THIRD AMENDED & RESTATEDAMENDMENT AND WAIVER AGREEMENT

                   THIS THIRD AMENDED & RESTATED AMENDMENT AND WAIVER AGREEMENT, dated as of November 15,2001 (this "Agreement"), is among ALLEGIANCE FUNDING I, LLC (the"Depositor"), MANUFACTURERS AND TRADERS TRUST COMPANY (the "Trustee"),and POINT WEST CAPITAL CORPORATION (the "Servicer") and is consented to by theCertificateholders named on the signature pages hereto.

RECITALS

                   WHEREAS (i) the Depositor, the Trustee and the Servicer are parties to that certain TrustAgreement, dated as of August 1, 1998 (as amended from time to time, and including allsupplements thereto, the "Trust Agreement"), and (ii) the Depositor, the Trusteeand the Servicer are parties to that certain Third Amended and Restated Supplement toTrust Agreement for Revolving Series 1998-1, dated as of April 14, 2000 (the "Series1998-1 Revolving Supplement"), pursuant to which the Depositor issued the AllegianceCapital Trust I Revolving Certificates, Series 1998-1 (the "98-1 RevolvingCertificates");

                   WHEREAS the Loan to Peavy & Brooks International, Inc. (the "PBI Loan") heldby theDepositor and the Loan to Southern Acquisitions, Inc. (the "SouthernLoan") held by the Depositor havebecome Defaulted Loans and have caused the Depositorto be in violation of certain provisions of theTrust Agreement;

                   WHEREAS the parties previously agreed to amend a provision of the Series 1998-1 RevolvingSupplement and to amend and waive certain provisions of the Trust Agreement on the termsand conditions set forth in the Amendment and Waiver Agreement dated as of December 15,2000 (the "Initial Waiver"), as modified by the Amended & Restated Amendmentand Waiver Agreement, dated as of April15, 2001 (the "First Amended Waiver"), asmodified by the Second Amended & Restated Amendmentand Waiver Agreement, dated as ofJuly 16, 2001 (the "Second Amended Waiver"; the Initial Waiver,together with theFirst Amended Waiver and the Second Amended Waiver, is sometimes hereinafter referred toas the "Existing Waiver");

                   WHEREAS the Scheduled Maturity of the 98-1 Revolving Certificates, as amended under theExisting Waiver, is September 17, 2001;

                   WHEREAS, pursuant to Section 9.02 of the Trust Agreement, the Depositor, the Servicer andthe Trustee may amend, modify or waive the provisions thereof with the prior writtenconsent of the Holders of each Outstanding Certificate and may amend, modify or waive theprovisions of the Series 1998-1

                   Revolving Supplement with the prior written consent of the Holders of the 98-1 RevolvingCertificates; and WHEREAS the parties have agreed to further amend a provision of theSeries 1998-1 Revolving Supplement and to amend and waive certain provisions of the TrustAgreement on the terms and conditions set forth in this Agreement;

                   NOW, THEREFORE, the parties hereto agree as follows:

                   1.      Definitions.  Each capitalized term used and nototherwise defined herein, including those used in the Recitals, has the meaning set forthin the Trust Agreement.

 

                   2.      Amendments to Series 1998-1 Revolving Supplement.  The definition of "Scheduled Maturity" in the Series 1998-1 RevolvingSupplement is hereby amended by deleting the date "December 15, 2000" thereinand substituting in its place the date "December 15, 2001". Notwithstanding theforegoing, the increase in interest rate that became effective on February 15, 2001 underSection 5 of the 1998-1 Revolving Supplement (as amended by the Initial Waiver) shallremain in effect.

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

                           (a)      Clause (b) of the definition of "AdjustmentAmount". The words "within sixty (60) days from the date the Loan became aDefaulted Loan" in clause (b) of the definition of"Adjustment Amount" arehereby deleted and replaced with the words "on or before February 15, 2002"; and

                           (b)     Clause (c) of the definition of "Adjustment Amount".     The words "within one hundred twenty (120) days from thedate of receipt of such letter of intent" in clause (c) of the definition of"Adjustment Amount" are hereby deleted and replaced with the words "on orbefore April 15, 2002".

