Registration No. ________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------
IMH ASSETS CORP.
(Exact name of Registrant as specified in its Charter)
California
(State of Incorporation)
33-0705301
(I.R.S. Employer Identification Number)
20371 Irvine Avenue
Santa Ana Heights, California 92707
(714) 556-0122
(Address and telephone number of Registrant's principal executive offices)
Richard Johnson
IMH Assets Corp.
20371 Irvine Avenue
Santa Ana Heights, California 92707
(714) 556-0122
(Name, address and telephone number of agent for service)
----------------
Copies to:
Paul D. Tvetenstrand, Esq.
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Approximate date of commencement of proposed sale to the public: From
time to time on or after the effective date of this Registration Statement, as
determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
AMOUNT PRICE OFFERING REGISTRATION
TITLE OF SECURITIES BEING REGISTERED TO BE REGISTERED PER UNIT (1) PRICE (1) FEE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Collateralized Mortgage Bonds, issued in $1,000,000 100% $1,000,000 $344.83
series
</TABLE>
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<PAGE>
(1) Estimated solely for the purpose of calculating the registration fee.
--------------------------
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
<PAGE>
EXPLANATORY NOTE
This Registration Statement includes (i) a base prospectus and (ii) an
illustrative form of prospectus supplement for use in an offering of
Collateralized Mortgage Bonds.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This preliminary prospectus supplement shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sale of
these securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
such State.
Subject to Completion Dated June 21, 1996
Prospectus Supplement
(To Prospectus Dated ____________, 19__)
$__________________
IMH Assets Corp.
Company
Imperial CMB Trust 19__-___
[Name of Master Servicer]
Master Servicer
Collateralized Mortgage Bonds, Series 19__-___
The Imperial CMB Trust 19__ (the "Issuer") will be formed pursuant to a
Trust Agreement to be dated as of _________________, 19__ between IMH Assets
Corp. (the "Company") and __________________________, the Owner Trustee. The
Issuer will issue $__________ aggregate principal amount of Collateralized
Mortgage Bonds, Series 19__-____ (the "Bonds"). The Bonds will be issued
pursuant to an Indenture to be dated as of _________________, 19__, between the
Issuer and ___________________, the Indenture Trustee. The Issuer will also
issue $___________ aggregate principal amount of Imperial CMB Trust
Certificates, Series 19__-____ (the "Certificates"). The Bonds and the
Certificates are collectively referred to herein as the "Securities". Only the
Bonds are offered hereby.
The Bonds will represent indebtedness of the related trust fund (the
"Trust Fund") created by the Trust Agreement. The Trust Fund consists of
adjustable-rate, conventional, residential, one- to four-family first lien
mortgage loans (the "Mortgage Loans"). In addition, the Bonds will have the
benefit of an irrevocable and unconditional financial guaranty insurance policy
(the "Policy") issued by _______________ (the "Insurer") as described under "The
Policy" herein.
The interest rates on the Mortgage Loans (each, a "Mortgage Rate") will
change semi-annually based on the Index (as defined herein) and the respective
Note Margins described herein, subject to certain periodic and lifetime
limitations as described more fully herein.
Payments of principal and interest on the Bonds will be made on the
_______ day of each month or, if such day is not a business day, then on the
next business day, commencing on ____________, 19__ (each, a "Payment Date"). As
described herein, interest will accrue on the Bonds at a floating rate (the
"Bond Rate") equal to [LIBOR (as defined herein)] plus _____% per annum subject
to certain limitations as described herein. See "Description of the
Securities--Interest on the Bonds" herein.
It is a condition of the issuance of the Bonds that they be rated "___"
by ___________________ and "____" by ___________________.
THE YIELD TO MATURITY ON THE BONDS WILL DEPEND ON THE RATE AND TIMING
OF PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS, LIQUIDATIONS AND REPURCHASES) ON
THE MORTGAGE LOANS.
<PAGE>
SEE "CERTAIN YIELD AND PREPAYMENT CONSIDERATIONS" HEREIN AND "YIELD AND
PREPAYMENT CONSIDERATIONS" IN THE PROSPECTUS.
