TRUST AGREEMENT


                                      among


                           ALLEGIANCE FUNDING CORP. I
                                (the "Depositor")

                     MANUFACTURERS AND TRADERS TRUST COMPANY
                                 (the "Trustee")

                                       and

                         POINT WEST CAPITAL CORPORATION
                                (the "Servicer")



================================================================================

                           Dated as of August 1, 1998


<PAGE>



                                                        
<TABLE>
<CAPTION>

                                                  TABLE OF CONTENTS
                                                  -----------------
                                                                                                               
<S>                        <C>                                                                                 <C>    
                                                                                                               Page   
ARTICLE ONE
DEFINITIONS

Section 1.01               Definitions............................................................................2
Section 1.02               Certain Rules of Construction.........................................................17
Section 1.03               Certain Calculations..................................................................17

ARTICLE TWO
THE CERTIFICATES

Section 2.01               Form Generally........................................................................18
Section 2.02               Series; Denomination..................................................................18
Section 2.03               Formation, Execution, Authentication, Delivery and Dating.............................19
Section 2.04               Temporary Certificates................................................................19
Section 2.05               Registration, Registration of Transfer and Exchange...................................20
Section 2.06               Limitation on Transfer and Exchange...................................................21
Section 2.07               Mutilated, Destroyed, Lost or Stolen Certificate......................................22
Section 2.08               Payment of Principal and Interest.....................................................22
Section 2.09               Persons Deemed Owner..................................................................24
Section 2.10               Cancellation..........................................................................24
Section 2.11               Tax Treatment.........................................................................25

ARTICLE THREE
ISSUANCE OF CERTIFICATES; SUBSTITUTIONS OF COLLATERAL

Section 3.01               Conditions to Initial Issuance of Certificates........................................26
Section 3.02               Issuances of Additional Series of Certificates........................................27
Section 3.03               Perfection of Transfer................................................................28
Section 3.04               Substitution and Repurchase of Loan Assets............................................29
Section 3.05               Releases..............................................................................30
Section 3.06               Trust Estate..........................................................................30
Section 3.07               Notice of Release.....................................................................30
Section 3.08               Nature of Transfer....................................................................31

ARTICLE FOUR 
FUNDINGS

Section 4.01               General...............................................................................32
Section 4.02               Funding Amounts.......................................................................32
Section 4.03               Procedures for Obtaining Fundings Under a Revolving Series............................32
Section 4.04               Procedures for Obtaining Fundings Under Term Certificates.............................33
Section 4.05               Obligation of Certificateholders to Make Fundings.....................................33
Section 4.06               Delivery of Loan Files................................................................35

                                       i
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                                                                                                                Page  

ARTICLE FIVE
ACCOUNTS, ALLOCATIONS AND DISTRIBUTIONS

Section 5.01               Collections; Collection Account.......................................................36
Section 5.02               Distributions; Distribution Account...................................................38
Section 5.03               Reserve Account.......................................................................38
Section 5.04               Reports by Trustee to Certificateholders..............................................40

ARTICLE SIX
DEFAULTS AND REMEDIES

Section 6.01               Depositor Events of Default...........................................................41
Section 6.02               Remedies..............................................................................42

ARTICLE SEVEN
THE TRUSTEE

Section 7.01               Certain Duties and Responsibilities...................................................43
Section 7.02               Notice of Default and Other Events....................................................44
Section 7.03               Certain Rights of Trustee.............................................................44
Section 7.04               Not Responsible for Recitals or Issuance of Certificates..............................45
Section 7.05               May Hold Certificates.................................................................46
Section 7.06               Money Held in Trust...................................................................46
Section 7.07               Compensation and Reimbursement........................................................46
Section 7.08               Corporate Trustee Required; Eligibility...............................................46
Section 7.09               Resignation and Removal; Appointment of Successor.....................................47
Section 7.10               Acceptance of Appointment by Successor................................................47
Section 7.11               Merger, Conversion, Consolidation or Succession to Business of Trustee................48
Section 7.12               Co-Trustees and Separate Trustees.....................................................48
Section 7.13               Rights with Respect to the Servicer...................................................49
Section 7.14               Trustee to Hold Loans.................................................................49
Section 7.15               Unclaimed Monies Held for Certificate Payments........................................49
Section 7.16               Swap Agreements.......................................................................50

ARTICLE EIGHT
REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 8.01               Representations and Warranties of the Depositor.......................................51
Section 8.02               Covenants of the Depositor............................................................52
Section 8.03               Other Matters as to the Depositor.....................................................56
Section 8.04               Representations and Warranties of the Trustee.........................................56

                                       ii
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                                                                                                              Page         

ARTICLE NINE
AMENDMENTS

Section 9.01               Amendments without Consent of Certificateholders......................................58
Section 9.02               Amendments and Modifications to Agreement with Consent of
                           Certificateholder.................................................................... 58
Section 9.03               Execution of Amendments...............................................................60
Section 9.04               Effect of Amendments..................................................................60
Section 9.05               Reference in Certificates to Amendments...............................................60

ARTICLE TEN
TERMINATION AND DISCHARGE

Section 10.01              Termination of Trust; Satisfaction and Discharge of Agreement.........................61
Section 10.02              Optional Termination..................................................................61

ARTICLE ELEVEN
PROVISIONS OF GENERAL APPLICATION

Section 11.01              General Provisions....................................................................62
Section 11.02              Acts of Certificateholders............................................................62
Section 11.03              Notices, etc., to Trustee, Depositor, Servicer........................................62
Section 11.04              Notices to Certificateholders; Waiver.................................................63
Section 11.05              Effect of Headings and Table of Contents..............................................64
Section 11.06              Successors and Assigns................................................................64
Section 11.07              Separability..........................................................................64
Section 11.08              Benefits of Agreement.................................................................64
Section 11.09              Legal Holidays........................................................................64
Section 11.10              Governing Law.........................................................................64
Section 11.11              Counterparts..........................................................................64
Section 11.12              Corporate Obligation..................................................................64
Section 11.13              Compliance Certificates and Opinions..................................................65

                                                     EXHIBITS
<FN>


A                 Form of Escrow Instructions
B                 Form of Investment and Assumption Letter
C                 Form of AFI Certificate
D                 Form of Funding Report

</FN>

</TABLE>

                                      iii

<PAGE>


         This TRUST AGREEMENT (this "Agreement"), dated as of August 1, 1998, is
              ---------------
entered into among  Allegiance  Funding  Corp.  I, a Delaware  corporation  (the
"Depositor"),  Manufacturers  and  Traders  Trust  Company,  a New York  banking
corporation,  as trustee (the "Trustee"),  and Point West Capital Corporation, a
Delaware corporation, as servicer (the "Servicer").

                              PRELIMINARY STATEMENT
                              ---------------------

         The  Depositor  is  conveying  assets  to  the  Trustee  and  has  duly
authorized  the  execution  and  delivery of this  Agreement  to provide for the
formation  of a trust  to be  known  as  "Allegiance  Capital  Trust  I" and the
issuance  of the  Certificates  issuable  as  provided  in this  Agreement.  All
covenants and agreements  made by the Depositor,  the Trustee,  and the Servicer
herein are for the benefit and security of the Holders of the Certificates.  The
Depositor,  the Trustee and the Servicer are entering into this  Agreement,  and
the  Trustee is  accepting  the trusts  created  hereby,  for good and  valuable
consideration, the receipt and sufficiency of which are hereby acknowledged.

         All things  necessary to make this  Agreement a valid  agreement of the
Depositor,  the Trustee and the Servicer in accordance  with its terms have been
done.

                                CONVEYANCE CLAUSE
                                ------------------

         The Depositor  does hereby  transfer,  assign,  set over, and otherwise
convey  to  the  Trustee,  for  the  ratable  benefit  of  the  Holders  of  the
Certificates,  all of the Depositor's  rights,  title and interest in and to the
following and any and all benefits  accruing to the Depositor  from (but none of
the  obligations  under):  (a) the Loans and all  payments  received  on or with
respect  to the Loans and due after  their  applicable  Cut-Off  Dates;  (b) the
Depositor's  rights and interests in the Loan Collateral;  (c) any rights of the
Depositor  under  each  Insurance  Policy  related  to the  Loans  or  the  Loan
Collateral  and Insurance  Proceeds;  (d) the Loan  Acquisition  Agreement,  the
Servicing  Agreement and any other Transaction  Documents to which the Depositor
is a party;  (e) all  amounts  from time to time on  deposit  in the  Collection
Account and the Reserve  Account  (including any Eligible  Investments and other
property  in such  accounts);  (f) the  Loan  Files;  and  (g)  proceeds  of the
foregoing (including all cash proceeds,  accounts,  accounts receivable,  notes,
drafts,  acceptances,   chattel  paper,  checks,  deposit  accounts,   insurance
proceeds,  condemnation  awards,  rights to payment of any and every  kind,  and
other forms of obligations and  receivables  which at any time constitute all or
part or are  included  in the  proceeds of any of the  foregoing),  in each case
whether now owned or hereafter acquired, (all of the foregoing being hereinafter
referred to as the "Trust Estate"). The foregoing transfer, assignment, set over
and  conveyance  does not constitute and is not intended to result in a creation
or an assumption by the Trustee or any  Certificateholder  of any  obligation of
the Depositor,  the Company, the Servicer or any other Person in connection with
the Trust Estate or under any agreement or instrument relating thereto.

         The   Trustee   acknowledges   its   acceptance   on   behalf   of  the
Certificateholders  of all  right,  title and  interest  previously  held by the
Depositor in and to the Trust Estate,  and declares that it shall  maintain such
right, title and interest in accordance with the provisions hereof and agrees to
perform  the  duties  herein  required  to the best of its  ability  so that the
interests of the Certificateholders may be adequately and effectively protected.

                                       1

<PAGE>


                                   ARTICLE ONE
                                   -----------
                                   DEFINITIONS
                                   -----------

        Section 1.01      Definitions.
        ------------      ------------

         Except as  otherwise  expressly  provided  herein or in the  applicable
Supplement,  or unless the context  otherwise  requires,  each of the  following
terms has the meaning set forth below for all purposes of this  Agreement.  Each
capitalized term used herein but not otherwise  defined has the meaning assigned
to such term in the Servicing  Agreement or the Loan Acquisition  Agreement,  as
applicable.

         "Accrual Period":  The period beginning on and including a Payment Date
(or, in the case of the Accrual Period that is applicable to an Initial  Payment
Date,  beginning on and  including the Delivery Date for such Series) and ending
on and including the day before the next Payment Date.

         "Acquisition  Date":  Any Delivery Date,  other Funding Date or date of
substitution of a Substitute Loan, as applicable.

         "Act":  With respect to any Certificateholder, the meaning specified in
Section 11.02.

         "Adjustment  Amount":  As of any date of determination and with respect
to any  Defaulted  Loan,  an amount  equal to the  valuation of the business and
assets comprising the Loan Collateral for such Defaulted Loan, as prepared by an
Independent Person; provided that in no event shall the Adjustment Amount exceed
                    --------
the Loan Balance for such Loan and provided,  further, the Adjustment Amount for
                                   ---------  -------
any Defaulted  Loan shall be zero if either (a) no such valuation has been done,
(b) the Special  Servicer  has not  received a letter of intent from a bona fide
purchaser with respect to such Loan  Collateral  within sixty (60) days from the
date such Loan became a Defaulted  Loan, or (c) such Loan Collateral is not sold
within one hundred twenty (120) days from the date of the receipt of such letter
of  intent.  Such  valuation  shall  (y) be net of  Recovery  Expenses  and  (z)
generally  be  performed  using the same methods as were used in the most recent
valuation for such Loan.

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

         "AFI  Certificate":   A  Certificate  delivered  by  the  Depositor  in
connection with a Funding, substantially in the form of Exhibit C hereto.

         "Agreement":  The  meaning  specified  in  the  introductory  paragraph
hereof,  as  supplemented  by the Supplements.

         "Available Collections": With respect to any Determination Date and the
related Payment Date, all Collections (including Reinvestment Income thereon but
excluding any Scheduled Payments due after such Determination Date) remaining in
the  Collection  Account  after  the  disbursements   provided  for  in  Section
5.01(f)(i)-(v).

         "Benefit Plan Investor": The meaning set forth in 29 C.F.R. ss 
2510.3-101.

                                       2

<PAGE>



         "Board of Directors":  The managing member,  in the case of the Special
Servicer,  and in the case of the Depositor or Servicer,  the board of directors
of such entity or any duly authorized committee of such board.

         "Board Resolution":  A copy of a resolution  certified by the secretary
or an assistant  secretary of the  Depositor or of the Servicer (or the managing
member,  in the case of the Special  Servicer)  to have been duly adopted by its
Board  of  Directors  and to be in full  force  and  effect  on the date of such
certification and delivered to the Trustee.

         "Business  Day":  Any day other than a  Saturday,  a Sunday or a day on
which member banks in the federal  reserve system,  banking  institutions in New
York City, London (solely for purposes of determining LIBOR Rate) or in the city
in which the principal place of business of the Depositor or the Servicer or the
Corporate  Trust  Office of the  Trustee  under this  Agreement  is located  are
authorized or obligated by law or executive order to close.

         "Certificate" or  "Certificates":  Any one or collectively,  all of the
Certificates  of any Series or Class, as is consistent with the context in which
such term is used.

         "Certificateholder" or "Holder": The Person in whose name a Certificate
is registered in the Certificate Register.

         "Certificateholder  Agent":  The  agent  for the  Holders  of the Rated
Certificates,  which shall be with respect to any Revolving Series,  each of ***
and  ***  provided  that,  to  the  extent  that  any  party  receives   written
          --------
instructions from both ***and *** which are  contradictory or incompatible,  the
instruction of *** shall control;  and with respect to any Term Series,  each
of *** and ***,  provided  that, to the extent that any party  receives  written
                 --------
instructions from both *** and *** which are contradictory or incompatible,  the
instruction of *** shall control.

         "Certificate  Interest  Rate":  The per annum  rate,  whether  fixed or
periodically  reset,  at  which  interest  shall  accrue  on a  Certificate,  as
specified in such Certificate and in the applicable Supplement.

         "Certificate  Prepayment Fee Amount": As of any Determination Date, the
sum for each Loan prepaid in the related Due Period of the following amounts (a)
50% of the Loan  Prepayment  Fee collected  with respect to such Loan until such
amount equals 1.5% of the Prepaid  Principal  Amount for such Loan, plus (b) 80%
of the amount of the Loan Prepayment Fee collected with respect to such Loan, if
any, in excess of 3% of the Prepaid Principal Amount for such Loan.

         "Certificate  Purchase Agreement":  Each Certificate Purchase Agreement
between the Depositor and one or more purchasers of Certificates.

         "Certificate  Register" and  "Certificate  Registrar":  The  respective
meanings specified in Section 2.05.

         "Class":  With  respect to each  Series of  Certificates,  the  various
classes of  Certificates  that are specified in the  Supplement for such Series,
each such Class having the specific  terms  identified in this  Agreement and in
the related Supplement.



***Confidential information omitted purusant to a request for confidential 
   treatment filed separately with the Securities and Exchange Commission.
                                     
                                        3

<PAGE>



         "Class D Percentage": The ratio of (a) the Outstanding Principal Amount
of the Class D  Certificates  of a Term  Series  less all  Realized  Losses  and
Valuation  Reductions to the extent not yet  distributed  to the Holders of such
Certificates  or set aside in the  Reserve  Account  with  respect  to such Term
Series to (b) the Outstanding Principal Amount of all Classes of Certificates in
such Series.

         "Code":  The Internal Revenue Code of 1986, as amended.
         "Collection Account":  The trust account or accounts designated as such
and created and maintained pursuant to Section 5.01.

         "Collections":  All amounts  collected with respect to and all proceeds
of the Loans,  including all  Repurchase  Prices,  all Scheduled  Payments,  all
Prepayment Fee Collections,  all Guaranty Amounts,  all Insurance Proceeds,  all
Servicing Charges and all Recoveries,  but excluding collections attributable to
amounts due before the Cut-off  Date for a Loan and that  portion of a Scheduled
Payment due after the Cut-off  Date for such Loan but  attributable  to interest
accrued before the Cut-off Date.

         "Company":  The meaning specified in the Loan Acquisition Agreement.

         "Company Certificate":  The meaning specified in the Loan Acquisition 
Agreement.

         "Controlling  Holders":  The  Holders  of  not  less  than  51%  of the
Outstanding  Principal  Amount (or with  respect to any Class during the Funding
Period  applicable to such Class, the Maximum Series Amount with respect to such
Class) of the most senior Class of Certificates then Outstanding (or Classes, if
more than one Series is Outstanding).

         "Corporate Trust Office":  The principal  corporate trust office of the
Trustee at One M&T Plaza, 7th Floor,  Buffalo,  New York 14203-2399,  or at such
other  address as the Trustee may  designate  from time to time by notice to the
Certificateholders and the Depositor, or the principal corporate trust office of
any successor Trustee.

         "Coverage Ratio":  With respect to each Loan, the debt service coverage
ratio,  fixed charge coverage ratio or other similar  measure,  as defined under
the terms of such Loan (as  provided in the Standard  Forms or as was  otherwise
agreed to by the Certificateholder  Agent on the Funding Report relating to such
Loan).

         "Cut-Off Date":  With respect to any Loan, the date specified for such
Loan in the related Loan Schedule.

         "Default":  Any  occurrence  or  circumstance  which with notice or the
lapse of time or both would  become a  Depositor  Event of  Default,  a Servicer
Event of Default,  a Special  Servicer  Event of Default or a Servicing  Advisor
Event of Default.

         "Defaulted Loan": A Loan shall become a Defaulted Loan upon the earlier
of (a) the date on which such Loan has been  delinquent  for ninety (90) days or
more,  or (b) the date on which the Special  Servicer  determines  in accordance
with its customary practices that such Loan is a Defaulted Loan.

         "Delinquent Loan": As of any date of determination,  any Loan (a) as to
which all  Scheduled  Payments due  (including  any  applicable  grace period as
provided  in  the  Standard  Forms  or  as  was  otherwise   agreed  to  by  the
Certificateholder  Agent on the Funding  Report  relating to such Loan) prior to
such date have not been received in full.

                                       4

<PAGE>


         "Delivery  Date":  The date on which the  Certificates  of a Series are
first  executed,  authenticated  and  delivered,  as specified in the applicable
Supplement.
 
         "Depositor":  The Person described in the introductory paragraph hereof
and all successors and permitted assigns of such Person under this Agreement.

         "Depositor Event of Default":  The meaning specified in Section 6.01.


         "Depositor Order" and "Depositor  Request": A written order or request,
as  applicable,  signed in the name of the  Depositor by its President or a Vice
President and delivered to the Trustee.
    
         "Determination  Date":  The twelfth day of each  calendar  month (or if
such day is not a Business Day, the next succeeding Business Day).

         "Directing Holder":  The meaning specified in the Servicing Agreement.

 
         "Distribution  Account":  The trust  account or accounts  designated as
such and created and maintained pursuant to Section 5.02.

         "Dollar(s)":  Lawful money of the United States of America.

         "Due Date":  With respect to each Loan, each date on which payment is 
due thereunder.

         "Due Period":  As to any Determination Date or Payment Date, the period
beginning  on and  including  the tenth day of the prior month and ending on and
including the ninth day of the calendar month in which such  Determination  Date
or Payment Date occurs.
 
         "Eligibility Criteria":  The criteria set forth in Section 3.01(a) of 
the Loan Acquisition Agreement.

         "Eligible Investments":  Any and all of the following:

         (a)      direct  obligations of, and obligations  fully  guaranteed by,
                  the United States of America, or any agency or instrumentality
                  of the United States of America the  obligations  of which are
                  backed by the full faith and  credit of the  United  States of
                  America;

         (b)      (i) demand and time deposits in,  certificates  of deposit of,
                  banker's  acceptances  issued by or federal  funds sold by any
                  depository institution or trust company (including the Trustee
                  or its agent acting in their respective commercial capacities)
                  incorporated under the laws of the United States of America or
                  any State thereof and subject to supervision  and  examination
                  by federal and/or state authorities, so long as at the time of
                  such investment or contractual  commitment  providing for such
                  investment, such depository institution or trust company has a
                  short term  unsecured  debt  rating in the  highest  available
                  ratings  categories and provided that each such investment has
                  an original  maturity of no more than 365 days;  and  provided
                  that any such  certificates  of deposit must be secured at all
                  times by  collateral  described  in  clause  (a)  above,  such
                  collateral  must be held by a third party and the Trustee must
                  have a  perfected  first  priority  security  interest in such
                  collateral,  and (ii) any  other  demand  or time  deposit  or
                  deposit  which  is  fully  insured  by  the  Federal   Deposit
                  Insurance Corporation;

                                       5

<PAGE>



         (c)      repurchase  obligations  with a term not to exceed thirty (30)
                  days with  respect  to any  security  described  in clause (a)
                  above and entered into with a depository  institution or trust
                  company (acting as a principal) rated in the highest available
                  rating  category of the Rating  Agency or, if not rated by the
                  Rating Agency,  in the highest available rating category of at
                  least  two  other  nationally   recognized   rating  agencies;
                  provided  that   collateral   transferred   pursuant  to  such
                  repurchase  obligation must be of the type described in clause
                  (a)  above and must (i) be valued  weekly  at  current  market
                  price plus accrued interest,  (ii) pursuant to such valuation,
                  equal,  at all  times,  104% of the  cash  transferred  by the
                  Trustee in exchange for such collateral and (iii) be delivered
                  to the Trustee or, if the Trustee is supplying the collateral,
                  an agent for the  Trustee,  in such a manner as to  accomplish
                  perfection  of  a  security  interest  in  the  collateral  by
                  possession of certificated securities;

         (d)      commercial  paper  having an  original  maturity  of less than
                  three  hundred   sixty-five   (365)  days  and  issued  by  an
                  institution  having a short term  unsecured debt rating of the
                  Rating Agency in the highest  available rating category at the
                  time of such investment or, if not rated by the Rating Agency,
                  in the highest available rating category of at least two other
                  nationally  recognized  rating  agencies  at the  time of such
                  investment;

         (e)      a guaranteed  investment  contract  approved in writing by the
                  Rating  Agency  and  issued by an  insurance  company or other
                  corporation  having a long term  unsecured  debt rating in the
                  highest  available rating category of the Rating Agency or, if
                  not  rated by the  Rating  Agency,  in the  highest  available
                  rating  category of at least two other  nationally  recognized
                  rating agencies;

         (f)      money market funds registered under the Investment Company Act
                  of 1940,  as amended,  whose shares are  registered  under the
                  Securities  Act of 1933,  and who have  ratings in the highest
                  available rating  categories of the Rating Agency,  or, if not
                  rated by the Rating Agency,  in the highest  available  rating
                  category of at least two other  nationally  recognized  rating
                  agencies,  and who, at the time of such investment invest only
                  in other  Eligible  Investments;  any such money  market funds
                  which provide for demand  withdrawals  shall  conclusively  be
                  deemed  to  satisfy  any  maturity  requirement  for  Eligible
                  Investments set forth in this Agreement; and

         (g)      any other investment  approved in writing by the Rating Agency
                  and the Certificateholder Agent.


The Trustee may purchase from or sell to itself or an Affiliate, as principal or
agent, the Eligible  Investments listed above. All Eligible Investments shall be
made in the name of the Trustee for the benefit of the Certificateholders.

         "Eligible Loan": The meaning specified in the Loan Acquisition 
Agreement.

         "ERISA":  The  Employee  Retirement  Income  Security  Act of 1974,  
as amended or any  successor  statute thereto.

         "Escrow  Instructions":  With respect to any Loan,  the related  escrow
instructions, if any, that are substantially in the form of Exhibit A, with such
changes  as the  Certificateholder  Agent  shall  approve  or  shall  reasonably
require,  so long as  such  escrow  instructions  are not  subsequently  changed
without the prior written consent of the Certificateholder Agent.


                                       6

<PAGE>


         "Existing Indebtedness":  The meaning specified in the Loan Acquisition
Agreement.

         "Final Due Date":  With respect to each Loan, the final Due Date 
thereunder.

         "Final Payment Date": With respect to any Certificate of a Series,  the
date on which the final principal payment on such Certificate is made as therein
or herein provided, whether at the Series Termination Date or otherwise.

         "First Period  Interest":  With respect to any Funding that occurs on a
day other than the first day of an  Accrual  Period,  the  amounts,  if any,  of
interest that will accrue on the related  Funding Amount for each Class,  at the
applicable  Certificate Interest Rate,  commencing on and including such Funding
Date and ending on and  including  the last day of the  Accrual  Period in which
such Funding occurs.

         "Funded Loan":  A Loan acquired by the Depositor on a Funding Date.

         "Funding":  Any  extension of credit by any  Class or  Series of  
Certificateholders  in  accordance  with Article Four.

         "Funding  Amount":  As of any Funding Date,  an amount equal to the
aggregate  Loan Balance of the related Funding Group.

         "Funding  Date": A day  designated by the Depositor in accordance  with
the terms of this  Agreement  on which it will  obtain a Funding,  which date is
either the fifteenth or last day of a month; provided that if such date is not a
Business Day, then the Funding Date shall be the next succeeding Business Day.

         "Funding Group":  A pool of Loans to be funded on a Delivery Date or 
subsequent Funding Date.

         "Funding Period": For each Series, the period of time commencing on the
Delivery Date for such Series and ending on the applicable  Funding  Termination
Date.

         "Funding Report":  A report substantially in the form of Exhibit D here
to.

         "Funding  Termination Date": With respect to each Series and each Class
within such Series,  the earlier of (a) the Scheduled Funding  Termination Date,
and (b) the day of the occurrence of a Funding  Termination Event for such Class
or Series.

         "Funding  Termination  Event":  For each  Series of  Certificates,  the
events specified in the related Supplement.

         "Guaranty Amounts":  Any and all amounts paid by any guarantor or
pledgor with respect to a Loan.

         "Holder" or "Certificateholder": The person in whose name a Certificate
is registered in the Certificate Register.

         "Independent":  When used with  respect  to any  specified  Person  and
except as otherwise  defined in the Servicing  Agreement with respect to a Loan,
means  such a  Person,  who (a) is in fact  independent  of the  Depositor,  the
Servicer, the Special Servicer, the Servicing Advisor and their Affiliates,  (b)
does not have any direct financial  interest or any material indirect  financial
interest in the Depositor,  the Servicer,  the Special  Servicer,  the Servicing
Advisor and their  Affiliates and (c) is not connected  with the Depositor,  the


                                       7

<PAGE>



Servicer, the Special Servicer, the Servicing Advisor and their Affiliates as an
officer, employee, promoter, advisor, consultant, underwriter, trustee, partner,
director, or person performing similar functions. Whenever it is herein provided
that any Independent  Person's opinion or certificate  shall be furnished to the
Trustee,  such Person shall be appointed by a Depositor  Order  delivered to the
Trustee and the  Certificateholder  Agent, and such opinion or certificate shall
state  that the  signer  has  read  this  definition  and  that  the  signer  is
Independent within the meaning hereof.

         "Independent  Accountants":  Any firm of Independent  certified  public
accountants of recognized national standing.

         "Initial Class D Percentage":  The ratio of the  Outstanding  Principal
Amount of the Class D Certificates  of a Term Series as of the Delivery Date for
such Series to the Maximum Series Amount for all Classes of Certificates in such
Series.

         "Initial  Delivery  Date":  The  date on  which  the  first  Series  of
Certificates are executed, authenticated and delivered.

         "Initial Funding Amount":  With respect to each Series of Certificates,
as defined in the related Supplement.

         "Initial Payment Date":  With respect to each Series, as defined in the
related Supplement.

         "Insurance Policy": With respect to any Loan Collateral and the related
Loan, any insurance policy maintained by or on behalf of the Obligor pursuant to
the related Loan that covers  physical  damage to the Loan Collateral or general
liability  (including policies procured by the Company or the Servicer on behalf
of the Obligor).