                           (c)      Section 1.03(b).     Section1.03(b) is hereby amended to provide that Recoveries in respect of the PBI Loan or theSouthern Loan shall be applied first to reimburse the Reserve Account for any RecoveryExpenses allocable to such PBI Loan or Southern Loan and previously withdrawn from theReserve Account.

                           (d)     Section 5.03(d).     Section 5.03(d) ishereby amended to allow disbursement of funds from the Reserve Account on eachDistribution Date to reimburse the Servicer or the Special Servicer, as applicable, forRecovery Expenses allocable to the PBI Loan and/or Southern Loan if (i) theCertificateholder Agent has provided to the Depositor, the Servicer and the SpecialServicer written consent to such disbursement and (ii) the remaining balance in theReserve Account after such disbursement would equal or exceed the Reserve Account FloorAmount. The Depositor, the Servicer or the Special Servicer, as applicable, shall providea written request for such disbursement to the Certificateholder Agent by the 3rd day ofthe calendar month in which such disbursement is to be made (or the next Business Day ifsuch day is not a Business Day) and the Certificateholder Agent shall provide writtenconsent or refusal to consent no later than the 10th day of such calendar month (or thenext Business Day if such day is not a Business Day) and, assuming such request is timelydelivered, the Certificateholder Agent's approval shall not be unreasonably withheld. TheCertificateholder Agent's written consent shall be deemed to be direction to the Trusteeto make such disbursement pursuant to Schedule 9 of the Servicing Report.

                           (e)      Section 6.01.     Section 6.01 ishereby amended to delete the period at the end of subparagraph (j) thereof and replace itwith a semi-colon and to add the following new clause at the end thereof:

                           (k)      the failure of the Special Servicer to provide to theCertificateholders and the Certificateholder Agent weekly reports as to the status of the                              PBI Loan and the Southern Loan, including a comparison of actual results to the projectedtimeline for completion of the workout of each                              such Defaulted Loans indicated on Exhibit A attached to that certain Third Amended &Restated Amendment and Waiver Agreement, dated as                              of November 15, 2001, among the Depositor, the Trustee and the Servicer (as consented toby the

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                                   Certificateholders), so long as such Loans are included in the Trust Estate and have notbeen re-classified as performing Loans or Liquidated Loans. 

                   4.              Waivers.     The Trustee and the Certificateholders hereby waive through butnot beyond February 15, 2002, any Default by the Depositor under Section 6.01(f) of theTrust Agreement, provided that a Depositor Event of Default under Section 6.01(f) shall bedeemed to exist on and after February 16, 2002 if the 98-1 Revolving Certificates that areRated Certificates have not been paid in full on or before February 15, 2002.

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

                   6.              GoverningLaw. This Agreement shall be governed by and construed in accordance with the internallaws of the State of New Yor k. 

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

                   8.              Ratification;Consent.  Except as expressly modified and superseded by this Agreement, each ofthe Trust Agreement and the Series 1998-1 Revolving Supplement is ratified and confirmedin all respects and shall continue in full force and effect. By their execution anddelivery of the consent hereto, each of the Certificateholders authorizes and directs theTrustee to execute and deliver that certain Third Amendment to Servicing Agreement, datedas of November 15, 2001 (the "Servicing Amendment"), among the Depositor, theTrustee, the Servicer, Allegiance Capital, LLC, as the Special Servicer, and ForesightAnalysts, Inc., as the Servicing Advisor, a final copy of which is attached hereto asExhibit B.

 

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| ALLEGIANCE FUNDING 1 llc, , as    the DepositerBy:             /s/ Michael W. McDermittName:    Michael W. McDermittTitle:        Vic    President & Secretary
 

MANUFACTURERE AND TRADERS TRUST    COMPANY, as the TrusteeBy:              /s/ Russell T. WhitleyName:     Russell T. WhitleyTitle:            Assitant Vice President
 

POINT WEST CAPITAL CORPORATION,      as the ServicerBy:             /s/ John Ward RotterName:    John Ward RotterTitle:           Chief Financial Officer**Consented and Agreed:**
Each of the Certificateholders aurhorizes and directs the Trustee to execute theforegoing Third Amended & Restated Amendment and Waiver Agreement and the ServicingAmendment referenced therein.

