Document:

exhibit 10.19 Supplemental to Trust AA 98-1

SUPPLEMENT TO

TRUST AGREEMENT

FOR

REVOLVING SERIES 1998-1

                   
This Supplement to Trust Agreement for Revolving Series 1998-1 (as amended or modified
from time to time, this "Supplement"), 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 (the
"Trustee"), and Point West Capital Corporation, as servicer, a Delaware
corporation (the "Servicer").

                   
This Supplement incorporates by reference all of the provisions of the Trust Agreement
(the "Trust Agreement"), dated as of August 1, 1998, among the Depositor, the
Servicer and the Trustee entered into in connection with the transactions described below.

                   
The Depositor has duly authorized the execution and delivery of this Supplement to provide
for the issuance of the Allegiance Capital Trust I Revolving Certificates, Series 1998-1
(the "98-1 Revolving Certificates"), which shall consist of the Class A-R
Revolving Certificates, Series 1998-1 (the "98-1 Class A-R Certificates")
in an aggregate principal amount not to exceed $20,950,000, Class B-R Revolving
Certificates, Series 1998-1 (the "98-1 Class B-R Certificates") in an aggregate
principal amount not to exceed $3,300,045, Class C-R Revolving Certificates, Series 1998-1
(the "98-1 Class C-R Certificates") in an aggregate principal amount not to
exceed $2,100,000, and Class D-R Revolving Certificates, Series 1998-1 (the "98-1
Class D-R Certificates") in an aggregate principal amount not to exceed $3,650,000,
each issuable as provided in the Trust Agreement. This Series of Certificates is hereby
designated as a "Revolving Series" under the Trust Agreement. The Class A-R
Certificates, Class B-R Certificates and Class C-R Certificates have initial credit
ratings from the Rating Agency of A, BBB and BB, respectively, and the Class D-R
Certificates are not rated. The Loan Schedule listing the Loans conveyed to the Trustee on
the Delivery Date for this Series is attached hereto as Schedule A. Pursuant to Section
2.02 of the Trust Agreement, this Supplement sets forth the following additional terms
applicable to this Series of Certificates.

Section 1.
             Definitions.

                   
"Applicable Rate Spread": For each of the Class A-R, Class B-R and Class C-R
Certificates within this Series, the amount specified below (or as otherwise adjusted
pursuant to Section 5 hereof):

                           
Class A-R = 2.00% per annual

                           
Class B-R = 2.80% per annum

                           
Class C-R = 5.50% per annum

                   
"Certificate Interest Rate": (a) For the Class A-R Certificates in this Series,
a per annum rate equal to the LIBOR Rate plus the Applicable Rate Spread for such Class, provided
that such Certificate Interest Rate shall not exceed the Maximum Interest Rate; (b) for
the Class B-R and C-R Certificates in this Series, respectively, the rate that provides a
bond equivalent yield equal to the sum of the Applicable Rate Spread for such Class plus
the Treasury Rate for such Class (as reset for each Funding Date for such Class), which
computation shall have been approved in writing by the Certificateholder Agent; and (c)
for the Class D-R Certificates in this Series, 0.0%.

                   
"Class A-R Certificate": Any Certificate of this Series designated as a
Class A-R Certificate, substantially in the form attached hereto as Exhibit A, and
which is Outstanding as of any date.

1

                   
"Class B-R Certificate": Any Certificate of this Series designated as a
Class B-R Certificate, substantially in the form attached hereto as Exhibit B, and
which is Outstanding as of any date.

                   
"Class C-R Certificate": Any Certificate of this Series designated as a
Class C-R Certificate, substantially in the form attached hereto as Exhibit C, and
which is Outstanding as of any date.

                   
"Class D-R Certificate": Any Certificate of this Series designated as a
Class D-R Certificate, substantially in the form attached hereto as Exhibit D, and
which is Outstanding as of any date.

                   
"Delivery Date": August 19, 1998.

                   
"Draw Fee": With respect to any Funding, an amount equal to the product of
(i) 0.0010 and (ii) the Funding Amount for such Funding that is attributable to
any Rated Certificates of this Series.

                   
"Excess Funding Amount": With respect to any Funding Date, if the requested
Funding Amount (a) would, under Section 2 hereof, cause the Outstanding Principal
Amount of a Class of Certificates in this Series (other than the Class A-R Certificates)
to equal the Maximum Series Amount for such Class but (b) would not be in an amount
sufficient to also permit a Funding in the amount of the Minimum Funding Amount for the
next Class of Certificates to be funded pursuant to Section 2 hereof, the amount by which
the requested Funding Amount exceeds the Maximum Series Amount for the Class of
Certificates referenced in clause (a) of this definition.

                   
"Funding Termination Event": The earlier to occur of (a) the cumulative Funding
of Loans having an aggregate Loan Balance of $60,000,045 and (b) the occurrence of a
Depositor Event of Default, Servicer Event of Default or Special Servicer Event of Default
that has not been cured or waived within thirty (30) days after written notice thereof.

                   
"Initial Funding Amount": For each of the Class A-R, Class B-R, Class C-R and
Class D-R Certificates within this Series, the amount specified below:

  
    
      Class A-R = $0.0

      Class B-R = $0.0

      Class C-R = $0.0

      Class D-R = $3,650,000

    

  

                   
"Initial Payment Date": October 15, 1998.

                   
"LIBOR Rate": With respect to each Accrual Period, a per annum interest rate
equal to the rate for London interbank offered quotations for one-month Eurodollar
deposits determined by the Servicer for such Accrual Period as follows:

  
    (a) On each Reset Date, the Servicer will determine the LIBOR Rate on
    the basis of the rate for deposits in U.S. Dollars for a period of one month that appears
    on Bloomberg MMR2 or, if unavailable, Telerate Page 3750, as of 11:00 a.m. (London time)
    on such Reset Date.

    (b) If such rate does not appear on Telerate Page 3750 or Bloomberg
    MMR2, the rate for such Reset Date will be determined on the basis of the rates at which
    deposits in U.S. Dollars are offered by the Reference Banks at approximately 11:00 a.m.
    (London time) on such date to prime banks in the London interbank market for a period of
    one month commencing on that Reset Date. The 

    2

    Servicer will request the principal London office of each of the
    Reference Banks to provide such a quotation. If, on any Reset Date: (i) at least two
    Reference Banks provide quotations when requested, the LIBOR Rate for such Reset Date will
    be the arithmetic mean of the quotations so received; or (ii) only one or none of the
    Reference Banks provides such a quotation, the LIBOR Rate will be the arithmetic mean of
    the offered rates quoted by major banks in New York City selected by the Servicer at
    approximately 11:00 a.m. (New York City time) on such Reset Date for loans to leading
    European banks in U.S. Dollars for a period of one month commencing on that Reset Date.

    (c) If, on any Reset Date, the LIBOR Rate cannot be calculated pursuant
    to one of the above methods, the LIBOR Rate for such Reset Date shall be the rate as most
    recently determinable under such methods.

  

                   
"Maximum Interest Rate": A per annum rate for the Class A-R Certificates that is
derived from its pro rata share of the Series Percentage of interest due on the Loans less
the Series Percentage of Scheduled Expenses, with such pro ration based upon the relative
rate at which interest otherwise accrues among Classes of this Series.

                   
"Maximum Series Amount": $30,000,045, allocated to each Class of
Certificates in this Series as follows (or as otherwise adjusted pursuant to Section 4
hereof):

  
    
      Class A-R = $20,950,000

      Class B-R = $ 3,300,045

      Class C-R = $ 2,100,000

      Class D-R = $ 3,650,000

    

  

                   
"Minimum Funding Amount": The amount specified below for each Class of
Certificates in this Series:

  
    
      Class A-R = $ 1,000,000

      Class B-R = $ 3,300,045

      Class C-R = $ 2,100,000

      Class D-R = $ 1,000

    

  

provided that: (a) with respect to the final funding prior to
issuance of any Term Certificates, the Minimum Funding Amount for the Class A-R
Certificates shall be $100,000; and (b) the Minimum Funding Amount for each Class of
Certificates in this Series shall be as otherwise adjusted pursuant to Section 4 hereof.

                   
"Non-Usage Fee": With respect to each Accrual Period through the Funding
Termination Date, an amount, payable to Warehouse Line Advisors, Inc. to the account
specified in Annex 2 to the Certificate Purchase Agreement, equal to the product of
(a) 0.0015 per annum and (b) the positive difference between $26,350,045 and the
average Outstanding Principal Amount of all Certificates of Classes A-R, B-R and C-R in
this Series during such Accrual Period.

                   
"Scheduled Funding Termination Date": August 31, 1999.

                   
"Scheduled Maturity": With respect to any Class A-R, Class B-R or Class C-R
Certificate, September 15, 1999.

3

 

                   
"Series Termination Date": For each of the Class A-R, Class B-R, Class C-R and
Class D-R Certificates in this Series, the date specified below:

  
    
      Class A-R = July 15, 2019

      Class B-R = July 15, 2019

      Class C-R = July 15, 2019

      Class D-R = July 15, 2019

    

  

                   
"Swap Agreement": Means the ISDA Master Agreement, dated as of August 1,1998,
along with the related Schedule, dated as of August 1, 1998 and the Confirmation dated as
of August 1,1998, between Point West Capital Corporation and the Trust.

                   
"Transaction Documents Date": As of August 1,1998.    

                   
"Treasury Rate": With respect to either the Class B-R and Class C-R
Certificates, on the date three (3) Business Days prior to any Funding Date for such
Class, a per annum rate equal to the bond equivalent yield on actively traded U.S.
government securities with a one year maturity as set forth on page "USD" of the
Bloomberg Financial Markets Screen (or if not available, any other nationally recognized
trading screen reporting on-line intra-day trading in United States government securities)
at 11:00 a.m. (New York time) on such date of determination, or in the event no such
nationally recognized trading screen is available, the arithmetic mean of the yields for
the two columns under the heading "Week Ending" published in the Federal Reserve
H.15 Statistical Release under the caption "Treasury Constant Maturities" for
one (1) year maturities. 

Section 2. Sequence for Fundings.

                   
Holders of Certificates in this Series shall provide Fundings under this Series in
sequence, by Class, in reverse order of alphabetical designation such that no Class in
this Series shall be obligated to make a Funding under Section 4.05 of the Trust Agreement
unless all subordinated Classes in this Series have an Outstanding Principal Amount
(taking into account any Fundings by such subordinated Class on such Funding Date) equal
to the Maximum Series Amount for such Class; provided that, on any Funding Date,
the Excess Funding Amount, if any, shall be funded by and allocated to the Class D-R
Certificates, though such Excess Funding Amount shall not change the Maximum Series Amount
for such Class; provided further that, on the next Funding Date, the Holders
of Certificates in the applicable Class of this Series then obligated to make a Funding
shall first fund an amount equal to the Excess Funding Amount then held by the Holders of
the Class D-R Certificates. 

                   
On each Funding Date, all Draw Fees shall be paid as provided in the applicable
Certificate Purchase Agreement(s).

Section 3. Distributions.

                   
Subject to the adjustments provided for in Section 5.02(c) of the Trust Agreement, on
each Payment Date, the Trustee shall withdraw all funds then in the Distribution Account
for such Series and shall make the following disbursements in the following order of
priority (in accordance with the provisions of and instructions on the monthly Servicer
Report):

                   
(a) to pay the interest accrued as of that Payment Date on all outstanding Class A-R
Certificates of this Series and any overdue interest;

4

                   
(b) to pay the interest accrued as of that Payment Date on all outstanding Class B-R
Certificates of this Series and any overdue interest;

                   
(c) to pay the interest accrued as of that Payment Date on all outstanding Class C-R
Certificates of this Series and any overdue interest;

                   
(d) to pay any Non-Usage Fees then due;

                   
(e) to the extent of the Series Percentage of any Interest Collections in excess of
Scheduled Expenses and amounts distributed pursuant to clauses (a) - (d) above, to deposit
into the Reserve Account an amount equal to the Series Percentage of the amount necessary
to bring the balance therein to an amount equal to the Reserve Account Required Balance;

                   
(f) to the extent of any remaining Series Collections, to pay to the Class A-R
Certificateholders of this Series an amount equal to the Principal Distribution Amount
allocable this Series, to be applied to the payment of the Outstanding Principal Amount of
such Certificates until such Outstanding Principal Amount is repaid in full;

                   
(g) to the extent of any remaining Series Collections, to pay to the Class B-R
Certificateholders of this Series an amount equal to the Principal Distribution Amount
allocable this Series (and not already distributed pursuant to clause (f) above), to be
applied to the payment of the Outstanding Principal Amount of such Certificates until such
Outstanding Principal Amount is repaid in full;

                   
(h) to the extent of any remaining Series Collections, to pay to the Class C-R
Certificateholders of this Series an amount equal to the Principal Distribution Amount
allocable this Series (and not already distributed pursuant to clauses (f) and (g) above),
to be applied to the payment of the Outstanding Principal Amount of such Certificates
until such Outstanding Principal Amount is repaid in full;

                   
(i) to pay to the Class A-R Certificateholders an amount equal to that portion of the
Certificate Interest Rate that would have otherwise accrued with respect to such Class in
respect of a prior Payment Date but for the application of the Maximum Interest Rate, to
the extent not already paid on a prior Payment Date;

                   
(j) to pay to the Trustee, the Servicer, the Special Servicer and the Servicing Advisor
any other amounts due to them as expressly provided in the Trust Agreement or in the
Servicing Agreement, including Recovery Expenses not previously reimbursed and deferred
Servicer Fees, Special Servicer Fees, and Servicing Advisor Fees not otherwise paid
pursuant to any Supplement or other Transaction Document;

                   
(k) upon the occurrence of a Depositor Event of Default, an amount sufficient to reimburse
the Trustee and the Certificateholders for any expenses incurred by them in enforcing
remedies available under Section 6.02 of the Trust Agreement; and

                   
(l) to pay any and all remaining funds to the Holders of the Class D-R Certificates and,
if no such Certificates are then Outstanding, to the Depositor.

 

5

Section 4.    Right to Cause Prepayments; Adjustment of
Maximum Series Amounts and Minimum Funding Amounts.

                   
Notwithstanding any other provision of the Trust Agreement or the Certificates to the
contrary, the Depositor shall have the option to cause the Trust to prepay, without
premium or penalty, principal on any Outstanding Class of 98-1 Revolving Certificates on a
dollar for dollar basis with the net proceeds of the issuance of a Series of Term
Certificates, with such net proceeds being used to prepay all 98-1 Revolving Certificates
by Class in reverse order of issuance; provided that no such prepayment of 98-1
Revolving Certificates shall be permitted unless all Rated Certificates are prepaid in
full. Notwithstanding such prepayment, such 98-1 Revolving Certificates shall remain
Outstanding and additional Fundings may be made under such Certificates in accordance with
Article Three of the Trust Agreement. Following any such prepayment in connection with the
issuance of a Series of Term Certificates: (a) the Maximum Series Amount for each Class of
Certificates in this Series shall be adjusted from time to time to the level required by
the Rating Agency to maintain the respective rating on each such Class of Certificates; provided
that in no event shall the aggregate Maximum Series Amount of $30,000,045 for all Classes
be exceeded; and (b) following such adjustment, the Minimum Funding Amount for the Class
B-R and Class C-R Certificates shall be adjusted upward or downward, as appropriate.
Notwithstanding the foregoing, the Maximum Series Amounts and Minimum Funding Amounts
shall not be increased without the consent of the Holders of Certificates in the relevant
Class, and the Certificateholder Agent shall use its best efforts to obtain any required
approvals. 

                   
In addition, on any Funding Date: (i) the Class D-R Certificates may be prepaid, without
premium or penalty, in the amount of any Excess Funding Amount being funded on such date
by the Holders of Rated Certificates; and (ii) the Maximum Series Amount for the Class D-R
Certificates shall be increased if required by the Rating Agency to maintain the rating of
any Certificates of this Series in connection with a specific Funding that involves Loans
that are permitted to deviate from the Program Guidelines or the Pool Criteria.

                   
The parties agree that the aggregate amount of each Funding under a Term Series shall be
at least $15,000,000.

Section 5. Increase in Interest Rate.

                   
Notwithstanding the definition of Certificate Interest Rate set forth above, if any
Class A-R, Class B-R or Class C-R Certificate in this Series is not repaid by
its Scheduled Maturity, then, for any Accrual Period commencing on or after such Scheduled
Maturity, the Certificate Interest Rate on such Certificate shall be increased by 1.00%.

Section 6. Limitation of Transfer and Exchange of Class D-R
Certificates.

So long as any Rated Certificates are Outstanding, the Depositor shall
maintain legal and beneficial ownership of at least 51% of the Outstanding Principal
Amount of the Class D-R Certificates, unless otherwise agreed to by the Controlling
Holders.

Section 7. Reserve Account Deposit.

                   
On or prior to the initial Funding Date for this Series, the Depositor shall deposit $
250,000 into the Reserve Account for investment and disbursement in accordance with
Section 5.03 of the Trust Agreement.

6

Section 8. Minimum Denominations

                   
The Certificates of this Series shall be issuable in minimum denominations greater than
$100,000 which denominations shall be, in the case of the Class A-R Certificates, integral
multiples of $500, in the case of the Class B-R and Class C-R Certificates, integral
multiples of $105, and in the case of the Class D-R Certificates, integral multiples of
$100. 

Section 9. General Provisions.

                   
As supplemented by this Supplement, the Trust Agreement is in all respects ratified and
confirmed and the Trust Agreement as so supplemented shall be read, taken and construed as
one and the same instrument. In the event that any term or provision contained herein
shall conflict with or be inconsistent with any term or provision contained in the Trust
Agreement, the terms and conditions of the Supplement shall be controlling.

                   
This Supplement 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.

                   
This Supplement 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.

7

 

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

 

	ALLEGIANCE FUNDING CORP. 1, as
    Depositer

	
	By:
             /s/ Alan B. Perper
	

    
	Name:    Alan B. Perper
	Title:       
    President

 

	MANUFACTURERE AND TRADERS TRUST
    COMPANY, as Trustee

	
	By:
              /s/ Russell T. Whitley
	

    
	Name:     Russell T. Whitley
	Title:
            Assitant Vice President

 

	POINT WEST CAPITAL CORPORATION,
      as Servicer

	
	By:
             /s/ Alan B. Perper
	

    
	Name:    Alan B. Perper
	Title:       
    President

 

 

 

EXHIBIT A

 

FORM OF CLASS A-R REVOLVING CERTIFICATE

THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS IN RELIANCE ON EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND SUCH STATE
SECURITIES LAWS. THIS CERTIFICATE MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS SUCH RESALE, TRANSFER, PLEDGE OR HYPOTHECATION (A) IS MADE IN
ACCORDANCE WITH SECTION 2.06 OF THE TRUST AGREEMENT REFERRED TO HEREIN AND (B) IS
MADE (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
(ii) IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS OR (iii) TO A PERSON WHO THE TRANSFEROR
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT WHO IS AWARE THAT THE RESALE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A. NEITHER ALLEGIANCE FUNDING CORP. I (THE "DEPOSITOR") NOR
MANUFACTURERS AND TRADERS TRUST COMPANY, AS TRUSTEE (THE "TRUSTEE"), IS
OBLIGATED TO REGISTER THE CERTIFICATES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAWS. IN THE EVENT THAT A TRANSFER OF A CLASS A-R CERTIFICATE IS TO BE MADE,
THE PROSPECTIVE TRANSFEREE SHALL DELIVER AN INVESTMENT AND ASSUMPTION LETTER IN THE FORM
REQUIRED UNDER THE TRUST AGREEMENT AND, IF THE TRUSTEE SO REQUESTS, AN OPINION OF COUNSEL
TO THE EFFECT THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT
OR ANY APPLICABLE STATE SECURITIES LAWS.

DUE TO THE PROVISIONS FOR FUNDINGS AND FOR THE PAYMENT OF PRINCIPAL
CONTAINED HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE ON ANY PARTICULAR
DATE MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. ANYONE PURCHASING THIS
CERTIFICATE MAY ASCERTAIN THE OUTSTANDING PRINCIPAL AMOUNT HEREOF BY INQUIRY OF THE
TRUSTEE.

No. A-R _____
                                                                                                                                                                                        
$____________

 

ALLEGIANCE CAPITAL TRUST I

CLASS A-R REVOLVING CERTIFICATE, SERIES 1998-1

Evidencing an undivided fractional interest in the Trust Estate, the
property of which includes, among other things, certain Loan Assets and monies on deposit
in the Collection Account.

(This Certificate does not represent an obligation of, or an interest
in, the Depositor, 

Allegiance Capital, LLC, the Trustee or any of their respective affiliates or successors.)

 

 

  
    
      
        
          
            Registered Owner:                               
            

            A-1

          

        

      

    

  

DELIVERY DATE: ____ __, ____

SERIES TERMINATION DATE: July 15, 2019

                   
THIS CERTIFIES THAT the registered owner specified above is the owner of a(n) __________
DOLLAR AND NO CENTS ($__________) nonassessable, fully paid, undivided fractional interest
in the Allegiance Capital Trust I (the "Trust") formed by Allegiance
Funding Corp. I (the "Depositor"). The Trust was created pursuant to the Trust
Agreement, dated as of August 1, 1998, among the Depositor, Manufacturers and Traders
Trust Company, as Trustee (the "Trustee"), and Point West Capital Corporation,
as Servicer, and the Supplement to Trust Agreement for Revolving Series 1998-1, dated as
of August 1, 1998, among the Depositor, the Trustee and Point West Capital Corporation, as
Servicer (collectively, the "Trust Agreement"). Reference is made to the Trust
Agreement for a statement of the respective rights thereunder of the Depositor, the
Trustee and the Holders of the Certificates, and the terms upon which the Certificates
are, and are to be, authenticated and delivered. To the extent not otherwise defined
herein, each capitalized term used herein has the meaning assigned to it in the Trust
Agreement.