         "Insurance  Proceeds":  With respect to an item of Loan  Collateral and
the related Loan, any amount  received during the related Due Period pursuant to
an Insurance  Policy issued with respect to such Loan Collateral and the related
Loan and not required to be held in trust or released to the related  Obligor or
guarantor or otherwise  applied under the terms of the related Loan,  net of any
costs of collecting such amounts not otherwise reimbursed.

         "Insurer":  Any insurance company or other insurer providing any 
Insurance Policy.

         "Interest  Collections":  As of any Determination Date, all Collections
attributable  to interest on the Loans accrued before the end of the related Due
Period.

         "Investment and Assumption Letter": The letter required to be delivered
by each transferee of a Certificate,  as provided in Section 2.06, substantially
in the form of Exhibit B hereto.

         "LIBOR Rate":  For each Series, the meaning, if any, specified in the 
applicable Supplement.

         "Lien":  The meaning specified in the Loan Acquisition Agreement.

         "Liquidated Loan":  The meaning specified in the Servicing Agreement.

         "Loan": Any loan that is (a) originated or purchased by the Company and
(b) is identified on the Loan Schedule and, in accordance with the terms of this
Agreement,  has become part of the Trust Estate;  



                                       8


<PAGE>

provided that, from and after the date on which a Loan is  repurchased,  removed
--------
or substituted by the Company or the Depositor in accordance  with Section 3.04,
such  repurchased,  removed or replaced Loan shall no longer constitute a "Loan"
for purposes of the Transaction Documents.

         "Loan Acquisition Agreement":  The Loan Acquisition Agreement, dated as
of August 1, 1998, entered into between the Depositor and the Company.

         "Loan Assets":  The meaning specified in the Loan Acquisition Agreement

         "Loan Balance":  As of any date of determination,  the principal amount
of such  Loan as of its  Cut-Off  Date,  minus  the  sum of (a) the  portion  of
Scheduled  Payments and any  prepayments  allocable  to principal  paid by or on
behalf of the related Obligor, (b) the amount of Recoveries,  Insurance Proceeds
or  other  Collections  allocable  to  principal,  and  (c) the  portion  of the
Repurchase Price allocable to principal and deposited in the Collection Account,
each as received  from such Loan's  Cut-Off Date to the close of business on the
last day of the Due  Period  (or,  prior  to the end of the  first  Due  Period,
calculated  as of the  close of  business  on the day  immediately  prior to the
Cut-Off  Date);  provided  that the Loan Balance of a  Liquidated  Loan shall be
                 --------
zero.

         "Loan Collateral":  The meaning specified in the Loan Acquisition
 Agreement.

         "Loan File":  The meaning specified in the Loan Acquisition Agreement.

         "Loan Pool":  The Loans in the aggregate.

         "Loan  Prepayment Fee": For any Loan, the fee, if any, that is due from
the Obligor upon prepayment of the Loan.

         "Loan  Schedule":  As the  context  requires:  (a) the  list  of  Loans
attached to an AFI Certificate  delivered to the Trustee on an Acquisition Date,
each of  which  shall  include  with  respect  to the  Loans  thereon  as of the
Acquisition  Date thereof:  (i) a number  identifying the Loan, (ii) the initial
and remaining Loan Balance, (iii) the Obligor's name, (iv) the Obligor's billing
address, (v) origination date, maturity date, and initial payment date, (vi) the
original  and  remaining  months to maturity  of the Loan,  (vii) the amount and
frequency of the Scheduled  Payments,  (viii) the amount of the final  Scheduled
Payment  (if  different),  (ix) the  Cut-Off  Date,  (x) the coupon  rate and if
applicable the reset index,  frequency and margin,  (xi) the  prepayment  terms,
(xii) the debt service or fixed charge coverage ratio,  (xiii) the loan-to-value
ratio, and (xiv) the name and address of each collateral  business,  the type of
business  and whether the related loan is secured by a fee interest or leasehold
interest in realty; and (b) the aggregate of all Loan Schedules.

         "Lockbox Account":  The meaning specified in the Servicing Agreement.

         "London  Banking Day": Any day on which dealings in deposits in Dollars
are transacted in the London interbank market.

         "Maximum  Series  Amount":  For each  Series and Class of  Certificates
within such Series, as defined in the related Supplement.

         "Minimum  Funding  Amount":  For each Series and Class of  Certificates
within such Series, the meaning specified in the related Supplement.

                                       9

<PAGE>


         "Obligor":  The borrower  under each Loan,  including  any guarantor of
such borrower, and their respective successors and assigns.

         "Officer's  Certificate":  A certificate  signed by the Chairman of the
Board,  the President,  a Vice  President,  the Treasurer,  the  Controller,  an
Assistant  Controller  or the  Secretary  of the  company  on whose  behalf  the
certificate is delivered,  and delivered to the Trustee, which certificate shall
comply with the  applicable  requirements  of Section  11.13.  Unless  otherwise
specified,  any reference in this Agreement to an Officer's Certificate shall be
to an Officer's Certificate of the Depositor.

         "Opinion of Counsel": A written opinion of outside counsel who shall be
reasonably  satisfactory  to the Trustee and which opinion shall comply with the
applicable  requirements of Section 11.13 and shall be acceptable as to form and
substance to the Trustee.

         "Outstanding":  With  respect  to  Certificates,  as  of  any  date  of
determination,  all Certificates  theretofore  authenticated and delivered under
this Agreement except:

         (a)      Certificates previously canceled by the  Certificate Registrar
                  or delivered to the Certificate Registrar for cancellation; 
                  and

         (b)      Certificates  in  exchange  for  or in  lieu  of  which  other
                  Certificates have been authenticated and delivered pursuant to
                  this  Agreement,  unless proof  satisfactory to the Trustee is
                  presented that any such  Certificates  are held by a bona fide
                  purchaser;

provided that, in determining  whether the Holders of the requisite  Outstanding
--------
Principal Amount of Certificates have given any request, demand,  authorization,
direction,  notice,  consent  or  waiver  hereunder,  Certificates  owned by the
Depositor or any other  obligor upon the  Certificates  or any  Affiliate of the
Depositor or the Servicer or such other obligor shall be disregarded  and deemed
not to be outstanding,  except that, in determining whether the Trustee shall be
protected in relying upon any such request,  demand,  authorization,  direction,
notice,  consent,  or waiver, only Certificates which the Trustee knows to be so
owned shall be so disregarded.

         "Outstanding   Principal  Amount":  With  respect  to  any  Outstanding
Certificate or Class of Certificates as of any date of determination, the unpaid
principal amount of such Certificate or Class of Certificates.

         "Overall Substitution/Repurchase Limitation":  10% of the Pool Balance 
as of its highest level.

         "Overdue  Payment":  With  respect to a Due Period and a Loan that is a
Delinquent  Loan,  all  payments  due in a prior Due  Period  that the  Servicer
receives  from or on behalf of a Obligor  during the  related Due Period on such
Delinquent Loan, including any Servicing Charges.

         "Paying Agent":  The Trustee or any other Person approved by the 
Certificateholder Agent.

         "Payment  Date":  For each Series,  the 15th day of each calendar month
(or if such  day is not a  Business  Day,  the  next  succeeding  Business  Day)
commencing on the Initial Payment Date for such Series.

         "Pending Credit Schedule":The meaning specified in the Loan Acquisition
Agreement.

                                       10
<PAGE>

         "Person":  Any  individual,  corporation,   partnership,   association,
joint-stock company, limited liability company, trust (including any beneficiary
thereof),  unincorporated  organization or government or any agency or political
subdivision thereof.

         "Pool Balance":  As of any date of determination, the sum of all Loan 
Balances.

         "Pool  Criteria":   The  meaning  specified  in  the  Loan  Acquisition
Agreement.

         "Pool Performance  Condition":  Shall be deemed satisfied if, as of the
applicable  Determination Date, each of the following tests is met: (a) the Loan
Balance of any  Liquidated  Loan has been either paid to  Certificateholders  or
allocated to reduce the Outstanding  Principal Amount of Certificates other than
Rated  Certificates;  (b) no  Loan  is  classified  as a  Delinquent  Loan  or a
Defaulted Loan unless an amount equal to all Valuation  Reductions  with respect
to each such Loan has been deposited into the Reserve  Account or distributed to
Certificateholders;  (c) not more than the lesser of three (3) loans and 8.0% of
the Pool  Balance is  attributable  to Loans  which are not  Defaulted  Loans or
Delinquent  Loans but whose Coverage  Ratio is below the minimum  required under
their  terms;  (d) not more  than the  lesser of five (5) loans and 16.0% of the
Pool Balance is attributable to Loans classified as  Underperforming  Loans; (e)
with  respect  to  Term  Series  Outstanding,  if any,  the  sum of the  Class D
Percentages  for all  Series  is not less  than the sum of the  Initial  Class D
Percentages  for all  Series,  or the  Rating  Agency has  confirmed  all of the
initial  ratings on all Rated  Certificates;  (f) with respect to all  Revolving
Series  Outstanding,  the Class D-R  Outstanding  Principal  Amount has not been
reduced by losses and is not less than the amount  required by the Rating Agency
from time to time,  pursuant to the applicable  Supplement;  and (g) the Reserve
Account balance is at least equal to the Reserve Account Required Balance.

         "Prepaid Principal Amount":  For each Due Period, all amounts allocable
to  principal  that are  received in respect of any Loan for which  either (i) a
Loan  Prepayment  Fee is due or (ii) the  Repurchase  Price is received and such
Repurchase Price includes an amount attributable to clause (c) of the definition
of Repurchase Price.

         "Prepayment Fee  Collections":  For each Due Period, an amount equal to
the sum of (a) all Collections attributable to Loan Prepayment Fees plus (b) all
amounts received in respect of clause (c) of the definition of Repurchase Price.

         "Principal Collections":  As of any Determination Date, all Collections
attributable  to  principal on the Loans due prior to the end of the related Due
Period.

         "Principal Distribution Amount": For any Payment Date, the sum, for all
Loans,  of (a) the  principal  component of all Scheduled  Payments,  (b) to the
extent not included in the preceding clause, the portion of the Repurchase Price
allocable to principal for any Loan which was purchased or repurchased  from the
Trust  Estate  during the related Due Period,  (c) to the extent not included in
the  preceding  clauses,  the amount of any  Valuation  Reduction  determined or
Realized Losses incurred during the preceding Due Period,  (d) to the extent not
included in the preceding clauses, the amount of any prepayments received during
the  preceding  Due Period and (e) to the extent not  included in the  preceding
clauses (a) through  (d),  any such  amounts  with respect to a prior Due Period
that have not previously been distributed.

         "Proceeding":  Any suit in equity, action at law or other judicial or 
administrative proceeding.

         "Qualified Institutional Buyer":  Any "qualified institutional buyer" 
as defined in 17 CFR 230.144A.

                                       11

<PAGE>

         "Rated Certificates": Any Class of Certificates bearing a credit rating
at issuance from the Rating Agency.

         "Rating Agency":  Duff & Phelps Credit Rating Co., and any legal 
successor thereto.

         "Realized Loss": As of any  Determination  Date, with respect to a Loan
designated as a Liquidated Loan during the preceding Due Period,  an amount (not
less  than  zero)  equal  to (a)  the  Loan  Balance  of  such  Loan  on the day
immediately  prior to it becoming a Liquidated Loan, plus (b) accrued and unpaid
interest thereon to such  Determination Dat, minus (c) all Recoveries in respect
of such Liquidated Loan that the Servicer has (in accordance with the definition
of  "Liquidated  Loan"  contained in the  Servicing  Agreement)  identified  and
reasonably  expects to receive  within  thirty (30) days from the date such Loan
became a Liquidated Loan.

         "Record  Date":  The  close of  business  on the last day of the  month
preceding the  applicable  Payment Date,  whether or not a Business Day,  except
with respect to an Initial  Payment  Date,  the Record Date shall be the related
Delivery Date.

         "Recoveries":  For any Due Period occurring after the date on which any
Loan  becomes a Defaulted  Loan and with  respect to such  Defaulted  Loan,  all
payments that the Servicer or Special  Servicer  received from or on behalf of a
Obligor during such Due Period in respect of such Defaulted  Loan, from the sale
of such  Defaulted  Loan,  or from  liquidation  or leasing of the related  Loan
Collateral,  including Scheduled Payments,  Overdue Payments,  Guaranty Amounts,
and Insurance Proceeds.

         "Recovery Expenses":  The meaning specified in the Servicing Agreement.

         "Reference  Banks":   Unless  otherwise  specified  in  the  applicable
Supplement,  four leading  banks  selected by the  Servicer  that are engaged in
transactions in eurodollar  deposits in the international  eurocurrency  market,
each of which shall have an established place of business in London.

         "Registered  Holder":  The Person whose name appears on the Certificate
Register on the applicable Record Date.

         "Reinvestment Income":  Any interest or other earnings earned on all or
part of the Trust Estate.

         "Report":  The meaning specified in the Servicing Agreement.

         "Repossessed Collateral":  The meaning specified in the Servicing 
Agreement.

         "Repurchase Price": With respect to any Loan repurchased by the Company
pursuant to Sections 2.06 or 3.03 of the Loan  Acquisition  Agreement or removed
by the Depositor  pursuant to Section  3.04(d) or Section 10.02,  the sum of the
following: (a) the excess of the Loan Balance (computed without giving effect to
clause  (c) and the  provisos  to the  definition  of "Loan  Balance"  contained
therein)  of the  related  Loan  on the  Determination  Date  on or  immediately
preceding the date when the Loan is removed or repurchased over the Loan Balance
of the Substitute Loan(s), if any,  substituted  therefore;  (b) any accrued but
unpaid  interest  thereon at the interest rate specified in the Loan through the
date of repurchase and (without duplication) any unreimbursed  advances; and (c)
other than in connection  with a  determination  of the  Repurchase  Price under
Section  10.02,  if the Loan  Balance  of the Loan (or  portion  thereof)  being
repurchased or removed,  together with the Loan Balance of all Loans  previously
repurchased  or removed,  exceeds 5.0% of the initial Loan Balances of all loans
transferred  by  the  Company  to  the  Depositor  under  

                                       12

<PAGE>

the Loan Acquisition Agreement,  then an amount equal to the Loan Prepayment Fee
which would be due if the Loan were being prepaid rather than repurchased.

         "Request for Release of Documents": The meaning specified in the
Servicing Agreement.

         "Required  Prepayment Fee Deposit":  As of any  Determination  Date for
which Prepayment Fee Collections were received during the related Due Period, an
amount equal to the lesser of (a) before  giving  effect to any deposits to, and
withdrawals  from,  the Reserve  Account on such  Determination  Date, an amount
sufficient  to bring the  Reserve  Account  balance  up to the  Reserve  Account
Required Balance, and (b) the Residual Prepayment Fee Amount.

         "Reserve Account": The trust account or accounts created and maintained
pursuant to Section 5.03.

         "Reserve Account Floor Amount":  $250,000.00.

         "Reserve Account Required Balance": As of any date of determination, an
amount  equal to the sum of: (a) the  greater of (i) the product of 1.0% and the
Pool Balance and (ii) the Reserve Account Floor Amount;  plus (b) the sum of (i)
the  product of 5.0% and the sum of the Loan  Balances of each Loan other than a
Delinquent Loan or Defaulted Loan whose Coverage Ratio is less than the Coverage
Ratio required  under its terms,  and (ii) the product of 5.0% and the excess of
(A) the sum of the  Loan  Balances  of each  Underperforming  Loan  over (B) the
product of 5.0% and the Pool Balance.

         "Reserve Withdrawals":  Amounts withdrawn from the Reserve Account
pursuant to Section 5.03(d)(i).

         "Reset  Date":  For each  Series,  except  otherwise  specified  in the
related  Supplement,  (a) with  respect  to First  Period  Interest,  the second
Business Day preceding a Funding Date, (b) with respect to the LIBOR Rate (other
than the  calculation of the LIBOR Rate with respect to First Period  Interest),
the second Business Day immediately  preceding the  commencement of each Accrual
Period for interest paid on any Payment Date;  provided that if such date is not
                                               --------
both a Business Day and a London  Banking Day, the Reset Date shall be the first
preceding day that is both a Business Day and a London Banking Day.

         "Residual Prepayment Fee Amount": As of any Determination Date, the sum
for each Loan prepaid in the related Due Period of the following amounts (a) 50%
of the Loan Prepayment Fee collected with respect to such Loan until such amount
equals 1.5% of the Prepaid  Principal  Amount for such Loan, plus (b) 20% of the
amount of the Loan  Prepayment  Fee collected with respect to such Loan, if any,
in excess of 3% of the Prepaid Principal Amount for such Loan.

         "Responsible  Officer":  When used with  respect  to the  Trustee,  any
officer  assigned to the  Corporate  Trust  Office (or any  successor  thereto),
including any Vice  President,  senior trust officer,  trust officer,  assistant
trust officer, any assistant  secretary,  any trust officer or any other Officer
of the Trustee  customarily  performing  functions similar to those performed by
any of the above designated  officers and having direct  responsibility  for the
administration of this Agreement, and also, with respect to a particular matter,
any other  officer,  to whom such matter is referred  because of such  officer's
knowledge of and familiarity with the particular subject.

         "Revolving  Certificates":   Any  Certificates  of  a  Series  that  is
designated as a Revolving Series in the Supplement for such Series.


                                       13

<PAGE>


         "Revolving Series":  Any Series denominated as such in the Supplement 
for such Series.

         "Scheduled  Distributions":  With respect to all Series and any Payment
Date,  the sum of (a)  interest  accrued  and payable on all  outstanding  Rated
Certificates on such date,  including  interest accrued in prior Due Periods but
unpaid, (b) the aggregate Principal  Distribution Amount payable on such date on
all  outstanding  Rated  Certificates,  and (c) the sum of all  prior  Principal
Distribution Amounts, if any, from prior Payment Dates not yet paid.

         "Scheduled  Expenses":  On any Determination Date, the Trustee Fee, the
Servicer Fee, the Special Servicer Fee and the Servicing  Advisor Fee due on the
related Payment Date.

         "Scheduled Funding  Termination Date": For each Series of Certificates,
the date specified in the related Supplement.

         "Scheduled Maturity": With respect to any Series, the meaning set forth
in the applicable Supplement.

         "Scheduled  Payment":  With respect to a Payment Date and any Loan, the
periodic  payment  (inclusive  of any amounts in respect of stated  interest but
exclusive of any Servicing  Charges or impound amounts) due with respect to such
Loan in the related Due Period.

         "Series": Each series of Revolving or Term Certificates issued pursuant
to this Agreement and a common  Supplement,  bearing the same Series designation
and which may be comprised of multiple Classes of Certificates.

         "Series Collections":  With respect to any Series and any Payment Date,
an amount equal to the Available  Collections  allocated to such Series pursuant
to Section 5.01(e), as otherwise adjusted pursuant to Section 5.01(f)(vi).

         "Series  Percentage":  With respect to any Series and any Determination
Date, a fraction the numerator of which is the Series  Principal  Amount and the
denominator of which is the aggregate  Series  Principal  Amounts for all Series
then Outstanding.

         "Series  Principal  Amount":   With  respect  to  any  Series  and  any
Determination   Date,  the  aggregate   Outstanding   Principal  Amount  of  all
Certificates of such Series immediately  following the preceding Payment Date or
Funding Date, whichever is later.

         "Series  Termination Date": With respect to any Series of Certificates,
the date specified in the applicable Supplement.

         "Servicer":  The meaning specified in the Servicing Agreement.

         "Servicer Event of Default":  The meaning specified in Section 6.01(a) 
of the Servicing Agreement.

         "Servicer  Fee": With respect to each Loan and for any Payment Date, an
amount per Due Period equal to (a) the product of (i)  one-twelfth  of 0.20% and
(ii)  (A) if the  Loan  became a Funded  Loan  prior to the  Determination  Date
occurring in the month  preceding  such Payment  Date,  the Loan Balance of such
loan as of the Determination  Date occurring in the month preceding such Payment
Date, otherwise (B) (1) the Loan Balance of such Loan as of the date it became a
Funded Loan times (2) a fraction,  the  numerator of 

                                       14
<PAGE>


which is the number of days from the date the Loan became a Funded Loan  through
the last day of the Due Period in which such Loan became a Funded Loan,  and the
denominator of which is thirty (30), minus (b) the Trustee Fee.

         "Servicer Report":  The meaning specified in the Servicing Agreement.

         "Servicer Termination Notice": The meaning specified in Section 6.01(b)
of the Servicing Agreement.

         "Servicing Advisor":  The meaning specified in the Servicing Agreement.

         "Servicing Advisor Fee": The meaning specified in the Servicing
Agreement.

         "Servicing Agreement":  The Servicing Agreement,  dated as of August 1,
1998, entered into among the Servicer, the Depositor,  the Special Servicer, the
Servicing Advisor and the Trustee.

         "Servicing  Charges":  The sum of (a) all late payment  charges paid by
Obligors  on Loans  that  are  Delinquent  Loans  after  payment  in full of any
Scheduled  Payments  due in a prior Due Period and  Scheduled  Payments  for the
related Due Period and (b) any other incidental  charges or fees received from a
Obligor, including assumption fees, other late fees, collection fees and bounced
check charges.

         "Servicing Officers":  The meaning specified in the Servicing Agreement

         "Special Servicer":  The meaning specified in the Servicing Agreement.

         "Special  Servicer Fee":  With respect to each Loan and for any Payment
Date,  an amount per Due Period equal to (a) the product of (i)  one-twelfth  of
0.20% and (ii) (A) if the Loan became a Funded  Loan prior to the  Determination
Date  occurring in the month  preceding  such Payment Date,  the Loan Balance of
such Loan as of the  Determination  Date  occurring in the month  preceding such
Payment Date,  otherwise (B) (1) the Loan Balance of such Loan as of the date it
became a Funded Loan times (2) a fraction,  the numerator of which is the number
of days from the date the Loan became a Funded Loan  through the last day of the
Due Period in which such Loan became a Funded Loan, and the denominator of which
is thirty (30), minus (b) the Servicing Advisor Fee.

         "Special Servicer Report":  The meaning specified in the Servicing 
Agreement.

         ***

         "State":  Any state of the United States of America and, in addition, 
the District of Columbia.

         "Substitute Loan":  The meaning specified in the Loan Acquisition 
Agreement.

         "Supplement": With respect to each Series of Certificates, a supplement
to this Agreement setting forth the terms of the various Classes of Certificates
comprising such Series, as provided in Section 2.02.

         "Swap  Agreement":  With  respect  to any Series of  Certificates,  the
meaning set forth in the applicable Supplement.

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

                                       15

<PAGE>



         "Swap Payments": With respect to each Due Period, the payments that are
required  to be made to or from  the  Trust  under  any Swap  Agreement  then in
effect.

         "Term  Certificates":  Any  Certificates of a Series that is designated
as a Term Series in the Supplement for such Series.

         "Term Series":  Any Series designated as such in the Supplement for
such Series.

         "Transaction  Documents":  This Agreement, the Servicing Agreement, the
Loan  Acquisition  Agreement,  the  Certificates  and the  Certificate  Purchase
Agreements.

         "Transaction   Documents   Date":   With  respect  to  each  Series  of
Certificates, the meaning specified in the applicable Supplement.

         "Transition  Costs": Any documented  expenses  reasonably incurred by a
Successor  Servicer or the Trustee in  connection  with a transfer of  servicing
from the  Servicer,  Special  Servicer  or  Servicing  Advisor,  pursuant to the
Servicing  Agreement,  but  not to  exceed  $25,000  in the  aggregate  for  any
particular transfer.

         "Trust":  Allegiance Capital Trust I, being the trust created hereunder

         "Trust Estate":  The meaning specified in the Conveyance Clause of this
 Agreement.

         "Trustee":  Manufacturers and Traders Trust Company, a New York banking
corporation,  until a successor Person shall have become the Trustee pursuant to
the applicable provisions of this Agreement, and thereafter "Trustee" shall mean
such successor Person.

         "Trustee Fee": The fee payable to the Trustee in consideration  for the
Trustee's performance of its duties as trustee pursuant to this Agreement, which
fee  shall be  nonrefundable  as to the  current  year and shall be  payable  in
advance as follows:  (a) $7,500,  payable by the Depositor to the Trustee on the
initial Funding Date; and (b) $615, deposited on each Payment Date thereafter.

         "UCC":  The Uniform Commercial Code in effect in the applicable
jurisdiction.

         "Underperforming  Loan": As of any  Determination  Date, a Loan that is
not a Defaulted Loan or a Delinquent  Loan and that has a Coverage Ratio of less
than ***.

         "Valuation Reduction": With respect to any Defaulted Loan that is not a
Liquidated Loan and with respect to which an updated Valuation has been prepared
in accordance with Section 3.12(f) of the Servicing  Agreement,  an amount equal
to the excess of (a) the sum, as of the  beginning of the Due Period in which an
updated  Valuation  is received  with  respect to such Loan in  accordance  with
Section 3.12(f) of the Servicing Agreement, (i) the Loan Balance of such Loan as
of the  beginning  of the  related  Due  Period,  plus,  (ii) to the  extent not
previously advanced by the Servicer or the Special Servicer, all unpaid interest
on such Loan at a per annum rate equal to the applicable  interest  rate,  (iii)
any  unreimbursed  advances  and (iv) all  currently  due but unpaid real estate
taxes and assessments,  insurance  premiums and, if applicable,  ground rents in
respect of the related Loan Collateral or Repossessed Collateral over (b) 80% of
the Valuation of the Loan  Collateral or  Repossessed  Collateral  securing such
Loan as per such updated Valuation.

         "Vice  President":  With respect to the  Depositor or the Trustee,  any
vice  president,  whether or not designated by a number or a word or words added
before or after the title "vice president."
         
***Confidential information omitted purusant to a request for confidential 
   treatment filed separately with the Securities and Exchange Commission.

                                       16

<PAGE>


         "Workout Fee":  The meaning specified in the Servicing Agreement.

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

         Unless the context of this Agreement or any Supplement 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  or  such  Supplement  (as  applicable)  as a  whole  and  not  to any
particular  provision  hereof;  and (f) article,  section,  subsection,  clause,
exhibit,  and schedule  references are to this Agreement or such  Supplement (as
applicable).  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  or any
Supplement.  All exhibits and schedules attached hereto are incorporated  herein
by this reference.  Any reference  herein to this Agreement or in any Supplement
or  any  other  agreement,   document,  or  instrument  includes  all  permitted
alterations,  amendments,  changes,  extensions,  modifications,   renewals,  or
supplements thereto or thereof, as applicable.

         Section 1.03      Certain Calculations.
         ------------      ---------------------

         For purposes of this Agreement and unless the context of this Agreement
clearly requires otherwise:

         (a) All  calculations of interest on the  Certificates and of Scheduled
Expenses  shall be made on the basis of a year of three hundred sixty (360) days
consisting of twelve (12), thirty (30) day months.  All calculations of interest
with  respect  to any Loan  shall be made in  accordance  with the  terms of the
related Note and  Mortgage  or, if such  documents do not specify the basis upon
which interest  accrues  thereon,  on the basis of a year of three hundred sixty
(360) days consisting of twelve (12), thirty (30) day months.

         (b) Subject to Section  1.03(c),  all  Recoveries  in respect of a Loan
shall be applied as follows:  (i) first,  to the  reimbursement  of any Recovery
Expenses with respect to such Loan; (ii) second, to past due Scheduled Payments;
(iii)  third,  to the  Scheduled  Payment  due in the Due  Period in which  such
Recoveries are received;  (iv) fourth, as a principal  prepayment on the related
Loan; (v) fifth,  to the applicable Loan Prepayment Fee, if any, and (vi) sixth,
to the Obligor, as required by law or the terms of the related Loan.

