Document:

exhibit 10.21 Servicing AA dated August 1, 1998

SERVICING AGREEMENT

among

POINT WEST CAPITAL CORPORATION, as the Servicer,

ALLEGIANCE CAPITAL, LLC, as the Special Servicer,

FORESIGHT ANALYSTS, INC., as the Servicing Advisor,

ALLEGIANCE FUNDING CORP. I, as the Depositor,

and

MANUFACTURERS AND TRADERS TRUST COMPANY, as the Trustee,

 

______________________________________________________________________________________________________________________

Dated as of August 1, 1998

 

TABLE OF CONTENTS

 

Page

ARTICLE ONE

DEFINITIONS

	Section 1.01
	Defined Terms.   
	2

	Section 1.02
	Certain Rules of Construction.   
	6

ARTICLE TWO

REPRESENTATIONS AND WARRANTIES

	Section 2.01
	Servicer Representations and Warranties.   
	7

	Section 2.02
	Special Servicer Representations and Warranties.
       
	8

	Section 2.03
	Servicing Advisor Representations and Warranties
       
	9

ARTICLE THREE

ADMINISTRATION AND SERVICING OF LOANS

	Section 3.01
	Responsibilities of the Servicer.
	12

	Section 3.02
	Responsibilities of Special Servicer.
	12

	Section 3.03
	Responsibilities of the Servicing Advisor.
	15

	Section 3.04
	Servicing Standard of Care.
	15

	Section 3.05
	Lockbox Account; Remittances.
	15

	Section 3.06
	Financing Statements; Title Filings.
	16

	Section 3.07
	Maintenance of Insurance Policy; Insurance Proceeds.
	16

	Section 3.08
	No Offset.
	16

	Section 3.09
	Servicing Compensation.
	17

	Section 3.10
	Prepayments Permitted; Substitution or Purchase of Loans.
	18

	Section 3.11
	Due-on-Sale Clauses; Assumptions; Due-on-Encumbrance Clauses.
	19

	Section 3.12
	Realization Upon Defaulted Loans.
	20

	Section 3.13
	Title and Management of Repossessed Collateral
	22

	Section 3.14
	Sale of Defaulted Loans and Repossessed Collateral.
	24

	Section 3.15
	Modifications, Waivers, Amendments and Consents.
	26

ARTICLE FOUR

ACCOUNTINGS, STATEMENTS AND REPORTS

	Section 4.01
	Reports.
	29

	Section 4.02
	Financial Statements; Certification as to Compliance; Notice of
    Default.
	30

	Section 4.03
	Annual Independent Accountants' Reports.
	32

	Section 4.04
	Access to Certain Documentation and Information
	32

	Section 4.05
	Other Necessary Data.
	33

ARTICLE FIVE

THE SERVICER, THE SPECIAL SERVICER AND THE DEPOSITOR

	Section 5.01
	Indemnification.
	34

	Section 5.02
	Corporate Existence; Reorganizations.
	34

	Section 5.03
	Limitation on Liability of the Servicer, the Special Servicer, the
    Servicing Advisor 
	35

		and Others.	
	Section 5.04
	The Servicer, the Special Servicer and the Servicing Advisor Not to
    Resign
	36

	Section 5.05
	Depositor Indemnification.
	36

ARTICLE SIX

SERVICING TERMINATION

	Section 6.01
	Events of Default.
	37

	Section 6.02
	Appointment of Successor Servicer; Taking of Bids.
	38

	Section 6.03
	Effects of Termination.
	40

	Section 6.04
	No Effect on Other Parties.	40
	Section 6.05
	Waiver of Past Defaults.
	40

	Section 6.06
	Notification to Certificateholders and the Certificateholder Agent.
	40

ARTICLE SEVEN

GENERAL PROVISIONS

	Section 7.01
	Termination of the Agreement.
	41

	Section 7.02
	Amendments.
	41

	Section 7.03
	Governing Law.
	42

	Section 7.04
	Notices.
	42

	Section 7.05
	Severability of Provisions.
	42

	Section 7.06
	Binding Effect.
	42

	Section 7.07
	Article Headings and Captions.
	42

	Section 7.08
	Legal Holidays.	42
	Section 7.09
	Assignment for Security for the Certificates
	43

	Section 7.10
	No Servicing Assignment.
	43

	Section 7.11
	Notifications.
	43

	Section 7.12
	Successor Servicer.
	43

EXHIBITS

	Exhibit A
	Form of Servicer Report

	Exhibit B
	Form of Special Servicer Report

	Exhibit C
	Form of Request for Release of Documents

	Exhibit D
	Form of Debt Service Report

	Exhibit E
	Form of Annual Pool Report

	Exhibit F
	Forms of D&O and Fidelity Bond Insurance

	Exhibit G
	Form of Agreed Upon Procedures Report

 

 

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

RECITALS

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

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

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

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

 

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 Loan Acquisition
Agreement. For purposes of this Agreement, each of the following terms has the meaning
specified herein:

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

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

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

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

                   
"Debt Service Report": With respect to each Loan, the report, substantially in
the form of Exhibit D, prepared by the Servicing Advisor pursuant to and in
accordance with Section 4.01(d) or Section 4.01(e).

