SERVICING AGREEMENT

                                      among

                POINT WEST CAPITAL CORPORATION, as the Servicer,

                ALLEGIANCE CAPITAL, LLC, as the Special Servicer,

                                   *** as the Servicing Advisor,

                  ALLEGIANCE FUNDING CORP. I, as the Depositor,

                                       and

            MANUFACTURERS AND TRADERS TRUST COMPANY, as the Trustee,







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

                           Dated as of August 1, 1998


***Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.


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<TABLE>


                                TABLE OF CONTENTS
<CAPTION>

                                                                                                               Page

<S>                         <C>                                                                                 <C>    

ARTICLE ONE
DEFINITIONS

         Section 1.01      Defined Terms..........................................................................2
         Section 1.02      Certain Rules of Construction..........................................................6

ARTICLE TWO
REPRESENTATIONS AND WARRANTIES

         Section 2.01      Servicer Representations and Warranties................................................7
         Section 2.02      Special Servicer Representations and Warranties........................................8
         Section 2.03      Servicing Advisor Representations and Warranties.......................................9

ARTICLE THREE
ADMINISTRATION AND SERVICING OF LOANS

         Section 3.01      Responsibilities of the Servicer......................................................12
         Section 3.02      Responsibilities of Special Servicer..................................................12
         Section 3.03      Responsibilities of the Servicing Advisor.............................................15
         Section 3.04      Servicing Standard of Care............................................................15
         Section 3.05      Lockbox Account; Remittances..........................................................15
         Section 3.06      Financing Statements; Title Filings...................................................16
         Section 3.07      Maintenance of Insurance Policy;  Insurance Proceeds..................................16
         Section 3.08      No Offset.............................................................................16
         Section 3.09      Servicing Compensation................................................................17
         Section 3.10      Prepayments Permitted; Substitution or Purchase of Loans..............................18
         Section 3.11      Due-on-Sale Clauses; Assumptions; Due-on-Encumbrance Clauses..........................19
         Section 3.12      Realization Upon Defaulted Loans......................................................20
         Section 3.13      Title and Management of Repossessed Collateral........................................22
         Section 3.14      Sale of Defaulted Loans and Repossessed Collateral....................................24
         Section 3.15      Modifications, Waivers, Amendments and Consents.......................................26

ARTICLE FOUR
ACCOUNTINGS, STATEMENTS AND REPORTS

         Section 4.01      Reports...............................................................................29
         Section 4.02      Financial Statements; Certification as to Compliance; Notice of Default...............30
         Section 4.03      Annual Independent Accountants' Reports...............................................32
         Section 4.04      Access to Certain Documentation and Information.......................................32
         Section 4.05      Other Necessary Data..................................................................33


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<CAPTION>


                                                                                                               Page    
<S>                         <C>                                                                                 <C>    
ARTICLE FIVE
THE SERVICER, THE SPECIAL SERVICER AND THE DEPOSITOR

         Section 5.01      Indemnification.......................................................................34
         Section 5.02      Corporate Existence; Reorganizations..................................................34
         Section 5.03      Limitation on Liability of the Servicer, the Special Servicer, the Servicing Advisor ...
                           and Others.      .....................................................................35
         Section 5.04      The Servicer, the Special Servicer and the Servicing Advisor Not to Resign............36
         Section 5.05      Depositor Indemnification.............................................................36

ARTICLE SIX
SERVICING TERMINATION

         Section 6.01      Events of Default.....................................................................37
         Section 6.02      Appointment of Successor Servicer; Taking of Bids.....................................38
         Section 6.03      Effects of Termination................................................................40
         Section 6.04      No Effect on Other Parties. ..........................................................40
         Section 6.05      Waiver of Past Defaults...............................................................40
         Section 6.06      Notification to Certificateholders and the Certificateholder Agent....................40

ARTICLE SEVEN
GENERAL PROVISIONS

         Section 7.01      Termination of the Agreement..........................................................41
         Section 7.02      Amendments............................................................................41
         Section 7.03      Governing Law.........................................................................42
         Section 7.04      Notices...............................................................................42
         Section 7.05      Severability of Provisions............................................................42
         Section 7.06      Binding Effect........................................................................42
         Section 7.07      Article Headings and Captions.........................................................42
         Section 7.08      Legal Holidays........................................................................42
         Section 7.09      Assignment for Security for the Certificates. ........................................43
         Section 7.10      No Servicing Assignment...............................................................43
         Section 7.11      Notifications.........................................................................43
         Section 7.12      Successor Servicer....................................................................43


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<PAGE>



                                                        
         This  SERVICING  AGREEMENT  (this  "Agreement"),  dated as of August 1,
1998,  is  entered  into  among  Point  West  Capital  Corporation,  a  Delaware
corporation  (the  "Servicer"),  Allegiance  Capital,  LLC, a  Delaware  limited
liability  company (the "Special  Servicer"),  ***  corporation  (the "Servicing
Advisor"), Allegiance Funding Corp. I, a Delaware corporation (the "Depositor"),
and Manufacturers and Traders Trust Company, a New York banking corporation (the
"Trustee").
            
                                    RECITALS
                                    --------

         The Depositor has entered into a Trust  Agreement dated as of August 1,
1998 (the "Trust  Agreement"),  with the Trustee and the  Servicer,  pursuant to
which the  Depositor,  on  behalf of the  Trust,  has  caused or will  cause the
issuance of various Series of Revolving  Certificates and various Series of Term
Certificates.

         The Depositor and Allegiance Capital,  LLC, a limited liability company
(the  "Company"),  have entered into a Loan Acquisition  Agreement,  dated as of
August 1, 1998 (the "Loan  Acquisition  Agreement"),  providing for, among other
things,  the  contribution  and sale,  from time to time,  by the Company to the
Depositor of all of its right,  title and interest in and to certain Loan Assets
which the  Depositor  is and will be  conveying  to the Trustee  pursuant to the
Trust Agreement.  As a precondition to the effectiveness of the Loan Acquisition
Agreement, such agreement requires that the Servicer, the Servicing Advisor, the
Depositor and the Trustee enter into this Agreement to provide for the servicing
of the Loan Assets.

         In addition,  the  Depositor  is conveying to the Trustee,  among other
things,  all of the Depositor's rights derived under this Agreement and the Loan
Acquisition  Agreement,  and each of the Servicer,  the Special Servicer and the
Servicing  Advisor agrees that all  representations,  warranties,  covenants and
agreements  made by such  Person  herein  with  respect  to the Loan  Assets and
otherwise   shall   also   be  for  the   benefit   of  the   Trustee   and  all
Certificateholders.  For their services under this Agreement,  the Servicer, the
Special  Servicer  and the  Servicing  Advisor  will  receive  the  compensation
described herein or in the Trust Agreement.

         In consideration of the mutual agreements contained herein and of other
good and  valuable  consideration  (the receipt and adequacy of which are hereby
acknowledged), the parties hereto agree as follows:


***Confidential information omitted purusant to a request for confidential 
   treatment filed separately with the Securities and Exchange Commission.

                                       1

<PAGE>


                                   ARTICLE ONE
                                   ------- ---

                                   DEFINITIONS
                                   -----------


Section 1.01      Defined Terms.
------------      --------------

         Each  capitalized  term used herein but not  otherwise  defined has the
meaning assigned to such term in the Trust Agreement or, if not defined therein,
in the Loan Acquisition Agreement.  For purposes of this Agreement,  each of the
following terms has the meaning specified herein:
 
        "Agreement": The meaning set forth in the introductory paragraph 
hereof.

         "Annual Pool Report":  The annual report,  substantially in the form of
Exhibit E, prepared by the Special  Servicer  pursuant to and in accordance with
---------
Section 4.01(c).

         "Assuming Party":  The meaning set forth in Section 3.11(a).

         "Company":  The  Person  described  in  the  recitals  hereof  and  all
successors  and  permitted  assigns of such  Person  under the Loan  Acquisition
Agreement.

         ***.
                               

         "Depositor":  The Person described in the  introduction  hereto and all
successors and permitted assigns of such Person under the Trust Agreement.

         "Directing  Holders":   The  Holders  of  not  less  than  51%  of  the
Outstanding   Principal  Amount  of  the  lowest  Class  of  Certificates   then
Outstanding (or Classes, if more than one Series is Outstanding).

         "Eligible Account": One or more accounts (a) that are maintained with a
depository  institution the long-term  unsecured debt  obligations of which have
been rated by the Rating Agency in one of its two highest  rating  categories at
the time of any deposit therein, (b) that are trust accounts with any depository
institution  held by the  depository  institution in its capacity as a corporate
trustee,  or (c) the  deposits  in which are  insured by the FDIC (to the limits
established  by the  FDIC) and the  uninsured  deposits  in which are  otherwise
secured such that the Special  Servicer has a claim with respect to the funds in
such accounts or a perfected  first  security  interest  against any  collateral
securing  such  funds  that is  superior  to claims of any other  depositors  or
creditors of the depository institution with which such accounts are maintained.

         "Environmental  Assessment":  With respect to any Mortgaged Property, a
"Phase I"  environmental  assessment  of such  Mortgaged  Property  meeting  the
applicable standards of the American Society for Testing Materials.

         "Event of Default":  The meaning set forth in Section 6.01.

         "Hazardous  Substances":  All substances or materials:  (a) that are or
become  defined  as  hazardous   wastes,   hazardous   substances,   pollutants,
contaminants,  or toxic  substances  under any  Environmental  Law; (b) that are
defined by any  Environmental  Law as toxic,  explosive,  corrosive,  ignitable,
infectious,  radioactive, mutagenic, or otherwise hazardous; (c) the presence of
which require  investigation or response 

***Confidential information omitted purusant to a request for confidential 
   treatment filed separately with the Securities and Exchange Commission.

                                       2
<PAGE>

under any Environmental Law; (d) that constitute a nuisance, trespass, or health
or safety  hazard  to Person or  neighboring  properties;  (e) that  consist  of
underground or aboveground  storage tanks,  whether empty,  filled, or partially
filled with any substance;  or (f) that contain,  without limitation,  asbestos,
polychlorinated   biphenyls,   urea  formaldehyde  foam  insulation,   petroleum
hydrocarbons,  petroleum derived substances or wastes,  crude oil, nuclear fuel,
natural gas, or synthetic gas.

         "Indemnified Party":  The meaning set forth in Section 5.01(a).

         "Interested Person": With respect to any specified Loan, a Person other
than an Independent Person.

         "Liquidated  Loan":  Any  Defaulted  Loan  with  respect  to which  the
Servicer has  determined,  in accordance  with Section 3.04, that all Recoveries
that it expects  with  respect to such Loan (a) have been  received  or (b) have
been  identified and are reasonably  expected to be received  within ninety (90)
days from the date of such determination.

         "Loan  Acquisition  Agreement":  The meaning set forth in the  recitals
hereof.

         "Loan Payment Data": At any time, a record of the monthly Loan balance,
all loan payments received and application of interest, principal and other fees
for each Loan in the Loan Pool from the closing date of such Loan to the date of
such report.

         "Lockbox Account":  The meaning set forth in Section 3.05.

         "Lockbox Bank":  The meaning set forth in Section 3.05.

         "Operating Account":  The meaning set forth in Section 3.13.

         "Outgoing  Servicer":  Any Person who  receives  a  Termination  Notice
pursuant to Section 6.01.

         "Recovery  Expenses":  As of any date of determination,  the sum of the
following:  (a) all  expenses,  if any,  incurred by the  Servicer,  the Special
Servicer or the Servicing  Advisor,  as the case may be, in connection  with any
Defaulted Loan or  Repossessed  Collateral  (including  legal fees and expenses,
committee  or referee  fees,  and,  if  applicable,  brokerage  commissions  and
conveyance  taxes)  provided  that, if any of the  foregoing  expenses are to be
                    -------- 
retained by the Servicer,  the Special Servicer or the Servicing Advisor, as the
case may be, and not to be paid or reimbursed  to an  Independent  Person,  such
expenses  shall not  constitute  "Recovery  Expenses"  unless such expenses were
approved in writing in advance by the Certificateholder  Agent; (b) all advances
made to an  Independent  Person by the  Servicer,  the  Special  Servicer or the
Servicing  Advisor,  as  applicable,  with  respect  to any  Defaulted  Loan  or
Repossessed Collateral and not previously reimbursed as provided for herein; and
(c) Workout Fees, if any, due to the Special Servicer.

         "Report": Each of the Servicer Report, the Special Servicer Report, the
Annual  Pool Report and the ***  prepare  pursuant to Section 4.01.

         "Repossessed  Collateral":  Loan Collateral related to a Defaulted Loan
that has been repossessed.

         "Request  for  Release  of  Documents":  The  request  prepared  by the
Servicer or the Special Servicer substantially in the form of Exhibit C.
                                                              ----------

***Confidential information omitted purusant to a request for confidential 
   treatment filed separately with the Securities and Exchange Commission.

                                       3
<PAGE>


         "Servicer":  The Person  described in the  introduction  hereto until a
successor Person shall have become (if applicable) the Servicer  pursuant to the
applicable  provisions of this Agreement,  whereupon  "Servicer" shall mean such
successor Person.

         "Servicer Default": Any occurrence or circumstance which with notice or
the  lapse of time or both  would be a  Servicer  Event of  Default  under  this
Agreement.

         "Servicer Event of Default":  Each of the occurrences or  circumstances
enumerated in Section 6.01(a) that occurs with respect to the Servicer.

         "Servicer Financial  Statements":  The Servicer's audited  consolidated
and  consolidating   balance  sheet  and  income  statement,   consolidated  and
consolidating statement of cash flows, auditors opinion letter regarding audited
financial statements, and all notes to such audited financial statements.

         "Servicer  Report":  The monthly report,  substantially  in the form of
Exhibit A, prepared by the Servicer  pursuant to and in accordance  with Section
---------
4.01(a).

         "Servicer State of  Incorporation":  The State of  incorporation of the
Servicer, which, as of the Initial Delivery Date, is the State of Delaware.

         "Servicer  Termination  Notice": A Termination Notice applicable to the
Servicer, as provided in Section 6.01(b).

         "Servicing  Advisor":  The Person described in the introduction  hereto
until a successor Person shall have (if applicable) become the Servicing Advisor
pursuant to the applicable  provisions of this Agreement,  whereupon  "Servicing
Advisor" shall mean such successor Person.

         "Servicing Advisor Default":  Any occurrence or circumstance which with
notice  or the  lapse of time or both  would  be a  Servicing  Advisor  Event of
Default under this Agreement.

         "Servicing  Advisor  Event  of  Default":  Each of the  occurrences  or
circumstances  enumerated  in Section  6.01(a)  that occurs with  respect to the
Servicing Advisor.

         "Servicing  Advisor  Fee":  With respect to each Loan,  the monthly fee
payable on each Payment Date to the Servicing  Advisor in consideration  for its
performance  of its duties as  Servicing  Advisor  under this  Agreement,  in an
amount  equal to the  lesser of (a) $83.50  per Loan plus five  hundred  dollars
($500) for each ***  delivered  pursuant  to Section  4.01(e) and (b) the amount
calculated in clause (a) of the  definition of "Special  Servicer Fee" contained
in the Trust Agreement.

         "Servicing Advisor State of Incorporation":  The State of incorporation
of the Servicing  Advisor,  which, as of the Initial Delivery Date, is the State
of ***.

         "Servicing Advisor Termination Notice": A Termination Notice applicable
to the Servicing Advisor, as provided in Section 6.01(b).

         "Servicing  Guidelines":  Part  III of the  Program  Guidelines,  which
relates to servicing generally.


***Confidential information omitted purusant to a request for confidential 
   treatment filed separately with the Securities and Exchange Commission.

                                       4

<PAGE>


         "Servicing  Officer":  As the context requires,  any of the officers of
the Servicer,  the Special  Servicer or the Servicing  Advisor,  as  applicable,
involved in, or responsible for, the  administration and servicing of the Loans,
as identified on the list of Servicing  Officers furnished by such Person to the
Trustee and the other parties hereto from time to time.

         "Special  Servicer":  The Person described in the  introduction  hereto
until a successor Person shall have (if applicable)  become the Special Servicer
pursuant to the  applicable  provisions  of the  Agreement,  whereupon  "Special
Servicer" shall mean such successor Person.

         "Special Servicer  Default":  Any occurrence or circumstance which with
notice or the lapse of time or both would be a Special Servicer Event of Default
under this Agreement.

         "Special  Servicer  Event  of  Default":  Each  of the  occurrences  or
circumstances  enumerated  in Section  6.01(a)  that occurs with  respect to the
Special Servicer.

         "Special Servicer Report":  The quarterly report,  substantially in the
form  of  Exhibit  B,  prepared  by  the  Special  Servicer  pursuant  to and in
          ----------
accordance with Section 4.01(b).

         "Special Servicer State of Incorporation": The State of organization of
the Special Servicer, which, as of the Initial Delivery Date, is Delaware.

         "Special Servicer  Termination Notice": A Termination Notice applicable
to the Special Servicer, as provided in Section 6.01(b).

         "Specified Lockbox Account":  The meaning set forth in Section 3.05.
         "Successor  Servicer":   Any  successor  Servicer,   successor  Special
Servicer or successor Servicing Advisor appointed in accordance with Article 6.
 
         "Termination Notice":  The notice described in Section 6.01(b).
 
         "Transition Costs":  The meaning set forth in the Trust Agreement.
 
         "Trust Agreement":  The meaning set forth in the recitals hereof.

         "Trustee":  The Person  described  in the  introduction  hereto until a
0successor  Person shall have become(if applicable) the Trustee  pursuant to the
applicable  provisions of the Trust  Agreement,  whereupon  "Trustee" shall mean
such successor Person.

         "Workout Fee": With respect to any Determination Date and any Loan that
is, at the  beginning of the related Due Period,  or became,  at any time during
such Due  Period,  a  Defaulted  Loan  (other  than by reason of the breach of a
representation or warranty by the Company  hereunder or defective  documentation
that has a material adverse effect on Certificateholders),  a fee payable to the
Special  Servicer in an amount equal to (a) in the case of a Liquidated  Loan or
in the case of a Defaulted Loan or any  Repossessed  Collateral  that is sold or
repurchased  pursuant to any provision of this Agreement  during the related Due
Period,  the product of (i) the amount equal to the product of (A) 1.25% and (B)
all  Recoveries  received on such Loan  during  such Due Period  (reduced by the
amount of the unpaid  accrued  interest on such Loan during such Due Period) and
(ii) a  fraction,  the  numerator  of  which is all of such  Recoveries  and the
denominator  of  which  

                                       5
<PAGE>


is the Loan Balance of such Loan at the time of disposition,  or (b) in the case
of each other such Loan,  the  product of (i) 1.25% and (ii) an amount  equal to
(A) the amount of Collections received with respect to such Loan during such Due
Period less (B) the aggregate amount of Recovery  Expenses incurred with respect
thereto and not  deducted  from  Collections  received in a previous  Due Period
pursuant to this clause (b);  provided that the amount of Special  Servicer Fees
                              --------
accrued  from the date  such  Loan  became  a  Defaulted  Loan to the end of the
related Due Period shall be subtracted from the amount  calculated in clause (a)
or (b)

         Section 1.02       Certain Rules of Construction.
         ------------       ------------------------------

         Unless the context of this Agreement  clearly requires  otherwise:  (a)
references  to the plural  include the singular and to the singular  include the
plural;  (b)  references to any gender  include any other gender;  (c) the words
"include" and "including" are not limiting;  (d) the word "or" has the inclusive
meaning  represented by the phrase "and/or";  (e) the words "hereof,"  "herein,"
"hereby," and "hereunder," and any other similar words,  refer to this Agreement
as a whole and not to any particular provision hereof; and (f) article, section,
subsection,  clause,  exhibit,  and schedule  references are to this  Agreement.
Article, section, and subsection headings are for convenience of reference only,
shall not constitute a part of this  Agreement for any other purpose,  and shall
not affect the  construction  of this  Agreement.  All  exhibits  and  schedules
attached hereto are incorporated herein by this reference.  Any reference herein
to this Agreement or any other agreement,  document,  or instrument includes all
permitted alterations, amendments, changes, extensions, modifications, renewals,
or supplements thereto or thereof, as applicable.