         (c)  Notwithstanding  acceleration  or  foreclosure of any Loan and the
repossession of the related Loan Collateral and the  cancellation of the related
Loan, such Loan shall (for purposes of all calculations hereunder) be considered
to be a Loan  held in the  Trust  Estate  until  such  time as such  Loan or the
related Repossessed Collateral is sold by the Trust Estate.  Consistent with the
foregoing,  for purposes of all calculations  hereunder, so long as such Loan is
considered  to be a Loan held in the Trust  Estate,  it shall be  assumed  that,
notwithstanding  that the indebtedness  evidenced by the related Note shall have
been  discharged,  such Note shall  remain  outstanding  and,  for  purposes  of
determining  the Loan Balance  thereof and in connection with the calculation of
any servicing compensation,  the interest rate and related amortization schedule
in effect at the time of any such  acquisition  of title shall  remain in effect
(except  that such  schedule  shall be adjusted to reflect  the  application  of
Recoveries  in  the  manner  set  forth  in  Section  1.03(b)  or  1.03(c),   as
applicable).

                                       17

<PAGE>


                                   ARTICLE TWO
                                   -----------
                                THE CERTIFICATES
                                ----------------

         Section 2.01      Form Generally.
         ------------      --------------

         Each Class of Certificates and the certificates of authentication shall
be in  substantially  the form set forth in the applicable  Supplement,  in each
case  with  such  appropriate  insertions,  omissions,  substitutions  and other
variations  as are required or permitted  by this  Agreement,  and may have such
letters,   numbers  or  other  marks  of  identification  and  such  legends  or
endorsements placed thereon, as may, consistently herewith, be determined by the
officers  executing such  Certificates,  as evidenced by their  execution of the
Certificates.

         The   definitive   Certificates   shall   be   typewritten,    printed,
lithographed,  or engraved or produced by any  combination  of these  methods on
steel  engraved  borders  or may be  produced  in any manner  acceptable  to the
Trustee and the initial purchasers of the Certificates, all as determined by the
officers  executing such  Certificates,  as evidenced by their execution of such
Certificates.

         Section 2.02      Series; Denomination.
         ------------      ---------------------

         (a) This  Agreement  provides for the issuance from time to time of one
or more Series of  Certificates,  designated  as either a Revolving  Series or a
Term Series,  each subject to and in accordance with the terms of this Agreement
and the applicable  Supplement.  Each Series of Certificates shall have multiple
Classes and, to the extent provided in the applicable  Supplement,  sub-Classes.
Certificates  in  a  Revolving  Series  may  be  designated  in  the  applicable
Supplement as Class A-R, Class B-R, Class C-R or Class D-R, and  Certificates in
a Term Series may be  designated  as Class A, Class B, Class C, Class D or Class
R. Each Certificate in a Series shall bear upon the face thereof the designation
selected for the Series and Class (and  sub-Class,  if  applicable)  to which it
belongs.

         (b) Each Class of Certificates issued under this Agreement shall in all
respects  represent a fractional  undivided  interest in the Trust  Estate,  and
shall be  entitled  to the  benefits  hereof  without  preference,  priority  or
distinction  on  account  of the  actual  time or  times of  authentication  and
delivery,  except as  otherwise  provided in this  Agreement  or the  applicable
Supplement.  As and to the  extent  set forth in the  priority  of  payments  in
Section  5.02(b)  and the  Supplements,  the  rights of the  Holders  of certain
Classes of Certificates  to receive  payments of interest and principal shall be
subordinated  to  the  rights  of  the  Holders  of  certain  other  Classes  of
Certificates to receive such payments.

         (c) The  Supplement  with  regard  to a Series  of  Certificates  shall
establish,  without limitation, the following terms and provisions of each Class
of Certificates  of such Series,  each of which the Depositor shall determine in
authorizing the issuance of any Series:

                   (i)     designation of the Series and the Classes of 
          Certificates within such Series;

                  (ii)     the applicable  Delivery Date,  Initial  Funding
          Amount,  Initial Payment Date, Minimum Funding Amount, and Transaction
          Documents Date;

                 (iii) the maximum aggregate principal amount of Certificates of
         each Class of such  Series  that may be issued,  including  the Maximum
         Series Amount;


                                       18

<PAGE>



                  (iv)  the   Certificate   Interest  Rate  for  each  Class  of
     Certificates in such Series;

                   (v)     the Series Termination Date for each Class of
     Certificates in such Series; and

                  (vi) the priority of payments for the Distribution Account for
     such Series.

         (d) The aggregate  principal  amount of  Certificates  of each Class of
each Series which may be authenticated  and delivered under this Agreement shall
be  the  Maximum  Series  Amount,  except  for  Certificates  authenticated  and
delivered upon  registration  of transfer or in exchange for or in lieu of other
Certificates  pursuant to Sections 2.04, 2.05, 2.07 or 9.05. Except as specified
in the related Supplement, the Certificates shall be issuable only as registered
Certificates  without  coupons in  denominations  of at least  $250,000  and any
amount in excess  thereof;  provided  that the  foregoing  shall not restrict or
prevent  the  transfer  in  accordance  with  Sections  2.05  and  2.06  of  any
Certificate with a remaining Outstanding Principal Amount of less than $250,000.

         Section 2.03      Formation, Execution, Authentication, Delivery and
         ------------      ---------------------------------------------------
Dating
------

         (a) By its  conveyance  of the Trust Estate to the Trustee as set forth
in the Conveyance Clause hereof,  the Depositor hereby  establishes the Trust in
exchange  for the  Depositor's  rights to  receive  payments  hereunder.  On the
Initial  Delivery Date and from time to time thereafter,  Certificates  shall be
issued in accordance with the terms hereof by the Trust and authenticated by the
Trustee upon the written order of the Depositor.

         (b) The  Certificates  shall be executed on behalf of the  Depositor by
its President or one of its Vice  Presidents  under its corporate seal imprinted
or  otherwise  reproduced  thereon.  The  signature  of  these  officers  on the
Certificates must be manual.

         (c) Certificates  bearing the manual signatures of individuals who were
at any time the proper  officers  of the  Depositor  shall  bind the  Depositor,
notwithstanding  that such  individuals  or any of them have ceased to hold such
offices prior to the  authentication or delivery of such Certificates or did not
hold offices at the date of authentication or delivery of such Certificates.

         (d) Each  Certificate  shall bear on its face the  applicable  Delivery
Date and be dated as of the date of its authentication.

         (e) No  Certificate  shall  be  entitled  to  any  benefit  under  this
Agreement or be valid or  obligatory  for any purpose,  unless there  appears on
such  Certificate  a certificate  of  authentication  substantially  in the form
provided  for herein  executed by the Trustee by the manual  signature of one of
its authorized  officers,  and such  certificate  upon any Certificate  shall be
conclusive evidence, and the only evidence,  that such Certificate has been duly
authenticated and delivered hereunder.

         Section 2.04      Temporary Certificates.
         ------------      -----------------------

         Pending the preparation of definitive  Certificates,  the Depositor may
execute,  and upon Depositor Order, the Trustee shall  authenticate and deliver,
temporary   Certificates   which   are   printed,   lithographed,   typewritten,
mimeographed or otherwise  produced,  in any  denomination,  containing the same
terms and representing the same rights as the definitive Certificates in lieu of
which they are issued.

                                       19

<PAGE>


         If  temporary   Certificates  are  issued,  the  Depositor  will  cause
definitive  Certificates to be prepared without  unreasonable  delay.  After the
preparation  of definitive  Certificates,  the temporary  Certificates  shall be
exchangeable  for  definitive  Certificates  upon  surrender  of  the  temporary
Certificates  at the  office or  agency of the  Depositor  to be  maintained  as
provided in Section  8.02(l),  without charge to the Holder.  Upon surrender for
cancellation  of any one or more  temporary  Certificates,  the Depositor  shall
execute and the Trustee shall  authenticate and deliver in exchange therefor one
or more definitive  Certificates of any authorized  denominations  and of a like
initial  aggregate  principal  amount  and  Series  Termination  Date.  Until so
exchanged,  the temporary  Certificates shall in all respects be entitled to the
same benefits under this Agreement as definitive Certificates.

         Section 2.05      Registration, Registration of Transfer and Exchange.
         ------------      ----------------------------------------------------

         (a) The  Depositor  shall cause to be kept at an office or agency to be
maintained by the Depositor in accordance  with Section  8.02(l) a register (the
"Certificate Register"),  in which, subject to such reasonable regulations as it
may prescribe,  the Depositor shall provide for the registration of Certificates
and the  registration  of  transfers  of  Certificates.  The  Trustee  is hereby
appointed  "Certificate  Registrar" for the purpose of registering  Certificates
and transfers of  Certificates  as herein  provided.  The Trustee shall have the
right to examine the  Certificate  Register at all reasonable  times and to rely
conclusively upon a Certificate of the Certificate Registrar as to the names and
addresses  of the  Holders of the  Certificates  and the  principal  amounts and
numbers of such Certificates as held.

         (b) Upon surrender for  registration  of transfer of any Certificate at
the office or agency of the  Depositor to be  maintained  as provided in Section
8.02(l) and subject to the  conditions  set forth in Section 2.06, the Depositor
shall execute,  and the Trustee or its agent shall authenticate and deliver,  in
the  name  of  the  designated  transferee  or  transferees,  one  or  more  new
Certificates of any authorized  denominations and of a like aggregate  principal
amount, Class, Series and Series Termination Date.

         (c) At the  option  of the  Holder,  Certificates  of a  Series  may be
exchanged for other Certificates of such Series of any authorized  denominations
and of a like aggregate principal amount, Class and Series Termination Date upon
surrender of the Certificates to be exchanged at such office or agency. Whenever
any Certificates  are so surrendered for exchange,  the Depositor shall execute,
and the Trustee or its agent shall  authenticate  and deliver,  the Certificates
which the Certificateholder making the exchange is entitled to receive.

         (d) All  Certificates  issued  upon any  registration  of  transfer  or
exchange  of  Certificates  shall be entitled  to the same  benefits  under this
Agreement,  as the  Certificates  surrendered  upon  such  registration  of such
transfer or exchange.

         (e) Every  Certificate  presented or surrendered  for  registration  of
transfer or exchange  shall (if so required by the Depositor or the  Certificate
Registrar)  be duly  endorsed  or be  accompanied  by a  written  instrument  of
transfer in form  reasonably  satisfactory  to the Depositor and the Certificate
Registrar duly executed by the Holder thereof or his attorney duly authorized in
writing.

         (f) No service charge shall be made to a Holder for any registration of
transfer or exchange of Certificates, but the Depositor may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection  with any  registration  of transfer or exchange of  Certificates,
other than exchanges  pursuant to Section 2.04 or Section 9.05 not involving any
registration of transfer.

                                       20

<PAGE>


         Section 2.06      Limitation on Transfer and Exchange.
         ------------      ------------------------------------

         (a) The  Certificates  have not been  registered or qualified under the
Securities  Act of 1933, as amended (the "1933 Act") or the  securities  laws of
any state. No transfer of any Certificate  shall be made unless that transfer is
made in a transaction which does not require registration or qualification under
the 1933 Act or under  applicable  state  securities  or "Blue Sky" laws. In the
event that a transfer is to be made without registration or qualification,  such
Certificateholder's  prospective  transferee shall (i) deliver to the Trustee an
Investment  and  Assumption  Letter and (ii) if the Trustee deems  necessary (in
other than a transfer  under Rule  144A),  deliver to the  Trustee an opinion of
counsel  that the  transfer is exempt from such  registration  or  qualification
(which  opinion shall not be at the expense of the Depositor,  the Trustee,  the
Servicer  or the  Trust  Estate).  Neither  the  Depositor  nor the  Trustee  is
obligated  to  register or qualify  the  Certificates  under the 1933 Act or any
other  securities  law. Any such Holder  desiring to effect such transfer shall,
and does hereby agree to,  indemnify the Trustee and the  Depositor  against any
liability,  cost or expense  (including  attorneys' fees) that may result if the
transfer  is not so exempt or is not made in  accordance  with such  federal and
state laws. The Trustee shall promptly,  after receipt of such information as is
set  forth  in the next  succeeding  sentence,  furnish  to any  Holder,  or any
prospective  owner  designated  by a  Holder,  the  information  required  to be
delivered to Holders and  prospective  owners of Certificates in connection with
resales of the Certificates to permit  compliance with Rule 144A of the 1933 Act
in  connection  with such  resales.  Such  information  shall be provided to the
Trustee by the Servicer.

         (b) No acquisition or transfer of a Certificate or any interest therein
may be made to any  Benefit  Plan  Investor  or to any Person who is directly or
indirectly  purchasing such Certificates or an interest therein on behalf of, as
named  fiduciary  of, as  trustee  of, or with  assets of,  such a Benefit  Plan
Investor  unless the Trustee is provided with evidence that  establishes  to the
satisfaction of the Trustee that either no "prohibited  transaction" under ERISA
or the Code  will  occur in  connection  with  such  prospective  acquiror's  or
transferee's acquisition and holding of the Certificates or that the acquisition
and holding of the  Certificates by such  prospective  acquiror or transferee is
subject to a statutory or administrative exemption.

         (c) Except as otherwise provided in the applicable Certificate Purchase
Agreement,  no acquisition or transfer of a Certificate or any interest  therein
may be made during such  Certificate's  Funding Period without the prior written
consent of the Depositor.

         (d) In addition,  no transfer of a Certificate shall be permitted,  and
no such transfer shall be registered by the Trustee or the Certificate Registrar
on the Certificate Register,  or shall be effective hereunder,  if such transfer
or the registration of such transfer would cause the Trust to have,  directly or
indirectly,  more than 98  Certificateholders  at any time. The Servicer  hereby
agrees to  determine  at least  annually  the number of  Certificateholders  and
promptly  notify the Trustee of the  restriction  in this  subsection (c) if the
number of beneficial  owners exceeds  seventy-five.  The Trustee  further agrees
that it shall not participate in the establishment of an "established securities
market" (within the meaning of section 1.7704-1(b) of the Treasury  Regulations)
or a  "secondary  market or the  substantial  equivalent  thereof"  (within  the
meaning of section 1.7704-1(c) of the Treasury Regulations), or the inclusion of
any of the  Certificates in such a market,  nor shall it permit the registration
or listing of any Certificate on any such market.

         (e) The  Trustee  shall have no  liability  to the Trust  Estate or any
Certificateholder  arising from a transfer of any such  Certificate  in reliance
upon a certification described in this Section 2.06.

                                       21

<PAGE>

         Section 2.07      Mutilated, Destroyed, Lost or Stolen Certificat.
         ------------      ------------------------------------------------

         If (a) any mutilated  Certificate  is  surrendered  to the  Certificate
Registrar,  or  the  Trustee  receives  evidence  to  its  satisfaction  of  the
destruction,  loss or theft of any Certificate  (which evidence shall be, in the
case  of  a  Qualified   Institutional   Buyer,   notice  from  such   Qualified
Institutional  Buyer of such  ownership  and such loss,  theft,  destruction  or
mutilation),  and (b) in the case of any such destruction,  loss or theft, there
is delivered to the Trustee such security or indemnity as may be required by the
Trustee to save the Depositor,  the Trustee or any agent of any of them harmless
(provided  that,  if the Holder of the  Certificate  is, or is a nominee  for, a
 --------
Qualified  Institutional  Buyer, then such Qualified  Institutional  Buyer's own
unsecured  agreement of indemnity  shall be deemed to be  satisfactory  for such
purpose),  then,  in the absence of notice to the  Depositor or the  Certificate
Registrar that such Certificate has been acquired by a bona fide purchaser,  the
Depositor  shall execute and, upon its request,  the Trustee shall  authenticate
and deliver, in exchange for or in lieu of any such mutilated,  destroyed,  lost
or stolen  Certificate,  a new  Certificate  of the same tenor,  Series,  Class,
initial  principal  amount and  Series  Termination  Date,  bearing a number not
contemporaneously  outstanding. If after the delivery of such new Certificate, a
bona  fide  purchaser  of the  original  Certificate  in lieu of which  such new
Certificate  was issued  presents for payment  such  original  Certificate,  the
Depositor and the Trustee shall be entitled to recover such new Certificate from
the person to whom it was  delivered or any person  taking  therefrom,  except a
bona fide  purchaser,  and shall be  entitled  to recover  upon the  security or
indemnity provided therefor to the extent of any loss, damage,  cost or expenses
incurred  by the  Depositor  or the  Trustee  or any  agent  of any of  them  in
connection  therewith.  If  any  such  mutilated,   destroyed,  lost  or  stolen
Certificate  shall have become or shall be about to become due and  payable,  or
shall  have  become  subject  to  redemption  in full,  instead of issuing a new
Certificate,  the Depositor may pay such Certificate  without surrender thereof,
except that any mutilated Certificate shall be surrendered.

         No service  charge  shall be made to a Holder for any  registration  of
transfer,  exchange or issuance of  Certificates,  but the Depositor may require
payment of a sum sufficient to cover any tax or other  governmental  charge that
may be imposed in connection  with any  registration  of transfer or exchange of
Certificates,  other than exchanges pursuant to Section 2.04 or Section 9.05 not
involving any registration of transfer.

         Every new Certificate  issued pursuant to this Section 2.07, in lieu of
any  destroyed,  lost  or  stolen  Certificate,  shall  constitute  an  original
additional  contractual  obligation  of  the  Depositor,   whether  or  not  the
destroyed,  lost or  stolen  Certificate  shall  be at any time  enforceable  by
anyone,  and shall be entitled to all the benefits of this Agreement equally and
proportionately with any and all other Certificates duly issued hereunder.

         The provisions of this Section are exclusive and shall preclude (to the
maximum  extent  permitted by law) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Certificates.

         Section 2.08      Payment of Principal and Interest.
         ------------      ----------------------------------

         (a) Each Certificate  shall bear interest during each Accrual Period at
the  Certificate  Interest  Rate  applicable  to such  Class  and  Series on the
Outstanding  Principal  Amount of such  Certificate  (as of the first day of the
Accrual  Period)  until and including the last day preceding the Payment Date on
which its Outstanding  Principal Amount has been reduced to zero, and, if and to
the extent specifically provided for in the related Supplement and to the extent
that the payment of such interest shall be legally  enforceable,  on any overdue
installment of interest from the date such interest became due until fully paid.
Unless  otherwise  specified in the related  Supplement,  such interest shall be
calculated on the basis of a three  hundred  sixty 

                                       22

<PAGE>


(360) day year  consisting  of twelve  (12)  months  of thirty  (30) days  each.
Interest  shall be payable in arrears on each  Payment  Date.  On any Reset Date
preceding any Accrual Period or Delivery Date, the Servicer shall  determine the
changes, if any, applicable to the Certificate  Interest Rates and will promptly
provide notice by 11:00 a.m. local time (of the Servicer) of such  determination
to the Holders of Certificates and the Trustee.

         In addition to the foregoing,  with respect to any Funding occurring in
any Accrual Period since the preceding Payment Date, the related Funding Amounts
shall  accrue  interest  from the related  Funding  Date  through the end of the
Accrual  Period in which such  Funding  occurs in the  amount of the  applicable
First Period Interest,  which interest shall be paid on the next Payment Date to
the Series and Class of  Certificates  having made such  Funding.  The  Servicer
shall  determine the First Period  Interest due on a Funding Amount based on the
rate established on the applicable Reset Date.

         Accrued but unpaid interest on a Certificate shall be paid on a Payment
Date to the extent of funds  available  to be  distributed  as  interest on such
Class in  accordance  with the  priorities  set  forth in  Article  Five and the
related Supplement.

         In making any interest payments hereunder,  if the interest calculation
with respect to a  Certificate  shall result in a portion of such payment  being
less than $0.01,  then such payment shall be decreased to the nearest whole cent
and no subsequent adjustment shall be made in respect thereof.

         (b) The principal of each Certificate  shall be payable in installments
beginning  on the Initial  Payment Date for such Series and ending no later than
the applicable  Series  Termination Date for such Series unless such Certificate
becomes due and payable at an earlier date by call for  redemption  or otherwise
under the terms of the  applicable  Supplement.  All reductions in the principal
amount of a Certificate  effected by payments of  installments of principal made
on any Payment Date shall be binding upon all future Holders of such Certificate
and of any Certificate  issued upon the  registration of transfer  thereof or in
exchange  therefor or in lieu  thereof,  whether or not such payment is noted on
such  Certificate.  Each installment of principal payable on a Certificate shall
be in an amount  equal to that  Certificate's  pro rata  share of the  Principal
Distribution  Amount for such Class and Series that is  available  to be paid in
accordance with the priorities of Article Five and the related  Supplement.  All
payments of principal with respect to the Certificates of a particular Class and
Series  shall  be made on a pro  rata  basis  based  upon  the  ratio  that  the
Outstanding Principal Amount of a Certificate bears to the Outstanding Principal
Amount of all  Certificates  of such Class and  Series;  provided  that if, as a
                                                         --------   
result of such proration,  a portion of such principal would be less than $0.01,
then such payment  shall be reduced to the nearest  whole cent and no subsequent
adjustment shall be made in respect thereof..

         In addition to the  foregoing,  on each  Payment  Date the  Certificate
Prepayment  Fee Amount  shall be  distributed  to the  Holders of any Series and
Class of Certificates then receiving a distribution of Prepaid Principal Amount,
in  the  same  proportion  as  such  Prepaid  Principal  Amount  is  then  being
distributed.  For  purposes  of  this  computation,  the  first  dollars  of the
Principal Distribution Amount for a Payment Date shall be deemed attributable to
the Prepaid  Principal Amount for such Due Period and such computation  shall be
made  after the  reallocations  provided  for in  Section  5.02(c)  hereof.  All
payments of Certificate  Prepayment Fee Amounts with respect to the Certificates
of a  particular  Class and Series  shall be made on a pro rata basis based upon
the ratio that the Outstanding  Principal  Amount of a Certificate  bears to the
Outstanding  Principal  Amount of all  Certificates  of such  Class and  Series;
provided  that if, as a result of such  proration,  a portion of such  principal
--------
would be less than  $0.01,  then such  payment  shall be reduced to the  nearest
whole cent and no subsequent adjustment shall be made in respect thereof..

                                       23

<PAGE>


         (c) Notwithstanding the foregoing, the Class R Certificates of any Term
Series shall be entitled  solely to the payment of the amounts  specified in the
related Supplement or otherwise released from the Reserve Account as provided in
Section 5.03(d).

         (d)  The  principal,  interest  and  any  other  amounts  paid  on  the
Certificates  are payable either (i) by check mailed by first-class  mail to the
Person whose name appears as the  Registered  Holder of such  Certificate on the
Certificate  Register  at the  address  of  such  Person  as it  appears  on the
Certificate Register or (ii) by wire transfer in immediately  available funds to
the account  specified  in writing to the Trustee by such  Registered  Holder at
least five  Business Days prior to the Record Date for the Payment Date on which
wire transfers  will commence,  in such coin or currency of the United States of
America as at the time of payment is legal  tender for the payment of public and
private  debts.  All  payments  on the  Certificates  shall be paid  without any
requirement of presentment.  The Depositor shall notify the Person in whose name
a  Certificate  is  registered  at the close of business on the Record Date next
preceding  the  Payment  Date on which  the  Depositor  expects  that the  final
installment  of principal of such  Certificate  will be paid that the  Depositor
expects  that such final  installment  will be paid on such Payment  Date.  Such
notice  shall be mailed no later than the tenth day prior to such  Payment  Date
and shall specify the place where such  Certificate  may be  surrendered.  Funds
representing any such checks returned  undeliverable shall be held in accordance
with Section 7.16. Each Certificateholder shall surrender its Certificate to the
Trustee within thirty (30) days after the Final Payment Date therefor;  provided
that if the  Holder of any  Certificate  is, or is a nominee  for,  a  Qualified
Institutional Buyer, then such Qualified  Institutional Buyer need not surrender
its Certificate but shall indemnify the Trustee and the Depositor for any losses
attributable to the failure to surrender such Certificate.

         (e) The  Certificates  are payable  only out of the Trust Estate and do
not  represent  recourse  obligations  of the  Depositor,  the  Servicer  or any
Affiliate thereof or any successor thereto.

         Section 2.09      Persons Deemed Owner.
         ------------      ---------------------

         Prior  to  due  presentment   for   registration  of  transfer  of  any
Certificate,  the  Depositor,  the Trustee and any agent of the Depositor or the
Trustee  shall treat the Person in whose name any  Certificate  is registered as
the owner of such Certificate for the purpose of receiving payments of principal
of and  interest  on such  Certificate  and for all other  purposes  whatsoever,
whether or not such  Certificate  be overdue,  and neither  the  Depositor,  the
Trustee  nor any agent of the  Depositor  or the  Trustee  shall be  affected by
notice to the contrary.

         Section 2.10      Cancellation.
         ------------      -------------

         All Certificates  surrendered to the Trustee for payment,  registration
of transfer or exchange (including Certificates  surrendered to any Person other
than the Trustee  which shall be  delivered  to the  Trustee)  shall be promptly
canceled by the Trustee. No Certificates shall be authenticated in lieu of or in
exchange for any Certificates  canceled as provided in this Section 2.10, except
as expressly permitted by this Agreement.  All canceled Certificates held by the
Trustee  shall be disposed of by the Trustee as is  customary  with its standard
practice.


                                       24

<PAGE>

         Section 2.11      Tax Treatment.
         ------------      --------------

         The Depositor has structured this Agreement and the  Certificates  with
the intention that the Trust formed hereby be treated as a partnership, with the
assets of the  partnership  including  all of the  assets  comprising  the Trust
Estate and the partners of the partnership being all  Certificateholders and the
Depositor.  The Depositor, the Trustee, the Servicer and each Certificateholder,
by acceptance of such Person's  Certificate (and any Person that is a beneficial
owner of any interest in a Certificate,  by virtue of such Person's  acquisition
of a beneficial interest therein) agree to report the transactions  contemplated
hereby in accordance with such stated  intentions unless and until determined to
the contrary by an applicable taxing  authority.  In connection  therewith,  the
Depositor  shall be  designated  as the "tax  matters  partner" of the Trust and
shall  be  authorized  to  maintain   capital   accounts  and  make  partnership
allocations in accordance with Section 704 of the Code, which  allocations shall
track as nearly as possible the cash  distributions  made to the various parties
hereunder.

         In no event shall the Trust,  or any party with the authority to act on
behalf  of the  Trust,  make  the  election  described  in  Treasury  Regulation
301.7701-3(a) to treat the Trust as an association  taxable as a corporation for
United States federal income tax purposes, or in any comparable state tax law.

         Section 2.12      No Petition By Certificateholders.
         ------------      ----------------------------------

         Each  Holder  of  a   Certificate,   by  acceptance  of  such  Person's
Certificate,  agrees that during the term of this Agreement and for one year and
one day after the termination  hereof, such Holder or any Affiliate thereof will
not  (without  the  consent  of  Holders  holding  at  least  51% of  all  Rated
Certificates,  by Outstanding Principal Amount) file any involuntary petition or
otherwise   institute  or  cooperate  in  the  institution  of  any  bankruptcy,
reorganization,  arrangement,  insolvency  or  liquidation  proceeding  or other
proceeding  under any  federal or state  bankruptcy  or similar  law against the
Depositor or the Trust.