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

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

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

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

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

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

2

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

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

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

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

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

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

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

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

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

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

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

                   
"Report": Each of the Servicer Report, the Special Servicer Report, the Annual
Pool Report and the Debt Service Report prepared pursuant to Section 4.01.

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

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

3

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

4

 

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

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

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

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

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

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

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

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

                   
"Successor Servicer": Any successor Servicer, successor Special Servicer or
successor Servicing Advisor appointed in accordance with Article 6.

                   
"Termination Notice": The notice described in Section 6.01(b).

                   
"Transition Costs": The meaning set forth in the Trust Agreement.

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

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

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

5

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

                   
Section 1.2 Certain Rules of Construction.

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

6

 

 

ARTICLE TWO

REPRESENTATIONS AND WARRANTIES

                   
Section 2.01 Servicer Representations and Warranties.

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

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

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

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

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

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

7

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

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

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

                   
Section 2.02 Special Servicer Representations and Warranties.

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

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

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

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

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

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

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

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

                   
Section 2.03 Servicing Advisor Representations and Warranties.

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

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

9

 

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

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

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

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

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

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

10

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

11

 

 

ARTICLE THREE

ADMINISTRATION AND SERVICING OF LOANS

                   
Section 3.01 Responsibilities of the Servicer.

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

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

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

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

                   
Section 3.02 Responsibilities of Special Servicer.

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

12

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

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

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

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

    13

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

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

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

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

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

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

  

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

14

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

                   
Section 3.03 Responsibilities of the Servicing Advisor.

                   
The Servicing Advisor, for the benefit of the Depositor, the Trustee and the
Certificateholders, shall be responsible for, and shall, in accordance with the Servicing
Guidelines: (a) within ten (10) Business Days of the receipt thereof, review the Special
Servicer Report to comment on the performance of the Loan Assets; (b) in accordance with
Section 4.01(d), prepare and deliver to the Special Servicer a Debt Service Report with
respect to each Loan based upon the annual financial data provided by such Obligor in
respect of such Loan; (c) in accordance with Section 4.01(e), prepare and deliver to the
Special Servicer a Debt Service Report with respect to each Loan referred to in Section
4.01(e); (d) respond to all inquiries of, and provide such further advice as requested by
the Special Servicer with respect to any Underperforming Loan, Delinquent Loan or
Defaulted Loan; and (e) at the direction of the Special Servicer, oversee, either directly
or indirectly through an Affiliate of the Servicing Advisor, the management and
disposition of Defaulted Loans or any Repossessed Collateral. Notwithstanding anything to
the contrary contained herein, the Servicing Advisor shall have no right to take any
action with respect to any of the Loans, any Loan Collateral or any Repossessed Collateral
without the express prior authorization of the Special Servicer.

                   
Section 3.04 Servicing Standard of Care.

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

                   
Section 3.05 Lockbox Account; Remittances.

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

15

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

                   
Section 3.06 Financing Statements; Title Filings.

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

                   
Section 3.07 Maintenance of Insurance Policy; Insurance Proceeds.

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

                   
Section 3.08 No Offset.

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

16

 

Section 3.09 Servicing Compensation.

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

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

17

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

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

                   
Section 3.10 Prepayments Permitted; Substitution or Purchase of Loans.

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

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

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

18

 

                   
Section 3.11 Due-on-Sale Clauses; Assumptions; Due-on-Encumbrance Clauses.

                   
(a) If any Loan contains a provision in the nature of a "due-on-sale" clause,
which by its terms:

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

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

  

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

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

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

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

  

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

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

19

 

                   
Section 3.12 Realization Upon Defaulted Loans.

                   
(a) Subject to Section 3.14, the Special Servicer shall repossess, foreclose upon or
otherwise comparably convert the ownership of assets securing such of the Loans as come
into and continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to the Servicing Guidelines and the provisions
of the Agreement, and which are not released from the Trust Estate pursuant to any other
provision hereof, if the Special Servicer determines, in a manner consistent with the
servicing standard set forth in Section 3.04, that such action would be in the best
economic interest of the Certificateholders. The Special Servicer shall advance the costs
and expenses of any such proceeding unless it makes a determination, in its reasonable
business judgment, that such advance, if made, would be nonrecoverable. The Special
Servicer shall be entitled to reimbursement of advances made pursuant to the preceding
sentence from Recoveries on such Loan.

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

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

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

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

    20

  

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

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

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

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

21

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

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

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

                   
Section 3.13 Title and Management of Repossessed Collateral.