                   
This Certificate is one of a duly authorized issue of Certificates designated as the
Class A-R Revolving Certificates, Series 1998-1 having a scheduled maturity of August
16, 1999 and a Series Termination Date of July 15, 2019 (herein called the
"Class A-R Certificates") issued and to be issued under the Trust
Agreement. This Class A-R Certificate is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement, to which Trust Agreement the holder of
this Class A-R Certificate by virtue of such Holder's acceptance hereof assents and
by which such Holder is bound.

                   
The Holder of this Certificate is obligated to provide funds to the Depositor on each
Funding Date during the Funding Period subject to the applicable terms and conditions set
forth in the Transaction Documents. The Fundings made by the Holder of this Certificate to
the Depositor shall be evidenced by this Certificate and the Certificateholder shall
endorse on the schedule annexed hereto and made a part hereof, or elsewhere in its
internal records, the date and amount of each Funding made by it to the Depositor and the
amount of each payment of principal made by the Depositor with respect thereto. The
Certificateholder is authorized and directed by the Depositor to endorse the schedule
attached hereto or maintain such records; provided that each Certificateholder's
endorsements or records shall be effective only if they are in agreement with the register
maintained by the Trustee, absent manifest error in such register. The failure of the
Certificateholder to make, or an error in making, a notation with respect to any Funding
shall not limit or otherwise affect the obligations of the Depositor hereunder or under
the Trust Agreement. The aggregate amount of all Fundings made by the Holder of this
Certificate (as reduced by any amounts distributed as principal during the Funding
Period), pursuant to this Certificate, shall not exceed [$_________].

                   
This Class A-R Certificate bears interest during each Accrual Period on the
Outstanding Principal Amount hereof (as of the first day of the Accrual Period) at the
Certificate Interest Rate, until and including the last day preceding the Payment Date on
which the Outstanding Principal Amount hereof has been reduced to zero. Interest on the
Outstanding Principal Amount hereof shall be calculated on the basis of a 360-day year
consisting of 12 months of 30 days each. Interest shall be due and payable in arrears on
each Payment Date. In addition, with respect to any Funding by the Class A-R Certificates
of this Series occurring in any Accrual Period following 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. The First
Period Interest on the Funding Amount shall be determined on the Funding Date at the rate
established on the applicable Reset Date. Notwithstanding the foregoing, if the
Outstanding Principal Amount of this Certificate is not paid in full by its Scheduled
Maturity, then, for any Accrual Period 

A-2

commencing on or after such Scheduled Maturity, the Floating Rate
Spread on this Certificate shall be increased by 1.00%. In making any interest payment, 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.

                   
The principal of this Class A-R Certificate shall be payable in installments ending
no later than the Series Termination Date unless this Class A-R Certificate becomes
due and payable at an earlier date by call for redemption or otherwise. All reductions in
the principal amount of a Class A-R Certificate effected by payments of installments
of principal made on any Payment Date shall be binding upon all future Holders of this
Class A-R Certificate and of any Class A-R Certificate issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not
such payment is noted on this Class A-R Certificate. Each installment of principal
payable on this Class A-R Certificate shall be in an amount equal to this
Certificateholder's pro rata share of the Class A-R Principal Distribution
Amount available to be paid in accordance with the priorities of Section 3 of the
Supplement for this Series and Section 5.02 of the Trust Agreement. Subject to the terms
of the Trust Agreement, the principal payable on this Class A-R Certificate shall be
paid on each Payment Date during the term of the Trust Agreement, beginning on the Initial
Payment Date. All payments of principal with respect to all of the Class A-R
Certificates of a Series shall be made on a pro rata basis based upon the ratio that the
Outstanding Principal Amount of a Class A-R Certificate bears to the Outstanding
Principal Amount of all Class A-R Certificates of such 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. 

                   
In addition, the Certificate Prepayment Fee Amount, if any, shall be distributed on each
Payment Date to the Holders of the Class A-R Certificates to the extent such Class is
receiving a distribution of Prepaid Principal Amount on such date. All payments of
Certificate Prepayment Fee Amounts with respect to the Class A-R Certificates shall be
made prorata based upon the ratio of the Outstanding Principal Amount of this Certificate
to the Outstanding Principal Amount of Class A-R Certificates of this Series, provided
that if as a result of such proration, a portion of such payment would be less than $0.01,
then such payment shall be reduce to the nearest whole cent. 

                   
The interest and principal so payable on any Payment Date will, as provided in the Trust
Agreement, be paid to the Person in whose name this Certificate is registered on the
Record Date for such Payment Date, which shall be the close of business on the last day of
the month prior to such Payment Date (whether or not a Business Day). The principal and
interest on this Certificate are payable by wire transfer in immediately available funds
to the account specified in writing to the Trustee by the Person whose name appears as the
Registered Holder of this Certificate on the Certificate Register received at least five
(5) Business Days prior to the Record Date for the Payment Date (or if no such account is
specified or if such wire fails, by check mailed by first-class mail to the Person whose
name appears as the Registered Holder of this Certificate on the Certificate Register at
the address of such Person as it appears on the Certificate Register), in such coin or
currency of the United States of America as at the time of payment is legal tender for
payment of public and private debts. Funds represented by checks returned undelivered will
be held for payment to the Person entitled thereto, subject to the terms of the Trust
Agreement, at the office or agency in the United States of America designated as such by
the Depositor for such purpose pursuant to the Trust Agreement.

                   
The Depositor has structured the Trust Agreement and the Certificates with the intention
that the Trust be treated as a partnership, with the assets of the partnership including
all of the assets of the Trust Estate and the partners of the partnership being all of the
Certificateholders and the Depositor. The Depositor, the Trustee, the Servicer and each
Certificateholder, by acceptance of its Certificate (and any 

A-3

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 thereby in accordance with such stated intentions unless and
until determined to the contrary by an applicable taxing authority.

                   
The property of the Trust Estate includes certain Loan Assets and certain other assets
described in the Trust Agreement. The Class A-R Certificates of the 1998-1 Series and
all other Series of Class A-R Certificates issued under the Trust Agreement are
payable out of the Trust Estate pari passu among such Class A-R Certificateholders
equally and ratably without prejudice, priority or distinction between any Class A-R
Certificate by reason of time of issue or otherwise. The Class A-R Certificates are
payable only out of the Trust Estate and do not represent recourse obligations of the
Depositor, Allegiance Capital, LLC or any of their respective affiliates or successors.
The Trust Agreement pursuant to which this Class A-R Certificate is issued also
provides for the issuance of other Classes and Series of Certificates from time to time.
Payments of interest on the Class A-R Certificates are senior to such payments on
other Classes having a lower credit rating from the Rating Agency and are subordinate to
payments of interest on any Classes having a higher credit rating form the Rating Agency.
Payments of principal in the Class A-R Certificates are senior to payments of principal on
other classes having a lower credit rating from the Rating Agency and are subordinate to
such payments on any Class having a higher credit rating from the Rating Agency. 

                   
Unless the Depositor exercises its Optional Termination rights, the Certificates are
payable only at the time and in the manner provided in the Trust Agreement and are not
redeemable or prepayable at the option of the Depositor before such time, except that the
Depositor may cause the Trust to prepay on a dollar for dollar basis the principal,
without penalty or premium, of any Outstanding Series of Revolving Certificates with the
proceeds of the issuance of a Series of Term Certificates.

                   
As provided in the Trust Agreement and subject to certain limitations therein set forth,
the transfer of this Certificate may be registered on the Certificate Register of the
Depositor upon surrender of this Certificate for registration of transfer at the office or
agency of the Depositor in the United States of America maintained for such purpose, duly
endorsed by, or accompanied by a written instrument of transfer in form reasonably
satisfactory to the Depositor and the Trustee and duly executed by the holder hereof or
his attorney duly authorized in writing, and thereupon one or more new Class A-R
Certificates of the same Scheduled Maturity of authorized denominations and for the same
initial aggregate principal amount will be issued to the designated transferees.

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

                   
The Holder of this Certificate, by acceptance of this Certificate, agrees that for one
year and one day after it has been paid hereunder, it or any Affiliate thereof will not
file any involuntary petition or otherwise institute any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding or other proceeding under any federal or
state bankruptcy or similar law against the Depositor.

                   
The Trust Agreement permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Depositor and the rights
of the Holders of the 

A-4

                   
Certificates under the Trust Agreement at any time by the Depositor, the Trustee and the
Servicer without the consent of the Holders of the Certificates.

                   
The Certificates are issuable only in registered form without coupons in such authorized
denominations as provided in the Trust Agreement and subject to certain limitations
therein set forth.

                   
This Class A-R Certificate and the Trust Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York, without regard to conflicts
of laws principles.

                   
No reference herein to the Trust Agreement and no provision of this Class A-R
Certificate or of the Trust Agreement shall alter or impair the obligation of the Trust
Estate to pay the principal of and interest on this Class A-R Certificate, but solely
from the assets of the Trust Estate and the Class A-R Certificate Insurance Policy at
the times, place and rate, and in the coin or currency, herein prescribed.

A-5

                   
IN WITNESS WHEREOF, Allegiance Funding Corp. I has caused this instrument to be signed,
manually, by its President or a Vice President.

  
     

     

  

  
    ALLEGIANCE FUNDING CORP

    By: _______________________

    Title: ______________________

  

  
     

        CERTIFICATE OF AUTHENTICATION

    This is on of the Class A-R Certificates described in the within-mentioned
    Trust Agreement.

  

Dated:                                                                                   

MANUFACTURERS AND TRADERS TRUST 

COMPANY, as Trustee

By:                                                                                       

  
    Authorized Signatory

  

 

 

 

 

Schedule to Class A-R Revolving Certificates, Series 1998-1

	Disbursement		Principal
	Date of	Amount of	Payment &
	Funding	Funding	Date Paid
	

    

 

EXHIBIT B

 

FORM OF CLASS B-R REVOLVING CERTIFICATE

THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS IN RELIANCE ON EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND SUCH STATE
SECURITIES LAWS. THIS CERTIFICATE MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS SUCH RESALE, TRANSFER, PLEDGE OR HYPOTHECATION (A) IS MADE IN
ACCORDANCE WITH SECTION 2.06 OF THE TRUST AGREEMENT REFERRED TO HEREIN AND (B) IS
MADE (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
(ii) IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS OR (iii) TO A PERSON WHO THE TRANSFEROR
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT WHO IS AWARE THAT THE RESALE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A. NEITHER ALLEGIANCE FUNDING CORP. I (THE "DEPOSITOR") NOR
MANUFACTURERS AND TRADERS TRUST COMPANY, AS TRUSTEE (THE "TRUSTEE"), IS
OBLIGATED TO REGISTER THE CERTIFICATES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAWS. IN THE EVENT THAT A TRANSFER OF A CLASS B-R CERTIFICATE IS TO BE MADE,
THE PROSPECTIVE TRANSFEREE SHALL DELIVER AN INVESTMENT AND ASSUMPTION LETTER IN THE FORM
REQUIRED UNDER THE TRUST AGREEMENT AND, IF THE TRUSTEE SO REQUESTS (IN A TRANSFER OTHER
THAN UNDER RULE 144A), AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER MAY BE MADE
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.

DUE TO THE PROVISIONS FOR FUNDINGS AND FOR THE PAYMENT OF PRINCIPAL
CONTAINED HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE ON ANY PARTICULAR
DATE MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. ANYONE PURCHASING THIS
CERTIFICATE MAY ASCERTAIN THE OUTSTANDING PRINCIPAL AMOUNT HEREOF BY INQUIRY OF THE
TRUSTEE.

No. B-R                  
                                                                                                                                                                   
$
                                   

PPN: 01747# AB 8 

 

ALLEGIANCE CAPITAL TRUST I

CLASS B-R REVOLVING CERTIFICATE, SERIES 1998-1

Evidencing an undivided fractional interest in the Trust Estate, the
property of which includes, among other things, certain Loan Assets and monies on deposit
in the Collection Account.

(This Certificate does not represent an obligation of, or an interest
in, the Depositor, 

Allegiance Capital, LLC, the Trustee or any of their respective affiliates or successors.)

 

  
    
      
        
          
            
              Registered Owner:                                               
              

              B-1

            

             

          

        

      

    

  

DELIVERY DATE: ____ __, ____
                                                                                                            
SERIES TERMINATION DATE: July 15, 2019

                   
THIS CERTIFIES THAT the registered owner specified above is the owner of a(n) __________
DOLLAR AND NO CENTS ($__________) nonassessable, fully paid, undivided fractional interest
in the Allegiance Capital Trust I (the "Trust") formed by Allegiance
Funding Corp. I (the "Depositor"). The Trust was created pursuant to the Trust
Agreement, dated as of August 1, 1998, among the Depositor, Manufacturers and Traders
Trust Company, as Trustee (the "Trustee"), and Point West Capital Corporation,
as Servicer, and the Supplement to Trust Agreement for Revolving Series 1998-1, dated as
of August 1, 1998, among the Depositor, the Trustee and Point West Capital Corporation, as
Servicer (collectively, the "Trust Agreement"). Reference is made to the Trust
Agreement for a statement of the respective rights thereunder of the Depositor, the
Trustee and the Holders of the Certificates, and the terms upon which the Certificates
are, and are to be, authenticated and delivered. To the extent not otherwise defined
herein, each capitalized term used herein has the meaning assigned to it in the Trust
Agreement.

                   
This Certificate is one of a duly authorized issue of Certificates designated as the
Class B-R Revolving Certificates, Series 1998-1 having a Scheduled Maturity of
September 15, 1999 and a Series Termination Date of July 15, 2019 (herein called the
"Class B-R Certificates") issued and to be issued under the Trust
Agreement. This Class B-R Certificate is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement, to which Trust Agreement the holder of
this Class B-R Certificate by virtue of such Holder's acceptance hereof assents and
by which such Holder is bound.

                   
The Holder of this Certificate is obligated to provide funds to the Depositor on each
Funding Date during the Funding Period subject to the applicable terms and conditions set
forth in the Transaction Documents. The Fundings made by the Holder of this Certificate to
the Depositor shall be evidenced by this Certificate and the Certificateholder shall
endorse on the schedule annexed hereto and made a part hereof, or elsewhere in its
internal records, the date and amount of each Funding made by it to the Depositor and the
amount of each payment of principal made by the Depositor with respect thereto. The
Certificateholder is authorized and directed by the Depositor to endorse the schedule
attached hereto or maintain such records; provided that each Certificateholder's
endorsements or records shall be effective only if they are in agreement with the register
maintained by the Trustee, absent manifest error in such register. The failure of the
Certificateholder to make, or an error in making, a notation with respect to any Funding
shall not limit or otherwise affect the obligations of the Depositor hereunder or under
the Trust Agreement. The aggregate amount of all Fundings made by the Holder of this
Certificate (as reduced by any amounts distributed as principal during the Funding
Period), pursuant to this Certificate, shall not exceed [$_________].

                   
This Class B-R Certificate bears interest during each Accrual Period on the
Outstanding Principal Amount hereof (as of the first day of the Accrual Period) at the
Certificate Interest Rate, until and including the last day preceding the Payment Date on
which the Outstanding Principal Amount hereof has been reduced to zero. Interest on the
Outstanding Principal Amount hereof shall be calculated on the basis of a 360-day year
consisting of 12 months of 30 days each. Interest shall be due and payable in arrears on
each Payment Date. In addition, with respect to any Funding by the Class B-R Certificates
of this Series occurring in any Accrual Period following 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. The First
Period Interest on the Funding Amount shall be determined on the Funding Date at the rate
established on the applicable Reset Date. Notwithstanding the foregoing, if the
Outstanding Principal Amount of this Certificate is not paid in full by its Scheduled
Maturity, then, for any Accrual Period commencing on or after such Scheduled Maturity, the
Applicable Rate Spread on this Certificate shall be increased by 1.00%. In making any
interest payment, if the interest calculation with respect to a Certificate 

B-2

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.

                   
The principal of this Class B-R Certificate shall be payable in installments ending
no later than the Series Termination Date unless this Class B-R Certificate becomes
due and payable at an earlier date by call for redemption or otherwise. All reductions in
the principal amount of a Class B-R Certificate effected by payments of installments
of principal made on any Payment Date shall be binding upon all future Holders of this
Class B-R Certificate and of any Class B-R Certificate issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not
such payment is noted on this Class B-R Certificate. Each installment of principal
payable on this Class B-R Certificate shall be in an amount equal to this
Certificateholder's pro rata share of the Class B-R Principal Distribution
Amount available to be paid in accordance with the priorities of Section 3 of the
Supplement for this Series and Section 5.02 of the Trust Agreement. Subject to the terms
of the Trust Agreement, the principal payable on this Class B-R Certificate shall be
paid on each Payment Date during the term of the Trust Agreement, beginning on the Initial
Payment Date. All payments of principal with respect to all of the Class B-R
Certificates of a Series shall be made on a pro rata basis based upon the ratio that the
Outstanding Principal Amount of a Class B-R Certificate bears to the Outstanding
Principal Amount of all Class A-R Certificates of such 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. 

                   
In addition, the Certificate Prepayment Fee Amount, if any, shall be distributed on each
Payment Date to the Holders of the Class B-R Certificates to the extent such Class is
receiving a distribution of Prepaid Principal Amount on such date. All payments of
Certificate Prepayment Fee Amounts with respect to the Class B-R Certificates shall be
made prorata based upon the ratio of the Outstanding Principal Amount of this Certificate
to the Outstanding Principal Amount of all Class B-R Certificates of this Series, provided
that if as a result of such proration, a portion of such payment would be less than $0.01,
then such payment shall be reduce to the nearest whole cent. 

                   
The interest and principal so payable on any Payment Date will, as provided in the Trust
Agreement, be paid to the Person in whose name this Certificate is registered on the
Record Date for such Payment Date, which shall be the close of business on the last day of
the month prior to such Payment Date (whether or not a Business Day). The principal and
interest on this Certificate are payable by wire transfer in immediately available funds
to the account specified in writing to the Trustee by the Person whose name appears as the
Registered Holder of this Certificate on the Certificate Register received at least five
(5) Business Days prior to the Record Date for the Payment Date (or if no such account is
specified or if such wire fails, by check mailed by first-class mail to the Person whose
name appears as the Registered Holder of this Certificate on the Certificate Register at
the address of such Person as it appears on the Certificate Register), in such coin or
currency of the United States of America as at the time of payment is legal tender for
payment of public and private debts. Funds represented by checks returned undelivered will
be held for payment to the Person entitled thereto, subject to the terms of the Trust
Agreement, at the office or agency in the United States of America designated as such by
the Depositor for such purpose pursuant to the Trust Agreement.

                   
The Depositor has structured the Trust Agreement and the Certificates with the intention
that the Trust be treated as a partnership, with the assets of the partnership including
all of the assets of the Trust Estate and the partners of the partnership being all of the
Certificateholders and the Depositor. The Depositor, the Trustee, the Servicer and each
Certificateholder, by acceptance of its 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 thereby in
accordance with such stated intentions unless and until determined to the contrary by an
applicable taxing authority.

B-3

                   
The property of the Trust Estate includes certain Loan Assets and certain other assets
described in the Trust Agreement. The Class B-R Certificates of the 1998-1 Series and
all other Series of Class B-R Certificates issued under the Trust Agreement are
payable out of the Trust Estate pari passu among such Class B-R Certificateholders
equally and ratably without prejudice, priority or distinction between any Class B-R
Certificate by reason of time of issue or otherwise. The Class B-R Certificates are
payable only out of the Trust Estate and do not represent recourse obligations of the
Depositor, Allegiance Capital, LLC or any of their respective affiliates or successors.
The Trust Agreement pursuant to which this Class B-R Certificate is issued also
provides for the issuance of other Classes and Series of Certificates from time to time.
Payments of interest on the Class B-R Certificates are senior to such payments on
other Classes having a lower credit rating from the Rating Agency and are subordinate to
payments of interest on any Classes having a higher credit rating form the Rating Agency.
Payments of principal in the Class B-R Certificates are senior to payments of principal on
other classes having a lower credit rating from the Rating Agency and are subordinate to
such payments on any Class having a higher credit rating from the Rating Agency. 

                   
Unless the Depositor exercises its Optional Termination rights, the Certificates are
payable only at the time and in the manner provided in the Trust Agreement and are not
redeemable or prepayable at the option of the Depositor before such time, except that the
Depositor may cause the Trust to prepay on a dollar for dollar basis the principal,
without penalty or premium, of any Outstanding Series of Revolving Certificates with the
proceeds of the issuance of a Series of Term Certificates.

                   
As provided in the Trust Agreement and subject to certain limitations therein set forth,
the transfer of this Certificate may be registered on the Certificate Register of the
Depositor upon surrender of this Certificate for registration of transfer at the office or
agency of the Depositor in the United States of America maintained for such purpose, duly
endorsed by, or accompanied by a written instrument of transfer in form reasonably
satisfactory to the Depositor and the Trustee and duly executed by the holder hereof or
his attorney duly authorized in writing, and thereupon one or more new Class B-R
Certificates having the same Scheduled Maturity, Series Termination Date, authorized
denomination(s) and for the same initial aggregate principal amount will be issued to the
designated transferees.

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

                   
The Holder of this Certificate, by acceptance of this Certificate, agrees that for one
year and one day after it has been paid hereunder, it 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 any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other
proceeding under any federal or state bankruptcy or similar law against the Depositor.

                   
The Trust Agreement permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Depositor and the rights
of the Holders of the Certificates under the Trust Agreement at any time by the Depositor,
the Trustee and the Servicer without the consent of the Holders of the Certificates.

                   
The Certificates are issuable only in registered form without coupons in such authorized
denominations as provided in the Trust Agreement and subject to certain limitations
therein set forth.

B-4

                   
This Class B-R Certificate and the Trust Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York, without regard to conflicts
of laws principles.