                                       25


<PAGE>


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

              ISSUANCE OF CERTIFICATES; SUBSTITUTIONS OF COLLATERAL
              ------------------------------------------------------

         Section 3.01      Conditions to Initial Issuance of Certificats.
         ------------      ----------------------------------------------

         Each  Certificate  to be issued on the Initial  Delivery  Date shall be
executed by the Depositor and delivered to the Trustee for  authentication,  and
thereupon,  the same shall be  authenticated  and  delivered by the Trustee upon
Depositor Order and upon receipt by the Trustee of the following:

         (a)      a Company Certificate and an AFI Certificate with the related
Loan Schedule attached thereto;

         (b) the  original  manually  executed  counterpart  of each  Loan to be
acquired  on such date and all other items  included in the related  Loan Files,
subject to such exceptions as shall be noted in an exception report delivered in
accordance with Section 4.06, by the Trustee to the Depositor, the Servicer, the
Certificateholders  of the  Series  being  issued  on such  date and the  Rating
Agency;

         (c) a Board  Resolution of each of the  Depositor,  the  Servicer,  the
Special  Servicer,  the  Servicing  Advisor  and  the  Company  authorizing,  as
applicable, the execution, delivery and performance of the Transaction Documents
and the transactions contemplated hereby and by the other Transaction Documents,
certified  by the  Secretary or an Assistant  Secretary  of the  Depositor,  the
Servicer,  the  Special  Servicer,  the  Servicing  Advisor or the  Company,  as
applicable;

         (d) a copy of an officially certified document,  dated not more than 30
days prior to the Initial  Delivery Date,  evidencing the due  organization  and
good standing of each of the Depositor,  the Servicer, the Special Servicer, the
Servicing Advisor and the Company in their respective states of formation;

         (e) copies of the  organizational  documents of each of the  Depositor,
the  Servicer,  the Special  Servicer,  the  Servicing  Advisor and the Company,
certified by the Secretary or Managing Member, as applicable,  of the Depositor,
the Servicer, the Special Servicer, the Servicing Advisor and the Company;

         (f) (i)  evidence  of filing with the  Secretary  of State of the State
(and with the relevant  county,  if required by the applicable state law) of the
Company's chief executive office of UCC-1 financing  statements  executed by the
Company,  as debtor,  and naming the Depositor as secured party, the Trustee for
the  benefit of the  Certificateholders,  as  assignee,  and the Loan  Assets as
collateral;  (ii)  evidence of filing with the  Secretary  of State of the State
(and with the relevant  county,  if required by the applicable state law) of the
Depositor's chief executive office of UCC-1 financing statements executed by the
Depositor,   as  debtor,   and  naming  the  Trustee  for  the  benefit  of  the
Certificateholders,  as secured party,  and the Trust Estate as collateral;  and
(iii) evidence of all other filings,  recordations or other actions  required to
be made,  filed,  recorded or taken under  Section 2.06 of the Loan  Acquisition
Agreement;

         (g) certificates  listing the Servicing  Officers of the Servicer,  the
Special Servicer, and the Servicing Advisor as of the Initial Delivery Date;

         (h)  executed  copies  of each of the  Supplement  for  the  Series  of
Certificates being issued on the Initial Delivery Date, the Servicing Agreement,
the Loan Acquisition Agreement and the Swap Agreement;

                                       26

<PAGE>


         (i)  evidence  of the  deposit  by the  Depositor  into the  Collection
Account of any amounts due and paid on the Loans  since the  applicable  Cut-Off
Date;

         (j) confirmation from the Rating Agency that each Class of Certificates
in the Series  being  issued on such date has been  assigned  the credit  rating
required under the Certificate Purchase Agreements for such Series; and

         (k)  such  other   documents   as  the   Trustee  or  the   prospective
Certificateholders  of  such  Series  may  reasonably  require,  including  such
documents and opinions as are described in the applicable  Certificate  Purchase
Agreement.

         Section 3.02      Issuances of Additional Series of Certificates.
         ------------      -----------------------------------------------

         (a) Additional  Series of Revolving or Term  Certificates may be issued
in accordance with the terms of this  Agreement,  provided that no new Series of
                                                  --------
Certificates shall be issued without the consent of the Certificateholder Agent.

         (b) On or  before  the  Delivery  Date  relating  to any new  Series of
Certificates,  the  parties  hereto  shall  execute  and  deliver  a  Supplement
specifying the terms  applicable to such new Series of  Certificates.  The terms
set forth in such  Supplement may modify or amend,  subject to Article Nine, the
terms of this Agreement solely as applied to such new Series of Certificates.

         (c) Each new Series of Certificates  shall be executed by the Depositor
and delivered to the Trustee for authentication,  and thereupon,  the same shall
be  authenticated  and  delivered by the Trustee upon  Depositor  Order and upon
receipt by the Trustee of the following:

                   (i)  a Supplement  for such Series of  Certificates executed 
         by each party hereto other than  the Trustee;

                  (ii) if the  Depositor is acquiring  Loans from the Company on
         the applicable  Delivery Date,  compliance with the  requirements for a
         Funding set forth in Article IV;

                 (iii) on or before the tenth Business Day immediately preceding
         the Delivery Date for the Series to be issued (unless the parties to be
         notified  agree to a shorter time  period),  the  Depositor  shall have
         given the Trustee,  the Servicer and the Rating  Agency  notice of such
         issuance and the applicable Delivery Date;

                  (iv) the  Depositor  shall have  delivered  to the  Trustee an
         Officer's Certificate of the Depositor to the effect that such issuance
         will not result in a Default and all conditions  precedent  provided in
         this  Agreement  relating  to the  authentication  and  delivery of the
         additional  Series of  Certificates  proposed  to be  issued  have been
         complied with;

                   (v) to the extent  not  previously  filed,  (A)  evidence  of
         filing with the  Secretary of State of the State (and with the relevant
         county, if required by the applicable state law) of the Company's chief
         executive office of UCC-1 financing statements executed by the Company,
         as debtor,  and naming the Depositor as secured party,  the Trustee for
         the benefit of the  Certificateholders as assignee,  and the applicable
         Loan Assets as collateral; (B) evidence of filing with the Secretary of
         State of the State (and with the  relevant  county,  if required by the
         applicable  state law) of the  Depositor's  chief  executive  office of
         UCC-1 financing  statements  executed by the Depositor,  as 

                                       27

<PAGE>



         debtor,   and   naming   the   Trustee   for   the   benefit   of   the
         Certificateholders,   as  secured  party,   and  the  Trust  Estate  as
         collateral;  and (C)  evidence of all other  filings,  recordations  or
         other  actions  required  to be made,  filed,  recorded  or taken under
         Section 2.06 of the Loan Acquisition Agreement;

                  (vi) confirmation from the Rating Agency of the initial rating
         on each Class of Certificates in any Series then Outstanding along with
         evidence that each Class of Certificates in the Series being issued has
         been assigned the credit rating required under the Certificate Purchase
         Agreements for such Series;

                 (vii) an opinion  of counsel to the effect  that the Trust will
         not be taxable as an association or as a publicly traded partnership as
         a result of the issuance of such Series of Certificate;

                (viii)  evidence  of the  deposit  by  the  Depositor  into  the
         Collection  Account of any amounts due and paid under the Loans of such
         Series since the related Cut-Off Date; and

                  (ix)  such   other   documents,   certificates,   instruments,
         opinions,  or  other  items  as may be  required  by the  terms  of the
         Supplement  creating  such Series of  Certificates  or the  Certificate
         Purchase Agreements executed in connection therewith.

         Upon  satisfaction of the above  conditions,  the Trustee shall execute
the  Supplement  and issue and deliver to or upon the order of the Depositor the
applicable Certificates.

         Section 3.03      Perfection of Transfer.
         ------------      -----------------------
       
         (a) The Depositor  and the Company  shall file such Uniform  Commercial
Code financing  statements and assignments as are described in Sections  3.01and
3.02 in  accordance  with such  Sections  and take  such  other  actions  as are
required  (i) to perfect the sale by the Company to the  Depositor  of the Loans
and the  related  Loan  Assets,  (ii)  to  assign  to the  Trustee  all  Uniform
Commercial  Code financing  statements  perfecting the security  interest of the
Depositor (as assignee of the Company) in the related Loan Collateral,  (iii) to
perfect the first priority security interest of the Trustee in the Loans and the
related Loan Assets and (iv) to cause any related Loan Collateral (including any
Mortgages) to name the Trustee as lienholder.  From time to time thereafter, the
Servicer shall take or cause to be taken such actions and execute such documents
as are necessary to perfect and protect the Trustee's  interest in the Loans and
the Loan Collateral against all other Persons, including the filing of financing
statements,  amendments  thereto and continuation  statements,  the execution of
transfer  instruments and the making of notations on or taking possession of all
records.

         (b)  File-stamped  copies of such  Uniform  Commercial  Code  financing
statements  and  assignments  with  respect  to the Loans  shall be given to the
Trustee within ten (10) days of the Initial Delivery Date.

         (c) If any  change in either the  Company's  or the  Depositor's  name,
identity,  structure or the location of its principal place of business or chief
executive office occurs,  then the Depositor shall, or the Depositor shall cause
the Company to,  deliver thirty (30) days prior written notice of such change or
relocation to the Servicer,  the Certificateholder  Agent and the Trustee and no
later than the effective date of such change or  relocation,  the Servicer shall
file such  amendments  or  statements as may be required to preserve and protect
the Trustee's interest in the Trust Estate.

         (d) During the term of this Agreement, the Depositor shall maintain its
chief  executive  office and principal place of business in one of the States of
the United States.


                                       28

<PAGE>



         (e) The Servicer agrees to pay all reasonable  costs and  disbursements
in connection with the perfection and the maintenance of perfection,  as against
all third  parties,  of the  Trustee's  right,  title and interest in and to the
Trust Estate.

         (f) The Trustee shall hold the original manually executed  counterparts
of each Loan at its office in the State of New York,  or at any such new address
in the  State of New  York,  as the  Trustee  shall  inform  the  Servicer,  the
Depositor,  and the Certificateholders in writing from time to time. The Trustee
shall hold each Loan for the benefit of  Certificateholders,  and shall maintain
accurate records  pertaining to each Loan including a current inventory thereof.
The Trustee  may,  pursuant to a Request for Release of  Documents,  temporarily
release such Loan to the Special  Servicer,  provided that such request shall be
                                             --------
in  writing  with  an   explanation  of  the  intended  use  specified  and  the
Certificateholder  Agent  shall  receive a copy of such  Request  for Release of
Documents.  Any Loan temporarily released from the custody of the Trustee to the
Special  Servicer  or its agents  shall have  stamped on it prior to  delivery a
legend to the effect that the Loan is the property of Manufacturers  and Traders
Trust  Company,  as Trustee.  The Special  Servicer  shall hold any such Loan in
trust for the benefit of the Trustee and shall  promptly  return the Loan to the
Trustee when the need therefor no longer exists.

         Section 3.04      Substitution and Repurchase of Loan Assets.
         ------------      -------------------------------------------

         (a) If any party  hereto  obtains  knowledge  (within  the  meaning  of
Section  7.01(e)),  or discovers or is notified by the Servicer  that any of the
representations and warranties of the Company in the Loan Acquisition  Agreement
were incorrect at the time as of which such  representations and warranties were
made, then the Person discovering such defect,  omission,  or circumstance shall
promptly notify the other parties to this Agreement.

         (b) Within the time period and in the manner set forth in Section  3.03
of the Loan  Acquisition  Agreement,  the Depositor shall require the Company to
substitute  for, or  repurchase,  Loan Assets as required by Section 3.03 of the
Loan Acquisition Agreement. The proceeds of a repurchase shall be remitted by or
on behalf of the Depositor to the Collection Account in accordance with Sections
3.03 and 3.04 of the Loan Acquisition Agreement.

         (c) If the  Depositor  fails to enforce the  purchase  or  substitution
obligation  of the Company  under the Loan  Acquisition  Agreement,  the Trustee
shall, at the direction of the Controlling Holders (provided, in each case, that
                                                    --------
the  requirements  of  Section  7.03(e)  have  been  satisfied),   enforce  such
repurchase or substitution obligation for the benefit of the Certificateholders,
and the Trustee is hereby appointed  attorney-in-fact to act on behalf of and in
the name of the Depositor to require such repurchase or substitution.

         (d) With  respect  to any  Loan  that  becomes  a  Defaulted  Loan or a
Delinquent Loan, the Depositor (and if not the Depositor,  the Directing Holder)
may,  upon five (5) Business  Days notice to the Trustee,  purchase such Loan at
the  Repurchase  Price or remove such Loan from the Trust Estate and deposit the
Repurchase Price and/or deliver a Substitute Loan meeting the same  requirements
as those  specified  in  Section  3.04 of the  Loan  Acquisition  Agreement  for
substitutions  and purchases by the Company upon breaches of a representation or
warranty by the Company  thereunder;  provided that the  aggregate  Loan Balance
                                      --------
(computed  without  regard to clause (c) and the proviso to such  definition) of
such Defaulted Loans and Delinquent Loans that are substituted or removed by the
Depositor  shall be subject to the Overall  Substitution/Repurchase  Limitation;
provided  further that no substitution  or repurchase  shall be made if (i) such
-----------------
substitution or repurchase is made with any intent to hinder,  delay, or defraud
any entity to which the Company is or will become indebted;  (ii) there shall be
any reason to believe that the Company is 


                                       29

<PAGE>


insolvent  or that such  substitution  or  repurchase  will  render the  Company
insolvent on the date thereof or as a result of such substitution or repurchase;
(iii) at the time of such substitution or repurchase,  the Company is engaged in
business, or about to engage in business, for which the assets remaining with it
after the  substitution or repurchase  will be an  unreasonably  small amount of
capital; or (iv) the Company intends or believes that it will incur debts beyond
its ability to pay as such debts mature.

         (e) Any  Substitute  Loans conveyed to the Trustee shall be accompanied
by the following items:

                   (i) on or before the applicable  Acquisition  Date, a Company
         Certificate  and an  AFI  Certificate,  each  such  certificate  having
         attached thereto a Loan Schedule and subjecting such Substitute Loan to
         the  provisions  thereof  and  hereof ,  along  with a  Pending  Credit
         Schedule for such Substitute Loan; and

                  (ii) by the  time  required  in  Section  4.06,  the  original
         executed  counterpart  of the  Substitute  Loan  and  all  other  items
         included in the related Loan File.

         Section 3.05      Releases.
         ------------      --------

         (a) The  Depositor  shall be entitled to obtain a release from the lien
of this  Agreement for any Loan and the related Loan  Collateral at any time (i)
after a payment by the Company or the Depositor of the  Repurchase  Price of the
Loan or (ii)  after a  Substitute  Loan is  substituted  for such  Loan,  if the
Depositor  delivers to the Trustee an Officer's  Certificate (A) identifying the
Loan and the related Loan  Collateral to be released and  requesting the release
thereof,  (B) setting forth the amount deposited in the Collection  Account with
respect thereto or identifying the Substitute  Loan, as the case may be, and (C)
certifying  that either the amount  deposited in the  Collection  Account or the
Loan Balance of the  Substitute  Loan, as the case may be, equals the Repurchase
Price of the Loan.

         (b) Upon  satisfaction  of the conditions  specified in subsection (a),
the Trustee shall release from the lien of this Agreement and deliver to or upon
the order of the  Depositor  (or to or upon the order of the  Company  if it has
satisfied its obligations  under Section 3.04 of the Loan Acquisition  Agreement
with  respect to a Loan) the Loan and any related Loan  Collateral  described in
the Depositor's request for release.

         Section 3.06      Trust Estate.
         ------------      ------------

         The Trustee may, and when required by the  provisions of this Agreement
shall,  execute instruments to release property from the lien of this Agreement,
or  convey  the  Trustee's   interest  in  the  same,  in  a  manner  and  under
circumstances  which are not inconsistent with the provisions of this Agreement.
No party relying upon an instrument  executed by the Trustee as provided in this
Article Three shall be bound to ascertain the Trustee's authority,  inquire into
the  satisfaction  of any conditions  precedent or see to the application of any
monies.

         Section 3.07      Notice of Release.
         ------------      -----------------

         The Trustee  shall be entitled to receive at least ten (10) days notice
of any action to be taken pursuant to Section 3.05(a),  accompanied by copies of
any instruments involved.


                                       30

<PAGE>


         Section 3.08      Nature of Transfer.
         ------------      ------------------

         To the extent that the transfer of the Trust Estate from the  Depositor
to the  Trustee  is deemed to be a secured  financing,  the  Depositor  shall be
deemed  hereunder to have granted to the Trustee,  and the Depositor does hereby
grant to the Trustee, a security interest in all of the Depositor's right, title
and interest in, to and under the Trust  Estate,  whether now owned or hereafter
acquired. For purposes of such grant, this Agreement shall constitute a security
agreement under applicable law.

                                       31
<PAGE>


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

                                    FUNDINGS
                                    --------


         Section 4.01      General.
         ------------      --------

         Subject  to  satisfaction  of the  conditions  precedent  set  forth in
Section 4.03 or 4.04, as applicable,  the Depositor  shall be eligible to obtain
Fundings  under  the  Certificates  on the  Delivery  Date  for such  Series  of
Certificates and thereafter on any applicable Funding Date.

         Section 4.02      Funding Amounts.
         ------------      ----------------

         The Funding Amount for a Funding Group acquired on a Funding Date shall
be determined by the Depositor and confirmed by the Trustee (based solely on the
information contained in the Funding Report) and shall be reflected in a Funding
Report with respect to such Funding Group.  Each Funding Group shall be conveyed
to the Trust pursuant to an AFI  Certificate and the Loans in such Funding Group
shall be identified on a Loan Schedule  attached to the AFI  Certificate and the
Company  Certificate  for such Funding.  The related Loan Files shall be held by
the Trustee for the benefit of the Certificateholders as provided herein.

         Section 4.03      Procedures for Obtaining Fundings Under a Revolving 
         ------------      ---------------------------------------------------
Series.
-------

         (a)  Conditions  Precedent.  Each Funding  under a Revolving  Series is
              ----------------------
subject  to  the  satisfaction  of the  following  conditions  precedent  on the
relevant date specified below:

                   (i)  fifteen  (15) days  prior to the  Funding  Date (or such
         shorter  period of time as may be  agreed  to by the  Certificateholder
         Agent in its sole  discretion),  the Depositor shall deliver,  for each
         Loan to be funded,  (A) the  related  Pending  Credit  Schedule  to the
         Rating  Agency and the  Certificateholder  Agent,  and (B) the  related
         credit   application,   preliminary  credit   memorandum,   preliminary
         Valuation,  draft Loan Funding  Checklist  and draft  credit  agreement
         (blacklined against the Standard Form thereof) to the Certificateholder
         Agent;

                  (ii) the  Depositor  shall  deliver  to the  Certificateholder
         Agent,  as soon as  possible,  with  respect to each Loan to be funded,
         written notice of any exceptions intended to be included on the Funding
         Report  relating  to  such  Loan,   which  notice  shall  specify  with
         reasonable detail the nature of such exceptions;

                  (iii) five (5)  Business  Days prior to the  Funding  Date (or
         such   shorter   period   of   time  as  may  be   agreed   to  by  the
         Certificateholder  Agent in its sole  discretion),  the Depositor shall
         deliver,  for each Loan to be  funded,  (A) an updated  Pending  Credit
         Schedule to the Trustee,  the Rating  Agency and the  Certificateholder
         Agent, (B) a *** to the Rating Agency and the Certificateholder  Agent,
         and (C) the Valuation, a draft Funding Report, indicating the amount of
         the Funding,  the related credit  memorandum,  and drafts of all of the
         items on the Loan Funding  Checklist for such Loan (blacklined  against
         the  Standard  Forms  thereof,   to  the  extent   applicable)  to  the
         Certificateholder Agent;

                  (iv) two (2)  Business  Days  prior to the  requested  Funding
         Date, the Depositor shall deliver,  (A) with respect to each Loan to be
         funded,  the  final  Funding  Report  to  the  Rating  Agency  and  the
         Certificateholder    Agent   and   (B)   to   the   Trustee   and   the
         Certificateholder Agent, with respect

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

                                       32

<PAGE>


         to all Loans to be funded, an AFI Certificate and Company  Certificate,
         each accompanied by a copy of the applicable Loan Schedule, executed by
         the Depositor, or the Company, respectively;

                   (v) on the Funding Date,  the Depositor  shall deliver to the
         Trustee either (A) the original  manually  executed  counterpart of the
         Loans  relating  to such  Funding and the other  items  comprising  the
         related  Loan  Files  or  (B)  the  Escrow   Instructions  or  evidence
         acceptable  to the  Certificateholder  Agent  that such items have been
         obtained from the Obligor and are being held in escrow with delivery of
         the Loan Files to be made in accordance with Section 4.06;

                  (vi) (A) the  Loans in the  proposed  Funding  Group  shall be
         Eligible  Loans and shall not cause the Loan Pool to  violate  the Pool
         Criteria,  (B) after  giving  effect to such  Funding,  the  applicable
         Maximum Series Amount shall not be exceeded, and (C) if any Funded Loan
         is  subject  to  Existing  Indebtedness  the  Depositor  shall  use the
         proceeds of such Funding to repay such Existing  Indebtedness and shall
         obtain a release and  extinguishment of rights from the obligee of such
         Existing Indebtedness,  which shall include an acknowledgment that upon
         such  repayment all  obligations  owing to such obligee and relating to
         such Funded Loan have been satisfied;

                 (vii)  such  Funding  shall  occur  on  a  date  prior  to  the
         applicable Funding  Termination Date and shall be at least equal to the
         Minimum Funding Amount for Series or Class, as applicable;

                (viii) no Default  (other  than a  Servicing  Advisor  Default),
         Depositor Event of Default, Servicer Event of Default, Special Servicer
         Event of Default or Servicing  Advisor  Event of Default shall exist or
         shall result from the Funding;

                  (ix) both before and after giving effect to such Funding,  the
         Pool Performance Condition shall be met; and

                   (x)  such  other  conditions  as  may  be  specified  in  the
         applicable Supplement or related Certificate Purchase Agreement(s).

         (b) Preparation of Funding Report. In connection with each Funding, the
             -----------------------------
Depositor  shall  prepare the  Funding  Report and the Loan  Schedule  and shall
calculate the First Period  Interest with respect to each Funding  Amount.  Each
Funding Report shall be countersigned by the Certificateholder Agent to evidence
its approval of the contents thereof.

         Section 4.04      Procedures for Obtaining Fundings Under Term 
         ------------      --------------------------------------------
Certificates.
------------

         Each  Funding  under a Term  Series  shall also be based upon a Funding
Report and shall be subject to the satisfaction of the conditions precedent that
are  specified in the  applicable  Supplement  or related  Certificate  Purchase
Agreement(s) for such Series.

         Section 4.05      Obligation of Certificateholders to Make Fundings.
         ------------      --------------------------------------------------

         (a) Unless  otherwise  specified  in the related  Supplement,  upon the
issuance of each Series of Certificates and execution of a Certificate  Purchase
Agreement on the related  Delivery  Date, the initial  Certificateholders  shall
have agreed,  and by their  acquisition of any  Certificates and execution of an
Investment  and  Assumption  Letter  after the  applicable  Delivery  Date,  any
subsequent Certificateholders shall have agreed, on the terms and conditions set
forth herein, in the applicable  Supplement and the related 

                                       33


<PAGE>

Certificate  Purchase  Agreement(s)  to make  Fundings to the  Depositor  on the
Delivery Date and from time to time thereafter during the Funding Period.


         (b) On the Delivery Date for a Series, a Funding shall take place under
such Series in an aggregate amount equal to the Initial Funding Amount specified
for each Class in such Series.  All subsequent  Fundings under that Series shall
be made by each  Class  in the  proportions  and  priorities  set  forth  in the
Supplement for such Series.

         (c) Each  Class of each  Series of  Certificates  shall be issued in an
aggregate  principal  amount equal to the Maximum  Series Amount for such Class,
although at any one time the Outstanding  Principal  Amount may be less than the
Maximum  Series  Amount for such Class of such  Series.  The  Certificateholders
shall endorse on a schedule,  which shall be attached to each  Certificate,  the
date and amount of each Funding made by such  Certificateholder  with respect to
the  related  Series and the amount of each  payment  of  principal  made by the
Depositor with respect  thereto;  provided that the  Certificateholders  may, at
                                  --------
their option,  record the amount of their respective  Fundings in other internal
records rather than on such a schedule.  The  Certificateholders  are authorized
and  directed by the  Depositor  to make such  endorsements  or records but each
Certificateholder's  records  shall be  effective  only if such  records  are in
agreement with the applicable  Certificate  Register  maintained by the Trustee,
absent   manifest   error  in  such   Certificate   Register.   Failure  by  any
Certificateholders to make, or an error by any Certificateholder in making, such
endorsement  or record with respect to any Funding  shall not limit or otherwise
affect the obligations of the Depositor hereunder or under any Certificate.

         (d)  Subject  to the terms  hereof,  each  Certificateholder  will wire
directly  to the  account  specified  in the  applicable  Funding  Report on the
applicable Funding Date in immediately available funds such  Certificateholder's
allocable  share of the Funding  Amount for its Class that is  specified  in the
Funding  Report  for  such  Class  and  Series.  Each  such  Certificateholder's
allocable  share of a Funding  shall be based on a fraction,  the  numerator  of
which  shall  be  equal  to  the  maximum  principal  amount  of  such  Holder's
Certificate (as indicated on the face of such Certificate),  and the denominator
of which shall be equal to the Maximum Series Amount for such Class.

         (e) The failure of any  Certificateholder  to remit its allocable share
of any  Funding  Amount  for its Series  and Class on the  Delivery  Date or any
subsequent  Funding Date shall not relieve any other  Certificateholder  in such
Series of any  obligation  hereunder  to make its  allocable  share of a Funding
Amount   for  its   Class   and   Series  on  such   date.   Any   nondefaulting
Certificateholder  may,  but is not required to, fund the portion of the Funding
Amount  of its  respective  Class  and  Series,  not  funded  by the  defaulting
Certificateholder.  If a  nondefaulting  Certificateholder  does  not  fund  the
portion of the Funding  Amount due from the  defaulting  Certificateholder,  the
Funding  Amount and the Minimum  Funding  Amount with respect  thereto  shall be
reduced by the defaulting  Certificateholder's  allocable portion of the Funding
Amount  and  the  Depositor  shall  have  all  remedies  available  to it  under
applicable law in respect of the defaulting Certificateholder.

         (f)  Immediately  following each Funding or payment of principal on any
Series of  Certificates,  the Trustee shall make an appropriate  notation in the
applicable Certificate Register indicating the amount and date of the Funding or
payment and the unused Maximum Series Amount after giving effect to any Funding.


                                       34

<PAGE>


         Section 4.06      Delivery of Loan Files.
         ------------      -----------------------


         (a) The  Depositor  shall or shall cause the Company to comply with the
requirements  relating to Funded Loans and Substitute  Loans as set forth in the
Loan Acquisition  Agreement (including  compliance with the Eligibility Criteria
and the Pool Criteria) within the time periods set forth therein. On or prior to
any Acquisition  Date, the Depositor shall deliver to the Trustee either (i) the
final,  executed Loan File or (ii) evidence acceptable to the  Certificateholder
Agent that such  documents  are being  held in escrow  pursuant  to the  related
Escrow  Instructions,  in which  case the Loan File  shall be  delivered  to the
Trustee in accordance  with the  provisions of the Loan  Acquisition  Agreement.
Upon  receipt of a Loan  File,  the  Trustee  will  review  such files and shall
confirm,  by  execution  and  delivery  of a  certificate  of the Trustee to the
Depositor and the Certificateholder  Agent, that: (A) the Trustee has received a
Loan File for each Loan  that it is listed on the Loan  Schedule;  (B) such Loan
File  contains all of the items listed on the Loan  Funding  Checklist  for such
Loan, including original executed copies of those items required to be originals
pursuant to the Loan Funding Checklist for such Loan.

         (b) If,  upon  examination  of the Loan Files in  accordance  with this
Section,  the  Trustee  determines  that any such Loan File is  incomplete,  the
Trustee shall,  within two (2) Business Days, deliver an exception report to the
Depositor,  the  Servicer  and  the  Certificateholder  Agent  by  telephone  or
telecopy.

         (c) Within thirty (30) days after each  Acquisition  Date,  the Trustee
shall  review  any  exception  report  delivered  pursuant  to  Section  7.14 in
connection  with the related Loan Files and shall verify that it has  possession
of any missing items noted  thereon.  The Trustee  shall send such  verification
report and notice of any defects to the  Depositor,  the  Company  and  Servicer
within thirty (30) days thereafter and shall take any  appropriate  action under
the Loan Acquisition Agreement.