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

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

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

22

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

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

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

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

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

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

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

                       
    (ii) any such contract shall require that the Independent Person pay all costs and
    expenses incurred in connection with the operation and management of such Repossessed
    Collateral, including those listed above, and return all related revenues (net of such
    costs and expenses); 

                       
    (iii) none of the provisions of this Section 3.13(c) relating to any such contract or to
    actions taken through any such Independent Person shall be deemed to relieve the Special
    Servicer or the Servicing Advisor of any of its duties and obligations to the Trust
    Estate, the Servicer or the Trustee on behalf of the Certificateholders with respect to
    the operation and management of any such Repossessed Collateral; 

                       
    (iv) the Special Servicer shall be obligated with respect thereto to the same extent as if
    it alone were performing all duties and obligations in connection with the operation and
    management of such Repossessed Collateral; and 

                       
    (v) the Servicing Advisor, and if the Independent Person shall be the Servicing Advisor or
    an Affiliate, the Special Servicer, shall have delivered a written opinion to the Special
    Servicer, and the Special Servicer shall have delivered a copy thereof to the Trustee and
    the Certificateholder Agent, to the effect that any such hiring of an Independent Person,
    in light of among other things any fees which may be charged, will maximize ultimate
    proceeds to the Trust Estate with respect to the related Repossessed Collateral.

  

                   
The Special Servicer shall be entitled to enter into any agreement with any Independent
Person performing services for it related to its duties and obligations hereunder for
indemnification of the Special Servicer by such Independent Person, and nothing in this
Agreement shall be deemed to limit or 

23

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

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

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

                   
Section 3.14 Sale of Defaulted Loans and Repossessed Collateral.

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

24

 

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

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

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

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

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

25

 

                   
Section 3.15 Modifications, Waivers, Amendments and Consents.

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

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

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

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

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

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

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

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

  

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

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

    26

     

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

  

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

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

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

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

27

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

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

                   
Section 3.16 Fidelity Bond; Directors and Officers Insurance.

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

 

28

 

ARTICLE FOUR

ACCOUNTINGS, STATEMENTS AND REPORTS

  
     

  

                   
Section 4.01 Reports.

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

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

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

                   
(d) Not later than May 15 of each year, the Servicing Advisor shall deliver to the Special
Servicer, and not later than May 31 of each year the Special Servicer shall deliver to the
Depositor, the Trustee, the Certificateholder Agent, and, if requested, the Rating Agency,
a Debt Service Report prepared with respect to the performance during the immediately
preceding calendar year of the Loan Collateral for each Loan as to which the Special
Servicer has received from the related Obligor, and delivered to the Servicing Advisor by
April 10 of such year, financial statement data. On March 31 of each year, the Special
Servicer shall notify the Depositor, the Certificateholder Agent and the Servicing Advisor
in writing if it has not received year end financial statement data from an Obligor and
shall use its best efforts to obtain such information as soon as practicable.

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

29

 

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

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

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

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

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

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

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

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

      

    

  

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

        30

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

      

    

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

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

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

  

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

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

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

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

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

      

    

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

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

    31

     

  

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

                   
Section 4.03 Annual Independent Accountants' Reports.

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

                   
Section 4.04 Access to Certain Documentation and Information.

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

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

32

 

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

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

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

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

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

                   
Section 4.05 Other Necessary Data.

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

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

 

33

 

ARTICLE FIVE

THE SERVICER, THE SPECIAL SERVICER AND THE DEPOSITOR

                   
Section 5.01 Indemnification.

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

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

Section 5.02 Corporate Existence; Reorganizations.

(a) Each of the Servicer, the Special Servicer and the Servicing
Advisor shall keep in full effect its existence and good standing as a corporation in the
Servicer State of Incorporation, Special Servicer State of Incorporation or the Servicing
Advisor State of Incorporation, as applicable, and will obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to enable such Servicer, Special Servicer or
Servicing Advisor to perform its duties under the Agreement, except where the failure to
so qualify would not have a material adverse effect on the Trust Estate or the ability of
the Servicer, the Special Servicer 

34

or the Servicing Advisor, as applicable, to perform its duties
hereunder; provided that the Servicer, the Special Servicer or the Servicing
Advisor may reincorporate in another state if to do so would be in the best interests of
the Servicer, the Special Servicer or the Servicing Advisor, as applicable, and would not
have a material adverse effect upon the Certificateholders as evidenced by an Opinion of
Counsel delivered to the Certificateholders and the Certificateholder Agent prior to such
reincorporation.

