limitation on Rights of
                                            Certificateholders.

                  The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.

                  No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of any of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.

                  No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee and the Trust Administrator a
written notice of default and of the continuance thereof, as hereinbefore
provided,

                                      -139-

<PAGE>

and unless also the Holders of Certificates entitled to at least 25% of the
Voting Rights shall have made written request upon the Trustee and the Trust
Administrator to institute such action, suit or proceeding in its own name as
Trustee or Trust Administrator hereunder and shall have offered to the Trustee
and the Trust Administrator such reasonable indemnity as it may require against
the costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee or the Trust Administrator, for 15 days after its receipt of such
notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding. It is understood and intended,
and expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee and the Trust Administrator, that no one or
more Holders of Certificates shall have any right in any manner whatsoever by
virtue of any provision of this Agreement to affect, disturb or prejudice the
rights of the Holders of any other of such Certificates, or to obtain or seek to
obtain priority over or preference to any other such Holder, or to enforce any
right under this Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all Certificateholders. For the protection
and enforcement of the provisions of this Section, each and every
Certificateholder, the Trustee and the Trust Administrator shall be entitled to
such relief as can be given either at law or in equity.

                  SECTION 11.04.            Governing Law.

                  This Agreement shall be construed in accordance with the laws
of the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.

                  SECTION 11.05.            Notices.

                  All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Depositor, 390 Greenwich Street, 4th Floor, New York, New York
10013, Attention: Mortgage Finance (telecopy number (212) 723-8604), or such
other address or telecopy number as may hereafter be furnished to the Servicer,
the Trustee and the Trust Administrator in writing by the Depositor, (b) in the
case of the Servicer, 5373 West Alabama, Suite 600, Houston, Texas 77056,
Attention: Janice McClure (telecopy number: (713) 960-0539), or such other
address or telecopy number as may hereafter be furnished to the Trustee, the
Trust Administrator and the Depositor in writing by the Servicer and (c) in the
case of the Trust Administrator, 111 Wall Street, 14th Floor, New York, New York
10005, Attention: Structured Finance/SBMSVII 2001-1 (telecopy number (212)
657-4009, or such other address or telecopy number as may hereafter be furnished
to the Servicer, the Depositor and the Trustee in writing by the Trust
Administrator and (d) in the case of the Trustee, 180 East Fifth Street, St.
Paul, Minnesota, 55101, Attention: Structured Finance/SBMSVII 2001-1 (telecopy
number (651) 244-0089, or such other address or telecopy number as may hereafter
be furnished to the Servicer, the Trust Administrator and the Depositor in
writing by the Trustee. Any notice required or permitted to be given to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given when mailed, whether or not the
Certificateholder receives such notice. A copy of any notice required to be
telecopied hereunder also shall be mailed to the

                                      -140-

<PAGE>

appropriate party in the manner set forth above.

                  SECTION 11.06.            Severability of Provisions.

                  If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.

                  SECTION 11.07.            Notice to Rating Agencies.

                  The Trust Administrator shall use its best efforts promptly to
provide notice to the Rating Agencies with respect to each of the following of
which it has actual knowledge:

                  1. Any material change or amendment to this Agreement;

                  2. The occurrence of any Servicer Event of Default that has
         not been cured or waived;

                  3. The resignation or termination of the Servicer or the
         Trustee or the Trust Administrator;

                  4. The repurchase or substitution of Mortgage Loans pursuant
         to or as contemplated by Section 2.03;

                  5. The final payment to the Holders of any Class of
         Certificates;

                  6. Any change in the location of the Collection Account or the
         Distribution Account;

                  7. Any event that would result in the inability of the Trust
         Administrator or the Trustee, as applicable, to make advances regarding
         delinquent Mortgage Loans; and

                  8. The filing of any claim under any Servicer's blanket bond
         and errors and omissions insurance policy required by Section 3.14 or
         the cancellation or material modification of coverage under any such
         instrument.

                  In addition, the Trust Administrator shall promptly furnish to
each Rating Agency copies of each report to Certificateholders described in
Section 4.02 and the Servicer shall promptly furnish to each Rating Agency
copies of the following:

                  1. Each annual statement as to compliance described in Section
         3.20; and

                  2. Each annual independent public accountants' servicing
         report described in Section 3.21.

                                      -141-

<PAGE>

                  Any such notice pursuant to this Section 11.07 shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service
to Fitch, Inc., One State Street, 32nd Floor, New York, New York 10004 and to
Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies,
Inc., 55 Water Street, New York, New York 10007 or such other addresses as the
Rating Agencies may designate in writing to the parties hereto.

                  SECTION 11.08.            Article and Section References.

                  All article and section references used in this Agreement,
unless otherwise provided, are to articles and sections in this Agreement.

                  SECTION 11.09.            Grant of Security Interest.

                  It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Depositor to the Trustee, be, and be
construed as, a sale of the Mortgage Loans by the Depositor and not a pledge of
the Mortgage Loans to secure a debt or other obligation of the Depositor.
However, in the event that, notwithstanding the aforementioned intent of the
parties, the Mortgage Loans are held to be property of the Depositor, then, (a)
it is the express intent of the parties that such conveyance be deemed a pledge
of the Mortgage Loans by the Depositor to the Trustee to secure a debt or other
obligation of the Depositor and (b)(1) this Agreement shall also be deemed to be
a security agreement within the meaning of Articles 8 and 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York; (2) the
conveyance provided for in Section 2.01 hereof shall be deemed to be a grant by
the Depositor to the Trustee of a security interest in all of the Depositor's
right, title and interest in and to the Mortgage Loans and all amounts payable
to the holders of the Mortgage Loans in accordance with the terms thereof and
all proceeds of the conversion, voluntary or involuntary, of the foregoing into
cash, instruments, securities or other property, including without limitation
all amounts, other than investment earnings, from time to time held or invested
in the Collection Account and the Distribution Account, whether in the form of
cash, instruments, securities or other property; (3) the obligations secured by
such security agreement shall be deemed to be all of the Depositor's obligations
under this Agreement, including the obligation to provide to the
Certificateholders the benefits of this Agreement relating to the Mortgage Loans
and the Trust Fund; and (4) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the Trustee
for the purpose of perfecting such security interest under applicable law.
Accordingly, the Depositor hereby grants to the Trustee a security interest in
the Mortgage Loans and all other property described in clause (2) of the
preceding sentence, for the purpose of securing to the Trustee the performance
by the Depositor of the obligations described in clause (3) of the preceding
sentence. Notwithstanding the foregoing, the parties hereto intend the
conveyance pursuant to Section 2.01 to be a true, absolute and unconditional
sale of the Mortgage Loans and assets constituting the Trust Fund by the
Depositor to the Trustee.

                                      -142-

<PAGE>

                  IN WITNESS WHEREOF, the Depositor, the Servicer and the
Trustee have caused their names to be signed hereto by their respective officers
thereunto duly authorized, in each case as of the day and year first above
written.

                                             SALOMON BROTHERS MORTGAGE
                                             SECURITIES VII, INC., as Depositor

                                             By: /s/ Matthew R. Bollo
                                                ----------------------------
                                             Name: Matthew R. Bollo
                                             Title: Assistant Vice President

                                             LITTON LOAN SERVICING LP,
                                               as Servicer

                                             By: /s/ Janice McClure
                                                ----------------------------
                                             Name: Janice McClure
                                             Title: Senior Vice President

                                             U.S. BANK NATIONAL ASSOCIATION,
                                               as Trustee

                                             By: /s/ Eve D. Kaplan
                                                ---------------------------
                                             Name: Eve D. Kaplan
                                             Title: Vice President

                                             CITIBANK, N.A.,
                                               as Trust Administrator

                                             By: /s/ Jennifer Cupo
                                                ---------------------------
                                             Name: Jennifer Cupo
                                             Title: Vice President

<PAGE>

STATE OF _____________  )
                        ) ss.:
COUNTY OF ___________   )

                  On the th day of November 2001, before me, a notary public in
and for said State, personally appeared ________________, known to me to be an
Assistant Vice President of Salomon Brothers Mortgage Securities VII, Inc., one
of the corporations that executed the within instrument, and also known to me to
be the person who executed it on behalf of said corporation, and acknowledged to
me that such corporation executed the within instrument.

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

                                                        _____________________
                                                             Notary Public

[Notarial Seal]

<PAGE>

STATE OF ______________         )
                                ) ss.:
COUNTY OF ____________          )

                  On the ____ day of November 2001, before me, a notary public
in and for said State, personally appeared _____________________, known to me to
be __________________ of Litton Loan Servicing LP, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

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

                                                        _____________________
                                                             Notary Public

[Notarial Seal]

<PAGE>

STATE OF MINNESOTA      )
                        )ss.:
COUNTY OF RAMSEY        )

                  On the ____ day of November 2001, before me, a notary public
in and for said State, personally appeared Eve D. Kaplan, known to me to be a
Vice President of U. S. Bank National Association, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

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

                                                        _____________________
                                                             Notary Public

[Notarial Seal]

<PAGE>

                                   EXHIBIT A-1

                         FORM OF CLASS AF-1 CERTIFICATE

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT  CONDUIT,"
     AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

Series 2001-1                            Aggregate Certificate Principal Balance
                                         of the Class AF-1 Certificates as of
                                         the Issue Date:
Pass-Through Rate: [___]%                $____________

Cut-off Date and date of Pooling and     Denomination: $______________
Servicing Agreement: October 19, 2001
                                         Servicer: Litton Loan Servicing LP
First Distribution Date:
November 26, 2001                        Trustee: U.S. Bank National Association

No. 1                                    Trust Administrator: Citibank, N.A.

                                         Issue Date: November __, 2001

                                         CUSIP: ___________

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE OF
     THIS   CERTIFICATE   MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                   A-1-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate, first lien and second lien mortgage loans (the "Group I
Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class AF-1 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class AF-1 Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer, the Trustee
and the Trust Administrator, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class AF-1 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class AF-1 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class AF-1 Certificates, or otherwise by check mailed
by first class mail to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such

                                      A-1-2

<PAGE>

distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trust Administrator for that purpose as
provided in the Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to ____% per annum in the case of each Distribution Date
through and including the Distribution Date on which the aggregate principal
balance of the Group I Mortgage Loans (and properties acquired in respect
thereof) remaining in the Trust Fund is reduced to less than 10% of the
aggregate principal balance of the Group I Mortgage Loans as of the Cut-off Date
and ____% per annum in the case of each Distribution Date thereafter.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Group I Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Group I Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, the Trust Administrator and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the

                                      A-1-3

<PAGE>

Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest, as requested by
the Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange of Certificates, but the Trust
Administrator may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Servicer, the Trustee,
the Trust Administrator nor any such agent shall be affected by notice to the
contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Group I Mortgage Loan and REO Property
remaining in REMIC I-A and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I-A of
all the Group I Mortgage Loans and all property acquired in respect of such
Group I Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from REMIC I-A all the Group I Mortgage
Loans and all property acquired in respect of any Group I Mortgage Loan at a
price determined as provided in the Agreement. The exercise of such right will
effect early retirement of the Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Group I Mortgage Loans
at the time of purchase being less than 10% of the aggregate principal balance
of the Group I Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assume no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-1-4

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:__________________________________
                                                    Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class AF-1 Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:__________________________________
                                                   Authorized Signatory

                                      A-1-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common            UNIF GIFT MIN ACT - Custodian
                                                              ---------
TEN ENT - as tenants by the entireties                      (Cust) (Minor) under
                                                            Uniform Gifts
JT TEN - as joint tenants with right                            to Minors Act
         if survivorship and not as                             ________________
          tenants in common                                             (State)

          Additional abbreviations may also be used though not in the above
list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
_______________________________________________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

                                      A-1-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to_____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________
___________________________.  This information is provided by _________________
_________________________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-1-7

<PAGE>

                                   EXHIBIT A-2
                                   -----------

                         FORM OF CLASS AF-2 CERTIFICATE

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT  CONDUIT,"
     AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

Series 2001-1                            Aggregate Certificate Principal Balance
                                         of the Class AF-2 Certificates as of
Pass-Through Rate: [___]%                the Issue Date:  $____________

Cut-off Date and date of Pooling and     Denomination: $______________
Servicing Agreement: October 19, 2001
                                         Servicer: Litton Loan Servicing LP
First Distribution Date:
November 26, 2001                        Trustee: U.S. Bank National Association

No. 1                                    Trust Administrator: Citibank, N.A.

                                         Issue Date: November __, 2001

                                         CUSIP: ___________

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE OF
     THIS   CERTIFICATE   MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                  A-2-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate, first lien and second lien mortgage loans (the "Group I
Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class AF-2 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class AF-2 Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer, the Trustee
and the Trust Administrator, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class AF-2 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class AF-2 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class AF-2 Certificates, or otherwise by check mailed
by first class mail to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such

                                      A-2-2

<PAGE>

distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trust Administrator for that purpose as
provided in the Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to ____% per annum in the case of each Distribution Date
through and including the Distribution Date on which the aggregate principal
balance of the Group I Mortgage Loans (and properties acquired in respect
thereof) remaining in the Trust Fund is reduced to less than 10% of the
aggregate principal balance of the Group I Mortgage Loans as of the Cut-off Date
and ____% per annum in the case of each Distribution Date thereafter.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Group I Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Group I Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, the Trust Administrator and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the

                                      A-2-3

<PAGE>

Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest, as requested by
the Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange of Certificates, but the Trust
Administrator may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Servicer, the Trustee,
the Trust Administrator nor any such agent shall be affected by notice to the
contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Group I Mortgage Loan and REO Property
remaining in REMIC I-A and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I-A of
all the Group I Mortgage Loans and all property acquired in respect of such
Group I Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from REMIC I-A all the Group I Mortgage
Loans and all property acquired in respect of any Group I Mortgage Loan at a
price determined as provided in the Agreement. The exercise of such right will
effect early retirement of the Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Group I Mortgage Loans
at the time of purchase being less than 10% of the aggregate principal balance
of the Group I Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assume no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-2-4

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:____________________________________
                                                     Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class AF-2 Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:____________________________________
                                                    Authorized Signatory

                                      A-2-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common             UNIF GIFT MIN ACT - Custodian
                                                               ---------

TEN ENT - as tenants by the entireties                      (Cust) (Minor) under
                                                          Uniform Gifts
JT TEN - as joint tenants with right                               to Minors Act
         if survivorship and not as                           _________________
          tenants in common                                         (State)

          Additional abbreviations may also be used though not in the above
list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

                                      A-2-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________
___________________________.This information is provided by ___________________
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-2-7

<PAGE>

                                   EXHIBIT A-3
                                   -----------

                         FORM OF CLASS AF-3 CERTIFICATE

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT  CONDUIT,"
     AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

Series 2001-1                            Aggregate Certificate Principal Balance
                                         of the Class AF-3 Certificates as of
                                         the Issue Date:
Pass-Through Rate: [___]%                $____________

Cut-off Date and date of Pooling and     Denomination: $______________
Servicing Agreement: October 19, 2001
                                         Servicer: Litton Loan Servicing LP
First Distribution Date:
November 26, 2001                        Trustee: U.S. Bank National Association

No. 1                                    Trust Administrator: Citibank, N.A.

                                         Issue Date: November __, 2001

                                         CUSIP: ___________

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE OF
     THIS   CERTIFICATE   MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                  A-3-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate, first lien and second lien mortgage loans (the "Group I
Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class AF-3 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class AF-3 Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer, the Trustee
and the Trust Administrator, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class AF-3 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class AF-3 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class AF-3 Certificates, or otherwise by check mailed
by first class mail to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such

                                      A-3-2

<PAGE>

distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trust Administrator for that purpose as
provided in the Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to ____% per annum in the case of each Distribution Date
through and including the Distribution Date on which the aggregate principal
balance of the Group I Mortgage Loans (and properties acquired in respect
thereof) remaining in the Trust Fund is reduced to less than 10% of the
aggregate principal balance of the Group I Mortgage Loans as of the Cut-off Date
and ____% per annum in the case of each Distribution Date thereafter.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Group I Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Group I Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, the Trust Administrator and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the

                                      A-3-3

<PAGE>

Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest, as requested by
the Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange of Certificates, but the Trust
Administrator may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Servicer, the Trustee,
the Trust Administrator nor any such agent shall be affected by notice to the
contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Group I Mortgage Loan and REO Property
remaining in REMIC I-A and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I-A of
all the Group I Mortgage Loans and all property acquired in respect of such
Group I Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from REMIC I-A all the Group I Mortgage
Loans and all property acquired in respect of any Group I Mortgage Loan at a
price determined as provided in the Agreement. The exercise of such right will
effect early retirement of the Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Group I Mortgage Loans
at the time of purchase being less than 10% of the aggregate principal balance
of the Group I Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assume no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-3-4

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:__________________________________
                                                     Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

         This is one of the Class AF-3 Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                      Authorized Signatory

                                      A-3-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------

TEN ENT - as tenants by the entireties                     (Cust) (Minor) under
                                                           Uniform Gifts
JT TEN - as joint tenants with right                               to Minors Act
         if survivorship and not as                         _______________
          tenants in common                                          (State)

         Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
_______________________________________________________________________________
_______________________________________________________________________________.

Dated:

                                         ______________________________________
                                         Signature by or on behalf of assignor

                                         ______________________________________
                                         Signature Guaranteed

                                      A-3-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to _____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to______________________________________
_______________________________________________________________________________
_______________________________________________.This information is provided by
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-3-7

<PAGE>

                                   EXHIBIT A-4
                                   -----------

                         FORM OF CLASS AV-1 CERTIFICATE

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT  CONDUIT,"
     AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

Series 2001-1                            Aggregate Certificate Principal Balance
                                         of the Class AV-1 Certificates as of
Pass-Through Rate: Variable              the Issue Date:  $____________

Cut-off Date and date of Pooling and     Denomination: $______________
Servicing Agreement: October 19, 2001
                                         Servicer: Litton Loan Servicing LP
First Distribution Date:
November 26, 2001                        Trustee: U.S. Bank National Association

No. 1                                    Trust Administrator: Citibank, N.A.

                                         Issue Date: November __, 2001

                                         CUSIP: ___________

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE OF
     THIS   CERTIFICATE   MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                  A-4-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, adjustable-rate, first lien and second lien mortgage loans (the
"Group II Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class AV-1 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class AV-1 Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer, the Trustee
and the Trust Administrator, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class AV-1 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class AV-1 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class AV-1 Certificates, or otherwise by check mailed
by first class mail to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such

                                      A-4-2

<PAGE>

distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trust Administrator for that purpose as
provided in the Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the related Formula Rate for such
Distribution Date and (ii) the related Net WAC Pass-Through Rate for such
Distribution Date.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Group II Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Group II Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, the Trust Administrator and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be

                                      A-4-3

<PAGE>

made for any such registration of transfer or exchange of Certificates, but the
Trust Administrator may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Servicer, the Trustee,
the Trust Administrator nor any such agent shall be affected by notice to the
contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Group II Mortgage Loan and REO
Property remaining in REMIC I-A and (ii) the purchase by the party designated in
the Agreement at a price determined as provided in the Agreement from REMIC I-B
of all the Group II Mortgage Loans and all property acquired in respect of such
Group II Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from REMIC I-B all the Group II Mortgage
Loans and all property acquired in respect of any Group II Mortgage Loan at a
price determined as provided in the Agreement. The exercise of such right will
effect early retirement of the Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Group II Mortgage Loans
at the time of purchase being less than 10% of the aggregate principal balance
of the Group II Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assume no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-4-4

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                     Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

         This is one of the Class AV-1 Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                      Authorized Signatory

                                      A-4-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------

TEN ENT - as tenants by the entireties                     (Cust) (Minor) under
                                                           Uniform Gifts
JT TEN - as joint tenants with right                              to Minors Act
         if survivorship and not as                         _______________
          tenants in common                                        (State)

         Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
_______________________________________________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

                                      A-4-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to_____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________
___________________________. This information is provided by __________________
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-4-7

<PAGE>

                                   EXHIBIT A-5
                                   -----------

                         FORM OF CLASS MF-1 CERTIFICATE

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT  CONDUIT,"
     AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS CERTIFICATE IS SUBORDINATE TO THE CLASS AF-1 CERTIFICATES,  THE
     CLASS  AF-2  CERTIFICATES  AND THE CLASS  AF-3  CERTIFICATES  TO THE
     EXTENT DESCRIBED IN THE POOLING AND SERVICING  AGREEMENT REFERRED TO
     HEREIN.

Series 2001-1                            Aggregate Certificate Principal Balance
                                         of the Class MF-1 Certificates as of
Pass-Through Rate: [___]%                the Issue Date: $____________

Cut-off Date and date of Pooling and     Denomination: $______________
Servicing Agreement: October 19, 2001
                                         Servicer: Litton Loan Servicing LP
First Distribution Date:
November 26, 2001                        Trustee: U.S. Bank National Association

No. 1                                    Trust Administrator: Citibank, N.A.