                   
No reference herein to the Trust Agreement and no provision of this Class B-R
Certificate or of the Trust Agreement shall alter or impair the obligation of the Trust
Estate to pay the principal of and interest on this Class B-R Certificate, but solely
from the assets of the Trust Estate and the Class B-R Certificate Insurance Policy at
the times, place and rate, and in the coin or currency, herein prescribed.

B-5

IN WITNESS WHEREOF, Allegiance Funding Corp. I has caused this
instrument to be signed, manually, by its President or a Vice President.

 

  
     

     

  

  
    ALLEGIANCE FUNDING CORP

    By: _______________________

    Title: ______________________

  

  
     

        CERTIFICATE OF AUTHENTICATION

    This is on of the Class B-R Certificates described in the within-mentioned
    Trust Agreement.

  

Dated:                                                                                   

MANUFACTURERS AND TRADERS TRUST 

COMPANY, as Trustee

By:                                                                                       

  
    Authorized Signatory

  

 

 

 

 

Schedule to Class B-R Revolving Certificates, Series 1998-1

	Disbursement		Principal
	Date of	Amount of	Payment &
	Funding	Funding	Date Paid
	

    

 

 

EXHIBIT C

 

FORM OF CLASS C-R REVOLVING CERTIFICATE

THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS IN RELIANCE ON EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND SUCH STATE
SECURITIES LAWS. THIS CERTIFICATE MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS SUCH RESALE, TRANSFER, PLEDGE OR HYPOTHECATION (A) IS MADE IN
ACCORDANCE WITH SECTION 2.06 OF THE TRUST AGREEMENT REFERRED TO HEREIN AND (B) IS
MADE (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
(ii) IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS OR (iii) TO A PERSON WHO THE TRANSFEROR
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT WHO IS AWARE THAT THE RESALE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A. NEITHER ALLEGIANCE FUNDING CORP. I (THE "DEPOSITOR") NOR
MANUFACTURERS AND TRADERS TRUST COMPANY, AS TRUSTEE (THE "TRUSTEE"), IS
OBLIGATED TO REGISTER THE CERTIFICATES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAWS. IN THE EVENT THAT A TRANSFER OF A CLASS C-R CERTIFICATE IS TO BE MADE,
THE PROSPECTIVE TRANSFEREE SHALL DELIVER AN INVESTMENT AND ASSUMPTION LETTER IN THE FORM
REQUIRED UNDER THE TRUST AGREEMENT AND, IF THE TRUSTEE SO REQUESTS (IN A TRANSFER OTHER
THAN UNDER RULE 144A), AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER MAY BE MADE
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.

DUE TO THE PROVISIONS FOR FUNDINGS AND FOR THE PAYMENT OF PRINCIPAL
CONTAINED HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE ON ANY PARTICULAR
DATE MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. ANYONE PURCHASING THIS
CERTIFICATE MAY ASCERTAIN THE OUTSTANDING PRINCIPAL AMOUNT HEREOF BY INQUIRY OF THE
TRUSTEE.

No. C-R                     
                                                                                                                                                                 
$
                                   

PPN: 01747# AC 6 

 

ALLEGIANCE CAPITAL TRUST I

CLASS C-R REVOLVING CERTIFICATE, SERIES 1998-1

Evidencing an undivided fractional interest in the Trust Estate, the
property of which includes, among other things, certain Loan Assets and monies on deposit
in the Collection Account.

(This Certificate does not represent an obligation of, or an interest
in, the Depositor, 

Allegiance Capital, LLC, the Trustee or any of their respective affiliates or successors.)

 

  
    
      
        
          
            Registered Owner:                                                             
            

            B-1

             

          

        

      

    

  

DELIVERY DATE: ____ __, ____
                                                                                                           
SERIES TERMINATION DATE: July 15, 2019

                   
THIS CERTIFIES THAT the registered owner specified above is the owner of a(n) __________
DOLLAR AND NO CENTS ($__________) nonassessable, fully paid, undivided fractional interest
in the Allegiance Capital Trust I (the "Trust") formed by Allegiance
Funding Corp. I (the "Depositor"). The Trust was created pursuant to the Trust
Agreement, dated as of August 1, 1998, among the Depositor, Manufacturers and Traders
Trust Company, as Trustee (the "Trustee"), and Point West Capital Corporation,
as Servicer, and the Supplement to Trust Agreement for Revolving Series 1998-1, dated as
of August 1, 1998, among the Depositor, the Trustee and Point West Capital Corporation, as
Servicer (collectively, the "Trust Agreement"). Reference is made to the Trust
Agreement for a statement of the respective rights thereunder of the Depositor, the
Trustee and the Holders of the Certificates, and the terms upon which the Certificates
are, and are to be, authenticated and delivered. To the extent not otherwise defined
herein, each capitalized term used herein has the meaning assigned to it in the Trust
Agreement.

                   
This Certificate is one of a duly authorized issue of Certificates designated as the
Class C-R Revolving Certificates, Series 1998-1 having a Scheduled Maturity of
September 15, 1999 and a Series Termination Date of July 15, 2019 (herein called the
"Class C-R Certificates") issued and to be issued under the Trust
Agreement. This Class C-R Certificate is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement, to which Trust Agreement the holder of
this Class C-R Certificate by virtue of such Holder's acceptance hereof assents and
by which such Holder is bound.

                   
The Holder of this Certificate is obligated to provide funds to the Depositor on each
Funding Date during the Funding Period subject to the applicable terms and conditions set
forth in the Transaction Documents. The Fundings made by the Holder of this Certificate to
the Depositor shall be evidenced by this Certificate and the Certificateholder shall
endorse on the schedule annexed hereto and made a part hereof, or elsewhere in its
internal records, the date and amount of each Funding made by it to the Depositor and the
amount of each payment of principal made by the Depositor with respect thereto. The
Certificateholder is authorized and directed by the Depositor to endorse the schedule
attached hereto or maintain such records; provided that each Certificateholder's
endorsements or records shall be effective only if they are in agreement with the register
maintained by the Trustee, absent manifest error in such register. The failure of the
Certificateholder to make, or an error in making, a notation with respect to any Funding
shall not limit or otherwise affect the obligations of the Depositor hereunder or under
the Trust Agreement. The aggregate amount of all Fundings made by the Holder of this
Certificate (as reduced by any amounts distributed as principal during the Funding
Period), pursuant to this Certificate, shall not exceed [$_________].

                   
This Class C-R Certificate bears interest during each Accrual Period on the
Outstanding Principal Amount hereof (as of the first day of the Accrual Period) at the
Certificate Interest Rate, until and including the last day preceding the Payment Date on
which the Outstanding Principal Amount hereof has been reduced to zero. Interest on the
Outstanding Principal Amount hereof shall be calculated on the basis of a 360-day year
consisting of 12 months of 30 days each. Interest shall be due and payable in arrears on
each Payment Date. In addition, with respect to any Funding by the Class C-R Certificates
of this Series occurring in any Accrual Period following 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. The First
Period Interest on the Funding Amount shall be determined on the Funding Date at the rate
established on the applicable Reset Date. Notwithstanding the foregoing, if the
Outstanding Principal Amount of this Certificate is not paid in full by its Scheduled
Maturity, then, for any Accrual Period commencing on or after such Scheduled Maturity, the
Applicable Rate Spread on this Certificate shall be increased by 1.00%. In making any
interest payment, if the interest calculation with respect to a Certificate 

C-2

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.

                   
The principal of this Class C-R Certificate shall be payable in installments ending
no later than the Series Termination Date unless this Class C-R Certificate becomes
due and payable at an earlier date by call for redemption or otherwise. All reductions in
the principal amount of a Class C-R Certificate effected by payments of installments
of principal made on any Payment Date shall be binding upon all future Holders of this
Class C-R Certificate and of any Class C-R Certificate issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not
such payment is noted on this Class C-R Certificate. Each installment of principal
payable on this Class C-R Certificate shall be in an amount equal to this
Certificateholder's pro rata share of the Class C-R Principal Distribution
Amount available to be paid in accordance with the priorities of Section 3 of the
Supplement for this Series and Section 5.02 of the Trust Agreement. Subject to the terms
of the Trust Agreement, the principal payable on this Class C-R Certificate shall be
paid on each Payment Date during the term of the Trust Agreement, beginning on the Initial
Payment Date. All payments of principal with respect to all of the Class C-R
Certificates of a Series shall be made on a pro rata basis based upon the ratio that the
Outstanding Principal Amount of a Class C-R Certificate bears to the Outstanding
Principal Amount of all Class C-R Certificates of such 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. 

                   
In addition, the Certificate Prepayment Fee Amount, if any, shall be distributed on each
Payment Date to the Holders of the Class C-R Certificates to the extent such Class is
receiving a distribution of Prepaid Principal Amount on such date. All payments of
Certificate Prepayment Fee Amounts with respect to the Class C-R Certificates shall be
made prorata based upon the ratio of the Outstanding Principal Amount of this Certificate
to the Outstanding Principal Amount of all Class C-R Certificates of this Series, provided
that if as a result of such proration, a portion of such payment would be less than $0.01,
then such payment shall be reduce to the nearest whole cent. 

                   
The interest and principal so payable on any Payment Date will, as provided in the Trust
Agreement, be paid to the Person in whose name this Certificate is registered on the
Record Date for such Payment Date, which shall be the close of business on the last day of
the month prior to such Payment Date (whether or not a Business Day). The principal and
interest on this Certificate are payable by wire transfer in immediately available funds
to the account specified in writing to the Trustee by the Person whose name appears as the
Registered Holder of this Certificate on the Certificate Register received at least five
(5) Business Days prior to the Record Date for the Payment Date (or if no such account is
specified or if such wire fails, by check mailed by first-class mail to the Person whose
name appears as the Registered Holder of this Certificate on the Certificate Register at
the address of such Person as it appears on the Certificate Register), in such coin or
currency of the United States of America as at the time of payment is legal tender for
payment of public and private debts. Funds represented by checks returned undelivered will
be held for payment to the Person entitled thereto, subject to the terms of the Trust
Agreement, at the office or agency in the United States of America designated as such by
the Depositor for such purpose pursuant to the Trust Agreement.

                   
The Depositor has structured the Trust Agreement and the Certificates with the intention
that the Trust be treated as a partnership, with the assets of the partnership including
all of the assets of the Trust Estate and the partners of the partnership being all of the
Certificateholders and the Depositor. The Depositor, the Trustee, the Servicer and each
Certificateholder, by acceptance of its 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 thereby in
accordance with such stated intentions unless and until determined to the contrary by an
applicable taxing authority.

C-3

                   
The property of the Trust Estate includes certain Loan Assets and certain other assets
described in the Trust Agreement. The Class C-R Certificates of the 1998-1 Series and
all other Series of Class C-R Certificates issued under the Trust Agreement are
payable out of the Trust Estate pari passu among such Class C-R Certificateholders
equally and ratably without prejudice, priority or distinction between any Class C-R
Certificate by reason of time of issue or otherwise. The Class C-R Certificates are
payable only out of the Trust Estate and do not represent recourse obligations of the
Depositor, Allegiance Capital, LLC or any of their respective affiliates or successors.
The Trust Agreement pursuant to which this Class C-R Certificate is issued also
provides for the issuance of other Classes and Series of Certificates from time to time.
Payments of interest on the Class C-R Certificates are senior to such payments on
other Classes having a lower credit rating from the Rating Agency and are subordinate to
payments of interest on any Classes having a higher credit rating form the Rating Agency.
Payments of principal in the Class C-R Certificates are senior to payments of principal on
other classes having a lower credit rating from the Rating Agency and are subordinate to
such payments on any Class having a higher credit rating from the Rating Agency. 

                   
Unless the Depositor exercises its Optional Termination rights, the Certificates are
payable only at the time and in the manner provided in the Trust Agreement and are not
redeemable or prepayable at the option of the Depositor before such time, except that the
Depositor may cause the Trust to prepay on a dollar for dollar basis the principal,
without penalty or premium, of any Outstanding Series of Revolving Certificates with the
proceeds of the issuance of a Series of Term Certificates.

                   
As provided in the Trust Agreement and subject to certain limitations therein set forth,
the transfer of this Certificate may be registered on the Certificate Register of the
Depositor upon surrender of this Certificate for registration of transfer at the office or
agency of the Depositor in the United States of America maintained for such purpose, duly
endorsed by, or accompanied by a written instrument of transfer in form reasonably
satisfactory to the Depositor and the Trustee and duly executed by the holder hereof or
his attorney duly authorized in writing, and thereupon one or more new Class C-R
Certificates having the same Scheduled Maturity, Series Termination Date, authorized
denomination(s) and for the same initial aggregate principal amount will be issued to the
designated transferees.

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

                   
The Holder of this Certificate, by acceptance of this Certificate, agrees that for one
year and one day after it has been paid hereunder, it 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 any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other
proceeding under any federal or state bankruptcy or similar law against the Depositor.

                   
The Trust Agreement permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Depositor and the rights
of the Holders of the Certificates under the Trust Agreement at any time by the Depositor,
the Trustee and the Servicer without the consent of the Holders of the Certificates.

                   
The Certificates are issuable only in registered form without coupons in such authorized
denominations as provided in the Trust Agreement and subject to certain limitations
therein set forth.

C-4

                   
This Class C-R Certificate and the Trust Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York, without regard to conflicts
of laws principles.

                   
No reference herein to the Trust Agreement and no provision of this Class C-R
Certificate or of the Trust Agreement shall alter or impair the obligation of the Trust
Estate to pay the principal of and interest on this Class C-R Certificate, but solely
from the assets of the Trust Estate and the Class C-R Certificate Insurance Policy at
the times, place and rate, and in the coin or currency, herein prescribed.

C-5

IN WITNESS WHEREOF, Allegiance Funding Corp. I has caused this
instrument to be signed, manually, by its President or a Vice President.

 

  
     

     

  

  
    ALLEGIANCE FUNDING CORP

    By: _______________________

    Title: ______________________

  

  
     

        CERTIFICATE OF AUTHENTICATION

    This is on of the Class C-R Certificates described in the within-mentioned
    Trust Agreement.

  

Dated:                                                                                   

MANUFACTURERS AND TRADERS TRUST 

COMPANY, as Trustee

By:                                                                                       

  
    Authorized Signatory

  

 

 

 

 

Schedule to Class C-R Revolving Certificates, Series 1998-1

	Disbursement		Principal
	Date of	Amount of	Payment &
	Funding	Funding	Date Paid
	

    

 

 

EXHIBIT D

 

FORM OF CLASS D-R REVOLVING CERTIFICATE

THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS IN RELIANCE ON EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND SUCH STATE
SECURITIES LAWS. THIS CERTIFICATE MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS SUCH RESALE, TRANSFER, PLEDGE OR HYPOTHECATION (A) IS MADE IN
ACCORDANCE WITH SECTION 2.06 OF THE TRUST AGREEMENT REFERRED TO HEREIN AND (B) IS
MADE (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
(ii) IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS OR (iii) TO A PERSON WHO THE TRANSFEROR
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT WHO IS AWARE THAT THE RESALE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A. NEITHER ALLEGIANCE FUNDING CORP. I (THE "DEPOSITOR") NOR
MANUFACTURERS AND TRADERS TRUST COMPANY, AS TRUSTEE (THE "TRUSTEE"), IS
OBLIGATED TO REGISTER THE CERTIFICATES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAWS. IN THE EVENT THAT A TRANSFER OF A CLASS D-R CERTIFICATE IS TO BE MADE,
THE PROSPECTIVE TRANSFEREE SHALL DELIVER AN INVESTMENT AND ASSUMPTION LETTER IN THE FORM
REQUIRED UNDER THE TRUST AGREEMENT AND, IF THE TRUSTEE SO REQUESTS (IN A TRANSFER OTHER
THAN UNDER RULE 144A), AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER MAY BE MADE
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.

DUE TO THE PROVISIONS FOR FUNDINGS AND FOR THE PAYMENT OF PRINCIPAL
CONTAINED HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE ON ANY PARTICULAR
DATE MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. ANYONE PURCHASING THIS
CERTIFICATE MAY ASCERTAIN THE OUTSTANDING PRINCIPAL AMOUNT HEREOF BY INQUIRY OF THE
TRUSTEE.

No. D-R                              
                                                                                                                                      
$
                                                 

 

 

ALLEGIANCE CAPITAL TRUST I

CLASS D-R REVOLVING CERTIFICATE, SERIES 1998-1

Evidencing an undivided fractional interest in the Trust Estate, the
property of which includes, among other things, certain Loan Assets and monies on deposit
in the Collection Account.

(This Certificate does not represent an obligation of, or an interest
in, the Depositor, 

Allegiance Capital, LLC, the Trustee or any of their respective affiliates or successors.)

 

  
    
      
        
          
            Registered Owner:                                                                                              
            

            D-1

             

          

        

      

    

  

DELIVERY DATE: ____ __, ____
                                                                                                        
SERIES TERMINATION DATE: July 15, 2019

                   
THIS CERTIFIES THAT the registered owner specified above is the owner of a(n) __________
DOLLAR AND NO CENTS ($__________) nonassessable, fully paid, undivided fractional interest
in the Allegiance Capital Trust I (the "Trust") formed by Allegiance
Funding Corp. I (the "Depositor"). The Trust was created pursuant to the Trust
Agreement, dated as of August 1, 1998, among the Depositor, Manufacturers and Traders
Trust Company, as Trustee (the "Trustee"), and Point West Capital Corporation,
as Servicer, and the Supplement to Trust Agreement for Revolving Series 1998-1, dated as
of August 1, 1998, among the Depositor, the Trustee and Point West Capital Corporation, as
Servicer (collectively, the "Trust Agreement"). Reference is made to the Trust
Agreement for a statement of the respective rights thereunder of the Depositor, the
Trustee and the Holders of the Certificates, and the terms upon which the Certificates
are, and are to be, authenticated and delivered. To the extent not otherwise defined
herein, each capitalized term used herein has the meaning assigned to it in the Trust
Agreement.

                   
This Certificate is one of a duly authorized issue of Certificates designated as the
Class D-R Revolving Certificates, Series 1998-1 having a Scheduled Maturity of
September 15, 1999 and a Series Termination Date of July 15, 2019 (herein called the
"Class D-R Certificates") issued and to be issued under the Trust
Agreement. This Class D-R Certificate is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement, to which Trust Agreement the holder of
this Class D-R Certificate by virtue of such Holder's acceptance hereof assents and
by which such Holder is bound.

                   
The Holder of this Certificate is obligated to provide funds to the Depositor on each
Funding Date during the Funding Period subject to the applicable terms and conditions set
forth in the Transaction Documents. The Fundings made by the Holder of this Certificate to
the Depositor shall be evidenced by this Certificate and the Certificateholder shall
endorse on the schedule annexed hereto and made a part hereof, or elsewhere in its
internal records, the date and amount of each Funding made by it to the Depositor and the
amount of each payment of principal made by the Depositor with respect thereto. The
Certificateholder is authorized and directed by the Depositor to endorse the schedule
attached hereto or maintain such records; provided that each Certificateholder's
endorsements or records shall be effective only if they are in agreement with the register
maintained by the Trustee, absent manifest error in such register. The failure of the
Certificateholder to make, or an error in making, a notation with respect to any Funding
shall not limit or otherwise affect the obligations of the Depositor hereunder or under
the Trust Agreement. The aggregate amount of all Fundings made by the Holder of this
Certificate (as reduced by any amounts distributed as principal during the Funding
Period), pursuant to this Certificate, shall not exceed [$_________].

                   
Principal and other amounts distributable with respect to Class D-R Certificates
shall be payable only to the extent of amounts available in accordance with, and to the
extent of, the priorities for payment of Class D-R Certificates set forth in Section 3 of
the Supplement for this Series and Section 5.02 of the Trust Agreement, in installments
ending no later than the Series Termination Date unless the Class D-R Certificates
becomes due and payable at an earlier date by call for redemption or otherwise. All
reductions in the principal amount of a Class D-R Certificate effected by
distributions made on any such Payment Date shall be binding upon all future Holders of
this Class D-R Certificate and of any Class D-R Certificate issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not
such payment is noted on this Class D-R Certificate. All payments with respect to all
of the Class D-R Certificates of a Series shall be made on a pro rata basis based
upon the ratio that the Outstanding Principal Amount of this Class D-R Certificate
bears to the Outstanding Principal Amount of all Class D-R Certificates of such
Series; provided that, if as a result of such proration a portion of such payment
would be less than $0.01, then such payment shall be reduced to the nearest whole cent. 

D-2

                   
In addition, the Certificate Prepayment Fee Amount, if any, shall be distributed on each
Payment Date to the Holders of the Class D-R Certificates to the extent such Class is
receiving a distribution of Prepaid Principal Amount on such date. All payments of
Certificate Prepayment Fee Amounts with respect to the Class D-R Certificates shall be
made prorata based upon the ratio of the Outstanding Principal Amount of this Certificate
to the Outstanding Principal Amount of all Class D-R Certificates of this Series, provided
that if as a result of such proration, a portion of such payment would be less than $0.01,
then such payment shall be reduce to the nearest whole cent. 

                   
All amounts payable with respect to this Class D-R Certificate on any Payment Date will,
as provided in the Trust Agreement, be paid to the Person in whose name this Certificate
is registered on the Record Date for such Payment Date, which shall be the close of
business on the last day of the month prior to such Payment Date (whether or not a
Business Day). Such amounts are payable by wire transfer in immediately available funds to
the account specified in writing to the Trustee by the Person whose name appears as the
Registered Holder of this Certificate on the Certificate Register received at least five
(5) Business Days prior to the Record Date for the Payment Date (or if no such account is
specified or if such wire fails, by check mailed by first-class mail to the Person whose
name appears as the Registered Holder of this Certificate on the Certificate Register at
the address of such Person as it appears on the Certificate Register), in such coin or
currency of the United States of America as at the time of payment is legal tender for
payment of public and private debts. Funds represented by checks returned undelivered will
be held for payment to the Person entitled thereto, subject to the terms of the Trust
Agreement, at the office or agency in the United States of America designated as such by
the Depositor for such purpose pursuant to the Trust Agreement.