                   
(b) Except as hereinafter provided, each of the Servicer, the Special Servicer and the
Servicing Advisor will keep in full effect its existence, rights and franchises as a
corporation or limited liability company, as appropriate, and will obtain and preserve its
qualification to do business as a foreign corporation or limited liability company, as
appropriate, in each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement or any of the Loans and to
perform its duties hereunder. Any Person into which the Servicer, the Special Servicer or
the Servicing Advisor may be merged or consolidated, or to whom the Servicer, the Special
Servicer or the Servicing Advisor may sell substantially all of its assets, or any Person
resulting from any merger, conversion or consolidation to which the Servicer, the Special
Servicer or the Servicing Advisor shall be a party, or any Person succeeding to the
business of the Servicer, the Special Servicer or the Servicing Advisor shall be the
successor of such Servicer, the Special Servicer or the Servicing Advisor, as applicable,
hereunder, without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding; provided
that (i) immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 2.01, 2.02 or 2.03 shall have been breached, (ii) such
successor executes an agreement or assumption, in form reasonably satisfactory to the
Trustee, to perform every obligation under this Agreement, (iii) such successor has a net
worth that is sufficient to perform in accordance with the Transaction Documents and at
least approximately equivalent to the net worth of the Servicer, the Special Servicer or
the Servicing Advisor, as applicable, immediately prior to such sale, merger or
consolidation, (iv) the Servicer, the Special Servicer or the Servicing Advisor, as
applicable, shall have delivered to the Depositor, the Trustee, the Certificateholder
Agent and each Certificateholder a certificate of an officer of the Servicer, the Special
Servicer or the Servicing Advisor, as applicable, and an Opinion of Counsel each stating
that such consolidation, merger, or succession and such agreement of assumption complies
with this Section 5.02 and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with, and (v) the Servicer, the
Special Servicer or the Servicing Advisor, as appropriate, shall have delivered to the
Depositor and the Trustee an Opinion of Counsel either (A) stating that, in the opinion of
such counsel, all financing statements, continuation statements and amendments thereto
have been executed and filed and, if applicable, all other actions have been taken to
preserve fully the interest of the Depositor in the Loans and the Loan Assets and reciting
the details of such filings and, if applicable, such actions, or (B) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve and protect such
interest. The Servicer, the Special Servicer or the Servicing Advisor, as applicable, will
provide written notice to the Rating Agency prior to the effective date of any such
transaction.

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

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

35

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

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

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

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

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

                   
Section 5.05 Depositor Indemnification.

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

36

 

 

ARTICLE SIX

SERVICING TERMINATION

                   
Section 6.01 Events of Default.

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

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

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

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

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

  

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

    37

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

  

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

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

                   
Section 6.02 Appointment of Successor Servicer; Taking of Bids.

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

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

38

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

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

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

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

39

 

 

                   
Section 6.03 Effects of Termination.

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

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

                   
Section 6.04 No Effect on Other Parties. 

                   
Upon any termination of the rights and powers of the Servicer, the Special Servicer or the
Servicing Advisor pursuant to Section 6.01 or Section 6.02, or upon any appointment of a
Successor Servicer, all the rights, powers, duties and obligations of the other parties
under the Transaction Documents shall remain unaffected by such termination or appointment
and shall remain in full force and effect thereafter.

                   
Section 6.05 Waiver of Past Defaults.

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

                   
Section 6.06 Notification to Certificateholders and the Certificateholder Agent.

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

40

 

 

ARTICLE SEVEN

GENERAL PROVISIONS

                   
Section 7.01 Termination of the Agreement.

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

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

                   
Section 70.2 Amendments.

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

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

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

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

41

 

                   
Section 7.03 Governing Law.

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

                   
Section 7.04 Notices.

                   
All demands, notices and communications hereunder shall be in writing, shall be made in
accordance with the provisions of the Trust Agreement, and shall be addressed, if to the
Depositor, at 1700 Montgomery Street, Suite 250B, San Francisco, California 94111 Fax
415-394-6703, if to the Servicer, at 1700 Montgomery Street, Suite 250, San Francisco,
California 94111 Fax 415-394-9471, if to the Special Servicer at 1700 Montgomery Street,
Suite 250, San Francisco, California 94111 Fax 415-394-9471, if to the Servicing Advisor,
at 5353 North 16th Street, Suite 370, Phoenix, Arizona 85016 Fax 602-277-6722,
if to the Certificateholders, to their address set forth on the Certificate Register, and
if to the Trustee, at One M&T Plaza, 7th Floor, Buffalo, New York
14203-2399 Fax 716-842-4474. All demands, notices and communications made in accordance
with the provisions hereof shall be deemed to have been received or made (as applicable)
as provided in the Trust Agreement. Any Person may change the address for notices
hereunder by giving notice of such change to the other Persons (or in the case of a
Certificateholder, by causing the Trustee to change its address as provided on the
Certificate Register).

                   
Section 7.05 Severability of Provisions.

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

                   
Section 7.06 Binding Effect.

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

                   
Section 7.07 Article Headings and Captions.

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

                   
Section 7.08 Legal Holidays.

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

42

 

                   
Section 7.09 Assignment for Security for the Certificates. 

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

                   
Section 7.10 No Servicing Assignment.

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

                   
Section 7.11 Notifications.