There is currently no secondary market for the Bonds. ______________
(the "Underwriter") intends to make a secondary market in the Bonds, but is not
obligated to do so. There can be no assurance that a secondary market for the
Bonds will develop or, if it does develop, that it will continue. The Bonds will
not be listed on any securities exchange.
THE BONDS REPRESENT OBLIGATIONS OF THE ISSUER ONLY AND DO NOT REPRESENT
AN INTEREST IN OR OBLIGATION OF THE COMPANY, THE MASTER SERVICER, OR ANY OF
THEIR AFFILIATES. NONE OF THE BONDS OR THE UNDERLYING MORTGAGE LOANS ARE INSURED
OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE COMPANY,
THE MASTER SERVICER OR ANY OF THEIR AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
Price to Underwriting Proceeds to
Public Discount the Company (1)
- --------------------------------------------------------------------------------
Per Bond.............. _______% _____% _____%
- --------------------------------------------------------------------------------
Total................. $________ $________ $________
================================================================================
(1) Before deducting expenses, estimated to be $__________.
The Bonds are offered by the Underwriter subject to prior sale, when,
as and if delivered to and accepted by the Underwriter and subject to certain
other conditions. The Underwriter reserves the right to withdraw, cancel or
modify such offer and to reject any order in whole or in part. It is expected
that delivery of the Bonds will be made on or about ____________, 19__ [in
book-entry form through the Same Day Funds Settlement System of The Depository
Trust Company as discussed herein,] [at the office of __________________,
_______________, _________________] against payment therefor in immediately
available funds.
[Name of Underwriter]
[Date of Prospectus Supplement]
<PAGE>
THE SECURITIES OFFERED BY THIS PROSPECTUS SUPPLEMENT CONSTITUTE PART OF
A SEPARATE SERIES OF SECURITIES BEING OFFERED PURSUANT TO THE COMPANY'S
PROSPECTUS DATED ____________, 19__, OF WHICH THIS PROSPECTUS SUPPLEMENT IS A
PART AND WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS
IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL. SALES OF THE SECURITIES MAY NOT BE CONSUMMATED UNLESS THE
PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
UNTIL NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL
DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS TO WHICH IT RELATES. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OFFERED
SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET, SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-3
<PAGE>
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere herein and in the Prospectus.
Capitalized terms used herein and not otherwise defined herein have the meanings
assigned in the Prospectus.
Issuer.......................The Bonds will be issued by Imperial CMB Trust
19__-___, a Delaware business trust established
pursuant to the Trust Agreement, dated as of
________ 1, 19__ between the Company and the Owner
Trustee.
The Bonds....................$____________ Collateralized Mortgage Bonds, Series
19__- __. Only the Bonds are offered hereby. The
Bonds will be issued pursuant to an Indenture,
dated as of ________ 1, 19__ between the Issuer and
___________________, as Indenture Trustee.
Company......................IMH Assets Corp., (the "Company"). See "The
Company" in the Prospectus.
Master Servicer..............[Name of Master Servicer] (the "Master Servicer").
See "[Name of Master Servicer]" in the Prospectus.
Owner Trustee................___________, ____________.
Indenture Trustee............__________________,____________.
Delivery Date................On or about ____________, 19__.
Payment Date.................The [______] day of each month (or, if such day is
not a business day, the next business day),
beginning on ___________________, 199___, (each, a
"Payment Date").
[Denominations and
Registration.................The Bonds (the "Book-Entry Bonds") will be issued,
maintained and transferred on the book-entry
records of DTC and its Participants (as defined in
the Prospectus). The Bonds will be offered in
registered form, in minimum denominations of
$______ and integral multiples of $_____ in excess
thereof. The Book-Entry Bonds will be represented
by one or more Bond certificates registered in the
name of Cede & Co., as nominee of DTC. No
Beneficial Owner will be entitled to receive a Bond
in fully registered, certificated form (a
"Definitive Bond"), except under the limited
circumstances described herein. See "Description of
the Bonds--Book Entry Bonds" herein.]