TICE & CO., as registered    owner of the 
UNITED OF OMAHA LIFE INSURANCEClass A-R Certificates
COMPANY
By:             /s/ Brian D.  HuntBy:        /s/    Edwin H. Garrison Jr.Its::            Partner-Tice & CoIts:            First Vice President
 

TICE & CO., as registered    owner of the 
NATIONWIDE LIFE INSURANCEClass B-R CertificatesCOMPANY
By:             /s/ Brian D.  HuntBy:        /s/    Mark W. PoeppelmanIts::            Partner-Tice & CoIts:             Associate Vice President
 

TICE & CO., as registered    owner of the 
LIBERTY LIFE INSURANCE COMPANYClass C-R Certificates(Certificates held in the nominee name HARE &    CO.)
By:             /s/ Brian D.  HuntBy:             /s/ Adam EmersonIts::            Partner-Tice & CoIts:            Authorized Officer
 

ALLEGIANCE FUNDING 1, LLC, as
TICE & CO.,  registered    owner of the Class Cregistered owner of the Class D-R CertificatesCertificates
By:             /s/ Michael W. McDermitt
By:             /s/ Brian D.  HuntIts::            Vice President & Secretary      Its::            Partner-Tice & Co
 

PACIFIC LIFE INSURANCE COMPANY
TICE & CO.,       registered owner of the Class DCertificates
By:             /s/ Cathy Schwartz
By:             /s/ Brian D.  HuntIts::             Asst. Vice PresidentIts::            Partner-Tice & Co
By:             /s/ Diane W. DalesIts::             Asst. Secretary
TICE & CO.,       registered owner of the Class ECertificates
By:             /s/ Brian D.  HuntIts::            Partner-Tice & Co** 

 

EXHIBIT A

to

THIRD AMENDED & RESTATED

AMENDMENT AND WAIVER AGREEMENT

 

Nichols Family Services, LLC

Timeline for Disposition- 
April - May -    June, 2001
- Complete business renewal activities;

- Get bookkeeping established;

- Account for pre-need assets & liabilities;

- Establish budget and fr ee cash flow expectations;

- Decide whether to hi re a broker for sale process;

- Collect info for sales prospectus;

- Prepare sales prospectus;

- Begin identifying possible buyers

- Business begins generating free cash flow
- 
June – July,    2001
- Marketing Process 

- Business continues generating free cash flow
- 
August, 2001
- Complete marketing process

- Select buyer

- Negotiate and Enter into LOI

- Business continues generating free cash flow
- 
September -    October, 2001
- Complete sale process

- Possible foreclosure and/or negotiation with Specialized Commercial  Lending (junior mortgage

holder) and/or the Nichols (former owners/ unsecured creditors), also  Brown-Service (landlord in

main funeral home)

- September 30 October 30: close sale 

 

 

 
**Southern Family Funeral Care, LLCTimeline for Disposition- 
April – May    – June – July, 2001
- Get bookkeeping established;

- Accounting for pre-need assets & liabilities;

- Establish budget and free cash flow expectations;

- Decide whether to hire broker;

- Collect info for sales prospectus;

- Prepare sales prospectus;

- Begin identifying possible buyers
- 
July –    August – September – October, 2001
- Marketing process

- Business generating free cash flow
- 
October –    November – December, 2001
- Complete marketing process;

- Select buyer, negotiate and enter into LOI
- 
December –    January – February, 2002
- Complete sale process;

- Possible foreclosure and/or negotiation with junior creditors (Kents  in respect of Kent FHs/ Morrows in respect of    Pineview Memory Gardens).

- January 30: close sale

 
** 

EXHIBIT BtoTHIRD AMENDED & RESTATEDAMENDMENT AND WAIVER AGREEMENT**
Please see attached.