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

                   
Section 7.12 Successor Servicer.

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

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

43

 

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

  
    
      
        
          
                                                       
            

            
          

        

      

    

  

 

 

	MANUFACTURERS AND TRADERS TRUST
    COMPANY,

	Trustee
	By:
             /s/ Russell T. Whitley
	

    
	Name:    Russell T. Whitley
	Title:       
    Assistant Vice President

 

	ALLEGIANCE CAPITAL, LLC,  
    

	Special Servicer
	By:
             /s/ Alan B. Perper
	

    
	Name:    Alan B. Perper
	Title:       
    President

  
    
      
        
          
            
              
                
                   

                

              

            

          

        

      

    

  

  

	POINT WEST CAPITAL CORPORATION,

	Servicer
	By:
             /s/ Alan B. Perper
	

    
	Name:    Alan B. Perper
	Title:       
    President

 

	FORESIGHT ANALYSTS, INC.,

	Servicing Advisor
	By:
             /s/ Daniel M. Isard
	

    
	Name:    Daniel M.
    Isard
	Title:       
    President

 

	ALLEGIANCE FUNDING CORP I
    ,  

	Depositor
	By:
             /s/ Alan B. Perper
	

    
	Name:    Alan B. Perper
	Title:       
    President

 

 

EXHIBIT C

to Servicing Agreement

REQUEST FOR RELEASE OF DOCUMENTS

To: Manufacturers and Traders Date Prepared: _________________________

Trust Company, as Trustee

One M & T Plaza, 7th Floor

Buffalo, NY 14203-2399

Attn: _________________

                   
In connection with the administration of certain original executed counterparts of loan
contracts (the "Loans") held by you pursuant to that certain Servicing
Agreement, dated as of August 1, 1998 (as amended or modified from time to time, the
"Servicing Agreement"), by and among Allegiance Funding Corp. I (the
"Depositor"), Manufacturers and Traders Trust Company (the "Trustee"),
Point West Capital Corporation (the "Servicer") and the undersigned (the
"Special Servicer"), the Special Servicer requests the delivery of the portions
of the Loan File relating to Loan # _______, as described below, for the reason indicated
below. The undersigned shall return the documents to the Trustee as soon as the
undersigned's need therefor no longer exists, except where the Loan is paid in full or
otherwise disposed of (as indicated below).

                   
The undersigned hereby certifies that (a) if this release is requested due to payment in
full of a Loan, or purchase, removal or substitution, all amounts received in connection
therewith that are required to be deposited in the Lockbox Account pursuant to the
Servicing Agreement have been so deposited or (b) if this release is requested due to a
substitution of a Loan, such substitution has been accomplished in accordance with the
terms of the Servicing Agreement. 

REASON FOR REQUESTING [ ] LOAN:

  
    ___ LOAN PAID IN FULL

    ___ SUBSTITUTION OF LOAN

    ___ REPURCHASE OF LOAN

    ___ OTHER - EXPLAIN ______________________________________________________

    

    
      
        ______________________________________________________________________

        ________________________________________________________________________

      

    

  

EXPECTED DATE OF RETURN: ____ __, ____

	POINT WEST CAPITAL CORPORATION, 
	as Special Servicer
	_________________________________
	Authorized Signature of Special Servicer
	LOAN NUMBER: ________________
	OBLIGOR: ___________________

 

                   
To Trustee: Please acknowledge below by your signature the execution of the above request.
You must retain this form for your files, and a copy of this form, signed and dated by
you, must be returned to the Special Servicer.

 

______________________________
                                                                                                                   
___________________________

Authorized Signature of Trustee
                                                                                                                                   
Release Date

 

 

RETURN OF RELEASED DOCUMENT(S) / FILE

All Documents Identified above as Previously Released have been
returned:

 

_____________________________
                                                                                                                       
___________________________

Authorized Signature of Trustee
                                                                                                                                           
Date of Return

 

cc: Certificateholder Agent

 

EXHIBIT G

to Servicing Agreement

[letterhead of Independent Account]

 

 

INDEPENDENT ACCOUNTANTS'
REPORT

ON APPLYING AGREED-UPON PROCEDURES

 

 

Allegiance Funding Corp. I

1700 Montgomery Street, Suite 250-B

San Francisco, California 94111

                   
We have performed the procedures enumerated below, which were agreed to by Point West
Capital Corporation (the ACompany@),
solely to assist in evaluating the Company=s compliance with certain requirements of the Servicing
Agreement for Allegiance Capital Trust I. This engagement to apply agreed-upon procedures
was performed in accordance with standards established by the American Institute of
Certified Public Accountants. The sufficiency of the procedures is solely the
responsibility of Allegiance Funding Corp. I. Consequently, we make no representation
regarding the sufficiency of the procedures described below either for the purpose for
which this report has been prepared or for any other purpose.

                   
For purposes of this letter, unless otherwise indicated, the following definitions have
been adopted in presenting our procedures and findings.