S-4
<PAGE>
The Mortgage Pool............The Mortgage Loans are secured by first liens on
one- to four-family residential real properties
(each, a "Mortgaged Property"). The Mortgage Loans
have individual principal balances at origination
of at least $______ but not more than $_________
with an average principal balance at origination of
approximately $_________. The Mortgage Loans have
terms to maturity of __ years from the date of
origination and a weighted average remaining term
to stated maturity of approximately ____ years and
__ months as of the Cut-off Date. The Mortgage Rate
on each Mortgage Loan will adjust semi-annually on
its Adjustment Date (as defined herein), with
corresponding adjustments in the amount of monthly
payments, to equal the sum (rounded as described
herein) of the Index described below and a fixed
percentage set forth in the related Mortgage Note
(the "Note Margin"). However, (i) on any Adjustment
Date such Mortgage Rate may not increase or
decrease by more than 1% (the "Periodic Rate Cap"),
(ii) over the life of such Mortgage Loan, such
Mortgage Rate may not exceed the related maximum
Mortgage Rate (such maximum Mortgage Rate is equal
to the Mortgage Rate at origination plus a lifetime
rate cap (the "Lifetime Rate Cap")), which maximum
Mortgage Rates will range from ______% to ______%
and (iii) with respect to approximately ____% of
the Mortgage Loans, by aggregate principal balance
as of the Cut-off Date, over the life of such
Mortgage Loan, such Mortgage Rate may not be lower
than the minimum Mortgage Rate. The difference
between the Mortgage Rate on each Mortgage Loan at
origination and the minimum Mortgage Rate on such
Mortgage Loan will equal the lifetime rate floor
(the "Lifetime Rate Floor"). The minimum Mortgage
Rates will range from _____% to ______% per annum.
The Mortgage Loans will bear interest at Mortgage
Rates of at least _____% per annum but not more
than ______% per annum, as of the Cut-off Date. For
a further description of the Mortgage Loans, see
"Description of the Mortgage Pool" herein.
The Index....................As of any Adjustment Date with respect to any
Mortgage Loan, the Index applicable to the
determination of the related Mortgage Rate will be
a rate equal to the monthly weighted average cost
of funds for members of the Federal Home Loan Bank
of San Francisco as most recently available 45 days
prior to the Adjustment Date (the "Cost of Funds
Index" or "Index").
S-5
<PAGE>
Interest Payments ...........Interest on the Bonds will be paid monthly on each
Payment Date, commencing in 19__, at the
Pass-Through Rate for the related Interest Period
(as defined below). The Pass- Through Rate for an
Interest Period will be equal to LIBOR plus ___% as
described herein under "Description of the
Bonds--Interest on the Bonds." Interest on the
Bonds in respect of any Payment Date will accrue
from the preceding Payment Date (or in the case of
the first Payment Date, from the date of initial
issuance of the Bonds (the "Closing Date") through
the day preceding such Payment Date (each such
period, an "Interest Period")) on the basis of the
actual number of days in the Interest Period and a
360-day year.
[Principal Payments .........On each Payment Date after the Funding Period,
other than the Payment Date in ___________,
principal payments will be due and payable on the
Bonds in an aggregate amount equal to the
applicable Security Percentage of Principal
Collections for such Payment Date. In addition, on
any Payment Date, to the extent of funds available
therefor, Securityholders will also be entitled to
receive principal payments generally equal to the
applicable Security Percentage of (i) Liquidation
Loss Amounts (as defined herein), as and to the
extent described herein, and (ii) the amount, if
any, necessary to bring the Outstanding Reserve
Amount up to the Reserve Amount Target. In no event
will principal payments on the Bonds on any Payment
Date exceed the Security Balance thereof on such
date. On the Payment Date in __________, principal
will be due and payable on the Bonds in an amount
equal to the Security Balance for each such
Security on such Payment Date.