                   
The Depositor has structured the Trust Agreement and the Certificates with the intention
that the Trust be treated as a partnership, with the assets of the partnership including
all of the assets of the Trust Estate and the partners of the partnership being all of the
Certificateholders and the Depositor. The Depositor, the Trustee, the Servicer and each
Certificateholder, by acceptance of its 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 thereby in
accordance with such stated intentions unless and until determined to the contrary by an
applicable taxing authority.

                   
The property of the Trust Estate includes certain Loan Assets and certain other assets
described in the Trust Agreement. The Class D-R Certificates of the 1998-1 Series and
all other Series of Class D-R Certificates issued under the Trust Agreement are
payable out of the Trust Estate pari passu among such Class D-R Certificateholders
equally and ratably without prejudice, priority or distinction between any Class D-R
Certificate by reason of time of issue or otherwise. The Class D-R Certificates are
payable only out of the Trust Estate and do not represent recourse obligations of the
Depositor, Allegiance Capital, LLC or any of their respective affiliates or successors.
The Trust Agreement pursuant to which this Class D-R Certificate is issued also
provides for the issuance of other Classes and Series of Certificates from time to time.
Except as otherwise may be provided in future Supplements to the Trust Agreement, payments
on the Class D-R Certificates are subordinate to payments on all other Classes of
Certificates.

                   
Unless the Depositor exercises its Optional Termination rights, the Certificates are
payable only at the time and in the manner provided in the Trust Agreement and are not
redeemable or prepayable at the option of the Depositor before such time, except that the
Depositor may cause the Trust to prepay on a dollar for dollar basis the principal,
without penalty or premium, of any Outstanding Series of Revolving Certificates with the
proceeds of the issuance of a Series of Term Certificates.

D-3

                   
As provided in the Trust Agreement and subject to certain limitations therein set forth,
the transfer of this Certificate may be registered on the Certificate Register of the
Depositor upon surrender of this Certificate for registration of transfer at the office or
agency of the Depositor in the United States of America maintained for such purpose, duly
endorsed by, or accompanied by a written instrument of transfer in form reasonably
satisfactory to the Depositor and the Trustee and duly executed by the holder hereof or
his attorney duly authorized in writing, and thereupon one or more new Class D-R
Certificates having the same Scheduled Maturity, Series Termination Date, authorized
denomination(s) and for the same initial aggregate principal amount will be issued to the
designated transferees.

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

                   
The Holder of this Certificate, by acceptance of this Certificate, agrees that for one
year and one day after it has been paid hereunder, it 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 any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other
proceeding under any federal or state bankruptcy or similar law against the Depositor.

                   
The Trust Agreement permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Depositor and the rights
of the Holders of the Certificates under the Trust Agreement at any time by the Depositor,
the Trustee and the Servicer without the consent of the Holders of the Certificates.

                   
The Certificates are issuable only in registered form without coupons in such authorized
denominations as provided in the Trust Agreement and subject to certain limitations
therein set forth.

                   
This Class D-R Certificate and the Trust Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York, without regard to conflicts
of laws principles.

                   
No reference herein to the Trust Agreement and no provision of this Class D-R
Certificate or of the Trust Agreement shall alter or impair the obligation of the Trust
Estate to pay the principal of this Class D-R Certificate, but solely from the assets
of the Trust Estate and the Class D-R Certificate Insurance Policy at the times,
place and rate, and in the coin or currency, herein prescribed.

                   
IN WITNESS WHEREOF, Allegiance Funding Corp. I has caused this instrument to be signed,
manually, by its President or a Vice President.

 

  
     

  

  
    ALLEGIANCE FUNDING CORP

    By: _______________________

    Title: ______________________

  

  
     

        CERTIFICATE OF AUTHENTICATION

    This is on of the Class D-R Certificates described in the within-mentioned
    Trust Agreement.

  

Dated:                                                                                   

MANUFACTURERS AND TRADERS TRUST 

COMPANY, as Trustee

By:                                                                                       

  
    Authorized Signatory

  

 

 

 

 

Schedule to Class D-R Revolving Certificates, Series 1998-1

	Disbursement		Principal
	Date of	Amount of	Payment &
	Funding	Funding	Date Paid10.20 exhibit Loan Acquisition Agreement

 

 

LOAN ACQUISITION AGREEMENT

between

ALLEGIANCE CAPITAL, LLC

("Company")

and

 

ALLEGIANCE FUNDING CORP. I

("Depositor")

 

 

 

Dated as of August 1, 1998

 

 

 

 

TABLE OF CONTENTS

	
	Page

	ARTICLE ONE
	DEFINITIONS
	Section 1.01 
	Defined Terms. 	2

	Section 1.02 
	Certain Rules of Construction. 	5
			
	ARTICLE TWO		
	ACQUISITION OF LOAN ASSETS		
	Section 2.01	Conveyance of Loan Assets	7
	Section 2.02	Authorization and Issuance of Common Stock by the Depositor.	7
	Section 2.03	Use of Proceeds	7
	Section 2.04	Delivery of Loans; Filing of Financing Statements	8
	Section 2.05	Servicing of Loans	8
	Section 2.06	Review of Loans	8
	Section 2.07	Nature of Transfer	9
			
	ARTICLE THREE
		
	REPRESENTATIONS AND WARRANTIES
		
			
	Section 3.01	Representations and Warranties of the Company	10
	Section 3.02	Representations and Warranties of the Depositor	20
	Section 3.03	Substitution or Repurchase of Loans	22
	Section 3.04	Requirements for Purchase or Substitution of Loans	22
			
	ARTICLE FOUR		
	COVENANTS OF THE COMPANY		
	Section 4.01	The Company Covenants	24
	Section 4.02	Depositor Covenants	27
	Section 4.03	Assignment of Loan Assets	28
			
	ARTICLE FIVE		
	CONDITIONS		
	Section 5.01	Conditions to the Depositor's Obligations	29
	Section 5.02	Conditions to the Company's Obligations	30
			
	ARTICLE SIX		
	TERM AND TERMINATION		
	Section 6.01	Term	31
	Section 6.02	Default by the Company	31
			
			
	i
	

			
	ARTICLE SEVEN		
	GENERAL PROVISIONS		
	Section 7.01
	Amendments.	32
	Section 7.02	Governing Law	32
	Section 7.03	Notices	32
	Section 7.04	Separability Clause	32
	Section 7.05	Assignment	32
	Section 7.06	Further Assurances	32
	Section 7.07	No Waivers; Cumulative Remedies	33
	Section 7.08	Binding Effect; Third Party Beneficiaries	33
	Section 7.09	Set-Off	33
			
	EXHIBITS
		
	Exhibit A	Form of Company Certificate	
	Exhibit B	Loan Funding Checklist	
	Exhibit C	Form of Pending Credit Schedule	
	Exhibit D	Pool Criteria	
	Exhibit E	Program Guidelines	
	Exhibit F	Scope of Specified Review	
	Exhibit G	Standard Forms	

ii

 

                   
This LOAN ACQUISITION AGREEMENT (this "Agreement"), dated as of August 1, 1998,
is entered into between Allegiance Capital, LLC, a Delaware limited liability company (the
"Company"), and Allegiance Funding Corp. I, a Delaware corporation (the
"Depositor").

RECITALS

                   
The Depositor has entered into, or is in the process of entering into, a Trust Agreement,
dated as of August 1, 1998 (the "Trust Agreement"), with Manufacturers and
Traders Trust Company, a New York banking corporation (the "Trustee"),
Allegiance Capital, LLC, as special servicer (the "Special Servicer"), and Point
West Capital Corporation, as servicer (the "Servicer"), pursuant to which the
Depositor, on behalf of the Trust, has caused or will cause the issuance of various Series
of Revolving Certificates and various Series of Term Certificates.

                   
In furtherance thereof, the Company and the Depositor are entering into this Agreement to
provide for, among other things, the acquisition by the Depositor of all of the Company=s right, title and interest
in and to certain Loan Assets, which the Depositor will, in accordance with the Trust
Agreement, subsequently be conveying to the Trustee from time to time for inclusion in the
Trust Estate. As a precondition to the effectiveness of this Agreement, the Depositor, the
Trustee, the Servicer, the Special Servicer and the Servicing Advisor will enter into the
Servicing Agreement to provide for the servicing of the Loan Assets. 

                    
In addition, the Depositor will be conveying to the Trustee, among other things, all of
the Depositor's rights derived under this Agreement and the Servicing Agreement, and the
Company agrees that all representations, warranties, covenants and agreements made by it
in this Agreement with respect to the Loan Assets and otherwise shall also be for the
benefit of the Trustee and all Certificateholders. In consideration of the Company=s contribution and sale and
the Company=s
representations, warranties, covenants and agreements under this Agreement, the Company
will be receiving all of the Common Stock and such other consideration as is required to
be paid from time to time hereunder.

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

1

ARTICLE ONE

DEFINITIONS

  
    
      
         

        
      

    

  

                   
Section 1.01            
Defined Terms.

                   
Each capitalized term used herein but not otherwise defined has the meaning assigned to
such term in the Trust Agreement or, if not defined therein, in the Servicing Agreement.
For purposes of this Agreement, each of the following terms has the meaning specified
herein:

                   
"Agreement": The meaning set forth in the introductory paragraph hereof.

                   
"Common Stock": All of the issued and outstanding shares of common stock of the
Depositor, which consist of one thousand (1,000) shares having a par value of $0.01 per
share.

                   
"Company": The Person described in the introductory paragraph hereof and all
successors and permitted assigns of such Person under this Agreement.

                   
"Company Address": 1700 Montgomery Street, Suite 250, San Francisco, California
94111, or such other address furnished in writing to the Trustee, the Certificateholders
and the Depositor in accordance with the provisions hereof.

                   
"Company Certificate": A certificate of the Company, substantially in the form
of Exhibit A.

                   
"Depositor": The Person described in the introductory paragraph hereof and all
successors and permitted assigns of such Person under the Trust Agreement and this
Agreement.

                   
"Depositor Address": 1700 Montgomery Street, Suite 250B, San Francisco,
California 94111, or such other address furnished in writing to the Trustee, the
Certificateholders and the Company in accordance with the provisions hereof.

                   
"Electronic Records": The electronic master records of all loans of the Company
or the Special Servicer similar to and including the Loans.

                   
"Eligible Loan": A Loan that satisfies all of the criteria set forth in Section
3.01(a) and does not cause the Loan Pool to violate the Pool Criteria.

                   
"Environmental Laws": All federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or other governmental restrictions relating to the
environment or to emissions, discharges or releases of pollutants, contaminants, petroleum
or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes
into the environment, including ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes or the cleanup
or other remediation thereof.

                   
"Existing Indebtedness": Any indebtedness of the Company that relates to
pre-existing financings of any Loans that are conveyed hereunder.

2

 

                   
"GAAP": With respect to any Loan, generally accepted accounting principles in
the United States consistently applied and, to the extent not in conflict therewith, in
the case of any accounting determination with respect to the related Obligor(s), on a
basis consistent with the financial statements of such Obligor(s).

                   
"Initial Delivery Date": The meaning set forth in the Trust Agreement.

                   
"Lease": A lease for all or any portion of the real property comprising the
Mortgaged Property entered into with a third party, the lessee=s interest in which is held
by an Obligor of the related Loan.

                   
"Lien": Any security interest, lien, charge, pledge, equity or encumbrance of
any kind, other than any inchoate liens for taxes not yet due.

                   
"Loan Assets": All of the Company=s right, title and interest, whenever existing or arising
and whether now owned or hereafter acquired, in and to the following: (a) the Loans and
all rights with respect thereto, including (i) all payments made or payable by or on
behalf of any Obligor thereunder or with respect thereto on or after the Cut-Off Date for
such Loan, including all periodic payments ( including all Scheduled Payments but
excluding the portion thereof representing interest accrued prior to the Cut-Off Date),
all amounts paid by any guarantor of a Loan, all payments made in respect of Defaulted
Loans, all Insurance Proceeds, all prepayments fees, all premiums, and all late payment or
other incidental charges or fees (including late fees, collection fees and bounced check
charges) and (ii) all guaranties, Insurance Policies, and other agreements or arrangements
of whatever character from time to time supporting or securing payment of any Loan; (b)
the Loan Files; (c) the security interests and other Liens of the Company in the Loan
Collateral; and (d) all income and proceeds of the foregoing or relating thereto.

                   
"Loan Collateral": The tangible and intangible assets (including accounts,
equipment, general intangibles, inventory, and real property) that secure, directly or
indirectly, all or any portion of a Loan.

                   
"Loan File": With respect to any Loan, a file containing: (a) all of the items
on the Loan Funding Checklist for such Loan, including the original manually executed
credit agreement(s), loan agreement(s), promissory note(s), Mortgage(s), assignment(s),
consent(s), estoppel(s), guaranty(ies), security agreement(s), and other agreements,
documents and instruments (including any Insurance Policies) evidencing or otherwise
relating to such Loan, the original credit application executed by the Obligor(s)
thereunder, and all other agreements, documents, and instruments required by the Loan
Funding Checklist (including any share certificates and related stock powers); (b) the
related loan application; (c) the related credit memorandum; (d) the related Valuation;
(e) the related Specified Review; and (f) all related filings (including Uniform
Commercial Code filings), notices, transfers, assignments (including assignments of all
related Mortgages (in recordable form and duly executed) and Notes), stock or other
appropriate powers or instruments of transfer (duly executed in blank) and recordings as
required under Section 3.01(a)(ix) hereof, the Trust Agreement or applicable law (i) to
perfect the sale by the Company to the Depositor of such Loan and the related Loan Assets
being acquired hereunder, (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 Depositor's rights therein, and (iv) to cause any related
Loan Collateral (including any related Mortgages) to name the Trustee as lienholder in
accordance with the provisions of the Trust Agreement.

                   
"Loan Funding Checklist": The checklist of all required documentation relating
to any Loan, substantially in the form of Exhibit B. 

3

                   
"Mortgage": The mortgage, deed of trust or other instrument securing a Loan,
which creates a first lien on an unsubordinated fee, leasehold or ground leasehold estate
on real property.

                   
"Mortgaged Property": Any real property (irrespective of whether a fee or a
leasehold estate) that is encumbered by a Mortgage and secures, directly or indirectly,
the repayment of all or any portion of any Loan or any guaranty thereof or any debt
evidenced by a Note.

                   
"Note": The note or other evidence of indebtedness of an Obligor evidencing a
Loan.

                   
"Pending Credit Schedule": A schedule, substantially in the form of Exhibit C
attached hereto, setting forth, with respect to each Loan, a summary of the financial
terms of such Loan, a summary of the relevant documents and the structure of the Loan and
the security therefor.

                   
"Pension Plans": The meaning set forth in Section 3.01(c)(xvi).

                   
"Permitted Loan Collateral Liens": Collectively, with respect to any Loan and
the related Loan Collateral therefor: (a) Liens that are identified as existing on the
date of the related Loan closing or that are permitted under the terms of the related Loan
documents to arise thereafter, in each case as approved in writing by the Depositor and
the Certificateholder Agent; (b) statutory Liens of landlords, carriers, warehousemen,
mechanics, or materialmen, and other Liens (other than Liens in connection with any
Environmental Law and any Lien imposed under ERISA) imposed by law and incurred in the
ordinary course of business of any related Obligor for sums either not yet delinquent or
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which adequate reserves have been established in accordance
with GAAP (if so required); (c) Liens (other than Liens in connection with any
Environmental Law and any Lien imposed under ERISA) incurred or deposits made in the
ordinary course of business of any related Obligor in connection with workers'
compensation, unemployment insurance, and other types of social security, or to secure the
performance of statutory obligations, surety and appeal bonds, leases, or other similar
obligations; (d) non-material easements, rights-of-way, restrictions, and other similar
charges or encumbrances not interfering in any material respect with the ordinary course
of business of any Obligor; (e) banker's Liens in the nature of rights of setoff arising
in the ordinary course of business of any related Obligor; (f) Liens on property of any
related Obligor to another related Obligor securing debt of the one party owing to the
other (but only if such debt is Loan Collateral); (g) Liens for taxes, assessments or
other governmental charges or statutory obligations that are not delinquent or remain
payable without any penalty or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and for which adequate reserves
have been established in accordance with GAAP (if so required); and (h) Liens created by
the Loan documents in favor of the Company.

                   
"Pool Criteria": The criteria set forth on Exhibit D.

"Program Guidelines": The underwriting guidelines of the
Company with respect to the origination of the Loans, which are as set forth on Exhibit
E attached hereto; provided that "Program Guidelines" shall not
include any Proposed Revisions (as that term is defined in Section 4.01(r)) if the
same is, or is deemed, rejected by the Depositor, the Rating Agency or the
Certificateholder Agent in accordance with Section 4.01(r).

                   
"Proposed Revisions": The meaning set forth in the Section 4.01(r).

4

 

                   
"Qualified Insurer": An insurance company duly qualified as such under the laws
of the states in which any applicable Loan Collateral is located, duly authorized and
licensed in such states to transact the applicable insurance business and to write the
insurance provided, and which is rated as to claims paying ability as follows: (a) with
respect to pre-need insurance for customers of Obligors, at least "B++/V" or, in
the case of Homesteaders Life Co., "B+/V" by Best=s Key Rating Guide; (b) with
respect to life insurance assigned by an Obligor under a Loan, at least "B+/V"
or, if in excess of the applicable state guaranty fund limits, at least "B++/VI"
by Best=s Key
Rating Guide; and (c) with respect to all other insurance, at least "A" by Best=s Key Rating Guide.

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

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

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

                   
"Specified Review": A review of a Loan and of the related initial Valuation,
conducted by Deloitte & Touche LLP or any other "Big 5" accounting firm
(including any consulting arm thereof) or any other Independent person approved in advance
in writing by the Certificateholder Agent, which review addresses the items set forth on Exhibit
F.

                   
"Standard Forms": The forms of the documents attached hereto as Exhibit G
with such changes thereto, if any, as are from time to time approved by both the
Certificateholder Agent and the Rating Agency.

                   
"Substitute Loan": The meaning set forth in Section 3.04(b).

                   
"Transfer Taxes": The meaning set forth in Section 3.01(a)(viii).

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

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

                   
"Valuation": A valuation of an Obligor=s business and assets comprising the Loan Collateral, as
prepared by an experienced and competent business appraiser acceptable to the
Certificateholder Agent and which, initially, shall include FAIr Market Value, Inc.

                   
Section 1.02            
Certain Rules of Construction.

                   
Unless the context of this Agreement clearly requires otherwise: (a) references to the
plural include the singular and to the singular include the plural; (b) references to any
gender include any other gender; (c) the words "include" and
"including" are not limiting; (d) the word "or" has the inclusive
meaning represented 

5

by the phrase "and/or"; (e) the words "hereof,"
"herein," "hereby," and "hereunder," and any other similar
words, refer to this Agreement as a whole and not to any particular provision hereof; and
(f) article, section, subsection, clause, exhibit, and schedule references are to this
Agreement. Article, section, and subsection headings are for convenience of reference
only, shall not constitute a part of this Agreement for any other purpose, and shall not
affect the construction of this Agreement. All exhibits and schedules attached hereto are
incorporated herein by this reference. Any reference herein to this Agreement or any other
agreement, document, or instrument includes all permitted alterations, amendments,
changes, extensions, modifications, renewals, or supplements thereto or thereof, as
applicable.

6

 

 

ARTICLE TWO

ACQUISITION OF LOAN ASSETS

                   
Section 2.01            
Conveyance of Loan Assets. 

                   
(a)          In consideration of the Depositor's
delivery to or upon the order of the Company of the Common Stock and the net proceeds from
the initial sale of the Certificates, the Company does hereby sell, transfer, contribute,
assign, set over and otherwise convey to the Depositor, without recourse (except as
provided in Sections 2.06, 3.03 and 3.04), all of the Company's right, title and interest
now existing or hereafter arising in and to the Loan Assets related to the Loans listed on
each Loan Schedule. The Company, from time to time hereafter, shall sell and contribute to
the Depositor all of the Company's right, title and interest then existing or thereafter
arising in and to a Funding Group or Substitute Loans (and, in each case, the related Loan
Assets) pursuant to a Company Certificate under the circumstances and in accordance with
the procedures set forth herein and in the Trust Agreement. The Company agrees that all
Loans sold, contributed, transferred and conveyed to the Depositor hereunder shall be
Eligible Loans and that all Loan Assets acquired by the Depositor shall conform with all
of the requirements hereof. The Company hereby acknowledges that each transfer of the Loan
Assets to the Depositor is absolute and irrevocable, without reservation, retention of any
interest, or recourse to the Company, except as provided in Sections 2.06, 3.03 and 3.04.

                   
(b)          If, for any reason, the Company
retains any portion of the Loan File pertaining to any Loan sold to the Depositor
hereunder, it shall hold such documents as the Special Servicer in trust for the benefit
of the Depositor and the Trustee. The possession by the Company of any Loan File (or any
portion thereof) pertaining to any Loan is, and shall be, at the will of the Depositor and
the Trustee for the sole purpose of servicing such Loan Assets, and such retention and
possession by the Company is, and shall be, in a custodial capacity only. Any Loan File or
portion thereof relating to any Loan shall be segregated from the books and records of the
Company and shall be marked appropriately to reflect clearly the sale of the related Loan
Assets to the Depositor and the conveyance thereof to the Trust.

                   
Section 2.02         Authorization and Issuance of
Common Stock by the Depositor. 