                                         Issue Date: November __, 2001

                                         CUSIP: ___________

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE OF
     THIS   CERTIFICATE   MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                  A-5-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate, first lien and second lien mortgage loans (the "Group I
Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class MF-1 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class MF-1 Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer, the Trustee
and the Trust Administrator, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class MF-1 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class MF-1 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class MF-1 Certificates, or otherwise by check mailed
by first class mail to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such

                                      A-5-2

<PAGE>

distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trust Administrator for that purpose as
provided in the Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to ____% per annum in the case of each Distribution Date
through and including the Distribution Date on which the aggregate principal
balance of the Group I Mortgage Loans (and properties acquired in respect
thereof) remaining in the Trust Fund is reduced to less than 10% of the
aggregate principal balance of the Group I Mortgage Loans as of the Cut-off Date
and ____% per annum in the case of each Distribution Date thereafter.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Group I Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Group I Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, the Trust Administrator and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the

                                      A-5-3

<PAGE>

Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest, as requested by
the Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange of Certificates, but the Trust
Administrator may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Servicer, the Trustee,
the Trust Administrator nor any such agent shall be affected by notice to the
contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Group I Mortgage Loan and REO Property
remaining in REMIC I-A and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I-A of
all the Group I Mortgage Loans and all property acquired in respect of such
Group I Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from REMIC I-A all the Group I Mortgage
Loans and all property acquired in respect of any Group I Mortgage Loan at a
price determined as provided in the Agreement. The exercise of such right will
effect early retirement of the Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Group I Mortgage Loans
at the time of purchase being less than 10% of the aggregate principal balance
of the Group I Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assume no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-5-4

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                    Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

         This is one of the Class MF-1 Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                    Authorized Signatory

                                      A-5-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------

TEN ENT - as tenants by the entireties                     (Cust) (Minor) under
                                                           Uniform Gifts
JT TEN - as joint tenants with right                               to Minors Act
         if survivorship and not as                         _______________
          tenants in common                                           (State)

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
______________________________________________________________________________
______________________________________________________________________________.

Dated:

                                         ______________________________________
                                         Signature by or on behalf of assignor

                                         ______________________________________
                                         Signature Guaranteed

                                      A-5-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________
___________________________. This information is provided by _________________
____________________________________________________________, the assignee named
above, or ________________________________________, as its agent.

                                      A-5-7

<PAGE>

                                   EXHIBIT A-6
                                   -----------

                         FORM OF CLASS MF-2 CERTIFICATE

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT  CONDUIT,"
     AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS CERTIFICATE IS SUBORDINATE TO THE CLASS AF-1 CERTIFICATES,  THE
     CLASS AF-2  CERTIFICATES,  THE CLASS AF-3 CERTIFICATES AND THE CLASS
     MF-1  CERTIFICATES  TO  THE  EXTENT  DESCRIBED  IN THE  POOLING  AND
     SERVICING AGREEMENT REFERRED TO HEREIN.

Series 2001-1                            Aggregate Certificate Principal Balance
                                         of the Class MF-2 Certificates as of
Pass-Through Rate: [___]%                the Issue Date: $____________

Cut-off Date and date of Pooling and     Denomination: $______________
Servicing Agreement: October 19, 2001
                                         Servicer: Litton Loan Servicing LP
First Distribution Date:
November 26, 2001                        Trustee: U.S. Bank National Association

No. 1                                    Trust Administrator: Citibank, N.A.

                                         Issue Date: November __, 2001

                                         CUSIP: ___________

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE OF
     THIS   CERTIFICATE   MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                      A-6-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate, first lien and second lien mortgage loans (the "Group I
Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class MF-2 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class MF-2 Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer, the Trustee
and the Trust Administrator, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class MF-2 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class MF-2 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class MF-2 Certificates, or otherwise by check mailed
by first class mail to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such

                                      A-6-2

<PAGE>

distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trust Administrator for that purpose as
provided in the Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to ____% per annum in the case of each Distribution Date
through and including the Distribution Date on which the aggregate principal
balance of the Group I Mortgage Loans (and properties acquired in respect
thereof) remaining in the Trust Fund is reduced to less than 10% of the
aggregate principal balance of the Group I Mortgage Loans as of the Cut-off Date
and ____% per annum in the case of each Distribution Date thereafter.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Group I Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Group I Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, the Trust Administrator and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the

                                      A-6-3

<PAGE>

Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest, as requested by
the Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange of Certificates, but the Trust
Administrator may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Servicer, the Trustee,
the Trust Administrator nor any such agent shall be affected by notice to the
contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Group I Mortgage Loan and REO Property
remaining in REMIC I-A and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I-A of
all the Group I Mortgage Loans and all property acquired in respect of such
Group I Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from REMIC I-A all the Group I Mortgage
Loans and all property acquired in respect of any Group I Mortgage Loan at a
price determined as provided in the Agreement. The exercise of such right will
effect early retirement of the Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Group I Mortgage Loans
at the time of purchase being less than 10% of the aggregate principal balance
of the Group I Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assume no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-6-4

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                    Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

         This is one of the Class MF-2 Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                   Authorized Signatory

                                      A-6-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------

TEN ENT - as tenants by the entireties                     (Cust) (Minor) under
                                                           Uniform Gifts
JT TEN - as joint tenants with right                              to Minors Act
         if survivorship and not as                         ___________________
          tenants in common                                          (State)

          Additional abbreviations may also be used though not in the above
list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
______________________________________________________________________________
______________________________________________________________________________.

Dated:

                                         ______________________________________
                                         Signature by or on behalf of assignor

                                         ______________________________________
                                         Signature Guaranteed

                                      A-6-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________
___________________________.  This information is provided by _________________
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-6-7

<PAGE>

                                   EXHIBIT A-7
                                   -----------

                         FORM OF CLASS MF-3 CERTIFICATE

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT  CONDUIT,"
     AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS CERTIFICATE IS SUBORDINATE TO THE CLASS AF-1 CERTIFICATES,  THE
     CLASS AF-2 CERTIFICATES, THE CLASS AF-3 CERTIFICATES, THE CLASS MF-1
     CERTIFICATES AND THE CLASS MF-2 CERTIFICATES TO THE EXTENT DESCRIBED
     IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

Series 2001-1                            Aggregate Certificate Principal Balance
                                         of the Class MF-3 Certificates as of
Pass-Through Rate: [___]%                the Issue Date: $____________

Cut-off Date and date of Pooling and     Denomination: $______________
Servicing Agreement: October 19, 2001
                                         Servicer: Litton Loan Servicing LP
First Distribution Date:
November 26, 2001                        Trustee: U.S. Bank National Association

No. 1                                    Trust Administrator: Citibank, N.A.

                                         Issue Date: November __, 2001

                                         CUSIP: ___________

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE OF
     THIS   CERTIFICATE   MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                      A-7-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate, first lien and second lien mortgage loans (the "Group I
Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class MF-3 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class MF-3 Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer, the Trustee
and the Trust Administrator, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class MF-3 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class MF-3 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class MF-3 Certificates, or otherwise by check mailed
by first class mail to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such

                                      A-7-2

<PAGE>

distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trust Administrator for that purpose as
provided in the Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to ____% per annum in the case of each Distribution Date
through and including the Distribution Date on which the aggregate principal
balance of the Group I Mortgage Loans (and properties acquired in respect
thereof) remaining in the Trust Fund is reduced to less than 10% of the
aggregate principal balance of the Group I Mortgage Loans as of the Cut-off Date
and ____% per annum in the case of each Distribution Date thereafter.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Group I Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Group I Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, the Trust Administrator and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the

                                      A-7-3

<PAGE>

Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest, as requested by
the Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange of Certificates, but the Trust
Administrator may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Servicer, the Trustee,
the Trust Administrator nor any such agent shall be affected by notice to the
contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Group I Mortgage Loan and REO Property
remaining in REMIC I-A and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I-A of
all the Group I Mortgage Loans and all property acquired in respect of such
Group I Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from REMIC I-A all the Group I Mortgage
Loans and all property acquired in respect of any Group I Mortgage Loan at a
price determined as provided in the Agreement. The exercise of such right will
effect early retirement of the Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Group I Mortgage Loans
at the time of purchase being less than 10% of the aggregate principal balance
of the Group I Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assume no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-7-4

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                    Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class MF-3 Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:____________________________________
                                                     Authorized Signatory

                                      A-7-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------

TEN ENT - as tenants by the entireties                     (Cust) (Minor) under
                                                           Uniform Gifts
JT TEN - as joint tenants with right                               to Minors Act
         if survivorship and not as                         ___________________
          tenants in common                                          (State)

          Additional abbreviations may also be used though not in the above
list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
______________________________________________________________________________
______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

                                      A-7-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
___________________________________________________________________ for the
account of ____________________________, account number _______________________,
or, if mailed by check, to_____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________
___________________________. This information is provided by __________________
_______________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-7-7

<PAGE>

                                   EXHIBIT A-8
                                   -----------

                         FORM OF CLASS MV-1 CERTIFICATE

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT  CONDUIT,"
     AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS  CERTIFICATE IS SUBORDINATE TO THE CLASS AV-1  CERTIFICATES  TO
     THE EXTENT DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED
     TO HEREIN.

Series 2001-1                            Aggregate Certificate Principal Balance
                                         of the Class MV-1 Certificates as of
Pass-Through Rate: Variable              the Issue Date: $____________

Cut-off Date and date of Pooling and     Denomination: $______________
Servicing Agreement: October 19, 2001
                                         Servicer: Litton Loan Servicing LP
First Distribution Date:
November 26, 2001                        Trustee: U.S. Bank National Association

No. 1                                    Trust Administrator: Citibank, N.A.

                                         Issue Date: November __, 2001

                                         CUSIP: ___________

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE OF
     THIS   CERTIFICATE   MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                  A-8-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, adjustable-rate, first lien and second lien mortgage loans (the
"Group II Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class MV-1 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class MV-1 Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer, the Trustee
and the Trust Administrator, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class MV-1 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class MV-1 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class MV-1 Certificates, or otherwise by check mailed
by first class mail to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such

                                      A-8-2

<PAGE>

distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trust Administrator for that purpose as
provided in the Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the related Formula Rate for such
Distribution Date and (ii) the related Net WAC Pass-Through Rate for such
Distribution Date.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Group II Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Group II Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, the Trust Administrator and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be

                                      A-8-3

<PAGE>

made for any such registration of transfer or exchange of Certificates, but the
Trust Administrator may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Servicer, the Trustee,
the Trust Administrator nor any such agent shall be affected by notice to the
contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Group II Mortgage Loan and REO
Property remaining in REMIC I-A and (ii) the purchase by the party designated in
the Agreement at a price determined as provided in the Agreement from REMIC I-B
of all the Group II Mortgage Loans and all property acquired in respect of such
Group II Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from REMIC I-B all the Group II Mortgage
Loans and all property acquired in respect of any Group II Mortgage Loan at a
price determined as provided in the Agreement. The exercise of such right will
effect early retirement of the Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Group II Mortgage Loans
at the time of purchase being less than 10% of the aggregate principal balance
of the Group II Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assume no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-8-4

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:__________________________________
                                                    Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class MV-1 Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:__________________________________
                                                  Authorized Signatory

                                      A-8-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------

TEN ENT - as tenants by the entireties                     (Cust) (Minor) under
                                                           Uniform Gifts
JT TEN - as joint tenants with right                             to Minors Act
         if survivorship and not as                         _______________
          tenants in common                                       (State)

          Additional abbreviations may also be used though not in the above
list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
_______________________________________________________________________________
_______________________________________________________________________________.

Dated:

                                         ______________________________________
                                         Signature by or on behalf of assignor

                                         ______________________________________
                                         Signature Guaranteed

                                      A-8-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________
___________________________. This information is provided by __________________
________________________________________________________________, the assignee
named above, or ________________________________________, as its agent.

                                      A-8-7

<PAGE>

                                   EXHIBIT A-9
                                   -----------

                         FORM OF CLASS MV-2 CERTIFICATE

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT  CONDUIT,"
     AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS  CERTIFICATE IS SUBORDINATE TO THE CLASS AV-1  CERTIFICATES AND
     THE CLASS MV-1  CERTIFICATES TO THE EXTENT  DESCRIBED IN THE POOLING
     AND SERVICING AGREEMENT REFERRED TO HEREIN.

Series 2001-1                            Aggregate Certificate Principal Balance
                                         of the Class MV-2 Certificates as of
Pass-Through Rate: Variable              the Issue Date: $____________

Cut-off Date and date of Pooling and     Denomination: $______________
Servicing Agreement: October 19, 2001
                                         Servicer: Litton Loan Servicing LP
First Distribution Date:
November 26, 2001                        Trustee: U.S. Bank National Association

No. 1                                    Trust Administrator: Citibank, N.A.

                                         Issue Date: November __, 2001

                                         CUSIP: ___________

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE OF
     THIS   CERTIFICATE   MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                      A-9-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, adjustable-rate, first lien and second lien mortgage loans (the
"Group II Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class MV-2 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class MV-2 Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer, the Trustee
and the Trust Administrator, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class MV-2 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class MV-2 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class MV-2 Certificates, or otherwise by check mailed
by first class mail to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such

                                      A-9-2

<PAGE>

distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trust Administrator for that purpose as
provided in the Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the related Formula Rate for such
Distribution Date and (ii) the related Net WAC Pass-Through Rate for such
Distribution Date.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Group II Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Group II Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, the Trust Administrator and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be

                                      A-9-3

<PAGE>

made for any such registration of transfer or exchange of Certificates, but the
Trust Administrator may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Servicer, the Trustee,
the Trust Administrator nor any such agent shall be affected by notice to the
contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Group II Mortgage Loan and REO
Property remaining in REMIC I-A and (ii) the purchase by the party designated in
the Agreement at a price determined as provided in the Agreement from REMIC I-B
of all the Group II Mortgage Loans and all property acquired in respect of such
Group II Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from REMIC I-B all the Group II Mortgage
Loans and all property acquired in respect of any Group II Mortgage Loan at a
price determined as provided in the Agreement. The exercise of such right will
effect early retirement of the Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Group II Mortgage Loans
at the time of purchase being less than 10% of the aggregate principal balance
of the Group II Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assume no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-9-4

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                  Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class MV-2 Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                  Authorized Signatory

                                      A-9-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------

TEN ENT - as tenants by the entireties                     (Cust) (Minor) under
                                                           Uniform Gifts
JT TEN - as joint tenants with right                            to Minors Act
         if survivorship and not as                         __________________
          tenants in common                                         (State)

          Additional abbreviations may also be used though not in the above
list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
_______________________________________________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

                                      A-9-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to_____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to______________________________________
_______________________________________________________________________________
___________________________. This information is provided by __________________
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-9-7

<PAGE>

                                  EXHIBIT A-10
                                  ------------

                         FORM OF CLASS MV-3 CERTIFICATE

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT  CONDUIT,"
     AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS CERTIFICATE IS SUBORDINATE TO THE CLASS AV-1 CERTIFICATES,  THE
     CLASS  MV-1  CERTIFICATES  AND THE CLASS  MV-2  CERTIFICATES  TO THE
     EXTENT DESCRIBED IN THE POOLING AND SERVICING  AGREEMENT REFERRED TO
     HEREIN.

Series 2001-1                            Aggregate Certificate Principal Balance
                                         of the Class MV-3 Certificates as of
Pass-Through Rate: Variable              the Issue Date: $____________

Cut-off Date and date of Pooling and     Denomination: $______________
Servicing Agreement: October 19, 2001
                                         Servicer: Litton Loan Servicing LP
First Distribution Date:
November 26, 2001                        Trustee: U.S. Bank National Association

No. 1                                    Trust Administrator: Citibank, N.A.

                                         Issue Date: November __, 2001

                                         CUSIP: ___________

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE OF
     THIS   CERTIFICATE   MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                     A-10-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, adjustable-rate, first lien and second lien mortgage loans (the
"Group II Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class MV-3 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class MV-3 Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer, the Trustee
and the Trust Administrator, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class MV-3 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class MV-3 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class MV-3 Certificates, or otherwise by check mailed
by first class mail to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such

                                     A-10-2

<PAGE>

distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trust Administrator for that purpose as
provided in the Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the related Formula Rate for such
Distribution Date and (ii) the related Net WAC Pass-Through Rate for such
Distribution Date.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Group II Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Group II Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, the Trust Administrator and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be

                                     A-10-3

<PAGE>

made for any such registration of transfer or exchange of Certificates, but the
Trust Administrator may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Servicer, the Trustee,
the Trust Administrator nor any such agent shall be affected by notice to the
contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Group II Mortgage Loan and REO
Property remaining in REMIC I-A and (ii) the purchase by the party designated in
the Agreement at a price determined as provided in the Agreement from REMIC I-B
of all the Group II Mortgage Loans and all property acquired in respect of such
Group II Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from REMIC I-B all the Group II Mortgage
Loans and all property acquired in respect of any Group II Mortgage Loan at a
price determined as provided in the Agreement. The exercise of such right will
effect early retirement of the Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Group II Mortgage Loans
at the time of purchase being less than 10% of the aggregate principal balance
of the Group II Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assume no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     A-10-4

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                    Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class MV-3 Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                    Authorized Signatory

                                     A-10-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------

TEN ENT - as tenants by the entireties                     (Cust) (Minor) under
                                                           Uniform Gifts
JT TEN - as joint tenants with right                              to Minors Act
         if survivorship and not as                         ___________________
          tenants in common                                          (State)

          Additional abbreviations may also be used though not in the above
list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

          I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
_______________________________________________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

                                     A-10-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________
___________________________. This information is provided by __________________
_________________________________________________________________, the assignee
named above, or ________________________________________, as its agent.

                                     A-10-7

<PAGE>

                                  EXHIBIT A-11
                                  ------------

                         FORM OF CLASS MV-4 CERTIFICATE

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT  CONDUIT,"
     AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS CERTIFICATE IS SUBORDINATE TO THE CLASS AV-1 CERTIFICATES,  THE
     CLASS MV-1  CERTIFICATES,  THE CLASS MV-2 CERTIFICATES AND THE CLASS
     MV-4  CERTIFICATES  TO  THE  EXTENT  DESCRIBED  IN THE  POOLING  AND
     SERVICING AGREEMENT REFERRED TO HEREIN.

Series 2001-1                            Aggregate Certificate Principal Balance
                                         of the Class MV-4 Certificates as of
Pass-Through Rate: Variable              the Issue Date: $____________

Cut-off Date and date of Pooling and     Denomination: $______________
Servicing Agreement: October 19, 2001
                                         Servicer: Litton Loan Servicing LP
First Distribution Date:
November 26, 2001                        Trustee: U.S. Bank National Association

No. 1                                    Trust Administrator: Citibank, N.A.

                                         Issue Date: November __, 2001

                                         CUSIP: ___________

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE OF
     THIS   CERTIFICATE   MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                     A-11-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, adjustable-rate, first lien and second lien mortgage loans (the
"Group II Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class MV-4 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class MV-4 Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer, the Trustee
and the Trust Administrator, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class MV-4 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class MV-4 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class MV-4 Certificates, or otherwise by check mailed
by first class mail to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such

                                     A-11-2

<PAGE>

distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trust Administrator for that purpose as
provided in the Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the related Formula Rate for such
Distribution Date and (ii) the related Net WAC Pass-Through Rate for such
Distribution Date.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Group II Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Group II Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, the Trust Administrator and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be

                                     A-11-3

<PAGE>

made for any such registration of transfer or exchange of Certificates, but the
Trust Administrator may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Servicer, the Trustee,
the Trust Administrator nor any such agent shall be affected by notice to the
contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Group II Mortgage Loan and REO
Property remaining in REMIC I-A and (ii) the purchase by the party designated in
the Agreement at a price determined as provided in the Agreement from REMIC I-B
of all the Group II Mortgage Loans and all property acquired in respect of such
Group II Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from REMIC I-B all the Group II Mortgage
Loans and all property acquired in respect of any Group II Mortgage Loan at a
price determined as provided in the Agreement. The exercise of such right will
effect early retirement of the Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Group II Mortgage Loans
at the time of purchase being less than 10% of the aggregate principal balance
of the Group II Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assume no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     A-11-4

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                     Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class MV-4 Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                   Authorized Signatory

                                     A-11-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------

TEN ENT - as tenants by the entireties                     (Cust) (Minor) under
                                                           Uniform Gifts
JT TEN - as joint tenants with right                              to Minors Act
         if survivorship and not as                         _______________
          tenants in common                                         (State)

          Additional abbreviations may also be used though not in the above
list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
_______________________________________________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

                                     A-11-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS
                            -------------------------

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to_____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________
___________________________. This information is provided by __________________
__________________________________________________________, the assignee named
above, or ________________________________________, as its agent.

                                     A-11-7

<PAGE>

                                  EXHIBIT A-12
                                  ------------

                          FORM OF CLASS OCF CERTIFICATE

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT  CONDUIT,"
     AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS CERTIFICATE IS SUBORDINATE TO THE CLASS AF-1 CERTIFICATES,  THE
     CLASS AF-2 CERTIFICATES, THE CLASS AF-3 CERTIFICATES, THE CLASS MF-1
     CERTIFICATES,  THE  CLASS  MF-2  CERTIFICATES  AND  THE  CLASS  MF-3
     CERTIFICATES  TO THE EXTENT  DESCRIBED IN THE POOLING AND  SERVICING
     AGREEMENT REFERRED TO HEREIN.