  	    [specific definitions to be inserted by
      Independent Accountants]

    

                   
All capitalized terms unless otherwise defined, have the same meaning as presented in the
attached schedules.

                   
We have obtained [text to be inserted by Independent Accountants B the Company and the Trustee
shall cooperate with and timely respond to provide materials needed by Independent
Accountants to perform the agreed-upon procedures, which shall include without limitation,
monthly Servicer Reports, monthly Trust account statements from Trustee, and Servicer=s Loan servicing system
records, any or all parts of which may be attached to this letter as an Appendix as the
Independent Accountants shall determine].

                   
For purposes of this letter, we have performed the following procedures which were applied
as indicated:

                   
[Independent Accountants shall provide text describing the agreed-upon procedures
performed and describing any exceptions which were found; the agreed-upon procedures to be
performed shall consist of the following:

 

Servicing System Tests to be Performed

 

1. Haphazard selection of greater of 10% (by number) and five (5) Loans

2. Agree Servicing System entries with respect to the selected Loans to Lockbox Statements

3. Agree application of receipts in respect of such Loans to principal and interest as
reflected in Servicing System for the year (normally 12 monthly
           P&I
           payments)

Servicer Report Tests to be Performed

1. Haphazard selection of four (4) monthly Servicer Reports

2. Agree entries in the reports with Trustee Collection Account and
Lockbox Account records

  
    (a)    Beginning Collection Account balance

    (b) Deposits/Transfers from Lockbox Account to Collection Account

    (c) Scheduled Payments received

  

3. Check the following calculations of defined terms versus Servicer
Reports

            (a)
        Scheduled Expenses

                   
(b) Deposits/Transfers from Lockbox Account to Collection Account

                   
(c) Series Collections for each Series

                   
(d) Class D-R Distribution Amount and Class D Distribution Amount

4. Agree entries in the reports with trustee bank reserve account records

  
    (a) Beginning Reserve Account balance

    (b) Ending Reserve Account balance]

  

5. Agree calculations on Schedule VI

                   
(a) Pool Performance Conditions (a) through (g)

                   
(b) Depositor Events of Default (1) through (4)

                   
The foregoing procedures do not constitute an audit conducted in accordance with generally
accepted auditing standards. Had we performed additional procedures or had we conducted an
audit or a review of the assumptions made or disclosed in the attached schedules in
accordance with the standards established by the American Institute of Certified Public
Accountants, other matters might have come to our attention that would have been reported
to you. Accordingly, we do not express such an opinion.

                   
It should be understood that we have no responsibility for establishing (and did not
establish) the scope and nature of the procedures enumerated above; rather, the procedures
enumerated herein are those the Company asked us to perform. Accordingly, we make no
representations regarding the sufficiency for your purposes of the procedures enumerated
in the preceding paragraphs; also, such procedures would not necessarily reveal any
material misstatement of the amounts or percentages listed above and as set forth in the
[Appendix _ ]. The procedures enumerated above are limited to those which the Company
determined would best meet their informational needs and may not necessarily disclose all
significant errors, irregularities, including fraud or defalcation, or illegal acts, that
may exist. Further, we have addressed ourselves solely to the foregoing data and make no
representations regarding questions of legal interpretation, the adequacy of disclosures
or whether any material facts have been omitted. This letter relates only to the items
specified above and does not extend to any financial statements of the Company.

                   
This report is intended solely for the use of Allegiance Funding Corp. I and should not be
used by those who have not agreed to the procedures and taken the responsibility for the
sufficiency of the procedures for their purposes.

 

 

  
    
      
        
          
            
              
                [signed & dated by Independent Accountants]exhibit 10.23 Amended and Restated supplement to Trust AA 98-1

AMENDED AND RESTATED

SUPPLEMENT TO

TRUST AGREEMENT

FOR

REVOLVING SERIES 1998-1

                   
This Amended and Restated Supplement to Trust Agreement for Revolving Series 1998-1 (as
amended or modified from time to time, this "Supplement"), dated as of September
1, 1999, is entered into among Allegiance Funding I, LLC, a Delaware limited liability
company (successor to Allegiance Funding Corp. I) (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 duly authorized the execution and delivery of the original Supplement dated
as of August 1, 1998 to provide for the issuance of the Allegiance Capital Trust I
Revolving Certificates, Series 1998-1 (the "98-1 Revolving Certificates"), which
consist of the Class A-R Revolving Certificates, Series 1998-1 (the "98-1
Class A-R Certificates"), Class B-R Revolving Certificates, Series 1998-1 (the
"98-1 Class B-R Certificates"), Class C-R Revolving Certificates, Series 1998-1
(the "98-1 Class C-R Certificates"), and Class D-R Revolving Certificates,
Series 1998-1 (the "98-1 Class D-R Certificates"), each issuable as provided in
the Trust Agreement. This Series of Certificates has been 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 for
this Series as in effect on the date hereof 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 annum for Accrual Periods commencing before
      September 1, 1999 and thereafter 2.05% per
                              
      annum

      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. 

