AMENDMENT AND WAIVER AGREEMENT

                    THIS AMENDMENT AND WAIVER AGREEMENT, dated as of December
15, 2000 (this "Agreement"), is among ALLEGIANCE FUNDING I, LLC (the
"Depositor"), MANUFACTURERS AND TRADERS TRUST COMPANY (the "Trustee"), POINT
WEST CAPITAL CORPORATION (the "Servicer") and as consented to by the
Certificateholders named on the signature pages hereto.

RECITALS

                    WHEREAS, (i) the Depositor, the Trustee and the Servicer are
parties to that certain Trust Agreement, dated as of August 1, 1998 (as amended
from time to time, and including all supplements thereto, the "Trust
Agreement"), and (ii) the Depositor, the Trustee and the Servicer are parties to
that certain Third Amended and Restated Supplement to Trust Agreement for
Revolving Series 1998-1, dated as of April 14, 2000 (the "Series 1998-1
Revolving Supplement"), pursuant to which the Depositor issued the Allegiance
Capital Trust I Revolving Certificates, Series 1998-1 (the "98-1 Revolving
Certificates").

                    WHEREAS, the Loan to Peavy & Brooks International, Inc. (the
"PBI Loan") held by the Depositor and the Loan to Southern Acquisitions, Inc.
(the "Southern Loan") held by the Depositor have become Defaulted Loans and have
caused the Depositor to be in violation of certain provisions of the Trust
Agreement.

                    WHEREAS, the Scheduled Maturity of the 98-1 Revolving
Certificates is December 15, 2000.

                    WHEREAS, pursuant to Section 9.02 of the Trust Agreement,
the Depositor, the Servicer and the Trustee may amend, modify or waive the
provisions thereof with the prior written consent of the Holders of each
Outstanding Certificate and may amend, modify or waive the provisions of the
Series 1998-1 Revolving Supplement with the prior written consent of the Holders
of the 98-1 Revolving Certficates.

                    WHEREAS, the parties have agreed to amend a provision of the
Series 1998-1 Revolving Supplement and to amend and waive certain provisions of
the Trust Agreement on the terms and conditions set forth herein.

                    NOW, THEREFORE, the parties hereto agree as follows:

                    1. Definitions. Each capitalized term used and not otherwise
defined herein, including those used in the Recitals, has the meaning set forth
in the Trust Agreement.

                    2. Amendment to Series 1998-1 Revolving Supplement. The
definition of "Scheduled Maturity" in the Series 1998-1 Revolving Supplement is
hereby amended by deleting the date "December 15, 2000" therein and substituting
in its place the date "February 15, 2001."

                    3. Amendments to Trust Agreement. Solely with respect to the
PBI Loan and the Southern Loan, each of the Depositor, the Servicer, the Trustee
and the Certificateholders agree to amend the following provisions of the Trust
Agreement on the following terms:

> > (a) Clause (b) of the definition of "Adjustment Amount". The reference to
> > "sixty (60) days" in clause (b) of the definition of "Adjustment Amount" is
> > hereby amended to read as "one hundred fifty (150) days";

> > (b) Clause (c) of the definition of "Adjustment Amount". The reference to
> > "one hundred twenty (120) days" in clause (c) of the definition of
> > "Adjustment Amount" is hereby amended to read as "two hundred ten (210)
> > days";
> > 
> > (c) Section 1.03(b). Section 1.03(b) is hereby amended to provide that
> > Recoveries in respect of the PBI Loan or the Southern Loan shall be applied
> > first to reimburse the Reserve Account for any Recovery Expenses allocable
> > to such PBI Loan or Southern Loan and previously withdrawn from the Reserve
> > Account.
> > 
> > (d) Section 5.03(d). Section 5.03(d) is hereby amended to allow disbursement
> > of funds from the Reserve Account on each Distribution Date to reimburse the
> > Servicer or the Special Servicer, as applicable, for Recovery Expenses
> > allocable to the PBI Loan and/or Southern Loan if (i) the Certificateholder
> > Agent has provided to the Depositor, the Servicer and the Special Servicer
> > written consent to such disbursement and (ii) the remaining balance in the
> > Reserve Account after such disbursement would equal or exceed the Reserve
> > Account Floor Amount. The Depositor, the Servicer or the Special Servicer,
> > as applicable, shall provide a written request for such disbursement to the
> > Certificateholder Agent by the 3rd day of the calendar month in which such
> > disbursement is to be made (or the next Business Day if such day is not a
> > Business Day) and the Certificateholder Agent shall provide written consent
> > or refusal to consent no later than the 10th day of such calendar month (or
> > the next Business Day if such day is not a Business Day) and, assuming such
> > request is timely delivered, the Certificateholder Agent's approval shall
> > not be unreasonably withheld. The Certificateholder Agent's written consent
> > shall be deemed to be direction to the Trustee to make such disbursement
> > pursuant to Schedule 9 of the Servicing Report.