                                       6
<PAGE>


                                   ARTICLE TWO
                                   -----------
 
                        REPRESENTATIONS AND WARRANTIES
                        -------------------------------

          Section 2.01    Servicer Representations and Warranties.
          ------------    ---------------------------------------- 

         The Servicer makes the following  representations and warranties to the
Depositor,  the Trustee and the  Certificateholders  as of the Initial  Delivery
Date, which shall survive the Initial Delivery Date:

         (a) The Servicer has been duly incorporated and is validly existing and
in good  standing  as a  corporation  under  the laws of the  Servicer  State of
Incorporation,   with  requisite  corporate  power  and  authority  to  own  its
properties,  perform its obligations under each of the Transaction  Documents to
which it is a party and to transact  the  business in which it is now engaged or
in which it proposes to engage.

         (b) Each of the  Transaction  Documents to which it is a party has been
duly  authorized,  executed and  delivered by the Servicer and  constitutes  the
valid and legally binding  obligation of the Servicer,  enforceable  against the
Servicer  in  accordance  with  its  terms,  subject  as to  enforcement  to any
bankruptcy,  insolvency,  reorganization  and  other  similar  laws  of  general
applicability  relating  to or  affecting  creditors'  rights  generally  and to
general  principles of equity  regardless of whether  enforcement is sought in a
court of equity or law.

         (c)  The  execution  and  delivery  by  the  Servicer  of  each  of the
Transaction Documents to which it is a party and the performance by the Servicer
of its obligations under such documents and the consummation of the transactions
contemplated  therein will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in the creation
or imposition  of any lien,  charge or  encumbrance  upon any of the property or
assets  of the  Servicer  pursuant  to the  terms  of  any  material  indenture,
mortgage,  deed of trust or other agreement or instrument to which it is a party
or by which it is bound or to which any of its  property  or assets is  subject,
nor  will  such  action  result  in  any  violation  of  the  provisions  of its
Certificate of  Incorporation  or Bylaws,  or any statute or any order,  rule or
regulation of any court or any regulatory authority or other governmental agency
or body having  jurisdiction  over it or any of its properties;  and no consent,
approval,  authorization,  order,  registration or  qualification of or with any
court, or any such regulatory  authority or other governmental agency or body is
required  for the  Servicer to enter into each of the  Transaction  Documents to
which it is a party.

         (d) There  are no  proceedings  or  investigations  pending,  or to the
knowledge of the  Servicer,  threatened  against or affecting the Servicer in or
before any  court,  governmental  authority  or agency or  arbitration  board or
tribunal,  which,  individually or in the aggregate,  involve the probability of
materially and adversely affecting the properties,  business, prospects, profits
or condition  (financial or  otherwise)  of the Servicer,  or the ability of the
Servicer to perform its obligations under the Transaction  Documents to which it
is a party.  The  Servicer  is not in default  with  respect to any order of any
court, governmental authority or agency or arbitration board or tribunal.

         (e) The  Servicer  (i) is not in  violation  of any  laws,  ordinances,
governmental rules or regulations to which it is subject, (ii) has not failed to
obtain any licenses,  permits,  franchises or other governmental  authorizations
necessary to the  ownership of its property or to the conduct of its business or
the performance of its obligations  under the Transaction  Documents to which it
is a party, and (iii) is not in violation in any material respect of any term of
any agreement, charter instrument, bylaw or instrument to which it is a party 

                                       7

<PAGE>

or by which it may be bound,  which  violation  or failure to obtain  materially
adversely  affects the business or condition  (financial  or  otherwise)  of the
Servicer.

         (f)  The  Servicer  will  service  the Loans in  accordance  with the 
terms and  conditions  contained herein.

         (g)  There  has  been  no  material  adverse  change  in the  financial
condition of the Servicer  since April 28, 1998 and all  information  concerning
the Servicer furnished by it to the Depositor,  the Certificateholder Agent, any
Certificateholder, the Trustee or the Rating Agency prior in connection with the
Transaction  Documents  or any  transaction  contemplated  thereby  is true  and
accurate in all material  respects or based on  reasonable  estimates  (but,  if
based on  estimates,  shall be  identified  as so based) on the date as of which
such information is stated or certified, as applicable,  and no such information
contains any untrue  statement  of a material  fact or omits to state a material
fact necessary in order to make the statements  contained herein or therein,  in
light of the circumstances  under which such statements were made and taken as a
whole, not misleading; provided that, to the extent that the representations and
                       --------
warranties of the Servicer  contained in this  subsection (g) relate to any such
information that was not prepared by the Servicer or any of its Affiliates, then
such  representations and warranties are made by the Servicer solely to the best
of its knowledge. As used in this clause,  "information" does not include casual
oral  conversations or informal oral statements of opinions on which it would be
unreasonable to rely.

         Section 2.02       Special Servicer Representations and Warranties.
         ------------       ------------------------------------------------

         The Special Servicer makes the following representations and warranties
to the  Depositor,  the  Trustee  and the  Certificateholders  as of the Initial
Delivery Date, which shall survive the Initial Delivery Date:

         (a) The  Special  Servicer  has  been  duly  organized  and is  validly
existing and in good standing as a limited  liability  company under the laws of
the Special Servicer State of  Incorporation,  with requisite  limited liability
company power and authority to own its properties, perform its obligations under
the Transaction Documents to which it is a party and to transact the business in
which it is now engaged or in which it proposes to engage.

         (b) Each of the  Transaction  Documents to which it is a party has been
duly authorized,  executed and delivered by the Special Servicer and constitutes
the valid and legally binding  obligation of the Special  Servicer,  enforceable
against  the  Special  Servicer  in  accordance  with its  terms,  subject as to
enforcement to any bankruptcy, insolvency, reorganization and other similar laws
of general  applicability  relating to or affecting  creditors' rights generally
and to general principles of equity regardless of whether  enforcement is sought
in a court of equity or law.

         (c) The execution  and delivery by the Special  Servicer of each of the
Transaction  Documents to which it is a party and the performance by the Special
Servicer of its  obligations  under such documents and the  consummation  of the
transactions  contemplated  therein will not conflict with or result in a breach
of any of the terms or provisions of, or constitute a default  under,  or result
in the creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Special Servicer pursuant to the terms of any material
indenture,  mortgage, deed of trust or other agreement or instrument to which it
is a party or by which it is bound or to which any of its  property or assets is
subject,  nor will such action result in any violation of the  provisions of its
Certificate  of Formation or Operating  Agreement,  or any statute or any order,
rule  or  regulation  of  any  court  or  any  regulatory   authority  or  other
governmental  agency  or  body  

                                       8
<PAGE>


having jurisdiction over it or any of its properties;  and no consent, approval,
authorization, order, registration or qualification of or with any court, or any
such regulatory  authority or other governmental  agency or body is required for
the Special Servicer to enter into each of the Transaction Documents to which it
is a party.

         (d) There  are no  proceedings  or  investigations  pending,  or to the
knowledge of the Special Servicer,  threatened  against or affecting the Special
Servicer in or before any court, governmental authority or agency or arbitration
board  or  tribunal,  which,  individually  or in  the  aggregate,  involve  the
probability  of materially  and adversely  affecting the  properties,  business,
prospects,  profits  or  condition  (financial  or  otherwise)  of  the  Special
Servicer,  or the  ability of the Special  Servicer  to perform its  obligations
under the Transaction  Documents to which it is a party. The Special Servicer is
not in default with respect to any order of any court, governmental authority or
agency or arbitration board or tribunal.

         (e)  The  Special  Servicer  (i)  is  not in  violation  of  any  laws,
ordinances,  governmental rules or regulations to which it is subject,  (ii) has
not failed to obtain any licenses,  permits,  franchises  or other  governmental
authorizations  necessary to the  ownership of its property or to the conduct of
its  business  or the  performance  of its  obligations  under  the  Transaction
Documents to which it is a party,  and (iii) is not in violation in any material
respect of any term of any agreement, charter instrument, bylaw or instrument to
which it is a party or by which it may be bound,  which  violation or failure to
obtain  materially  adversely  affects the business or condition  (financial  or
otherwise) of the Special Servicer.

         (f) The Special  Servicer will service the Loans in accordance with the
terms and conditions contained herein.

         (g)  There  has  been  no  material  adverse  change  in the  financial
condition  of the Special  Servicer  since  April 28,  1998 and all  information
concerning  the  Special  Servicer  furnished  by  it  to  the  Depositor,   the
Certificateholder Agent, any Certificateholder, the Trustee or the Rating Agency
prior  in  connection  with  the   Transaction   Documents  or  any  transaction
contemplated  thereby is true and accurate in all material  respects or based on
reasonable  estimates  (but,  if based on  estimates,  shall be identified as so
based) on the date as of which  such  information  is stated  or  certified,  as
applicable,  and no such information contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained  herein or  therein,  in light of the  circumstances  under which such
statements were made and taken as a whole, not misleading; provided that, to the
                                                           -------- 
extent that the representations and warranties of the Special Servicer contained
in this subsection (g) relate to any such  information  that was not prepared by
the Special  Servicer or any of its Affiliates,  then such  representations  and
warranties are made by the Special Servicer solely to the best of its knowledge.
As used in this clause, "information" does not include casual oral conversations
or informal  oral  statements of opinions on which it would be  unreasonable  to
rely.

         Section 2.03       Servicing Advisor Representations and Warranties.
         ------------       -------------------------------------------------

         The  Servicing   Advisor  makes  the  following   representations   and
warranties to the Depositor,  the Trustee and the  Certificateholders  as of the
Initial Delivery Date, which shall survive the Initial Delivery Date:
 
        (a) The  Servicing  Advisor has been duly  incorporated  and is validly
existing and in good standing as a  corporation  under the laws of the Servicing
Advisor State of Incorporation,  with requisite corporate power and authority to
own its properties,  perform its obligations under the Transaction  Documents to
which it is a party and to transact  the  business in which it is now engaged or
in which it proposes to engage.

                                       9

<PAGE>


         (b) Each of the  Transaction  Documents to which it is a party has been
duly authorized, executed and delivered by the Servicing Advisor and constitutes
the valid and legally binding  obligation of the Servicing  Advisor  enforceable
against the  Servicing  Advisor,  in  accordance  with its terms,  subject as to
enforcement to any bankruptcy, insolvency, reorganization and other similar laws
of general  applicability  relating to or affecting  creditors' rights generally
and to general principles of equity regardless of whether  enforcement is sought
in a court of equity or law.

         (c) The execution and delivery by the Servicing  Advisor of each of the
Transaction  Documents  to  which  it is a  party  and  the  performance  by the
Servicing  Advisor of its obligations  under such documents and the consummation
of the transactions  contemplated  therein will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default  under,  or
result in the creation or imposition of any lien, charge or encumbrance upon any
of the property or assets of the Servicing  Advisor pursuant to the terms of any
material indenture,  mortgage, deed of trust or other agreement or instrument to
which it is a party or by which it is bound or to which any of its  property  or
assets  is  subject,  nor  will  such  action  result  in any  violation  of the
provisions  of its Articles of  Incorporation  or Bylaws,  or any statute or any
order,  rule or  regulation  of any court or any  regulatory  authority or other
governmental  agency  or  body  having  jurisdiction  over  it  or  any  of  its
properties;  and no consent,  approval,  authorization,  order,  registration or
qualification  of or with any court, or any such  regulatory  authority or other
governmental  agency or body is required for the Servicing Advisor to enter into
each of the Transaction Documents to which it is a party.

         (d) Except as previously disclosed in writing, there are no proceedings
or  investigations  pending,  or to  the  knowledge  of the  Servicing  Advisor,
threatened  against or affecting the  Servicing  Advisor in or before any court,
governmental  authority  or  agency or  arbitration  board or  tribunal,  which,
individually  or in the  aggregate,  involve the  probability  of materially and
adversely affecting the properties,  business,  prospects,  profits or condition
(financial  or  otherwise)  of the  Servicing  Advisor,  or the  ability  of the
Servicing Advisor to perform its obligations under the Transaction  Documents to
which it is a party. The Servicing Advisor is not in default with respect to any
order of any court,  governmental  authority or agency or  arbitration  board or
tribunal.

         (e)  The  Servicing  Advisor  (i)  is  not in  violation  of any  laws,
ordinances,  governmental rules or regulations to which it is subject,  (ii) has
not failed to obtain any licenses,  permits,  franchises  or other  governmental
authorizations  necessary to the  ownership of its property or to the conduct of
its  business  or the  performance  of its  obligations  under  the  Transaction
Documents to which it is a party,  and (iii) is not in violation in any material
respect of any term of any agreement, charter instrument, bylaw or instrument to
which it is a party or by which it may be bound,  which  violation or failure to
obtain  materially  adversely  affects the business or condition  (financial  or
otherwise) of the Servicing Advisor.

         (f) The  Servicing  Advisor will provide all services in respect of the
Loans in accordance with the terms and conditions contained herein.

         (g)  There  has  been  no  material  adverse  change  in the  financial
condition  of the  Servicing  Advisor  since April 28, 1998 and all  information
concerning  the  Servicing  Advisor  furnished  by  it  to  the  Depositor,  the
Certificateholder Agent, any Certificateholder, the Trustee or the Rating Agency
prior  in  connection  with  the   Transaction   Documents  or  any  transaction
contemplated  thereby is true and accurate in all material  respects or based on
reasonable  estimates  (but,  if based on  estimates,  shall be identified as so
based) on the date as of which  such  information  is stated  or  certified,  as
applicable,  and no such information contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained  herein or  therein,  in light of the  circumstances  under which such
statements were 

                                       10
<PAGE>


made and taken as a whole, not misleading; provided that, to the extent that the
                                           --------
representations  and  warranties  of the  Servicing  Advisor  contained  in this
subsection  (g)  relate to any such  information  that was not  prepared  by the
Servicing  Advisor  or any of its  Affiliates,  then  such  representations  and
warranties  are  made  by  the  Servicing  Advisor  solely  to the  best  of its
knowledge.  As used in this clause,  "information"  does not include casual oral
conversations  or  informal  oral  statements  of  opinions on which it would be
unreasonable to rely.

                                       11

<PAGE>


                                  ARTICLE THREE
                                  --------------

                      ADMINISTRATION AND SERVICING OF LOANS
                      -------------------------------------

          Section 3.01      Responsibilities of the Servicer.
          ------------      ---------------------------------

         (a) The Servicer, for the benefit of the Depositor, the Trustee and the
Certificateholders,  shall be responsible for, and shall perform,  in accordance
with the  Servicing  Guidelines  the duties of reporting  and  collecting on the
Loans,  in  accordance  with the  standards  and  procedures  set  forth in this
Agreement  and any  related  provisions  of the  Trust  Agreement  and the  Loan
Acquisition  Agreement.  The Servicer's  responsibilities  shall include sending
monthly billing and periodic  reporting notices to the Obligors,  collecting and
posting all payments, accounting for collections,  furnishing monthly and annual
statements to the Special  Servicer,  the Servicing  Advisor,  the Trustee,  the
Rating  Agency,  the  Certificateholders  and the  Certificateholder  Agent with
respect to payments  and  maintaining  the  perfected  security  interest of the
Trustee in the Trust Estate. The Servicer (at its expense),  acting alone, shall
have full power and authority,  acting at its sole discretion, to do any and all
things  in  connection  with  such  reporting  and  collection  that it may deem
necessary or desirable.  Without  limiting the generality of the foregoing,  the
Servicer shall, and is hereby  authorized and empowered by the Trustee,  subject
to  Section   3.04,   to  execute  and   deliver  (on  behalf  of  itself,   the
Certificateholders, the Certificateholder Agent, the Trustee or any of them) any
and all instruments necessary to the performance of its obligations with respect
to the  Loans  and any  files or  documentation  pertaining  to the Loan  Assets
(including  the Loan Files).  Subject to Section 3.04, the Servicer also may, in
its sole discretion, waive any late payment charge or penalty, or any other fees
that  may be  payable  to it in the  ordinary  course  of  servicing  any  Loan.
Notwithstanding  the  foregoing,  the Servicer shall not,  except  pursuant to a
judicial order from a court of competent jurisdiction, or as otherwise expressly
provided in this Agreement,  release or waive the right to collect the Scheduled
Payments or any unpaid balance on any Loan or any prepayment or assumption fees.
The Trustee shall, at the expense of the Servicer, furnish the Servicer with any
powers of attorney and other  documents  necessary or  appropriate to enable the
Servicer  to carry  out its  duties  hereunder,  and the  Trustee  shall  not be
responsible for the Servicer's application thereof.

         (b) The Servicer  shall  cooperate  with and take  directions  from the
Special  Servicer in connection with the Loans,  including any Delinquent  Loan,
Defaulted Loan or Underperforming Loan.

         (c) The Servicer shall monitor collections of Loan payments made to the
Lockbox  Account  and  administer  and  update  collection  information,   which
information  shall  be  made  available  to the  Servicer  on a daily  basis  by
electronic  transfer.  The Servicer shall promptly,  but within two (2) Business
Days of receipt thereof,  remit to the Lockbox Account any Collections  remitted
to or received by it.

         (d) In the  performance  of its duties  hereunder,  the Servicer  shall
comply with Section 3.04.