 

 

 

 
**THIRD AMENDMENT TO SERVICING AGREEMENT**
                   THIS THIRD AMENDMENT TO SERVICING AGREEMENT, dated as of November 15, 2001 (this"Agreement"), is among ALLEGIANCE FUNDING I, LLC (the "Depositor"),MANUFACTURERS AND TRADERS TRUST COMPANY (the "Trustee"), POINT WEST CAPITALCORPORATION (the "Servicer"), ALLEGIANCE CAPITAL, LLC ("SpecialServicer"), and FORESIGHT ANALYSTS, INC. (the "Servicing Advisor").
**RECITALS**
                   WHEREAS the Servicer, the Special Servicer, the Servicing Advisor, the Depositor and theTrustee are parties to that certain Servicing Agreement, dated as of August 1, 1998 (asamended by the Consent and Amendment, dated as of June 4, 1999, and the Fourth Amendmentto Trust Agreement & Second Amendment to Servicing Agreement, dated as of August 1,2001, the "Servicing Agreement"), whereby the Servicer, the Special Servicer andthe Servicing Advisor each perform certain duties with respect to servicing the Loans onbehalf of the Depositor and the Certificateholders;

                   WHEREAS the parties have agreed to amend the Servicing Agreement on the terms andconditions contained herein; and

                   WHEREAS, pursuant to Section 7.02 of the Servicing Agreement, the Depositor, the Servicer,the Special Servicer, the Servicing Advisor and the Trustee may amend, modify or waive theprovisions of the Servicing Agreement with the prior written consent of the Holders of 51%of each affected Class ofRated Certificates; 

                   NOW, THEREFORE, the parties hereto agree as follows:

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

                   2.          Amendments to Servicing Agreement.

                               (a)          Section 3.02(b). Section3.02(b) of the Servicing Agreement is hereby amended to add a new sub-clause (viii)thereto at the end                    thereof as follows:

                                            (viii) The Special Servicer shall, promptly upon becoming aware of any material fact ormaterial development concerning (w) any                                 Defaulted Loan, (x) any Delinquent Loan, (y) any Loan that the Special Servicer at suchtime reasonably believes could reasonably be                                 expected to become a Delinquent Loan or a Defaulted Loan or (z) any underperforming Loan,provide written notice to the Certificateholder                                Agent specifying such material fact or material development.

                               (b) Section 3.16. Each of the Depositor, the Servicer, the Special Servicer, the ServicingAdvisor, the Trustee and the Certificateholders                    hereby agree that, notwithstanding anything to the contrary contained in the ServicingAgreement, including, without limitation, Section 3.16 thereof and                    Exhibit F thereto, effective on and after March 15, 2001, each of the Servicer and theSpecial Servicer shall use its best efforts to obtain and/or keep in                    place the insurance required under Section 3.16 of the Servicing Agreement and Exhibit Fthereto; provided that, so long as the Servicer and the                    Special Servicer use such best efforts, no Servicer Default, Servicer Event of Default,Special Servicer Default or Special Servicer Event of Default

 

 

                   shall be deemed to occur by virtue of the Servicer and/or the Special Servicer, asapplicable, being unable to comply with the requirements contained in                    Section 3.16 of the Servicing Agreement and Exhibit F thereto; provided further that theforegoing shall in no way diminish or relieve the Servicer, the                    Special Servicer and the Servicing Advisor, as applicable, from any of their otherrespective duties and obligations as set forth in the Servicing                    Agreement.

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

                   4. Governing Law.     This Agreement shall be governed by andconstrued in accordance with the internal laws of the State of New York.

                   5. General.     This Agreement and all the provisions hereofshall be binding upon and inure to the benefit of the parties hereto and their respectivesuccessors and permitted assigns. This Agreement may be executed in one or morecounterparts, all of which taken together shall constitute one instrument. Delivery of anexecuted counterpart of a signature page to this Agreement by telecopier shall be aseffective as delivery of a manually executed counterpart of this Agreement.

                   6. Ratification.     Except as expressly modified andsuperseded by this Agreement, the Servicing Agreement is ratified and confirmed in allrespects and shall continue in full force and effect.

                   7. Effectiveness.     This Agreement shall become effectiveupon (a) the execution and delivery of a counterpart hereof by each of the parties heretoand (b) the execution and delivery by the Certificateholders of their consent to thatcertain Third Amended & Restated Amendment and Waiver Agreement, dated as of November15, 2001, among the Depositor, the Trustee and the Servicer.

 

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