This letter, dated Sept. 1, was the first of two sent by Merritt Savings and Loan Inc. to its mortgagors.

Dear Mortgagors:

This association is the holder of a mortgage from you and on which you have been making payments. Your mortgage is at a very favorable, below-market, interest rate. You have a right to continue to preserve that interest rate, provided you comply with all of the terms and conditions of the mortgage. This is a valuable right and you should protect it.

However, should you default in the mortgage, we have the option of treating the remainder of the mortgage debt accelerated and due and payable, in full, and at once. We have not in the past strictly adhered to this policy, and we therefore believe it is fair and proper to advise you of our intention to do so in the future.

Your mortgage payments are due in this office on the first day of each month. You may make them in advance if you wish to do so, but it is your responsibility to see to it that the payments arrive in our office by the first of the month. Failure to do so is a default under the mortgage.

We wish to advise you, that any time a payment is received after the first of the month, we will be free to exercise our option of requiring the mortgage to be paid in full and at once. Should we fail to exercise this option in any month, this does not mean that this will constitute a waiver of the right to exercise it in any subsequent month.

Very truly yours,

Gerald S. Klein

Chairman of the Board

This is the second letter Merritt sent its mortgagors. It was dated Sept. 9.

Dear Mortgagor:

In order to improve and stimulate our mortgage collection procedures, we recently sent out a letter to all accounts, that has apparently proven to be offensive to some of the recipients. This letter was not intended as a particular complaint concerning your account but a reminder of the general responsibilities that pertain to all mortgages to avoid error and confusion.

We believe that it is important for everyone to realize the fact that mortgage payments are as important as any others; and, that failure to make such payments could have grave effects.

We regret that anyone may have taken offense; none was intended. We hope it may be beneficial to those in need of such a reminder.

Very truly yours,

Gerald S. Klein,

Chairman of the Board