                   
"Effective Date": September 10, 1999. 

                   
"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 

    2

    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 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, 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.

                   
"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) 0.0025 per annum and (b) the positive difference between the Maximum Series
Amount for the Class A-R, B-R and C-R Certificates in this Series and the average
Outstanding Principal Amount of all Class A-R, B-R and C-R Certificates in this Series
during such Accrual Period.

                   
"Revolving Funding Date": Any Funding Date on which the Depositor obtains a
Funding under the 98-1 Revolving Certificates. 

3

                   
"Revolving Funding Schedule": The schedule attached hereto as Schedule B, as
amended from time to time pursuant to Section 4 hereof. Such Revolving Funding Schedule,
as amended from time to time, is incorporated herein by this reference. 

                   
"Scheduled Funding Termination Date": (a) With respect to the Class A-R
certificates, March 31, 2000; and (b) with respect to the Class B-R and Class C-R
certificates, December 30, 1999, provided that if there is an active "B" fund
under management by the Certificateholder Agent, the Certificateholder Agent shall use its
best efforts to extend the Scheduled Funding Termination Date applicable to any Class B-R
or Class C-R Certificate to March 31, 2000.

                   
"Scheduled Maturity": With respect to any Class A-R, Class B-R or Class C-R
Certificate, April 17, 2000.

                   
"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.

                   
(a) 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.

4

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

                   
(c) Notwithstanding the definition of Funding Date set forth in the Trust Agreement, upon
the request of the Depositor, up to two additional Funding Dates may be designated under
this Series, one during the period beginning August 30, 1999 and ending September 14, 1999
and one during the period beginning March 30, 2000 and ending April 14, 2000. Such
Fundings shall otherwise occur on the terms set forth in the Transaction Documents. 

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;

                   
(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;

5

                   
(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.

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

                   
(a) 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: (i) 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; (ii) 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;
and (iii) such adjustments shall be reflected on a Revolving Funding Schedule as described
on clause (b) below. 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. 

                   
(b) As of the Delivery Date, the Revolving Funding Schedule is as set forth on Schedule B
hereto. Thereafter, a revised Revolving Funding Schedule shall be included with each
Funding Report delivered in connection with a Funding Date. In addition, upon any
prepayment in accordance with clause (a) above, a revised Revolving Funding Schedule shall
be provided by the Depositor to the Rating Agency and the Certificateholder Agent. Each
such revised Revolving Funding Schedule shall, as appropriate, specify (i) the dollar
amount that each Class of this Series shall fund in connection with the related Funding or
(ii) the adjusted Maximum Series Amount and Minimum Funding Amount for each Class of
Certificates in this Series.

                   
(c) 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 

6

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.

                   
(d) 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.

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. Legal Opinion.

                   
It shall be a condition to any Funding under this Series after September 10, 1999 that
prior to such Funding there shall have been delivered to the Trustee and each Holder of
Rated Certificates a legal opinion of counsel to the Company, the Depositor and the
Servicer, inform and substance satisfactory to such Holders, with respect to this
Supplement and such related matters as such Holders may reasonably request.

Section 10. General Provisions.

                   
The amendments to the original Supplement dated as of August 1, 1998 made pursuant to this
Amended and Restated Supplement shall be effective as of the Effective Date. Upon
execution and delivery of this Supplement, the Depositor shall execute and the Trustee
shall authenticate amended 98-1 Revolving Certificates which shall be delivered by the
Trustee to each Holder of a 98-1 Revolving Certificate in exchange for its existing 98-1
Revolving Certificate. 

7

 

                   
As amended and 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.

 

8

                   
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 1 llc, , as
    the Depositer

	
	By:
             /s/ Alan B. Perper
	

    
	Name:    Alan B. Perper
	Title:       
    President

 

	MANUFACTURERE AND TRADERS TRUST
    COMPANY, as the Trustee

	
	By:
              /s/ Russell T. Whitley
	

    
	Name:     Russell T. Whitley
	Title:
            Assitant Vice President

 

	POINT WEST CAPITAL CORPORATION,
      as the Servicer

	
	By:
             /s/ Alan B. Perper
	

    
	Name:    Alan B. Perper
	Title:       
    President

Consented and Agreed:

 

 

	TICE & CO., as registered
    owner of the 

	Class A-R Certificates
	
	By:
             /s/ Brian D. Hunt

	

    
	Its::   
          Vice President
	Date:       
    9/10/99

 

	TICE & CO., as registered
    owner of the 

	Class B-R Certificates
	
	By:
             /s/ Brian D. Hunt

	

    
	Its::   
          Vice President
	Date:       
    9/10/99

 

	TICE & CO., as registered
    owner of the 

	Class C-R Certificates
	
	By:
             /s/ Brian D. Hunt

	