With respect to any Payment Date and Security, the
"Security Percentage" is the percentage equivalent
of a fraction the numerator of which is the
Security Balance of such Security immediately prior
to such Payment Date and the denominator of which
is the aggregate of the Security Balances of all
Securities (the "Aggregate Security Balance")
immediately prior to such date.
The "Security Balance" of any Security on any day
is, with respect to the Bonds and the Certificates,
the respective initial balance thereof as of the
Closing Date reduced by all payments of principal
thereon as of such day.
Notwithstanding the foregoing provisions, as
further described herein, if the Insurer fails to
make any payment
S-6
<PAGE>
required under the Policy in accordance with its
terms, distributions on the Certificates will be
subordinate to the payment of interest and
principal on the Bonds.
P&I Collections..............All collections on the Mortgage Loans will be
allocated by the Master Servicer in accordance with
the terms of the Mortgage Loans between amounts
collected in respect of interest and amounts
collected in respect of principal. See "Description
of the Servicing Agreement--P&I Collections"
herein, which describes the calculation of the
Interest Collections and the Principal Collections
on the Mortgage Loans for the Collection Period
related to each Payment Date.
With respect to any Payment Date, the portion of
Principal Collections and Interest Collections that
are distributable pursuant to the Servicing
Agreement (together, the "P&I Collections") will
equal (a) Interest Collections for such Payment
Date and (b) Principal Collections for such Payment
Date. During the Funding Period, Principal
Collections will be deposited to the Funding
Account.
[Funding Period..............On each Payment Date during the Funding Period,
Principal Collections for such Payment Date will be
deposited in the Funding Account. During the
Funding Period, amounts on deposit in the Funding
Account in respect of Principal Collections will be
used to purchase Subsequent Mortgage Loans.
The Funding Period is the period commencing on the
Closing Date and ending on the earlier of (x) the
business day immediately prior to the Payment Date
in ______________ and (y) the occurrence of an
Amortization Event (as defined herein under
"Description of the Securities--Allocation of P&I
Collections").]
Outstanding Reserve
Amount.......................The distribution of the Additional Principal
Distribution Amount, if any, on the Mortgage Loans
will create the Outstanding Reserve Amount. The
Outstanding Reserve Amount, if any, will be
available to absorb any Liquidation Loss Amounts
that are allocated to the Mortgage Loans and not
covered by Principal Collections and Interest
Collections. Any Liquidation Loss Amounts allocable
to the Bondholders and not covered by such
overcollateralization will be covered by draws on
the Policy to the extent provided herein. The
S-7
<PAGE>
"Outstanding Reserve Amount" on any Payment Date is
the amount, if any, by which the sum of the Pool
Balance as of the end of the related Collection
Period and the amounts, if any, on deposit in the
Funding Account in respect of Principal Collections
on such Payment Date exceed the Aggregate Security
Balance on such day (after giving effect to all
distributions on such Payment Date).
As of the Closing Date, the Reserve Amount Target
is equal to ___% of the Cut-Off Date Pool Balance.
The Reserve Amount Target may be increased or
reduced from time to time pursuant to the terms of
the [Insurance] Agreement, with the consent of the
Rating Agencies and the Indenture Trustee. To the
extent the Reserve Amount Target is reduced on any
Payment Date, the amount of the Principal
Collections distributed on such Payment Date will
be reduced and on each subsequent Payment Date to
the extent the remaining Outstanding Reserve Amount
is in excess of the reduced Reserve Amount Target
until the Outstanding Reserve Amount equals the
Reserve Amount Target.
Insurer......................______________. See "The Insurer" herein.
Policy.......................On the Closing Date, the Insurer will issue a
Policy in favor of the [Indenture Trustee on behalf
of the Issuer]. The Policy will unconditionally and
irrevocably guarantee principal payments on the
Bonds plus accrued and unpaid interest due on the
Bonds. The Policy will not guarantee payments on
the Certificates. On each Payment Date, a draw will
be made on the Policy to cover (a) any shortfall in
amounts available to make payments of interest on
the outstanding Security Balance of the Bonds and
(b) the amount, if any, [by which the Aggregate
Security Balance of the Bonds exceeds the sum of
the Pool Balance at the end of the related
Collection Period and the amount, if any, on
deposit in the Funding Account in respect of
Principal Collections on such date]. In addition,
the Policy will guarantee the payment of the
outstanding Security Balance of each Bond on the
Payment Date in _______ (after giving effect to all
other amounts distributable and allocable to
principal on such Payment Date). See "The Policy"
herein and "Description of Credit Enhancement" in
the Prospectus.