     THIS  CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED  UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED,  OR THE  SECURITIES  LAWS OF ANY
     STATE AND MAY NOT BE RESOLD OR  TRANSFERRED  UNLESS IT IS REGISTERED
     PURSUANT  TO  SUCH  ACT  AND  LAWS  OR IS  SOLD  OR  TRANSFERRED  IN
     TRANSACTIONS  THAT ARE EXEMPT FROM  REGISTRATION  UNDER SUCH ACT AND
     UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE
     PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.

     NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
     RETIREMENT  ARRANGEMENT  SUBJECT TO THE EMPLOYEE  RETIREMENT  INCOME
     SECURITY  ACT OF 1974,  AS AMENDED,  OR THE CODE WILL BE  REGISTERED
     EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.

                                  A-12-1

<PAGE>

Series 2001-1                            Aggregate Certificate Principal Balance
                                         of the Class OCF Certificates as of the
Pass-Through Rate: Variable              Issue Date: $____________

Cut-off Date and date of Pooling and     Denomination: $______________
Servicing Agreement: October 19, 2001
                                         Servicer: Litton Loan Servicing LP
First Distribution Date:
November 26, 2001                        Trustee: U.S. Bank National Association

No. ___                                  Trust Administrator: Citibank, N.A.

Aggregate Notional Amount of the Class
OCF Certificates as of the Issue Date:   Issue Date: November __, 2001
$__________
                                         CUSIP: ___________
Notional Amount: $_________________

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE OF
     THIS   CERTIFICATE   MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate, first lien and second lien mortgage loans (the
"Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that ___________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class OCF Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class OCF Certificates in REMIC II created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor

                                     A-12-2

<PAGE>

entity under the Agreement), the Servicer, the Trustee and the Trust
Administrator, a summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class OCF Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class OCF Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class OCF Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency appointed
by the Trust Administrator for that purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Group I Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Group I Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, the Trust Administrator and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this

                                     A-12-3

<PAGE>

Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee, the
Trust Administrator or the Servicer in their respective capacities as such),
together with copies of the written certification(s) of the Holder of the
Certificate desiring to effect the transfer and/or such Holder's prospective
transferee upon which such Opinion of Counsel is based. None of the Depositor,
the Trust Administrator or the Trustee is obligated to register or qualify the
Class of Certificates specified on the face hereof under the 1933 Act or any
other securities law or to take any action not otherwise required under the
Agreement to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Trust Administrator, the
Depositor and the Servicer against any liability that may result if the transfer
is not so exempt or is not made in accordance with such federal and state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trust Administrator

                                     A-12-4

<PAGE>

may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any transfer or exchange of
Certificates.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Servicer, the Trustee,
the Trust Administrator nor any such agent shall be affected by notice to the
contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Group I Mortgage Loan and REO Property
remaining in REMIC I-A and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I-A of
all the Group I Mortgage Loans and all property acquired in respect of such
Group I Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from REMIC I-A all the Group I Mortgage
Loans and all property acquired in respect of any Group I Mortgage Loan at a
price determined as provided in the Agreement. The exercise of such right will
effect early retirement of the Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Group I Mortgage Loans
at the time of purchase being less than 10% of the aggregate principal balance
of the Group I Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assume no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     A-12-5

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                     Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

         This is one of the Class OCF Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                     Authorized Signatory

                                     A-12-6

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------

TEN ENT - as tenants by the entireties                     (Cust) (Minor) under
                                                           Uniform Gifts
JT TEN - as joint tenants with right                              to Minors Act
         if survivorship and not as                         ___________________
          tenants in common                                           (State)

         Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
_______________________________________________________________________________
_______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

                                     A-12-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to_____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________
__________________________________________________________________. This
information is provided by ___________________________________________, the
assignee named above, or ________________________________________, as its agent.

                                     A-12-8

<PAGE>

                                  EXHIBIT A-13
                                  ------------

                          FORM OF CLASS OCV CERTIFICATE

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT  CONDUIT,"
     AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS CERTIFICATE IS SUBORDINATE TO THE CLASS AV-1 CERTIFICATES,  THE
     CLASS MV-1 CERTIFICATES, THE CLASS MV-2 CERTIFICATES, THE CLASS MV-3
     CERTIFICATES AND THE CLASS MV-4 CERTIFICATES TO THE EXTENT DESCRIBED
     IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

     THIS  CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED  UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED,  OR THE  SECURITIES  LAWS OF ANY
     STATE AND MAY NOT BE RESOLD OR  TRANSFERRED  UNLESS IT IS REGISTERED
     PURSUANT  TO  SUCH  ACT  AND  LAWS  OR IS  SOLD  OR  TRANSFERRED  IN
     TRANSACTIONS  THAT ARE EXEMPT FROM  REGISTRATION  UNDER SUCH ACT AND
     UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE
     PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.

     NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
     RETIREMENT  ARRANGEMENT  SUBJECT TO THE EMPLOYEE  RETIREMENT  INCOME
     SECURITY  ACT OF 1974,  AS AMENDED,  OR THE CODE WILL BE  REGISTERED
     EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.

                                     A-13-1

<PAGE>

Series 2001-1                            Aggregate Certificate Principal Balance
                                         of the Class OCF Certificates as of the
Pass-Through Rate: Variable              Issue Date: $____________

Cut-off Date and date of Pooling and     Denomination: $______________
Servicing Agreement: October 19, 2001
                                         Servicer: Litton Loan Servicing LP
First Distribution Date:
November 26, 2001                        Trustee: U.S. Bank National Association

No. __                                   Trust Administrator: Citibank, N.A.

Aggregate Notional Amount of the Class
OCF Certificates as of the Issue Date:   Issue Date: November __, 2001
$___________
                                         CUSIP: ___________
Notional Amount: $_________________

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE OF
     THIS   CERTIFICATE   MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, adjustable-rate, first lien and second lien mortgage loans (the
"Group II Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that ____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class OCV Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class OCV Certificates in REMIC II created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor

                                     A-13-2

<PAGE>

entity under the Agreement), the Servicer, the Trustee and the Trust
Administrator, a summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class OCV Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class OCV Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class OCV Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency appointed
by the Trust Administrator for that purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Group II Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Group II Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, the Trust Administrator and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this

                                     A-13-3

<PAGE>

Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee, the
Trust Administrator or the Servicer in their respective capacities as such),
together with copies of the written certification(s) of the Holder of the
Certificate desiring to effect the transfer and/or such Holder's prospective
transferee upon which such Opinion of Counsel is based. None of the Depositor,
the Trust Administrator or the Trustee is obligated to register or qualify the
Class of Certificates specified on the face hereof under the 1933 Act or any
other securities law or to take any action not otherwise required under the
Agreement to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Trust Administrator, the
Depositor and the Servicer against any liability that may result if the transfer
is not so exempt or is not made in accordance with such federal and state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trust Administrator

                                     A-13-4

<PAGE>

may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any transfer or exchange of
Certificates.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Servicer, the Trustee,
the Trust Administrator nor any such agent shall be affected by notice to the
contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Group II Mortgage Loan and REO
Property remaining in REMIC I-A and (ii) the purchase by the party designated in
the Agreement at a price determined as provided in the Agreement from REMIC I-B
of all the Group II Mortgage Loans and all property acquired in respect of such
Group II Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from REMIC I-B all the Group II Mortgage
Loans and all property acquired in respect of any Group II Mortgage Loan at a
price determined as provided in the Agreement. The exercise of such right will
effect early retirement of the Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Group II Mortgage Loans
at the time of purchase being less than 10% of the aggregate principal balance
of the Group II Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assume no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     A-13-5

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                  Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class OCV Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                   Authorized Signatory

                                     A-13-6

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------

TEN ENT - as tenants by the entireties                     (Cust) (Minor) under
                                                           Uniform Gifts
JT TEN - as joint tenants with right                              to Minors Act
         if survivorship and not as                         __________________
          tenants in common                                       (State)

          Additional abbreviations may also be used though not in the above
list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
_______________________________________________________________________________
_______________________________________________________________________________.

Dated:

                                        ________________________________________
                                        Signature by or on behalf of assignor

                                        ________________________________________
                                        Signature Guaranteed

                                     A-13-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to_____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________
___________________________. This information is provided by __________________
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                     A-13-8

<PAGE>

                                  EXHIBIT A-14
                                  ------------

                          FORM OF CLASS PF CERTIFICATE

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT  CONDUIT,"
     AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS  CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED  UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED,  OR THE  SECURITIES  LAWS OF ANY
     STATE AND MAY NOT BE RESOLD OR  TRANSFERRED  UNLESS IT IS REGISTERED
     PURSUANT  TO  SUCH  ACT  AND  LAWS  OR IS  SOLD  OR  TRANSFERRED  IN
     TRANSACTIONS  THAT ARE EXEMPT FROM  REGISTRATION  UNDER SUCH ACT AND
     UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE
     PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.

     NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
     RETIREMENT  ARRANGEMENT  SUBJECT TO THE EMPLOYEE  RETIREMENT  INCOME
     SECURITY  ACT OF 1974,  AS AMENDED,  OR THE CODE WILL BE  REGISTERED
     EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.

Series 2001-1                            Aggregate Certificate Principal Balance
                                         of the Class PF Certificates as of the
Cut-off Date and date of Pooling and     Issue Date: $____________
Servicing Agreement: October 19, 2001
                                         Denomination: $______________
First Distribution Date:
November 26, 2001                        Servicer: Litton Loan Servicing LP

No. ___                                  Trustee: U.S. Bank National Association

                                         Trust Administrator: Citibank, N.A.

                                         Issue Date: November __, 2001

                                  A-14-1

<PAGE>

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE OF
     THIS   CERTIFICATE   MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                  ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate, first lien and second lien mortgage loans (the
"Mortgage Loans") formed and sold by

              SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that __________ is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class PF Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class PF Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer, the Trustee
and the Trust Administrator, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class PF Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to

                                     A-14-2

<PAGE>

such Distribution Date and is the registered owner of Class PF Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class PF Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency appointed
by the Trust Administrator for that purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Group I Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Group I Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, the Trust Administrator and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer

                                     A-14-3

<PAGE>

of this Certificate is to be made without registration or qualification, the
Trustee shall require receipt of (i) if such transfer is purportedly being made
in reliance upon Rule 144A under the 1933 Act, written certifications from the
Holder of the Certificate desiring to effect the transfer, and from such
Holder's prospective transferee, substantially in the forms attached to the
Agreement as Exhibit F-1, and (ii) in all other cases, an Opinion of Counsel
satisfactory to it that such transfer may be made without such registration or
qualification (which Opinion of Counsel shall not be an expense of the Trust
Fund or of the Depositor, the Trustee, the Trust Administrator or the Servicer
in their respective capacities as such), together with copies of the written
certification(s) of the Holder of the Certificate desiring to effect the
transfer and/or such Holder's prospective transferee upon which such Opinion of
Counsel is based. None of the Depositor, the Trust Administrator or the Trustee
is obligated to register or qualify the Class of Certificates specified on the
face hereof under the 1933 Act or any other securities law or to take any action
not otherwise required under the Agreement to permit the transfer of such
Certificates without registration or qualification. Any Holder desiring to
effect a transfer of this Certificate shall be required to indemnify the
Trustee, the Trust Administrator, the Depositor and the Servicer against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trust Administrator may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Servicer, the Trustee,
the Trust Administrator nor any such agent shall be affected by notice to the
contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Group I Mortgage Loan and REO Property
remaining in REMIC I-A and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I-A of
all the Group I Mortgage Loans and all property acquired in respect of such
Group I Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from REMIC I-A all the Group I Mortgage
Loans and all property acquired in respect of any Group I Mortgage Loan at a

                                     A-14-4

<PAGE>

price determined as provided in the Agreement. The exercise of such right will
effect early retirement of the Certificates; however, such right to purchase is
subject to the aggregate Stated Principal Balance of the Group I Mortgage Loans
at the time of purchase being less than 10% of the aggregate principal balance
of the Group I Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assume no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     A-14-5

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                   Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

         This is one of the Class PF Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                  Authorized Signatory

                                     A-14-6

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------

TEN ENT - as tenants by the entireties                     (Cust) (Minor) under
                                                           Uniform Gifts
JT TEN - as joint tenants with right                              to Minors Act
         if survivorship and not as                         _________________
          tenants in common                                           (State)

          Additional abbreviations may also be used though not in the above
list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
______________________________________________________________________________
______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

                                     A-14-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ___________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________
___________________________. This information is provided by ___________________
________________________, the assignee named above, or _________________________
______________________________________________________, as its agent.

                                     A-14-8

<PAGE>

                                  EXHIBIT A-15
                                  ------------

                          FORM OF CLASS PV CERTIFICATE

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT  CONDUIT,"
     AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS  CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED  UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED,  OR THE  SECURITIES  LAWS OF ANY
     STATE AND MAY NOT BE RESOLD OR  TRANSFERRED  UNLESS IT IS REGISTERED
     PURSUANT  TO  SUCH  ACT  AND  LAWS  OR IS  SOLD  OR  TRANSFERRED  IN
     TRANSACTIONS  THAT ARE EXEMPT FROM  REGISTRATION  UNDER SUCH ACT AND
     UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE
     PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.

     NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
     RETIREMENT  ARRANGEMENT  SUBJECT TO THE EMPLOYEE  RETIREMENT  INCOME
     SECURITY  ACT OF 1974,  AS AMENDED,  OR THE CODE WILL BE  REGISTERED
     EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.

Series 2001-1                            Aggregate Certificate Principal Balance
                                         of the Class PV Certificates as of the
Cut-off Date and date of Pooling and     Issue Date: $____________
Servicing Agreement: October 19, 2001
                                         Denomination: $______________
First Distribution Date:
November 26, 2001                        Servicer: Litton Loan Servicing LP

No. ___                                  Trustee: U.S. Bank National Association

                                         Trust Administrator: Citibank, N.A.

                                         Issue Date: November __, 2001

                                     A-15-1

<PAGE>

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE  PRINCIPAL  BALANCE OF
     THIS   CERTIFICATE   MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, adjustable-rate, first lien and second lien mortgage loans (the
"Group II Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that ____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class PV Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class PV Certificates in REMIC II created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Servicer, the
Trustee and the Trust Administrator, a summary of certain of the pertinent
provisions of which is set forth hereafter. To the extent not defined herein,
the capitalized terms used herein have the meanings assigned in the Agreement.
This Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class PV Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to

                                     A-15-2

<PAGE>

such Distribution Date and is the registered owner of Class PV Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class PV Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency appointed
by the Trust Administrator for that purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Group II Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Group II Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, the Trust Administrator and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer

                                     A-15-3

<PAGE>

of this Certificate is to be made without registration or qualification, the
Trustee shall require receipt of (i) if such transfer is purportedly being made
in reliance upon Rule 144A under the 1933 Act, written certifications from the
Holder of the Certificate desiring to effect the transfer, and from such
Holder's prospective transferee, substantially in the forms attached to the
Agreement as Exhibit F-1, and (ii) in all other cases, an Opinion of Counsel
satisfactory to it that such transfer may be made without such registration or
qualification (which Opinion of Counsel shall not be an expense of the Trust
Fund or of the Depositor, the Trustee, the Trust Administrator or the Servicer
in their respective capacities as such), together with copies of the written
certification(s) of the Holder of the Certificate desiring to effect the
transfer and/or such Holder's prospective transferee upon which such Opinion of
Counsel is based. None of the Depositor, the Trust Administrator or the Trustee
is obligated to register or qualify the Class of Certificates specified on the
face hereof under the 1933 Act or any other securities law or to take any action
not otherwise required under the Agreement to permit the transfer of such
Certificates without registration or qualification. Any Holder desiring to
effect a transfer of this Certificate shall be required to indemnify the
Trustee, the Trust Administrator, the Depositor and the Servicer against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trust Administrator may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, the Servicer, the Trustee,
the Trust Administrator nor any such agent shall be affected by notice to the
contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Group II Mortgage Loan and REO
Property remaining in REMIC I-A and (ii) the purchase by the party designated in
the Agreement at a price determined as provided in the Agreement from REMIC I-B
of all the Group II Mortgage Loans and all property acquired in respect of such
Group II Mortgage Loans. The Agreement permits, but does not require, the party
designated in the Agreement to purchase from REMIC I-B all the Group II Mortgage
Loans and all property acquired in respect of any Group II Mortgage Loan

                                     A-15-4

<PAGE>

at a price determined as provided in the Agreement. The exercise of such right
will effect early retirement of the Certificates; however, such right to
purchase is subject to the aggregate Stated Principal Balance of the Group II
Mortgage Loans at the time of purchase being less than 10% of the aggregate
principal balance of the Group II Mortgage Loans as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assume no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     A-15-5

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                      Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

         This is one of the Class PV Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                    Authorized Signatory

                                     A-15-6

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------

TEN ENT - as tenants by the entireties                     (Cust) (Minor) under
                                                           Uniform Gifts
JT TEN - as joint tenants with right                             to Minors Act
         if survivorship and not as                         __________________
          tenants in common                                           (State)

          Additional abbreviations may also be used though not in the above
list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
______________________________________________________________________________
______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

                                     A-15-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________
___________________________. This information is provided by __________________
_________________________, the assignee named above, or _______________________
________________________________________________________, as its agent.

                                     A-15-8

<PAGE>

                                  EXHIBIT A-16
                                  ------------

                           FORM OF CLASS R CERTIFICATE

     THIS  CERTIFICATE  MAY NOT BE  TRANSFERRED  TO A  NON-UNITED  STATES
     PERSON.

     SOLELY FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE IS A
     "RESIDUAL  INTEREST" IN A "REAL ESTATE MORTGAGE  INVESTMENT CONDUIT"
     ("REMIC"),  AS THOSE TERMS ARE  DEFINED,  RESPECTIVELY,  IN SECTIONS
     860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE
     MADE ONLY IN ACCORDANCE  WITH THE  PROVISIONS OF SECTION 5.02 OF THE
     POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

     THIS  CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED  UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED,  OR THE  SECURITIES  LAWS OF ANY
     STATE AND MAY NOT BE RESOLD OR  TRANSFERRED  UNLESS IT IS REGISTERED
     PURSUANT  TO  SUCH  ACT  AND  LAWS  OR IS  SOLD  OR  TRANSFERRED  IN
     TRANSACTIONS  THAT ARE EXEMPT FROM  REGISTRATION  UNDER SUCH ACT AND
     UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE
     PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.

     NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
     RETIREMENT  ARRANGEMENT  SUBJECT TO THE EMPLOYEE  RETIREMENT  INCOME
     SECURITY  ACT OF 1974,  AS AMENDED,  OR THE CODE WILL BE  REGISTERED
     EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.

     ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE
     MADE ONLY IF THE  PROPOSED  TRANSFEREE  PROVIDES (I) AN AFFIDAVIT TO
     THE TRUSTEE THAT (A) SUCH TRANSFEREE IS NOT (1) THE UNITED STATES OR
     ANY POSSESSION THEREOF, ANY STATE OR POLITICAL  SUBDIVISION THEREOF,
     ANY  FOREIGN  GOVERNMENT,  ANY  INTERNATIONAL  ORGANIZATION,  OR ANY
     AGENCY  OR  INSTRUMENTALITY  OF  ANY  OF  THE  FOREGOING,   (2)  ANY
     ORGANIZATION  (OTHER THAN A COOPERATIVE  DESCRIBED IN SECTION 521 OF
     THE CODE)  THAT IS EXEMPT  FROM THE TAX  IMPOSED BY CHAPTER 1 OF THE
     CODE  UNLESS  SUCH  ORGANIZATION  IS SUBJECT  TO THE TAX  IMPOSED BY
     SECTION 511 OF THE CODE, (3) ANY  ORGANIZATION  DESCRIBED IN SECTION
     1381(A)(2)(C)  OF  THE  CODE  (ANY  SUCH  PERSON  DESCRIBED  IN  THE
     FOREGOING CLAUSES (1), (2) OR

                                  A-16-1

<PAGE>

     (3)  SHALL   HEREINAFTER   BE   REFERRED   TO  AS  A   "DISQUALIFIED
     ORGANIZATION")  OR (4) AN AGENT OF A DISQUALIFIED  ORGANIZATION  AND
     (B) NO  PURPOSE OF SUCH  TRANSFER  IS TO IMPEDE  THE  ASSESSMENT  OR
     COLLECTION  OF TAX,  AND  (II)  SUCH  TRANSFEREE  SATISFIES  CERTAIN
     ADDITIONAL  CONDITIONS  RELATING TO THE  FINANCIAL  CONDITION OF THE
     PROPOSED   TRANSFEREE.   NOTWITHSTANDING  THE  REGISTRATION  IN  THE
     CERTIFICATE  REGISTER OF ANY TRANSFER,  SALE OR OTHER DISPOSITION OF
     THIS  CERTIFICATE  TO A DISQUALIFIED  ORGANIZATION  OR AN AGENT OF A
     DISQUALIFIED  ORGANIZATION,  SUCH REGISTRATION SHALL BE DEEMED TO BE
     OF NO LEGAL FORCE OR EFFECT  WHATSOEVER AND SUCH PERSON SHALL NOT BE
     DEEMED  TO  BE  A  CERTIFICATEHOLDER   FOR  ANY  PURPOSE  HEREUNDER,
     INCLUDING,  BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS
     CERTIFICATE.  EACH HOLDER OF THIS  CERTIFICATE BY ACCEPTANCE  HEREOF
     SHALL  BE  DEEMED  TO  HAVE  CONSENTED  TO THE  PROVISIONS  OF  THIS
     PARAGRAPH AND THE  PROVISIONS OF SECTION  5.02(D) OF THE POOLING AND
     SERVICING  AGREEMENT  REFERRED  TO  HEREIN.  ANY  PERSON  THAT  IS A
     DISQUALIFIED  ORGANIZATION IS PROHIBITED  FROM ACQUIRING  BENEFICIAL
     OWNERSHIP OF THIS CERTIFICATE.