                4. Waivers. The Trustee and the Certificateholders hereby waive
for a period of ninety (90) days from the date of default, any default by the
Depositor under Section 6.01(f) of the Trust Agreement.

                5. Expenses. The Trust shall reimburse from funds on deposit in
the Reserve Account all reasonable fees, costs and expenses incurred by the
Certificateholder Agent and the Holders of the Rated Certificates in connection
with their review of this Agreement, including without limitation the reasonable
fees of their special counsel (namely, Day, Berry & Howard LLP). In each
applicable monthly Servicer Report the Servicer shall from time to time instruct
the Trustee to effect any such reimbursements.

                    6. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.

                    7. General. This Agreement and all the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement may be executed in
one or more counterparts, all of which taken together shall constitute one
instrument. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be as effective as delivery of a manually executed
counterpart of this Agreement.

                    8. Ratification. Except as expressly modified and superseded
by this Agreement, each of the Trust Agreement and the Series 1998-1 Revolving
Supplement is ratified and confirmed in all respects and shall continue in full
force and effect.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

 

> > > > > ALLEGIANCE FUNDING I, LLC
> > > > > 
> > > > > , as Depositor
> > > > 
> > > > > /s/Michael w. McDermitt
> > > > > 
> > > > > --------------------------------------------------------------------------------
> > > > > 
> > > > > VP & Secretary
> > > > 
> > > > > > > > > > >  
> > > > > 
> > > > > MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee
> > > > 
> > > > >  
> > > > > 
> > > > > /s/Russell T. Whitley
> > > > > 
> > > > > --------------------------------------------------------------------------------
> > > > > 
> > > > > Asst Vice President
> > > > 
> > > > > > > > > > >  
> > > > > 
> > > > > POINT WEST CAPITAL CORPORATION, as Servicer
> > > > > 
> > > > > > > > > > >  
> > > > 
> > > > >  
> > > > > 
> > > > > /s/Alan B. Perper
> > > > > 
> > > > > --------------------------------------------------------------------------------
> > > > > 
> > > > > President
> > > > 
> > > > > > > > > > >  

Consented and Agreed:

Each of the Certificateholders authorizes and directs the Trustee to execute the
foregoing.

TICE & CO.

, as registered owner of the Class A-R Certificates

/s/Brian D. Hunt

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Partner

 

TICE & CO.

, as registered owner of the Class B-R Certificates

 

/s/Brian D. Hunt

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Partner

 

TICE & CO.

, as registered owner of the Class C-R Certificates

 

/s/Brian D. Hunt

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Partner

________

 

ALLEGIANCE FUNDING I, LLC

, as registered owner of the Class D-R Certificates

 

/s/Michael W. McDermitt

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VP & Secretary

 

PACIFIC LIFE INSURANCE COMPANY

/s/Cathy Schwartz

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Asst. Vice President

/s/Audrey L. Milfs

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Corp. Secretary

UNITED OF OMAHA LIFE INSURANCE COMPANY

 

/s/Kent Knudsen

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Vice President

NATIONWIDE LIFE INSURANCE COMPANY

 

/s/Mark W. Poeppelman

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Associate Vice President

LIBERTY LIFE INSURANCE COMPANY

(Certificates held in the nominee name HARE & CO.)

 

/s/Adam Emerson

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Authorized Officer

 

TICE & CO.

, registered owner of the Class C Certificates

 

/s/Brian D. Hunt

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Partner

 

TICE & CO.

, registered owner of the Class D Certificates

/s/Brian D. Hunt

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Partner

TICE & CO.

, registered owner of the Class E Certificates

 

/s/Brian D. Hunt

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Partner