         Section 3.02       Responsibilities of Special Servicer.
         ------------       -------------------------------------

         (a) The Special Servicer, for the benefit of the Depositor, the Trustee
and the  Certificateholders,  shall be responsible for, and shall, in accordance
with the Servicing Guidelines, pursue the managing, servicing, administering and
enforcing of the Loans,  the  enforcement of the Trustee's  interest in the Loan
and  Assets  conveyed  and  assigned  pursuant  to  the  Trust  Agreement,   the
repossession  and sale of the Loan  Collateral  upon default of the related Loan
and the  enforcement of all other remedies under the Loans,  in accordance  with
the  standards  and  procedures  set  forth in this  Agreement  and any  related
provisions of the 

                                       12

<PAGE>


Trust  Agreement.   The  Special  Servicer's   responsibilities   shall  include
responding  to  inquiries of Obligors,  investigating  delinquencies,  providing
appropriate  federal income tax  information to the Trustee for use in providing
information  to the  Certificateholders  and  the  Certificateholder  Agent  and
maintaining Insurance Policies. Subject to Section 3.04 and the other provisions
contained  herein,  the Special  Servicer (at its expense) shall have full power
and  authority,  acting  at its sole  discretion,  to do any and all  things  in
connection with such management, servicing, administration, enforcement and such
sale of the Loan  Collateral  that it may deem  necessary or desirable.  Without
limiting the generality of the foregoing,  the Special  Servicer  shall,  and is
hereby  authorized  and  empowered by the Trustee,  subject to Section  3.04, to
execute and deliver (on behalf of itself, the Depositor, the Certificateholders,
the Certificateholder Agent, the Trustee or any of them) 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 Loans and any files or
documentation  pertaining  to the Loan  Assets.  Subject  to Section  3.04,  the
Special Servicer also may, in its sole discretion, waive any late payment charge
or penalty, or any other fees (but not, without the prior written consent of the
Certificateholder  Agent,  any prepayment fee or premium) that may be payable to
it in the ordinary course of servicing any Loan.  Notwithstanding the foregoing,
the Special Servicer shall not, except pursuant to a judicial order from a court
of competent jurisdiction, or as otherwise expressly provided in this Agreement,
release  or waive the right to  collect  the  Scheduled  Payments  or any unpaid
balance on any Loan. The Trustee shall, at the expense of the Special  Servicer,
furnish the Special  Servicer  with any powers of attorney  and other  documents
necessary  or  appropriate  to  enable  the  Special  Servicer  to carry out its
servicing  and  administrative  duties  hereunder,  and the Trustee shall not be
responsible for the Special Servicer's application thereof.

         (b) The Special Servicer shall conduct any Loan management,  servicing,
administration or enforcement actions in the following manner:

                  (i) The  Special  Servicer,  as agent for and on behalf of the
         Depositor, the Trustee and the Certificateholders,  with respect to any
         Defaulted  Loan,  shall follow such  practices  and  procedures  as are
         normal  and  consistent  with  the  Special  Servicer's  standards  and
         procedures  relating to its own loans and interests in collateral  that
         are  similar  to the Loans and the Loan  Collateral,  and in any event,
         consistent  with  the  standard  of care  described  in  Section  3.04,
         including the taking of  appropriate  actions to foreclose or otherwise
         liquidate  any such  Defaulted  Loan,  together  with the related  Loan
         Collateral,  to  collect  any  Guaranty  Amounts,  and to  enforce  the
         Depositor's   rights  under  the  Loan   Acquisition   Agreement.   All
         Collections  (including  Recoveries)  in  respect  of any  Loan or Loan
         Collateral,  if for any reason received by the Special Servicer,  shall
         be remitted  to the Lockbox  Account  within two (2)  Business  Days of
         receipt thereof;

                  (ii) The Special  Servicer  may sue to enforce or collect upon
         the Loans as agent for the  Certificateholders and the Trust Estate. If
         the Special Servicer elects to commence a legal proceeding to enforce a
         Loan, then the act of  commencement  shall be deemed to be an automatic
         assignment  of the  Loan  to  the  Special  Servicer  for  purposes  of
         collection  only, and a Servicing  Officer shall deliver by facsimile a
         Request for  Release of  Documents  to the Trustee  (with a copy to the
         Certificateholder Agent) requesting delivery to the Special Servicer of
         the Loan and  stating the  reasons  for the  delivery  of any  original
         documents.  Upon receipt of such  delivery  request,  the Trustee shall
         release such Loan to the Special  Servicer within two (2) Business Days
         of receipt of such request  (receipt being deemed to have occurred upon
         confirmation of facsimile transmission).  Upon release of such items as
         provided  herein,  the  Special  Servicer is  authorized  to execute an
         instrument in  satisfaction  of such Loan and to do such other acts and
         execute  such other  documents as it deems  necessary to discharge  the
         Obligor  thereunder  and  release  any  security  interest  in the

                                       13
<PAGE>

         Loan Collateral related thereto.  The Special Servicer shall determine,
         in accordance with the standard of care described in Section 3.04, when
         a Loan has been  paid in full and when a Loan has  become a  Liquidated
         Loan. If in any  enforcement  suit or legal  proceeding it is held that
         the  Special  Servicer  may not enforce a Loan on the ground that it is
         not a real party in interest or a holder  entitled to enforce the Loan,
         then the  Trustee  on behalf of the  Certificateholders  shall,  at the
         Special Servicer's request and expense,  take such steps as the Special
         Servicer  deems  necessary and instructs the Trustee in writing to take
         to enforce the Loan, including bringing suit in its name or the name of
         the  Depositor,  as  beneficial  owner of the Loan, or the names of the
         Certificateholders,  as third party beneficiaries  thereunder,  and the
         Trustee  shall be  indemnified  by the  Special  Servicer  for any such
         action taken.

                  (iii) The  Special  Servicer  shall exercise  any  rights of
         recourse  against  third parties that exist with respect to any Loan in
         accordance with the Special Servicer's usual practice and in any event,
         consistent  with the  standard of care  described in Section  3.04.  In
         exercising  recourse rights,  the Special Servicer is authorized on the
         Trustee's  behalf  to  reassign  the Loan to the  person  against  whom
         recourse exists to the extent necessary,  and at the price set forth in
         the  document  creating the  recourse.  The Special  Servicer  will not
         reduce or diminish such recourse  rights,  except to the extent that it
         exercises such right;

                  (iv) The Special  Servicer may waive, modify or vary any terms
         of any Loan or consent to the  postponement  of strict  compliance with
         any such term  solely in  accordance  with  Section  3.15.  The Special
         Servicer  shall  provide the  Servicer  and the Trustee with an amended
         Loan Schedule reflecting any modification of any Scheduled Payment.

                  (v) The Special  Servicer shall not consent to the termination
         of any Loan in  connection  with loss of or damage to the related  Loan
         Collateral  unless  the  Obligor  has paid an  amount  not less than an
         amount equal to the Loan Balance of such Loan plus any accrued interest
         thereon or, if less, the maximum amount legally  collectible  under the
         related  Loan.   In  the  event  of  damage  to  any  Loan   Collateral
         constituting a total loss, in lieu of terminating  the related Loan, at
         the request of the Obligor,  the Special Servicer may allow the Obligor
         to  use  the  insurance   proceeds  to  purchase  Loan  Collateral  and
         substitute such Loan  Collateral for the damaged Loan Collateral  under
         the Loan if, in the reasonable judgement of the Special Servicer, doing
         so would maximize the total recovery with respect to such Loan.

                  (vi) If the Special  Servicer, in the enforcement of any Loan,
         claims  possession  of the Loan  Collateral  from an Obligor,  then the
         Special  Servicer  shall  use  its  best  efforts  to  sell  such  Loan
         Collateral  promptly and consistent with the standard of care set forth
         in Section 3.04. Any Recoveries  related  thereto shall be deposited in
         accordance with Section 3.05.

                  (vii)  Notwithstanding any provision to the contrary contained
         in this Agreement,  the Special  Servicer shall use its best efforts to
         exercise  any right under a  Defaulted  Loan to  accelerate  the unpaid
         Scheduled  Payments  due or to become due  thereunder  to the extent it
         believes,  consistently with the Servicing Guidelines, that such action
         will maximize the net proceeds available to the Trust Estate;  provided
                                                                        --------
         that the Special  Servicer shall not  accelerate any Scheduled  Payment
         unless  permitted to do so by the terms of the Loan or under applicable
         law.

         (c) The  Special  Servicer  shall hold  copies of the Loan Files in its
capacity as Special  Servicer for the benefit of the Depositor,  the Trustee and
the  Certificateholders.  The  possession  of a copy  of each  

                                       14
<PAGE>

Loan File by the  Special  Servicer  is for the sole  purpose of  servicing  the
related Loan.  Upon the release of the lien of the Trust  Agreement with respect
to any Loan in accordance with Section 3.05 of the Trust Agreement,  the Special
Servicer  will no longer hold the related  Loan File in its  capacity as Special
Servicer  hereunder.  Each Loan File shall be held and maintained by the Special
Servicer in accordance with the standard of care set forth in Section 3.04.

         Section 3.03       Responsibilities of the Servicing Advisor.
         ------------       ------------------------------------------

         The Servicing  Advisor,  for the benefit of the Depositor,  the Trustee
and the  Certificateholders,  shall be responsible for, and shall, in accordance
with the Servicing Guidelines:  (a) within ten (10) Business Days of the receipt
thereof,  review  the  Special  Servicer  Report to ***;(b) in  accordance  with
Section  4.01(d),  prepare  and  deliver to the  Special  Servicer  ***;  (c) in
accordance  with Section  4.01(e),  prepare and deliver to the Special  Servicer
***;  (d)  respond to all  inquiries  of, and  provide  such  further  advice as
requested by the Special  Servicer with respect to ***; and (e) at the direction
of the Special  Servicer,  oversee,  either  directly or  indirectly  through an
Affiliate  of  the  Servicing  Advisor,  ***.  Notwithstanding  anything  to the
contrary contained herein, the Servicing Advisor shall have no right to take any
action  with  respect to ***  without the  express  prior  authorization  of the
Special Servicer.

         Section 3.04       Servicing Standard of Care.
         ------------       ---------------------------

         In managing, administering, servicing, enforcing and making collections
on the Loan Contracts and the Loan Assets pursuant to this  Agreement:  (a) each
of the Servicer and the Special  Servicer will exercise that degree of skill and
care consistent with industry  standards for the servicing of secured commercial
loans,  and  that  which  each of the  Servicer  and the  Special  Servicer,  as
applicable,  customarily  exercises  with respect to similar loan  contracts and
interests in Loan Assets owned or originated by it in a manner  consistent  with
the  Servicing  Guidelines,  and in any  event,  in a prudent  and  commercially
reasonable  manner;  and (b) in performing its duties under Section 3.03 (a)-(e)
inclusive,  the  Servicing  Advisor will  exercise that degree of skill and care
consistent with industry standards in financial and management consulting in the
death care industry and that which the Servicing Advisor  customarily  exercises
in performance of financial and management consulting services to clients in the
death care industry,  will handle any funds  collected by it in accordance  with
the  standards  established  by this  Agreement  and will act in a  prudent  and
commercially  reasonable manner. Each of the Servicer,  the Special Servicer and
the  Servicing  Advisor  shall  punctually  perform all of its  obligations  and
agreements under this Agreement and shall comply with all applicable federal and
state laws and  regulations,  shall maintain all state and federal  licenses and
franchises necessary for it to perform its responsibilities hereunder, and shall
not  materially  impair  the  rights of the  Certificateholders  in any Loans or
payments thereunder.

         Section 3.05       Lockbox Account; Remittances.
         ------------       -----------------------------

         The  Servicer  shall open and  maintain  one or more bank  accounts  at
Manufacturers  and Traders Trust Company,  located in Buffalo,  New York or such
other bank as the  Certificateholder  Agent and the Trustee shall approve (which
approval shall not be unreasonably withheld) (the"Lockbox Bank"), in the name of
the  Trustee  for  the  benefit  of  the  Certificateholders   (individually,  a
"Specified  Lockbox  Account" and,  collectively,  the "Lockbox  Account").  The
Servicer  shall  provide  three (3) Business  Days prior  written 


***Confidential information omitted purusant to a request for confidential 
   treatment filed separately with the Securities and Exchange Commission.
 

                                       15
<PAGE>


notice to the  Depositor,  the  Trustee and the  Certificateholder  Agent of the
opening of any Specified  Lockbox  Account and the name of any new Lockbox Bank.
The  Company  shall,  in  writing,  direct  all  Obligors  to make all  payments
(including Scheduled Payments) directly to the Lockbox Account.  Notwithstanding
anything to the contrary  contained  herein,  upon the occurrence and during the
continuation of a Servicer Default, (a) the Servicer shall not have the right to
establish any new Specified Lockbox Account and (b) the Certificateholder  Agent
may direct,  in writing,  (i) the Trustee to establish a new  Specified  Lockbox
Account at any Lockbox  Bank,  whereupon  the Trustee  shall so  establish a new
Specified Lockbox Account,  and (ii) the Special Servicer to direct, in writing,
all Obligors to make all payments  (including  Scheduled Payments) directly to a
Specified  Lockbox  Account,  whereupon the Special Servicer shall so direct all
Obligors.  Neither the Servicer, the Special Servicer, the Servicing Advisor nor
the  Depositor  shall have any right to  withdraw,  or  otherwise  exercise  any
control  over,  any amounts  contained in any  Specified  Lockbox  Account.  The
Servicer and the Trustee shall  provide  standing  instructions  to each Lockbox
Bank that all  amounts  deposited  in the  Lockbox  Account  other than  amounts
deposited  in error  (which  are shown to be other  than  Collections)  shall be
electronically transferred to the Collection Account on a daily basis after such
funds have been collected by the Lockbox Bank; none of the amounts  deposited in
the Lockbox Account in error shall constitute the property of the Depositor, the
Trustee or the  Certificateholders.  If, for any  reason,  any  Collections  are
received by the Servicer or the Special  Servicer,  the Servicer and the Special
Servicer  shall (i) send notice to the Obligor  that future  payments  are to be
made directly to the applicable Specified Lockbox Account and (ii) hold in trust
for the benefit of the Trustee and the  Certificateholders  such Collections (in
the form  received)  until such time as amounts are  transferred  to the Lockbox
Account as required pursuant to Section 3.01(c).

         Section 3.06       Financing Statements; Title Filings.
         ------------       ------------------------------------

         The Servicer will make all UCC filings and  recordings,  and shall take
all other actions,  as may be required  pursuant to the terms of the Transaction
Documents to maintain  perfected  the interest of the  Depositor and to maintain
the  perfected  security  interest  of  the  Trustee  (for  the  benefit  of the
Certificateholders)  in the Trust Estate. The Servicer shall, in accordance with
its customary  servicing  procedures and at its own expense,  be responsible for
taking such steps as are  necessary  to  maintain  perfection  of such  security
interests.  The Trustee hereby authorizes the Servicer to re-perfect or to cause
the  re-perfection  of such  security  interest  on its  behalf as  Trustee,  as
necessary. The Servicer shall provide the Company, the Depositor and the Trustee
with copies of all such UCC filings and recordings.

         Section 3.07      Maintenance of Insurance Policy;  Insurance Proceeds.
         -----------       -----------------------------------------------------

         The Special  Servicer shall have the obligation to verify,  monitor and
enforce the acquisition and  maintenance of each Obligor's  Insurance  Policies.
Unless  required  to be held in  trust  in  accordance  with  the  related  loan
document,  any  Insurance  Proceeds  shall be deposited  in the Lockbox  Account
pursuant to Section 3.05.

         Section 3.08       No Offset.
         ------------       ----------

         The obligations of the Servicer, the Special Servicer and the Servicing
Advisor under the Agreement shall not be subject to any defense, counterclaim or
right of offset that the  Servicer or Special  Servicer  has or may have against
the Depositor or any other  Person,  whether in respect of this  Agreement,  any
Loan, any Loan Asset or otherwise.

                                       16
<PAGE>


         Section 3.09       Servicing Compensation.
         ------------       -----------------------

         (a) As compensation  for the performance of its obligations  under this
Agreement,  the  Servicer  shall be entitled to receive the  Servicer  Fee.  The
Servicer Fee shall be paid monthly on each Payment Date in  accordance  with the
provisions  of the Trust  Agreement.  The  Servicer  Fee shall be  payable  with
respect to the period  commencing on the Initial Delivery Date and ending on the
first to occur of (i) the receipt of the last Scheduled  Payment with respect to
the last remaining  Loan, (ii) the receipt of all Recoveries with respect to the
last  remaining  Loan,  (iii)  the  date on  which  the  Depositor  redeems  the
Certificates  pursuant to Article Ten of the Trust Agreement or (iv) the receipt
by the Servicer of a Servicer  Termination  Notice;  provided  that,  after such
                                                     ---------
receipt of the Servicer  Termination  Notice,  the successor  Servicer  shall be
entitled to the  Servicer  Fee. The Servicer Fee shall be paid by the Trustee to
the  Servicer  at the  times  and in the  priority  as set  forth  in the  Trust
Agreement.  The Servicer shall also be entitled to receive any Servicing Charges
collected by it other than assumption and substitution  fees pursuant to Section
3.11. The Servicer shall pay all expenses  incurred by it in connection with its
servicing activities hereunder,  including payment of the fees and disbursements
of the  Independent  Accountants  and  payment  of  expenses  incurred  by it in
connection with distributions and reports to the Trustee,  the Special Servicer,
the Rating Agency, the  Certificateholders  and the Certificateholder  Agent and
shall not be entitled to  reimbursement  for such  expenses;  provided  that the
                                                              --------   
Servicer will be entitled to prompt  reimbursement  from the  Depositor,  out of
amounts  received  as  Recoveries  with  respect to a  Defaulted  Loan,  for the
reasonable  costs and expenses  incurred by the Servicer  (including  reasonable
attorneys' fees and  out-of-pocket  expenses) in connection with the realization
or attempted  realization  upon, or the  enforcement of rights and remedies with
respect to, such Defaulted Loan.

         (b) As compensation  for the performance of its obligations  under this
Agreement,  the  Special  Servicer  shall be  entitled  to receive  the  Special
Servicer Fee and, with respect to Defaulted  Loans not assigned to the Servicing
Advisor for collection in accordance with the terms hereof,  the related Workout
Fees.  The Special  Servicer  Fee and the Workout  Fees shall be payable on each
Payment Date in  accordance  with the  provisions  of the Trust  Agreement.  The
Special  Servicer Fee shall be payable with respect to the period  commencing on
the Initial Delivery Date and ending on the first to occur of (i) the receipt of
the last  Scheduled  Payment with respect to the last remaining  Loan,  (ii) the
receipt of all Recoveries  with respect to the last remaining Loan, or (iii) the
date on which the Depositor redeems the Certificates  pursuant to Article Ten of
the Trust  Agreement  or (iv) the receipt by the  Special  Servicer of a Special
Servicer  Termination  Notice;  provided that, after such receipt of the Special
                                --------
Servicer Termination Notice, the successor Special Servicer shall be entitled to
the Special  Servicer Fee. The Special Servicer Fee shall be paid by the Trustee
to the  Special  Servicer  at the times and in the  priority as set forth in the
Trust Agreement.  The Special Servicer shall also be entitled to retain any fees
collected by it from an Obligor in connection with activities permitted pursuant
to Sections  3.11 or 3.15 in an amount not to exceed 1% of the Loan  Balance per
Loan assumption,  substitution,  modification or other permitted  activity.  The
Special  Servicer shall pay all expenses  incurred by it in connection  with its
servicing activities hereunder,  including payment of the fees and disbursements
of the Servicing Advisor and the Independent Accountants and payment of expenses
incurred  in  connection  with  distributions  and reports to the  Trustee,  the
Servicer,  the Rating Agency, the  Certificateholders  and the Certificateholder
Agent and shall not be entitled to  reimbursement  for such  expenses;  provided
                                                                        --------
that the Special  Servicer  will be entitled  to prompt  reimbursement  from the
Trust Estate,  out of amounts received as Recoveries with respect to a Defaulted
Loan, for the  reasonable  costs and expenses  incurred by the Special  Servicer
(including reasonable attorneys' fees and out-of-pocket  expenses) in connection
with the realization or attempted realization upon, or the enforcement of rights
and remedies with respect to, such Defaulted Loan.