Series 2001-1                            Aggregate Percentage Interest of the
                                         Class R Certificates as of the
Cut-off Date and date of Pooling and     Issue Date: 100.00%
Servicing Agreement: October 19, 2001
                                         Servicer: Litton Loan Servicing LP

First Distribution Date:                 Trustee: U.S. Bank National Association
November 26, 2001

No. __                                   Trust Administrator: Citibank, N.A.

                                         Issue Date: November __, 2001

                                     A-16-2

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family,
adjustable-rate and fixed-rate, first lien mortgage loans (the "Mortgage Loans")
formed and sold by

              SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS  CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS  MORTGAGE  SECURITIES VII, INC., THE SERVICER,  THE
     TRUSTEE,   THE  TRUST  ADMINISTRATOR  OR  ANY  OF  THEIR  RESPECTIVE
     AFFILIATES.  NEITHER THIS  CERTIFICATE  NOR THE UNDERLYING  MORTGAGE
     LOANS ARE GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY OF THE UNITED
     STATES.

          This certifies that ___________ is the registered owner of a
Percentage Interest (as specified above) in that certain beneficial ownership
interest evidenced by all the Certificates of the Class to which this
Certificate belongs created pursuant to a Pooling and Servicing Agreement, dated
as specified above (the "Agreement"), among Salomon Brothers Mortgage Securities
VII, Inc. (hereinafter called the "Depositor," which term includes any successor
entity under the Agreement), the Servicer, the Trustee and the Trust
Administrator, a summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class R Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trust Administrator by wire
transfer in immediately available funds to the account of the Person entitled
thereto if such Person shall have so notified the Trust Administrator in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class R Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class R Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trust Administrator of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency appointed
by the Trust Administrator for that purpose as provided in the Agreement.

                                     A-16-3

<PAGE>

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the Trust Administrator and the rights
of the Certificateholders under the Agreement at any time by the Depositor, the
Servicer, the Trustee and the Trust Administrator with the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trust Administrator as
provided in the Agreement, duly endorsed by, or accompanied by an assignment in
the form below or other written instrument of transfer in form satisfactory to
the Trust Administrator duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trust Administrator shall require receipt of
(i) if such transfer is purportedly being made in reliance upon Rule 144A under
the 1933 Act, written certifications from the Holder of the Certificate desiring
to effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee, the
Trust Administrator or the Servicer in their respective capacities as such),
together with copies of the written certification(s) of the Holder of the
Certificate desiring to effect the transfer and/or such Holder's prospective
transferee upon which such Opinion of Counsel is based. None of the Depositor,
the Trust Administrator or

                                     A-16-4

<PAGE>

the Trustee is obligated to register or qualify the Class of Certificates
specified on the face hereof under the 1933 Act or any other securities law or
to take any action not otherwise required under the Agreement to permit the
transfer of such Certificates without registration or qualification. Any Holder
desiring to effect a transfer of this Certificate shall be required to indemnify
the Trustee, the Trust Administrator, the Depositor and the Servicer against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trust Administrator may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.

          Prior to registration of any transfer, sale or other disposition of
this Certificate, the proposed transferee shall provide to the Trust
Administrator (i) an affidavit to the effect that such transferee is any Person
other than a Disqualified Organization or the agent (including a broker, nominee
or middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R Certificates. Notwithstanding the registration
in the Certificate Register of any transfer, sale or other disposition of this
Certificate to a Disqualified Organization or an agent (including a broker,
nominee or middleman) of a Disqualified Organization, such registration shall be
deemed to be of no legal force or effect whatsoever and such Person shall not be
deemed to be a Certificateholder for any purpose, including, but not limited to,
the receipt of distributions in respect of this Certificate.

          The Holder of this Certificate, by its acceptance hereof, shall be
deemed to have consented to the provisions of Section 5.02 of the Agreement and
to any amendment of the Agreement deemed necessary by counsel of the Depositor
to ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the Trust Fund to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC.

          The Depositor, the Servicer, the Trustee, the Trust Administrator and
any agent of the Depositor, the Servicer, the Trustee or the Trust Administrator
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor,

                                     A-16-5

<PAGE>

the Servicer, the Trustee, the Trust Administrator nor any such agent shall be
affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the [Trustee] and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Mortgage Loan and REO Property
remaining in REMIC I-A and REMIC I-B and (ii) the purchase by the party
designated in the Agreement at a price determined as provided in the Agreement
from REMIC I-A and REMIC I-B of all the Mortgage Loans and all property acquired
in respect of such Mortgage Loans. The Agreement permits, but does not require,
the party designated in the Agreement to purchase from (i) REMIC I-A all the
Group I Mortgage Loans and all property acquired in respect of any Group I
Mortgage Loan at a price determined as provided in the Agreement and (ii) REMIC
I-B all the Group II Mortgage Loans and all property acquired in respect of any
Group II Mortgage Loan at a price determined as provided in the Agreement. The
exercise of such right will effect early retirement of the Certificates;
however, such right to purchase is subject to the aggregate Stated Principal
Balance of the Group I Mortgage Loans and Group II Mortgage Loans at the time of
purchase being less than 10% of the aggregate principal balance of the Group I
Mortgage Loans and Group II Mortgage Loans, respectively as of the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee and the Trust Administrator assumes no responsibility
for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trust Administrator, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     A-16-6

<PAGE>

          IN WITNESS WHEREOF, the Trust Administrator has caused this
Certificate to be duly executed.

Dated: November __, 2001

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                   Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class PV Certificates referred to in the
within-mentioned Agreement.

                                         CITIBANK, N.A., as Trust Administrator

                                         By:___________________________________
                                                   Authorized Signatory

                                     A-16-7

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------

TEN ENT - as tenants by the entireties                     (Cust) (Minor) under
                                                           Uniform Gifts
JT TEN - as joint tenants with right                              to Minors Act
         if survivorship and not as                         ___________________
          tenants in common                                         (State)

          Additional abbreviations may also be used though not in the above
list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto ______________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
______________________________________________________________________________
______________________________________________________________________________.

Dated:

                                         _______________________________________
                                         Signature by or on behalf of assignor

                                         _______________________________________
                                         Signature Guaranteed

                                     A-16-8

<PAGE>

                           DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________
___________________________.  This information is provided by _________________
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                     A-16-9

<PAGE>

                                    EXHIBIT B
                                    ---------

                                   [Reserved]

                                       B-1

<PAGE>

                                   EXHIBIT C-1
                                   -----------

                     FORM OF TRUSTEE'S INITIAL CERTIFICATION

                                                     [Date]

Salomon Brothers Mortgage Securities VII, Inc.
390 Greenwich Street, 4th Floor
New York, NY 10013

Litton Loan Servicing LP
5373 West Alabama
Houston, Texas 77056

     Re:  Pooling and Servicing Agreement, dated as of October 19, 2001, among
          Salomon Brothers Mortgage Securities VII, Inc., Litton Loan Servicing
          LP, U.S. Bank National Association and Citibank, N.A. as Trust
          Administrator, Asset Backed Pass-Through Certificates, Series 2001-1
          --------------------------------------------------------------------

Ladies and Gentlemen:

          Attached is the Trustee's preliminary exceptions in accordance with
Section 2.02 of the referenced Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"). Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them in the Pooling and Servicing Agreement.

          The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
Pooling and Servicing Agreement.

          The Trustee makes no representations as to: (i) the validity,
legality, sufficiency, enforceability or genuineness of any of the documents
contained in the Mortgage File of any of the Mortgage Loans identified on the
Mortgage Loan Schedule, (ii) the collectability, insurability, effectiveness or
suitability of any such Mortgage Loan, or (iii) whether any Mortgage File
included any of the documents specified in clause (v) of Section 2.01 of the
Pooling and Servicing Agreement.

                                         U.S. BANK NATIONAL ASSOCIATION

                                         By:______________________________
                                         Name:
                                         Title:

                                      C-2-1

<PAGE>

                                   EXHIBIT C-2
                                   -----------

                      FORM OF TRUSTEE'S FINAL CERTIFICATION

                                                       [Date]

Salomon Brothers Mortgage Securities VII, Inc.
390 Greenwich Street, 4th Floor
New York, NY 10013

Litton Loan Servicing LP
5373 West Alabama
Houston, Texas 77056

     Re:  Pooling and Servicing Agreement, dated as of October 19, 2001, among
          Salomon Brothers Mortgage Securities VII, Inc., Litton Loan Servicing
          LP, U.S. Bank National Association and Citibank, N.A. as Trust
          Administrator, Asset Backed Pass-Through Certificates, Series 2001-1
          --------------------------------------------------------------------

Ladies and Gentlemen:

          In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or listed on the attachment hereto), it or a Custodian on its
behalf has received:

          (i) the original recorded Mortgage, and the original recorded power of
     attorney, if the Mortgage was executed pursuant to a power of attorney, or
     a certified copy thereof in those instances where the public recording
     office retains the original or where the original has been lost; and

          (ii) an original Assignment in recordable form or a recorded
     Assignment to the Trustee together with the original recorded Assignment or
     Assignments showing a complete chain of assignment from the originator, or
     a certified copy of such Assignments in those instances where the public
     recording retains the original or where original has been lost; and

          (iii) the original lender's title insurance policy.

          The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in the Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.

                                      C-2-1

<PAGE>

          Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.

                                         U.S. BANK NATIONAL ASSOCIATION

                                         By:________________________________
                                         Name:
                                         Title:

                                      C-2-2

<PAGE>

                                    EXHIBIT D
                                    ---------

                    FORM OF MORTGAGE LOAN PURCHASE AGREEMENT

                                       D-1

<PAGE>

                        MORTGAGE LOAN PURCHASE AGREEMENT

                  This is a Mortgage Loan Purchase Agreement (this "Agreement"),
dated November 8, 2001, between Salomon Brothers Realty Corp., a New York
corporation (the "Seller") and Salomon Brothers Mortgage Securities VII, Inc., a
Delaware corporation (the "Purchaser").

                              PRELIMINARY STATEMENT

                  The Seller intends to sell the Mortgage Loans (as hereinafter
identified) to the Purchaser on the terms and subject to the conditions set
forth in this Agreement. The Purchaser intends to deposit the Mortgage Loans
into a mortgage pool comprising the Trust Fund. The Trust Fund will be evidenced
by a single series of mortgage pass-through certificates designated as Series
2001-1 (the "Certificates"). The Certificates will consist of sixteen classes of
certificates. The Certificates will be issued pursuant to a Pooling and
Servicing Agreement for Series 2001-1, dated as of October 19, 2001 (the
"Pooling and Servicing Agreement"), among the Depositor as depositor, Litton
Loan Servicing LP as servicer (the "Servicer"), U.S. Bank National Association
as trustee (the "Trustee") and Citibank, N.A. as trust administrator (the "Trust
Administrator"). Capitalized terms used but not defined herein shall have the
meanings set forth in the Pooling and Servicing Agreement.

                  The parties hereto agree as follows:

                  SECTION 1. AGREEMENT TO PURCHASE. The Seller agrees to sell
and the Purchaser agrees to purchase, on or before November 9, 2001 (the
"Closing Date"), certain fixed-rate and adjustable-rate conventional, one- to
four-family, residential mortgage loans (the "Mortgage Loans"), having an
aggregate principal balance as of the close of business on October 19, 2001,
(the "Cut-off Date") of approximately $96,305,215.64 (the "Closing Balance"),
after giving effect to all payments due on the Mortgage Loans on or before the
Cut-off Date, whether or not received including the right to any Prepayment
Charges payable by the related Mortgagors in connection with any Principal
Prepayments on the Mortgage Loans.

                  SECTION 2. MORTGAGE LOAN SCHEDULE. The Purchaser and the
Seller have agreed upon which of the mortgage loans owned by the Seller are to
be purchased by the Purchaser pursuant to this Agreement and the Seller will
prepare or cause to be prepared on or prior to the Closing Date a final schedule
(the "Closing Schedule") that shall describe such Mortgage Loans and set forth
all of the Mortgage Loans to be purchased under this Agreement, including the
Prepayment Charges. The Closing Schedule will conform to the requirements set
forth in this Agreement and to the definition of "Mortgage Loan Schedule" under
the Pooling and Servicing Agreement. The Closing Schedule shall be used as the
Mortgage Loan Schedule under the Pooling and Servicing Agreement.

                  SECTION 3. CONSIDERATION.

                  (a) In consideration for the Mortgage Loans to be purchased
hereunder, the Purchaser shall, as described in Section 8, pay to or upon the
order of the Seller in immediately available funds an amount (the "Purchase
Price") equal to the net sale proceeds of the Certificates.

<PAGE>

                  (b) The Purchaser or any assignee, transferee or designee of
the Purchaser shall be entitled to all scheduled payments of principal due after
the Cut-off Date, all other payments of principal due and collected after the
Cut-off Date, and all payments of interest on the Mortgage Loans allocable to
the period after the Cut-off Date. All scheduled payments of principal and
interest due on or before the Cut-off Date and collected after the Cut-off Date
shall belong to the Seller.

                  (c) Pursuant to the Pooling and Servicing Agreement, the
Purchaser will assign all of its right, title and interest in and to the
Mortgage Loans, together with its rights under this Agreement, to the Trustee
for the benefit of the Certificateholders.

                  SECTION 4. TRANSFER OF THE MORTGAGE LOANS.

                  (a) POSSESSION OF MORTGAGE FILES. The Seller does hereby sell,
transfer, assign, set over and convey to the Purchaser, without recourse but
subject to the terms of this Agreement, all of its right, title and interest in,
to and under the Mortgage Loans, including the related Prepayment Charges. The
contents of each Mortgage File not delivered to the Purchaser or to any
assignee, transferee or designee of the Purchaser on or prior to the Closing
Date are and shall be held in trust by the Seller for the benefit of the
Purchaser or any assignee, transferee or designee of the Purchaser. Upon the
sale of the Mortgage Loans, the ownership of each Mortgage Note, the related
Mortgage and the other contents of the related Mortgage File is vested in the
Purchaser and the ownership of all records and documents with respect to the
related Mortgage Loan prepared by or that come into the possession of the Seller
on or after the Closing Date shall immediately vest in the Purchaser and shall
be delivered immediately to the Purchaser or as otherwise directed by the
Purchaser.

                  (b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. The Seller will, on
or prior to the Closing Date, deliver or cause to be delivered to the Purchaser
or any assignee, transferee or designee of the Purchaser each of the following
documents for each Mortgage Loan:

                  (i) the original Mortgage Note, endorsed in blank or in the
         following form: "Pay to the order of U. S. Bank National Association,
         as Trustee under the applicable agreement, without recourse," with all
         prior and intervening endorsements showing a complete chain of
         endorsement from the originator to the Person so endorsing to the
         Trustee;

                  (ii) the original Mortgage with evidence of recording thereon,
         and the original recorded power of attorney, if the Mortgage was
         executed pursuant to a power of attorney, with evidence of recording
         thereon;

                  (iii) an original Assignment in blank;

                  (iv) the original recorded Assignment or Assignments showing a
         complete chain of assignment from the originator to the Person
         assigning the Mortgage to the Trustee as contemplated by the
         immediately preceding clause (iii);

                  (v) the original or copies of each assumption, modification,
         written assurance or substitution agreement, if any; and

                                       -2-

<PAGE>

                  (vi) the original lender's title insurance policy (except with
         respect to any Mortgage Loan originated with a Principal Balance of
         $150,000 or less), together with all endorsements or riders that were
         issued with or subsequent to the issuance of such policy, insuring the
         priority of the Mortgage as a first lien or second lien on the
         Mortgaged Property represented therein as a fee interest vested in the
         Mortgagor, or in the event such original title policy is unavailable, a
         written commitment or uniform binder or preliminary report of title
         issued by the title insurance or escrow company.

                  The Seller promptly shall (within sixty Business Days
following the later of the Closing Date and the date of the receipt by the
Seller of the recording information for a Mortgage but in no event later than
ninety days following the Closing Date) submit or cause to be submitted for
recording, at no expense to the Purchaser (or the Trust Fund, the Trustee or the
Trust Administrator under the Pooling and Servicing Agreement), in the
appropriate public office for real property records, each Assignment referred to
in clauses (b)(iii) and (b)(iv) of this Section 4 and shall execute or cause to
be executed each original Assignment in the following form: "U.S. Bank National
Association, as Trustee under the applicable agreement." In the event that any
such Assignment is lost or returned unrecorded because of a defect therein, the
Seller promptly shall prepare or cause to be prepared a substitute Assignment or
cure such defect, as the case may be, and thereafter cause each such Assignment
to be duly recorded.

                  With respect to a maximum of approximately 2.0% of the
Mortgage Loans, by outstanding principal balance of the Mortgage Loans as of the
Cut-off Date, if any original Mortgage Note referred to in Section 4(b)(i) above
cannot be located, the obligations of the Seller to deliver such documents shall
be deemed to be satisfied upon delivery to the Purchaser of a photocopy of such
Mortgage Note, if available, with a lost note affidavit substantially in the
form of Exhibit K to the Pooling and Servicing Agreement. If any of the original
Mortgage Notes for which a lost note affidavit was delivered to the Purchaser is
subsequently located, such original Mortgage Note shall be delivered to the
Purchaser within three Business Days. If any of the documents referred to in
Sections 4(b)(ii), (iii) or (iv) above has, as of the Closing Date, been
submitted for recording but either (x) has not been returned from the applicable
public recording office or (y) has been lost or such public recording office has
retained the original of such document, the obligations of the Seller to deliver
such documents shall be deemed to be satisfied upon (1) delivery to the
Purchaser of a copy of each such document certified by the Seller in the case of
(x) above or the applicable public recording office in the case of (y) above to
be a true and complete copy of the original that was submitted for recording and
(2) if such copy is certified by the Seller, delivery to the Purchaser promptly
upon receipt thereof of either the original or a copy of such document certified
by the applicable public recording office to be a true and complete copy of the
original. Notice shall be provided to the Trustee, the Trust Administrator and
the Rating Agencies by the Seller if delivery pursuant to clause (2) above will
be made more than 180 days after the Closing Date. If the original lender's
title insurance policy was not delivered pursuant to Section 4(b)(vi) above, the
Seller shall deliver or cause to be delivered to the Purchaser, promptly after
receipt thereof, the original lender's title insurance policy. The Seller shall
deliver or cause to be delivered to the Purchaser promptly upon receipt thereof
any other original documents constituting a part of a Mortgage File received
with respect to any Mortgage Loan, including, but not limited to, any original
documents evidencing an assumption or modification of any Mortgage Loan.

                                       -3-

<PAGE>

                  Each original document relating to a Mortgage Loan which is
not delivered to the Purchaser or its assignee, transferee or designee, if held
by the Seller, shall be so held for the benefit of the Purchaser, its assignee,
transferee or designee.

                  (c) ACCEPTANCE OF MORTGAGE LOANS. The documents delivered
pursuant to Section 4(b) hereof shall be reviewed by the Purchaser or any
assignee, transferee or designee of the Purchaser at any time before or after
the Closing Date (and with respect to each document permitted to be delivered
after the Closing Date, within seven days of its delivery) to ascertain that all
required documents have been executed and received and that such documents
relate to the Mortgage Loans identified on the Mortgage Loan Schedule.

                  (d) TRANSFER OF INTEREST IN AGREEMENTS. The Purchaser has the
right to assign its interest under this Agreement, in whole or in part, to the
Trustee, as may be required to effect the purposes of the Pooling and Servicing
Agreement, without the consent of the Seller, and the assignee shall succeed to
the rights and obligations hereunder of the Purchaser. Any expense reasonably
incurred by or on behalf of the Purchaser or the Trustee in connection with
enforcing any obligations of the Seller under this Agreement will be promptly
reimbursed by the Seller.