                   
Subject to all the terms and conditions hereof and in reliance upon the representations,
warranties and covenants set forth in this Agreement, the Depositor shall issue, as of the
Initial Delivery Date, the Common Stock to the Company. In accordance with all of the
terms and conditions hereof: (a) the Depositor shall issue the Common Stock in the name
of, and shall deliver the Common Stock directly to, the Company; and (b) the Company shall
obtain the Common Stock directly from the Depositor.

                   
Section 2.03         Use of Proceeds.

                   
Subject to all the terms and conditions hereof and in reliance upon the representations,
warranties and covenants set forth herein, the Depositor shall, on the Initial Delivery
Date and on any Acquisition Date, repay the Existing Indebtedness, if any, with the
proceeds of the sale of any Certificates simultaneously upon the issuance of such
Certificates.

 

7

 

                   
Section 2.04         Delivery of Loans; Filing of
Financing Statements.

                   
(a)          In connection with each Funding, the
Company shall deliver to the Depositor, the Certificateholder Agent and the Rating Agency
a Pending Credit Schedule, Specified Reviews, a Funding Report and a Company Certificate
in accordance with Sections 4.03 and 4.04 of the Trust Agreement.

                   
(b)          Promptly upon the transfer by the
Company to the Depositor of the Loan Assets, the Company shall notify all Obligors in
writing to send all payments in respect of the Loans directly to the Lockbox Account.

                   
(c)          In connection with the Depositor's
acquisition of any Loan Assets, the Company, on behalf of the Depositor, shall deliver to
the Trustee in accordance with Section 4.06 of the Trust Agreement the original
related Loan Files and shall deliver to the Servicer and the Special Servicer a copy of
such Loan Files to assist them in their respective servicing obligations (as provided
under the Transaction Documents). In addition, in connection with the Depositor=s acquisition of any Loan
Assets, the Company shall make, file, or record, as applicable, on or prior to the
acquisition of such Loan Assets all filings (including Uniform Commercial Code filings),
notices, transfers, assignments (including assignments of all related Mortgages (in
recordable form duly executed) and Notes), stock or other appropriate powers or
instruments of transfer (duly executed in blank) and recordings as required under Section
3.01(a)(ix) hereof, the Trust Agreement or applicable law (i) to perfect the sale by the
Company to the Depositor of the Loans and the related Loan Assets being acquired
hereunder, (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 Depositor's rights therein, and (iv) to cause any related Loan Collateral
(including any Mortgages) to name the Trustee as lienholder in accordance with the
provisions of the Trust Agreement.

                   
(d)          In connection with the Depositor's
acquisition of any Loan Assets, the Company shall promptly, at its own expense, cause all
Electronic Records and other records maintained by it to be marked to show that the Loan
Assets have been acquired by the Depositor in accordance herewith and subsequently
conveyed by the Depositor to the Trustee in accordance with the Transaction Documents..

  
    Section 20.5
                 Servicing of
    Loans.

  

The Servicer and the Special Servicer shall service all Loan Assets for
the benefit of the Depositor (and its successors and assigns), the Trustee and the
Certificateholders, in accordance with the terms and conditions of the Transaction
Documents. Notwithstanding the foregoing, the Company acknowledges and agrees that its
obligations hereunder are independent of any obligations it may have as the Special
Servicer and that its obligations under this Agreement will continue in full force and
effect, whether or not it is acting as the Special Servicer, until termination of this
Agreement in accordance with Section 6.01.

  
    Section 2.06
                 Review of Loans.

  

If the Company discovers or is notified by the Depositor or by the
Trustee on behalf of the Certificateholders or by the Certificateholder Agent that any
material document in any Loan File (including any Note, Mortgage or other document
specified in clause (f) of the definition of "Loan File" contained herein) is
missing or defective (that is, mutilated, damaged, defaced, incomplete, improperly dated,
clearly forged or otherwise physically altered) in any material respect, the Company shall
correct or cure such omission, defect or other irregularity within forty-five (45) days
from the date the Company discovered, or 

8

 

is notified by the Depositor or the Trustee of, such omission or
defect. Otherwise, the Company shall repurchase such Loan from the Depositor or replace
such Loan with a Substitute Loan in accordance with Sections 3.03 and 3.04.

                   
Section 2.07         Nature of Transfer. 

                   
(a) The transfers of Loan Assets by the Company to the Depositor pursuant to this
Agreement are intended to be absolute assignments of all of the Company's right, title and
interest in, to and under such Loan Assets, without recourse (except as provided in
Sections 2.06, 3.03 and 3.04), for all purposes.

                   
(b) If the transfer of any or all of the Loan Assets from the Company to the Depositor is
deemed for any reason to be a secured financing, then the Company shall be deemed
hereunder to have granted to the Depositor, and the Company does hereby grant to the
Depositor, a first priority security interest in all of the Loan Assets. For purposes of
such grant, this Agreement shall constitute a security agreement under applicable law.

                   
(c) If the transfer contemplated by this Agreement is deemed for any reason to be less
than a transfer of complete legal title of all of the Loan Assets, the parties hereto
nevertheless intend that this Agreement operate to transfer all of the Loan Assets to the
Depositor.

9

 

 

ARTICLE THREE

REPRESENTATIONS AND WARRANTIES

  
    
      
         

        
      

    

  

                   
Section 3.01         Representations and
Warranties of the Company.

                   
(a)          Subject to any exceptions reflected
in a related Funding Report that are approved by the Certificateholder Agent, the Company
hereby makes the following representations and warranties as to each Loan to the Depositor
and for the benefit of the Trustee and the Certificateholders, on which the Depositor
relies in acquiring the Loan and the other related Loan Assets, the Trustee relies in
accepting the Trust Estate and authenticating the Certificates and the Certificateholders
rely in acquiring the Certificates and making advances under the Transaction Documents.
Such representations and warranties speak, unless otherwise indicated, as of the
Acquisition Date with respect to such Loan, but such representations and warranties shall
survive any subsequent transfer, assignment, contribution or conveyance of such Loan.

  
                (i)
                 The information
    set forth with respect to such Loan in the Loan Schedule is true and correct as of the
    related Cut-Off Date and Acquisition Date;

                (ii)
                 Such Loan is a
    senior secured commercial loan originated in the United States of America by the Company
    in the ordinary course of the Company's business. Such Loan is denominated and payable in
    United States dollars. Such Loan is fully and properly executed by the parties thereto.
    The rights with respect to such Loan are assignable by the lender thereunder and its
    assignees without the consent of or notice to any Person. 

               
    (iii)              The Company
    shall have delivered to the Depositor either (A) the original manually executed Note
    relating to such Loan, all other original documents evidencing such Loan (with the
    exception of such original documents as have not yet been returned from the appropriate
    filing/recordation office, which documents shall be forwarded to the Trustee within one
    hundred twenty (120) days of the date of the closing of such Loan; provided that,
    if such original documents are not forwarded to the Trustee on or before such date, then
    the Company shall provide written notice to the Trustee and the Certificateholder Agent of
    such fact, such written notice to provide the circumstances of such failure and what steps
    the Company is taking or is able to take in respect thereof (depending on information
    supplied by the applicable filing/recordation office)), and the other items comprising the
    Loan File related thereto or (B) executed Escrow Instructions, or other evidence
    acceptable to the Depositor, the Trustee and the Certificateholder Agent that such items
    have been obtained from the Obligor and are being held in escrow; with delivery of all
    original documents evidencing such Loan and the related Loan File to be made within two
    (2) Business Days following the related Acquisition Date (with the exception of such
    original documents as have not yet been returned from the appropriate filing/recordation
    office, which documents shall be forwarded to the Trustee within one hundred twenty (120)
    days of the date of the closing of such Loan; provided that, if such original
    documents are not forwarded to the Trustee on or before such date, then the Company shall
    provide written notice to the Trustee and the Certificateholder Agent of such fact, such
    written notice to provide the circumstances of such failure and what steps the Company is
    taking or is able to take in respect thereof (depending on information supplied by the
    applicable filing/recordation office)).

    10

     

  

                   
(iv)          There is only one original manually
executed counterpart of the Note relating to such Loan, which has been delivered to the
Trustee, and the Company's Electronic Records and other records have been marked as
provided in Section 2.04(d).

                   
(v)          Such Loan was not originated in, nor
is it subject to the laws of, any jurisdiction, the laws of which would make unlawful the
sale, transfer or assignment of such document under any of the Transaction Documents,
including any repurchase in accordance with the Transaction Documents.

                   
(vi)          Such Loan is, and on the related
Cut-Off Date and Acquisition Date will be, in full force and effect in accordance with its
respective terms and neither the Company nor any Obligor has or will have suspended or
reduced any payments or obligations due or to become due thereunder by reason of a default
by the other party to such Loan; and, as of the related Acquisition Date: (A) such Loan is
not a Delinquent Loan or a Defaulted Loan and (B) there are no proceedings pending, or to
the best of the Company's knowledge, threatened, asserting the insolvency of an Obligor;
and there are no proceedings pending, or to the best of the Company's knowledge,
threatened wherein the Obligor or any governmental agency has alleged that such Loan is
illegal or unenforceable or which could reasonably be expected to have a material adverse
effect on the financial condition of the related Obligor or the enforceability of the
Loan; and no advances were made to qualify the Loan under the eligibility criteria
contained in this Section 3.01. 

                   
(vii)          To the best of the Company=s knowledge, there has been no advance of
funds by a party other than the related Obligor(s) for the payment of any amount required
in respect of such Loan.

                   
(viii)          Such Loan is the valid, binding
and legally enforceable obligation of the parties thereto, enforceable in accordance with
its terms, subject, as to enforcement, to applicable bankruptcy, insolvency,
reorganization and other similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity regardless of whether
enforcement is sought in a court of law or equity. 

                   
(ix)          All related filings (including
Uniform Commercial Code filings and further including such Uniform Commercial Code filings
naming the Trustee as assignee of secured party with respect to the Obligors under such
Loan), notices, transfers, assignments (including assignments of all related Mortgages (in
recordable form and duly executed)), stock or other appropriate powers or instruments of
transfer (duly executed in blank), recordings and other actions as required under the
Trust Agreement or applicable law to perfect the first priority security interest of the
Depositor in such Loan and the related Loan Assets being acquired hereunder, to assign
such security interest to the Trustee, to perfect the first priority security interest of
the Trustee in the Depositor's rights therein and to cause any related Loan Collateral
(including any related Mortgages) to name the Trustee as lienholder in accordance with the
provisions of the Trust Agreement have been accomplished and are in full force and effect
or will be accomplished within the time period specified in the Transaction Documents.
Such Loan creates a valid, subsisting and enforceable first priority lien upon and
security interest in the related Loan Collateral subject only to Permitted Loan Collateral
Liens, securing such Loan in favor of the Company. Such Loan together with the related
lien and security interest in the Loan Collateral has been duly assigned by the Company to
the Depositor and by the Depositor to the Trustee.

11

 

                   
(x)          Each Loan (except as described below)
is secured by a related Mortgage, which is a valid and enforceable first lien on the fee
or leasehold estate (as indicated in the exhibit/attachment to the Mortgage) of the
related Mortgage Property, which estate is free and clear of all other encumbrances and
liens, except (in the case of a mortgage of a fee estate) for (A) liens for real estate
taxes and special assessments not yet due and payable, (B) covenants, conditions and
restrictions, rights of way, easements and other matters of public record as of the date
of recording of such Mortgage, such exceptions appearing of record being acceptable to
commercial mortgage lending institutions generally or specifically (i.e., not through a
general exception or exclusion) reflected in the title policy made in connection with the
origination of the related Loan, (C) other matters to which like properties are commonly
subject which do not individually or in the aggregate, materially interfere with the
benefits of the security intended to be provided by such Mortgage, or (D) any other lien
as approved by the Company, the Depositor and the Certificateholder Agent.

                   
(xi)          Such Loan is not
cross-collateralized with any other obligation other than the following: (A) a Loan that
is a whole loan and not a participation interest; or (B) an obligation not a Loan to the
extent that: (1) such obligation is a loan originated by the Company; (2) such obligation
has a debt service coverage ratio, fixed charge coverage ratio or other similar measure
analogous to the Coverage Ratio applicable to the Loan of not less than 1.60:1.00; (3) the
proceeds of such other obligation are to be used solely for (y) acquiring additional death
care establishments or real property or making any improvements relating thereto or (z)
constructive business purposes of the related Obligor, provided that no proceeds of
any such obligation are used by or distributed to any Affiliate of the related Obligor
other than such Person=s wholly owned
subsidiaries; (4) such other obligation will be serviced solely by the Servicer; (5) the
Company shall have entered into an intercreditor agreement in form and substance
reasonably satisfactory to the Certificateholder Agent and the Rating Agency with the
related creditor (or the assignee thereof) of such other obligation; and (6) the Company
shall have provided all information with respect to such other obligation as shall have
been reasonably requested by the Certificateholder Agent and the Rating Agency.

                   
(xii) In the case of a Mortgage of a fee or leasehold estate in connection with such Loan,
the related Mortgaged Property is covered by an ALTA or comparable lender's title
insurance policy, issued by a Qualified Insurer, insuring the Company, its successors and
assigns that the related Mortgage is a valid first lien on such Mortgaged Property,
subject (in the case of a Mortgage on a fee estate) only to the matters set forth in
Section 3.01(a)(x) and Permitted Loan Collateral Liens. Such title insurance policy is in
full force and effect, is freely assignable to each of the Depositor and the Trustee, as
assignee of the Loan using a 104 or similar endorsement which endorsement insures the
holder of record that there is no prior assignment of the Loan. Such title insurance
policy insures the Mortgaged Property in the amount required by the Program Guidelines.
The policy does not contain any special exceptions (other than standard exclusions and
endorsements) for zoning and uses or other special exceptions (other than survey
exceptions) that would render the Mortgaged Property unmarketable. No claim has been made
under such title insurance policy. The Company has not done, by act or omission, anything,
and has no knowledge of any fact, which would materially impair the coverage of any such
title insurance policy. The title policy has been marked to delete the intervening lien
exception and all premiums for such policy, including any premiums for endorsements and
special endorsements, have been paid. 

                   
(xiii) Any Mortgaged Property related to such Loan is insured by a fire and extended
perils insurance policy, issued by a Qualified Insurer, providing coverage against loss or
damage sustained by reason of fire, lightning, windstorm, hail, explosion, riot, riot
attending a strike, civil 

12

commotion, aircraft, vehicles and smoke, and, to the extent required as
of the date of origination by the Company consistent with its commercial lending practices
and the Program Guidelines, against other risks insured against by Persons operating like
properties in the locality of the Mortgaged Property, in an amount not less than that
specified by the Program Guidelines. The primary related Obligor also maintains business
interruption and rental continuation coverage sufficient to protect against loss under a
policy issued by a Qualified Insurer in accordance with the Program Guidelines. If any
portion of the Mortgage Property is in an area identified by any federal governmental
department, agency or authority as having special flood hazards, and flood insurance is
available, a flood insurance policy meeting the current guidelines of the Federal
Insurance Administration is in effect with a generally acceptable insurance carrier, in an
amount representing coverage not less than the least of the maximum amount of insurance
available under the Flood Disaster Protection Act of 1973, as amended. All such insurance
policies contain a standard loss payable endorsement naming the Company, its successors
and assigns (including subsequent owners of the Loan), as mortgagee, and may not be
reduced, terminated or cancelled without thirty (30) days prior written notice to the
mortgagee. No such notice has been received by the insured. All premiums on any such
policy have been paid for at least six (6) months following the related Loan closing date.
The related Mortgage obligates the related Obligor to maintain all such insurance and, at
such Obligor's failure to do so, authorizes the mortgagee to maintain such insurance at
the Obligor's cost and expense and to seek reimbursement therefor from such Obligor.

                   
(xiv)          Such Loan was originated by the
Company and each related Loan Asset satisfies in all material respects the Program
Guidelines.

                   
(xv)          The proceeds of such Loan have been
fully disbursed and there is no requirement for future advances thereunder and any and all
requirements stated in the commitment letter between the Company and the related Obligors
and the closing instructions of the Company as to the escrow of any funds have been
complied with except as described in the related Loan File and approved in writing by the
Depositor and the Certificateholder Agent. Except for any escrowed funds deposited
pursuant to the related Loan documents, no cash deposits, letters of credit, pledged
account, surety bonds or other cash equivalent items are held to assure compliance by any
related Obligor with any of its obligations in respect of the Loan. 

                   
(xvi)          The Coverage Ratio relating to such
Loan is not less than 1.4:1.0.

                   
(xvii)          No Obligor with respect to such
Loan is the United States of America or any state, or agency, department or
instrumentality or political subdivision of the United States of America or any State.

                   
(xviii)          All requirements of any federal,
state or local law (including usury, truth in lending, real estate settlement procedures,
consumer credit protection, equal credit opportunity or disclosure laws) applicable to the
origination, conveyance and servicing of such Loan have been complied with.

                   
(xix)          Such Loan is not and, to the best
of the Company=s knowledge, will not be
subject to any right of rescission, set-off, claim, counterclaim or defense, including the
defense of usury, whether arising out of transactions concerning such Loan or otherwise;
the operation of any of the terms of such Loan or the exercise by the Company or any
related Obligor of any right under such Loan will not render such Loan unenforceable in
whole or in part, nor subject to any claim, counterclaim, setoff, recision or defense, and
no such right of rescission, set-off, claim, counterclaim 

13

or defense has been asserted with respect thereto; provided that
certain rights or defenses may exist under applicable law which, individually or in the
aggregate, do not make the remedies available to the Company and its assignees with
respect to such Loan inadequate for the practical realization of the benefits provided
thereby. 

                   
(xx)              Proceeds of
the Loans may be used for acquisitions, debt refinancing, stock purchase, distribution and
other legal purposes specified in the Program Guidelines or otherwise approved by the
Certificateholder Agent. Except as expressly previously disclosed to the Depositor and the
Certificateholder Agent, to the best of the Company=s knowledge, the proceeds of such Loan have not been and will not be used
to satisfy, in whole or in part, any debt owed or owing by any Obligor to any of its
Affiliates.

                   
(xxi)              All
existing indebtedness of the related primary Obligor of such Loan shall be repaid prior to
or concurrently upon the closing of such Loan; provided that, subject to Section
3.01(a) (xvi), incidental unsecured debt (including revolving credit), debt secured by,
and leases of, or indebtedness relating to, vehicles and equipment consistent with the
Program Guidelines and as permitted under the related Loan documents is permitted.

                   
(xxii)              There is
no default, breach, violation or event of acceleration existing with respect to such Loan,
and no event (other than payments due but not yet delinquent) which, with the passage of
time or with notice and the expiration of any grace or cure period, would constitute a
default, breach, violation or event of acceleration, exists with respect to such Loan. 

                   
(xxiii)              Such Loan
is evidenced by documents substantially in the form of the Standard Forms. The related
Note, the related Mortgage and the other related Loan documents contain customary and
enforceable provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against each related Obligor's interest in the related Loan
Collateral. Such Loan has a stated maturity. Such Loan has scheduled monthly payments and
an amortization schedule that comply with the Program Guidelines; without limiting the
foregoing, the grace period with respect to any scheduled monthly payment due in respect
of such Loan is not greater than five (5) days.

                   
(xxiv)              To the
extent such Loan is secured by a Mortgage that is a deed of trust, a trustee, duly
qualified under applicable law to serve as such, has either been properly designated and
currently so serves or may be substituted in accordance with applicable law. Except in
connection with a trustee's sale after default by the related Obligor, no fees or expenses
are payable by the Company or the Depositor to such trustee. 

                   
(xxv)              With
respect to each Loan which is secured by the interest of an Obligor as lessee under a
Lease, unless otherwise approved in writing by the Depositor and the Certificateholder
Agent:

  
                       
    (1)              The lessor
    under such Lease has agreed in such Lease or in another writing contained in the Loan
    File, or the related Loan provides for the Obligor's agreement, that such Lease may not be
    amended, modified, surrendered, cancelled or terminated in any manner that would be
    materially adverse to the Company without the prior written consent of the Company;

    14

     

                       
    (2)              Such Loan
    provides that the original term of the related Lease (plus all consecutive renewal terms
    which may be exercised, and which under all circumstances would be enforceable, by the
    Company, the Depositor and the Trustee, as appropriate) extends beyond the stated maturity
    date for such Loan, unless otherwise approved in writing by the Depositor and the
    Certificateholder Agent;

                       
    (3)              Such Lease or
    related lease estoppel requires the lessor thereunder to give to the Company notice of any
    default by the lessee, the opportunity to cure any such default, and the right to enter
    into a new lease on substantially the same terms as the Lease following a rejection
    thereof by a trustee or debtor-in-possession in any bankruptcy or insolvency proceeding or
    a termination of such Lease as a result of an incurable default; and

                       
    (4)              Such Lease is
    in full force and effect and no default has occurred under such Lease, nor is there any
    existing condition which, but for the passage of time or the giving of notice, would
    result in a default under the terms of such Lease.

    (xxvi)
                 The Company has
    duly fulfilled all obligations to be fulfilled on the lender's part under or in connection
    with the origination, acquisition and assignment of the Loan Assets related to such Loan,
    including giving any notices or consents necessary to effect the acquisition of such Loan
    Assets by the Depositor, and has done nothing to impair the rights of the Trust Estate and
    the Certificateholders in such Loan. The Company has obtained all necessary licenses,
    permits and charters required to be obtained by the Company, which failure to obtain would
    render any material portion of the Loan documents unenforceable or would have a material
    adverse effect on the Depositor or the Certificateholders.

    (xxvii)
                 Such Loan and the
    related Loan Assets have not been sold, transferred, assigned or pledged by the Company to
    any Person other than the Depositor (except for security interests in the Loan Assets
    which shall be terminated on or prior to the related Cut-Off Date), and upon execution and
    delivery of this Agreement by the Company and the contemporaneous repayment of the
    Existing Indebtedness, the Depositor will have all of the right, title and interest in and
    to the Loan Assets, free and clear of all liens and encumbrances and any interest of the
    Company or its successors, except for the interests of any related Obligors in connection
    with the Loan and the lien of the Trustee under the Trust Agreement. The sale to the
    Depositor of the such Loan and the related Loan Assets does not violate the terms or
    provisions of any loan or any other agreement to which the Company is a party or by which
    it is bound.