                                       17

<PAGE>

         (c) As compensation  for the  performance of its obligations  under the
Agreement,  the  Servicing  Advisor  shall be entitled to receive the  Servicing
Advisor Fee and, with respect to Defaulted  Loans  assigned to it for collection
by the Special Servicer in accordance with the terms hereof, the related Workout
Fees.  The  Servicing  Advisor Fee with respect to any Loan and the Workout Fees
shall be payable on each Payment Date in accordance  with the  provisions of the
Trust Agreement.  The Servicing Advisor Fee shall be payable with respect to the
period  commencing on the Initial Delivery Date and ending on the first to occur
of (i) the  receipt  of the last  Scheduled  Payment  with  respect  to the last
remaining  Loan,  (ii) the receipt of all  Recoveries  with  respect to the last
remaining  Loan,  or  (iii)  the  date  on  which  the  Depositor   redeems  the
Certificates  pursuant to Article Ten of the Trust Agreement or (iv) the receipt
by the Servicing Advisor of a Servicing  Advisor  Termination  Notice;  provided
                                                                        --------
that,  after such  receipt of the  Servicing  Advisor  Termination  Notice,  the
successor  Servicing Advisor shall be entitled to the Servicing Advisor Fee. The
Servicing  Advisor Fee shall be paid by the Special Servicer at the times and in
the priority as set forth in the Trust  Agreement.  The Servicing  Advisor shall
pay all expenses  incurred by it in  connection  with its  servicing  activities
hereunder;  provided  that the  Servicing  Advisor  will be  entitled  to prompt
            --------
reimbursement  from the Special Servicer,  out of amounts received as Recoveries
with respect to a Defaulted Loan, for the reasonable costs and expenses incurred
by the Servicing Advisor (including reasonable attorneys' fees and out-of-pocket
expenses) in connection with the realization or attempted  realization  upon, or
the enforcement of rights and remedies with respect to, such Defaulted Loans.

         (d)  Notwithstanding  anything to the contrary  contained  herein,  all
payments  made or  reimbursed  to the  Servicer,  the  Special  Servicer  or the
Servicing Advisor hereunder (including Recovery Expenses) shall be made, and all
services  shall be  performed,  without  duplication,  and no such Person  shall
receive any amounts for services actually performed by any other such Person.

         Section 3.10  Prepayments Permitted; Substitution or Purchase of Loans.
         ------------  ---------------------------------------------------------

         (a) The Servicer shall accept prepayments and terminations of the Loans
in accordance  with their terms,  provided that all amounts due under such Loans
                                  --------
are  deposited  in the Lockbox  Account  pursuant to Section  3.05.  All amounts
collected  with  respect to prepaid  Loans  shall be  deposited  in the  Lockbox
Account  and  held  in  trust  for  the  benefit  of the  Certificateholders  in
accordance with Section 3.05.

         (b)  Notwithstanding  any other  provision  to the  contrary  contained
herein,  neither the Special Servicer nor the Servicer shall,  with respect to a
Defaulted Loan (i) negotiate or enter into a new loan with the Obligor  relating
to the Loan Assets or the Obligor's  obligations  under such Defaulted  Loan, or
(ii) allow the  Obligor  thereunder  to resume its rights  under such  Defaulted
Loan, unless the Depositor has removed or made a substitution for such Defaulted
Loan in the manner  set forth in the Trust  Agreement  and the Loan  Acquisition
Agreement  or,  subject to Section  3.04(d)  of the Trust  Agreement,  otherwise
received the prior written consent of the Directing  Holders and the Controlling
Holders.

         (c) If the Company is  required  to  repurchase  or  substitute  a Loan
pursuant to the terms of the Loan  Acquisition  Agreement,  the Special Servicer
shall permit such repurchase or  substitution  only in accordance with the terms
of the Loan Acquisition Agreement and the terms hereof.


                                       18
<PAGE>


         Section 3.11      Due-on-Sale Clauses; Assumptions; Due-on-Encumbrance 
         
 
        (a)    If any Loan contains a provision in the nature of a "due-on-sale"
        clause, which by its terms:

                  (i)  provides  that  such Loan  shall (or may at the  lender's
         option)  become due and payable  upon the sale or other  transfer of an
         interest in the related Loan Collateral; or

                  (ii) provides  that such Loan may not be assumed  without  the
         consent  of the  lender  in  connection  with  any  such  sale or other
         transfer;

then,  for so long as such Loan is  included  in the Trust  Estate,  the Special
Servicer,  on behalf of the Trust  Estate,  will  enforce  and may not waive any
due-on-sale  clause  contained  in the  related  Note or  Mortgage.  The Special
Servicer is  authorized to take or enter into an  assumption  agreement  from or
with the Person to whom such  property has been or is about to be conveyed  (the
"Assuming  Party"),  and to release the original Obligor from liability upon the
Loan and substitute such Assuming Party as obligor  thereon;  provided that: (i)
                                                              --------   
the Special Servicer shall  re-underwrite  the Loan in a manner  consistent with
the Program  Guidelines and shall not approve any assumption unless the Loan and
the   Assuming   Party   qualify   under  the  Program   Guidelines;   (ii)  the
Certificateholder Agent shall have been provided with any information reasonably
requested and shall have approved in writing in advance such  assumption,  which
approval shall in the absence of material deviations from the Program Guidelines
not be  unreasonably  withheld;  and (iii) the terms of any such  assumption  or
substitution  agreement  shall not be  materially  different  from  those in the
original Note or Mortgage.  The Special  Servicer shall notify the Trustee,  the
Certificateholder  Agent  and the  Rating  Agency  that any such  assumption  or
substitution  agreement  has been  completed  and  forward  to the  Trustee  the
original of such agreement,  which original shall be added by the Trustee to the
related Loan File,  and shall,  for all  purposes,  be considered a part of such
Loan File to the same extent as all other documents and instruments constituting
a  part  thereof.  In  connection  with  any  such  assumption  or  substitution
agreement,  the interest rate, principal amount and other material payment terms
of the Loan  pursuant  to the  related  Note  shall  not be  changed,  except as
otherwise  permitted  by  Section  3.15.  Subject to  Section  3.09(b),  any fee
collected  by  the  Special   Servicer  for  entering   into  an  assumption  or
substitution agreement will be retained by it.

         (b) For so long as such  Loan is  included  in the  Trust  Estate,  the
Special  Servicer  shall  enforce any  provision  in any Loan in the nature of a
"due-on-encumbrance" clause, which by its terms:

                  (i)  provides  that  such Loan  shall (or may at the  lender's
         option)  become due and payable  upon the creation of any lien or other
         encumbrance on the related Loan Collateral; or

                  (ii)  requires the  consent of the  related  mortgagee  to the
         creation  of any such lien or other  encumbrance  on the  related  Loan
         Collateral.

         (c)  Nothing  in this  Section  3.11 shall  constitute  a waiver of the
Trustee's  right, if it becomes the mortgagee of record or beneficiary of record
under any Mortgage,  to receive  notice of any assumption of a Loan, any sale or
other transfer of the related Mortgaged  Property or the creation of any lien or
other encumbrance with respect to such Mortgaged Property.

         (d) Except as otherwise permitted by this Section, the Special Servicer
shall not agree to modify,  waive or amend,  and no assumption  or  substitution
agreement  entered into  pursuant this Section 3.11 shall contain any terms that
are different from, any term of any Loan or the related Note.

                                       19

<PAGE>

         Section 3.12      Realization Upon Defaulted Loans.
         ------------      ---------------------------------

         (a) Subject to Section  3.14,  the Special  Servicer  shall  repossess,
foreclose upon or otherwise  comparably convert the ownership of assets securing
such of the  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 the Servicing  Guidelines and the  provisions of the Agreement,  and
which are not  released  from the Trust Estate  pursuant to any other  provision
hereof,  if the Special  Servicer  determines,  in a manner  consistent with the
servicing  standard set forth in Section 3.04,  that such action would be in the
best economic  interest of the  Certificateholders.  The Special  Servicer shall
advance  the  costs  and  expenses  of any  such  proceeding  unless  it makes a
determination,  in its reasonable business judgment, that such advance, if made,
would be nonrecoverable. The Special Servicer shall be entitled to reimbursement
of advances  made pursuant to the  preceding  sentence  from  Recoveries on such
Loan.

                  If the Special  Servicer  elects to proceed with a foreclosure
in accordance  with the laws of the state where the Loan  Collateral is located,
the  Special  Servicer  shall not be required  to pursue a  deficiency  judgment
against the related  Obligor or any other  liable party if the laws of the state
do not  permit  such a  deficiency  judgment  after such  foreclosure  or if the
Special Servicer determines, in its best judgment, that the likely recovery if a
deficiency  judgment is  obtained  will not be  sufficient  to warrant the cost,
time, expense or exposure of pursuing the deficiency  judgment.  If title to any
Mortgaged Property is acquired in foreclosure or by deed in lieu of foreclosure,
then the deed or certificate  of sale shall be issued to the Trustee,  or to its
nominee on behalf of Certificateholders.

         (b)  Notwithstanding  any  provision to the contrary  contained in this
Agreement, the Special Servicer shall not, on behalf of the Trust Estate, obtain
title to a  Mortgaged  Property  as a  result  of or in lieu of  foreclosure  or
otherwise,  and shall not  otherwise  acquire  possession  of, or take any other
action  with  respect  to, any  Mortgaged  Property  if, as a result of any such
action,  the  Trustee,  the  Servicer,   the  Depositor,   the  Company  or  the
Certificateholders, would be considered to hold title to, to be a "mortgagee-in-
possession"  of or to be an "owner" or  "operator"  of such  Mortgaged  Property
within the meaning of the Comprehensive  Environmental  Response,  Compensation,
and Liability Act of 1980, as amended from time to time, or any comparable  law,
unless the Special  Servicer has previously  determined in accordance  with this
Section  3.12,  based  on an  Environmental  Assessment  report  prepared  by an
Independent  Person  satisfying the requirements set forth in the first sentence
of Section 3.12(c), that:

                  (i) such Mortgaged  Property is in compliance  with applicable
         environmental  laws (in the  reasonable  judgment  of such  Independent
         Person based upon all available  information) or, if not, that it would
         be in the best economic interest of the Trust Estate and there would be
         no  adverse  effect  on the  Servicer,  Special  Servicer,  Trustee  or
         Depositor to take such actions as are necessary to bring such Mortgaged
         Property in compliance therewith, and

                  (ii)  there  are no circumstances  present  at such  Mortgaged
         Property  relating to the use,  management or disposal of any Hazardous
         Substances for which investigation,  testing, monitoring,  containment,
         clean-up or remediation could be required under any currently effective
         federal,  state or local law or regulation (in the reasonable  judgment
         of such Independent  Person based upon all available  information),  or
         that,  if any such  Hazardous  Substances  are  present  for which such
         action could be required,  it would be in the best economic interest of
         the Trust Estate and there would be no adverse  effect on the Servicer,
         Special  Servicer,  Trustee or the  Depositor to take such actions with
         respect to the affected Mortgaged Property.


                                       20

<PAGE>

                  In the event that the Environmental  Assessment first obtained
by the Special Servicer with respect to a Mortgaged Property indicates that such
Mortgaged  Property may not be in compliance with applicable  environmental laws
or that Hazardous Substances may be present but does not definitively  establish
such fact, the Special Servicer shall cause such further  environmental tests to
be conducted by an Independent  Person who regularly  conducts such tests as the
Special   Servicer   shall   deem   prudent   to  protect   the   interests   of
Certificateholders.  Any such tests  shall be deemed  part of the  Environmental
Assessment obtained by the Special Servicer for purposes of this Section 3.12.

         (c) The Environmental  Assessment contemplated by Section 3.12(b) shall
be prepared  by any  Independent  Person who  regularly  conducts  environmental
audits for  purchasers  of  commercial  property,  as  determined by the Special
Servicer in a manner consistent with the servicing standard set forth in Section
3.04. The Special Servicer shall advise the Trustee by delivery of a certificate
of a Special  Servicer  Officer of the cost of preparation  of an  Environmental
Assessment,  and the Trustee  shall pay such cost from amounts on deposit in the
Collection  Account.  The Trustee may rely  conclusively on such certificate and
shall have no duty or obligation to re-calculate the amounts stated therein.  To
the extent that amounts on deposit in the Collection  Account are  insufficient,
the  Special  Servicer  shall  advance  the amount of such  insufficiency  as an
advance  unless the Special  Servicer makes a  determination,  in its reasonable
business judgment, that such advance would be nonrecoverable.

         (d) If the Special Servicer  determines  pursuant to Section 3.12(b)(i)
that a Mortgaged  Property  securing a Defaulted Loan is not in compliance  with
applicable  environmental  laws but that it is in the best economic  interest of
the Trust Estate to take such actions as are  necessary to bring such  Mortgaged
Property  in  compliance  therewith,  or  if  the  applicable  Special  Servicer
determines  pursuant to Section  3.12(b)(ii) that the circumstances  referred to
therein  relating to Hazardous  Substances  are present on a Mortgaged  Property
securing a Defaulted  Loan but that it is in the best  economic  interest of the
Trust  Estate to take such action with respect to the  containment,  clean-up or
remediation of Hazardous  Substances  affecting  such  Mortgaged  Property as is
required by law or regulation, the Special Servicer shall take such action as it
deems to be in the best economic interest of the Trust Estate and that would not
have an adverse effect on the Servicer, the Special Servicer, the Depositor, the
Trustee or the Certificateholders; provided that, in advance of any such action,
                                   --------
the   Trustee   shall   mail   notice   to  the   Certificateholders   and   the
Certificateholder  Agent of such proposed action, which notice shall be prepared
by the Special Servicer, and if the Trustee receives, within thirty (30) days of
such notification, instructions from the Directing Holders directing the Special
Servicer not to take such action,  then the Special  Servicer  shall so refrain;
provided further that, if there has occurred a Depositor Event of Default,  then
-------- -------
the  Special  Servicer  shall act  without  the  instructions  of the  Directing
Holders,  unless,  in the case of a  Depositor  Event of Default  under  Section
6.01(a),  (b)  or  (c)  of  the  Trust  Agreement,  the  Directing  Holders  are
Independent.  The Special  Servicer  shall  advise the Trustee by delivery of an
Officer's Certificate of the cost of any such compliance,  containment, clean-up
or  remediation,  and the Trustee shall pay such cost from amounts on deposit in
the Collection  Account. To the extent that amounts on deposit in the Collection
Account are insufficient,  the Special Servicer shall advance the amount of such
shortfall unless the Special  Servicer makes a determination,  in its reasonable
business  judgment,  that such advance,  if made, would be  nonrecoverable.  The
Special Servicer shall be entitled to reimbursement of advances made pursuant to
the preceding sentence from Recoveries on such Loan.

         (e) The Servicer  shall report to the Internal  Revenue  Service and to
the related  Obligor,  in the manner required by applicable law, the information
required to be  reported  regarding  any  Mortgaged  Property  or any  mortgagor
including regarding any Mortgaged Property that is abandoned or foreclosed.  The
Servicer  shall  concurrently  deliver a copy of any such report to the Trustee.
The Special  Servicer,  on 

                                       21

<PAGE>


a timely basis,  shall provide the Servicer with such information as to any Loan
as is necessary to enable the Servicer to comply with this Section 3.12(e).

         (f) The  Special  Servicer  shall  cause  an  updated  Valuation  to be
prepared  with  respect  to any Loan (i)  promptly  upon  such Loan  becoming  a
Defaulted  Loan and (ii) so long as such Loan remains a Defaulted  Loan, on each
six (6) month  anniversary of the date such Loan became a Defaulted  Loan.  Such
updated  Valuation  shall be prepared by an Independent  Person or the Servicing
Advisor (or an Affiliate  thereof) for an amount not to exceed the lesser of (A)
the lowest amount then being quoted to or available to the Special  Servicer for
the preparation of such a Valuation and (B) $5,000, adjusted for inflation based
on changes in the "Consumer Price Index" since the date of this Agreement.  Upon
its receipt of each  updated  Valuation,  the Special  Servicer  shall  promptly
provide a copy thereof to the  Servicer,  the Servicing  Advisor,  the Directing
Holders,  the Trustee and the  Certificateholder  Agent. The cost of all updated
Valuation(s) made in accordance with this Section 3.12(f) shall be an expense of
the Trust Estate.

         (g) Upon any Defaulted  Loan becoming a Liquidated  Loan,  the Servicer
shall deliver a certificate of a Servicing Officer to the Depositor, the Trustee
and  the  Certificateholder  Agent  specifying  (i)  the  actual  amount  of all
Recoveries  received by the Servicer in respect of such Loan to the date of such
certificate,  and (ii) the  amount of all  other  Recoveries,  if any,  that the
Servicer expects to be recovered in the future with respect to such Loan.

         Section 3.13      Title and Management of Repossessed Collateral.
         ------------      -----------------------------------------------

         (a) In the event that title to any Loan  Collateral is acquired for the
benefit of Certificateholders, by foreclosure, by deed in lieu of foreclosure or
upon abandonment or reclamation from bankruptcy, the deed or certificate of sale
shall be taken in the name of the  Trustee,  or its  nominee,  on  behalf of the
Trust Estate. The Special Servicer shall manage,  conserve,  protect and operate
any Repossessed Collateral for the Certificateholders  solely for the purpose of
its prompt disposition and sale.

         (b) The Special  Servicer shall not be required to remit to the Lockbox
Account,  but shall  segregate  and hold,  all funds  collected  and received in
connection with the operation of any  Repossessed  Collateral  (including  among
other things,  rent,  insurance proceeds and liquidation  proceeds) separate and
apart from its own funds and general  assets and shall  establish  and  maintain
with  respect to any  Repossessed  Collateral  an account  held in trust for the
Trust  Estate  for  the  benefit  of  the  Certificateholders   (the  "Operating
Account"),  which shall be an Eligible Account,  and will account separately for
funds  received or expended  with respect to the  Repossessed  Collateral of any
Loan.  The Special  Servicer  shall  notify the  Trustee,  the  Servicer and the
Certificateholder  Agent in writing of the location  and account  number of each
Operating  Account  immediately  upon its  establishment  and shall  notify  the
Trustee,  the Servicer and the  Certificateholder  Agent prior to any subsequent
change  thereof.  Amounts  on  deposit  in any  Operating  Account  shall not be
invested.