         (d) Notwithstanding  anything to the contrary contained in this Section
4.06, any review by the Trustee of the documents  contained in a Loan File shall
be  limited  to  ascertaining  that such  documents  appear on their  face to be
executed  original  counterparts of the documents  listed on the applicable Loan
Funding  Checklist.   The  Trustee  shall  have  no  obligation  to  verify  the
authenticity,  completeness  or legal  sufficiency  of any such documents or the
genuineness of any signatures thereon.

                                       35



<PAGE>


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

                     ACCOUNTS, ALLOCATIONS AND DISTRIBUTIONS
                     ---------------------------------------

         Section 5.01      Collections; Collection Account.
         ------------      --------------------------------

         (a) Except as otherwise  expressly  provided herein or in the Servicing
Agreement,  the Trustee may demand payment or delivery of, and shall receive and
collect, all money and other property payable to or receivable by the Trustee in
respect  of the  Trust  Estate.  The  Trustee  shall,  upon the  request  of the
Servicer,  provide the Servicer with the  information  requested by the Servicer
regarding the amount of Collections received by the Trustee in the accounts held
in the name of the Trustee  (including the Lockbox  Account) so as to permit the
Servicer to perform its duties under the Servicing Agreement.  The Trustee shall
hold all such money and  property so received by it as part of the Trust  Estate
and shall apply it as provided in this Agreement.  Absent  manifest  error,  the
Trustee shall be entitled to rely, without any independent verification,  on all
information  contained in any Report.  If any Loan becomes a Defaulted Loan, the
Trustee,  upon  Depositor  or Servicer  request may, and upon the request of the
Controlling Holders shall take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of appropriate
Proceedings.  If the Depositor  receives any amounts payable to or receivable by
the Trustee  pursuant to this Agreement,  then the Depositor shall  immediately,
but not later than two (2) Business  Days after  receipt,  remit such amounts in
the form received to the Trustee for deposit in the Collection Account.

         (b) On or before the Initial  Delivery Date, the Trustee shall open and
maintain  a  trust  account  at its  Corporate  Trust  Office  (the  "Collection
Account") in the name of the Trustee for the benefit of the  Certificateholders,
wherein it shall deposit or where there shall be received,  among other amounts,
Collections  and all of the following:  (i) payments  remitted to the Trustee by
the  Servicer or Special  Servicer  pursuant to Article  Three of the  Servicing
Agreement,  (ii) any amounts received by the Trustee from the Lockbox Account or
otherwise  pursuant  to Section  5.01(a),  (iii)  amounts  transferred  from the
Reserve  Account in accordance  with Section  5.03(d)(i),  (ii) and (iii),  (iv)
amounts  received  by the  Trustee as Swap  Payments,  and (v) any  Reinvestment
Income.  Funds in the Collection  Account shall not be commingled with any other
monies.  All  monies  deposited  from  time to time  in the  Collection  Account
pursuant  to this  Agreement  shall be held by the  Trustee as part of the Trust
Estate (other than monies  attributable  to that portion of a Scheduled  Payment
that relates to interest accrued on a Loan prior to its Cut-off Date which shall
be held in Trust for the benefit of the Company). The Business Day prior to each
Payment Date, the Trustee shall (i) remove any amounts improperly deposited into
the Collection  Account and remit them to the correct  party;  (ii) remove funds
from the Collection  Account and pay the Swap Payments,  if any,  required to be
paid  by the  Trust;  and  (iii)  pay  to  the  Company  any  amounts  collected
representing interest accrued on any Loan prior to its Cut-off Date.

         (c) Upon  Depositor  Order,  the Trustee  shall invest the funds in the
Collection  Account in Eligible  Investments.  The Depositor Order shall specify
the Eligible Investments in which the Trustee shall invest, shall state that the
same are Eligible  Investments and shall further specify the percentage of funds
to be invested in each Eligible  Investment.  No such Eligible  Investment shall
mature  later  than  one  (1)  Business  Day   preceding   the  next   following
Determination  Date and shall not be sold or disposed of prior to its  maturity;
provided that Eligible  Investments  of the type  described in clause (a) of the
--------
definition  of  "Eligible  Investments"  contained  herein  may  mature  on such
Determination  Date.  In the absence of a  Depositor  Order,  the Trustee  shall
invest  funds in the  Collection  Account in Eligible  Investments  described in
clause (f) of the definition thereof.  Eligible Investments shall be made in the
name of the Trustee for the benefit of the Certificateholders. The Trustee shall
provide to the Depositor and the Servicer  monthly written  


                                       36

<PAGE>


confirmation of such investments,  describing the Eligible  Investments in which
such amounts have been invested.

         (d) Any income or other gain from  investments in Eligible  Investments
as outlined in Section  5.01(c) shall be credited to the Collection  Account and
any loss  resulting  from such  investments  shall be charged  to such  account.
Except as otherwise  specifically  set forth  herein,  the Trustee  shall not be
liable for any loss  incurred  on any funds  invested  in  Eligible  Investments
pursuant to the  provisions  of this Section 5.01 (other than in its capacity as
obligor under any Eligible Investment).

         (e) On each  Determination  Date,  after  computing  all  transfers and
deposits to the Collection Account referred to in Section 5.01(b),  the Servicer
shall (i) determine the amount of any Certificate  Prepayment Fee Amounts,  (ii)
determine  the  Available  Collections  and then shall  allocate  them among the
outstanding  Series pro rata  according to the Series  Percentage  for each such
Series, and (iii) determine the amount of any Reserve Withdrawals.

         (f)  Thereafter,  on each Payment Date,  the Trustee shall withdraw all
amounts in the Collection Account (including the Reinvestment Income therein but
excluding  any  Scheduled  Payments  due after the  Determination  Date for such
Payment Date) and shall  disburse  them in the following  priority in accordance
with the provisions of and instructions in the monthly Servicer Report; provided
                                                                        --------
that,  to the extent that the  Available  Collections  are  insufficient  to pay
Scheduled  Distributions  on Rated  Certificates,  any  Servicing  Fee,  Special
Servicing  Fee and  Servicing  Advisor  Fee  otherwise  payable  to the  initial
Servicer or the initial Special Servicer or the initial  Servicing  Advisor (or,
with respect to any such Person prior to the delivery of a Termination Notice to
such Person,  such Person's  successors or Affiliates) under clauses (ii), (iii)
and (iv)  respectively  shall  not be paid to them  and  shall  instead  be made
available  for   disbursement   under  clause  (vi)  below  and  the  applicable
Supplement:

                   (i) to pay  to the  Trustee:  (A) a  deposit  of  $615  to be
         applied to the  payment of the  Trustee  Fee  becoming  due on the next
         anniversary  of the initial  Funding Date;  (B) to reimburse it for any
         expenses  incurred by it and  reimbursable  from the Trust Estate under
         the terms of any of the Transaction  Documents;  and (C) after delivery
         of a Termination  Notice, to pay any Transition Costs to the applicable
         party;

                  (ii) to pay to the  Servicer:  (A) the  Servicer Fee then due;
         (B) all  Servicing  Charges  received and due to the  Servicer;  (C) in
         respect of each  Liquidated  Loan,  from Recoveries on such Loan or any
         related  Repossessed  Collateral,  any Recovery Expenses not previously
         reimbursed and all other  reimbursement  amounts due to it, as provided
         in Section  3.09(a) of the  Servicing  Agreement;  and (D) any  amounts
         received  from  Obligors  to pay the  taxes  or  other  impound  amount
         required  under  the  related  Loan,  to the  extent  deposited  in the
         Collection Account;

                 (iii) to pay to the Special Servicer:  (A) the Special Servicer
         Fee then due; (B) all Servicing Charges received and due to the Special
         Servicer;  and (C) in respect of each Liquidated  Loan, from Recoveries
         on such  Loan  or any  related  Repossessed  Collateral,  any  Recovery
         Expenses not previously  reimbursed and all other reimbursement amounts
         due to it, as provided in Section 3.09(b) of the Servicing Agreement;

                  (iv)  to pay to  the  Servicing  Advisor:  (A)  the  Servicing
         Advisor Fee then due; and (B) in respect of each Liquidated  Loan, from
         Recoveries  on such Loan or any  related  Repossessed  Collateral,  any
         Recovery Expenses not previously reimbursed and all other reimbursement
         amounts  due to it, as  provided  in Section  3.09(c) of the  Servicing
         Agreement;

                                       37

<PAGE>


                   (v) to the extent of Prepayment Fee  Collections,  (A) to pay
         the  Certificate  Prepayment  Fee Amount to the  Certificateholders  as
         provided in Section  2.08(b),  (B) to make any Required  Prepayment Fee
         Deposit into the Reserve  Account,  and (C) to pay the remainder to the
         Class R Certificateholders, or if there are none, to the Depositor;

                  (vi) to deposit into the Distribution Account for each Series,
         the Available  Collections allocable to such Series pursuant to Section
         5.01(e) plus the  applicable  Series  Percentage  of any Servicer  Fee,
                 ----
         Special Servicer Fee and Servicing Advisor Fee deferred pursuant to the
         introductory   paragraph  of  this  Section  5.01(f)  and  any  Reserve
         Withdrawal made with respect to such Series; and

                    (vii) to  deposit  into (or  remove  from) the  Distribution
         Account  for each  Series  any  amounts  reallocated  to (or from) such
         Series in accordance with Section 5.02(c)

         Section 5.02      Distributions; Distribution Account.
         ------------      ------------------------------------

         (a) On or before the Delivery  Date for a Series of  Certificates,  the
Trustee shall open and maintain a trust  account at its  Corporate  Trust Office
(each such account, a "Distribution Account") in the name of the Trustee for the
benefit of the  Certificateholders  of that  Series,  for the receipt of amounts
allocated  to such Series in  accordance  with  Section  5.01(e).  Funds in each
Distribution Account shall not be commingled with any other monies and shall not
be invested. All monies deposited from time to time in each Distribution Account
pursuant  to this  Agreement  shall be held by the  Trustee as part of the Trust
Estate  as herein  provided.  All  payments  to be made from time to time to the
Certificateholders  out of funds in the  Distribution  Account  pursuant  to the
Agreement shall be made by the Trustee or the Paying Agent.

         (b) On each Payment Date, the Trustee shall withdraw amounts on deposit
in each Distribution Account and shall distribute them to the Certificateholders
of the  related  Series  in  accordance  with the  priorities  set  forth in the
applicable Supplement (as directed in the Servicer Report).

         (c) Each  Supplement  shall provide for  reallocations  as described in
this   subsection.   On  each  Payment  Date,   Series   Collections   otherwise
distributable to Certificates other than Rated Certificates of such Series shall
be made available for Scheduled Distributions on any other Series and payment of
any Outstanding Principal Amount on the Rated Certificates of a Revolving Series
at their  Scheduled  Maturity,  to the extent that any  shortfalls  with respect
thereto exist. Such  reallocation  shall be divided between each Series having a
shortfall  pro rata by the  amount of its  shortfall  and  shall be  distributed
within each Series according to the Supplement for such Series. In addition,  if
after  such   reallocation  of  amounts   otherwise   distributable  to  unrated
Certificates,  Series  Collections  are  insufficient  to pay accrued  interest,
whether current or past due, on all Rated Certificates for all Series, then such
shortfall  shall  be  allocated   among  all  Series  with  Rated   Certificates
outstanding  with a like initial  rating,  pro rata,  in reverse order of rating
seniority,  in a manner such that,  after giving effect to the  distribution  of
such Available  Collections,  all Rated  Certificates with a like initial rating
shall have received  identical  percentages  of interest  distributable  to such
Rated Certificates on the Payment Date.

         Section 5.03      Reserve Account.
         ------------      ---------------- 

         (a) Prior to the initial  Delivery Date, the Depositor  shall cause the
Trustee to open and  maintain a trust  account  (the  "Reserve  Account") at the
Corporate  Trust  Office  in the  name of the  Trustee  for the  benefit  of the
Certificateholders,  for the receipt of deposits pursuant to Section 5.01(f) and
the Supplements.  Monies received in the Reserve Account will be invested at the
written  direction of a majority of the Holders of the Class R Certificates  or,
if  there  are no Class R  Certificates  then  Outstanding,  the  Depositor,  in
Eligible 

                                       38

<PAGE>

Investments  during  the term of this  Agreement,  and any  income or other gain
realized  from such  investment,  shall be held by the  Trustee  in the  Reserve
Account as part of the Trust Estate  subject to  disbursement  and withdrawal as
herein provided.  Eligible  Investments shall be made in the name of the Trustee
for the benefit of the  Certificateholders.  No such Eligible  Investment  shall
mature  later  than  one  (1)  Business  Day   preceding   the  next   following
Determination  Date and shall not be sold or disposed of prior to its  maturity;
provided that Eligible  Investments  of the type  described in clause (a) of the
--------
definition of "Eligible  Investments" may mature on such Determination  Date. In
the absence of direction,  the Trustee shall invest funds in the Reserve Account
in  Eligible  Investments  described  in clause (f) of the  definition  thereof.
Monies in the Reserve  Account shall be subject to withdrawal in accordance with
Section 5.03(d).

         (b)  The  Trustee  shall  provide  to  the  Servicer   monthly  written
confirmation of investments of funds held in the Reserve Account, describing the
Eligible Investments in which such amounts have been invested.  Any funds not so
invested must be insured by the Federal Deposit Insurance Corporation.

         (c) The Trustee shall not be liable for any  investment  loss resulting
from  investment of money in the Reserve  Account in any Eligible  Investment in
accordance  with the terms hereof  (other than in its capacity as obligor  under
any Eligible Investment).

         (d) Disbursements from the Reserve Account shall be made, to the extent
funds therefor are available, only as follows (in accordance with the provisions
of and instructions in the monthly Servicer Report):

                   (i)  if  the  Available  Collections  allocable  to a  Series
         (computed  after  giving  effect to any  deferral  of  Servicing  Fees,
         Special Servicing Fees and Servicing  Advisors Fees pursuant to Section
         5.01(f) on the  Determination  Date immediately  preceding such Payment
         Date) are less than the amounts  required to be distributed as interest
         on all Classes of Rated Certificates in such Series plus, at the Series
         Termination  Date for such Series,  the  Outstanding  Principal  Amount
         thereof,  the Trustee shall withdraw funds from the Reserve  Account on
         such  Determination  Date to the extent necessary to make such payments
         on such  Payment  Date and  deposit  such  funds  into  the  Collection
         Account;

                  (ii) at the close of any Payment Date on which (A) the balance
         in the Reserve Account exceeds the Reserve Account Required Balance,(B)
         the Pool  Performance  Condition is met, and (C) no Default,  Depositor
         Event of Default,  Servicer Event of Default, Special Servicer Event of
         Default or Servicing Advisor Event of Default exists, the Trustee shall
         withdraw  such excess  funds from the  Reserve  Account and pay them as
         follows:

                           (1)    first to the  Depositor,  to the extent of any
                                  unreimbursed  deposits made by it pursuant to
                                  any Series Supplement, and

                           (2)    second,  to the  Holders  of the Class R  
                                  Certificates  of any Term  Series then
                                  Outstanding and if no such Certificates are
                                  then Outstanding, to the Depositor; and
                                        

                 (iii) upon  termination of the Trust and payment in full of all
         Rated Certificates, any funds remaining in the Reserve Account shall be
         paid in the same manner as provided in Section 5.03(d) (ii) above.

                                       39

<PAGE>


         Section 5.04      Reports by Trustee to Certificateholders.
         ------------      ------------------------------------------


         (a) On each Payment  Date,  the Trustee shall account to each Holder of
Certificates  on which  payments are then being made the amount that  represents
principal,  the amount that  represents  interest and the amount that represents
any  Certificate  Prepayment Fee Amount and shall  contemporaneously  advise the
Depositor of all such payments.  The Trustee may satisfy its  obligations  under
this Section 5.04 by delivering the monthly  Servicer Report to each such Holder
of the Certificates,  the Depositor and the Rating Agency. On or before the 15th
day prior to any Final  Payment Date (or the 5th day prior to the Final  Payment
Date occurring as a result of the Depositor  taking action under Section 10.02),
the Trustee  shall  provide  notice to the Rating  Agency and the Holders of the
applicable   Series  of   Certificates  of  the  Final  Payment  Date  for  such
Certificates.  Such notice shall  include (i) a statement  that  interest  shall
cease to accrue as of the last day preceding the date on which the Final Payment
Date occurs,  and (ii) shall  specify the place or places at which  presentation
and surrender of Certificates  may be made;  provided that, if the Holder of any
                                             --------
Certificate is, or is a nominee for, a Qualified  Institutional Buyer, then such
Person need not  surrender  such  Certificate,  provided  further  that, in such
event, such Qualified  Institutional Buyer shall automatically be deemed to have
provided its own unsecured  agreement of indemnity  saving the Depositor and the
Trustee, or either of them, harmless in respect of such failure to surrender.

         (b) At least  annually,  or as  otherwise  required by law, the Trustee
shall distribute to the  Certificateholders any information returns or other tax
information  or  statements  as  are  required  by  applicable  tax  law  to  be
distributed to the Certificateholders. The Servicer shall prepare or cause to be
prepared  all  such   information  for   distribution  by  the  Trustee  to  the
Certificateholders.

         Section 5.05      Trustee Permitted to Rely on Reports.
         ------------      ------------------------------------- 

         Absent  manifest  error,  the Trustee shall be permitted to rely on the
Servicer Report and, to the extent  relevant,  any other Reports,  in making the
allocations, distributions and funds transfers required pursuant to this Article
Five and the Supplements.

                                       40
<PAGE>


                                   ARTICLE SIX
                                   -----------
                              DEFAULTS AND REMEDIES
                              ----------------------


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

         "Depositor Event of Default" wherever used herein means any one of the 
following events:

         (a) (i) the breach in any  material  respect of any  representation  or
warranty of the  Depositor  in any  Transaction  Document or (ii) default in the
performance of any covenant of the Depositor in any Transaction  Document,  and,
except  in  the  case  of a  default  in  the  performance  of  Section  8.2(a),
continuance of such default or breach for a period of thirty (30) days after the
earlier of the Depositor  has received  notice  thereof or has actual  knowledge
thereof;

         (b) the  entry  of a decree  or  order  for  relief  by a court  having
jurisdiction in the premises in respect of the Depositor under the United States
Bankruptcy Code or any other applicable federal or state bankruptcy, insolvency,
reorganization,  liquidation  or other similar law now or hereafter in effect or
any arrangement with creditors or appointing a receiver,  liquidator,  assignee,
trustee,  or sequestrator  (or other similar  official) for the Depositor or for
any substantial part of its property,  or ordering the winding up or liquidation
of the  Depositor's  affairs,  and the  continuance  of any such decree or order
unstayed and in effect for a period of sixty (60) consecutive days;

         (c) the  institution  by the  Depositor  of  bankruptcy  or  insolvency
proceedings  against itself,  or the consent by the Depositor to the institution
of bankruptcy or insolvency proceedings against the Depositor,  or the filing by
the  Depositor  of a petition  or answer or consent  seeking  reorganization  or
relief under the United States  Bankruptcy Code or any other applicable  federal
or state bankruptcy insolvency, reorganization, liquidation or other similar law
now or hereafter in effect, or the consent by the Depositor to the filing of any
such  petition  or to the  appointment  of or taking  possession  by a receiver,
liquidator,  assignee,  custodian,  trustee or  sequestrator  (or other  similar
official)  of  the  Depositor  or of any  substantial  part  of the  Depositor's
property,  or the making by the Depositor of any  assignment  for the benefit of
creditors, or the admission by it in writing of its inability, or the failure by
it  generally,  to pay its debts as they become due, or the taking of  corporate
action by the Depositor in furtherance of any such action;

         (d) the cumulative  amount  (without  double  counting) of all Realized
Losses  and all  Valuation  Reduction  Amounts,  to the extent  that  amounts in
respect  thereof have not previously  been  distributed  to  Certificateholders,
exceeds  62.5%  of the  initial  Outstanding  Principal  Amount  of all  Class D
Certificates  and the Maximum Series Amount of any Class D-R  Certificates  then
Outstanding, unless the initial rating on all Rated Certificates is confirmed in
writing by the Rating Agency upon (i) the initial  triggering of such  condition
and (ii) at any time  thereafter  that a Loan is delinquent  thirty (30) days or
more;

         (e) any  portion  of the  interest  accrued  on any  Rated  Certificate
(computed  without  regard to any  Maximum  Interest  Rate  provided  for in the
applicable  Supplement)  remains  unpaid 5 days  after  the  Payment  Date  such
interest was first scheduled to be paid;

         (f) the failure of any Rated Certificates of any Revolving Series to be
paid  in  full  by  their  Scheduled  Maturity,  or the  failure  of  any  Rated
Certificates  of any Term  Series to be paid in full by the  Series  Termination
Date,  in either case for any reason  other than a breach by the Holders of such
Certificates  of their  obligations under the applica.ble  Certificate  Purchase
Agreement,  and  continuance  of such  failure  for a period of sixty  (60) days
thereafter;

                                       41

<PAGE>

         (g) at any time the amount equal to the Loan  Balances of all Defaulted
Loans minus all Adjustment  Amounts with respect to all Defaulted  Loans exceeds
the amount equal to 7.50% of the sum of the initial  Loan  Balances of all Loans
transferred by the Company to the Depositor under the Loan Acquisition Agreement
and not repurchased or replaced by substitution;

         (h) the cumulative  amount of Realized  Losses exceeds (i) prior to the
first  anniversary of the initial  Funding Date,  2.0% of the sum of the initial
Loan Balances of all loans transferred by the Company to the Depositor under the
Loan Acquisition  Agreement prior to such date and not replaced by substitution,
or (ii) at any time following the first anniversary of the initial Funding Date,
3.0% of the sum of the initial  Loan  Balances of all loans  transferred  by the
Company to the Depositor under the Loan Acquisition Agreement prior to such date
and not replaced by substitution;

         (i) the Coverage  Ratio  applicable to Loans  comprising 10% or more of
the Pool  Balance is less than  1.10:1.00  and such Loans are not  current  with
respect to their Scheduled Payments; or

         (j) following the delivery of a Servicing  Advisor  Termination  Notice
with respect to the initial  Servicing Advisor or the resignation of the initial
Servicing  Advisor,  (i) the Depositor  shall have failed to appoint a successor
Servicing  Advisor within the time period provided,  and otherwise in accordance
with the  provisions  of, the Servicing  Agreement or (ii) the Special  Servicer
shall  have not  provided  to the  Certificateholder  Agent in  writing  two (2)
qualified successor Servicing Advisor candidates.

         Section 6.02      Remedies.
         ------------      ---------

         (a)  If a  Depositor  Event  of  Default  shall  have  occurred  and be
continuing, the Trustee may, at the direction of the Controlling Holders, do one
or more of the following:

                  (i) to the extent  that such  Depositor  Event of Default  has
interfered  with the  collection of any payments or the making of  distributions
hereunder,  institute Proceedings for the collection of all amounts then due and
payable on the  Certificates  or under this  Agreement  and enforce any judgment
obtained;

                  (ii) exercise any remedies  available at law, in equity, or by
statute,  including  under  the UCC,  and take any other  appropriate  action to
protect and  enforce  the rights and  remedies of the Trustee and the Holders of
the Certificates under the Transaction Documents; and

                  (iii) direct the Trustee, the Servicer or the Special Servicer
to sell or otherwise  liquidate the Trust  Estate,  in whole or in any number of
parts,  in one or more  transactions  from  time to  time,  in any  commercially
reasonable  manner  approved  by the  Controlling  Holders;  provided  that,  in
connection with any such sale or other  liquidation,  the Person conducting such
sale or other  liquidation  shall provide the  Directing  Holders and the Rating
Agencies with ten (10) days prior written notice thereof.

         (b) Upon the  occurrence and during the  continuation  of any Depositor
Event of Default,  the Controlling  Holders may deliver a Termination  Notice to
any or all of the Servicer, the Special Servicer or the Servicing Advisor.

         (c) Any amounts  realized by the  Trustee,  the Servicer or the Special
Servicer  in  accordance  with this  Section  6.02 shall be  deposited  into the
Collection  Account within two (2) Business Days  following the receipt  thereof
and treated as Collections for distribution on the next Payment Date.

                                       42


<PAGE>


                                  ARTICLE SEVEN
                                  -------------
                                   THE TRUSTEE
                                   -----------

         Section 7.01      Certain Duties and Responsibilities.
         ------------      -----------------------------------

         (a) Except during the  continuance of a Default known to the Trustee as
provided in subsection (e) below:

                   (i) the Trustee  undertakes  to perform  such duties and only
         such  duties as are  specifically  set forth in any of the  Transaction
         Documents  to  which  it  is  a  party  and  no  implied  covenants  or
         obligations shall be read into this Agreement against the Trustee; and

                  (ii) in the  absence of bad faith or  negligence  on its part,
         the Trustee may conclusively rely as to the truth of the statements and
         the correctness of the opinions expressed therein, upon certificates or
         opinions furnished to the Trustee and conforming to the requirements of
         this Agreement;  but in the case of any such  certificates or opinions,
         which by any provision hereof are specifically required to be furnished
         to the Trustee,  the Trustee  shall be under a duty to examine the same
         and to  determine  whether or not they conform to the  requirements  of
         this Agreement.

         (b) If a Default  known to the Trustee as provided  in  subsection  (e)
below has occurred and is  continuing,  the Trustee  shall  exercise such of the
rights and powers vested in it by this Agreement,  and shall use the same degree
of care and skill in its exercise,  as a reasonable person would exercise or use
under the circumstances in the conduct of his or her own affairs.

         (c) No  provision of this  Agreement  shall be construed to relieve the
Trustee from liability for its own negligent  action,  its own negligent failure
to act, or its own willful misconduct or bad faith, except that:

                  (i) this  subsection  (c) shall not be  construed to limit the
         effect of subsection (a) of this Section;

                  (ii) the Trustee shall not be liable for any error of judgment
         made in good faith by a Responsible  Officer of the Trustee,  unless it
         shall be proved that the  Trustee was  negligent  in  ascertaining  the
         pertinent facts;

                 (iii)  the  Trustee  shall not be liable  with  respect  to any
         action  taken or omitted to be taken by it in good faith in  accordance
         with the direction of the Controlling Holders (or other such percentage
         as may be required by the terms hereof) in accordance with Section 6.02
         relating to the time, method and place of conducting any Proceeding for
         any remedy  available to the Trustee,  or exercising any trust or power
         conferred upon the Trustee, under this Agreement,  the Loan Acquisition
         Agreement or the Servicing Agreement; and

                  (iv) no provision of this Agreement  shall require the Trustee
         to  expend  or risk its own  funds or  otherwise  incur  any  financial
         liability in the performance of any of its duties hereunder,  or in the
         exercise  of any of its rights or powers,  if it shall have  reasonable
         grounds  for  believing  that  repayment  of  such  funds  or  adequate
         indemnity  against such risk or liability is not reasonably  assured to
         it, provided that nothing  contained in this Agreement shall excuse the
             --------
         Trustee  for  failure  to  perform  its  duties as  Trustee  under this
         Agreement. 

                                       43

<PAGE>


         (d) Whether or not therein  expressly so provided,  every  provision of
this  Agreement  relating  to the  conduct  or  affecting  the  liability  of or
affording  protection to the Trustee shall be subject to the  provisions of this
Section 7.01.

         (e) For all purposes  under this  Agreement,  the Trustee  shall not be
deemed to have notice of any Default, Servicer Event of Default, Depositor Event
of  Default  or of the  failure  of any  Pool  Performance  Condition  unless  a
Responsible  Officer  assigned to and working in the Trustee's  corporate  trust
department  has actual  knowledge  thereof or unless written notice of any event
which is in fact such a Default or failure of a Pool  Performance  Condition  is
received  by  the  Trustee  at the  Corporate  Trust  Office,  and  such  notice
references any of the Certificates generally, the Depositor, the Trust Estate or
this Agreement.