    (xviii)
                 The sale,
    transfer, assignment and conveyance of such Loan and the related Loan Assets by the
    Company pursuant to this Agreement is not subject to and will not result in any tax, fee
    or governmental charge payable by the Company to any federal, state or local government
    ("Transfer Taxes") other than Transfer Taxes that have or will be paid by the
    Company as due. If the Depositor receives actual notice of any Transfer Taxes arising out
    of the transfer, assignment and conveyance of such Loan or the related Loan Assets, on
    written demand by the Depositor, or upon the Company otherwise being given notice thereof,
    then the Company shall pay, and otherwise indemnify and hold the Depositor, the Trustee
    and the Trust harmless, on an after-tax basis, from 

    15

    and against any and all such Transfer Taxes (it being understood that
    the Certificateholders, the Trustee and the Trust shall have no obligation to pay such
    Transfer Taxes).

                       
    (xxix)              As of the
    related Acquisition Date, such Loan has not been prepaid in full or in part (except for
    any partial prepayment reflected in the Loan Balance as shown on the Loan Schedule).

                       
    (xxx) Such Loan has been originated at par (100% of the Note amount) and all fees paid to
    the Company in connection with the origination of such Loan have been disclosed in the
    related Loan File.

                       
    (xxxi) Such Loan has a final Scheduled Payment on or before the date that is six months
    prior to the latest Series Termination Date. 

                       
    (xxxii) Such Loan has (A) an amortization schedule of not more than 216 months and
    (B) a remaining term of at least 140 months and not more than 180 months.

                       
    (xxxiii) Except as disclosed in the Funding Report relating to such Loan, to the best of
    the Company's knowledge, there is no hazardous substance, or proceeding for remediation of
    any hazardous substance, affecting any Mortgaged Property related to such Loan and there
    is no material violation of any environmental law, regulation or order affecting any
    Mortgaged Property relating to such Loan.

                       
    (xxxiv) There are no delinquent property taxes or similar charges on or affecting any
    Mortgaged Property relating to such Loan.

                       
    (xxxv) Any improvements on any Mortgaged Property relating to such Loan are in good
    repair, and, to the best of the Company's knowledge, since the origination of such Loan,
    the operator of such Mortgaged Property has maintained all material licenses, permits and
    qualifications necessary for the operation of the Mortgaged Property, and the Company has
    not received any notice of any proceeding to revoke or suspend any such license, permit or
    qualification.

                       
    (xxxvi) Such Loan has been serviced solely by the Company or the Servicer.

  

                   
(b)
                
The Company hereby makes, as of each Acquisition Date, the following representations and
warranties to the Depositor, and for the benefit of the Trustee and the
Certificateholders, on which the Depositor relies in acquiring the Loan Assets and selling
the Certificates, the Trustee relies in accepting the Trust Estate and authenticating the
Certificates and the Certificateholders rely in acquiring the Certificates and making
advances under the Transaction Documents. Such representations and warranties speak as of
each Acquisition Date, as applicable, unless otherwise indicated, but shall survive any
subsequent transfer, assignment, contribution or conveyance of the Loans.

  
                       
    (i)              The Company
    used no selection procedures that identified the Loans being acquired as being less
    desirable or valuable than other comparable loans, if any, originated by the Company.

                       
    (ii)              The Loans
    comply with the Pool Criteria.

                       
    (iii)              As of any
    Acquisition Date on which any Substitute Loans are conveyed to the Depositor and the
    Trustee: (A) the weighted average remaining term to maturity of the Loans

    16

    immediately after the substitution of such Substitute Loans does not
    vary by more than 1.5 months shorter or longer from the weighted average remaining term to
    maturity immediately prior to such substitution of Substitute Loans; (B) each Substitute
    Loan has a final Scheduled Payment on or before the final scheduled maturity of all other
    Loans; (C) the interest rate and prepayment premium with respect to each Substitute Loan
    are not less than those on the Loan being replaced.

                       
    (iv)              As to any
    Loans acquired on any Acquisition Date while a Swap Agreement is then in effect, the
    acquisition of such Loans will not cause the weighted average interest rate on all Loans
    then held in the Trust Estate (computed, prior to any default under the Swap Agreement, by
    taking into account any Swap Payments anticipated to be made in respect thereof) to be
    less than the weighted average interest rate then accruing on Rated Certificates then
    Outstanding.

  

                   
(c)
                
The Company hereby makes the following representations and warranties to the Depositor,
and for the benefit of the Trustee and the Certificateholders, on which the Depositor
relies in acquiring the Loan Assets and selling the Certificates, the Trustee relies in
accepting the Trust Estate and authenticating the Certificates and the Certificateholders
rely in acquiring the Certificates and making advances under the Transaction Documents.
Such representations and warranties speak as of the related Acquisition Date, unless
otherwise indicated, but shall survive any subsequent transfer, assignment, contribution
or conveyance of the Loans:

  
                       
    (i)              The Company
    has been duly organized and is validly existing and in good standing as a limited
    liability company under the laws of its jurisdiction of organization with limited
    liability company power and authority to own its properties and to transact the business
    in which it is now engaged, and the Company is duly qualified to do business in and is in
    good standing under the laws of each State in which any Obligor or Mortgaged Property is
    located or is not required under applicable law to effect such qualification, except where
    failure to so qualify would not have a material adverse effect on the ability of the
    Company to perform its obligations under the Transaction Documents or under any of the
    Loans.

                       
    (ii)              The
    performance of the obligations of the Company under this Agreement and the other
    Transaction Documents and the consummation of the transactions herein and therein
    contemplated will not conflict with or result in any breach of any of the terms or
    provisions of, or constitute with or without notice, lapse of time or both, a default
    under any material indenture, agreement, mortgage, deed of trust or other instrument to
    which the Company is a party or by which it is bound, or result in the creation or
    imposition of any Lien (except the Lien created by the Trust Agreement) upon any of the
    property or assets of the Company pursuant to the terms of such indenture, mortgage, deed
    of trust, or other agreement or instrument to which the Company is a party or by which the
    Company is bound or to which any of the Company's property or assets is subject, nor will
    such action conflict with or result in any violation of the provisions of the Company's
    certificate of formation or limited liability company operating agreement or any statute
    or any order, rule or regulation of any court or any regulatory authority or other
    governmental agency or body having jurisdiction over the Company or any of its properties;
    and no consent, approval, authorization, order, registration or qualification of or with
    or other action of any court, or any such regulatory authority or other governmental
    agency or body is required for consummation of the transactions contemplated by this
    Agreement and the other Transaction Documents except such consents, approvals and
    authorizations that have been obtained or such registrations or qualifications that have
    been made.

    17

     

                       
    (iii)              Each of the
    Transaction Documents has been duly authorized, executed and delivered by the Company by
    all necessary corporate action and such agreements are the valid and legally binding
    obligations of the Company, enforceable against the Company in accordance with their
    respective terms, subject as to enforcement to applicable bankruptcy, insolvency,
    reorganization and other similar laws of general applicability relating to or affecting
    creditors' rights generally and to general principles of equity regardless of whether
    enforcement is sought in a court of law or equity.

                       
    (iv)              The Company
    Address is the chief executive office and chief place of business of the Company and the
    office where the Company keeps its records concerning the Loans. 

                       
    (v)              The Company
    does not believe, nor does it have any reasonable cause to believe, that it cannot perform
    each and every covenant contained in this Agreement.

                       
    (vi)              The
    transactions contemplated by the Transaction Documents are being consummated by the
    Company in furtherance of its ordinary business purposes, with no contemplation of
    insolvency and with no intent to hinder, delay or defraud any of its present or future
    creditors.

                       
    (vii)              The
    consideration received by the Company as set forth herein is fair consideration having
    value reasonably equivalent to or in excess of the value of the Loan Assets and the
    performance of the Company's obligations hereunder.

                       
    (viii)              Neither on
    the date of the transactions contemplated by the Transaction Documents or immediately
    before or after such transactions, nor as a result of the transactions, will the Company:

    
      
                           
        (1)              be insolvent
        such that the sum of its debts is greater than all of its respective property, at a fair
        valuation;

                           
        (2)              be engaged in
        or about to engage in, business or a transaction for which the Company will have
        unreasonably small capital or the remaining assets of the Company will be unreasonably
        small in relation to its respective business or the transaction; and

                           
        (3)              have intended
        to incur or believed it would incur, debts that would be beyond its respective ability to
        pay as such debts mature or become due. The Company's assets and cash flow enable it to
        meet its present obligations in the ordinary course of business as they become due.

      

    

                       
    (ix)               
    Both immediately before and after the transactions contemplated by the Transaction
    Documents: (A) the present fair salable value of the Company's assets was or will be in
    excess of the amount that will be required to pay its probable liabilities as they then
    exist and as they become absolute and matured; and (B) the sum of the Company's assets was
    or will be greater than the sum of its debts, valuing its assets at a fair salable value.

    18

     

                       
    (x)              The
    acquisition of the Loan Assets by the Depositor pursuant to this Agreement is not subject
    to the bulk transfer or any similar statutory provisions in effect in any applicable
    jurisdiction.

                       
    (xi)              There are no
    proceedings or investigations pending, or to the knowledge of the Company, threatened,
    against or affecting the Company in or before any court, governmental authority or agency
    or arbitration board or tribunal which, individually or in the aggregate, if determined
    adversely to the Company, would materially and adversely affect the ability of the Company
    to perform its obligations under, or the validity or enforceability of, any of the
    Transaction Documents. The Company is not in default with respect to any order of any
    court, governmental authority or agency or arbitration board or tribunal.

                       
    (xii)              All tax
    returns or extensions required to be filed by the Company in any jurisdiction have in fact
    been filed, and all taxes, assessments, fees and other governmental charges upon the
    Company, or upon any of the respective properties, income or franchises of the Company,
    shown to be due and payable on such returns have been, or will be, paid when due. To the
    best of the Company's knowledge, all such tax returns are true and correct and the Company
    has no knowledge of any proposed additional tax assessment against it in any material
    amount nor of any basis therefor. The provisions for taxes on the books of the Company are
    in accordance with generally accepted accounting principles.

                       
    (xiii)              The
    Company (A) is not in violation of any laws, ordinances, governmental rules or regulations
    to which it is subject, (B) has not failed to obtain any licenses, permits, franchises or
    other governmental authorizations necessary to the ownership of its property or to the
    conduct of its business, and (C) is not in violation in any material respect of any term
    of any agreement, charter instrument, bylaw or instrument to which it is a party or by
    which it may be bound which violation or failure to obtain would materially and adversely
    affect the ability of the Company to perform its obligations under, or the validity or
    enforceability of, any of the Transaction Documents.

                       
    (xiv)              It is the
    intention of the Company that the Loan Assets be acquired by the Depositor and that the
    beneficial interest in and title to the Loan Assets not be part of the Company's estate in
    the event of the filing of a bankruptcy petition by or against the Company under any
    bankruptcy law.

                       
    (xv)              As of the
    Initial Delivery Date and after giving effect to the transactions contemplated hereby to
    be consummated on the Initial Delivery Date, the Company is and will be the registered
    owner of all of the issued and outstanding common stock of the Depositor, all of which
    Common Stock is validly issued, fully paid and nonassessable. 

                       
    (xvi)              The present
    value of all benefits vested under all "employee pension benefit plans," as such
    term is defined in Section 3 of ERISA, maintained by the Company, or in which
    employees of the Company are entitled to participate, as from time to time in effect
    (collectively, the "Pension Plans"), does not exceed the value of the assets of
    the Pension Plans allocable to such vested benefits (based on the value of such assets as
    of December 31, 1997, the last annual valuation date). No prohibited transactions,
    accumulated funding deficiencies, withdrawals or reportable events have occurred with
    respect to any Pension Plans that, in the aggregate, could subject the Company to any
    material tax, penalty or other liability. No notice of intent to terminate a Pension Plan
    has been filed, nor has any Pension Plan been terminated under Section 4041(f) of ERISA,
    nor has the 

    19

    Pension Benefit Guaranty Corporation instituted proceedings to
    terminate, or appoint a trustee to administer, a Pension Plan and no event has occurred or
    condition exists which might constitute grounds under Section 4042 of ERISA for the
    termination of, or the appointment of a trustee to administer, any Pension Plan.

                       
    (xvii)              There has
    been no material adverse change in the financial condition of the Company since April 28,
    1998 and all information concerning the Company and its Affiliates furnished by the
    Company to the Depositor, the Certificateholder Agent, any Certificateholder, the Trustee
    or the Rating Agency prior to such Acquisition Date in connection with the Transaction
    Documents or any transaction contemplated thereby was 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 Company contained in this clause (xvii) relate to any such
    information that was not prepared by the Company or any of its Affiliates, then such
    representations and warranties are made by the Company 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.

  

Notwithstanding that any representation or warranty set forth in this
Section 3.01 is made to the best of the Company's knowledge (or to the best of the
Depositor's knowledge as such representation or warranty is applied to the Depositor under
the terms of the Trust Agreement), in the event any such representation or warranty is
found to be untrue or incorrect, the repurchase and substitution provisions of Sections
3.03 and 3.04 shall apply as if such representation or warranty was not conditioned on the
Company's (or the Depositor's) knowledge.

  
    Section 3.02
                 Representations
    and Warranties of the Depositor. 

  

                   
The Depositor hereby makes the following representations and warranties to the Company,
and for the benefit of the Trustee and the Certificateholders, on which the Company relies
in entering into this Agreement with the Depositor the Trustee relies in accepting the
Trust Estate and authenticating the Certificates and the Certificateholders rely in
acquiring the Certificates and making Fundings. The Company agrees that any breach by the
Depositor of any such representations and warranties shall not limit or excuse the full
performance of the Company's obligations hereunder. Unless otherwise indicated, such
representations and warranties speak as of the Initial Delivery Date and each Acquisition
Date, but such representations and warranties shall survive any subsequent transfer,
assignment, contribution or conveyance of the Loan Assets:

                   
(a)              The Depositor
has been duly organized and is validly existing in good standing as a corporation under
the laws of the State of Delaware, with corporate power and authority to own its
properties, perform its obligations under the Transaction Documents and to transact the
business in which it is now engaged or in which it proposes to engage; the Depositor is
duly qualified to do business and is in good standing in each State in which the nature of
its business requires it to be so qualified, except where failure to so qualify would not
have a material adverse effect on the ability of the Depositor to perform its obligations
under the Transaction Documents.

20

 

                   
(b)              The
performance of the obligations of the Depositor under this Agreement and the other
Transaction Documents and the consummation of the transactions herein and therein
contemplated will not conflict with or result in any breach of any of the terms or
provisions of, or constitute with or without notice, lapse of time or both, a default
under any indenture, agreement, mortgage, deed of trust or other instrument to which the
Depositor is a party or by which it is bound, or result in the creation or imposition of
any Lien (except the Lien created by the Trust Agreement) upon any of the property or
assets of the Depositor pursuant to the terms of such indenture, mortgage, deed of trust,
or other agreement or instrument to which the Depositor is a party or by which the
Depositor is bound or to which any of the Depositor's property or assets is subject, nor
will such action conflict with or result in any violation of the provisions of the
Depositor's certificate of incorporation or bylaws or any statute or any order, rule or
regulation of any court or any regulatory authority or other governmental agency or body
having jurisdiction over the Depositor or any of its properties; and no consent, approval,
authorization, order, registration or qualification of or with or other action of any
court, or any such regulatory authority or other governmental agency or body is required
for consummation of the transactions contemplated by this Agreement and the other
Transaction Documents except such consents, approvals and authorizations that have been
obtained or such registrations or qualifications that have been made.

                
(c)
                
The Transaction Documents have been duly authorized, executed and delivered by the
Depositor by all necessary corporate action and constitute valid and legally binding
obligations of the Depositor, enforceable against the Depositor in accordance with their
terms, except that such enforcement may be subject to bankruptcy, insolvency,
reorganization and other similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity regardless of whether
enforcement is sought in a court of equity or law.

               
(d)
                
There are no proceedings or investigations to which the Depositor is a party pending, or,
to the knowledge of the Depositor, threatened, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality (i) asserting the
invalidity of any Transaction Document, (ii) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated by any of the
Transaction Documents, or (iii) 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, any of the Transactions Documents.

              
(e)
                    
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 this Agreement have been or will be taken or obtained on or prior to the
Initial Delivery Date.

              
(f)
                    
The Depositor Address is the principal place of business and chief executive office of the
Depositor.

               
(g)
                    
All tax returns or extensions required to be filed by the Depositor in any jurisdiction
have in fact been filed, and all taxes, assessments, fees and other governmental charges
upon the Depositor, or upon any of the respective properties, income or franchises of
the Depositor, shown to be due and payable on such returns have been, or will be, paid
when due. To the best of the Depositor's knowledge, all such tax returns are true and
correct and the Depositor has no knowledge of any proposed additional tax assessment
against it in any material amount nor of any basis therefor. The provisions for taxes on
the books of the Depositor are in accordance with generally accepted accounting
principles.

21

 

               
(h)
                    
The Depositor (i) is not in violation of any laws, ordinances, governmental rules or
regulations to which it is subject, (ii) has not failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the ownership of its property
or to the conduct of its business, and (iii) is not in violation in any material respect
of any term of any agreement, charter instrument, bylaw or instrument to which it is a
party or by which it may be bound which violation or failure to obtain would materially
and adversely affect the ability of the Depositor to perform its obligations under, or the
validity or enforceability of, any of the Transaction Documents.

      Section 3.03
               Substitution or
  Repurchase of Loans. 

             
If (a) the Company, the Depositor, the Trustee, the Servicer or the Special Servicer
discovers or are notified of (i) the breach of any representations or warranties set forth
in Sections 3.01 or 3.02 that materially and adversely affects the value of a Loan, an
interest (of the Company, the Depositor or the Trustee) in the related Loan Collateral, or
the interests of the Certificateholders, or (ii) the breach of any of the representations
and warranties set forth in Sections 3.01(a)(ii), 3.01(a)(v), 3.01(a)(viii) or
3.01(a)(xxvii), or (b) the Company or the Depositor discovers or is notified of the
occurrence of any missing or defective document as specified in Section 2.06, then the
party discovering such breach or condition shall give prompt written notice to the other
parties and to the Trustee, the Certificateholder Agent and each Certificateholder and, in
the case of clause (a) of this Section, the Company shall, within thirty (30) days from
the date the Company was notified of or otherwise discovers such breach, cure such breach,
and in the case of clause (b) of this Section, the Company shall, within forty-five (45)
days from the date the Company was notified of or otherwise discovers such breach, cure
such breach. If in the case of either clause (a) or (b) of this Section, the Company fails
to cure such breach in the applicable time period or the Company or the Special Servicer
is unable to cure such circumstance or condition, then at the expiration of the applicable
cure period the Company shall either (A) purchase such Loan and the security interest in
the related Loan Collateral at the Repurchase Price or (B) provide a Substitute Loan
(together with a Company Certificate) and remit the applicable Repurchase Price, if any,
to the Collection Account. The Repurchase Price for a repurchased Loan and, if any, for a
Substitute Loan shall be paid and any Substitute Loan shall be delivered, by the Company
to the Collection Account in accordance with Section 3.04. It is understood and agreed
that the obligation of the Company to cure or purchase or substitute any Loan as to which
such a breach has occurred shall constitute the sole remedy respecting such breach
available to the Depositor, the Certificateholders or the Trustee on behalf of such
Certificateholders (except for any indemnities provided under Section 4.01(j) or under the
Trust Agreement) for any losses, claims, damages and liabilities arising from the
Depositor's ownership of such Loan or the inclusion of such Loan in the Trust Estate.

      Section 3.04
               Requirements for
  Purchase or Substitution of Loans.

            (a)
                    
If the Company purchases any Loan under Sections 2.06 or 3.03, or if the Depositor removes
any Loan under Section 3.04 of the Trust Agreement, such Loan shall be purchased by the
Company or removed by the Depositor, as applicable, at the Repurchase Price. All purchases
and removals shall be accomplished at the times specified in subsection (c) below.

            (b)
                    
If the Company substitutes for any Loan under Section 2.06 or 3.03, or if the Depositor
substitutes any Loan under Section 3.04 of the Trust Agreement (a "Substitute
Loan"), each such Substitute Loan shall (i) be an Eligible Loan, (ii) be written on
one of the Standard Forms, (iii) be accompanied by (A) a Company Certificate subjecting
such Loan to the provisions hereof and providing with respect to such Substitute Loan the
related Loan Schedule and (B) evidence of all required UCC filings and other actions
required under the Transaction Documents to perfect the interests of the Depositor and the
Trustee in such 

22

Substitute Loan and the related Loan Assets, and (iv) not have been
selected using any other procedures that identified the Loan as being less desirable or
valuable than other comparable loans owned by the Company. Upon the substitution of any
Substitute Loan pursuant to the provisions of this Section 3.04(b): (y) such Substitute
Loan will be subject to all the terms and provisions of this Agreement, the Servicing
Agreement and the Trust Agreement (including the applicability and accuracy of all of the
representations and warranties set forth in Sections 3.01(a) and 3.01(b) as of the date of
substitution) just as if such Substitute Loan had been one of the original Loans acquired
on the Initial Delivery Date; and (z) the Depositor and the Company shall also comply with
the provisions and limitations set forth in the Trust Agreement. All substitutions shall
be accomplished at the time specified in subsection (c) below.