    
	Its::   
          Vice President
	Date:       
    9/10/99

 

 

EXHIBIT A

 

FORM OF AMENDED AND RESTATED 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 I, LLC (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 (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. A-R _____ $____________

 

ALLEGIANCE CAPITAL TRUST I

AMENDED AND RESTATED 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 Amended and Restated Supplement to Trust Agreement for Revolving
Series 1998-1, dated as of September 1, 1999 (amending and restating the original
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
Amended and Restated Class A-R Revolving Certificates, Series 1998-1 having a
scheduled maturity of April 17, 2000 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 required to be made by the
Holder of this Certificate, shall be as set forth in the Revolving Funding Schedule. 

                   
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 

A-2

Certificate is not paid in full by its Scheduled Maturity, then, for
any Accrual Period 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 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.

A-4

 

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 I, LLC has caused this
instrument to be signed, manually, by the President or a Vice President of its Manager,
Allegiance Management Corp.

	ALLEGIANCE FUNDING I, LLC

	By: Allegiance Management Corp., as Manager

	By:

	Title:

 

 

 

 

 

CERTIFICATE OF AUTHENTICATION

 

                   
This is one 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 Amended Class A-R Revolving Certificates, Series 1998-1

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

 

 

 

EXHIBIT B

 

FORM OF AMENDED AND RESTATED 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 I, LLC (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 _____ $____________

 

ALLEGIANCE CAPITAL TRUST I

AMENDED AND RESTATED 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-2

          

        

      

    

  

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 Amended and Restated Supplement to Trust Agreement for Revolving
Series 1998-1, dated as of September 1, 1999 (amending and restating the original
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
Amended and Restated Class B-R Revolving Certificates, Series 1998-1 having a
scheduled maturity of April 17, 2000 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 required to be made by the
Holder of this Certificate, shall be as set forth in the Revolving Funding Schedule. 

                   
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 

B-2

Certificate is not paid in full by its Scheduled Maturity, then, for
any Accrual Period 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 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 B-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 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 

B-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 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
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.

B-4

 

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 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 I, LLC has caused this
instrument to be signed, manually, by the President or a Vice President of its Manager,
Allegiance Management Corp.

	ALLEGIANCE FUNDING I, LLC

	By: Allegiance Management Corp., as Manager

	By:

	Title:

 

 

 

B-6

 

CERTIFICATE OF AUTHENTICATION

 

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

 

  
    Dated: 

     

  

MANUFACTURERS AND TRADERS TRUST 

COMPANY, as Trustee

By: 

Authorized Signatory

 

B-7

 

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

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

B-8

 

 

 

EXHIBIT C

 

FORM OF AMENDED AND RESTATED 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 I, LLC (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 _____ $____________

 

ALLEGIANCE CAPITAL TRUST I

AMENDED AND RESTATED 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: 

            C-2

          

        

      

    

  

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 Amended and Restated Supplement to Trust Agreement for Revolving
Series 1998-1, dated as of September 1, 1999 (amending and restating the original
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
Amended and Restated Class C-R Revolving Certificates, Series 1998-1 having a
scheduled maturity of April 17, 2000 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 required to be made by the
Holder of this Certificate, shall be as set forth in the Revolving Funding Schedule. 

                   
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 

C-2

Certificate is not paid in full by its Scheduled Maturity, then, for
any Accrual Period 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 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 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 

C-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 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
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.

C-4

 

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 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 I, LLC has caused this
instrument to be signed, manually, by the President or a Vice President of its Manager,
Allegiance Management Corp.

	ALLEGIANCE FUNDING I, LLC

	By: Allegiance Management Corp., as Manager

	By:

	Title:

 

 

 

C-6

 

CERTIFICATE OF AUTHENTICATION

 

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

 

  
    Dated: 

     

  

MANUFACTURERS AND TRADERS TRUST 

COMPANY, as Trustee

By: 

Authorized Signatory

 

C-7

 

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

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

C-8

 

EXHIBIT D

 

FORM OF AMENDED AND RESTATED 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 I, LLC (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

AMENDED AND RESTATED 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 Amended and Restated Supplement to Trust Agreement for Revolving
Series 1998-1, dated as of September 1, 1999 (amending and restating the original
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
Amended and Restated Class D-R Revolving Certificates, Series 1998-1 having a
scheduled maturity of April 17, 2000 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 required to be made by the
Holder of this Certificate, shall be as set forth in the Revolving Funding Schedule. 

                   
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; 

D-2

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. 

                   
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 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
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 and interest on 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.

D-4

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

	ALLEGIANCE FUNDING I, LLC

	By: Allegiance Management Corp., as Manager

	By:

	Title:

 

 

 

CERTIFICATE OF AUTHENTICATION

 

                   
This is one 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 Amended Class D-R Revolving Certificates, Series 1998-1

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

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