         (c) The Special  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 Repossessed Collateral as are commercially
reasonable and not  inconsistent  with the manner in which the Special  Servicer
manages and operates  similar  property owned or managed by the Special Servicer
or any of its  Affiliates,  all on such terms and for such period as the Special
Servicer  deems to be in the best  interests  of the  Certificateholders  and in
accordance  with Section  3.04. In connection  therewith,  the Special  Servicer
shall deposit or cause to be deposited on a daily basis in the Operating Account
all revenues  received by it with respect to any Repossessed  Collateral and the
related  Loan,  and shall  withdraw  therefrom  funds  

                                       22

<PAGE>


necessary  for  the  proper   operation,   management  and  maintenance  of  any
Repossessed Collateral and for other property protection expenses, including:

                  (i)      all insurance premiums due and payable in respect of
         any Repossessed Collateral;

                  (ii) all  property  taxes and  assessments in  respect  of any
         Repossessed  Collateral  that may  result in the  imposition  of a lien
         thereon; and

                  (iii) all costs and expenses necessary to maintain,  manage or
         operate any Repossessed Collateral.

                  If the  amounts  on  deposit  in  the  Operating  Account  are
insufficient for the purposes set forth in clauses (i) through (iii) above, then
the Special  Servicer shall advance the amount of any such shortfall  unless the
Special Servicer makes a  determination,  in its reasonable  business  judgment,
that such advance is not reasonably recoverable from anticipated Recoveries with
respect to such Repossessed  Collateral.  The Special Servicer shall be entitled
to  reimbursement  of advances  made  pursuant to the  preceding  sentence  from
Recoveries on such Loan or Repossessed Collateral.

         (d) The Special Servicer shall or shall direct the Servicing Advisor to
use its best efforts to contract with any  Independent  Person for the operation
and management of any Repossessed Collateral, provided that:

                  (i) the terms and conditions of any such contract shall not be
                  inconsistent  herewith; 

                  (ii) any such  contract  shall  require  that the  Independent
         Person  pay all costs and  expenses  incurred  in  connection  with the
         operation and  management  of such  Repossessed  Collateral,  including
         those listed above,  and return all related revenues (net of such costs
         and expenses);
 
                 (iii) none of the provisions of this Section 3.13(c)  relating
         to any such contract or to actions  taken through any such  Independent
         Person shall be deemed to relieve the Special Servicer or the Servicing
         Advisor of any of its duties and  obligations to the Trust Estate,  the
         Servicer  or the  Trustee  on  behalf  of the  Certificateholders  with
         respect  to  the  operation  and  management  of any  such  Repossessed
         Collateral;

                  (iv) the Special  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
         Repossessed Collateral; and

                  (v) the Servicing Advisor, and if the Independent Person shall
         be the Servicing Advisor or an Affiliate,  the Special Servicer,  shall
         have  delivered  a written  opinion to the  Special  Servicer,  and the
         Special Servicer shall have delivered a copy thereof to the Trustee and
         the  Certificateholder  Agent, to the effect that any such hiring of an
         Independent  Person,  in light of among other things any fees which may
         be charged,  will maximize  ultimate  proceeds to the Trust Estate with
         respect to the related Repossessed Collateral.
 
                The  Special  Servicer  shall be  entitled  to enter  into any
agreement with any Independent Person performing  services for it related to its
duties and obligations  hereunder for indemnification of the Special Servicer by
such Independent  Person, and nothing in this Agreement shall be deemed to limit
or

                                       23

<PAGE>


modify such  indemnification.  Fees, if any, owed to any  Independent  Person
other than the Special Servicer, Servicing Advisor or an Affiliate thereof shall
be payable from amounts on deposit in the Operating Account or, if the amount on
deposit therein is  insufficient  therefor,  the Special  Servicer shall advance
such fees unless the Special Servicer makes a  determination,  in its reasonable
business  judgment,  that such advance is not  reasonably  recoverable  from the
operation or sale of the related  Repossessed  Collateral.  The Special Servicer
shall be entitled to reimbursement of such advances from Recoveries on such Loan
or Repossessed Collateral. Notwithstanding anything to the contrary contained in
any of the Transaction Documents,  for purposes of this Section 3.13(d) (but not
for purposes of the  definition of "Recovery  Expenses"  contained  herein),  an
"Independent  Person"  shall,  prior  to the  delivery  of a  Servicing  Advisor
Termination  Notice with respect to the initial Servicing  Advisor,  include the
initial Servicing Advisor or an Affiliate thereof.

         (e) On each  Determination  Date,  the Special  Servicer shall withdraw
from the Operating Account and deposit into the Collection  Account the proceeds
and  collections  received  during the  related  Due  Period,  net of  expenses;
provided,  that the Special  Servicer may retain in the  Operating  Account such
--------
portion of such proceeds and  collections as may be necessary to maintain in the
Operating  Account  sufficient  funds for the proper  operation,  management and
maintenance of the  Repossessed  Collateral,  including  without  limitation the
creation of reasonable reserves for repairs,  replacements and necessary capital
improvements and other related expenses. On the first Business Day prior to each
Determination Date, the Special Servicer shall notify the Servicer of the amount
of all such  deposits  (and the Loans to which the  deposits  relate) to be made
into the Collection Account on the following Determination Date.

         (f)  Promptly  following  any  acquisition  by the Trust  Estate of any
Repossessed  Collateral,  the Special  Servicer  shall,  upon the request of the
Certificateholder  Agent,  determine  the fair market value of such  Repossessed
Collateral  based on an  appraisal,  conducted  within  sixty  (60) days of such
acquisition. Such appraisal shall be prepared by an Independent Person or by the
Special  Servicer  (or an  Affiliate  thereof)  for an amount  not to exceed the
lesser of (i) the lowest amount then being quoted to the  Servicing  Advisor for
the  preparation  of such an appraisal  and (ii) $5,000,  adjusted for inflation
based on changes in the "Consumer Price Index" since the date of this Agreement.
Notwithstanding  anything to the contrary  contained  herein, if an appraisal or
Valuation  with  respect to such  Repossessed  Collateral  has  previously  been
conducted,  whether  pursuant to Section  3.12(f) or  otherwise,  within six (6)
months of such  acquisition by the Trust Estate,  then no new appraisal shall be
required. The cost of any appraisal made in accordance with this Section 3.13(f)
shall be an expense of the Trust Estate.

         Section 3.14      Sale of Defaulted Loans and Repossessed Collateral.
         ------------      ---------------------------------------------------

         (a) The Special Servicer may offer to sell to any Person (including the
Special Servicer) any Defaulted Loan or any Repossessed Collateral,  if and when
the Special Servicer  determines,  with the advice of the Servicing  Advisor and
consistent  with the servicing  standard set forth in Section 3.04,  that such a
sale would be in the best economic  interests of the Trust  Estate.  The Special
Servicer   shall  give  the   Servicer,   the   Depositor,   the  Trustee,   the
Certificateholder  Agent  and the  Directing  Holders  not  less  than  ten (10)
Business  Days  prior  written  notice  of its  intention  to (i)  purchase  any
Defaulted Loan or  Repossessed  Collateral  (which  purchase must be approved in
writing in advance by the  Controlling  Holders) or (ii) sell any Defaulted Loan
or Repossessed Collateral.  Subject to the repurchase or purchase rights, as the
case may be, of the  Depositor  and the  Directing  Holders  pursuant to Section
3.04(d) of the Trust Agreement, the Special Servicer may purchase such Defaulted
Loan or  Repossessed  Collateral  unless a higher bid is received  from  another
Person.  The Special  Servicer  shall accept the highest bid  received  from any
Person for any  Defaulted  Loan or any  Repossessed  Collateral  in an amount at
least equal to the Repurchase Price therefor.

                                       24

<PAGE>



                  In the  absence of any such bid,  the Special  Servicer  shall
accept the  highest  bid  received  from any Person  that is  determined  by the
Special Servicer,  with the advice of the Servicing Advisor,  to be a fair price
for such Defaulted Loan or  Repossessed  Collateral,  if the highest bidder is a
Person other than an Interested  Person,  or is determined to be such a price by
the Trustee,  if the highest  bidder is an  Interested  Person.  Notwithstanding
anything to the  contrary  herein:  (i) neither the Trustee,  in its  individual
capacity,  nor any of its  Affiliates may bid for or purchase any Defaulted Loan
or any Repossessed Collateral; and (ii) any sale to an Interested Person must be
consented to in writing in advance by the Controlling Holders (which consent may
not be unreasonably withheld).

                  Subject to the repurchase or purchase rights,  as the case may
be, of the Depositor and the Directing  Holders  pursuant to Section  3.04(d) of
the Trust  Agreement,  the Special  Servicer shall not be obligated by either of
the  foregoing  paragraphs or otherwise to accept the highest bid if the Special
Servicer determines,  or is advised by the Servicing Advisor, in accordance with
the servicing  standard stated in Section 3.04, that rejection of such bid would
be in the best  interests of the  Certificateholders.  In addition,  the Special
Servicer  may  accept  a lower  bid if it  determines,  with the  advice  of the
Servicing  Advisor,  and in  accordance  with the servicing  standard  stated in
Section 3.04,  that acceptance of such bid would be in the best interests of the
Certificateholders  (for example,  if the prospective buyer making the lower bid
is  more  likely  to  perform  its  obligations,  or the  terms  offered  by the
prospective buyer making the lower bid are more favorable).

         (b) In  determining  whether any bid  constitutes  a fair price for any
Defaulted  Loan or any  Repossessed  Collateral,  the  Special  Servicer  or the
Trustee,  and the Servicing  Advisor,  shall take into account,  as  applicable,
among other  factors,  the period and amount of any  delinquency on the affected
Defaulted Loan, the physical condition of the related Repossessed Collateral and
the  state  of  the  local  economy.  The  Special  Servicer  shall  dispose  of
Repossessed Collateral in accordance with Section 3.02(b)(vi).

         (c) Subject to the provisions of the preceding Section 3.14(a) and (b),
the Special  Servicer and the Trustee shall act on behalf of the Trust Estate in
negotiating  and taking any other action  necessary or appropriate in connection
with the sale of any Defaulted  Loan or  Repossessed  Collateral,  including the
collection  of all  amounts  payable  in  connection  therewith.  Any  sale of a
Defaulted Loan or any Repossessed  Collateral  shall be without  recourse to, or
representation  or warranty by, the Trustee,  the Depositor,  the Servicer,  the
Special  Servicer  or the Trust  Estate  (except  that any  contract of sale and
assignment and conveyance  documents may contain customary  warranties of title,
so long as the only recourse for breach thereof is to the Trust Estate), and, if
consummated  in  accordance  with  the  terms  of  this  Agreement,  none of the
Servicer,  the Special  Servicer,  the  Depositor or the Trustee  shall have any
liability  to the Trust  Estate or any  Certificateholder  with  respect  to the
purchase price therefor accepted by the Special Servicer or the Trustee.

         (d) The net  proceeds of any sale after  deduction  of the  expenses of
such sale incurred in connection  therewith  shall be promptly  deposited in the
Collection Account.


                                       25

<PAGE>


         Section 3.15      Modifications, Waivers, Amendments and Consents.
         ------------      ------------------------------------------------

         (a) None of the Servicer, the Special Servicer or the Servicing Advisor
shall have any right to agree to any  modification,  waiver or  amendment of any
term of any Loan, or to any  substitution  of collateral,  except as provided in
Section  3.11 and this  Section  3.15.  The  Special  Servicer  may agree to any
modification,  waiver or amendment of any term of any Defaulted  Loan, or to any
substitution of collateral securing a Defaulted Loan, without the consent of the
Trustee,  the  Servicer or any  Certificateholder,  to the extent  permitted  by
paragraphs (b) through (h) of this Section 3.15. All  modifications,  waivers or
amendments of any such Loan shall be in writing and shall be consistent with the
servicing standard set forth in Section 3.04.

         (b) The Special  Servicer shall not agree to any  modification,  waiver
(other than a waiver referred to in Section 3.11 which waiver,  if any, shall be
governed  by  Section  3.11)  or  amendment  of any  term  of any  Loan  if such
modification, waiver or amendment would:

                  (i) result in the forgiveness of any Scheduled Payment on such
         Loan;

                  (ii) decrease any Scheduled  Payment or the interest or coupon
         rate applicable to such Loan;

                  (iii) defer the  payment of any principal or  interest  of any
         Scheduled  Payment on such Loan,  other than an  extension  of not more
         than one Scheduled  Payment per year, in accordance  with the Servicing
         Guidelines,   provided  that  the  Special  Servicer  shall  not  defer
                       --------
         Scheduled  Payments  for any one  Loan  more  than  five  times  in the
         aggregate,  provided  further  that no such  deferral  may be to a date
                     --------  -------
         later than the earlier of (A) the  original  maturity  date of the Loan
         and (B) the Determination  Date immediately  preceding the date that is
         six (6) months prior to the Series Termination Date;

                  (iv)  reduce  the  Loan   Balance  of  such  Loan  (except  in
         connection with actual payments attributable to such Loan Balance);

                  (v) prevent the complete  amortization  of the Loan Balance of
         such  Loan  from  occurring  by  the  Determination   Date  immediately
         preceding the Series Termination Date; or

                  (vi)  result in a release of the lien of the Loan (or  related
         Mortgage)  or  related on any  material  portion  of the  related  Loan
         Collateral  without  a  corresponding  principal  prepayment  (and  any
         corresponding prepayment fee or premium) in an amount not less than the
         fair market  value (as  determined  by an  appraisal  delivered  to the
         Special  Servicer)  of the  property  to be  released,  or would in the
         Special Servicer's  judgment,  otherwise materially impair the security
         for such Loan or reduce the likelihood of timely payment of amounts due
         thereon.

         (c)  Notwithstanding  subsection  (b) above,  the Special  Servicer may
extend the date on which any balloon payment is scheduled to be due, without the
consent of the Trustee, the Servicer, or any Certificateholder if, but only if:

                  (i) any such extension  shall be for a period of not more than
         twelve (12) months and each  monthly  payment  shall be in an amount at
         least  sufficient  to  pay  interest  accrued  and  principal  payments
         sufficient to meet the amortization  schedule on the related Loan since
         the immediately preceding Due Date;

                                       26

<PAGE>


                  (ii) the Special Servicer  has  previously  determined  in its
         reasonable business judgment, with the advice of the Servicing Advisor,
         that (A) such  extension  is  reasonably  likely  to  produce a greater
         recovery than  liquidation of the related Loan, (B) no material  damage
         or deferred  maintenance  exists at the related Mortgaged  Property and
         (C) the Obligor is in material  compliance with all applicable  federal
         and state regulations  governing the operation of the related Mortgaged
         Property.

         (d) The Special Servicer must provide that any interest  deferred shall
be added to the  principal  balance of the related Loan (and shall be due on the
maturity  date of such Loan,  or such earlier  date as the Special  Servicer may
deem  appropriate),  and such  deferred  interest  shall accrue  interest at the
related Loan interest rate.

         (e) The Special Servicer may, as a condition to granting any request by
a Obligor for consent, modification, waiver or indulgence or any other matter or
thing,  the granting of which is not prohibited by the terms of this  Agreement,
require that such Obligor pay to the Special Servicer,  as additional  servicing
compensation,  a  reasonable  or  customary  fee  for  the  additional  services
performed in connection  with such request,  together with any related costs and
expenses incurred by the Special Servicer.

         (f)   The   Special   Servicer   shall   notify   the   Trustee,    the
Certificateholder Agent, the Rating Agency and the Servicer of any modification,
waiver  or  amendment  of any term of any Loan  and the date and  terms  thereof
(including  the fees and expenses  payable to the Special  Servicer),  and shall
deliver to the  Trustee  for  deposit in the  related  Loan  File,  an  original
counterpart of the agreement relating to such modification, waiver or amendment,
promptly following the execution thereof.

         (g) The  Special  Servicer  may from time to time  permit an Obligor to
substitute  collateral for all or a portion of the related Mortgaged Property or
pledge  additional  collateral  for the related Loan, or may release part of the
related Mortgaged Property from the lien of the related Mortgage;  provided that
                                                                   --------
(i) if such  release is not in  accordance  with the related  Loan,  the Special
Servicer shall: (A) (i) provide the Certificateholder Agent with any information
reasonably  requested by the  Certificateholder  Agent and (ii) obtain the prior
written consent of the  Certificateholder  Agent to such release,  which consent
shall, in the absence of material deviations from the Program Guidelines, not be
unreasonably  withheld;  and (B) obtain the prior written  confirmation from the
Rating Agency that such release shall not result in the downgrade, qualification
or  withdrawal  of  the  ratings  then  assigned  to  any  Series  or  Class  of
Certificates,  and (ii) the  Special  Servicer  shall not  permit an  Obligor to
substitute  any Loan  Collateral  pursuant to this  Section  3.15 unless (A) the
Special Servicer shall have first  determined,  in accordance with the servicing
standard set forth in Section 3.04, and based upon an  Environmental  Assessment
prepared by an  Independent  Person  satisfying  the  requirements  set forth in
Section  3.12,  at the  expense  of  the  Obligor,  that  such  substitute  Loan
Collateral is in compliance  with applicable  environmental  laws and that there
are no circumstances  present at such substitute Loan Collateral relating to the
use, management or disposal of any Hazardous Substances for which investigation,
testing,  monitoring,  containment,  clean-up or  remediation  would be required
under any then effective federal,  state or local law or regulation,  or, if any
such  containment,  clean-up or  remediation  is required,  that adequate  funds
therefor have been placed in escrow with the Special Servicer by or on behalf of
the Obligor, and (B) the  Certificateholder  Agent shall have been provided with
any  information  reasonably  requested  and shall have  approved  in writing in
advance such  substitution,  which  approval  shall,  in the absence of material
deviations from the Program  Guidelines,  not be unreasonably  withheld.  In the
event that the Special  Servicer intends to permit an Obligor to substitute Loan
Collateral for all or any portion of a Mortgaged  Property or pledge  additional
Loan  Collateral  for the related Loan as permitted  hereunder,  if the security
interest  of  the  Trust  Estate  in  such  collateral  would  be  perfected  by


                                       27
<PAGE>


possession,  or if such collateral  requires  special care or protection,  then,
prior to agreeing to such substitution or addition of Loan Collateral,  then the
Special Servicer shall make arrangements for such possession, care or protection
and, prior to agreeing to such  substitution  or addition of collateral (or such
arrangement for possession, care or protection),  shall obtain the prior written
consent  of the  Trustee  (which  consent  shall not be  unreasonably  withheld,
delayed or conditioned)  and the written  confirmation by the Rating Agency with
respect  thereto to the effect that such  substitution or addition of collateral
shall not result in the  downgrade,  qualification  or withdrawal of the ratings
then assigned to the Certificates.