            (c)
                    
Any purchase or substitution of a Loan by the Company in accordance with Sections 2.06,
3.03 or this Section 3.04 shall be made by remittance of the Repurchase Price directly to
the Collection Account or by substitution of a Substitute Loan and remittance of the
applicable Repurchase Price, if any, directly to the Collection Account, on or prior
to the Determination Date next following the expiration of the cure period set forth in
Sections 2.06 or 3.03, as applicable. In addition, the Trustee shall release the related
Loan in accordance with Section 3.05 of the Trust Agreement, and the Special Servicer
shall no longer hold the copy of the related Loan File in its capacity as the Special
Servicer in accordance with the provisions of the Servicing Agreement.

            (d)
                    
Any voluntary purchase or substitution of a Loan by the Depositor pursuant to the terms of
the Trust Agreement in the event of a prepayment, default or delinquency with respect to
such Loan shall satisfy the same requirements for a purchase or substitution, as the case
may be, as are set forth in this Section 3.04.

 

23

 

 

ARTICLE FOUR

COVENANTS OF THE COMPANY

  
    Section 4.01 The Company Covenants. 

  

                   
The Company hereby covenants and agrees with the Depositor and for the benefit of the
Trustee and the Certificateholders as follows:

                   
(a)
                    
Except as hereinafter provided, the Company will keep in full effect its existence, rights
and franchises as a limited liability company and will obtain and preserve its
qualification to do business as a foreign limited liability company in each jurisdiction
in which such qualification is or shall be necessary to protect the validity and
enforceability of the Transaction Documents or any of the Loans and to perform its duties
hereunder. The Company may not merge or consolidate with, or sell all or substantially all
of its assets to, any other Person unless: (i) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 3.01(c) shall have
been breached and no Default would occur as a result thereof, (ii) such intended successor
executes an agreement or assumption, in form reasonably satisfactory to the Trustee, to
perform every obligation under each of the Transaction Documents to which it is to be a
party, (iii) such intended successor has a net worth that is sufficient to perform in
accordance with the Transaction Documents to which it is to be a party and at least
approximately equivalent to the net worth of the Company immediately prior to such
intended sale, merger or consolidation, (iv) the Company shall have delivered prior
written notice to the Certificateholder Agent, the Certificateholders and the Trustee and
shall have delivered to the Depositor, the Certificateholder Agent, the Certificateholders
and the Trustee an Officer=s Certificate of the Company and an Opinion of Counsel each stating that such
intended consolidation, merger, or succession and such agreement of assumption complies
with this Section 4.01 and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with, and (v) the Company shall
have delivered to the Depositor, the Certificateholder Agent, the Certificateholders and
the Trustee an Opinion of Counsel either (A) stating that, in the opinion of such Counsel,
all financing statements, continuation statements and amendments thereto have been
executed and filed and, if applicable, all other actions have been taken, to preserve
fully the interest of the Depositor in the Loans and the Loan Assets and reciting the
details of such filings and, if applicable, such actions, or (B) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve and protect such
interest; whereupon such Person, upon consummation of such transaction shall become the
successor of the Company hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto.

                   
(b)
                    
Neither the Company nor any of the directors, officers, employees or agents of the Company
shall be under any liability to the Depositor, the Trustee or the Certificateholders for
taking any action, or for refraining to take any action, in good faith pursuant to this
Agreement or for errors in judgment unless such action or inaction involves recklessness
or negligence; provided that this provision shall not protect the Company against
any breach of warranties or representations made herein, any failure to perform its
obligations in strict compliance with this Agreement, or any liability which would
otherwise be imposed by reason of any breach of the terms and conditions of this
Agreement. The Company, and any director, officer, employee or agent of the Company, may
rely in good faith on any document of any kind prima facie properly executed and submitted
by any Person respecting any matters arising hereunder. The Company shall not be under any
obligation to appear in, prosecute, or defend any legal action that is not incidental to
its obligations as the contributor of the Loan Assets hereunder and that in its opinion
may involve it incurring any expense or liability.

24

 

                   
(c)
                    
The Company, from time to time, at its own expense, shall execute and file such additional
financing statements (including continuation statements) and take such other actions as
may be necessary to preserve the security interests and liens described in Section
3.01(a)(ix) as may be reasonably requested by the Depositor or the Trustee and are
reasonably satisfactory in form and substance to the Trustee.

                   
(d)
                    
The Company will not change its name, identity or corporate structure in any manner that
would, could, or might make any financing statement or continuation statement misleading
within the meaning of Section 9-402(7) of the UCC, unless it shall have given the
Depositor, the Certificateholder Agent and the Trustee at least thirty (30) days prior
written notice thereof and shall have provided evidence of appropriate UCC filings.

                   
(e)
                    
The Company will give the Depositor, the Certificateholder Agent and the Trustee at least
thirty (30) days prior written notice of any relocation of its principal executive
office and, if, as a result of such relocation, the applicable provisions of the UCC would
require the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and the Company, the Company shall provide
evidence of appropriate UCC filings.

                   
(f)
                    
The Company will duly fulfill all obligations on its part to be fulfilled under or in
connection with each Loan, will not change or modify the terms of the Loans except as
expressly permitted by the terms of the Transaction Documents and will do nothing to
impair the rights of the Depositor or the Trustee in the Loans or the Loan Collateral. If,
for any reason, the rights of the Company under any Loan (including under any guaranty of
the related Obligor's obligations under any Loan) are not assignable or have, in fact, not
been assigned to the Depositor or to the Trustee, then the Company will enforce such
rights on behalf of the Depositor and the Trustee.

                   
(g)
                    
The Company will comply, in all material respects, with all acts, rules, regulations,
orders, decrees and directions of any governmental authority applicable to the Loan Assets
or any part thereof; provided that the Company may contest any act, regulation,
order, decree or direction in any reasonable manner which shall not materially and
adversely affect the rights of the Depositor or the Trustee in the Loan Assets.

                   
(h)
                    
The Company will advise the Depositor, the Certificateholders and the Trustee promptly, in
reasonable detail, of the occurrence of any breach by the Company, following discovery by
the Company of such breach, of any of its representations, warranties or covenants
contained herein. 

                   
(i)
                    
The Company will execute or endorse, acknowledge, and deliver to the Depositor, the
Certificateholders and the Trustee from time to time such schedules, confirmatory
assignments, conveyances, powers of attorney, and other reassurances or instruments and
take such further similar actions relating to the Loans and the rights covered by the
Transaction Documents, as the Depositor or the Trustee may reasonably request to preserve
and maintain title to the Loan Assets and the rights of the Trustee and the
Certificateholders therein against the claims of all Persons.

                   
(j)
                    
The Company agrees to indemnify, defend and hold the Depositor, the Trustee and the
Certificateholders harmless from and against any loss, liability, damage, judgment, claim,
deficiency or expense (including interest, penalties, reasonable attorney's fees and
amounts paid in settlement) that is caused by (i) a breach at any time by the Company of
its representations, warranties and covenants contained in Section 3.01 or this Section
4.01 or (ii) any material information furnished by the Company that is set forth in any
schedule delivered hereunder, being untrue in any respect when any such representation was

25

made or schedule delivered; provided that the Company shall not
have any liability with respect to a representation or warranty as to any specific Loan
other than to purchase such Loan or substitute for such Loan in accordance with Sections
3.03 and 3.04 unless such breach of representation or warranty is the result of the
Company's fraud, gross negligence, bad faith or willful misconduct. The Company shall also
indemnify the Depositor, the Trustee and the Certificateholders for any costs or expenses
incurred by them in the enforcement of this Agreement or as a result of the Company's
failure to perform its obligations hereunder. The obligations of the Company under this
Section 4.01(j) shall be considered to have been relied upon by the Depositor, the Trustee
and the Certificateholders and shall survive the execution, delivery and performance of
this Agreement, regardless of any investigation made by or on behalf of the Depositor, the
Trustee, the Certificateholder Agent or any Certificateholder until termination of the
Trust Agreement. If the Company has made any indemnity payments pursuant to this Section
4.01(j) and thereafter any Person recovers the amount of the related loss or any portion
thereof from others, such Person will promptly repay the amount recovered to the Company,
without interest.    

                   
(k)
                    
The Company will not do anything to disturb or impair the acquisition of the Loan Assets
by the Depositor hereunder.

                   
(l)
                    
The Company (i) will (A) maintain its books and records separate from the books and
records of the Depositor and (B) maintain bank accounts separate from those of the
Depositor and (C) maintain one (1) independent director on the Depositor's board of
directors, so long as the Company is a shareholder of the Depositor and (ii) will not, and
will not in any manner encourage any other Person to, (A) take any action that would cause
the dissolution or liquidation of the Depositor, (B) guarantee (directly or indirectly),
endorse or otherwise become contingently liable (directly or indirectly) for the
obligations of the Depositor, or (C) institute against the Depositor, or join any other
Person in instituting against the Depositor, any case, proceeding or other action under
any existing or future bankruptcy, insolvency or similar laws. This Section 4.01(l) shall
survive termination of this Agreement.

                   
(m)
                    
The Company shall notify the Depositor, the Trustee, the Certificateholder Agent and each
Certificateholder promptly after becoming aware of any Lien (other than a Permitted Loan
Collateral Lien) on any Loan Asset.

                   
(n)
                    
On each date as of which the Company substitutes a Substitute Loan or Substitute Loans in
accordance with Sections 2.06 or 3.04(b), the Company shall provide to the Depositor (with
a copy thereof to the Trustee, the Certificateholder Agent and each Certificateholder) a
Company Certificate with respect to such Substitute Loan(s), subjecting such Loan(s) and
the related Loan Assets to the provisions hereof and providing with respect to such
Loan(s) the information required in the related amended Loan Schedule.

                   
(o)
                    
The annual financial statements of the Company will reflect the effects of the
transactions contemplated by the Transaction Documents as a sale by the Company and a sale
by the Depositor in accordance with generally accepted accounting principles. The
financial statements of the Company and the Depositor will also reflect that the assets of
the Depositor are not available to pay creditors of the Company. The resolutions,
agreements and other instruments underlying the Transaction Documents will be continuously
maintained by the Company as official records.

                   
(p)
                    
The Company, in its capacity as the Special Servicer, will, at its own cost and expense,
(i) retain on its Electronic Records a master record of the Loans for the benefit of the
Depositor, the Trustee and other Persons, if any, with interests in the Loans and (ii)
mark its Electronic Records and all other records 

26

to the effect that the Loan Assets have been acquired by the Depositor
and that they have been transferred and assigned to the Trustee pursuant to the Trust
Agreement.

                   
(q)
                    
Except as otherwise agreed to in advance in writing by the Controlling Holders, the
Company will at all times own one hundred percent (100%) of the Common Stock and will not
pledge the Common Stock as security. If (with such agreement of the Controlling Holders)
the Company elects to transfer the Common Stock to an affiliate or pledge a security
interest in the Common Stock, then, as a condition to such sale or pledge, the Company
shall, on behalf of the Depositor, obtain an agreement from the transferee or the secured
party that it will take no action that would cause the Depositor to breach any of its
covenants under any Transaction Document, and that for so long as the Trust Agreement is
in effect and for one year and one day thereafter, it will not file any involuntary
petition or otherwise institute any bankruptcy, reorganization, insolvency or liquidation
proceeding or other proceeding under any federal or state bankruptcy or similar law
against the Depositor and it will comply with the Depositor's certificate of incorporation
and the covenants of the Depositor set forth in the Transaction Documents. Subject to the
foregoing limitation, the parties acknowledge and agree that the Company may in the future
transfer the Common Stock to a direct or indirect wholly owned subsidiary of the Company,
which subsidiary may pledge the Common Stock to or for the benefit of one or more lenders
or purchasers of its Certificates or other obligations.

                   
(r)
                    
If the Company desires to amend or otherwise revise the Program Guidelines, then the
Company shall first deliver to the Depositor, the Trustee, the Certificateholder Agent and
the Rating Agency the final version of the proposed amendments or other proposed revisions
to the Program Guidelines (in each instance and as so proposed, the "Proposed
Revision"). Within thirty (30) days following its receipt of any Proposed Revision,
each of the Depositor, the Rating Agency and the Certificateholder Agent shall deliver to
the Company written notice indicating whether the Depositor, the Rating Agency and the
Certificateholder Agent deem the Proposed Revision acceptable or not acceptable; provided
that the failure of the Depositor, the Rating Agency or the Certificateholder Agent to
provide such a written notice to the Company within such time period shall be deemed to
constitute rejection of such Proposed Revision. 

  
    Section 4.02
                        
    Depositor Covenants. 

  

                   
The Depositor hereby covenants and agrees with the Company and for the benefit of the
Trustee and the Certificateholders as follows:

                   
(a)
                    
If in any enforcement suit or legal proceeding it is held that the Company may not enforce
a Loan on the ground that it is not a real party in interest or holder entitled to enforce
the Loan, the Depositor shall, at the Depositor's expense, take such steps as the
Depositor deems necessary to enforce the Loan, including bringing suit in the Depositor's
name.

                   
(b)
                    
The Depositor warrants that it will own and possess a first priority security interest in
the Loan Collateral (subject only to Permitted Loan Collateral Liens) upon its acquisition
of the Loan Assets and that it will warrant and defend its interest in the Loan Collateral
against all Persons, claims and demands whatsoever. The Depositor shall not assign, sell,
pledge, or exchange, or in any way encumber or otherwise dispose of its interest in the
Loan Assets, except as permitted under the Trust Agreement.

27

 

  
    Section 4.03
                        
    Assignment of Loan Assets. 

  

                       
The Company understands that the Depositor will convey and assign to the Trustee all of
its right, title and interest in and to this Agreement and the Loan Assets. The Company
consents to such assignment and grants and further agrees that all representations,
warranties, covenants and agreements of the Company made herein shall also be for the
benefit of and inure to the Trustee and all Certificateholders.

28

 

 

ARTICLE FIVE

CONDITIONS

  
    Section 5.01
                        
    Conditions to the Depositor's Obligations. 

  

                   
The obligations of the Depositor to provide the Company with the consideration provided
for herein, and of the Certificateholders to make Fundings on any Funding Date, shall be
subject to the satisfaction of the following conditions:

                   
(a)
                    
On or before the Initial Delivery Date, the Depositor, the Servicer, the Special Servicer,
the Servicing Advisor and the Trustee shall have entered into the Trust Agreement and the
Servicing Agreement (to the extent they are parties thereto);

                   
(b)
                    
On the Initial Delivery Date, the Certificates to be sold on such Date shall have been
issued and sold and the Depositor shall have received the full consideration due it upon
the issuance of such Certificates.

                   
(c)
                    
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 have occurred and be continuing;

                   
(d)
                    
The Company shall have delivered all other information previously required or reasonably
requested by the Depositor, the Trustee or the Certificateholder Agent to be delivered by
the Company hereunder, duly certified by an officer of the Company, shall have complied
with Section 2.04 and shall have substantially performed all other obligations required to
be performed by it pursuant to the terms of the Transaction Documents;

                   
(e)
                    
All representations and warranties of the Company contained in Sections 3.01(a) and (b)
and all information provided in any Loan Schedule (including any related Funding Report
and Pending Credit Schedule), as applicable, shall be true and correct on the relevant
Acquisition Date, all representations and warranties in Sections 3.01(c) shall be true and
correct as of each Acquisition Date, and the Company shall have delivered to the Depositor
and the Trustee an Officer's Certificate to such effect;

                   
(f)
                    
Within two (2) Business Days of each Acquisition Date, as applicable, the Company shall
have delivered, or cause to have been delivered, to the Trustee, in the manner
contemplated by Section 3.01(a)(iii), the original manually executed Note relating to the
Loans being acquired, all other original documents evidencing such Loans (except as
otherwise contemplated by Section 3.01(a)(iii)), and the other items comprising the Loans
Files relating to such Loans, and there shall have been made all filings, recordings or
registrations, and there shall have been given or taken any notice or any other action, as
applicable, as may be necessary in the reasonable opinion of the Depositor, the Trustee
and the Certificateholder Agent, in order to establish and preserve the right, title and
interest of the Depositor and the Trustee in the Loan Assets;

                   
(g)
                    
On or prior to the second Business Day following delivery of each of the documents
specified in Section 3.01(a)(iii), the Servicer and the Special Servicer shall have
received a copy of such documents; and 

29

 

                   
(h)
                    
On or before the Initial Delivery Date, the Depositor, the Servicer, the Special Servicer,
the Servicing Advisor and the Trustee shall have entered into the Trust Agreement and the
Servicing Agreement (to the extent they are parties thereto).

  
    Section 5.02
                    
    Conditions to the Company's Obligations. 

  

                   
The obligations of the Company to enter into this Agreement on the Initial Delivery Date
shall be subject to the satisfaction of the following conditions:

                   
(a)
                    
On or before the Initial Delivery Date, the Depositor, the Servicer, the Special Servicer,
the Servicing Advisor and the Trustee shall have entered into the Trust Agreement and the
Servicing Agreement;

                   
(b)
                    
On the Initial Delivery Date, the Certificates shall have been issued and sold and the
Depositor shall have received the full consideration due it upon the issuance of such
Certificates; and

                   
(c)
                    
The consideration set forth herein shall have been paid or delivered to the Company
simultaneously with the execution of this Agreement.

 

30

 

ARTICLE SIX

TERM AND TERMINATION

  
    Section 6.01
                        
    Term. 

  

                   
This Agreement shall commence as of the date of execution and delivery hereof and shall
continue in full force and effect until the later of (a) the final payment with respect to
the last Loan Asset and (b) termination of the Trust Agreement; provided that any
obligations of the Depositor with respect to the acquisition of any Loans from and after
the Initial Delivery Date shall terminate upon the occurrence of a Funding Termination
Event.

  
    Section 6.02
                        
    Default by the Company. 

  

                   
If the Company shall be in default under this Agreement and such default shall not have
been cured for a period of thirty (30) days, or if the Company shall become insolvent or
make an assignment for the benefit of its creditors or have a receiver appointed for all
or substantially all of its properties, or if any proceedings are commenced, or consented
to, by the Company or are not stayed or dismissed within sixty (60) days after being
commenced against the Company under any bankruptcy, insolvency or other law for the relief
of debtors, then the Depositor shall have the right, with the prior written consent of the
Trustee, in addition to any other rights it may have under any applicable law, to
terminate its obligations under this Agreement upon thirty (30) days prior written notice
to the Company; provided that any termination of this Agreement pursuant to this
Section 6.02 shall not release the Company from any obligation under this Agreement.

31

 

ARTICLE SEVEN

GENERAL PROVISIONS

  
    Section 7.01
                        
    Amendments.

  

                   
This Agreement and the rights and obligations of the parties hereunder may not be changed
orally but only by an instrument in writing signed by the party against whom enforcement
is sought together with the prior written consent of the Holders of not less than 51% of
the Outstanding Principal Amount of each affected Class (or, with respect to any affected
Class during the Funding Period applicable to such Class, of not less than 51% of the
Maximum Series Amount of such Class) of Rated Certificates. Promptly after the execution
of any amendment, the Depositor shall send to the Trustee, each Certificateholder, the
Certificateholder Agent and each Rating Agency a conformed copy of each such amendment.

  
    Section 7.02
                        
    Governing Law. 

  

                   
This Agreement shall be construed in accordance with the internal laws of the State of New
York.

  
    Section 7.03
                        
    Notices.

  

                   
All demands, notices and communications hereunder shall be made in accordance with the
provisions of the Trust Agreement and shall be addressed, in the case of the Company, to
the Company Address, in the case of the Depositor, to the Depositor Address, and in the
case of any Certificateholders, to their address set forth on the Certificate Register.
All demands, notices and communications made in accordance with the provisions hereof
shall be deemed to have been received or made (as applicable) as provided in the Trust
Agreement. Any Person may change the address for notices hereunder by giving notice of
such change to the other Person (or in the case of a Certificateholder, by causing the
Trustee to change its address as provided on the Certificate Register).

  
    Section 7.04
                        
    Separability Clause. 

  

                   
Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

  
    Section 7.05
                        
    Assignment. 

  

                   
Except as provided in Section 4.01(a), this Agreement may not be assigned or delegated by
the Company without the prior written consent of the Depositor and the Trustee and may not
be assigned or delegated by the Depositor without the prior written consent of the
Trustee.

  
    Section 7.06
                        
    Further Assurances.

  

                   
Each of the Company and the Depositor agrees to do such further acts and things and to
execute and deliver to the Trustee such additional assignments, agreements, powers and
instruments as are required by the Trustee to carry into effect the purposes of this
Agreement or to better assure and confirm unto the Trustee or the Certificateholders their
rights, powers or remedies hereunder. If any Obligor shall be in 

32

default under any Loan, upon reasonable request from the Special
Servicer or the Trustee, the Company will take all reasonable steps to assist in enforcing
such Loan and preserving and maintaining title to the Loan Assets and the rights of the
Trustee and the Certificateholders therein against the claims of all persons and parties
to the extent the Company is capable of performing such requested steps and the Special
Servicer or the Trustee reasonably determines that the assistance of the Company is
necessary to effect the intent and purposes hereof.

  
    Section 7.07
                        
    No Waivers; Cumulative Remedies.

  

                   
No failure to exercise and no delay in exercising, on the part of the Depositor, the
Company, the Trustee or any other Person, any right, remedy, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise of any right,
remedy, or privilege hereunder preclude any other or further exercise hereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exhaustive of any rights, remedies,
powers and privilege provided by law.

  
    Section 7.08
                        
    Binding Effect; Third Party Beneficiaries.

  

                   
This Agreement will inure to the benefit of and be binding upon the parties hereto and
shall inure to the benefit of the Trustee and the Certificateholders, and their respective
successors and permitted assigns, as express third party beneficiaries.

  
    Section 7.09
                        
    Set-Off.

  

                   
(a)
                    
The Company hereby irrevocably and unconditionally waives all right of set-off that it may
have under contract (including this Agreement), applicable law or otherwise with respect
to any funds or monies of the Depositor, the Trustee, each Certificateholder, the
Certificateholder Agent, the Servicer, the Special Servicer or the Servicing Advisor at
any time held by or in the possession of the Company.