                  (e) EXAMINATION OF MORTGAGE FILES. Prior to the Closing Date,
the Seller shall either (i) deliver in escrow to the Purchaser, or to any
assignee, transferee or designee of the Purchaser for examination, the Mortgage
File pertaining to each Mortgage Loan or (ii) make such Mortgage Files available
to the Purchaser or to any assignee, transferee or designee of the Purchaser for
examination. Such examination may be made by the Purchaser or the Trustee, and
their respective designees, upon reasonable notice to the Seller during normal
business hours before the Closing Date and within 60 days after the Closing
Date. If any such person makes such examination prior to the Closing Date and
identifies any Mortgage Loans that do not conform to the requirements of the
Purchaser as described in this Agreement, such Mortgage Loans shall be deleted
from the Closing Schedule. The Purchaser may, at its option and without notice
to the Seller, purchase all or part of the Mortgage Loans without conducting any
partial or complete examination. The fact that the Purchaser or any person has
conducted or has failed to conduct any partial or complete examination of the
Mortgage Files shall not affect the rights of the Purchaser or any assignee,
transferee or designee of the Purchaser to demand repurchase or other relief as
provided herein or under the Pooling and Servicing Agreement.

         SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER.

                  (a) The Seller hereby represents and warrants to the
Originator and the Purchaser, as of the date hereof and as of the Closing Date,
and covenants, that:

                  (i) The Seller is duly organized, validly existing and in good
         standing as a corporation under the laws of the State of New York with
         full corporate power and authority to conduct its business as presently
         conducted by it to the extent material to the consummation of the
         transactions contemplated herein. The Seller has the full corporate
         power and authority to own the Mortgage Loans and to transfer and
         convey the Mortgage Loans to the Purchaser and has the full corporate
         power and authority to execute and deliver,

                                       -4-

<PAGE>

         engage in the transactions contemplated by, and perform and observe the
         terms and conditions of this Agreement.

                  (ii) The Seller has duly authorized the execution, delivery
         and performance of this Agreement, has duly executed and delivered this
         Agreement, and this Agreement, assuming due authorization, execution
         and delivery by the Purchaser, constitutes a legal, valid and binding
         obligation of the Seller, enforceable against it in accordance with its
         terms except as the enforceability thereof may be limited by
         bankruptcy, insolvency or reorganization or by general principles of
         equity.

                  (iii) The execution, delivery and performance of this
         Agreement by the Seller (x) does not conflict and will not conflict
         with, does not breach and will not result in a breach of and does not
         constitute and will not constitute a default (or an event, which with
         notice or lapse of time or both, would constitute a default) under (A)
         any terms or provisions of the articles of incorporation or by-laws of
         the Seller, (B) any term or provision of any material agreement,
         contract, instrument or indenture, to which the Seller is a party or by
         which the Seller or any of its property is bound or (C) any law, rule,
         regulation, order, judgment, writ, injunction or decree of any court or
         governmental authority having jurisdiction over the Seller or any of
         its property and (y) does not create or impose and will not result in
         the creation or imposition of any lien, charge or encumbrance which
         would have a material adverse effect upon the Mortgage Loans or any
         documents or instruments evidencing or securing the Mortgage Loans.

                  (iv) No consent, approval, authorization or order of,
         registration or filing with, or notice on behalf of the Seller to any
         governmental authority or court is required, under federal laws or the
         laws of the State of New York, for the execution, delivery and
         performance by the Seller of, or compliance by the Seller with, this
         Agreement or the consummation by the Seller of any other transaction
         contemplated hereby and by the Pooling and Servicing Agreement;
         provided, however, that the Seller makes no representation or warranty
         regarding federal or state securities laws in connection with the sale
         or distribution of the Certificates.

                  (v) This Agreement does not contain any untrue statement of
         material fact or omit to state a material fact necessary to make the
         statements contained herein not misleading. The written statements,
         reports and other documents prepared and furnished or to be prepared
         and furnished by the Seller pursuant to this Agreement or in connection
         with the transactions contemplated hereby taken in the aggregate do not
         contain any untrue statement of material fact or omit to state a
         material fact necessary to make the statements contained therein not
         misleading.

                  (vi) The Seller is not in violation of, and the execution and
         delivery of this Agreement by the Seller and its performance and
         compliance with the terms of this Agreement will not constitute a
         violation with respect to, any order or decree of any court or any
         order or regulation of any federal, state, municipal or governmental
         agency having jurisdiction over the Seller or its assets, which
         violation might have consequences that would materially and adversely
         affect the condition (financial or otherwise) or the operation of the

                                       -5-

<PAGE>

         Seller or its assets or might have consequences that would materially
         and adversely affect the performance of its obligations and duties
         hereunder.

                  (vii) The Seller does not believe, nor does it have any reason
         or cause to believe, that it cannot perform each and every covenant
         contained in this Agreement.

                  (viii) Immediately prior to the sale of the Mortgage Loans to
         the Purchaser as herein contemplated, the Seller will be the owner of
         the related Mortgage and the indebtedness evidenced by the related
         Mortgage Note, and, upon the payment to the Seller of the Purchase
         Price, in the event that the Seller retains or has retained record
         title, the Seller shall retain such record title to each Mortgage, each
         related Mortgage Note and the related Mortgage Files with respect
         thereto in trust for the Purchaser as the owner thereof from and after
         the date hereof.

                  (ix) There are no actions or proceedings against, or
         investigations known to it of, the Seller before any court,
         administrative or other tribunal (A) that might prohibit its entering
         into this Agreement, (B) seeking to prevent the sale of the Mortgage
         Loans by the Seller or the consummation of the transactions
         contemplated by this Agreement or (C) that might prohibit or materially
         and adversely affect the performance by the Seller of its obligations
         under, or validity or enforceability of, this Agreement.

                  (x) The consummation of the transactions contemplated by this
         Agreement are in the ordinary course of business of the Seller, and the
         transfer, assignment and conveyance of the Mortgage Notes and the
         Mortgages by the Seller are not subject to the bulk transfer or any
         similar statutory provisions.

                  (xi) The Seller has not dealt with any broker, investment
         banker, agent or other person, except for the Purchaser or any of its
         affiliates, that may be entitled to any commission or compensation in
         connection with the sale of the Mortgage Loans.

                  (xiii) There is no litigation currently pending or, to the
         best of the Seller's knowledge without independent investigation,
         threatened against the Seller that would reasonably be expected to
         adversely affect the transfer of the Mortgage Loans, the issuance of
         the Certificates or the execution, delivery, performance or
         enforceability of this Agreement, or that would result in a material
         adverse change in the financial condition of the Seller.

                  SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE SELLER
                             RELATING TO THE MORTGAGE LOANS.

                  REPRESENTATIONS AND WARRANTIES AS TO INDIVIDUAL MORTGAGE
LOANS. The Seller hereby represents and warrants to the Purchaser that as to
each Mortgage Loan as of the Closing Date:

                  (i) The information set forth on the Mortgage Loan Schedule is
complete, true and correct in all material respects;

                                       -6-

<PAGE>

                  (ii) The Seller has not advanced funds, or induced, solicited
or knowlingly received any advance of funds from a party other than the owner of
the related Mortgaged Property, directly or indirectly, for the payment of any
amount required by the Mortgage Note or Mortgage;

                  (iii) There has been no error, omission, fraud, dishonesty,
misrepresentation, negligence or similar occurrence on the part of the Seller or
Mortgagor, or to the best of the Seller's knowledge, on the part of any person,
including without limitation any appraiser, any builder or developer, or any
other party in connection with the solicitation of the Mortgage Loan, the
origination of the Mortgage Loan, the application of any insurance in relation
to such Mortgage Loan or in connection with the sale of such Mortgage Loan to
Purchaser, and there are no circumstances existing with respect to the Mortgage
Loan which would permit the primary mortgage guaranty insurer to deny coverage
under any policy;

                  (iv) With respect to those Mortgage Loans with original
balances greater than $150,000 each such Mortgage Loan is covered by an American
Land Title Association lender's title insurance policy or other generally
acceptable form of policy of insurance acceptable to prudent mortgage lending
institutions, issued by a title insurer acceptable to prudent mortgage lending
institutions and qualified to do business in the jurisdiction where the
Mortgaged Property is located (or by an attorney's abstract and opinion of title
if the Mortgaged Property is located in Iowa), insuring the Seller, its
successors and assigns, as to the first or second priority lien of the Mortgage,
as indicated on the Mortgage Loan Schedule, in the original principal amount of
the Mortgage Loan and against any loss by reason of the invalidity or
unenforceability of the lien resulting from the provisions of the Mortgage
providing for adjustment in the Mortgage interest rate and monthly payment.
Additionally, such lender's title insurance policy affirmatively insures ingress
and egress to and from the Mortgaged Property, and against encroachments by or
upon the Mortgaged Property or any interest therein. The Seller is the sole
insured of lender's title insurance policy, and lender's title insurance policy
is in full force and effect. No claims have been made under the lender's title
insurance policy, and neither the Seller nor any prior holder has done, by act
or omission, anything which would impair the coverage of the lender's title
insurance policy;

                  (v) At the time of origination of the Mortgage Loan, no
improvement located on or being part of the Mortgaged Property was in violation
of any applicable zoning law or regulation and no such improvement is currently
in violation of any applicable zoning law or regulation. No improvements on
adjoining properties encroach upon the Mortgaged Property. The Mortgaged
Property is lawfully occupied under applicable law; all inspections, licenses
and certificates required in connection with the origination of any Mortgage
Loan with respect to the occupancy of the same, including but not limited to
certificates of occupancy and fire underwriting certificates, have been made or
obtained from the appropriate authorities;

                  (vi) If the Mortgage Loan provides that the Mortgage Rate on
the principal balance of the related Mortgage Loan may be adjusted, all of the
terms of the related Mortgage pertaining to interest rate adjustments, payment
adjustments and adjustments of the outstanding principal balance have been made
in accordance with the terms of the related Mortgage Note and applicable law and
are enforceable and such adjustments will not affect the priority of the
Mortgage lien;

                                       -7-

<PAGE>

                  (vii) The Mortgaged Property complies with all applicable
laws, rules and regulations, including those relating to environmental matters,
including but not limited to those relating to radon, asbestos and lead paint
and neither the Seller nor, to the Seller's knowledge, the mortgagor, has
received any notice of any violation or potential violation of such law;

                  (viii) The Mortgaged Property was free of material damage at
the time of origination;

                  (ix) To the extent required under applicable law, each
originator and subsequent mortgagee or servicer of the Mortgage Loan complied
with all licensing requirements and was authorized to transact and do business
in the jurisdiction in which the related Mortgaged Property is located at all
times when it held or serviced the Mortgage Loan. Any and all requirements of
any federal, state or local laws or regulations, including, without limitation,
usury, truth-in-lending, real estate settlement procedures, consumer credit
protection, anti-predatory lending, fair credit reporting, unfair collection
practice, equal credit opportunity, fair housing and disclosure laws and
regulations, applicable to the solicitation, origination, collection and
servicing of such Mortgage Loan have been complied with in all material
respects; and any obligations of the holder of the Mortgage Note, Mortgage and
other loan documents have been complied with in all material respects; servicing
of each Mortgage Loan has been in accordance with prudent mortgage servicing
standards, any applicable laws, rules and regulations and in accordance with the
terms of the Mortgage Notes, Mortgage and other loan documents, whether such
origination and servicing was done by Seller, its affiliates, or any third party
which originated the Mortgage Loan on behalf of, or sold the Mortgage Loan to,
any of them, or any servicing agent of any of the foregoing;

                  (x) The mortgagor has received all disclosure materials
required by applicable law with respect to the making of Fixed-Rate Mortgage
Loans in the case of Fixed-Rate Mortgage Loans, and Adjustable-Rate Mortgage
Loans in the case of Adjustable-Rate Mortgage Loans and rescission materials
with respect to refinanced Mortgage Loans, and has executed any required
consents that it has reviewed such information, which consents are and will
remain in the Mortgage File;

                  (xi) There is no action, suit or proceeding pending, or to the
best of the Seller's knowledge, threatened or likely to be asserted with respect
to the Mortgage Loan against or affecting the Seller before or by any court,
administrative agency, arbitrator or governmental body;

                  (xii) At the time of origination, no action, inaction, or
event had occurred and no state of fact existed that has resulted or will result
in the exclusion from, denial of, or defense to coverage under any applicable
hazard insurance policy, or bankruptcy bond, irrespective of the cause of such
failure of coverage. In connection with the placement of any such insurance, no
commission, fee, or other compensation has been or will be received by the
Seller or any designee of the Seller or any corporation in which the Seller or
any officer, director, or employee had a financial interest at the time of
placement of such insurance;

                  (xiii) No Mortgage Loan is subject to the provisions of the
Homeownership and Equity Protection Act of 1994 ("HOEPA"), except as identified
as such on the Mortgage Loan Schedule. With respect to any Mortgage Loan subject
to HOEPA, the Mortgage File contains a notice from the originator, and a copy of
a notice to each entity which was a purchaser or assignee

                                       -8-

<PAGE>

of the Mortgage Loan, satisfying the provisions of such Act and the regulations
issued thereunder, to the effect that the Mortgage Loan is subject to special
truth in lending rules;

                  (xiv) Principal payments on the Mortgage Loan commenced no
more than sixty days after the proceeds of the Mortgage Loan were disbursed.
With respect to each Mortgage Loan, the Mortgage Note is payable each month on
the day identified on the Mortgage Loan Schedule in monthly payments, which,
except with respect to any Mortgage Loan which is identified on the Mortgage
Loan Schedule as a balloon mortgage loan (each, a "Balloon Mortgage Loan"), in
the case of a Fixed-Rate Mortgage Loan, are sufficient to fully amortize the
original principal balance over the original term thereof and to pay interest at
the related Mortgage Rate, and in the case of an Adjustable-Rate Mortgage Loan,
are changed on each Adjustment Date, and in any case, are sufficient to fully
amortize the original principal balance over the original term thereof and to
pay interest at the related Mortgage Rate. In the case of a Balloon Mortgage
Loan, the Mortgage Note is payable in monthly payments based on a thirty (30)
year amortization schedule and a final monthly payment substantially greater
than the preceding monthly payment which is sufficient to amortize the remaining
principal balance of the Balloon Mortgage Loan. No Adjustable-Rate Mortgage Loan
is convertible to a Fixed-Rate Mortgage Loan;

                  (xv) No Mortgage Loan was made in connection with (A) the
construction or rehabilitation of a Mortgaged Property or (B) facilitating the
trade-in or exchange of a Mortgaged Property;

                  (xvi) No Mortgage Loan had a Loan-to-Value Ratio or a Combined
Loan-to-Value Ratio (each as defined herein) at origination in excess of 100%.
"Loan-to-Value Ratio" means with respect to any Mortgage Loan as of any date of
determination, the ratio on such date of the outstanding principal amount of the
Mortgage Loan to the Value of the Mortgaged Property. "Combined Loan-to-Value
Ratio" means with respect to any Mortgage Loan secured by a second lien on the
Mortgaged Property securing the related Mortgage Note, the fraction, expressed
as a percentage, the numerator of which is the sum of (a) the original principal
balance of the Mortgage Loan, plus (b) the unpaid principal balance of the
related first mortgage loan secured by the Mortgaged Property as of such date,
and the denominator of which is the Value of the related Mortgaged Property;

                  (xvii) The Mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of the Mortgage Loan
in the event that the Mortgaged Property is sold or transferred without the
prior written consent of the mortgagee thereunder;

                  (xviii) The Mortgage Loan complies with all applicable
consumer credit statutes and regulations, including, without limitation, the
respective Uniform Consumer Credit Code laws in effect in Colorado, Idaho,
Indiana, Iowa, Kansas, Maine, Oklahoma, South Carolina, Utah and Wyoming, has
been originated by a properly licensed entity, and in all other respects,
complies with all of the material requirements of any such applicable laws;

                  (xix) No Mortgage Loan is more than 30 days contractually
delinquent, with the exception of those loans on Exhibit 1;

                                       -9-

<PAGE>

                  (xx) Combined points and fees for any Mortgage Loan do not
exceed 12.00% of the original principal amount of the Mortgage Loan;

                  (xxi) No Mortgagor has purchased single premium credit life
insurance in conjunction with the origination of the Mortgage Loan;

                  (xxii) There are no unpaid taxes, ground rent, water charges
or sewer rents or rates affecting the Mortgaged Property that are due and
payable;

                  (xxiii) The terms of the Mortgage and Mortgage Note have not
been impaired, waived, altered, or modified in any respect, except by
instruments, the originals or certified true copies of which are in the Mortgage
File;

                  (xxiv) The Mortgage Loan, the Mortgage, the Mortgage Note and
any insurance policy, certificate and coverage relating thereto, comply with all
applicable federal, state and local laws, rules, regulations and ordinances
including, without limitation, all usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit opportunity or
disclosure laws applicable to the Mortgage Loan. The origination and servicing
practices, including transfer of the Mortgage Loans with respect to each
Mortgage Note and Mortgage have been in all respects legal, proper, prudent and
customary in the mortgage servicing business, as conducted at prudent mortgage
lending institutions that service mortgage loans of the same type in the
jurisdictions in which the Mortgaged Property is located;

                  (xxv) The Mortgaged Property and all buildings upon the
Mortgaged Property are insured against loss by (a) fire, (b) hazards of extended
coverage, and (c) such other hazards as are customary in the area. All such
insurance policies contain a standard mortgagee clause naming the originator of
the Mortgage Loan, its successors and assigns as mortgagee, and all premiums
thereon have been paid for the initial coverage period. Each Mortgage obligates
the Mortgagor thereunder to maintain such insurance at the Mortgagor's cost and
expense and to seek reimbursement therefor from the Mortgagor, with all such
sums as may be advanced by the Mortgagee to be added to the Mortgage
indebtedness and secured by the Mortgage. If the appraisal obtained in
connection with the origination of the Mortgage Loan indicates that the
Mortgaged Property is in an area identified on a flood hazard map or flood
insurance rate map issued by the Federal Emergency Management Agency as having
special flood hazards (and such flood insurance has been made available), then a
flood insurance policy meeting the requirements of the current guidelines of the
Federal Insurance Administration is in effect, which policy conforms to the
requirements of Fannie Mae and Freddie Mac;

                  (xxvi) The Mortgage has not been satisfied, cancelled,
rescinded or subordinated, in whole or in part, nor has any instrument been
executed by the Seller that would effect any such satisfaction, cancellation,
rescission or subordination. No Mortgagor has been released, in whole or in part
from such Mortgagor's obligations under the Mortgage Note, and the Mortgaged
Property has not been released, in whole or in part, from the lien of the
Mortgage;

                  (xxvii) The Mortgage, as transferred to the Purchaser, is a
valid, subsisting and enforceable first or second lien on the Mortgaged
Property, as set forth in the Mortgage Loan

                                      -10-

<PAGE>

Schedule. Such lien and Mortgaged Property are subject only to (a) the lien of
an approved first lien Mortgage Loan with an approved unpaid balance, if the
Mortgage Loan is a second lien Mortgage Loan, (b) the lien of current real
property taxes, water and sewer rents, rates and assessments not yet due and
payable, and (c) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record acceptable to mortgage lending
institutions generally which do not impair the value of the property;

                  (xxviii) All parties to the Mortgage Note, Mortgage, and all
other documents in the Mortgage File were the real parties in interest on the
Mortgage Loan and not mere nominees or accommodation parties for any other
persons and had full legal capacity to execute same. All signatures are the
genuine and authentic signatures of the person they purport to be. The Mortgage
Note, the Mortgage and other agreements executed in connection therewith are
genuine and each is the legal, valid and binding obligation of the maker
thereof, enforceable in accordance with its terms except as such enforcement may
be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by general equity
principles (regardless of whether such enforcement is considered in a proceeding
in equity or at law) and free from any right of offset, counterclaim, rescission
or other claim or defense, including the defense of usury. The obligor under the
Mortgage Note is a natural person;

                  (xxix) The Mortgage Note and the Mortgage have not been
assigned, pledged, or hypothecated, nor subject to any security agreement by the
Seller. The Seller has good and marketable title to the Mortgage Loan and is the
sole owner thereof and has full and unrestricted right to sell, assign and
transfer the Mortgage Loan, the Mortgage Note, the Mortgage and the Mortgage
File to the Purchaser free and clear of any liens, encumbrances, equities,
loans, pledges, charges, claims, or security interests;

                  (xxx) There is no default, breach, violation or event of
default and/or acceleration existing under the Mortgage Note or Mortgage or to
the Seller's knowledge under the first lien Mortgage Loan, if any, nor is there
any state of facts which, with the passage of time or the giving of notice or
both, could give rise to such default, breach, violation or event of default
and/or acceleration. The Seller has not waived any default, breach, violation or
event of default or acceleration under the Mortgage Note, Mortgage or under the
first lien Mortgage Loan, if any;

                  (xxxi) There are no mechanic's or materialman's liens or
claims for work, labor or materials affecting the Mortgaged Property which are
or may be liens prior to, or equal or coordinate with, the lien of the Mortgage;

                  (xxxii) There is no proceeding pending for the partial or
total condemnation of the Mortgaged Property;

                  (xxxiii) The Mortgage Note is not and has not been secured by
any collateral except the Mortgaged Property;