         (h) The Special  Servicer  shall have no liability to the Trust Estate,
the  Certificateholders  or any other Person if its  analysis and  determination
that the  modification,  waiver or amendment is  reasonably  likely to produce a
greater recovery on a present-value basis than liquidation proves to be wrong or
incorrect,  so long as the analysis and determination was made in the good faith
reasonable business judgment of the Special Servicer.

         Section 3.16      Fidelity Bond; Directors and Officers Insurance.
         ------------      ------------------------------------------------

         Each of the  Servicer,  the Special  Servicer and, at any time that the
Servicing  Advisor possesses  signatory  authority with respect to any Specified
Lockbox Account or Operating Account,  the Servicing Advisor shall maintain,  at
such Person's own expense, a blanket fidelity bond on all officers and employees
of such  Person  with  respect to actions  concerning  the  handling of funds or
documents  or other papers  relating to the Loans.  Each of the Servicer and the
Special  Servicer shall  maintain,  at such Person's own expense,  directors and
officers  liability  insurance  covering all Servicing  Officers with respect to
wrongful  acts  relating to the  servicing of the Loans.  Such fidelity bond and
directors and officers  insurance shall be  substantially  in the form and shall
provide for coverage in the amounts indicated on Exhibit F. No provision of this
Section 3.16 shall  diminish or relieve the Servicer,  the Special  Servicer and
the  Servicing  Advisor,  as  applicable,   from  their  respective  duties  and
obligations as set forth in this Agreement. Each of the Servicer and the Special
Servicer  shall  cause  to be  delivered  to the  Trustee  (with  a copy  to the
Certificateholder  Agent)  on or  before  the  initial  Funding  Date,  and  the
Servicing Advisor shall cause to be delivered to the Trustee (with a copy to the
Certificateholder  Agent) at such time as it is  required to maintain a fidelity
bond  hereunder):  (a) a certified  true copy of the fidelity bond and directors
and officers  insurance,  as applicable,  respecting such Person;  (b) a written
statement from each surety issuing such fidelity bond and directors and officers
insurance,  as  applicable,  that such  fidelity  bond or directors and officers
insurance, as applicable, shall in no event be terminated or materially modified
without  thirty (30) days prior written  notice to the Trustee;  and (c) written
evidence reasonably  satisfactory to the Trustee and the Certificateholder Agent
that such fidelity bond and directors  and officers  insurance,  as  applicable,
provides  that  the  Trustee,  on  behalf  of  the  Certificateholders,  is  the
beneficiary or loss payee, as applicable, thereunder.

                                       28
<PAGE>


                                  ARTICLE FOUR
                                  ------------

                       ACCOUNTINGS, STATEMENTS AND REPORTS
                       -----------------------------------

          Section 4.01      Reports.
          ------------      --------

         (a) No later than 10:00 a.m.,  California  time, on each  Determination
Date,  the Servicer  shall  deliver the Servicer  Report to the  Depositor,  the
Certificateholder  Agent, the  Certificateholders,  the Special Servicer and the
Trustee,  and not later than the following Business Day the Trustee will deliver
the  Servicer  Report to the Rating  Agency with  respect to the activity in the
immediately  preceding  Due  Period.  In the course of  preparing  the  Servicer
Report, the Servicer shall seek direction from the Depositor as to remittance of
any funds to be paid  pursuant to Section  5.02 of the Trust  Agreement  and any
related  Supplement(s).  The  Servicer  shall  identify  Loans  which  have been
substituted with a Substitute Loan or purchased by the Company or removed by the
Depositor by Obligor loan number on the Servicer Report.  On each  Determination
Date, the Servicer shall deliver to the Trustee a computer  diskette in a format
acceptable  to the Trustee  containing  the Loan Payment  Data.  Nothing in this
Section shall limit or otherwise affect the Trustee's  obligations under Section
5.03 of the Trust Agreement to deliver the Servicer Report.

         (b) On the second Determination Date following the end of each calendar
quarter,  the Special  Servicer shall deliver the Special Servicer Report to the
Depositor,  the Certificateholders,  the Certificateholder  Agent, the Servicer,
the Servicing Advisor and the Trustee,  and the Trustee will deliver the Special
Servicer  Report  to the  Rating  Agency  with  respect  to the Loan  Collateral
performance  in the preceding  calendar  quarter.  Nothing in this Section shall
limit or otherwise  affect the Trustee's  obligations  under Section 5.03 of the
Trust Agreement to deliver the Special Servicer Report.

         (c) 3Not later than May 31 of each year,  the  Special  Servicer  shall
deliver to the Depositor,  the  Certificateholders,  the Certificateholder Agent
and the Servicer,  and, not later than the  following  Business Day, the Trustee
shall  deliver to the Rating  Agency,  the Annual  Pool  Report  prepared by the
Special  Servicer with respect to the  performance  of the Loans and the related
Loan Collateral during the immediately preceding calendar year.

         (d) Not later than May 15 of each year,  the  Servicing  Advisor  shall
deliver  to the  Special  Servicer,  and not later  than May 31 of each year the
Special   Servicer   shall   deliver  to  the   Depositor,   the  Trustee,   the
Certificateholder  Agent,  and, if requested,  the Rating Agency,  ***.

         (e)  Following  a written  request by the Special  Servicer,  within 15
Business  Days  following  the later of (i) such request and (ii) the receipt by
the Servicing  Advisor of such financial  statement data  concerning the related
Obligor  and  Loan  Collateral  as has  been  reasonably  requested  by it,  the
Servicing  Advisor shall also prepare and deliver to the Special  Servicer,  the
Depositor,  the Trustee,  the  Certificateholder  Agent, and, if requested,  the
Rating  Agency,  ***.


***Confidential information omitted purusant to a request for confidential 
   treatment filed separately with the Securities and Exchange Commission.

                                       29

<PAGE>

         (f) If a Swap  Agreement  is in effect with  respect to any Due Period,
the Servicer shall also include in the Servicer  Report  delivered in connection
with such Due Period the  computations  with  respect to and the  amounts of any
Swap Payments due under such Swap Agreement with respect to such Due Period.

         Section 4.02     Financial Statements; Certification as to Compliance;
         ------------     -----------------------------------------------------
Notice of Default.
-------------------

         (a) The Servicer will deliver to the Trustee, the Special Servicer, the
Rating Agency, the Certificateholder Agent and each Certificateholder:

                  (i) within one hundred twenty (120) days after the end of each
         fiscal year, a copy of either (A) the Servicer Financial Statements for
         such Servicer,  all in reasonable  detail and accompanied by an opinion
         of the Independent  Accountant  stating that such financial  statements
         present fairly the financial condition of the Servicer (or, in the case
         of a successor Servicer, such successor Servicer's financial condition)
         and have been prepared in accordance with generally accepted accounting
         principles  consistently  applied (except for changes in application in
         which  such  accountants  concur),  and  that the  examination  of such
         accountants in connection with such financial  statements has been made
         in  accordance  with  generally   accepted  auditing   standards,   and
         accordingly  included  such tests of the  accounting  records  and such
         other  auditing   procedures  as  were  considered   necessary  in  the
         circumstances or (B) the Servicer's Form 10-K for such fiscal year;

                  (ii) with each set of  Servicer Financial  Statements  or Form
         10-K delivered  pursuant to subsection  (a)(i) above, the Servicer will
         deliver an Officer's Certificate stating that such officer has reviewed
         the  relevant  terms  of the  Trust  Agreement,  the  Loan  Acquisition
         Agreement and this Agreement and has made, or caused to be made,  under
         such officer's supervision,  a review of the transactions and condition
         of the Servicer  during the period  covered by the  Servicer  Financial
         Statements then being furnished,  that the review has not disclosed the
         existence of any Servicer Default or Servicer Event of Default or, if a
         Servicer  Default or Servicer Event of Default  exists,  describing its
         nature  and what  action  the  Servicer  has taken  and is taking  with
         respect  thereto,  and that on the  basis of such  review  the  officer
         signing such  certificate is of the opinion that during such period the
         Servicer  has  serviced  the Loans in  compliance  with the  procedures
         hereof except as disclosed in such certificate;

                  (iii) immediately upon becoming  aware of the existence of any
         condition or event which constitutes a Servicer Default, Servicer Event
         of Default,  Depositor  Event of  Default,  Special  Servicer  Default,
         Special  Servicer  Event  of  Default,  Servicing  Advisor  Default  or
         Servicing  Advisor Event of Default,  a written  notice  describing its
         nature and period of  existence  and what  action the  Servicer  or, if
         known to the Servicer,  such other Person, as applicable,  is taking or
         proposes to take with respect thereto;

                  (iv) promptly upon the Servicer's becoming aware of:

                           (A) any  proposed or pending  investigation  of it or
                  the  Depositor,  the  Servicer,  the  Special  Servicer or the
                  Servicing Advisor by any governmental authority or agency, or



                           (B) any pending or proposed  court or  administrative
                  proceeding  which  involves or may involve the  probability of
                  materially and adversely  affecting the properties,  business,
                  prospects,  profits or condition  

                                       30
<PAGE>

                  (financial  or otherwise) of the  Depositor,  the  Servicer,  
                   the  Special  Servicer or the Servicing Advisor,

         a  written  notice  specifying  the  nature  of such  investigation  or
         proceeding  and what action the Servicer or, if known to the  Servicer,
         such other Person,  as  applicable,  is taking or proposes to take with
         respect thereto and evaluating its merits;

                  (v) with reasonable  promptness any other data and information
         with respect to the  Servicer,  the  Depositor or the Loan Assets which
         may  be  reasonably   requested  from  time  to  time,   including  any
         information   required  to  be  made  available  at  any  time  to  any
         prospective  transferee  of any  Certificates  in order to satisfy  the
         requirements of Rule 144A under the Securities Act of 1933, as amended;
         and

                  (vi)  within  sixty (60)  days  following  the end of a fiscal
         quarter,  either  (A)  the  Service's  most  recent  Form  10-Q or (B)
         unaudited Servicer Financial Statements for such fiscal quarter.

         (b) The Special Servicer will deliver to the Trustee, the Servicer, the
Rating Agency, the Certificateholder Agent and each Certificateholder:

                  (i)  immediately  upon becoming  aware of the existence of any
         condition or event which constitutes a Servicer Default, Servicer Event
         of Default,  Depositor  Event of  Default,  Special  Servicer  Default,
         Special Servicer Event of Default, Servicing Advisor Default, Servicing
         Advisor Event of Default or  non-compliance  with the Pool  Performance
         Condition,  a  written  notice  describing  its  nature  and  period of
         existence  and what  action the  Special  Servicer  or, if known to the
         Special  Servicer,  such  other  Person,  as  applicable,  is taking or
         proposes to take with respect thereto;

                  (ii) promptly upon the Special Servicer's becoming aware of:

                           (A) any  proposed or pending  investigation  of it or
                  the  Depositor,  the  Servicer,  the  Special  Servicer or the
                  Servicing Advisor by any governmental authority or agency, or

                           (B) any pending or proposed  court or  administrative
                  proceeding  which  involves or may involve the  probability of
                  materially and adversely  affecting the properties,  business,
                  prospects,  profits or condition  (financial  or otherwise) of
                  the  Depositor,  the  Servicer,  the  Special  Servicer or the
                  Servicing Advisor,

         a  written  notice  specifying  the  nature  of such  investigation  or
         proceeding  and what  action the Special  Servicer  or, if known to the
         Special  Servicer,  such  other  Person,  as  applicable  is  taking or
         proposes to take with respect thereto and evaluating its merits; and

                  (iii)   with   reasonable   promptness   any  other  data  and
         information with respect to the Special Servicer,  the Depositor or the
         Loan  Assets  which  may be  reasonably  requested  from  time to time,
         including any information  required to be made available at any time to
         any prospective  transferee of any Certificates in order to satisfy the
         requirements of Rule 144A under the Securities Act of 1933, as amended.

                                       31

<PAGE>


         (c) On the Determination Date occurring in March, beginning in 1998, so
long as any of the Certificates  are  Outstanding,  each of the Servicer and the
Special Servicer shall furnish to the Trustee and the Certificateholder Agent an
Officer's  Certificate  either  stating  that such  action  has been  taken with
respect to the recording,  filing, and rerecording and refiling of any financing
statements and continuation  statements,  and all other actions, as necessary to
maintain the perfected  security interest of the Trustee (for the benefit of the
Certificateholders)  in the Trust  Estate and to  maintain  the  interest of the
Depositor  (assigned to the Trustee) in the Loan Assets and reciting the details
of such actions or stating that no such actions are  necessary to maintain  such
interest. Such Officer's Certificates shall also describe the recording, filing,
rerecording   and  refiling  of  any  financing   statements  and   continuation
statements,  and such other  actions,  that will be  required  to  maintain  the
perfected   security   interest  of  the   Trustee   (for  the  benefit  of  the
Certificateholders)  in the Trust  Estate  until  the date  such next  Officer's
Certificates are due. On the Payment Date following such Determination Date, the
Trustee  shall  furnish  a  copy  of  such   Officer's   Certificates   to  each
Certificateholder.  In addition,  on the Determination  Date occurring in March,
2002,  and on each  five  (5)  year  anniversary  thereof  so long as any of the
Certificates are Outstanding,  the Special Servicer shall furnish to the Trustee
and the  Certificateholder  Agent an  Opinion of Counsel  stating  that,  in the
opinion of such  counsel,  either (a) such action has been taken with respect to
the recording,  filing, and rerecording and refiling of any financing statements
and continuation statements, and all other actions, as necessary to maintain the
perfected   security   interest  of  the   Trustee   (for  the  benefit  of  the
Certificateholders)  in the Trust  Estate and to  maintain  the  interest of the
Depositor  (assigned to the Trustee) in the Loan Assets and reciting the details
of such actions or (b) no such actions are necessary to maintain such  interest.
Such opinion  shall also specify any actions  necessary to be taken prior to the
expected  date of the next opinion in order to maintain the  perfected  security
interest of the Trustee (for the benefit of the Certificateholders).

         Section 4.03       Annual Independent Accountants' Reports.
         ------------       ----------------------------------------

         Commencing  with the fiscal year ending  December  31,  1998,  and each
fiscal year thereafter,  the Servicer at its expense shall cause the Independent
Accountant  (who may also render and deliver other  services to the Servicer and
its  Affiliates)  to undertake  agreed upon  procedures (as of the close of such
fiscal year) and prepare a report in respect thereof,  substantially in the form
of Exhibit G hereto, addressed to each of the Special Servicer, the Trustee, the
Certificateholders,  the Certificateholder  Agent and the Rating Agency, so long
as Rated Certificates are Outstanding. The Servicer shall deliver to the Special
Servicer,  the  Servicing  Advisor,  the Trustee,  the  Certificateholders,  the
Certificateholder  Agent and the  Rating  Agency,  so long as  Certificates  are
Outstanding,  a copy of any such statement  within one hundred twenty (120) days
of the close of the relevant fiscal year.

         Section 4.04       Access to Certain Documentation and Information.
         ------------       ------------------------------------------------

         (a) The Servicer,  the Special Servicer,  the Servicing Advisor and the
Depositor  shall provide to the Servicer,  the Special  Servicer,  the Servicing
Advisor,  the Trustee,  the Rating Agency,  the  Certificateholder  Agent or any
Certificateholder  and  their  duly  authorized  representatives,  attorneys  or
accountants  access to any and all  documentation  regarding  the  Trust  Estate
(including  the Loan  Schedule)  that the Servicer,  the Special  Servicer,  the
Servicing Advisor or the Depositor may, as the case may be, possess, such access
being afforded without charge but only upon reasonable request and during normal
business  hours so as not to interfere  unreasonably  with such  party's  normal
operations  or  customer  or  employee  relations,  at  offices  of  such  party
designated by such party.

         (b) At all times  during  the term  hereof,  the  Servicer  shall  keep
available   at   its   principal    executive    office   for    inspection   by
Certificateholders, the Certificateholder Agent, the Rating Agency, the Trustee,
the Special Servicer and the Servicing  Advisor a list of all Loans then held as
a part of the Trust 

                                       32

<PAGE>


Estate,  together  with a  reconciliation  of such list to that set forth in the
Loan  Schedule  and each of the  Servicer  Reports,  indicating  the  cumulative
addition and removal of Loans from the Trust Estate.

         (c)  The  Servicer  will  maintain  accounts  and  records  as to  each
respective  Loan  serviced by the Servicer  that are  accurate and  sufficiently
detailed  as to permit  (i) the  reader  thereof  to know as of the most  recent
Determination  Date  the  status  of  such  Loan,  including  any  payments  and
Recoveries  received  or owing  (and the  nature of each)  thereon  and (ii) the
reconciliation  between payments or Recoveries on (or with respect to) each Loan
and the amounts from time to time deposited in the Collection Account in respect
of such Loan.

         (d) The Servicer,  the Special Servicer and the Depositor will maintain
all  computerized  accounts  and  records  so that,  from and after the  Initial
Delivery Date and each Acquisition Date, the accounts and records (including any
back-up computer archives) that refer to any Loan conveyed on such date indicate
clearly that the Loans and perfected  first  priority  security  interest in the
Loan  Collateral  are owned by the  Depositor and pledged to the Trustee for the
benefit of the  Certificateholders.  Indication of the  Trustee's  interest in a
Loan will be deleted from or modified on the accounts and records when, and only
when, the Loan has been paid in full, replaced with a Substitute Loan, purchased
by the Company or removed by the Depositor.

         (e) Nothing in this  Section 4.04 shall  affect the  obligation  of the
Servicer or the  Special  Servicer to observe  any  applicable  law  prohibiting
disclosure of  information  regarding  the Obligors,  and the failure to provide
information  otherwise  required  by  this  Section  4.04  as a  result  of such
observance by the Servicer or the Special Servicer shall not constitute a breach
of this Section 4.04.

         (f) All  information  obtained by the Trustee,  the Rating Agency,  the
Servicer,  the Special Servicer,  the Servicing Advisor,  the  Certificateholder
Agent or any  Certificateholder  regarding  the Obligors and the Loans,  whether
upon  exercise of its rights  under this  Section  4.04 or  otherwise,  shall be
maintained  by the  Trustee,  the Rating  Agency,  the  Servicing  Advisor,  the
Certificateholder Agent or the Certificateholder,  as applicable,  in confidence
and shall not be  disclosed  to any other  Person  (other  than to or among such
other Persons),  unless ordered by a court of applicable jurisdiction,  provided
                                                                        --------
that the Certificateholder  Agent and the  Certificateholders  may disclose such
information  to the extent  permitted  by the  applicable  Certificate  Purchase
Agreement.

         Section 4.05       Other Necessary Data.
         ------------       ---------------------

         (a) The  Servicer  shall,  on request of the  Special  Servicer  or the
Trustee,  (i) on reasonable notice,  furnish the Trustee such data necessary for
the  administration  of the Trust Estate as can be  reasonably  generated by the
Servicer's  existing data processing  systems,  and (ii) on and after a Servicer
Event of Default,  within five (5)  Business  Days,  provide the Trustee and the
Special Servicer with access to the Servicer's  existing data processing systems
and any files or records with respect to the Loan Assets that it may have.