                   
(b)
                    
Each of the Depositor, the Trustee, the Certificateholders and the Certificateholder Agent
shall have the right to set-off against the Company any amounts to which the Company may
be entitled and to apply such amounts to any claims the Depositor, the Trustee, any
Certificateholder or the Certificateholder Agent may have against the Company from time to
time under this Agreement. Upon any such set-off, the Person exercising such right shall
give notice of the amount thereof and the reasons therefor. 

33

 

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

  
    
      
        
          
            
              
                
                  
                    
                      
                         

                         

                      

                    

                  

                

              

            

          

        

      

    

  

 

	ALLEGIANCE CAPITAL, LLC,  
    Company

	
	By:
             /s/ Alan B. Perper
	

    
	Name:    Alan B. Perper
	Title:       
    President

  
    
      
        
          
            
              
                
                  
                    
                      
                         

                         

                      

                    

                  

                

              

            

          

        

      

    

  

  

 

	ALLEGIANCE FUNDING CORP. 1,
      Depositor

	
	By:
             /s/ Alan B. Perper
	

    
	Name:    Alan B. Perper
	Title:       
    President

  
    
      
        
          
            
              
                
                  
                    
                      
                         

                         

                      

                    

                  

                

              

            

          

        

      

    

    
  

 

EXHIBIT A

to Loan Acquisition Agreement

COMPANY CERTIFICATE

 

_______________, 19__

 

                   
Pursuant to Section 2.01 of that certain Loan Acquisition Agreement, dated as of August 1,
1998 (as amended or modified from time to time in accordance with the terms thereof, the
"Loan Acquisition Agreement"), between Allegiance Capital, LLC (the
"Company") and Allegiance Funding Corp. I (the "Depositor"), attached
hereto as Schedule A is a Loan Schedule related to the requested Funding that includes
information regarding the Loan Assets that are hereby sold, transferred, contributed,
assigned, set over and otherwise conveyed by the Company to the Depositor in accordance
with the Loan Acquisition Agreement. Each capitalized term used herein that is not
otherwise defined herein has the meaning assigned thereto in the Loan Acquisition
Agreement. 

 

 

	ALLEGIANCE CAPITAL, LLC,  
    Company

	
	By:
             
	Name:    
	Title:      

 

	ALLEGIANCE FUNDING CORP. I,
    Depositor

	
	By:
             
	Name:    
	Title:      

 

A-1

 

Schedule A to

Company Certificate

 

Loan Schedule

 

 

EXHIBIT B

to Loan Acquisition Agreement

 

LOAN FUNDING CHECKLIST

CREDIT AGREEMENT

Dated as of [__________ __, ____] 

between

[______________________________],

as Borrower

and

ALLEGIANCE CAPITAL, LLC,

as Lender

 

                   
The following is a list of closing documents in connection with the Credit Agreement,
dated as of [______________ __, ____] (the "Credit Agreement"), between
[_______________], a [_________] (the "Borrower"), and Allegiance Capital, LLC,
a Delaware limited liability company, as lender (the "Lender").

Unless otherwise defined herein, each term used herein has the meaning
assigned to it in the Credit Agreement. 

 

B-1

	 PARTIES 
	ABBREVIATION
	[_______________]	Borrower
	[Subsidiary # 1of Borrower]	Sub1
	[Subsidiary # 2 of Borrower]	Sub2
	[Shareholder # 1 of Borrower]	SHolder1
	[Shareholder # 2 of Borrower]	SHolder2
	Borrower, Sub1, and Sub2	Companies
	Allegiance Capital, LLC	Lender
	[Title Company]	TCompany
	Borrower, [Sub1, Sub2, SHolder1 and Sholder2]	Credit Parties
	 	  

	 COUNSEL
	 
	 Counsel to the Credit Parties
	CPCounsel
	Giancarlo & Gnazzo, counsel to Lender	G&G

 

B-2

 

 

 

Primary

Documents and Actions Required
                                                                                             
Responsibility             Status

  
    1. Credit Documents

    
      1.1     Credit Agreement
                                                                                             
      G&G 

      1.1.1     Exhibit G-1: Form of Guaranty
                                                                       
      G&G 

      1.1.2     Exhibit M-1: Form of Mortgage
                                                                     
      G&G 

      1.1.3     Exhibit N-1: Form of Note
                                                                             
      G&G 

      1.1.4     Exhibit P-1: Form of Parent Pledge Agreement
                                               
      G&G 

    

  

  
    
      1.1.5     Exhibit S-2: Form of Subsidiary Pledge
      and 

                   Security
      Agreement
                                                                                        
      G&G   

                                         
      

      1.1.6     Exhibit 4.1(e): Form of Opinion of Counsel
                                                     
      G&G 

      1.1.7     Exhibit 6.1(c): Form of Quarterly Borrower
      Report
                                         
      G&G 

      1.1.8     [Schedule L-1: Schedule of Leases]
                                                              
      Borrower 

    

  

  
    
      1.1.9     Schedule S-1: Schedule of Environmental
      Exceptions
                                    
      Borrower 

    

  

  
    
      1.1.10     Schedule S-2: Schedule of Pending
      Litigation
                                              
      Borrower 

      1.1.11     Schedule S-3: Schedule of Permitted Debt
                                                  
      Borrower 

      1.1.12     Schedule S-4: Schedule of Permitted Liens
                                                  
      Borrower 

      1.1.13     Schedule S-5: Schedule of Permitted Uses of
      Proceeds
                                  
      Lender 

      1.1.14     Schedule S-6: Schedule of
      Subsidiaries/Establishments
                                  
      Borrower 

      1.1.15     Schedule 4.1(q): Schedule of Debt to be
      Repaid
                                           
      Borrower 

      1.1.16     Schedule 5.21: Schedule of Locations of
      Collateral
                                       
      Borrower 

      1.1.17     Schedule 5.23: Schedule of Investment
      Collateral
                                          
      Borrower 

    

  

  
    
      1.1.18     Schedule 6.4(b): Schedule of Insurance
      Coverage

                    Amounts
                                                                                                          
      Lender 

    

  

  1.2
               Note
                                                                                                                            
  G&G 

  B-3

   

  Primary

  Documents and Actions Required
                                                                                     
  Responsibility      Status

   

  1.3
               Guaranties:

  
    
      1.3.1     Guaranty by SHolder1
                                                                                    
      G&G 

      1.3.2     Guaranty by SHolder2
                                                                                     
      G&G 

      1.3.3     Guaranty by Sub1
                                                                                            
      G&G 

      1.3.4     Guaranty by Sub2
                                                                                            
      G&G 

    

  

  1.4
                 
  Parent Pledge Agreement(s):

  
    
      1.4.1     Parent Pledge Agreement by SHolder1
                                                            
      G&G 

      1.4.1.1  Schedule 1: Description of Investment Collateral
                                         
      CPCounsel 

      1.4.1.2  Schedule 2: Location of Collateral
                                                              
      CPCounsel 

      1.4.1.3  Stock Powers
                                                                                            
      CPCounsel 

      1.4.1.4  Stock Certificates
                                                                                       
      CPCounsel 

      1.4.2     Parent Pledge Agreement by SHolder2
                                                             
      G&G 

      1.4.2.1  Schedule 1: Description of Investment Collateral
                                         
      CPCounsel 

      1.4.2.2  Schedule 2: Location of Collateral
                                                              
      CPCounsel 

      1.4.2.3  Stock Powers
                                                                                           
      CPCounsel 

    

  

  
    
      1.4.2.4  Stock Certificates
                                                                                      
      CPCounsel

    

  

  1.5
                
  Subsidiary Pledge and Security Agreement(s):

  
    
      1.5.1     Subsidiary Pledge and Security Agreement
      by Sub1
                                        
      G&G 

      1.5.1.1  Schedule 1: Schedule of Investment Collateral
                                            
      CPCounsel 

      1.5.1.2  Schedule 2: Location of Collateral
                                                              
      CPCounsel 

      1.5.2     Subsidiary Pledge and Security Agreement
      by Sub2
                                        
      G&G 

      1.5.2.1  Schedule 1: Schedule of Investment Collateral
                                             
      CPCounsel 

       

      B-4

       

    

  

  
    
      Primary

      
    

  

Documents and Actions Required
                                                                                             
Responsibility       Status

 

  
    
      1.5.2.2  Schedule 2: Location of Collateral
                                                                  
      CPCounsel 

    

    
  

  
    1.6     Deeds of Trust/Mortgages:

  

  
    
      1.6.1     Deed of Trust/Mortgage by Borrower
                                                                
      G&G 

      1.6.1.1 Exhibit A: Description of Real Property
                                                            
      CPCounsel 

      1.6.2 Deed of Trust/Mortgage by Sub1
                                                                             
      G&G 

      1.6.2.1 Exhibit A: Description of Real Property
                                                             
      CPCounsel 

      1.6.3 Deed of Trust/Mortgage by Sub2
                                                                              
      G&G 

      1.6.3.1 Exhibit A: Description of Real Property
                                                              
      CPCounsel 

      1.6.4 Deed of Trust/Mortgage by [___________]
                                                               
      G&G 

      1.6.4.1 Exhibit A: Description of Real Property
                                                              
      CPCounsel 

    

    1.7     Environmental Indemnity by Borrower, Sub1,
                                                                      
    G&G 

              Sub2 and [________]

  

  
    1.8     Landlord's Estoppel
                                                                                                             
    G&G 

    
      1.8.1 Exhibit A: Lease Description and Lease
                                                                  
      CPCounsel

    

  

2
                   
Certain Documents Relating to Collateral

  
    2.1     UCC-1 financing statements for Borrower:
                                                                               
    +

  

  
    
      2.1.1 [_______] Secretary of State UCC-1 filing(s)
                                                              
      G&G 

    

  

  
    
      2.1.2 [_______] County UCC-1 filing(s)
                                                                               
      G&G

    

  

  
    
      2.1.3 UCC-1 financing statements for Sub1:

    

  

  
    
      2.1.4 [_______] Secretary of State UCC-1 filing(s)
                                                               
      G&G 

      2.1.5 [_______] County UCC-1 filing(s)
                                                                               
      G&G 

    

  

    2.2
                        
UCC-1 financing statements for Sub2:

 

B-5

 

 

  
    
      Primary

      
    

  

Documents and Actions Required
                                                                                                    
Responsibility       Status

 

  
    
      2.2.1 [_______] Secretary of State UCC-1 filing(s)
                                                                    
      G&G 

      2.2.2 [_______] County UCC-1 filing(s)
                                                                                     
      G&G 

    

  

    2.3
                        
UCC-1 financing statements for SHolder1:

  
    
      2.3.1 [_______] Secretary of State UCC-1 filing(s)
                                                                     
      G&G 

      2.3.2 [_______] County UCC-1 filing(s)
                                                                                      
      G&G 

    

  

    2.4
                        
UCC-1 financing statements for SHolder2:

  
    
      2.4.1 [_______] Secretary of State UCC-1 filing(s)
                                                                       
      G&G 

      2.4.2 [_______] County UCC-1 filing(s)
                                                                                        
      G&G 

      2.4.3 Pre-filing UCC/Judgment/Lien searches for Borrower: 

      2.4.4 Pre-filing Secretary of State and 

              County searches
                                                                                                            
      G&G/CPCounsel 

    

  

    2.5
                        
Pre-filing UCC/Judgment/Lien searches for Sub1:

  
    
      2.5.1 Pre-filing Secretary of State and 

               County searches
                                                                                                            
      G&G/CPCounsel 

    

  

    2.6
                        
Pre-filing UCC/Judgment/Lien searches for Sub2:

  
    
      2.6.1 Pre-filing Secretary of State and 

               County searches
                                                                                                            
      G&G/CPCounsel 

    

  

    2.7
                        
Pre-filing UCC/Judgment/Lien searches for SHolder1:

  
    
      2.7.1 Pre-filing Secretary of State and

               County searches
                                                                                                             
      G&G/CPCounsel

    

  

    2.8
                        
Pre-filing UCC/Judgment/Lien searches for SHolder2:

  
    
      2.8.1 Pre-filing Secretary of State and

                County searches
                                                                                                            
      G&G/CPCounsel

       

      B-6 

    

     

  

  
    
      
        Primary
                                                                                       
        

        
      

    

  

Documents and Actions Required
                                                                                                    
Responsibility           Status

  
    
      
        
           

        

      

    

  

    2.9
                        
Preliminary Title Report(s):

  
    
      2.9.1 [_______________]
                                                                                        
      Lender/TCompany 

      2.9.2 [_______________]
                                                                                        
      Lender/TCompany 

      2.9.3 [_______________]
                                                                                        
      Lender/TCompany 

      2.9.4 [_______________]
                                                                                         
      Lender/TCompany 

    

  

    2.10
                    
Title Insurance Policies:

  
    
      2.10.1 [_______________]
                                                                                      
      Lender/TCompany 

      2.10.2 [_______________]
                                                                                      
      Lender/TCompany 

      2.10.3 [_______________]
                                                                                      
      Lender/TCompany 

    

  

  
    
      2.10.4 [_______________]
                                                                                      
      Lender/TCompany

    

  

3    Additional Closing Documents

  
    
      3.1 Evidence of Insurance per Section 4.1(f)
                                                                    
      Borrower 

    

  

  
    
      3.2 Certified Copy of Related Transaction Documents per

             Section 4.1(g)
                                                                                                    
      Borrower/CPCounsel 

      3.3 Payoff Letters per Section 4.1(q)
                                                                        
      Borrower/CPCounsel 

      3.4 Account and Wire Transfer Instructions per Section 4.1(r)
                                          
      Borrower 

      3.5 Certified Copy of Base Financials per Section 4.1(s)
                                                  
      Borrower 

      3.6 [Additional Documents]
                                                                                          
      CPCounsel 

      
    

  

4
                        
Corporate Documents

  
    
      4.1 Companies=
      articles/certificate of incorporation 

    

  

  
    
      
        4.1.1 Borrower
                                                                                                    
        CPCounsel

      

    

  

  
    
      
        4.1.2 Sub1 CPCounsel

        4.1.3 Sub2 CPCounsel

         

        B-7

      

    

  

 

  
    
      
        Primary

        
      

    

  

Documents and Actions Required
                                                                                                 
Responsibility           Status

  
    
      
         

      

    

  

    4.2
             Companies= bylaws 

  
    4.2.1 Borrower
                                                                                                                 
    CPCounsel

  

  
    4.2.2 Sub1 CPCounsel

    4.2.3 Sub2 CPCounsel

  

   4.3
             Companies' good
standing certificates from State of 

                     
Incorporation, state where principal place of business

                     
located and requested bring-down certificates

  
    4.3.1 Borrower
                                                                                                                   
    CPCounsel

    4.3.2 Sub1
                                                                                                                          
    CPCounsel

    4.3.3 Sub2         CPCounsel

  

  4.4
             Secretary
Certificates as to (A) resolutions, and 

                   
(B) incumbency, authority and signatures of 

                    
each officer of Companies executing any Credit Document

  
    4.4.1 Borrower
                                                                                                                    
    CPCounsel

    4.4.2 Sub1 CPCounsel

    4.4.3 Sub2 CPCounsel

  

   5     Legal Opinions

  5.1 Opinion of Credit Parties
                                                                                                        
  CPCounsel 

6        Selected Post-Closing
Documents and Actions

  6.1 Confirmation by Lender of closing
                                                                                            
  Lender

  6.2 Delivery by Lender of copies of closing documents to parties
                                                     
  G&G

  6.3 Confirmation of UCC filings
                                                                                                       
  G&G

  6.4 [Other] 

   

  B-8

   

   

  EXHIBIT C

  to Loan Acquisition Agreement

  FORM OF PENDING CREDIT SCHEDULE

   

  Borrower:
                                          
  ___________________________________________________________________ 

  Type of Entity:
                                  
  ___________________________________________________________________ 

  Principal Place

  of Business (City & State):          
  ___________________________________________________________________ 

  Business Type, Seasoning, Realty Type, Service Volume & Revenue

  of each Establishment serving as Collateral:   
  ______________________________________________________________

  Number & Business Type of other
         
  ___________________________________________________________________ 

  Establishments owned by Borrower:      
  ___________________________________________________________________

  Guarantor(s):
                                      
  ___________________________________________________________________ 

  Obligor/Principal Seasoning:
              
  ___________________________________________________________________ 

  Anticipated Funding Date:
                       
  ___________________________________________________________________ 

  Use of Proceeds:
                               
  ___________________________________________________________________ 

  Interest Type & Rate:
                       
  ___________________________________________________________________ 

  Arrangement Fee:
                               
  ___________________________________________________________________ 

  Term to Maturity:
                               
  ___________________________________________________________________ 

  Amortization Term:
                               
  ___________________________________________________________________ 

  Adjusted Cash Flow:
                       
  ___________________________________________________________________ 

  Coverage Ratio:
                               
  ___________________________________________________________________ 

  Valuation:
                                               
  ___________________________________________________________________ 

  Loan-to-Value Ratio:
                       
  ___________________________________________________________________ 

  Underwriting or Documentation
               
  ___________________________________________________________________ 

  Exceptions:
                                       
  ___________________________________________________________________ 

  Pool Criteria Exceptions:
                       
  ___________________________________________________________________ 

  Summary of Legal Structure:
               
  ___________________________________________________________________ 

         ______________________________________________________________________________________________

         
  ______________________________________________________________________________________________

  Underwriting Model Output: To be attached.

   

   

  EXHIBIT D

  to Loan Acquisition Agreement

  POOL CRITERIA

  (Dollar Percentage Limits Based on Greater of Pool Balance and $30,000,000)

   

  
    
      1. Minimum Number of Obligors* - 15

      2. Minimum Number of Establishments** - 35

      3. Maximum Aggregate Loan Balance to any one Obligor - $3,825,000 if
      Pool Balance is less than $30,000,000, 

              otherwise 15% of the Pool Balance.

      4. Maximum Number of Obligor Concentrations Over 10% - 3

      5. Maximum Establishment Concentration - 6.5%

      6. Maximum Number of Establishment Concentrations Over 5% - 3

      7. Maximum State Concentration (By $) - 20%

      8. Maximum Number of State Concentrations Over 15% (By $) - 3

      9. Minimum Loan-Level Coverage Ratio*** - 1.40 if Obligor
      Concentration 10% or less, 1.55 if Obligor Concentration
                 over 10%

      10. Minimum Pool-Level Wtd. Avg. Coverage Ratio - 1.55

      11. Maximum Loan-Level Loan-to-Value Ratio - 80% if Obligor
      Concentration 10% or less, 70% if Obligor 

              Concentration over 10%

      12. Maximum Pool-Level Wtd. Avg. Loan-to-Value Ratio - 70%

      13. Minimum Obligor/Principal ****Seasoning - 5 years,
      including (a) 5 years with Funeral Service if a Funeral Home is
                 included, and (b) 5 years or
      since inception with Cemetery Industry if a Cemetery is included.

       

      __________________

       

      

	*Obligor=all affiliated entities not satisfying
          bankruptcy-remoteness standards.

        
        

	**Establishment=a business establishment which
          serves as collateral for a Loan.

        
        

	***Coverage Ratio=the fixed charge or debt service
          coverage ratio, as applicable under the related loan and loan documents.

        
        

	****Obligor/Principal=the primary stockholder,
          partner, proprietor.

        
      
      
D-1

      14. Minimum Pool-Level Average (Non-Wtd.) Obligor/Principal Seasoning -
      10 years

      15. Minimum Establishment Seasoning for 1 of every 3 of Establishments
      on those Loans with at least 3 Establishments -1
                year

      16. Minimum Establishment Seasoning for All other Establishments - 5
      years

      17. Minimum Pool-Level Average (Non-Wtd.) Establishment Seasoning - 20
      years

      18. Maximum Amount of Loans (or portion thereof by Establishment)
      secured by other than Fee interests in Realty (By $
                and By Rounded#)-17.50%

      19. Maximum Amount of Loans (or portion thereof by Establishment)
      secured by Cemetery Establishments other than

              Combination Establishments (By $ and By Rounded
      #) - 20%

      20. Maximum Amount of Loans (or portion thereof by Establishment)
      secured by Combination Establishments***** (By $
                and By Rounded #) - 25%

      21. Maximum Amount of Loans (or portion thereof by Establishment)
      secured by Cemetery or Combination 

              Establishments (By $ and By Rounded #) - 35%

       

      **** Combination Establishment = Fuenral Home and
      Cemetery Located at same/contiguous site

    

  

D-2

  
    
      
        
          
            
              
                
                  
                    
                      
                         

                      

                    

                  

                

              

            

          

        

      

    

  

 

EXHIBIT E

PROGRAM GUIDELINES

To be delivered under separate cover to the 

Certificateholder Agent and its Counsel.

 

 

EXHIBIT F

to Loan Acquisition Agreement

SCOPE OF SPECIFIED REVIEW

 

 

A.  Review of Appraiser's Valuation

  1. Agree Valuation Methodology to Standard Methodology

  2. Agree Reasonableness/Adequacy of Valuation Assumptions

  3. Agree Valuation Calculations

B.  Review Company's Underwriting Calculations

  1. Agree Adjusted Cash Flow to Borrower Financials

  2. Agree Loan Payment Calculation

  3. Agree Coverage Ratio

  4. Agree Loan-to-Value Ratio

  5. Agree Loan Payment Cap if Loan Coupon has not been fixed

(Highest Loan Payment at which Coverage Ratio and Pool Criteria are
satisfied)

C. Review Pool Criteria

  1. Agree Pool Criteria Calculations (agree that the Pool Criteria are
  met)

 

 

EXHIBIT G

STANDARD FORMS

To be delivered under separate cover to the 

Certificateholder Agent, its Counsel and the Trustee.

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