         (f) The Trustee  shall be under no obligation to institute any suit, or
to take any remedial proceeding under this Agreement, or to enter any appearance
or in any way defend in any suit in which it may be made  defendant,  or to take
any steps in the execution of the trusts hereby created or in the enforcement of
any  rights  and  powers   hereunder  until  it  shall  be  indemnified  to  its
satisfaction  against any and all costs and  expenses,  outlays and counsel fees
and other reasonable  disbursements and against all liability,  except liability
that is adjudicated, in connection with any action so taken.

         (g)  Notwithstanding  anything to the contrary  contained  herein,  the
provisions  of  subsections  (e) and(f) of this Section 7.01 shall be subject to
the provisions of subsections (a) through (c), inclusive, of this Section 7.01.

         (h) The Trustee shall provide the reports and  accountings  as required
pursuant to Section 5.04.
 
         Section 7.02      Notice of Default and Other Events.
         ------------      -----------------------------------

         Within one (1)  Business  Day after the Trustee has notice  (within the
meaning of Section  7.01(e)) of any Default or Funding  Termination  Event,  the
Trustee shall transmit by telephonic or telegraphic  communication  confirmed by
mail to all  Holders,  as their names and  addresses  appear on the  Certificate
Register, notice of such Default or Funding Termination Event, unless such event
shall have been promptly cured or waived in accordance with this Agreement.

         Section 7.03      Certain Rights of Trustee.
         ------------      --------------------------

         Except as otherwise provided in Section 7.01:

         (a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution,  certificate,  statement,  instrument, opinion,
report,  notice,  request,  direction,  consent,  order,  bond,  note  or  other
obligation,  paper or  document  believed  by it to be genuine  and to have been
signed or presented by the proper party or parties;

         (b) any request or direction of the Depositor mentioned herein shall be
sufficiently  evidenced  by a  Depositor  Request  or  Depositor  Order  and any
resolution  of the Board of Directors may be  sufficiently  evidenced by a Board
Resolution;

         (c) whenever in the  administration of this Agreement the Trustee shall
deem it  desirable  that a matter  be  proved or  established  prior to  taking,
suffering or omitting any action  hereunder,  the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officer's Certificate;

                                       44

<PAGE>


         (d) the Trustee may consult with counsel and the written advice of such
counsel selected by the Trustee with due care or any Opinion of Counsel shall be
full and complete  authorization  and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon;

         (e) the Trustee  shall be under no  obligation  to exercise  any of the
rights or powers  vested in it by this  Agreement at the request or direction of
any  of  the  Certificateholders   pursuant  to  this  Agreement,   unless  such
Certificateholders  shall have  offered to the  Trustee  reasonable  security or
indemnity against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction;

         (f)  unless  so  directed  by  the  Controlling   Holders  and  if  the
requirements of clause (e) above have been  satisfied,  the Trustee shall not be
bound to make  any  investigation  into  the  facts  or  matters  stated  in any
resolution,   certificate,   statement,  instrument,  opinion,  report,  notice,
request,  direction,  consent, order, bond, note or other paper or document, but
the Trustee,  in its discretion,  may make such further inquiry or investigation
into  such  facts  or  matters  as it may see fit,  and,  if the  Trustee  shall
determine to make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Depositor, upon reasonable notice
and at reasonable times personally or by agent or attorney; and

         (g) the Trustee may  execute any of the trusts or powers  hereunder  or
perform  any  duties  hereunder  either  directly  or by or  through  agents  or
attorneys.

         Section 7.04      Not Responsible for Recitals or Issuance of 
         ------------      ------------------------------------------- 
Certificates.
-------------

         (a) The recitals  contained in this Agreement and in the  Certificates,
except the certificates of authentication on the Certificates, shall be taken as
the statements of the Depositor,  and the Trustee assumes no responsibility  for
their  correctness.  The Trustee makes no  representations as to the validity or
condition  of the Trust  Estate or any part  thereof,  or as to the title of the
Depositor  thereto,  or as to the security  afforded thereby or hereby, or as to
the validity or  genuineness of any securities at any time pledged and deposited
with  the  Trustee  hereunder  or as to the  validity  or  sufficiency  of  this
Agreement  as against  any other party or any of the  Certificates.  The Trustee
shall not be  accountable  for the use or application by the Depositor of any of
the  Certificates or the proceeds  thereof or of any money paid to the Depositor
or upon Depositor Order under any provisions hereof.

         (b) Except as otherwise  expressly  provided herein and in Section 7.15
and without limiting the generality of the foregoing,  the Trustee shall have no
responsibility  or  liability  for or with  respect to the  validity of any Loan
Collateral or Loan, the perfection of any security  interest  (whether as of the
date  hereof or at any future  time),  the  maintenance  of or the taking of any
action to  maintain  such  perfection,  the  validity of the  assignment  of any
portion of the Trust Estate to the Trustee or of any intervening assignment, the
review of any Loan (it being  understood  that the Trustee has not  reviewed and
does  not  intend  to  review  the  substance  or form of any  such  Loan),  the
performance  or  enforcement of any Loan, the compliance by the Depositor or the
Servicer with any covenant or the breach by the Depositor or the Servicer of any
warranty or  representation  made  hereunder  or in any related  document or the
accuracy of any such warranty or representation, any investment of monies in the
Collection Account or any loss resulting therefrom, the acts or omissions of the
Depositor, the Servicer, or any Obligor, any action of the Servicer taken in the
name of the Trustee, or the validity as against any other party of the Servicing
Agreement or the Loan Acquisition Agreement.

         (c) Except as otherwise  expressly  provided herein,  the Trustee shall
not have any obligation or liability  under any Loan by reason of or arising out
of this Agreement or the assignment of such Loan hereunder or the receipt by the
Trustee of any  payment  relating  to any Loan  pursuant  hereto,  nor shall the

                                       45

<PAGE>

Trustee be required or  obligated in any manner to perform or fulfill any of the
obligations  of the  Depositor  under or  pursuant  to any Loan,  or to make any
payment,  or to make any  inquiry  as to the  nature or the  sufficiency  of any
payment  received by it, or the  sufficiency  of any  performance  by any party,
under any Loan.

         Section 7.05      May Hold Certificates.
         ------------      ----------------------

         The Trustee, the Servicer,  any Paying Agent, the Certificate Registrar
or any other agent of the Depositor,  in its  individual or any other  capacity,
may become the owner or pledgee of Certificates, and if operative, may otherwise
deal  with  the  Depositor  with the same  rights  it would  have if it were not
Trustee, Servicer, Paying Agent, Certificate Registrar or such other agent.

         Section 7.06      Money Held in Trust.
         ------------      --------------------

         Money and investments  held in trust by the Trustee or any Paying Agent
hereunder shall be held in one or more trust accounts  hereunder but need not be
segregated  from other funds except to the extent  required in this Agreement or
required by law. The Trustee or any Paying Agent shall be under no liability for
interest on any money received by it hereunder  except as otherwise  agreed with
the Depositor or otherwise specifically provided in this Agreement.

         Section 7.07      Compensation and Reimbursement.
         ------------      -------------------------------

         The  Trustee  shall  be  paid,  from the  Trust  Estate,  a fee for all
services  rendered by it hereunder as Trustee,  in the amount of the Trustee Fee
(which  compensation  shall not  otherwise be limited by any provision of law in
regard  to the  compensation  of a  trustee  of an  express  trust)  payable  in
accordance  with Section  5.01(f) and the  definition of "Trustee Fee" contained
herein;  provided that upon the  termination of the Trust or the  resignation or
         --------
removal of the Trustee,  the Trustee shall return to the Servicer a sum equal to
$615 times the number of months that have elapsed since the last  anniversary of
the initial Funding Date. In addition, the Trustee shall be reimbursed, from the
Trust Estate, for all expenses (including attorneys fees) reasonably incurred by
it in connection with its  administration of the Trust. The Trustee shall not be
entitled to any other or additional  compensation  or  reimbursement,  except as
expressly provided in Section 8.02(q) hereof.

         Section 7.08      Corporate Trustee Required; Eligibility.
         ------------      ----------------------------------------

         There  shall  at all  times be a  trustee  hereunder  which  shall be a
corporation  or  association  organized and doing business under the laws of the
United States of America or of any state, authorized under such laws to exercise
corporate  trust  powers,  having a  combined  capital  and  surplus of at least
$100,000,000  (or a lesser amount with the approval of the Rating Agency and the
Controlling Holders),  subject to supervision or examination by Federal or state
authority and having an office  within the United  States of America,  and which
shall have a commercial  paper or other  short-term  rating of the highest short
term rating  categories  by the Rating  Agency,  or otherwise  acceptable to the
Rating Agency and the Controlling Holders. If such corporation publishes reports
of condition at least  annually,  pursuant to law or to the  requirements of the
aforesaid  supervising  or  examining  authority,  then for the purposes of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its  combined  capital and surplus as set forth in its most recent  report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section,  it shall resign  immediately in
the manner and with the effect hereinafter specified in this Article.

                                       46

<PAGE>


         Section 7.09      Resignation and Removal; Appointment of Successor.
         ------------      --------------------------------------------------

         (a) No  resignation  or removal of the Trustee and no  appointment of a
successor  Trustee  pursuant to this Article  shall become  effective  until the
acceptance of appointment by the successor Trustee under Section 7.10.

         (b) The  Trustee  may  resign  at any time by giving  thirty  (30) days
written  notice  thereof  to the  Depositor  and each  Certificateholder.  If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the  Trustee  within  thirty  (30)  days  after  the  giving  of such  notice of
resignation,   the  resigning  Trustee  may  petition  any  court  of  competent
jurisdiction  for  the  appointment  of a  successor  Trustee.  Such  court  may
thereupon,  after such notice,  if any, as it may deem proper and may prescribe,
appoint a successor Trustee.

         (c) The Trustee may be removed by (i) the  Depositor  with (A) with the
consent of the Controlling  Holders, or (ii) upon written notice from the Rating
Agency  that  failure to remove the Trustee  will  result in a downgrade  of any
Rated  Certificates  or by the  Controlling  Holders  so long as  removal of the
Trustee will not result in a downgrade of any Rated Certificates, at any time if
one of the following events have occurred:

                   (i) the Trustee shall cease to be eligible under Section 7.08
         and  shall  fail  to  resign  after  written  request  therefor  by the
         Depositor or by any Certificateholder, or

                  (ii) the Trustee shall become  incapable of acting or shall be
         the subject of a bankruptcy or  insolvency  proceeding or a receiver of
         the Trustee or of its property shall be appointed or any public officer
         shall  take  charge or control of the  Trustee  or of its  property  or
         affairs for the purpose of rehabilitation, conservation or liquidation,
         or

                 (iii) the  Trustee  has  failed to  perform  its duties in this
         Agreement or has breached any  representation  of warranty made in this
         Agreement, in either case, in any material respect.

         (d) If the Trustee  shall  resign,  be removed or become  incapable  of
acting,  or if a vacancy  shall occur in the office of the Trustee for any cause
with respect to any of the  Certificates,  the Depositor by a Board  Resolution,
shall  promptly  appoint a successor  Trustee  satisfactory  to the  Controlling
Holders and subject to  confirmation by the Rating Agency of no downgrade of the
Rated Certificates.  If no successor Trustee shall have been so appointed by the
Depositor within thirty (30) days, then the Controlling Holders may petition any
court of competent  jurisdiction for the appointment of a successor Trustee with
respect to the Certificates.

         (e) The Depositor  shall give notice in the manner  provided in Section
11.03 and 11.04 of each  resignation  and each  removal of the  Trustee and each
appointment  of a successor  Trustee  with  respect to the  Certificates  to the
Certificateholders,  the  Certificateholder  Agent and the Rating  Agency.  Each
notice shall  include the name of the  successor  Trustee and the address of its
Corporate Trust Office.

         Section 7.10      Acceptance of Appointment by Successor.
         ------------      ----------------------------------------

         Every successor Trustee appointed hereunder shall execute,  acknowledge
and deliver to the Depositor, the Certificateholders and the retiring Trustee an
instrument accepting such appointment,  and thereupon the resignation or removal
of the retiring  Trustee  shall become  effective  and such  successor  Trustee,
without any further act,  deed or  conveyance,  shall become vested with all the
rights, powers, trusts 

                                       47

<PAGE>


and duties of the  retiring  Trustee  but,  on request of the  Depositor  or the
successor  Trustee,  such retiring Trustee shall, upon payment of its reasonable
out-of-pocket costs and expenses, execute and deliver an instrument transferring
to such  successor  Trustee  all the rights,  powers and trusts of the  retiring
Trustee,  and shall duly assign,  transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee hereunder.  Upon request of
any such successor Trustee,  the Depositor shall execute any and all instruments
for more fully and certainly vesting in and confirming to such successor Trustee
all such rights, powers and trusts.

         No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be eligible under this Article.

         Section 7.11      Merger, Conversion, Consolidation or Succession to 
         ------------      ---------------------------------------------------
Business of Trustee.
-------------------

         Any Person into which the Trustee  may be merged or  converted  or with
which  it  may be  consolidated,  or  any  Person  resulting  from  any  merger,
conversion  or  consolidation  to which  the  Trustee  shall be a party,  or any
corporation  succeeding  to all or  substantially  all  of the  corporate  trust
business  of the  Trustee,  shall be the  successor  of the  Trustee  hereunder,
provided that such Person shall be otherwise  qualified and eligible  under this
--------
Article,  without the execution or filing of any paper or any further act on the
part of any of the parties  hereto,  and notice thereof shall be provided by the
Trustee  to  the   Certificateholders   and  the  Rating  Agency.  In  case  any
Certificates have been authenticated,  but not delivered, by the Trustee then in
office,   any  successor  by  merger,   conversion  or   consolidation  to  such
authenticating   Trustee   may  adopt  such   authentication   and  deliver  the
Certificates so authenticated  with the same effect as if such successor Trustee
had itself authenticated such Certificates.

         Section 7.12      Co-Trustees and Separate Trustees.
         ------------      ----------------------------------

         At any time or times, for the purpose of meeting the legal requirements
of any jurisdiction in which any of the Trust Estate may at the time be located,
the Depositor and the Trustee shall have power to appoint, and, upon the written
request of the Trustee and the Holders  representing at least 25% in Outstanding
Principal Amount of all Certificates,  the Depositor shall for such purpose join
with the Trustee in the execution,  delivery and  performance of all instruments
and  agreements  necessary or proper to appoint one or more Persons  approved by
the  Trustee  and meeting the  requirements  of Section  7.08,  either to act as
co-Trustee, jointly with the Trustee of all or any part of such Trust Estate, or
to act as separate Trustee of any such property, in either case with such powers
as may be provided in the instrument of appointment,  and to vest in such Person
or persons in the capacity aforesaid, any property, title, right or power deemed
necessary or desirable,  subject to the other provisions of this Section. If the
Depositor does not join in such  appointment  within fifteen (15) days after the
receipt by it of a request so to do, or in case a Depositor Event of Default has
occurred  and is  continuing,  the  Trustee  alone shall have power to make such
appointment.

         Every  co-Trustee or separate Trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms:

         (a) the Certificates  shall be authenticated  and delivered by, and all
rights,  powers,  duties and obligations  under this Agreement in respect of the
custody of securities,  cash and other personal property held by, or required to
be  deposited  or pledged  with,  the  Trustee  under this  Agreement,  shall be
exercised solely by the Trustee;

         (b) the rights,  powers,  duties and  obligations  conferred or imposed
upon the Trustee by this  Agreement in respect of any  property  covered by such
appointment shall be conferred or imposed upon and 


                                       48

<PAGE>

exercised or performed by the Trustee or by the Trustee and such  co-Trustee  or
separate Trustee jointly, as shall be provided in the instrument appointing such
co-Trustee or separate  Trustee,  except to the extent that under any law of any
jurisdiction  in which any particular act is to be performed,  the Trustee shall
be  incompetent  or unqualified to perform such act, in which event such rights,
powers,  duties  and  obligations  shall  be  exercised  and  performed  by such
co-Trustee or separate Trustee;

         (c) the Trustee at any time, by an  instrument  in writing  executed by
it, with the concurrence of the Depositor  evidenced by a Board Resolution,  may
accept  the  resignation  of or  remove  any  co-Trustee  or  separate  Trustee,
appointed  under this  Section,  and, in case a  Depositor  Event of Default has
occurred  and is  continuing,  the  Trustee  shall  have  power  to  accept  the
resignation of, or remove,  any such co-Trustee or separate  Trustee without the
concurrence  of the  Depositor.  Upon the written  request of the  Trustee,  the
Depositor shall join with the Trustee in the execution, delivery and performance
of all  instruments  and  agreements  necessary  or  proper to  effectuate  such
resignation or removal.  A successor to any co-Trustee or separate  Trustee that
has so resigned or been removed may be appointed in the manner  provided in this
Section;

         (d) no co-Trustee  or separate  Trustee  hereunder  shall be personally
liable by reason of any act or omission of the Trustee or any other such Trustee
hereunder  nor shall the  Trustee be liable by reason of any act or  omission of
any  co-Trustee  or separate  Trustee  selected by the Trustee  with due care or
appointed in accordance with directions to the Trustee pursuant to Section 6.02;
and

         (e) any Act of  Certificateholders  delivered  to the Trustee  shall be
deemed to have been delivered to each such co-Trustee and separate Trustee.

         Section 7.13      Rights with Respect to the Servicer.
         ------------      ------------------------------------

         The Trustee's  rights and obligations  with respect to the Servicer and
the Special Servicer shall be governed by the Servicing Agreement.

         Section 7.14      Trustee to Hold Loans.
         ------------      ---------------------

         The Trustee hereby  acknowledges  receipt of the Loans and related Loan
Files  (subject  to any  exceptions  as  may be  noted  by  the  Trustee  to the
Depositor,  the Servicer and the Certificateholder Agent within two (2) Business
Days of receipt  thereof) and shall hold each Loan  together  with any documents
relating  thereto that may from time to time be delivered to the Trustee,  until
such time as such Loan is released  from the Trust Estate  pursuant to the terms
of this Agreement.

         Except as provided in Section 4.06,  the Trustee shall be under no duty
or obligation to inspect,  review or examine the Loans,  related Loan Files, and
other  documents  to  determine  that  the  same  are  genuine,  enforceable  or
appropriate for the represented purpose or that they have actually been recorded
or that they are other than what they purport to be on their face.

         Section 7.15      Unclaimed Monies Held for Certificate Payments.
         ------------      -----------------------------------------------

         If there is any Paying Agent other than the Trustee, the Depositor will
cause each  Paying  Agent  other than the  Trustee to execute and deliver to the
Trustee and the Certificateholder Agent an instrument in which such Paying Agent
shall agree with the Trustee and the  Certificateholder  Agent that,  subject to
the provisions of this Section, such Paying Agent will:

                                       49

<PAGE>


         (a) hold all sums held by it for the payment of  principal  or interest
on  Certificates  in trust for the  benefit of the  Certificateholders  entitled
thereto  until such sums shall be paid to such Persons or otherwise  disposed of
as herein provided;

         (b)  give   the   Trustee,   the   Certificateholder   Agent   and  the
Certificateholders  notice of any Default by the Depositor (or any other obligor
upon the  Certificates)  in the making of any payment of  principal or interest;
and

         (c) at any time during the  continuance  of any such Default,  upon the
written request of the Trustee and the Certificateholder  Agent forthwith pay to
the Trustee all sums so held in trust by such Paying Agent.

         The  Depositor  may at any  time,  for the  purpose  of  obtaining  the
satisfaction  and discharge of this Agreement or for any other purpose,  pay, or
by Depositor  Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by such Paying  Agent;  and, upon
such  payment by any Paying  Agent to the  Trustee,  such Paying  Agent shall be
released from all further liability with respect to such money.

         Section 7.16      Swap Agreements.
         ------------      ----------------

         The Trustee is hereby directed to executed, on behalf of the Trust, the
Swap Agreement entered into connection with the Initial Delivery Date. Such Swap
Agreement shall not be amended or modified  without the consent of the Depositor
and the Controlling Holders, with notice to the Rating Agency. The Trustee shall
be  authorized to enter into any  subsequent  Swap  Agreement  upon receipt of a
Depositor  Order to such effect,  which Depositor Order has been approved by the
Controlling   Holders,   as   evidenced   by   the   countersignature   of   the
Certificateholder Agent.


                                       50

<PAGE>


                                  ARTICLE EIGHT
                                  -------------

                    REPRESENTATIONS, WARRANTIES AND COVENANTS
                    ------------------------------------------

         Section 8.01      Representations and Warranties of the Depositor.
         ------------      ------------------------------------------------

         The Depositor hereby makes the following representations and warranties
for the benefit of the Trustee and the  Certificateholders  on which the Trustee
relies  in  accepting  the  Trust  Estate  in trust  and in  authenticating  the
Certificates  and on  which  the  Certificateholders  rely  in  acquiring  their
Certificates.  Such  representations  and  warranties are made as of the Initial
Delivery Date and,  except as  specifically  provided  herein,  each  additional
Delivery Date, and shall survive the transfer,  conveyance and assignment of the
Trust Estate to the Trustee.

         (a) The Depositor is a corporation duly organized, validly existing and
in good  standing  under the law of the State of  Delaware  and each other State
where the nature of its  business  requires it to qualify,  except to the extent
that the failure to so qualify would not in the aggregate  materially  adversely
affect  the  ability  of the  Depositor  to perform  its  obligations  under the
Transaction  Documents or otherwise materially adversely affect the interests of
the Certificateholders, as Certificateholders, under the Transaction Documents.

         (b) The Depositor has the power,  authority and legal right to execute,
deliver  and  perform  under  the  terms of the  Transaction  Documents  and the
execution,  delivery and performance of the Transaction Documents have been duly
authorized by the Depositor by all necessary corporate action.

         (c) Each of (i) this Agreement,  assuming due authorization,  execution
and  delivery by the Trustee and the  Servicer,  (ii) the  Servicing  Agreement,
assuming due authorization,  execution and delivery by the Servicer, the Special
Servicer,   the  Servicing  Advisor  and  the  Trustee,   (iii)  the  applicable
Certificate  Purchase  Agreement,  assuming  due  authorization,  execution  and
delivery by the purchaser(s) named therein, (iv) the Loan Acquisition Agreement,
assuming due authorization, execution and delivery by the Company, constitutes a
legal,  valid and binding obligation of the Depositor,  enforceable  against the
Depositor in accordance  with its terms except that (A) such  enforcement may be
subject to bankruptcy, insolvency,  reorganization,  moratorium or other similar
laws (whether  statutory,  regulatory or decisional)  now or hereafter in effect
relating  to  creditors'  rights  generally  and  (B)  the  remedy  of  specific
performance and injunctive and other forms of equitable relief may be subject to
certain  equitable  defenses and to the discretion of the court before which any
proceeding therefor may be brought, whether a proceeding at law or in equity.

         (d)  The   consummation  of  the   transactions   contemplated  by  the
fulfillment of the terms of the Transaction  Documents to which the Depositor is
a party  will not  conflict  with,  result in any breach of any of the terms and
provisions of or constitute  (with or without  notice,  lapse of time or both) a
default under the  organizational  documents or bylaws of the Depositor,  or any
indenture,  agreement,  mortgage, deed of trust or other instrument to which the
Depositor is a party or by which it is bound,  or in the creation or  imposition
of any Lien upon any of its properties  pursuant to the terms of such indenture,
agreement, mortgage, deed of trust or other such instrument, other than any Lien
created or  imposed  pursuant  to the terms of such  Transaction  Documents,  or
violate any law, or any order, rule or regulation applicable to the Depositor of
any court or of any federal or state regulatory body,  administrative  agency or
other governmental instrumentality having jurisdiction over the Depositor or any
of its properties.

                                       51

<PAGE>


         (e) There are no Proceedings or  investigations to which the Depositor,
or any of the Depositor's  Affiliates,  is a party pending, or, to the knowledge
of Depositor,  threatened,  before any court,  regulatory  body,  administrative
agency or other  tribunal or  governmental  instrumentality  (A)  asserting  the
invalidity of the Transaction Documents,  (B) seeking to prevent the issuance of
any  of  the  Certificates  or the  consummation  of  any  of  the  transactions
contemplated by the Transaction  Documents or (C) seeking any  determination  or
ruling  that  would  materially  and  adversely  affect the  performance  by the
Depositor of its obligations  under, or the validity or  enforceability  of, the
Transaction  Documents  or  materially  adversely  affect the  interests  of the
Certificateholders, as Certificateholders, under the Transaction Documents.

         (f) All approvals, authorizations, consents, orders or other actions of
any Person, or of any court,  governmental agency or body or official,  required
in connection with the execution and delivery of the  Transaction  Documents and
with the valid and proper  authorization,  issuance and sale of the Certificates
pursuant to this Agreement (except approvals of state securities officials under
the Blue Sky Laws),  have been or will be taken or  obtained  on or prior to the
applicable Delivery Date.

         (g) As of the Initial Delivery Date, the Depositor's principal place of
business and chief executive office is located at 1700 Montgomery Street,  Suite
250B, San Francisco,  California  94111 and the Depositor has done business only
under the name Allegiance Funding Corp. I.

         (h) The Depositor hereby restates and makes each of the representations
and warranties  with respect to the Loans and the related Loan  Collateral  that
are made by the  Company  in  Section  3.01(a)  and (b) of the Loan  Acquisition
Agreement as of the date on which such  representations and warranties were made
with references to the Company therein deemed to refer to the Depositor,  as the
context requires.

         (i) The  Depositor  is not an  "investment  company"  as  such  term is
defined in the Investment Company Act of 1940, as amended.

         (j)  There  has  been  no  material  adverse  change  in the  financial
condition of the Depositor since April 28, 1998 and all  information  concerning
the Depositor  furnished by the Depositor to the  Certificateholder  Agent,  any
Certificateholder,  the  Trustee or the  Rating  Agency 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 Depositor  contained in this subsection (j) relate to any such
information  that was not prepared by the  Depositor  or any of its  Affiliates,
then such representations and warranties are made by the Depositor 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 8.02      Covenants of the Depositor.
         ------------      ---------------------------

         The Depositor  hereby makes the following  covenants for the benefit of
the Trustee and the Certificateholders, on which the Trustee relies in accepting
the  Trust  Estate  in trust  and in  authenticating  the  Certificates  and the
Certificateholders  rely in acquiring their  Certificates.  Such covenants shall
survive the  transfer,  conveyance  and  assignment  of the Trust  Estate to the
Trustee.

                                       52

<PAGE>



         (a) Except for the conveyances and assignment hereunder,  the Depositor
will not sell, pledge, assign or transfer to any other Person, or grant, create,
incur,  assume or suffer to exist any Lien on the Trust  Estate now  existing or
hereafter  created,  or any interest  therein prior to the  termination  of this
Agreement  pursuant to Section  10.01;  the Depositor will notify the Trustee of
the  existence  of any  Lien on the  Trust  Estate  immediately  upon  discovery
thereof;  and the  Depositor  shall defend the right,  title and interest of the
Trustee in, to and under the Trust  Estate now  existing or  hereafter  created,
against all claims of third  parties  claiming  through or under the  Depositor;
provided  that nothing in this  Section  8.02(a)  shall  prevent or be deemed to
--------
prohibit the Depositor from  suffering to exist upon any of the Loan  Collateral
any Liens permitted under the terms of the related Loan.

         (b) The  Depositor  agrees  to hold in trust  and  promptly  pay to the
Servicer  any amounts  received by the  Depositor in respect of the Trust Estate
(other than amounts  distributed to or for the benefit of the Depositor pursuant
to Article Five).

         (c) The Depositor  will duly fulfill all  obligations on its part to be
fulfilled  under or in  connection  with each Loan and will do nothing to impair
the rights of the  Trustee  (for the benefit of the  Certificateholders)  in the
Loans and the related Loan Collateral.