         (b) The  Special  Servicer  shall,  on request of the  Servicer  or the
Trustee,  (i) on reasonable notice,  furnish the Trustee such data necessary for
the  administration  of the Trust Estate as can be  reasonably  generated by the
Special  Servicer's  existing data processing  systems,  and (ii) on and after a
Special  Servicer Event of Default,  within five (5) Business Days,  provide the
Trustee and the Servicer  with access to the Special  Servicer's  existing  data
processing systems and any files or records with respect to the Loan Assets that
it may have.


                                       33
<PAGE>


                                  ARTICLE FIVE
                                  ------------

              THE SERVICER, THE SPECIAL SERVICER AND THE DEPOSITOR
              -----------------------------------------------------

          Section 5.01      Indemnification.
          -----------       ----------------

         (a) The Servicer,  the Special Servicer and the Servicing Advisor shall
indemnify and hold harmless the Trustee,  the Depositor,  the Trust Estate,  the
Certificateholder  Agent  and  each  Certificateholder  (each,  an  "Indemnified
Party") from and against any loss, liability,  claim, expense,  damage or injury
suffered or sustained to the extent that such loss,  liability,  claim, expense,
damage or injury  arose out of or was  imposed by reason of the  failure by such
Servicer,  Special Servicer or Servicing Advisor to perform its duties under the
Agreement  or are  attributable  to errors or  omissions  of the  Servicer,  the
Special Servicer or the Servicing Advisor related to such duties;  provided that
                                                                   --------
none of the  Servicer or the Special  Servicer or the  Servicing  Advisor  shall
indemnify any party to the extent that acts of fraud, gross negligence or breach
of fiduciary  duty by such party  contributed  to such loss,  liability,  claim,
expense, damage or injury.

         (b) The Servicer,  the Special Servicer and the Servicing Advisor shall
have the right to defend any such action,  suit or proceeding;  provided that an
                                                                -------- 
Indemnified  Party shall have the right to employ  separate  counsel in any such
action,  suit or proceeding and to participate in the defense  thereof,  but the
fees and  expenses of such counsel  shall be at the expense of such  Indemnified
Party unless the Servicer,  the Special Servicer or the Servicing Advisor agrees
to pay such fees and  expenses  or the  Servicer,  the  Special  Servicer or the
Servicing Advisor fails to assume the defense of such action, suit or proceeding
or fails to employ counsel reasonably  satisfactory to such Indemnified Party in
any such action,  suit or proceeding;  it being  understood,  however,  that the
Servicer,  the  Special  Servicer  and  the  Servicing  Advisor  shall  not,  in
connection with any one such action or proceeding or separate but  substantially
similar or related actions or proceedings in the same  jurisdiction  arising out
of the same general  allegations  or  circumstances,  be liable for the fees and
expenses of more than one separate  firm of attorneys at any time acting for all
Indemnified  Parties  unless  the  named  parties  to any such  action,  suit or
proceeding include more than one of any Indemnified Party and the Servicer,  the
Special Servicer and the Servicing  Advisor and the Indemnified Party shall have
been  advised  that  there  may  be one  or  more  defenses  available  to  such
Indemnified Party which are different from those available to the Servicer,  the
Special Servicer or the Servicing  Advisor or any other  Indemnified  Party. The
Servicer, the Special Servicer and the Servicing Advisor shall not be liable for
any  settlement  of any action or claim  effected  without its  consent.  If the
Servicer,  the Special Servicer or the Servicing  Advisor has made any indemnity
payments to the Trustee or the  Certificateholders  pursuant to this Section and
such party thereafter  collects any of such amounts from others, such party will
promptly repay such amounts  collected to the Servicer,  the Special Servicer or
the Servicing Advisor, as applicable,  without interest.  The provisions of this
Section 5.01 shall survive any expiration or termination of the Agreement.

         Section 5.02       Corporate Existence; Reorganizations.
         ------------       -------------------------------------

         (1)  Each of the  Servicer,  the  Special  Servicer  and the  Servicing
Advisor  shall  keep in  full  effect  its  existence  and  good  standing  as a
corporation in the Servicer State of  Incorporation,  Special  Servicer State of
Incorporation or the Servicing  Advisor State of  Incorporation,  as applicable,
and 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 enable such  Servicer,  Special  Servicer or  Servicing  Advisor to
perform its duties under the  Agreement,  except where the failure to so qualify
would not have a material  adverse  effect on the Trust Estate or the ability of
the Servicer,  the Special Servicer or the Servicing Advisor, as applicable,  to
perform its duties hereunder;  provided that the Servicer,  the Special Servicer
                               --------
or the Servicing Advisor may reincorporate in another state if to do so would be
in the best  interests of the  Servicer,  the Special  Servicer

                                       34
<PAGE>


or the Servicing Advisor,  as applicable,  and would not have a material adverse
effect  upon the  Certificateholders  as  evidenced  by an  Opinion  of  Counsel
delivered to the  Certificateholders  and the  Certificateholder  Agent prior to
such reincorporation.

         (b) Except as hereinafter provided,  each of the Servicer,  the Special
Servicer  and the  Servicing  Advisor  will keep in full  effect its  existence,
rights  and  franchises  as a  corporation  or  limited  liability  company,  as
appropriate,  and will obtain and preserve its qualification to do business as a
foreign  corporation  or limited  liability  company,  as  appropriate,  in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement or any of the Loans and to perform
its duties hereunder.  Any Person into which the Servicer,  the Special Servicer
or the Servicing Advisor may be merged or consolidated, or to whom the Servicer,
the Special Servicer or the Servicing Advisor may sell  substantially all of its
assets, or any Person resulting from any merger,  conversion or consolidation to
which the Servicer,  the Special  Servicer or the  Servicing  Advisor shall be a
party,  or any Person  succeeding to the business of the  Servicer,  the Special
Servicer or the Servicing  Advisor shall be the successor of such Servicer,  the
Special Servicer or the Servicing Advisor, as applicable, 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 that
                                                                   --------   
(i) immediately  after giving effect to such  transaction,  no representation or
warranty made pursuant to Section 2.01,  2.02 or 2.03 shall have been  breached,
(ii) such  successor  executes an agreement or  assumption,  in form  reasonably
satisfactory to the Trustee,  to perform every  obligation under this Agreement,
(iii) such successor has a net worth that is sufficient to perform in accordance
with the Transaction Documents and at least approximately  equivalent to the net
worth of the  Servicer,  the  Special  Servicer  or the  Servicing  Advisor,  as
applicable,  immediately prior to such sale,  merger or consolidation,  (iv) the
Servicer,  the Special Servicer or the Servicing Advisor,  as applicable,  shall
have delivered to the Depositor,  the Trustee, the  Certificateholder  Agent and
each  Certificateholder a certificate of an officer of the Servicer, the Special
Servicer or the Servicing Advisor, as applicable, and an Opinion of Counsel each
stating that such  consolidation,  merger,  or succession  and such agreement of
assumption complies with this Section 5.02 and that all conditions precedent, if
any,  provided  for in this  Agreement  relating to such  transaction  have been
complied  with,  and (v) the  Servicer,  the Special  Servicer or the  Servicing
Advisor,  as appropriate,  shall have delivered to the Depositor and the Trustee
an Opinion of Counsel  either (A) stating  that, in the opinion of such counsel,
all financing  statements,  continuation  statements and amendments thereto have
been executed and filed and, if applicable, all other actions have been taken to
preserve  fully the  interest of the  Depositor in the Loans and the Loan Assets
and reciting the details of such filings and, if  applicable,  such actions,  or
(B) stating  that,  in the  opinion of such  counsel,  no such  action  shall be
necessary to preserve  and protect  such  interest.  The  Servicer,  the Special
Servicer or the Servicing Advisor, as applicable, will provide written notice to
the Rating Agency prior to the effective date of any such transaction.

         Section 5.03       Limitation on Liability of the Servicer  the Special
         ------------       ----------------------------------------------------
Servicer,  the Servicing  Advisor and Others.
---------------------------------------------

         Except as provided herein, none of the Servicer or the Special Servicer
or the Servicing Advisor or any of the officers, directors,  employees or agents
of such  Persons  shall be  under  any  liability  for any  action  taken or for
refraining  from the taking of any action in its capacity as  Servicer,  Special
Servicer or  Servicing  Advisor,  as  appropriate,  pursuant to this  Agreement;
provided  that this  provision  shall not  protect  the  Servicer,  the  Special
--------
Servicer or the Servicing Advisor or any such person against any liability which
would  otherwise  be  imposed  by  reason of  breach  of any  provision  of this
Agreement by such Person or willful  misconduct,  bad faith or gross  negligence
(which  includes  negligence  with  respect to the duties of the  Servicer,  the
Special  Servicer  or  the  Servicing  Advisor  explicitly  set  forth  in  this
Agreement) in the performance of its duties hereunder. The Servicer, the Special
Servicer and the Servicing Advisor and any 

                                       35
<PAGE>


officer,  director,  employee or agent of the Servicer,  the Special Servicer or
the  Servicing  Advisor may rely in good faith on any document of any kind prima
                                                                           -----
facie properly  executed and submitted by any Person with respect to any matters
-----
arising hereunder.  The Servicer,  the Special Servicer or the Servicing Advisor
may from time to time request such additional information and documentation from
each other as any of them deems  reasonably  necessary to perform such  Person's
duties  hereunder;  the Person from whom the  information  or  documentation  is
requested  shall provide such  information  or  documentation  to the requesting
Party, as available. No implied covenants or obligations shall be read into this
Agreement against the Servicer,  the Special Servicer or the Servicing  Advisor.
In the event  the  Servicer,  the  Special  Servicer  or the  Servicing  Advisor
performs any activities beyond the requirements  hereof, such Servicer,  Special
Servicer or Servicing  Advisor shall have the option but will not be required to
perform such activities in the future.

         Section 5.04     The Servicer, the Special Servicer and the Servicing 
         ------------     ----------------------------------------------------
Advisor Not to Resign.
----------------------

         (a) None of the Servicer, the Special Servicer or the Servicing Advisor
shall resign from the duties and obligations  hereby imposed on it except upon a
determination  by its respective  Board of Directors that by reason of change in
applicable legal requirements,  with which the Servicer, the Special Servicer or
the Servicing  Advisor,  as applicable,  cannot reasonably comply, the continued
performance by the Servicer,  the Special Servicer or the Servicing Advisor,  as
applicable,  of its duties  hereunder  would cause it to be in violation of such
legal requirements,  said determination to be evidenced by a resolution from its
Board of Directors to such effect,  accompanied by an Opinion of Counsel to such
effect and reasonably satisfactory to the Trustee.

         (b) No such  resignation  shall  become  effective  until  a  Successor
Servicer  shall  have  assumed  the  responsibilities  and  obligations  of  the
Servicer,  the  Special  Servicer  or the  Servicing  Advisor,  as  appropriate,
hereunder.

         (c)  Except as  provided  in  Sections  5.02 and 6.01,  the  duties and
obligations  of the Servicer,  the Special  Servicer and the  Servicing  Advisor
under  the  Agreement  shall  continue  until  this  Agreement  shall  have been
terminated  as provided in Section  7.01,  and shall survive the exercise by the
Depositor  or the Trustee of any right or remedy  under this  Agreement,  or the
enforcement  by the  Depositor,  the  Trustee  or any  Certificateholder  of any
provision of the Certificates or this Agreement.

         Section 5.05       Depositor Indemnification.
         ------------       --------------------------

         The Depositor  shall  indemnify  and hold  harmless the  Servicer,  the
Special Servicer,  the Servicing Advisor, the  Certificateholder  Agent and each
Certificateholder  from and  against  any loss,  liability,  expense,  damage or
injury  suffered  or  sustained  by the  Servicer,  the  Special  Servicer,  the
Servicing Advisor, the Certificateholder  Agent and each such Certificateholder,
including any judgment, award, settlement,  reasonable attorneys' fees and other
costs and  expenses  incurred  in  connection  with the defense of any actual or
threatened action, proceeding or claim, which arises out of the Service's,  the
Special Servicer's or the Servicing  Advisor's  activities  hereunder;  provided
                                                                        --------
that the Depositor shall not indemnify the Servicer,  the Special Servicer,  the
Servicing Advisor, the Certificateholder  Agent or any such Certificateholder if
such Service's,  Special  Servicer's,  Servicing  Advisor's,  Certificateholder
Agent's or Certificateholder's activities constituted fraud, willful misconduct,
gross  negligence  (which includes  negligence with respect to the duties of the
Servicer, the Special Servicer or the Servicing Advisor which are explicitly set
forth herein) or breach of fiduciary duty by such Servicer,  Special Servicer or
Servicing Advisor.

                                       36

<PAGE>


                                   ARTICLE SIX
                                   -----------

                              SERVICING TERMINATION
                              ---------------------

Section 6.01      Events of Default.
------------      ------------------

         (a) Any of the following acts or occurrences  shall constitute an Event
of Default:

                  (i) any  failure  by a Person to deliver  to the  Trustee  for
         payment to Certificateholders any proceeds or payments received from an
         Obligor  or in  respect  of the  Trust  Estate  and  required  to be so
         delivered  under the terms of the Trust  Agreement  and this  Agreement
         that continues  unremedied  until 10:00 a.m.,  California  time, on the
         following  Business  Day;  provided  that the Trustee,  upon  receiving
                                    --------
         actual  knowledge  of such  failure,  shall  give  such  Person  prompt
         written,   telecopied   or   telephonic   notice   of   such   failure.
         Notwithstanding  the  foregoing,  any failure by the Trustee to deliver
         such notice to the Person shall not prevent the  occurrence of an Event
         of Default under this Section 6.01(a)(i); or

                  (ii) any failure by a Person to  deliver a Report as  required
         under  Section  4.01(a) or (b) that  continues  unremedied  until 10:00
         a.m.,  California time, the following  Business Day;  provided that, if
                                                               --------  
         the Person has not delivered the Report by 12:00 p.m., California time,
         on the Determination  Date, the Trustee shall give the Person notice of
         such failure. Notwithstanding the foregoing, any failure by the Trustee
         to deliver such notice to such Person shall not prevent the  occurrence
         of an Event of Default under this Section 6.01(a)(ii); or

                  (iii) any failure on the part of a Person  duly to  observe or
         perform in any material  respect any other  covenants or  agreements of
         such Person set forth in this Agreement,  or if any  representation  or
         warranty  of the  Person set forth in  Section  2.01 shall  prove to be
         incorrect or  misleading  in any  material  respect,  which  failure or
         breach continues  unremedied for a period of thirty (30) days after the
         earlier of the date on which such Person  becomes aware of such failure
         or breach or written  notice of such failure or breach,  requiring  the
         situation giving rise to such breach or  non-conformity to be remedied,
         shall have been  given to a  Servicing  Officer  of such  Person by the
         Trustee,   the   Depositor,   the   Certificateholder   Agent   or  any
         Certificateholder; or

                  (iv) the  entry of a decree  or order  for  relief  by a court
         having  jurisdiction  in respect  of a Person or a  petition  against a
         Person in an involuntary case under any federal bankruptcy laws, as now
         or hereafter in effect, or any other present or future federal or state
         bankruptcy,  insolvency  or similar  law,  or  appointing  a  receiver,
         liquidator,  assignee, trustee,  sequestrator or other similar official
         for such Person or for any substantial part of such Person's  property,
         or ordering the winding up or  liquidation of the affairs of the Person
         and the  continuance of any such decree or order unstayed and in effect
         for a period of sixty (60) consecutive days; or


                  (v) the commencement by a Person of a voluntary case under any
         federal  bankruptcy  laws, as now or hereafter in effect,  or any other
         present   or   future   federal   or  state   bankruptcy,   insolvency,
         reorganization  or  similar  law,  or the  consent  by a Person  to the
         appointment  of  or  taking  possession  by  a  conservator,  receiver,
         liquidator,  assignee, trustee,  sequestrator or other similar official
         in any  insolvency,  readjustment  of debt,  marshaling  of assets  and
         liabilities,  bankruptcy  or similar  proceedings  of or  relating to a
         Person or relating to a substantial part of its property, or the making
         by the Person of an  assignment  for the benefit of  creditors,  or the
         failure by the Person  generally  to pay its debts as such debts become
         due or if the Person  shall admit in writing its  

                                       37
<PAGE>


         inability  to pay its  debts  as they  become  due,  or the  taking  of
         corporate action by the Person in furtherance of any of the foregoing.

         (b) So long as an Event of Default shall not have been remedied  within
the period set forth in (i), (ii), (iii) or (iv) above, as applicable,  or if an
Event of Default  described  in (v) above  occurs,  the  Trustee  shall,  at the
direction of the Controlling Holders or upon exercise by the Controlling Holders
of their rights under Section 6.02(b) of the Trust  Agreement,  give notice (the
"Termination  Notice") in writing to the  Person(s) to whom the Event of Default
concerns (or to any or all of such  Persons if such notice is given  pursuant to
Section 6.02(b) of the Trust  Agreement) of the termination of all, but not less
than all, of the rights and the servicing  obligations of such  Person(s)  under
this  Agreement;  provided  that such  Termination  Notice  shall not relieve or
                  --------
exculpate  such  Person(s) from any liability for any action or inaction of such
Person(s)   hereunder  prior  to  the  delivery  of  such  Termination   Notice.
Notwithstanding  the foregoing,  no Termination Notice shall take effect until a
Successor Servicer has assumed its responsibilities.

         (c) On or after the receipt by a Person of a  Termination  Notice,  all
authority and power of such Person under this Agreement, whether with respect to
the  Certificates  or the Loans or  otherwise,  shall pass to and be vested in a
Successor Servicer appointed pursuant to Section 6.02, and, without  limitation,
such  Successor  Servicer  is hereby  authorized  and  empowered  to execute and
deliver,  on behalf of the Outgoing Servicer,  as attorney-in-fact or otherwise,
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  of  the  Loans  and  related
documents,  or otherwise.  The Outgoing  Servicer  agrees to cooperate  with the
Trustee,  the others of the  Servicer,  the Special  Servicer and the  Servicing
Advisor  and  the  Successor  Servicer  in  effecting  the  termination  of  the
responsibilities  and rights of the Outgoing Servicer  hereunder,  including the
transfer to the Successor  Servicer for administration by it of all cash amounts
that shall at the time be held by the Outgoing  Servicer  for  deposit,  or have
been deposited by the Outgoing Servicer, in the Collection Account or thereafter
received with respect to any of the Loans.  To assist the Successor  Servicer in
enforcing all rights under the Loans, the Outgoing Servicer, at its own expense,
shall transfer its records  (electronic and otherwise) relating to such Loans to
the  Successor  Servicer in such form as the Successor  Servicer may  reasonably
request and shall  transfer  all other  records,  correspondence  and  documents
relating  to the Loans that it may  possess  to the  Successor  Servicer  in the
manner and at such times as the Successor Servicer shall reasonably request.