                  (xxxiv) The Mortgage contains customary and enforceable
provisions so as to render the rights and remedies of the holder thereof
adequate for the realization against the Mortgaged Property of the benefits of
the security provided thereby including, but not limited to, (a)

                                      -11-

<PAGE>

in case of a Mortgage designated as a deed of trust, enforcement by trustee's
sale or power of sale, and (b) otherwise by judicial foreclosure, (c) the right
of the Mortgagee upon failure by the Mortgagor to make any payment on a first
lien Mortgage Loan when the Mortgage Loan becomes due, to pay same, to pay real
estate taxes, property insurance premiums and the costs of Mortgaged Property
repairs, with the amount so paid added to the Mortgage indebtedness and secured
by the Mortgage, and the right to call a default under the Mortgage and
accelerate the Mortgage indebtedness in the event of a default under a first
lien Mortgage Loan, and (d) the right, subject to any applicable federal
restrictions, to call a default under the Mortgage and to accelerate the
Mortgage indebtedness in the event the Mortgaged Property or a portion thereof
is sold or transferred without the consent of the holder of the Mortgage;

                  (xxxv) If the Mortgage constitutes a deed of trust, a trustee,
duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage or in a
properly recorded substitution of trustee;

                  (xxxvi) The Mortgaged Property consists of a fee simple
interest in a single parcel of property improved by a detached single family
residential dwelling (including a manufactured home) or a detached two, three or
four family residential dwelling, which is not a cooperative apartment;

                  (xxxvii) The Mortgage Loan does not provide for negative
amortization;

                  (xxxviii) The proceeds of the Mortgage Loan have been fully
disbursed, and there is no obligation on the part of the Seller to make future
advances thereunder other than protective advances. Any and all requirements as
to completion of any on-site or off-site improvements and as to disbursement of
any escrow funds therefor have been complied with. All costs, fees and expenses
incurred in making, closing or recording the Mortgage Loan have been paid. The
Mortgagor is not entitled to any refund of any amounts paid or due under the
Mortgage Note or the Mortgage;

                  (xxxix) There is no obligation on the part of the Seller or
any other party to make payments on account of the Mortgage which are in
addition to those made by the Mortgagor;

                  (xl) The Mortgage File contains an appraisal on a form then
currently acceptable to Fannie Mae and Freddie Mac setting forth the Value of
the Mortgaged Property at the time of origination of the Mortgage Loan;

                  (xli) All information contained in the Mortgage File and each
document and instrument comprising same and all copies thereof are complete,
accurate and correct;

                  (xlii) No instruments other than those delivered to the
Purchaser are required under applicable law to evidence the indebtedness
represented by the Mortgage Loan or to perfect the security interest in the
Mortgaged Property;

                                      -12-

<PAGE>

                  (xliii) The Seller has not made any agreement or reached any
understanding with any Mortgagor for any variation of the Mortgage Rate,
schedule of payments or other terms and conditions of the Mortgage Loan not
reflected in the Mortgage Note;

                  (xliv) Neither the Seller nor any stockholder, director or
officer of the Seller has received any benefit, consideration or value, other
than the increased business to the Seller and its affiliated corporations
represented by the Mortgage Loan or a prepaid finance charge disclosed to the
Mortgagor on the Mortgage Loan or insurance commissions from time to time
heretofore paid, from any Mortgagor or anyone else in connection with the
Mortgage Loan;

                  (xlv) The governing laws with respect to the foreclosure of
any collateral securing such Mortgage Loans are the applicable provisions of the
laws of the State in which the collateral is located, or the laws of the United
States, and not any tribal law, and no tribal court has exclusive jurisdiction
of the repossession, repletion or foreclosure of any collateral;

                  (xlvi) All persons who have or will have an ownership,
homestead or dower interest in the real property have signed the Mortgage
relating to such property if said signature is permitted;

                  (xlvii) The Mortgage and the assignment executed with respect
thereto are in recordable form and are acceptable for recording under the laws
of the jurisdiction in which the Mortgaged Property is located, and the
endorsement of the Mortgage Note is in a form that is acceptable and enforceable
as executed under the laws of the jurisdiction in which the Mortgaged Property
is located;

                  (xlviii) The Mortgagor has not notified the Seller and the
Seller has no actual knowledge of any relief requested or allowed to, the
Mortgagor under the Soldiers' and Sailors' Civil Relief Act of 1940;

                  (xvlix) The consideration received by the Seller upon the sale
of the Mortgage Loans under this Agreement constitutes fair consideration and
reasonably equivalent value for the Mortgage Loans;

                  (l) The information set forth in the Prepayment Charge
Schedule (including the prepayment charge summary attached thereto) is complete,
true and correct in all material respects on the date or dates when such
information is furnished and each Prepayment Charge is permissible and
enforceable in accordance with its terms (except to the extent that the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors' rights generally or
the collectability thereof may be limited due to acceleration in connection with
a foreclosure) under applicable state law;

                  (li) Each Mortgage Loan was originated by the Seller or by a
savings and loan association, a savings bank, a commercial bank or similar
institution which is supervised and examined by a federal or state authority, or
by a mortgagee approved as such by HUD;

                  (lii) Each Mortgage Loan was underwritten in accordance with
the originator's credit underwriting guidelines previously provided to the
Purchaser. To the extent that the Mortgage

                                      -13-

<PAGE>

Loans were underwritten in excess of those guidelines, there were other
compensating factors, which, consistent with industry standards, reasonably
justified the originator in making the Mortgage Loan to the Mortgagor. A breach
of this warranty shall not give rise to any rights under this Agreement absent a
default by the Mortgagor. Notwithstanding the foregoing, no Mortgage Loan
presents a debt-to-income ratio at the time of underwriting that exceeds 60%;
and

                  (liii) Each Mortgage Loan is an obligation that is principally
secured by real property.

                  SECTION 7. REPURCHASE OBLIGATION FOR DEFECTIVE DOCUMENTATION
                             AND FOR BREACH OF REPRESENTATION AND WARRANTY.

                  (a) The representations and warranties contained in Section 6
shall not be impaired by any review and examination of loan files or other
documents evidencing or relating to the Mortgage Loans or any failure on the
part of the Seller or the Purchaser to review or examine such documents and
shall inure to the benefit of any assignee, transferee or designee of the
Purchaser, including the Trustee for the benefit of holders of the Certificates.
With respect to the representations and warranties contained herein as to which
the Seller has no knowledge, if it is discovered that the substance of any such
representation and warranty was inaccurate as of the date such representation
and warranty was made or deemed to be made, and such inaccuracy materially and
adversely affects the value of the related Mortgage Loan or the interest therein
of the Purchaser or the Purchaser's assignee, transferee or designee, then
notwithstanding the lack of knowledge by the Seller with respect to the
substance of such representation and warranty being inaccurate at the time the
representation and warranty was made, the Seller shall take such action
described in the following paragraph in respect of such Mortgage Loan.

                  Upon discovery by the Purchaser or any assignee, transferee or
designee of the Purchaser of any materially defective document in, or that any
material document was not transferred by the Seller (as listed on the Trustee's
Preliminary Exception Report) as part of any Mortgage File, or of a breach of
any of the representations and warranties contained in Section 6 that materially
and adversely affects the value of any Mortgage Loan or the interest therein of
the Purchaser or the Purchaser's assignee, transferee or designee, the party
discovering such breach shall give prompt written notice to the Seller. Within
sixty (60) days of its discovery or its receipt of notice of any such missing
documentation that was not transferred by the Seller as described above, or of
materially defective documentation, or of any such breach of a representation
and warranty, the Seller promptly shall deliver such missing document or cure
such defect or breach in all material respects or, in the event the Seller
cannot deliver such missing document or cannot cure such defect or breach, the
Seller shall, within ninety (90) days of its discovery or receipt of notice,
either (i) repurchase the affected Mortgage Loan at the Purchase Price (as such
term is defined in the Pooling and Servicing Agreement) or (ii) pursuant to the
provisions of the Pooling and Servicing Agreement, cause the removal of such
Mortgage Loan from the Trust Fund and substitute one or more Qualified
Substitute Mortgage Loans. The Seller shall amend the Closing Schedule to
reflect the withdrawal of such Mortgage Loan from the terms of this Agreement
and the Pooling and Servicing Agreement. The Seller shall deliver to the
Purchaser such amended Closing Schedule and shall deliver such other documents
as are required by this Agreement or the Pooling and Servicing Agreement within
five (5) days of any such amendment. Any repurchase pursuant to this Section
7(a) shall be accomplished

                                      -14-

<PAGE>

by transfer to an account designated by the Purchaser of the amount of the
Purchase Price in accordance with Section 2.03 of the Pooling and Servicing
Agreement. Any repurchase required by this Section shall be made in a manner
consistent with Section 2.03 of the Pooling and Servicing Agreement.

                  Notwithstanding the foregoing, within 90 days of the earlier
of discovery by the Seller or receipt of notice by the Seller of the breach of
the representation or covenant of the Seller set forth in Section 6(l) above
which materially and adversely affects the interests of the Holders of the Class
PF Certificates or Class PV Certificates, as applicable, in any Prepayment
Charge, the Seller shall remedy such breach as follows: the Seller must pay the
amount of the scheduled Prepayment Charge, for the benefit of the Holders of the
Class PF Certificates or Class PV Certificates, as applicable, by remitting such
amount to the Servicer for deposit into the Collection Account, net of any
amount previously collected by the Servicer or paid by the Servicer, for the
benefit of the Holders of the Class PF Certificates or Class PV Certificates, as
applicable, in respect of such Prepayment Charge.

                  (b) It is understood and agreed that the obligations of the
Seller set forth in this Section 7 to cure or repurchase a defective Mortgage
Loan constitute the sole remedies of the Purchaser against the Seller respecting
a missing document or a breach of the representations and warranties contained
in Section 6.

                  SECTION 8. CLOSING; PAYMENT FOR THE MORTGAGE LOANS. The
closing of the purchase and sale of the Mortgage Loans shall be held at the New
York City office of Thacher Proffitt & Wood at 10:00 a.m. New York City time on
the Closing Date.

                  The closing shall be subject to each of the following
conditions:

                  (a)      All of the representations and warranties of the
                           Seller under this Agreement shall be true and correct
                           in all material respects as of the date as of which
                           they are made and no event shall have occurred which,
                           with notice or the passage of time, would constitute
                           a default under this Agreement;

                  (b)      The Purchaser shall have received, or the attorneys
                           of the Purchaser shall have received in escrow (to be
                           released from escrow at the time of closing), all
                           Closing Documents as specified in Section 9 of this
                           Agreement, in such forms as are agreed upon and
                           acceptable to the Purchaser, duly executed by all
                           signatories other than the Purchaser as required
                           pursuant to the respective terms thereof;

                  (c)      The Seller shall have delivered or caused to be
                           delivered and released to the Purchaser or to its
                           designee, all documents (including without
                           limitation, the Mortgage Loans) required to be so
                           delivered by the Purchaser pursuant to Section 2.01
                           of the Pooling and Servicing Agreement; and

                  (d)      All other terms and conditions of this Agreement and
                           the Pooling and Servicing Agreement shall have been
                           complied with.

                                      -15-

<PAGE>

                  Subject to the foregoing conditions, the Purchaser shall
deliver or cause to be delivered to the Seller on the Closing Date, against
delivery and release by the Seller to the Trustee of all documents required
pursuant to the Pooling and Servicing Agreement, the consideration for the
Mortgage Loans as specified in Section 3 of this Agreement, by delivery to the
Seller of the Purchase Price in immediately available funds.

                  SECTION 9. CLOSING DOCUMENTS. Without limiting the generality
of Section 8 hereof, the closing shall be subject to delivery of each of the
following documents:

                  (a)      An Officer's Certificate of the Seller, dated the
                           Closing Date, in form satisfactory to and upon which
                           the Purchaser and Salomon Smith Barney Inc. (the
                           "Underwriter") may rely, and attached thereto copies
                           of the certificate of incorporation, by-laws and
                           certificate of good standing of the Seller under the
                           laws of New York;

                  (b)      An Officer's Certificate of the Seller, dated the
                           Closing Date, in form satisfactory to and upon which
                           the Purchaser and the Underwriter may rely, with
                           respect to certain facts regarding the sale of the
                           Mortgage Loans by the Seller to the Purchaser;

                  (c)      An Opinion of Counsel of the Seller, dated the
                           Closing Date, in form satisfactory to and addressed
                           to the Purchaser and the Underwriter;

                  (d)      Such opinions of counsel as the Rating Agencies, the
                           Trustee or the Trust Administrator may request in
                           connection with the sale of the Mortgage Loans by the
                           Seller to the Purchaser or the Seller's execution and
                           delivery of, or performance under, this Agreement;

                  (e)      A letter from Deloitte & Touche LLP, certified public
                           accountants, to the effect that they have performed
                           certain specified procedures as a result of which
                           they determined that certain information of an
                           accounting, financial or statistical nature set forth
                           in the Purchaser's prospectus supplement for Series
                           2001-1, dated November 8, 2001 (the "Prospectus
                           Supplement") relating to the Offered Certificates
                           contained under the captions "Summary--The Mortgage
                           Loans," "Risk Factors," (to the extent of information
                           concerning the Mortgage Loans contained therein) "The
                           Mortgage Pool" (except with respect to the
                           information contained under the caption "The Mortgage
                           Pool--Underwriting Standards of the Originators and
                           Representations Concerning the Mortgage Loans")
                           agrees with the records of the Seller;

                  (f)      Such further information, certificates, opinions and
                           documents as the Purchaser or the Underwriter may
                           reasonably request.

                  SECTION 10. COSTS. The Seller shall pay (or shall reimburse
the Purchaser or any other Person to the extent that the Purchaser or such other
Person shall pay) all costs and expenses incurred in connection with the
transfer and delivery of the Mortgage Loans, including without

                                      -16-

<PAGE>

limitation, recording fees, fees for title policy endorsements and continuations
and the fees for recording Assignments, the fees and expenses of the Seller's
accountants and attorneys, the costs and expenses incurred in connection with
producing the Servicer's or any Subservicer's loan loss, foreclosure and
delinquency experience, and the costs and expenses incurred in connection with
obtaining the documents referred to in Sections 9(d), 9(e) and 9(g), the costs
and expenses of printing (or otherwise reproducing) and delivering this
Agreement, the Pooling and Servicing Agreement, the Certificates, the prospectus
and Prospectus Supplement, and any private placement memorandum relating to the
Certificates and other related documents, the initial fees, costs and expenses
of the Trustee and the Trust Administrator, the fees and expenses of the
Purchaser's counsel in connection with the preparation of all documents relating
to the securitization of the Mortgage Loans, the filing fee charged by the
Securities and Exchange Commission for registration of the Certificates and the
fees charged by any rating agency to rate the Certificates. All other costs and
expenses in connection with the transactions contemplated hereunder shall be
borne by the party incurring such expense.

                  SECTION 11. [RESERVED].

                  SECTION 12. INDEMNIFICATION. The Seller shall indemnify and
hold harmless each of (i) the Purchaser, (ii) the Underwriter, (iii) the Person,
if any, to which the Purchaser assigns its rights in and to a Mortgage Loan and
each of their respective successors and assigns and (iv) each person, if any,
who controls the Purchaser within the meaning of Section 15 of the Securities
Act of 1933, as amended (the "1933 Act") ((i) through (iv) collectively, the
"Indemnified Party") against any and all losses, claims, expenses, damages or
liabilities to which the Indemnified Party may become subject, under the 1933
Act or otherwise, insofar as such losses, claims, expenses, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (a)
any untrue statement or alleged untrue statement of any material fact contained
in the Prospectus Supplement or any private placement memorandum relating to the
offering by the Purchaser or an affiliate thereof, of the Class CE Certificates
or the Class P Certificates, or the omission or the alleged omission to state
therein the material fact necessary in order to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with (i) information furnished in writing to
the Purchaser or any of its affiliates by the Seller or any of its affiliates
specifically for use therein, which shall include, with respect to the
Prospectus Supplement, the information set forth under the captions
"Summary--The Mortgage Loans," "Risk Factors," (to the extent of information
concerning the Mortgage Loans contained therein) "The Mortgage Pool" (except
with respect to the information contained under the caption "The Mortgage
Pool--Underwriting Standards of the Originators and Representations Concerning
the Mortgage Loans") and, with respect to any private placement memorandum, any
information of a comparable nature, or (ii) the data files containing
information with respect to the Mortgage Loans as transmitted by modem to the
Purchaser by the Seller or any of its affiliates (as such transmitted
information may have been amended in writing by the Seller or any of its
affiliates with the written consent of the Purchaser subsequent to such
transmission), (b) any representation, warranty or covenant made by the Seller
or any affiliate of the Seller herein or in the Pooling and Servicing Agreement,
on which the Purchaser has relied, being, or alleged to be, untrue or incorrect
or (c) any updated collateral information provided by the Underwriter to a
purchaser of the Certificates derived from the data contained in clause (ii) and
the Remittance Report or a current collateral tape obtained from the Seller or
an affiliate of the Seller, including the current loan balances of the Mortgage
Loans; provided, however, that to the extent that

                                      -17-

<PAGE>

any such losses, claims, expenses, damages or liabilities to which the
Indemnified Party may become subject arise out of or are based upon both (1)
statements, omissions, representations, warranties or covenants of the Seller
described in clause (a), (b) or (c) above and (2) any other factual basis, the
Seller shall indemnify and hold harmless the Indemnified Party only to the
extent that the losses, claims, expenses, damages, or liabilities of the person
or persons asserting the claim are determined to rise from or be based upon
matters set forth in clause (1) above and do not result from the gross
negligence or willful misconduct of such Indemnified Party. This indemnity shall
be in addition to any liability that the Seller may otherwise have.

                  SECTION 13. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST.
The sale and delivery on the Closing Date of the Mortgage Loans described on the
Mortgage Loan Schedule in accordance with the terms and conditions of this
Agreement is mandatory. It is specifically understood and agreed that each
Mortgage Loan is unique and identifiable on the date hereof and that an award of
money damages would be insufficient to compensate the Purchaser for the losses
and damages incurred by the Purchaser in the event of the Seller's failure to
deliver the Mortgage Loans on or before the Closing Date. The Seller hereby
grants to the Purchaser a lien on and a continuing security interest in the
Seller's interest in each Mortgage Loan and each document and instrument
evidencing each such Mortgage Loan to secure the performance by the Seller of
its obligation hereunder, and the Seller agrees that it holds such Mortgage
Loans in custody for the Purchaser, subject to the Purchaser's (i) right, prior
to the Closing Date, to reject any Mortgage Loan to the extent permitted by this
Agreement, and (ii) obligation to deliver or cause to be delivered the
consideration for the Mortgage Loans pursuant to Section 8 hereof. Any Mortgage
Loans rejected by the Purchaser shall concurrently therewith be released from
the security interest created hereby. All rights and remedies of the Purchaser
under this Agreement are distinct from, and cumulative with, any other rights or
remedies under this Agreement or afforded by law or equity and all such rights
and remedies may be exercised concurrently, independently or successively.

                  Notwithstanding the foregoing, if on the Closing Date, each of
the conditions set forth in Section 8 hereof shall have been satisfied and the
Purchaser shall not have paid or caused to be paid the Purchase Price, or any
such condition shall not have been waived or satisfied and the Purchaser
determines not to pay or cause to be paid the Purchase Price, the Purchaser
shall immediately effect the re-delivery of the Mortgage Loans, if delivery to
the Purchaser has occurred, and the security interest created by this Section 12
shall be deemed to have been released.

                  SECTION 14. NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by fax and, receipt of which is confirmed by telephone, if to the
Purchaser, addressed to the Purchaser at 390 Greenwich Street, 4th Floor, New
York, New York 10013, Attention: Mortgage Finance Group, or such other address
as may hereafter be furnished to the Seller in writing by the Purchaser; if to
the Seller, addressed to the Seller at 390 Greenwich Street, 4th Floor, New
York, New York 10013, Attention: Mortgage Finance Group, or to such other
address as the Seller may designate in writing to the Purchaser.

                  SECTION 15. SEVERABILITY OF PROVISIONS. Any part, provision,
representation or warranty of this Agreement that is prohibited or that is held
to be void or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining

                                      -18-

<PAGE>

provisions hereof. Any part, provision, representation or warranty of this
Agreement that is prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.

                  SECTION 16. AGREEMENT OF PARTIES. The Seller and the Purchaser
each agree to execute and deliver such instruments and take such actions as
either of the others may, from time to time, reasonably request in order to
effectuate the purpose and to carry out the terms of this Agreement and the
Pooling and Servicing Agreement.

                  SECTION 17. SURVIVAL. The Seller agrees that the
representations, warranties and agreements made by it herein and in any
certificate or other instrument delivered pursuant hereto shall be deemed to be
relied upon by the Purchaser, notwithstanding any investigation heretofore or
hereafter made by the Purchaser or on its behalf, and that the representations,
warranties and agreements made by the Seller herein or in any such certificate
or other instrument shall survive the delivery of and payment for the Mortgage
Loans and shall continue in full force and effect, notwithstanding any
restrictive or qualified endorsement on the Mortgage Notes and notwithstanding
subsequent termination of this Agreement, the Pooling and Servicing Agreement or
the Trust Fund.