         (d) The Depositor will comply, in all material respects, with all acts,
rules, regulations, orders, decrees and directions of any governmental authority
applicable to the Loans or the Loan Collateral or the Depositor.

         (e) The Depositor shall execute and file such  continuation  statements
and any other  documents and take such other actions that may be required by law
to fully  preserve  and protect the  interest of the Trustee (for the benefit of
the Certificateholders) in the Trust Estate.

         (f) The Depositor will not,  without  providing thirty (30) days notice
to  the  Trustee  and  the  Certificateholder  Agent  and  without  filing  such
amendments  to any  previously  filed  financing  statements  as the Trustee may
require or as may be  required  in order to  maintain  the  Trustee's  perfected
security interest in the Trust Estate,  (a) change the location of its principal
executive office, or (b) change its name, identity or corporate structure in any
manner which would make any financing statement or continuation  statement filed
by the Depositor in accordance  with the Servicing  Agreement or this  Agreement
seriously  misleading  within the meaning of Article  9-402(7) of any applicable
enactment of the UCC.

         (g) The Depositor will make, execute or endorse,  acknowledge, and file
or  deliver  to the  Trustee  from  time to time  such  schedules,  confirmatory
assignments,   conveyances,   transfer   endorsements,   powers   of   attorney,
certificates,  reports and other assurances or instruments and take such further
steps  relating to the Trust Estate,  as the Trustee may request and  reasonably
require.

         (h) The  Depositor  shall notify the Trustee  promptly  after  becoming
aware of any Lien on any Trust Estate,  except for any Liens on Loan  Collateral
for municipal or other local taxes if such taxes shall not at the time be due or
payable  without  penalty  or if the  Depositor  or the  related  Obligor  shall
currently  be  contesting  the  validity  thereof in good  faith by  appropriate
proceedings  and the  Depositor  shall  have  set  aside on its  books  adequate
reserves with respect thereto.

         (i)  The  Depositor  (a)  shall  engage  in only  (1) the  acquisition,
ownership,  leasing,  selling  and  pledging  of the  property  acquired  by the
Depositor pursuant to the Loan Acquisition  Agreement,  and causing the issuance
of, receiving and selling the Certificates issued pursuant to this Agreement and
(2) the exercise of any powers permitted to corporations under the corporate law
of the State of Delaware  which are  

                                       53  

<PAGE>



incidental  to the  foregoing or necessary to  accomplish  the foregoing and the
Depositor shall incur no debt other than trade payables and expense  accruals in
connection with its operations in the normal course of business,  and other than
as contemplated by the Transaction  Documents;  (b) will (1) maintain its books,
records and cash management  accounts separate from the books and records of any
other entity and in accordance with generally  accepted  accounting  principles,
(2) maintain separate bank accounts and shall not commingle its funds with those
of any  other  entity,  (3)  keep in  full  effect  its  existence,  rights  and
franchises as a corporation  under the laws of its State of  incorporation,  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 protect the  validity and  enforceability  of this  Agreement,  (4)
observe all corporate  procedures  required by its Certificate of Incorporation,
its bylaws and the laws of the State of Delaware, (5) maintain its good standing
under the laws of the State of Delaware, (6) keep correct and complete books and
records of account and minutes of meeting and other  proceedings of its Board of
Directors and shareholder  meetings,  (7) obtain proper  authorization  from its
directors or shareholders,  as appropriate, and act solely in its corporate name
and  through  its duly  authorized  officers  and  agents in the  conduct of its
business,  (8) disclose in its  financial  statements  that the Loan Assets have
been sold and assigned to the  Depositor and from the Depositor to the Trust and
that the assets of the  Depositor  are not available to pay the creditors of the
Company,  (9) maintain a separate  telephone number and stationery  reflecting a
separate  address and identity  from that of the  Company;  and (c) will not (1)
dissolve or liquidate  in whole or in part,  (2) own any  subsidiary  or lend or
advance  any  moneys to, or make an  investment  in,  any  Person,  (3) make any
capital expenditures, (4)(A) commence any case, proceeding or other action under
any existing or future bankruptcy,  insolvency or similar law seeking to have an
order  for  relief  entered  with  respect  to it,  or  seeking  reorganization,
arrangement, adjustment, wind-up, liquidation, dissolution, composition or other
relief  with  respect to it or its debts,  (B) seek  appointment  of a receiver,
trustee,  custodian or other similar  official for it or any part of its assets,
(C) make a general  assignment  for the  benefit of  creditors,  or (D) take any
action in furtherance of, or consenting or acquiescing in, any of the foregoing,
(5) guarantee (directly or indirectly), endorse or otherwise become contingently
liable  (directly or indirectly)  for the obligations of, or own or purchase any
stock,  obligations  or  securities  of or any  other  interest  in, or make any
capital  contribution  to, any other Person,  (6) merge or consolidate  with any
other Person,  (7) engage in any other action that bears on whether the separate
legal identity of the Depositor will be respected,  including (A) holding itself
out as being liable for the debts of any other party or (B) acting other than in
its corporate name and through its duly  authorized  officers or agents,  or (8)
create,  incur,  assume,  or in any  manner  become  liable  in  respect  of any
indebtedness  other than as contemplated by the Transaction  Documents and other
than trade  payables and expense  accruals  incurred in the  ordinary  course of
business and which are  incidental  to its business  purpose;  provided that the
                                                               --------  
Depositor may take any action prohibited by this clause (8) if (y) the Depositor
shall  cause,  prior  to the  taking  of such  action,  an  Opinion  of  Counsel
experienced in federal  bankruptcy  matters,  in substance  satisfactory  to the
Trustee,   the   Certificateholders   and  the  Rating  Agency   confirming  the
non-consolidation  of the  Depositor  and the  Company,  to be  delivered to the
Trustee,  the  Certificateholders  and the Rating Agency,  (z) the Rating Agency
shall  indicate  in writing  that the taking of such  action will not affect the
then current rating of any Series of Certificates. The Depositor shall not amend
any  article  in its  Certificate  of  Incorporation  that deals with any matter
discussed above without the prior written consent of the Controlling Holders. On
or  before  April  15 of  each  year,  so long  as any of the  Certificates  are
Outstanding,  the  Depositor  shall  furnish to each  Certificateholder  and the
Trustee,  an Officer's  Certificate  confirming  that the Depositor has complied
with its obligations under this Section 8.02(i).

         (j) The  Depositor  agrees  that at all times,  at least one (1) of the
directors  and one (1) of the  executive  officers of the  Depositor (or two (2)
persons,  one of whom is serving as both a director  and an  executive  officer)
will not be a director, officer or employee of any direct or ultimate parent, or
Affiliate  of the parent or of the  Depositor;  provided  that such  independent
                                                --------
directors  and  officers  may serve in  similar 

                                       54

<PAGE>

capacities for other "special  purpose  corporations"  formed by the Company and
its Affiliates.  The Depositor's Certificate of Incorporation shall at all times
provide  that such  independent  directors  shall have a  fiduciary  duty to the
Holders of the  Certificates  and will always require  unanimous  consent of the
Board of Directors to file any bankruptcy petition.

         (k) The Depositor  shall comply with Section 2.11 of this  Agreement at
all times and its financial and tax records shall reflect such tax treatment.

         (l) The  Depositor  will maintain an office or agency within the United
States of America  where  notices and demand to or upon the Depositor in respect
of the  Certificates  and this  Agreement may be served.  The  Depositor  hereby
initially  appoints  the  Trustee as the Paying  Agent and its  Corporate  Trust
Office as the office for each of said  purposes.  The Depositor will give thirty
(30) days prior written notice to the Trustee and the  Certificateholders of any
change in the identity of the Paying Agent or the location of any such office or
agency.  If at any time the Depositor  shall fail to maintain any such office or
agency or shall fail to furnish  the  Trustee  with the  address  thereof,  such
presentations,  surrenders,  notices  and  demands  may be made or served to the
Trustee,  and the Depositor hereby appoints the Trustee its agent to receive all
such presentations, surrenders, notices and demands.

         (m) The  Depositor  will take all actions,  and  diligently  pursue all
remedies  available to it, in any case,  to the extent  necessary or  reasonably
prudent and to the extent commercially reasonable, to enforce the obligations of
the  Servicer  under the  Servicing  Agreement  and the  Company  under the Loan
Acquisition   Agreement  and  to  secure  the  Depositor's   rights  under  such
agreements.

         (n) The proceeds from the sale of the Certificates  will be used by the
Depositor (i) to pay the Existing  Indebtedness,  if any, and to otherwise  make
the payments required under the terms of the Loan Acquisition Agreement; (ii) to
pay the  expenses  associated  with  this  transaction  and  (iii)  for  general
corporate purposes,  including the cost of funding additional Loans. None of the
transactions contemplated in the Transaction Documents (including the use of the
proceeds  from the sale of the  Certificates)  will  result  in a  violation  of
Section  7 of the  Securities  and  Exchange  Act of 1934,  as  amended,  or any
regulations  issued pursuant  thereto,  including  Regulations T, U and X of the
Board of Governors of the Federal  Reserve  System,  12 C.F.R.,  Chapter II. The
Depositor  does not own or intend to carry or  purchase  any  "margin  security"
within the meaning of said Regulation G, including margin securities  originally
issued by it or any "margin stock" within the meaning of said Regulation U.

         (o) The Depositor  shall not  consolidate  with or merge into any other
Person or convey or  transfer  its  properties  and assets  substantially  as an
entirety to any Person, without the consent of the Controlling Holders.

         (p) Upon any  consolidation or merger, or any conveyance or transfer of
the  properties and assets of the Depositor in accordance  with Section  8.02(o)
hereof, the Person formed by or surviving such consolidation or merger (if other
than the  Depositor) or the Person to which such  conveyance or transfer is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Depositor  under this  Agreement  with the same effect as if such Person
had been named as the Depositor  herein upon the execution of an assignment  and
assumption  agreement by such  Person.  In the event of any such  conveyance  or
transfer,  the Person named as the  "Depositor"  in the first  paragraph of this
Agreement  or any  successor  which  shall  theretofore  have become such in the
manner prescribed in this Article shall be released from its liabilities and its
obligations  under this Agreement and may be dissolved,  wound-up and liquidated
at any time thereafter.

                                       55

<PAGE>


         (q) The Depositor  shall  indemnify and hold harmless the Trustee,  the
Certificateholders  and the  Certificateholder  Agent from and against any loss,
liability,  expense,  damage or injury  (other than any loss  attributable  to a
Certificateholder's investment in any of the Certificates) sustained or suffered
by them by reason of any acts, omissions or alleged acts or omissions (i) by the
Depositor in the performance of its obligations under the Transaction  Documents
(including any violation of any applicable  laws by the Depositor as a result of
the  transactions  contemplated  by this  Agreement),  (ii)  arising  out of the
activities of the Trust,  or (iii) arising out of the  activities of any of them
with respect to the Trust,  including enforcement of rights and remedies against
the  Depositor  under  the  Transaction  Documents  and  any  judgment,   award,
settlement, reasonable attorneys' fees and other expenses reasonably incurred in
connection  with the defense of any actual or threatened  action,  proceeding or
claim;  provided  that the  Depositor  shall  not  indemnify  the  Trustee,  the
        --------
Certificateholders  or the  Certificateholder  Agent  if such  loss,  liability,
expense, damage or injury is due to the such Person's gross negligence,  willful
misconduct, willful misfeasance or bad faith in the performance of its rights or
duties  hereunder.  Any  indemnification  pursuant to this Section shall only be
payable  from the  assets of the  Depositor  and shall not be  payable  from the
assets of the Trust  Estate  except as  otherwise  provided  in the  Transaction
Documents.  The  provisions of this indemnity  shall survive the  termination of
this Agreement.


         Section 8.03      Other Matters as to the Depositor.
         ------------      ----------------------------------

         (a) Except as provided in subsection  (b) of this Section and elsewhere
in this Agreement, the directors,  officers, or employees of the Depositor shall
not  be  under  any  personal   liability  to  the  Trust,   the  Trustee,   the
Certificateholders,  the Servicer,  or any other Person hereunder or pursuant to
any documents delivered  hereunder,  it being expressly understood that all such
liability  is  expressly   waived  and  released  as  a  condition  of,  and  as
consideration  for,  the  execution  of this  Agreement  and the issuance of the
Certificates,  except with respect to  liability  resulting  from such  person's
fraudulent or willful  misconduct.  The Depositor and any director or officer or
employee  or agent of the  Depositor  may rely in good  faith on the  advice  of
counsel or on any  documents  of any kind,  prima facie  properly  executed  and
submitted by any Person respecting any matters arising hereunder.

         (b) During the term of this  Agreement and for one (1) year and one (1)
day after the  termination  hereof,  none of the parties hereto or any Affiliate
thereof will file any involuntary  petition or otherwise  institute or cooperate
in the institution of any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding or other proceeding under any federal or state bankruptcy
or similar law against the Depositor or the Trust.

         Section 8.04      Representations and Warranties of the Trustee.
         ------------      ----------------------------------------------

         The Trustee hereby makes the following  representations  and warranties
for the  benefit  of the  Depositor  and the  Certificateholders  on  which  the
Certificateholders  rely in acquiring their Certificates.  Such  representations
and  warranties  are  made  as of the  Initial  Delivery  Date  and,  except  as
specifically  provided herein,  each additional Delivery Date, and shall survive
the transfer, conveyance and assignment of the Trust Estate to the Trustee.

         (a) The  Trustee  is a  banking  corporation  duly  organized,  validly
existing  and in good  standing  under the law of the State of New York and each
other State where the nature of its business  requires it to qualify,  except to
the extent that the failure to so qualify would not in the aggregate  materially
adversely affect the ability of the Trustee to perform its obligations under the
Transaction  Documents or otherwise

                                       56

<PAGE>


materially  adversely  affect  the  interests  of  the  Certificateholders,   as
Certificateholders, under the Transaction Documents.

         (b) The  Trustee has the power,  authority  and legal right to execute,
deliver  and  perform  under  the  terms of the  Transaction  Documents  and the
execution,  delivery and performance of the Transaction Documents have been duly
authorized by the Trustee by all necessary corporate action.

         (c) Each of (i) this Agreement,  assuming due authorization,  execution
and  delivery by the  Servicer and (ii) the  Servicing  Agreement,  assuming due
authorization,  execution  and  delivery by the  Depositor,  the  Servicer,  the
Special  Servicer and the  Servicing  Advisor,  constitutes  a legal,  valid and
binding obligation of the Trustee, enforceable against the Trustee in accordance
with its terms except that (A) such  enforcement  may be subject to  bankruptcy,
insolvency, reorganization, moratorium or other similar laws (whether statutory,
regulatory  or  decisional)  now or hereafter in effect  relating to  creditors'
rights  generally and (B) the remedy of specific  performance and injunctive and
other forms of equitable relief may be subject to certain equitable defenses and
to the  discretion  of the court  before  which any  proceeding  therefor may be
brought, whether a proceeding at law or in equity.

         (d)  The   consummation  of  the   transactions   contemplated  by  the
fulfillment of the terms of the Transaction  Documents to which the Trustee is a
party  will not  conflict  with,  result  in any  breach of any of the terms and
provisions of or constitute  (with or without  notice,  lapse of time or both) a
default  under the  organizational  documents or bylaws of the  Trustee,  or any
indenture,  agreement,  mortgage, deed of trust or other instrument to which the
Trustee is a party or by which it is bound,  or in the creation or imposition of
any Lien upon any of its  properties  pursuant  to the terms of such  indenture,
agreement, mortgage, deed of trust or other such instrument, other than any Lien
created or  imposed  pursuant  to the terms of such  Transaction  Documents,  or
violate any law, or any order,  rule or regulation  applicable to the Trustee of
any court or of any federal or state regulatory body,  administrative  agency or
other governmental  instrumentality  having jurisdiction over the Trustee or any
of its properties.

         (e) There are no Proceedings or investigations to which the Trustee, or
any of the Trustee's  Affiliates,  is a party  pending,  or, to the knowledge of
Trustee, threatened, before any court, regulatory body, administrative agency or
other tribunal or governmental  instrumentality  (A) asserting the invalidity of
the  Transaction  Documents,  (B) seeking to prevent the  issuance of any of the
Certificates or the consummation of any of the transactions  contemplated by the
Transaction  Documents  or (C)  seeking any  determination  or ruling that would
materially  and  adversely   affect  the  performance  by  the  Trustee  of  its
obligations  under,  or the  validity  or  enforceability  of,  the  Transaction
Documents or otherwise adversely affect the interests of the Certificateholders,
as Certificateholders, under the Transaction Documents.

         (f) All approvals, authorizations, consents, orders or other actions of
any Person, or of any court,  governmental agency or body or official,  required
as a condition to the execution  and delivery by the Trustee of the  Transaction
Documents  have been or will be taken or obtained on or prior to the  applicable
Delivery Date.

                                       57

<PAGE>


                                  ARTICLE NINE 
                                  ------------

                                   AMENDMENTS
                                   ----------

         Section 9.01      Amendments without Consent of Certificateholders.
         ------------      -------------------------------------------------
 
         The Depositor, the Servicer and the Trustee, without the consent of the
Holders of any  Certificates,  at any time and from time to time, may enter into
one or more amendments  hereto, in form satisfactory to the Trustee,  for any of
the following  purposes,  provided that any such  amendment,  as evidenced by an
                          --------
Opinion  of  Counsel,   will  not  have  a  material   adverse   affect  on  the
Certificateholders:

         (a) to correct or amplify the  description  of any property at any time
included in the Trust Estate (other than any such  correction  or  amplification
that   would   have  the  effect  of  curing  a  Default  or  a  breach  of  any
representation, warranty or covenant that would otherwise require the Company or
the Depositor to repurchase or substitute  for any Loan),  or to better  assure,
convey and  confirm  unto the Trustee  any  property  included or required to be
included in the Trust Estate,  or to include in the Trust Estate any  additional
property;

         (b) to evidence the succession of another Person to the Depositor,  and
the assumption by such successor of the covenants of the Depositor herein and in
the Certificates, in accordance with Section 8.02(o);

         (c) to add to the covenants of any party hereto, for the benefit of the
Holders of all  Certificates or to surrender any right or power herein conferred
upon the Depositor;

         (d) to convey, transfer, assign, mortgage or pledge any property to or 
with the Trustee;

         (e) to cure any  ambiguity,  to correct  or  supplement  any  provision
herein which may be defective or  inconsistent  with any other  provisions  with
respect to matters or questions arising under this Agreement, which shall not be
inconsistent with the provisions of this Agreement; or

         (f) to  evidence  the  succession  of the  Trustee  pursuant to Article
Seven;  provided  that any such  amendment  does not modify this  Agreement in a
        --------
manner described in paragraphs (i) through (vii) of Section 9.02(a).

         The Trustee is hereby  authorized  to join in the execution of any such
amendment and to make any further  appropriate  agreements and stipulations that
may be therein  contained,  but the Trustee shall not be obligated to enter into
any such amendment that affects the Trustee's own rights, duties, liabilities or
immunities under this Agreement or otherwise.

         Promptly  after the  execution by the  Depositor,  the Servicer and the
Trustee of any amendment  pursuant to this Section,  the Depositor shall mail to
the Rating Agency, the Certificateholder Agent and each Certificateholder a copy
of such amendment.

         Section 9.02     Amendments and Modifications to Agreement with Consent
        -------------     ------------------------------------------------------
of Certificateholders.
---------------------

         (a)  With  the  prior  written  consent  of not  less  than  51% of the
Outstanding  Principal  Amount of the Holders 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


                                       58

<PAGE>


Certificates, by Act of such Holders delivered to the Depositor and the Trustee,
the  Depositor,  the  Servicer  and the Trustee may enter into an  amendment  or
modification  of this  Agreement for the purpose of adding any  provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
modifying in any manner the rights of the Holders of the Certificates under this
Agreement  (other than as  described  in Section  9.01);  provided  that no such
                                                          --------
amendment  shall,  without  the  consent  of the  Holders  of  each  Outstanding
Certificate affected thereby:

                  (i) change the Series  Termination  Date of any Certificate or
         the Due Date of any  installment of principal of, or any installment of
         interest on, any Certificate, or change the principal amount thereof or
         the Certificate  Interest Rate or change any place of payment where, or
         the coin or currency in which,  any Certificate or the interest thereon
         is payable,  or impair the right to institute suit for the  enforcement
         of any such payment;

                  (ii) reduce the percentage in Outstanding  Principal Amount of
         Certificates,  the consent of the Holders of which is required  for any
         such amendment,  or the consent of the Holders of which is required for
         any waiver of compliance  with certain  provisions of this Agreement or
         Events of Default or their consequences;

                  (iii) impair or adversely affect the Trust Estate;

                  (iv)  modify or alter the definition of the term "Outstanding"
         or "Outstanding Principal Amount" or "Controlling Holders";

                  (v)   modify or alter the provisions of Sections 5.01 or 5.02;

                  (vi)  modify any of the provisions of this Section 9.02,except
         to increase the percentage of Holders  required for any modification or
         waiver or to provide that certain other  provisions  of this  Agreement
         cannot be modified or waived without the consent of each Holder of each
         Outstanding Certificate affected thereby; or

                  (vii) permit the  creation of any lien ranking  prior to, on a
         parity with, or  subordinate to the lien of this Agreement with respect
         to any part of the Trust  Estate or  terminate  or release  the lien of
         this Agreement or any lien created under the Loan Acquisition Agreement
         on any property at any time subject hereto or deprive the Holder of any
         Certificate  of the security  afforded by the lien of this Agreement or
         any lien created under the Loan Acquisition Agreement.

         (b) With the prior  written  consent  of the  Holders  of not less than
66-2/3%  in  Outstanding  Principal  Amount  of each  Class  of each  Series  of
Certificates then in its Funding Period, by Act of said Holders delivered to the
Depositor and the Trustee, the Depositor, the Servicer and the Trustee may enter
into  amendments  hereto for the purpose of adding any provisions to or changing
in any manner or  eliminating  any of the  provisions  of  Article  Three or the
definitions  used therein,  provided that any such amendment does not modify the
                            --------
Agreement in a manner described in clauses (i) through (vii) of paragraph (a) of
this Section 9.02.

         (c) The Trustee is hereby  authorized  to join in the  execution of any
amendments to this Agreement pursuant to clause (a) or (b) above and to make any
further  appropriate  agreements and stipulations that may be therein contained,
but the Trustee  shall not be  obligated to enter into any such  amendment  that
affects the Trustee's own rights,  duties,  liabilities or immunities under this
Agreement.  It shall not be necessary  for any Act of  Certificateholders  under
this  Section  to  approve  the  particular  form of 

                                       59

<PAGE>


any proposed  supplemental  agreement,  but it shall be  sufficient  if such Act
shall  approve  the  substance  thereof.  Promptly  after the  execution  by the
Depositor,  the  Servicer  and the  Trustee of any  amendment  pursuant  to this
Section,  the Depositor  shall mail to the Holders of the  Certificates  and the
Rating Agency a copy of such amendment,  together with any consents  obtained in
connection therewith.

         Section 9.03      Execution of Amendments.
         ------------      ------------------------

         In  executing   any   amendment   permitted  by  this  Article  or  the
modifications thereby of the trusts created by this Agreement, the Trustee shall
be entitled to receive  upon  request,  and  (subject to Section  7.01) shall be
fully protected in relying in good faith upon, an Opinion of Counsel  reasonably
acceptable  to the Trustee  stating  that the  execution  of such  amendment  is
authorized  or  permitted by this  Agreement.  The Trustee may, but shall not be
obligated  to, enter into any such  amendment  which  affects the  Trustee's own
duties or immunities under this Agreement or otherwise.

         Section 9.04      Effect of Amendments.
         ------------      --------------------- 

         Upon the execution of any amendment under this Article,  this Agreement
shall be modified in accordance therewith,  and such amendment shall form a part
of this Agreement for all purposes; and every Holder of Certificates theretofore
or thereafter authenticated and delivered hereunder shall be bound thereby.

         Section 9.05      Reference in Certificates to Amendments.
         ------------      ----------------------------------------

         Certificates  authenticated  and  delivered  after the execution of any
amendment  pursuant to this Article  may, and if required by the Trustee  shall,
bear a notation in form approved by the Trustee as to any matter provided for in
such  amendment.  If the  Depositor  shall so  determine,  new  Certificates  so
modified as to conform, in the opinion of the Trustee and the Depositor,  to any
such  amendment may be prepared and executed by the Depositor and  authenticated
and delivered by the Trustee in exchange for Outstanding Certificates.


                                       60
<PAGE>


                                 ARTICLE TEN
                                 ------------
                            TERMINATION AND DISCHARGE
                            -------------------------  

         Section 10.01     Termination of Trust; Satisfaction and Discharge of
         -------------     --------------------------------------------------- 
Agreement.
----------

         (a) The Trust shall terminate upon the earlier of (i) December 31, 2020
and (ii) the day  following  the date when the Pool  Balance has been reduced to
zero and all proceeds of the Trust Estate have been applied in  accordance  with
Article Five and each applicable Supplement.  Upon termination of the Trust, all
rights, obligations and Liens created by this Agreement shall be discharged.

         (b) If,  nine  (9)  months  prior  to the  date  specified  in  Section
10.01(a)(i),  there remains an Outstanding  Principal Amount on any Certificate,
the Special  Servicer  shall use its best efforts to sell,  dispose or otherwise
liquidate  the Loans and related Loan  Collateral in a  commercially  reasonable
manner in the  succeeding  one hundred  eighty (180) days and shall  deposit the
proceeds  thereof in the Collection  Account for  application in accordance with
Article Five.

         (c) Thirty (30) days advance written notice of termination of the Trust
shall be given by the Trustee to the  Certificateholders,  the Certificateholder
Agent and the Rating Agency, specifying the Final Payment Date and the amount of
any such final payment on the Certificates.

         (d) Upon  termination  of the Trust and  application of all proceeds of
the Trust Estate in accordance with Article Five and each applicable Supplement,
the Depositor may submit to the Trustee an Officer's Certificate  requesting the
release of the funds on deposit in the Reserve  Account,  if any,  and any other
assets then  comprising  the Trust  Estate.  Upon receipt of such  request,  the
Trustee shall release from the lien of this Agreement and deliver to or upon the
order of the  Depositor  all  property  remaining  in the Trust Estate and shall
execute and file,  at the expense of the  Depositor,  UCC  financing  statements
evidencing such discharge and release.

         Section 10.02     Optional Termination.
         -------------     --------------------- 

         (a) At any time when the Pool  Balance  is equal to or less than 15% of
the Pool Balance at its highest  level,  the  Depositor  shall have the right to
purchase  the Loan  Assets  at a price  equal to the  Repurchase  Price for such
Loans.  The Depositor  shall deposit such amount in the  Collection  Account for
application in accordance with Article Five.

         (b) The Depositor shall give written notice to the Trustee,  the Rating
Agency and the  Certificateholders of its intention to exercise such option five
(5) Business Days in advance thereof.  Such notice shall include (i) a statement
that  interest  shall cease to accrue as of the last day  preceding  the date on
which such  repurchase  is to occur (such date being the Final  Payment Date for
all of such  Certificates)  and (ii) shall  specify the place or places at which
presentation  and surrender of Certificates  may be made;  provided that, if the
                                                           ---------      
Holder of any  Certificate  is, or is a nominee  for, a Qualified  Institutional
Buyer,  then such Person need not surrender such  Certificate,  provided further
                                                                ----------------
that, in such event, such Qualified  Institutional  Buyer shall automatically be
deemed to have  provided its own  unsecured  agreement  of indemnity  saving the
Depositor  and the  Trustee,  or either of them,  harmless  in  respect  of such
failure to surrender.

         (c) Upon  exercise of such  option and deposit of the amounts  required
under Section 10.01 into the Collection Account, the Depositor shall be entitled
to obtain an  assignment  of the Loan  Assets  and the  Trustee  shall  promptly
execute all  instruments  provided to it as may be necessary to effectuate  such
assignment and the release of any lien created hereunder.