         Section 6.02       Appointment of Successor Servicer; Taking of Bids.
         ------------       --------------------------------------------------- 

         (a) On and  after  the time  any  Servicer,  the  Special  Servicer  or
Servicing Advisor, as applicable,  receives a Termination Notice hereunder,  the
Depositor,  by a Board Resolution,  shall promptly appoint a Successor Servicer,
as  applicable,  reasonably  satisfactory  to  the  Trustee,  on  behalf  of the
Certificateholders; provided that such appointment shall be subject to the prior
                    ---------
approval of the  Certificateholder  Agent and,  unless waived by the Controlling
Holders,  the written  confirmation from the Rating Agency that such appointment
would not result in a rating downgrade. If no such Successor Servicer shall have
been so appointed  within  thirty (30) days of notice of removal or  resignation
and  shall  have  accepted  appointment,  then the  Trustee,  on  behalf  of the
Certificateholders,  shall appoint a Successor  Servicer,  as appropriate.  If a
Depositor Event Default exists and is continuing,  the Trustee,  acting with the
advice of the  Certificateholder  Agent,  shall appoint a Successor Servicer and
the Depositor shall have no right to make any such appointment.  If the Trustee,
on behalf of the  Certificateholders  shall fail to appoint a Successor Servicer
within thirty (30) days,  then any of the  Controlling  Holders or the Directing
Holders may petition any court of competent  jurisdiction for the appointment of
a Successor Servicer.

         (b)  Any  Successor   Servicer  shall  be  a  Person  experienced  with
performing the  responsibilities  of the Outgoing  Servicer it replaces.  In the
case of the Successor Servicer replacing the Servicer, the

                                       38

<PAGE>


applicable  experience  required  shall include  experience in servicing  either
commercial  mortgage  or  other  secured  business  loans.  In the  case  of the
Successor  Servicer  replacing the Special Servicer,  the applicable  experience
required  shall  include   experience  in  the  management  and  disposition  of
underperforming,  non-performing  and  defaulted  commercial  mortgage  or other
secured  business  loans.  In the case of the Successor  Servicer  replacing the
Servicing Advisor, such Successor Servicer shall be a Person (i) that has as its
principal  employees or officers one or more persons whose primary  business for
at least ten (10) years has been  providing  advisory,  valuation and consulting
services to funeral home and cemetery businesses and (ii) who is approved by the
Controlling Holders (which approval shall not be unreasonably withheld).

         (c) The  Successor  Servicer  shall be the successor in all respects to
the Servicer,  the Special Servicer or the Servicing Advisor, as applicable,  in
its capacity as Servicer,  Special Servicer or Servicing Advisor, as applicable,
under the Transaction  Documents and the  transactions set forth or provided for
therein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Successor Servicer, as appropriate,  by the terms
and provisions hereof;  provided that the Successor Servicer shall not be liable
                        --------
for any acts or  omissions  of the  Outgoing  Servicer  or for any breach by the
Outgoing Servicer of any of its representations and warranties  contained herein
or in any  related  document  or  agreement.  The  Successor  Servicer  shall be
entitled to the  applicable  Servicer  Fee,  Special  Servicer  Fee or Servicing
Advisor Fee and, as applicable, all Servicing Charges.

         (d) The Servicer,  the Special  Servicer,  the Servicing  Advisor,  the
Depositor,  the  Trustee and such  Successor  Servicer  shall take such  action,
consistent  with this  Agreement,  as shall be necessary to effectuate  any such
succession.  The  Successor  Servicer,  as  appropriate  (or the  Trustee or the
Certificateholders  if such  Certificateholders  have previously  reimbursed the
Successor  Servicer  therefor) shall be reimbursed for Transition Costs, if any,
incurred in connection with the assumption of  responsibilities of the Successor
Servicer,  upon  receipt  of  documentation  of such costs and  expenses  and in
accordance  with Section 5.02 of the Trust  Agreement.  The  Successor  Servicer
shall have no claim  against the Depositor or the Trust Estate for any costs and
expenses incurred in effecting such succession in excess of the amount specified
in the definition of "Transition Costs."

         (e)  Solely  for  purposes  of  establishing  the fee to be paid to the
Successor  Servicer,  and only if the  Successor  Servicer  would  require a fee
higher than the fee  previously  paid,  the  Successor  Servicer  shall  solicit
written bids, with a copy to the  Certificateholders  and the  Certificateholder
Agent  (such bids to  include a proposed  servicer  fee and  servicing  transfer
costs)  from not less than three (3) Persons  experienced  in the  servicing  of
loans  similar  to the Loans and that are not  Affiliates  of the  Trustee,  the
Servicer,  the Special Servicer,  the Servicing Advisor or the Depositor and are
reasonably  acceptable  to  the  Controlling  Holders.  The  Depositor  and  the
Certificateholder  Agent  may also  solicit  additional  bids  from  other  such
entities.  Any such written  solicitation  shall prominently  indicate that bids
should specify any applicable  Transition Costs and that any such transfer costs
in excess of the  Servicer  Fee,  the Special  Servicer  Fee,  or the  Servicing
Advisor Fee shall be paid only pursuant to Section 5.02 of the Trust  Agreement.
The Successor  Servicer shall act as Servicer,  Special  Servicer,  or Servicing
Advisor,  as appropriate,  hereunder and shall,  subject to the  availability of
sufficient funds in the Collection Account pursuant to Section 5.02 of the Trust
Agreement  (up to the Servicer  Fee, the Special  Servicer Fee, or the Servicing
Advisor  Fee,  as  applicable,  and up to any  Successor  Servicer's  Transition
Costs),  receive as compensation therefor a fee equal to the fee proposed in the
bid so solicited  which provides for the lowest  combination of servicer fee and
transition costs, as reasonably determined by the Controlling Holders.

                                       39

<PAGE>


         Section 603       Effects of Termination.
         ------------       -----------------------

         (a)  Upon the  appointment  of a  Successor  Servicer,  the  applicable
Outgoing  Servicer shall remit any Scheduled  Payments and any other payments or
proceeds that it may receive  pursuant to any Loan or otherwise to the Successor
Servicer after such date of appointment.

         (b)  After the  delivery  of a  Servicer  Termination  Notice,  Special
Servicer  Termination  Notice or Servicing  Advisor  Termination  Notice and the
acceptance of appointment by a Successor  Servicer,  the Outgoing Servicer shall
continue  to  have  all of  its  obligations  with  respect  to the  management,
administration,  servicing,  enforcement,  custody or collection of the Loans in
full until such time as the Successor Servicer has assumed its responsibilities.
Thereafter,  the Successor  Servicer shall have all of such obligations,  except
that the Outgoing Servicer shall transmit or cause to be transmitted directly to
the  Successor  Servicer,  promptly  on  receipt  and in the same  form in which
received,  any  amounts  held or  received by the  Outgoing  Servicer  (properly
endorsed where required for the Successor  Servicer to collect them) received as
payments upon or otherwise in connection with the Loans. The Outgoing Servicer's
indemnification   obligations   pursuant  to  Section   5.01  will  survive  the
termination  of such  Outgoing  Servicer  but  will  not  extend  to any acts or
omissions of a Successor Servicer.

         Section 6.04       No Effect on Other Parties.
         ------------       ---------------------------
      
         Upon any  termination  of the rights and  powers of the  Servicer,  the
Special  Servicer or the Servicing  Advisor  pursuant to Section 6.01 or Section
6.02, or upon any appointment of a Successor Servicer,  all the rights,  powers,
duties and  obligations  of the other  parties under the  Transaction  Documents
shall remain  unaffected by such  termination or appointment and shall remain in
full force and effect thereafter.

         Section 6.05       Waiver of Past Defaults.
         ------------       --------------------------

         The Trustee shall, at the direction of the Controlling  Holders,  waive
any  default by any of the  Servicer,  the  Special  Servicer  or the  Servicing
Advisor in the  performance of its obligations  hereunder and its  consequences,
other  than a  default  with  respect  to  required  deposits  and  payments  in
accordance with Article Three or a default of the type set forth in clauses (iv)
or (v) of Section  6.01(a),  which  waiver  shall  require  the  consent of each
Certificateholder.  Upon any such waiver of a past  default,  such default shall
cease to exist and any  Servicer  Event of Default,  Special  Servicer  Event of
Default or Servicing  Advisor Event of Default arising therefrom shall be deemed
to have been remedied for every purpose of this Agreement.  No such waiver shall
extend to any subsequent or other default or impair any right consequent thereon
except to the extent expressly waived.

         Section 6.06       Notification to Certificateholders and the 
         ------------       -------------------------------------------
Certificateholder Agent.
------------------------

         The  Servicer,  the  Special  Servicer  or the  Servicing  Advisor,  as
appropriate,    shall   promptly    notify   the   Successor    Servicer,    the
Certificateholders, the Certificateholder Agent, the others of the Servicer, the
Special Servicer,  and the Servicing Advisor,  the Depositor,  the Rating Agency
and the Trustee of any  Servicer  Event of Default,  Special  Servicer  Event of
Default or Servicing Advisor Event of Default upon actual knowledge thereof by a
Servicing  Officer.  Upon any  termination of, or appointment of a successor to,
the Servicer,  the Special  Servicer or the Servicing  Advisor  pursuant to this
Article 6, the Trustee shall give prompt  written  notice  thereof to the Rating
Agency and the  Certificateholder  Agent and to the  Certificateholders at their
respective addresses appearing on the Certificate Register.

                                       40

<PAGE>


                                  ARTICLE SEVEN
                                  -------------

                               GENERAL PROVISIONS
                               ------------------

          Section 7.01      Termination of the Agreement.
          ------------      -----------------------------

         (a) Except with  respect to a  particular  party under  Sections  5.01,
5.02, 5.04, 6.01 or 6.03, the respective duties and obligations of the Servicer,
the Special  Servicer,  the  Servicing  Advisor,  the  Depositor and the Trustee
created  by this  Agreement  shall  terminate  upon the  discharge  of the Trust
Agreement in accordance with its terms;  provided that no resignation or removal
                                         --------
of the Trustee and no appointment of a successor  Trustee shall become effective
until the acceptance of appointment by the successor  Trustee under Section 7.09
of the Trust Agreement.  Upon the termination of this Agreement pursuant to this
Section  7.01(a),  the  Servicer  and  the  Special  Servicer  shall  pay to the
Depositor  (or upon the  Depositor's  order) all monies with respect to the Loan
Assets held by the Servicer or the Special  Servicer and to which such Person is
not entitled.

         (b) This Agreement shall not be automatically terminated as a result of
an Event of Default under the Trust Agreement or any action taken by the Trustee
thereafter  with respect  thereto,  and any  liquidation or  preservation of the
Trust  Estate by the  Trustee  thereafter  shall be subject to the rights of the
Servicer and Special  Servicer to service the Loans and the Loan  Collateral and
to collect servicing compensation as provided hereunder.

         Section 7.02       Amendments.
         -----------        -----------

         (a) This  Agreement  and the  rights  and  obligations  of the  parties
hereunder may not be changed  orally but only by an instrument in writing signed
by the party against whom  enforcement is sought together with the prior written
consent of the Holders of not less than 51% of the Outstanding  Principal Amount
of each  affected  Class (or,  with  respect to any  affected  Class  during the
Funding  Period  applicable  to such Class,  of not less than 51% of the Maximum
Series  Amount  of such  Class)  of Rated  Certificates;  provided  that no such
                                                          ---------
amendment shall,  without the consent of each  Certificateholder,  (i) alter the
method of computing any allocation of funds under this Agreement or the priority
of any funds to be allocated under this  Agreement,  (ii) permit the creation of
any Lien on the Trust Estate (other than the Lien of the Trust Agreement) or any
portion  thereof or deprive  any such  Certificateholder  of the benefit of this
Agreement  with  respect to the Trust  Estate or any portion  thereof,  or (iii)
modify this Section 7.02.

         (b) Promptly after the execution of any amendment  hereto,  the Special
Servicer shall send to the Servicer,  the Servicing Advisor, the Depositor,  the
Trustee, the  Certificateholder  Agent, each  Certificateholder  and each Rating
Agency a conformed copy of each such amendment.

         (c)  It  shall  be   necessary,   in   obtaining   the   consent  of  a
Certificateholder  under this Section 7.02, for the Certificateholder to approve
the  particular  form of any proposed  amendment.  The manner of obtaining  such
consent  and of  evidencing  the  authorization  of  the  execution  thereof  by
Certificateholders  shall  be  subject  to such  reasonable  regulations  as the
Trustee may prescribe.

         (d)  Any amendment or modification  effected contrary to the provisions
of this Section 7.02 shall be void.

                                       41

<PAGE>


         Section 7.03       Governing Law.
         ------------       --------------

         This Agreement  shall be construed in accordance with the internal laws
of the State of New York without  regard to conflict of laws  principles and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.

         Section 7.04       Notices.
         ------------       --------

         All demands,  notices and communications hereunder shall be in writing,
shall be made in  accordance  with the  provisions of the Trust  Agreement,  and
shall be addressed,  if to the Depositor, at 1700 Montgomery Street, Suite 250B,
San Francisco,  California 94111 Fax 415-394-6703,  if to the Servicer,  at 1700
Montgomery Street, Suite 250, San Francisco,  California 94111 Fax 415-394-9471,
if to the Special Servicer at 1700 Montgomery Street,  Suite 250, San Francisco,
California 94111 Fax 415-394-9471,  if to the Servicing Advisor,  at ***Fax ***,
if to the  Certificateholders,  to their  address  set forth on the  Certificate
Register,  and if to the Trustee, at One M&T Plaza, 7th Floor, Buffalo, New York
14203-2399 Fax 716-842-4474.  All demands,  notices and  communications  made in
accordance  with the provisions  hereof shall be deemed to have been received or
made (as applicable) as provided in the Trust  Agreement.  Any Person may change
the address for notices  hereunder by giving  notice of such change to the other
Persons (or in the case of a Certificateholder, by causing the Trustee to change
its address as provided on the Certificate Register).

         Section 7.05       Severability of Provisions.
         ------------       --------------------------- 

         If one or more of the  provisions  of this  Agreement  shall be for any
reason  whatsoever held invalid,  such provisions shall be deemed severable from
the remaining  covenants and provisions of this  Agreement,  and shall in no way
affect the validity or enforceability of such remaining  provisions,  the rights
of any parties hereto, or the rights of the Trustee or any Certificateholder. To
the extent permitted by law, the parties hereto waive any provision of law which
renders any  provision of this  Agreement  prohibited  or  unenforceable  in any
respect.

         Section 7.06       Binding Effect.
         ------------       ---------------

         All provisions of this Agreement shall be binding upon and inure to the
benefit of the respective  successors and assigns of the parties hereto, and all
such  provisions  shall  inure to the  benefit of the  Certificateholders.  This
Agreement may not be modified except by a writing signed by all parties hereto.

         Section 7.07       Article Headings and Captions.
         ------------       ------------------------------

         The article headings and captions in this Agreement are for convenience
of reference only, and shall not limit or otherwise affect the meaning hereof.

         Section 7.08       Legal Holidays.
         ------------       ---------------

         In the event  that where the date on which any  action  required  to be
taken, document required to be delivered or payment required to be made is not a
Business  Day,  such action,  delivery or payment need not be made on such date,
but may be made on the next succeeding Business Day.

***Confidential information omitted purusant to a request for confidential 
   treatment filed separately with the Securities and Exchange Commission.

                                       42
<PAGE>


         Section 7.09       Assignment for Security for the Certificates.
         ------------       ---------------------------------------------

         The  Servicer,  the Special  Servicer,  the  Servicing  Advisor and the
Trustee  understand that the Depositor will assign to the Trustee all its right,
title and interest to this Agreement.  The Servicer,  the Special Servicer,  the
Servicing  Advisor and the Trustee  consent to such assignment and further agree
that all representations,  warranties, covenants and agreements of the Servicer,
the Special  Servicer,  and the Servicing  Advisor made herein shall also be for
the benefit of and inure to the Trustee and all Certificateholders.

         Section 7.10      No Servicing Assignment.
         ------------      ------------------------

         Notwithstanding  anything to the contrary  contained herein,  except as
provided in Sections  5.02 and 5.04,  this  Agreement may not be assigned by the
Depositor,  the Servicer,  the Special Servicer or the Servicing Advisor without
the prior written consent of the Controlling Holders.

         Section 7.11      Notifications.
         ------------      --------------

         Notwithstanding  any  provision  to  the  contrary  contained  in  this
Agreement, all reports, notices, consents and communications which are required,
by the terms of this Agreement, to be delivered by the  Certificateholders,  the
Certificateholder  Agent or the Directing Holders to the Trustee, as the context
requires, shall be required to be delivered to the Trustee in writing.

         Section 7.12      Successor Servicer.
         ------------      -------------------

         (a)  Notwithstanding  anything  contained  in  this  Agreement  to  the
contrary, any Successor Servicer shall promptly after it assumes the role obtain
state and federal  qualifications,  licenses and franchises  necessary for it to
perform its servicing responsibilities under this Agreement.

         (b)  Notwithstanding  anything  contained  in  this  Agreement  to  the
contrary,  the  Successor  Servicer  shall  only  be  required  to  perform  its
obligations  in the time and manner set forth in this  Agreement  if, and to the
extent,  any  information  which is required to be  delivered  to the  Successor
Servicer or any  information  on which the  Successor  Servicer is authorized to
rely on, is delivered to the Successor Servicer in accordance with provisions of
this  Agreement;  provided that nothing in this clause (b) shall be construed to
                  --------
relieve the Successor  Servicer of its  obligations  under this Agreement if the
failure  appropriately  to  deliver  or  provide  any  such  information  to the
Successor Servicer is remedied.


                                       43
<PAGE>



         IN WITNESS WHEREOF, the Depositor,  the Servicer, the Special Servicer,
the  Servicing  Advisor and the Trustee  have caused this  Agreement  to be duly
executed by their respective  officers  thereunto duly authorized as of the date
and year first above written.

                                
                                MANUFACTURERS AND TRADERS TRUST 
                                COMPANY, as Trustee

                                By:     /S/ Russell T. Whitley        
                                -------------------------------- 
                                Name:    Russell T. Whitley
                                Title:   Assistant Vice President


                                ALLEGIANCE CAPITAL, LLC,
                                Special Servicer
                                   
                                By:      /s/ Alan B. Perper        
                                -------------------------------- 
                                Name:   Alan B. Perper
                                Title:  President

                                POINT WEST CAPITAL CORPORATION, as Servicer


                                By:     /s/ Alan B. Perper        
                                -------------------------------- 
                                Name:   Alan B. Perper
                                Title:  President

                                ***
                                Servicing Advisor

                                By:     /s/ ***        
                                -------------------------------- 
                                Name:   ***
                                Title:  President


                                ALLEGIANCE FUNDING CORP. I,
                                Depositor


                                By:     /s/ Alan B. Perper        
                                -------------------------------- 
                                Name:   Alan B. Perper
                                Title:  President


***Confidential information omitted purusant to a request for confidential 
   treatment filed separately with the Securities and Exchange Commission.