                  SECTION 18. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS,
DUTIES, OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS (INCLUDING THE CHOICE OF LAW
PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK. THE PARTIES HERETO INTEND
THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW
SHALL APPLY TO THIS AGREEMENT.

                  SECTION 19. MISCELLANEOUS. This Agreement may be executed in
two or more counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
instrument. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.

                  It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Seller to the Purchaser as provided in
Section 4 hereof be, and be construed as, a sale of the Mortgage Loans by the
Seller to the Purchaser and not as a pledge of the Mortgage Loans by the Seller
to the Purchaser to secure a debt or other obligation of the Seller. However, in
the event that, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Seller, then (a) it is the express
intent of the parties that such conveyance be deemed a pledge

                                      -19-

<PAGE>

of the Mortgage Loans by the Seller to the Purchaser to secure a debt or other
obligation of the Seller and (b) (1) this Agreement shall also be deemed to be a
security agreement within the meaning of Articles 8 and 9 of the New York
Uniform Commercial Code; (2) the conveyance provided for in Section 4 hereof
shall be deemed to be a grant by the Seller to the Purchaser of a security
interest in all of the Seller's right, title and interest in and to the Mortgage
Loans and all amounts payable to the holders of the Mortgage Loans in accordance
with the terms thereof and all proceeds of the conversion, voluntary or
involuntary, of the foregoing into cash, instruments, securities or other
property, including without limitation all amounts, other than investment
earnings, from time to time held or invested in the Collection Account whether
in the form of cash, instruments, securities or other property; (3) the
possession by the Purchaser or its agent of Mortgage Notes, the related
Mortgages and such other items of property that constitute instruments, money,
negotiable documents or chattel paper shall be deemed to be "possession" by the
secured party for purposes of perfecting the security interest pursuant to the
New York Uniform Commercial Code; and (4) notifications to persons holding such
property and acknowledgments, receipts or confirmations from persons holding
such property shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Purchaser for the purpose of perfecting such security interest under
applicable law. Any assignment of the interest of the Purchaser pursuant to
Section 4(d) hereof shall also be deemed to be an assignment of any security
interest created hereby. The Seller and the Purchaser shall, to the extent
consistent with this Agreement, take such actions as may be necessary to ensure
that, if this Agreement were deemed to create a security interest in the
Mortgage Loans, such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be maintained
as such throughout the term of this Agreement and the Pooling and Servicing
Agreement.

                                      -20-

<PAGE>

                  IN WITNESS WHEREOF, the Purchaser and the Seller have caused
their names to be signed by their respective officers thereunto duly authorized
as of the date first above written.

                                          SALOMON BROTHERS MORTGAGE
                                          SECURITIES VII, INC.

                                          By:________________________________
                                          Name:
                                          Title:

                                          SALOMON BROTHERS REALTY CORP.

                                          By:________________________________
                                          Name:
                                          Title:

<PAGE>

                                                                       EXHIBIT 1

                  References to percentage of the Mortgage Loans as set forth in
this Exhibit 1, unless otherwise noted, are calculated based on the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date.

                  On the Cut-off Date, the Mortgage Loans will comply with the
following conditions:

                  (i) Except with respect to 2.78% of the Group I Mortgage Loans
and 5.17% of the Group II Mortgage Loans, in each case by aggregate principal
balance of the related loan group as of the Cut-off Date, the Mortgage Loans
were not 30 or more days delinquent in their monthly payments as of the Cut-off
Date;

                  (ii) the weighted average loan-to-value ratio for the Group I
Mortgage Loans at origination will not exceed 77.16% and the weighted average
loan-to-value ratio for the Group II Mortgage Loans at origination will not
exceed 80.69%;

                  (iii) the maximum percentage concentration of Mortgage Loans
secured by mortgaged properties in any one zip code will be 1.00%; and

                  (iv) not less than 54.24% of the Group I Mortgage Loans and
81.43% of the Group II Mortgage Loans provide for payment by the mortgagor of a
prepayment charge within a specified period as provided in the related Mortgage
Note not in excess of 5 years.

                                      -22-

<PAGE>

                                   EXHIBIT E-1
                                   -----------

                               REQUEST FOR RELEASE
                             (for Trustee/Custodian)

Loan Information
----------------

         Name of Mortgagor:          __________________________________

         Master Servicer
         Loan No.:                   __________________________________

Trustee/Custodian
-----------------

         Name:                       __________________________________

         Address:                    __________________________________
                                     __________________________________

         Trustee/Custodian
         Mortgage File No.:          __________________________________

Trust Administrator
-------------------

         Name:                       __________________________________

         Address:                    __________________________________
                                     __________________________________

Depositor
---------

         Name:                       SALOMON BROTHERS MORTGAGE
                                     SECURITIES VII, INC.

         Address:                    _________________________________
                                     _________________________________

         Certificates:               Asset Backed Mortgage Pass-Through
                                     Certificates, Series 2001-1

          The undersigned Servicer hereby acknowledges that it has received from
_______________________, as Trustee for the Holders of Asset Backed Pass-Through
Certificates, Series 2001-1 the documents referred to below (the "Documents").
All capitalized terms not otherwise defined in this Request for Release shall
have the meanings given them in the Pooling and Servicing Agreement, dated as of
October 19, 2001, among the Trustee, the Trust Administrator, the Depositor and
the Servicer (the "Pooling and Servicing Agreement").

                                      E-1-1

<PAGE>

          ( ) Promissory Note dated _______________, 20__, in the original
principal sum of $__________, made by _____________________, payable to, or
endorsed to the order of, the Trustee.

          ( ) Mortgage recorded on _________________________ as instrument no.
____________________ in the County Recorder's Office of the County of
_________________, State of __________________ in book/reel/docket
_________________ of official records at page/image _____________.

          ( ) Deed of Trust recorded on ___________________ as instrument no.
________________ in the County Recorder's Office of the County of
_________________, State of ____________________ in book/reel/docket
_________________ of official records at page/image ______________.

          ( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded
on ___________________ as instrument no. _________ in the County Recorder's
Office of the County of _______________, State of _______________________ in
book/reel/docket ____________ of official records at page/image ____________.

          ( ) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.

          ( ) __________________________________

          ( ) __________________________________

          ( ) __________________________________

          ( ) __________________________________

          The undersigned Servicer hereby acknowledges and agrees as follows:

          (1) The Servicer shall hold and retain possession of the Documents in
trust for the benefit of the Trustee and the Trust Administrator, solely for the
purposes provided in the Agreement.

          (2) The Servicer shall not cause or permit the Documents to become
subject to, or encumbered by, any claim, liens, security interest, charges,
writs of attachment or other impositions nor shall the Servicer assert or seek
to assert any claims or rights of setoff to or against the Documents or any
proceeds thereof.

          (3) The Servicer shall return each and every Document previously
requested from the Mortgage File to the Trustee when the need therefor no longer
exists, unless the Mortgage Loan

                                      E-1-2

<PAGE>

relating to the Documents has been liquidated and the proceeds thereof have been
remitted to the Collection Account and except as expressly provided in the
Agreement.

          (4) The Documents and any proceeds thereof, including any proceeds of
proceeds, coming into the possession or control of the Servicer shall at all
times be earmarked for the account of the Trustee, and the Servicer shall keep
the Documents and any proceeds separate and distinct from all other property in
the Servicer's possession, custody or control.

Dated:

                                     LITTON LOAN SERVICING LP

                                     By:__________________________
                                     Name:
                                     Title:

                                      E-1-3

<PAGE>

                                   EXHIBIT E-2
                                   -----------

                               REQUEST FOR RELEASE
                          [Mortgage Loans Paid in Full]

                     OFFICER'S CERTIFICATE AND TRUST RECEIPT
                 ASSET BACKED MORTGAGE PASS-THROUGH CERTIFICATES
                                  SERIES 2001-1

___________________________________________________ HEREBY CERTIFIES THAT HE/SHE
IS AN OFFICER OF THE SERVICER, HOLDING THE OFFICE SET FORTH BENEATH HIS/HER
SIGNATURE, AND HEREBY FURTHER CERTIFIES AS FOLLOWS:

WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE POOLING AND
SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:

ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN MADE.

LOAN NUMBER: _________________ BORROWER'S NAME:______________________

COUNTY: ______________________

WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE POOLING AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.

______________________________                        DATED:___________________

/ / VICE PRESIDENT

/ / ASSISTANT VICE PRESIDENT

                                      E-2-1

<PAGE>

                                   EXHIBIT F-1
                                   -----------

                    FORM OF TRANSFEROR REPRESENTATION LETTER

                                                              [Date]

Citibank, N.A.
111 Wall Street
New York, New York 10005

          Re:  Salomon Home Equity Loan Trust, Series 2001-1, Asset Backed
               Mortgage Pass-Through Certificates, Class ___, representing a
               ___% Class ___ Percentage Interest
               -------------------------------------------------------------

Ladies and Gentlemen:

          In connection with the transfer by ________________ (the "Transferor")
to ________________ (the "Transferee") of the captioned mortgage pass-through
certificates (the "Certificates"), the Transferor hereby certifies as follows:

          Neither the Transferor nor anyone acting on its behalf has (a)
offered, pledged, sold, disposed of or otherwise transferred any Certificate,
any interest in any Certificate or any other similar security to any person in
any manner, (b) has solicited any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c) has
otherwise approached or negotiated with respect to any Certificate, any interest
in any Certificate or any other similar security with any person in any manner,
(d) has made any general solicitation by means of general advertising or in any
other manner, (e) has taken any other action, that (in the case of each of
subclauses (a) through (e) above) would constitute a distribution of the
Certificates under the Securities Act of 1933, as amended (the "1933 Act"), or
would render the disposition of any Certificate a violation of Section 5 of the
1933 Act or any state securities law or would require registration or
qualification pursuant thereto. The Transferor will not act, nor has it
authorized or will it authorize any person to act, in any manner set forth in
the foregoing sentence with respect to any Certificate. The Transferor will not
sell or otherwise transfer any of the Certificates, except in compliance with
the provisions of that certain Pooling and Servicing Agreement, dated as of
October 19, 2001, among Salomon Brothers Mortgage Securities VII, Inc. as
Depositor, Litton Loan Servicing LP as Servicer, U.S. Bank National Association
as Trustee and Citibank, N.A. as Trust Administrator (the "Pooling and Servicing
Agreement"), pursuant to which Pooling and Servicing Agreement the Certificates
were issued.

                                      F-1-1

<PAGE>

          Capitalized terms used but not defined herein shall have the meanings
assigned thereto in the Pooling and Servicing Agreement.

                                     Very truly yours,

                                     [Transferor]

                                     By:________________________________
                                     Name:
                                     Title:

                                      F-1-2

<PAGE>

                    FORM OF TRANSFEREE REPRESENTATION LETTER

                                                         [Date]

Citibank, N.A.
111 Wall Street
New York, New York 10005

          Re:  Salomon Home Equity Loan Trust, Series 2001-1, Asset Backed
               Mortgage Pass-Through Certificates, Class ___, representing a
               ___% Percentage Interest
               -------------------------------------------------------------

Ladies and Gentlemen:

          In connection with the purchase from ______________________ (the
"Transferor") on the date hereof of the captioned trust certificates (the
"Certificates"), _______________ (the "Transferee") hereby certifies as follows:

          1. The Transferee is a "qualified institutional buyer" as that term is
defined in Rule 144A ("Rule 144A") under the Securities Act of 1933 (the "1933
Act") and has completed either of the forms of certification to that effect
attached hereto as Annex 1 or Annex 2. The Transferee is aware that the sale to
it is being made in reliance on Rule 144A. The Transferee is acquiring the
Certificates for its own account or for the account of a qualified institutional
buyer, and understands that such Certificate may be resold, pledged or
transferred only (i) to a person reasonably believed to be a qualified
institutional buyer that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the 1933 Act.

          2. The Transferee has been furnished with all information regarding
(a) the Certificates and distributions thereon, (b) the nature, performance and
servicing of the Mortgage Loans, (c) the Pooling and Servicing Agreement
referred to below, and (d) any credit enhancement mechanism associated with the
Certificates, that it has requested.

          All capitalized terms used but not otherwise defined herein have the
respective meanings assigned thereto in the Pooling and Servicing Agreement,
dated as of October 19, 2001, among Salomon Brothers Mortgage Securities VII,
Inc. as Depositor, Litton Loan Servicing LP as Servicer, U.S. Bank National
Association as Trustee and Citibank, N.A. as Trust Administrator, pursuant to
which the Certificates were issued.

                                            [TRANSFEREE]

                                            By:__________________________
                                            Name:
                                            Title:

                                      F-1-3

<PAGE>

                                                          ANNEX 1 TO EXHIBIT F-1
                                                          ----------------------

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

          [For Transferees Other Than Registered Investment Companies]

          The undersigned hereby certifies as follows to [name of Transferor]
(the "Transferor") and Ctibibank, N.A., as Trust Administrator, with respect to
the mortgage pass-through certificates (the "Certificates") described in the
Transferee Certificate to which this certification relates and to which this
certification is an Annex:

          1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
entity purchasing the Certificates (the "Transferee").

          2. In connection with purchases by the Transferee, the Transferee is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because (i) the Transferee owned and/or
invested on a discretionary basis $_____________________/1 in securities (except
for the excluded securities referred to below) as of the end of the Transferee's
most recent fiscal year (such amount being calculated in accordance with Rule
144A) and (ii) the Transferee satisfies the criteria in the category marked
below.

     ___ CORPORATION, ETC. The Transferee is a corporation (other than a bank,
savings and loan association or similar institution), Massachusetts or similar
business trust, partnership, or any organization described in Section 501(c)(3)
of the Internal Revenue Code of 1986.

     ___ BANK. The Transferee (a) is a national bank or banking institution
organized under the laws of any State, territory or the District of Columbia,
the business of which is substantially confined to banking and is supervised by
the State or territorial banking commission or similar official or is a foreign
bank or equivalent institution, and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial statements, a copy of
which is attached hereto.

     ___ SAVINGS AND LOAN. The Transferee (a) is a savings and loan association,
building and loan association, cooperative bank, homestead association or
similar institution, which is supervised and examined by a State or Federal
authority having supervision over any such institutions or is a foreign savings
and loan association or equivalent institution and (b) has an audited net worth
of at least

_________________________

     1 Transferee must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Transferee is a dealer, and, in that case,
Transferee must own and/or invest on a discretionary basis at least $10,000,000
in securities. $25,000,000 as demonstrated in its latest annual financial
statements, A COPY OF WHICH IS ATTACHED HERETO.

                                      F-1-4

<PAGE>

     ___ BROKER-DEALER. The Transferee is a dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934.

     ___ INSURANCE COMPANY. The Transferee is an insurance company whose primary
and predominant business activity is the writing of insurance or the reinsuring
of risks underwritten by insurance companies and which is subject to supervision
by the insurance commissioner or a similar official or agency of a State,
territory or the District of Columbia.

     ___ STATE OR LOCAL PLAN. The Transferee is a plan established and
maintained by a State, its political subdivisions, or any agency or
instrumentality of the State or its political subdivisions, for the benefit of
its employees.

     ___ ERISA PLAN. The Transferee is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act of 1974.

     ___ INVESTMENT ADVISOR. The Transferee is an investment advisor registered
under the Investment Advisers Act of 1940.

          3. The term "SECURITIES" as used herein DOES NOT INCLUDE (i)
securities of issuers that are affiliated with the Transferee, (ii) securities
that are part of an unsold allotment to or subscription by the Transferee, if
the Transferee is a dealer, (iii) securities issued or guaranteed by the U.S. or
any instrumentality thereof, (iv) bank deposit notes and certificates of
deposit, (v) loan participations, (vi) repurchase agreements, (vii) securities
owned but subject to a repurchase agreement and (viii) currency, interest rate
and commodity swaps.

          4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Transferee, the Transferee
used the cost of such securities to the Transferee and did not include any of
the securities referred to in the preceding paragraph. Further, in determining
such aggregate amount, the Transferee may have included securities owned by
subsidiaries of the Transferee, but only if such subsidiaries are consolidated
with the Transferee in its financial statements prepared in accordance with
generally accepted accounting principles and if the investments of such
subsidiaries are managed under the Transferee's direction. However, such
securities were not included if the Transferee is a majority-owned, consolidated
subsidiary of another enterprise and the Transferee is not itself a reporting
company under the Securities Exchange Act of 1934.

          5. The Transferee acknowledges that it is familiar with Rule 144A and
understands that the Transferor and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Transferee may be in reliance on Rule 144A.

         ___      ___      Will the Transferee be purchasing the Certificates
         Yes      No       only for the Transferee's own account?

                                      F-1-5

<PAGE>

          6. If the answer to the foregoing question is "no", the Transferee
agrees that, in connection with any purchase of securities sold to the
Transferee for the account of a third party (including any separate account) in
reliance on Rule 144A, the Transferee will only purchase for the account of a
third party that at the time is a "qualified institutional buyer" within the
meaning of Rule 144A. In addition, the Transferee agrees that the Transferee
will not purchase securities for a third party unless the Transferee has
obtained a current representation letter from such third party or taken other
appropriate steps contemplated by Rule 144A to conclude that such third party
independently meets the definition of "qualified institutional buyer" set forth
in Rule 144A.

          7. The Transferee will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Transferee's purchase of the Certificates will
constitute a reaffirmation of this certification as of the date of such
purchase. In addition, if the Transferee is a bank or savings and loan as
provided above, the Transferee agrees that it will furnish to such parties
updated annual financial statements promptly after they become available.

Dated:

                                     ___________________________________
                                     Print Name of Transferee

                                     By:________________________________
                                     Name:
                                     Title:

                                      F-1-6

<PAGE>

                                                          ANNEX 2 TO EXHIBIT F-1
                                                          ----------------------

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

           [For Transferees That Are Registered Investment Companies]

          The undersigned hereby certifies as follows to [name of Transferor]
(the "Transferor") and Citibank, N.A., as Trust Administrator, with respect to
the mortgage pass- through certificates (the "Certificates") described in the
Transferee Certificate to which this certification relates and to which this
certification is an Annex:

          1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the entity purchasing the
Certificates (the "Transferee") or, if the Transferee is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because the Transferee is part of a Family of
Investment Companies (as defined below), is such an officer of the investment
adviser (the "Adviser").

          2. In connection with purchases by the Transferee, the Transferee is a
"qualified institutional buyer" as defined in Rule 144A because (i) the
Transferee is an investment company registered under the Investment Company Act
of 1940, and (ii) as marked below, the Transferee alone, or the Transferee's
Family of Investment Companies, owned at least $100,000,000 in securities (other
than the excluded securities referred to below) as of the end of the
Transferee's most recent fiscal year. For purposes of determining the amount of
securities owned by the Transferee or the Transferee's Family of Investment
Companies, the cost of such securities was used.

     ____      The Transferee owned $___________________ in securities (other
               than the excluded securities referred to below) as of the end of
               the Transferee's most recent fiscal year (such amount being
               calculated in accordance with Rule 144A).

     ____      The Transferee is part of a Family of Investment Companies which
               owned in the aggregate $______________ in securities (other than
               the excluded securities referred to below) as of the end of the
               Transferee's most recent fiscal year (such amount being
               calculated in accordance with Rule 144A).

          3. The term "FAMILY OF INVESTMENT COMPANIES" as used herein means two
or more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).

          4. The term "SECURITIES" as used herein does not include (i)
securities of issuers that are affiliated with the Transferee or are part of the
Transferee's Family of Investment Companies, (ii) securities issued or
guaranteed by the U.S. or any instrumentality thereof, (iii) bank deposit notes
and certificates of deposit, (iv) loan participations, (v) repurchase
agreements, (vi) securities owned but subject to a repurchase agreement and
(vii) currency, interest rate and commodity swaps.

                                      F-1-7

<PAGE>

          5. The Transferee is familiar with Rule 144A and understands that the
parties to which this certification is being made are relying and will continue
to rely on the statements made herein because one or more sales to the
Transferee will be in reliance on Rule 144A. In addition, the Transferee will
only purchase for the Transferee's own account.

          6. The undersigned will notify the parties to which this certification
is made of any changes in the information and conclusions herein. Until such
notice, the Transferee's purchase of the Certificates will constitute a
reaffirmation of this certification by the undersigned as of the date of such
purchase.

Dated:

                                     ___________________________________
                                     Print Name of Transferee or Advisor

                                     By:________________________________
                                     Name:
                                     Title:

                                     IF AN ADVISER:

                                     ___________________________________
                                     Print Name of Transferee

                                      F-1-8

<PAGE>

                    FORM OF TRANSFEREE REPRESENTATION LETTER
                    ----------------------------------------

          The undersigned hereby certifies on behalf of the purchaser named
below (the "Purchaser") as follows:

          1. I am an executive officer of the Purchaser.

          2. The Purchaser is a "qualified institutional buyer", as defined in
Rule 144A, ("Rule 144A") under the Securities Act of 1933, as amended.