                                       61
<PAGE>


                                 ARTICLE ELEVEN
                                 --------------  

                        PROVISIONS OF GENERAL APPLICATION
                        ---------------------------------

         Section 11.01     General Provisions.
         -------------     -------------------

         All of the provisions of this Article shall apply to this Agreement, as
supplemented by each Supplement.

         Section 11.02     Acts of Certificateholders.
         -------------     ---------------------------

         (a) Any request,  demand,  authorization,  direction,  notice, consent,
waiver  or  other  action  provided  by this  Agreement  to be given or taken by
Certificateholders  may be embodied in and evidenced by one or more  instruments
of substantially similar tenor signed by such Certificateholders in person or by
an agent duly appointed in writing;  and, except as herein  otherwise  expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee, and, where it is hereby expressly required, to the
Depositor.  Such instrument or instruments  (and the action embodied therein and
evidenced  thereby)  are  herein  sometimes  referred  to as  the  "Act"  of the
Certificateholders signing such instrument or instruments. Proof of execution of
any  such  instrument  or of a  writing  appointing  any  such  agent  shall  be
sufficient  for any purpose of this  Agreement  and  (subject  to Section  7.01)
conclusive  in favor of the  Trustee  and the  Depositor,  if made in the manner
provided in this Section 11.02.

         (b) The  fact  and  date of the  execution  by any  Person  of any such
instrument  or  writing  may be proved in any  manner  which the  Trustee  deems
sufficient.

         (c) The ownership of  Certificates  shall be proved by the  Certificate
Register.

         (d) Any request,  demand,  authorization,  direction,  notice, consent,
waiver or other action by the Holder of any Certificate shall bind the Holder of
every  Certificate  issued  upon the  registration  of  transfer  thereof  or in
exchange  therefor or in lieu thereof,  in respect of anything done,  omitted or
suffered to be done by the Trustee or the Depositor in reliance thereon, whether
or not notation of such action is made upon such Certificate.

         Section 11.03  Notices,etc.,to Trustee, Depositor, Servicer and Rating 
         -------------  ------------------------------------------------------- 
Agency.
-------

         (a)  All  notices,  requests,  demands,   authorizations,   directions,
consents,  waivers or Acts of Certificateholders and other communications to any
party  under  this  Agreement  shall  be  in  writing  (including  telefacsimile
communication)  and mailed,  sent by telefacsimile or delivered to such party at
its address or telefacsimile  number set forth in Section 11.03(b) or such other
address or  telefacsimile  number as such party may  hereafter  specify for such
purpose by notice given in accordance with this Section 11.03. Each such notice,
request or other  communication  shall be deemed to have been  received:  (i) if
mailed as provided  above by any method other than overnight  delivery  service,
when  actually  received;  (ii) if mailed by overnight  delivery  service,  when
delivered by the overnight delivery service; (iii) if sent by telefacsimile when
transmitted by  telefacsimile  (with  electronic  confirmation of receipt by the
sending party),  so long as such notice is promptly  confirmed in writing by any
of the other  means  specified  in  clauses  (i),  (ii) or (iv) of this  Section
11.03(a); or (iv) if delivered by hand, upon delivery.

                                       62

<PAGE>


         (b) For purposes hereof, the address and telefacsimile number of:

                  (i) the Trustee shall be One M & T Plaza, 7th Floor,  Buffalo,
         New York  14203-2399,  Fax  716-842-4474,  or otherwise as furnished in
         writing   to  the   Depositor,   the   Certificateholder   Agent,   the
         Certificateholders,  the  Servicer  and  the  Special  Servicer  by the
         Trustee;

                  (ii) the  Depositor  shall be 1700  Montgomery  Street,  Suite
         250-B, San Francisco,  California 94111, Fax 415-394-6703, or otherwise
         as furnished in writing to the Trustee,  the  Certificateholder  Agent,
         the  Certificateholders,  the Servicer and the Special  Servicer by the
         Depositor;

                  (iii) the Servicer shall be 1700 Montgomery Street, Suite 250,
         San Francisco,  California  94111,  Fax  415-394-9471,  or otherwise as
         furnished   in   writing   to   the   Trustee,   the   Depositor,   the
         Certificateholder   Agent,  the   Certificateholders  and  the  Special
         Servicer by the Servicer;

                  (iv) the Special  Servicer  shall be 1700  Montgomery  Street,
         Suite 250,  San  Francisco,  California  94111,  Fax  415-394-9471,  or
         otherwise  furnished  in writing to the  Trustee,  the  Depositor,  the
         Certificateholder Agent, the Certificateholders and the Servicer by the
         Special Servicer; and

                  (v) the  Certificateholder  Agent  shall be ***,  Attn.  Asset
         Manager,  Fax *** or otherwise furnished in writing to the Trustee, the
         Depositor,  the  Certificateholders,   the  Servicer  and  the  Special
         Servicer by the Certificateholder Agent;

                  (vi) the Rating Agency shall be 17 State  Street,  12th Floor,
         New York, New York 10004 Fax  212-908-0222,  or otherwise  furnished in
         writing to the Trustee, the Depositor, the Certificateholder Agent, the
         Certificateholders, the Servicer and the Special Servicer by the Rating
         Agency.

         Section 11.04     Notices to Certificateholders; Waiver.
         -------------     --------------------------------------

         Where this Agreement provides for notice to  Certificateholders  of any
event,  such  notice  shall  be  sufficiently  given  (unless  otherwise  herein
expressly  provided) if in writing and made in accordance  with Section 11.03 to
each  Certificateholder  affected by such event, at such Person's  address as it
appears on the  Certificate  Register,  not later than the latest date,  and not
earlier than the earliest date, prescribed for the giving of such notice. In any
case in which notice to Certificateholders is given by mail, neither the failure
to mail such notice,  nor any defect in any notice so mailed,  to any particular
Certificateholder  shall affect the  sufficiency  of such notice with respect to
other  Certificateholders,  and any notice which is mailed in the manner  herein
provided shall conclusively be presumed to have been duly given.

         Where this Agreement provides for notice in any manner, such notice may
be waived in writing by any Person  entitled  to  receive  such  notice,  either
before or after the  event,  and such  waiver  shall be the  equivalent  of such
notice. Waivers of notice by Certificateholders shall be filed with the Trustee,
but such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.

         In case,  by reason of the  suspension  of  regular  mail  service as a
result of a strike,  work stoppage or similar activity,  it shall be impractical
to mail notice of any event to  Certificateholders  when such notice is required
to be given  pursuant to any  provision  of this  Agreement,  then any manner of
giving such notice as shall be satisfactory to the Trustee shall be deemed to be
a sufficient giving of such notice.


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

                                       63
<PAGE>


         Section 11.05     Effect of Headings and Table of Contents.
         -------------     -----------------------------------------

         The Article and Section  headings  herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.

         Section 11.06     Successors and Assigns.
         -------------     -----------------------

         All covenants and agreements in this  Agreement by the Depositor  shall
bind its  successors and assigns,  whether so expressed or not.  Notwithstanding
the foregoing,  no party shall assign any of its rights under this Agreement, or
delegate any of its duties, except in accordance with the provisions of Sections
2.06, 7.10 and 8.02(o).

         Section 11.07     Separability.
         -------------     -------------

         In case any provision in this Agreement or in the Certificates shall be
invalid, illegal or unenforceable,  the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

         Section 11.08     Benefits of Agreement.
         -------------     ----------------------

         Nothing in this Agreement or in the  Certificates,  express or implied,
shall give to any Person, other than the parties hereto, the Certificateholders,
and any Paying Agent which may be appointed  pursuant to the provisions  hereof,
and any of their  successors  hereunder,  any benefit or any legal or  equitable
right, remedy or claim under this Agreement or under the Certificates.

         Section 11.09     Legal Holidays.
         -------------     ---------------

         In any  case in  which  the  date  of any  Payment  Date or the  Series
Termination  Date  of  any  Certificate  shall  not  be  a  Business  Day,  then
(notwithstanding any other provision of a Certificate or this Agreement) payment
of principal or interest  need not be made on such date,  but may be made on the
next  succeeding  Business  Day with the same force and effect as if made on the
nominal date of any such Series  Termination Date or Payment Date and,  assuming
such payment is actually  made on such  subsequent  Business  Day, no additional
interest  shall  accrue on the amount so paid for the period  from and after any
such nominal date.

         Section 11.10     Governing Law.
         -------------     --------------

         THIS  AGREEMENT AND EACH  CERTIFICATE  SHALL BE CONSTRUED IN ACCORDANCE
         -----------------------------------------------------------------------
WITH AND GOVERNED BY THE INTERNAL  LAWS OF THE STATE OF NEW YORK  APPLICABLE  TO
--------------------------------------------------------------------------------
AGREEMENTS MADE AND TO BE PERFORMED  THEREIN,  WITHOUT REGARD TO THE CONFLICT OF
--------------------------------------------------------------------------------
LAWS PROVISIONS OF ANY STATE.
-----------------------------

         Section 11.11     Counterparts.
         -------------     -------------

         This Agreement may be executed in any number of  counterparts,  each of
which so executed shall be deemed to be an original,  but all such  counterparts
shall together constitute but one and the same instrument.

         Section 11.12     Corporate Obligation.
         -------------     ---------------------

         No  recourse  may  be  taken,  directly  or  indirectly,   against  any
incorporator, subscriber to the capital stock, stockholder, employee, officer or
director of the  Depositor or of any  predecessor  or successor of the 

                                       64

<PAGE>


Depositor with respect to the Trust or under this  Agreement or any  certificate
or other writing delivered in connection herewith.
 
       Section 11.13     Compliance Certificates and Opinions.
       -------------     -------------------------------------

         Upon any application, order or request by the Depositor or the Servicer
to the Trustee to take any action  under any  provision  of this  Agreement  for
which a specific request is required under this Agreement,  the Depositor or the
Servicer,  as applicable,  shall furnish to the Trustee an Officer's Certificate
of the Depositor or the Servicer,  as  applicable,  stating that all  conditions
precedent,  if any,  provided  for in this  Agreement  relating to the  proposed
action have been complied with,  except that in the case of any such application
or request as to which the furnishing of a different certificate is specifically
required  by any  provision  of  this  Agreement  relating  to  such  particular
application or request, no additional certificate need be furnished.

         Every  certificate  or  opinion  with  respect  to  compliance  with  a
condition or covenant provided for in this Agreement shall include:

         (a) a  statement  that each  individual  signing  such  certificate  or
opinion  has read or has caused to be read such  covenant or  condition  and the
definitions herein relating thereto;

         (b) a brief  statement as to the nature and scope of the examination or
investigation   upon  which  the  statements  or  opinions   contained  in  such
certificate or opinion are based;

         (c) a  statement  that,  in the opinion of each such  individual,  such
individual has made such  examination or investigation as is necessary to enable
such  individual  to  express  an  informed  opinion  as to  whether or not such
covenant or condition has been complied with; and

         (d) a statement as to whether,  in the opinion of each such individual,
such condition or covenant has been complied with.


                                       65
<PAGE>



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


                                ALLEGIANCE FUNDING CORP. I, as Depositor


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


                                MANUFACTURERS AND TRADERS TRUST 
                                COMPANY, as Trustee

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

                                POINT WEST CAPITAL CORPORATION, as Servicer


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


<PAGE>



                                                                      EXHIBIT A
                                                                      ---------
                                                              to Trust Agreement
                                                              ------------------

                                     FORM OF
                                     -------   
                          STANDARD ESCROW INSTRUCTIONS
                          ----------------------------    


                          --------------- --, 199_


[Title Company]

              Re:      Loan  (the  "Loan")  from  Allegiance Capital, LLC  (the
                           "Lender") to [] (the "Borrower")

Ladies and Gentlemen:

                  This letter is being forwarded to you by the Borrower[, [other
Credit  Parties]]  and the Lender in connection  with the Loan.  Pursuant to the
written  authorization  from  the  Borrower  to the  Lender  (the  "Disbursement
Letter"), the Lender is sending to you, or will cause to be sent to you, by wire
transfer  of  immediately  available  federal  funds  (in  accordance  with wire
transfer instructions  previously supplied by you) an amount equal to ($       )
                                                                        -------
(the "Wired  Funds").  A copy of the  Disbursement  Letter is attached hereto as
Exhibit A. The Wired  Funds are being  delivered  to you to be held in trust for
payment as provided in the Disbursement Letter.

                  You are not  authorized  to  disburse  any or all of the Wired
Funds  unless  and  until  all  of  the  following  conditions  (the  "Threshold
Conditions") have been satisfied:

                  (a) You  hold in your  possession  each of the  documents  set
forth on Exhibit B attached hereto (collectively,  the "Credit Documents"), duly
executed by each of the respective parties thereto.

                  (b) You hold in your  possession  originals  of all  documents
required by Section [] of each Title Commitment  (except to the extent otherwise
permitted by the Lender);

                  (c) You have received  written  authorization  from the Lender
that you may disburse the Wired Funds.


                  If all of the foregoing  conditions are satisfied on or before
the close of business on         199   (the "Threshold  Date"),  then, on the
                        ----- --    --
earliest date on which (A) all such  conditions  have been fulfilled and (B) you
are able to satisfy the Title Company Conditions (as hereinafter  defined),  you
are hereby  authorized and directed to disburse the Wired Funds according to the
Disbursement Letter.  Notwithstanding anything to the contrary contained herein,
you may not disburse any or all of the Wired  Funds,  unless,  contemporaneously
with your  disbursement  of the Wired Funds,  you do both of the following  (the
"Title Company Conditions"):  (1) record, or cause to be recorded, each Mortgage
(as that term is  defined on Exhibit B attached  hereto,  a  "Mortgage")  in the
appropriate  recording  office  identified  on Exhibit B attached  hereto,  with
respect to the related real property  identified in such Mortgage(s) that is the
subject 

<PAGE>


(Title Company)
                 199
------------ --,    -
Page 2


of your Title Commitment(s), dated   , 199  (the "Title Commitment(s)");
                                   --     -
and (2) issue, in favor of the Lender,  the following  title insurance  policies
(collectively, the "Title Insurance Policies"):

                           (i)  [identify  title   insurance   policy  for  each
         separate  piece of real  property  that is the subject of a  Mortgage],
         such  policy  to  reflect  the lien of the  Lender  as the only lien or
         encumbrance  of any kind on such real  property,  other  than those set
         forth in Items [] of the [related] Title Commitment; and

                           (ii)  [identify  title  insurance   policy  for  each
         separate  piece of real  property  that is the subject of a  Mortgage],
         such  policy  to  reflect  the lien of the  Lender  as the only lien or
         encumbrance  of any kind on such real  property,  other  than those set
         forth in Items [] of the [related] Title Commitment.

                  Should all of the Threshold  Conditions not be satisfied on or
before the close of business on the Threshold Date and/or should you not be able
to comply with the Title  Company  Conditions on or before the close of business
on the  Threshold  Date,  you are to return (i) the Wired  Funds to the  Trustee
according  to wire  transfer  instructions  provided to you by the Lender or its
counsel, and (ii) the Credit Documents to the Lender.

                  Following  the  distribution  of the Wired  Funds,  you are to
deliver the Credit  Documents to  Manufacturers  and Traders  Trust Company (the
"Trustee"),  One M & T Plaza,  7th Floor,  Buffalo,  NY  14203-2399,  Attention:
           .  Within five (5) business  days of receipt of a recorded  Mortgage,
-----------
you are to forward such recorded  Mortgage to the Trustee at the above  address.
In addition,  within three (3) business days of the disbursement of Wired Funds,
you are to send  originals  of each of the Title  Policies to the Trustee at the
above address.

                  The instructions contained herein may not be altered, changed,
or  modified  in any way except by a writing  signed by the  Lender.  The Lender
reserves the right to amend or cancel these  instructions and  authorizations at
any time prior to the  recording  of the  Mortgages,  the  issuance of the Title
Policies,   the  delivery  to  the  Trustee  of  the  Credit  Documents  or  the
disbursement of the Wired Funds.

                  Please indicate your acceptance of the foregoing provisions by
signing this letter in the space  provided  below and returning a copy by fax to
the undersigned at 415-394-9471. Please note that, by signing this letter below,
you are  indicating  that you will hold and  disburse  the Wired Funds solely as
provided herein. In addition,  please note that,  notwithstanding the failure of
the Lender to receive a copy of this letter signed by you, your act of recording
any or all of the  Mortgages or  disbursing  any or all of the Wired Funds shall
constitute evidence of your agreement to comply with the foregoing instructions.


<PAGE>

(Title Company)
                 199
------------ --,    -
Page 3

                  Should you have any  questions  regarding the above or receive
any  contrary  instructions  from any other  person,  please do not  hesitate to
contact the undersigned at 415-394-5180.

                                                     Very truly yours,

                                                     ALLEGIANCE CAPITAL, LLC

                                                     By:
                                                     Name:
                                                     Title:

Acknowledged and Agreed:

[TITLE COMPANY]

By:
Name:
Title:

[BORROWER]

By:
Name:
Title:

[ADDITIONAL CREDIT PARTIES]


<PAGE>

                                                                      EXHIBIT B
                                                                     ---------
                                                             to Trust Agreement
                                                             ------------------

                    FORM OF INVESTMENT AND ASSUMPTION LETTER
                    ----------------------------------------

                           ALLEGIANCE FUNDING CORP. I
                     REVOLVING CERTIFICATES, SERIES       -1
                                                    ------

Allegiance Funding Corp. I (the "Company")
1700 Montgomery Street, Suite 250B
San Francisco, CA 94111

Manufacturers and Traders Trust Company
One M & T Plaza, 7th Floor
Buffalo,  NY  14203-2399


Ladies and Gentlemen:

         Terms used herein and not  otherwise  defined  shall have the  meanings
given to them in the Trust  Agreement,  dated as of August 1, 1998, by and among
the Depositor,  Point West Capital Corporation,  as servicer,  and Manufacturers
and Traders Trust  Company,  as trustee.  The  undersigned  hereby  certifies on
behalf of the Purchaser named below (the "Purchaser") as follows:

         1.  I,                ,  am  the  chief  financial  officer,  a  person
                 --------------
fulfilling an equivalent function or other executive officer of the Purchaser.

         [2.      I am familiar with the  provisions of Rule 144A ("Rule  144A")
under the  Securities  Act of 1933 (the "1933 Act").

                  (a)      The Purchaser is a "qualified institutional buyer," 
as defined in Rule 144A.

                  (b) The  Purchaser is aware that the Depositor may rely on the
         exemption from the  registration  requirements of the 1933 Act provided
         by Rule 144A.

                  (c) The  Purchaser  acknowledges  that the  Purchaser  has (i)
         received  such  information  regarding the  Allegiance  Capital Trust I
         Revolving  Certificates,  Series     -1 Class            Certificates,
                                          ----         ----------
         Class            Certificates,  Class            Certificates and Class
               ----------                      ----------
                    Certificates  (the  "Certificates")  as the  Purchaser  may
         ----------
         require  pursuant to Rule 144A or (ii) the Purchaser has determined not
         to request such information.]

         (2.      I am familiar with the  provisions of  Regulation D under the 
Securities  Act of 1933 (the "1933 Act").


<PAGE>

                  (a) The  Purchaser  is an  "accredited  investor"  within  the
         meaning of Rule  501(a)(1),  (2), (3), or (7) of Regulation D under the
         1933 Act.

                 (b) In the  normal  course  of the  Purchaser's  business  the
         Purchaser   invests  in  or   purchases   securities   similar  to  the
         Certificates,  has such  knowledge  and  experience  in  financial  and
         business matters that the Purchaser is capable of evaluating the merits
         and risks of its investment in the Certificates.

                  (c) The  Purchaser  is  capable  of  bearing  the  economic  
         risks of an  investment  in the Certificates.)

         3. The Purchaser is acquiring the  Certificates  for its own account or
the account of its  affiliated  entities for the purpose of investment or resale
under Rule 144A or any other  exemption from  registration  available  under the
1933 Act and not with a view to the distribution thereof.

         4. The Purchaser  understands  that it is the  expressed  intent of the
Depositor  that the  Certificates  are being  issued  only in  transactions  not
involving  any public  offering  within the meaning of the 1933 Act and that the
Certificates  will bear a legend  substantially  as set forth in the  applicable
form of the Certificate attached to the Supplement to Trust Agreement.

         5. The Purchaser has no present  intention of selling,  negotiating  or
otherwise  disposing  of  the  Certificates  (except  pursuant  to  Rule  144A);
provided, that it is understood that the disposition of the Purchaser's property
shall at all times be and  remain  within its  control  and  without  prejudice,
subject however,  to its right at all times to sell or otherwise  dispose of all
or any part of the  Certificates  in accordance with the Trust Agreement under a
registration  statement  under the 1933 Act,  or under the  exemption  from such
registration available under the 1933 Act.

         6. The Purchaser  represents to the Depositor that it is either (a) not
a "Benefit Plan  Investor" (as defined in 29 C.F.R.  '2510.3-101)  or any person
who is  directly  or  indirectly  purchasing  such  Certificates  or an interest
therein on behalf of, as named  fiduciary  of, as trustee of, or with assets of,
such a Benefit Plan  Investor or (b) the Trustee has been provided with evidence
that  should  establish  to the  satisfaction  of the  Trustee  that  either  no
"prohibited  transaction"  under ERISA or the Code will occur in connection with
the  Purchaser's  acquisition  and  holding  of the  Certificates  or  that  the
acquisition  and holding of the  Certificates  by the  Purchaser is subject to a
statutory or administrative exemption.

         7. The Purchaser represents to the Depositor that it is and will be the
beneficial  owner of the  Certificates  for federal  income tax purposes and (a)
that it is not classified as a partnership,  grantor trust or S Corporation  for
federal income tax purposes or (b) the value of the  Certificates  represents no
more than 50 percent  (50%) of the value of its assets.1 The  Purchaser  further
covenants that it will not cause the  Certificates  to be marketed on or through
an established securities market within the meaning of Section 7704(b)(1) of the
Code and acknowledges that transfers of a Certificate (including the granting of
any  participation  therein) can only be effected in  accordance  with the Trust
Agreement, that any attempted 


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



     1 (Or describe  other facts that, in  conjunction  with existing  facts re:
current Holders, Maintains publicly traded partnership exemption.)

<PAGE>


transfers in violation of such  provisions  shall be void and any such purported
transferee not recognized as by the Trust as a Holder for any purpose.

         8. [The Purchaser  acknowledges that no transfer can be made during the
Funding  Period  without the consent of the Depositor  and hereby  confirms it's
obligation  to make  Fundings  in  accordance  with  Article  Four of the  Trust
Agreement, and         of the Certificate Purchase Agreement,  dated           ,
               --------                                              ----------
among  the  Depositor  and  the  initial  purchaser  named  therein,  as if such
Purchaser were an original party to such agreement.)2

         The  representations  and warranties  contained herein shall be binding
upon  the  heirs,   executors,   administrators  and  other  successors  of  the
undersigned.  If  there is more  than one  signatory  hereto,  the  obligations,
representations,  warranties and agreements of the  undersigned are made jointly
and severally.

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

2 Required for transfers during the related Funding Period.

<PAGE>


         Executed at                                               , this 
                      -----------------------   -------------------        -----
day of            , 199  
      ------------     -

--------------------------------    ------------------------------
Purchaser's Name and Title (Print)  Signature of Purchaser

---------------------------------
Address of Purchaser

---------------------------------
Purchaser's Taxpayer Identification or
Social Security number

(Acknowledged and consented to:



--------------------------
Depositor]3






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

     3 Required for transfers during the related Funding Period.

<PAGE>




                                                        

                                                                       EXHIBIT C
                                                                       ---------
                                                              to Trust Agreement
                                                              ------------------


                             FORM OF AFI CERTIFICATE

                                             , 19
                              ---------------    --

         Pursuant to the Trust Agreement, dated as of August 1, 1998 (as amended
or modified from time to time, the "Trust Agreement"),  among Allegiance Funding
Corp.  I,  Manufacturers  and  Traders  Trust  Company  and Point  West  Capital
Corporation,  attached  hereto as Schedule I is a Loan Schedule,  which includes
information  regarding  the Loan  Assets  that are  hereby  assigned,  set over,
transferred, delivered and otherwise conveyed by the Depositor to the Trustee in
accordance with the Trust  Agreement.  Each capitalized term used herein and not
otherwise defined has the meaning assigned thereto in the Trust Agreement.

         Further, Allegiance Funding Corp. I hereby certifies:

         1.       no Default (other than a Servicing Advisor Default), Depositor
                  Event of Default,  Servicer Event of Default, Special Servicer
                  Event  of  Default,  Servicing  Advisor  Event of  Default  or
                  Funding  Termination  Event  exists or shall  result  from the
                  Funding;

         2.       the Loans to be funded are Eligible Loans and do not cause the
                  Loan Pool to violate the Pool Criteria;

         3.       after giving effect to such Funding,  the  applicable  Maximum
                  Series Amount shall not be exceeded;

         4.       if any Funded  Loan is subject to Existing  Indebtedness,  the
                  Depositor  will use the  proceeds  of the Funding to repay the
                  Existing   Indebtedness   and  will   obtain  a  release   and
                  extinguishment  of rights  from the  obligee of such  Existing
                  Indebtedness;

         5.       the Funding is at least equal to the Minimum Funding Amount 
                  for Series or Class, as applicable;

         6.       both before and after giving effect to such  Funding, the Pool
                  Performance Condition is met; and

         7.       it is not aware of any proposed or threatened downgrade in the
                  credit rating of any Rated Certificate.

                                      C-1

<PAGE>

                                       ALLEGIANCE FUNDING CORP. I


                                       By:
                                             ----------------------------
                                       Name: 
                                             ----------------------------
                                       Title: 
                                             ----------------------------

                                       MANUFACTURERS AND TRADERS
                                       TRUST COMPANY, as Trustee


                                        By:
                                             ----------------------------
                                        Name: 
                                             ----------------------------
                                        Title: 
                                             ---------------------------- 


                                      C-2


<PAGE>


                                   SCHEDULE I

                                  LOAN SCHEDULE






                                      C-3

<PAGE>




                                                      
                                                      
                                                                      EXHIBIT D
                                                                      ---------
                                                              to Trust Agreement
                                                              ------------------


FORM OF FUNDING REPORT
SERIES 19   -
         --   -
Depositor:  Allegiance Funding Corp. I


                                        Funding Date:
                                                     ----------------  
                                  Determination Date:
                                                     ----------------
                     Class ___ Maximum Series Amount:
                                                     ----------------       
                    [Class ___ Maximum Series Amount:                ]
                                                     ----------------  
                    Class ___ Minimum Funding Amount:
                                                     ----------------
                   [Class ___ Minimum Funding Amount:                 ]

                                                     ----------------
                            Class ___ Funding Amount:
                                                     ----------------
                           [Class ___ Funding Amount:                 ]
                                                     ----------------


Please see Schedule I attached hereto.

[With final Funding Report:

         A.     Please see AFI Certificate attached hereto as Schedule II.
         B.     Please see Company Certificate attached hereto as Schedule III.]


                                                ALLEGIANCE FUNDING CORP.

                                               Name:    
                                                        ------------------------
                                               Title:   
                                                        ------------------------
                                               Date:    
                                                        ------------------------

Acknowledged and Approved:

[CERTIFICATEHOLDER AGENT]

Name:    
         ------------------------ 
Title:   
         ------------------------
Date:    
         ------------------------

                                      D-1


<PAGE>


                           SCHEDULE I to EXHIBIT D to
                                 TRUST AGREEMENT


Exceptions to and deviations from the Standard Forms:

         Loan No.    :
                  --- 
         Loan No.    :
                  ---
         Loan No.    :
                  ---

Exceptions to and deviations from the Program Guidelines:

         Loan No.    :
                 ---
         Loan No.    :
                 ---
         Loan No.    :
                 ---

Updated Pool  concentrations  reflecting  compliance with (or exceptions to) the
Pool Criteria:

                                      D-2