          3. As of the date specified below (which is not earlier than the last
day of the Purchaser's most recent fiscal year), the amount of "securities",
computed for purposes of Rule 144A, owned and invested on a discretionary basis
by the Purchaser was in excess of $100,000,000.

                                     Name of Purchaser

                                     __________________________________

                                     By:_______________________________
                                     Name:
                                     Title:

Date of this certificate:

Date of information provided in paragraph 3

                                      F-1-9

<PAGE>

                                   EXHIBIT F-2
                                   -----------

                    FORM OF TRANSFER AFFIDAVIT AND AGREEMENT

STATE OF NEW YORK       )

COUNTY OF NEW YORK      )

          __________________________, being duly sworn, deposes, represents and
warrants as follows:

          1. I am a ______________________ of ____________________________ (the
"Owner") a corporation duly organized and existing under the laws of
______________, the record owner of Salomon Home Equity Loan Trust, Series
2001-1, Asset Backed Mortgage Pass-Through Certificates, Series 2001-1, Class R
Certificates, (the "Class R Certificates"), on behalf of whom I make this
affidavit and agreement. Capitalized terms used but not defined herein have the
respective meanings assigned thereto in the Pooling and Servicing Agreement
pursuant to which the Class R Certificates were issued.

          2. The Owner (i) is and will be a "Permitted Transferee" as of
____________, 20__ and (ii) is acquiring the Class R Certificates for its own
account or for the account of another Owner from which it has received an
affidavit in substantially the same form as this affidavit. A "Permitted
Transferee" is any person other than a "disqualified organization" or a
possession of the United States. For this purpose, a "disqualified organization"
means the United States, any state or political subdivision thereof, any agency
or instrumentality of any of the foregoing (other than an instrumentality all of
the activities of which are subject to tax and, except for the Federal Home Loan
Mortgage Corporation, a majority of whose board of directors is not selected by
any such governmental entity) or any foreign government, international
organization or any agency or instrumentality of such foreign government or
organization, any rural electric or telephone cooperative, or any organization
(other than certain farmers' cooperatives) that is generally exempt from federal
income tax unless such organization is subject to the tax on unrelated business
taxable income.

          3. The Owner is aware (i) of the tax that would be imposed on
transfers of the Class R Certificates to disqualified organizations under the
Internal Revenue Code of 1986 that applies to all transfers of the Class R
Certificates after March 31, 1988; (ii) that such tax would be on the transferor
or, if such transfer is through an agent (which person includes a broker,
nominee or middleman) for a non-Permitted Transferee, on the agent; (iii) that
the person otherwise liable for the tax shall be relieved of liability for the
tax if the transferee furnishes to such person an affidavit that the transferee
is a Permitted Transferee and, at the time of transfer, such person does not
have actual knowledge that the affidavit is false; and (iv) that each of the
Class R Certificates may be a "noneconomic residual interest" within the meaning
of proposed Treasury regulations promulgated under the Code and that the
transferor of a "noneconomic residual interest" will remain liable for any taxes
due with respect to the income on such residual interest, unless no significant
purpose of the transfer is to impede the assessment or collection of tax.

                                      F-2-1

<PAGE>

          4. The Owner is aware of the tax imposed on a "pass-through entity"
holding the Class R Certificates if, at any time during the taxable year of the
pass-through entity, a non-Permitted Transferee is the record holder of an
interest in such entity. (For this purpose, a "pass-through entity" includes a
regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.)

          5. The Owner is aware that the Trustee will not register the transfer
of any Class R Certificate unless the transferee, or the transferee's agent,
delivers to the Trustee, among other things, an affidavit in substantially the
same form as this affidavit. The Owner expressly agrees that it will not
consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.

          6. The Owner consents to any additional restrictions or arrangements
that shall be deemed necessary upon advice of counsel to constitute a reasonable
arrangement to ensure that the Class R Certificates will only be owned, directly
or indirectly, by an Owner that is a Permitted Transferee.

          7. The Owner's taxpayer identification number is _________________.

          8. The Owner has reviewed the restrictions set forth on the face of
the Class R Certificates and the provisions of Section 5.02(d) of the Pooling
and Servicing Agreement under which the Class R Certificates were issued (in
particular, clauses (iii)(A) and (iii)(B) of Section 5.02(d) which authorize the
Trustee to deliver payments to a person other than the Owner and negotiate a
mandatory sale by the Trustee in the event that the Owner holds such Certificate
in violation of Section 5.02(d)); and that the Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.

          9. The Owner is not acquiring and will not transfer the Class R
Certificates in order to impede the assessment or collection of any tax.

          10. The Owner anticipates that it will, so long as it holds the Class
R Certificates, have sufficient assets to pay any taxes owed by the holder of
such Class R Certificates, and hereby represents to and for the benefit of the
person from whom it acquired the Class R Certificates that the Owner intends to
pay taxes associated with holding such Class R Certificates as they become due,
fully understanding that it may incur tax liabilities in excess of any cash
flows generated by the Class R Certificates.

          11. The Owner has no present knowledge that it may become insolvent or
subject to a bankruptcy proceeding for so long as it holds the Class R
Certificates.

          12. The Owner has no present knowledge or expectation that it will be
unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding.

          13. The Owner is not acquiring the Class R Certificates with the
intent to transfer the Class R Certificates to any person or entity that will
not have sufficient assets to pay any taxes

                                      F-2-2

<PAGE>

owed by the holder of such Class R Certificates, or that may become insolvent or
subject to a bankruptcy proceeding, for so long as the Class R Certificates
remain outstanding.

          14. The Owner will, in connection with any transfer that it makes of
the Class R Certificates, obtain from its transferee the representations
required by Section 5.02(d) of the Pooling and Servicing Agreement under which
the Class R Certificate were issued and will not consummate any such transfer if
it knows, or knows facts that should lead it to believe, that any such
representations are false.

          15. The Owner will, in connection with any transfer that it makes of
the Class R Certificates, deliver to the Trustee an affidavit, which represents
and warrants that it is not transferring the Class R Certificates to impede the
assessment or collection of any tax and that it has no actual knowledge that the
proposed transferee: (i) has insufficient assets to pay any taxes owed by such
transferee as holder of the Class R Certificates; (ii) may become insolvent or
subject to a bankruptcy proceeding for so long as the Class R Certificates
remains outstanding; and (iii) is not a "Permitted Transferee".

          16. The Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States may be included in
gross income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.

          17. The Owner of the Class R Certificate, hereby agrees that in the
event that the Trust Fund created by the Pooling and Servicing Agreement is
terminated pursuant to Section 9.01 thereof, the undersigned shall assign and
transfer to the Holders of the Class OCF Certificates (with respect to a
termination of REMIC I-A) or the Class OCV Certificates (with respect to a
terminiation of REMIC I-B) any amounts in excess of par received in connection
with such termination. Accordingly, in the event of such termination, the
Trustee is hereby authorized to withhold any such amounts in excess of par and
to pay such amounts directly to the Holders of the Class OCF Certificates or
Class OCV Certificates, as applicable. This agreement shall bind and be
enforceable against any successor, transferee or assigned of the undersigned in
the Class R Certificate. In connection with any transfer of the Class R
Certificate, the Owner shall obtain an agreement substantially similar to this
clause from any subsequent owner.

                                      F-2-3

<PAGE>

          IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
__________, 20__.

                                              [OWNER]

                                              By:__________________________
                                              Name:
                                              Title:   [Vice] President

ATTEST:

By:_________________________________
Name:
Title:   [Assistant] Secretary

          Personally appeared before me the above-named , known or proved to me
to be the same person who executed the foregoing instrument and to be a [Vice]
President of the Owner, and acknowledged to me that [he/she] executed the same
as [his/her] free act and deed and the free act and deed of the Owner.

          Subscribed and sworn before me this ____ day of __________, 20___.

                                              ____________________________
                                                       Notary Public

                                              County of __________________
                                              State of ___________________

                                              My Commission expires:

                                      F-2-4

<PAGE>

                          FORM OF TRANSFEROR AFFIDAVIT
                          ----------------------------

STATE OF NEW YORK     )

COUNTY OF NEW YORK    )

          __________________________, being duly sworn, deposes, represents and
warrants as follows:

          1. I am a ____________________ of ____________________________ (the
"Owner"), a corporation duly organized and existing under the laws of
______________, on behalf of whom I make this affidavit.

          2. The Owner is not transferring the Class R Certificates (the
"Residual Certificates") to impede the assessment or collection of any tax.

          3. The Owner has no actual knowledge that the Person that is the
proposed transferee (the "Purchaser") of the Residual Certificates: (i) has
insufficient assets to pay any taxes owed by such proposed transferee as holder
of the Residual Certificates; (ii) may become insolvent or subject to a
bankruptcy proceeding for so long as the Residual Certificates remain
outstanding and (iii) is not a Permitted Transferee.

          4. The Owner understands that the Purchaser has delivered to the
Trustee a transfer affidavit and agreement in the form attached to the Pooling
and Servicing Agreement as Exhibit F-2. The Owner does not know or believe that
any representation contained therein is false.

          5. At the time of transfer, the Owner has conducted a reasonable
investigation of the financial condition of the Purchaser as contemplated by
Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result of that
investigation, the Owner has determined that the Purchaser has historically paid
its debts as they became due and has found no significant evidence to indicate
that the Purchaser will not continue to pay its debts as they become due in the
future. The Owner understands that the transfer of a Residual Certificate may
not be respected for United States income tax purposes (and the Owner may
continue to be liable for United States income taxes associated therewith)
unless the Owner has conducted such an investigation.

          6. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Pooling and Servicing Agreement.

                                      F-2-5

<PAGE>

          IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
___________, 20__.

                                     [OWNER]

                                     By:_____________________________
                                     Name:
                                     Title:   [Vice] President

ATTEST:

By:______________________________
Name:
Title:   [Assistant] Secretary

          Personally appeared before me the above-named , known or proved to me
to be the same person who executed the foregoing instrument and to be a [Vice]
President of the Owner, and acknowledged to me that [he/she] executed the same
as [his/her] free act and deed and the free act and deed of the Owner.

          Subscribed and sworn before me this ____ day of __________, 20___.

                                     _____________________________
                                              Notary Public

                                     County of ___________________
                                     State of ____________________

                                     My Commission expires:

                                      F-2-6

<PAGE>

                                    EXHIBIT G
                                    ---------

            FORM OF CERTIFICATION WITH RESPECT TO ERISA AND THE CODE

                                            _____________, 20__

Salomon Brothers Mortgage Securities VII, Inc.
390 Greenwich Street, 4th Floor
New York, NY 10013

Citibank, N.A.
111 Wall Street
New York, New York 10005

Litton Loan Servicing LP
5373 West Alabama
Houston, Texas 77056

          Re:  Salomon Home Equity Loan Trust, Series 2001-1, Asset Backed
               Mortgage Pass-Through Certificates, Class ___
               -----------------------------------------------------------

Dear Sirs:

          _______________________ (the "Transferee") intends to acquire from
_____________________ (the "Transferor") $____________ Initial Certificate
Principal Balance of Salomon Home Equity Loan Trust, Series 2001-1, Asset Backed
Pass-Through Certificates, Class [OCF] [OCV] [PF] [PV] [R] (the "Certificates"),
issued pursuant to a Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement") dated as of October 19, 2001 among Salomon Brothers Mortgage
Securities VII, Inc. as depositor (the "Depositor"), Litton Loan Servicing LP as
servicer (the "Servicer"), U.S. Bank National Association as trustee (the
"Trustee") and Citibank, N.A. as trust administrator (the "Trust
Administrator"). Capitalized terms used herein and not otherwise defined shall
have the meanings assigned thereto in the Pooling and Servicing Agreement. The
Transferee hereby certifies, represents and warrants to, and covenants with the
Depositor, the Trustee, the Trust Administrator and the Servicer one of the
following:

          (A) The Certificates (i) are not being acquired by, and will not be
transferred to, any employee benefit plan within the meaning of section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
other retirement arrangement, including individual retirement accounts and
annuities, Keogh plans and bank collective investment funds and insurance
company general or separate accounts in which such plans, accounts or
arrangements are invested, that is subject to Section 406 of ERISA or Section
4975 of the Internal Revenue Code of 1986 (the "Code") (any of the foregoing, a
"Plan"), (ii) are not being acquired with "plan assets" of a Plan within the
meaning of the Department of Labor ("DOL") regulation, 29 C.F.R.ss.2510.3-101,
and (iii) will not be transferred to any entity that is deemed to be investing
in plan assets within the meaning of the DOL regulation at 29 C.F.R.ss.
2510.3-101 or

                                       G-1

<PAGE>

          (B) In the case of the Class OCF and OCV Certificates only, the
transferee is an insurance company and (i) the source of funds used to purchase
such Certificates is an "insurance company general account" (as such term is
defined in PTCE 95-60), (ii) the conditions set forth in Sections I and III of
PTCE 95-60 have been satisfied and (iii) there is no Plan with respect to which
the amount of such general account's reserves and liabilities for contracts held
by or on behalf of such Plan and all other Plans maintained by the same employer
(or any "affiliate" thereof, as defined in PTCE 95-60) or by the same employee
organization, exceeds 10% of the total of all reserves and liabilities of such
general account (as determined under PTCE 95-60) as of the date of the
acquisition of such Certificates.

                                     Very truly yours,

                                     _______________________________

                                     By:____________________________
                                     Name:
                                     Title:

                                       G-2

<PAGE>

                                    EXHIBIT H

                     FORM OF REPORT PURSUANT TO SECTION 4.06

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

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    Form 10-K

                                  Annual Report

                     Pursuant to Section 13 or 15(d) of the
                 Securities Exchange Act of 1934 (Fee Required)

                     For fiscal year ended ________________

                       Commission file number: 333-_______

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
            (as depositor under the Pooling and Servicing Agreement,
           dated as of October 19, 2001, providing for the issuance of
             Asset Backed Pass-Through Certificates, Series 2001-1)

                 Salomon Brothers Mortgage Securities VII, Inc.
                 ----------------------------------------------

             (Exact name of registrant as specified in its charter)
--------------------------------------------------------------------------------

           Delaware                                   13-3439681
-----------------------------                         ------------------------
(State or Other Jurisdiction                          (I.R.S. Employer
of Incorporation)                                     Identification Number)

390 Greenwich Street
New York, New York                                    10013
----------------------------------------              ------
(Address of Principal Executive Offices)              (Zip Code)

Registrant's telephone number, including area code:  (212) 816-6000
                                                     --------------

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

                                       H-1

<PAGE>

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate whether the Registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

                                                           X  YES       No
                                                           ---       ---
Item 1.  Business:

Not applicable

Item 2.  Properties:

Not applicable

Item 3.  Legal Proceedings:

None

Item 4.  Submission of Matters to a Vote of Security-Holders

None

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

To the best knowledge of the registrant there is no established public trading
market for the certificates.

There are approximately _____ holders of record as of the end of the reporting
year.

Item 6.  Selected Financial Data.

Not applicable.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

Not applicable

Item 8.  Financial Statements and Supplementary Data.

                                       H-2

<PAGE>

Not applicable.

Item 9.  Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

None

Item 10.

Not applicable

Item 11.  Executive Compensation

Not applicable

Item 12.  Security Ownership of Certain Beneficial Owners and Management

Not applicable

Item 13.  Certain Relationships and Related Transactions

Not applicable

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

          a)   The company filed on Form 8-K, separately for each distribution
               date, the distribution of funds related to the trust for each of
               the following distribution dates:

                        Distribution Date           Form 8-K Filing Date
                        -----------------           --------------------
                        _________________           ____________________
                        _________________           ____________________
                        _________________           ____________________

         b)    99.1     Annual Report of Independent Public Accountants' as to
                        master servicing activities or servicing activities,
                        as applicable

                        (a) Litton Loan Servicing LP, as servicer

               99.2     Annual Statement of Compliance with obligations under
                        the Pooling and Servicing Agreement or servicing
                        agreement, as applicable, of:

                        (a) Litton Loan Servicing LP, as servicer

Such document (i) is not filed herewith since such document was not received by
the Reporting Person at least three business days prior to the due date of this
report; and (ii) will be included in an

                                       H-3

<PAGE>

amendment to this report on Form 10-K/A to be filed within 30 days of the
Reporting Person's receipt of such document.

                                   Signatures

          Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

Date: ___________

                                          Salomon Brothers Mortgage Securities
                                          VII, Inc., by Citibank N.A., as Trust
                                          Administrator for Salomon Home Equity
                                          Loan Trust, Series 2001-1, Asset
                                          Backed Pass-Through Certificates.

                                          By: _________________________________
                                          Name:
                                          Title:
                                          Company:

                                       H-4

<PAGE>

                                    EXHIBIT I

                                   [RESERVED]

                                       I-1

<PAGE>

                                    EXHIBIT J

                OFFICER'S CERTIFICATE WITH RESPECT TO PREPAYMENTS

                                       J-1

<PAGE>

                                    EXHIBIT K

                           FORM OF LOST NOTE AFFIDAVIT

Loan #: ____________
Borrower: _____________

                               LOST NOTE AFFIDAVIT

          I, as ____________________ of ______________________, a
_______________ corporation am authorized to make this Affidavit on behalf of
_____________________ (the "Seller"). In connection with the administration of
the Mortgage Loans held by ____________________, a _________________ corporation
as Seller on behalf of Salomon Brothers Mortgage Securities VII, Inc. (the
"Purchaser"), _____________________ (the "Deponent"), being duly sworn, deposes
and says that:

     1.   The Seller's address is: _____________________
                                   _____________________
                                   _____________________

     2.   The Seller previously delivered to the Purchaser a signed Initial
          Certification with respect to such Mortgage and/or Assignment of
          Mortgage;

     3.   Such Mortgage Note and/or Assignment of Mortgage was assigned or sold
          to the Purchaser by ________________________, a ____________
          corporation pursuant to the terms and provisions of a Mortgage Loan
          Purchase Agreement dated as of __________________ ___, ____;

     4.   Such Mortgage Note and/or Assignment of Mortgage is not outstanding
          pursuant to a request for release of Documents;

     5.   Aforesaid Mortgage Note and/or Assignment of Mortgage (the "Original")
          has been lost;

     6.   Deponent has made or caused to be made a diligent search for the
          Original and has been unable to find or recover same;

     7.   The Seller was the Seller of the Original at the time of the loss; and

     8.   Deponent agrees that, if said Original should ever come into Seller's
          possession, custody or power, Seller will immediately and without
          consideration surrender the Original to the Purchaser.

     9.   Attached hereto is a true and correct copy of (i) the Note, endorsed
          in blank by the Mortgagee and (ii) the Mortgage or Deed of Trust
          (strike one) which

                                       K-1

<PAGE>

          secures the Note, which Mortgage or Deed of Trust is recorded in the
          county where the property is located.

     10.  Deponent hereby agrees that the Seller (a) shall indemnify and hold
          harmless the Purchaser, its successors and assigns, against any loss,
          liability or damage, including reasonable attorney's fees, resulting
          from the unavailability of any Notes, including but not limited to any
          loss, liability or damage arising from (i) any false statement
          contained in this Affidavit, (ii) any claim of any party that has
          already purchased a mortgage loan evidenced by the Lost Note or any
          interest in such mortgage loan, (iii) any claim of any borrower with
          respect to the existence of terms of a mortgage loan evidenced by the
          Lost Note on the related property to the fact that the mortgage loan
          is not evidenced by an original note and (iv) the issuance of a new
          instrument in lieu thereof (items (i) through (iv) above hereinafter
          referred to as the "Losses") and (b) if required by any Rating Agency
          in connection with placing such Lost Note into a Pass-Through
          Transfer, shall obtain a surety from an insurer acceptable to the
          applicable Rating Agency to cover any Losses with respect to such Lost
          Note.

     11.  This Affidavit is intended to be relied upon by the Purchaser, its
          successors and assigns. _____________________, a ______________
          corporation represents and warrants that is has the authority to
          perform its obligations under this Affidavit of Lost Note.

Executed this ____ day, of ___________ ______.

                                                     SELLER

                                                     By:______________________
                                                     Name:
                                                     Title:

          On this _____ day of ________, _____, before me appeared
_________________ to me personally known, who being duly sworn did say that he
is the _____________________ of ____________________ a ______________
corporation and that said Affidavit of Lost Note was signed and sealed on behalf
of such corporation and said acknowledged this instrument to be the free act and
deed of said corporation.

                                             Signature:

                                             [Seal]

                                       K-2

<PAGE>

                                   Schedule 1

                             MORTGAGE LOAN SCHEDULE

                             Available Upon Request

                                  Schedule 1-1

<PAGE>

                                   Schedule 2

                         SCHEDULE OF PREPAYMENT CHARGES

                             Available Upon Request

                                  Schedule 2-1

<PAGE>

                                   Schedule 3

                         SCHEDULE OF PMI MORTGAGE LOANS

                             Available Upon Request

                                  Schedule 3-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00032-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00032-of-00352.parquet"}]]