The Certificates.............$________ Collateralized Mortgage Certificates,
Series 19__- __. The Certificates will be issued
pursuant to the Trust
S-8
<PAGE>
Agreement and will represent the beneficial
ownership interest in the Issuer. The Certificates
are not offered hereby. Interest on the
Certificates will be paid monthly on each Payment
Date, at a rate equal to LIBOR plus ___%.
Final Payment of Principal on
the Bonds...................The Bonds will be payable in full on . In addition,
the -------- Issuer will pay the Bonds in full upon
the exercise by the [Master Servicer] of its option
to purchase all Mortgage Loans and all property
acquired in respect of such Mortgage Loans. See
"The Agreements-- Termination; Redemption of Bonds"
in the Prospectus.
Certain Federal Income Tax
Consequences................In the opinion of Tax Counsel (as defined in the
Prospectus), for federal income tax purposes, the
Bonds will be characterized as indebtedness of the
Issuer and the Issuer, as created pursuant to the
terms and conditions of the Trust Agreement, will
not be characterized as an association (or publicly
traded partnership) taxable as a corporation or as
a taxable mortgage pool within the meaning of
section 7701(i) of the Code.
For further information regarding certain federal
income tax consequences of an investment in the
Bonds see "Certain Federal Income Tax Consequences"
herein and "Certain Federal Income Tax
Consequences" and "State and Other Tax
Consequences" in the Prospectus.
Legal Investment.............So long as the Bonds are rated in the top two
rating agencies, the Bonds will constitute
"mortgage related securities" for purposes of
SMMEA. See "Legal Investment Considerations"
herein.
Rating.......................It is a condition to the issuance of the Bonds that
they be rated "____" by and "____" by (each a
"Rating Agency"). A security rating is not a
recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any
time by the assigning rating organization. A
security rating does not address the frequency of
prepayments of Mortgage Loans, or the corresponding
effect on yield to investors. See "Certain Yield
and Prepayment Considerations" and "Ratings"
herein.
S-9
<PAGE>
[RISK FACTORS]
[Prospective Certificateholders should consider, among other things,
the items discussed under "Risk Factors" in the Prospectus and the following
factors in connection with the purchase of the Certificates:]
[Appropriate Risk Factors as necessary.]
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of Mortgage Loans with an aggregate
principal balance outstanding as of the Cut-off Date of $____________. The
Mortgage Loans will consist of conventional, adjustable-rate, fully-amortizing,
first lien Mortgage Loans with terms to maturity of not more than ___ years from
the due date of the first monthly payment. On or before the Delivery Date, the
Company will acquire the Mortgage Loans to be included in the Mortgage Pool from
_______________ and ________________ (the "Sellers"). The Sellers will make
certain representations and warranties with respect to the Mortgage Loans and,
as more particularly described in the Prospectus, will have certain repurchase
or substitution obligations in connection with a breach of any such
representation and warranty, as well as in connection with an omission or defect
in respect of certain constituent documents required to be delivered with
respect to the Mortgage Loans, in any event if such breach, omission or defect
cannot be cured and it materially and adversely affects the interests of
Bondholders. Neither the Company nor any other entity or person will have any
responsibility to purchase or replace any Mortgage Loan if a Seller is obligated
but fails to do so. See "Description of the Mortgage Pool--Representations by
Sellers" and "Description of the Bonds--Assignment of Trust Fund Assets" in the
Prospectus and "--The Seller" below. The Mortgage Loans will have been
originated or acquired by the [Sellers] in accordance with the underwriting
criteria described herein. See "--Underwriting" below. All percentages of the
Mortgage Loans described herein are approximate percentages (except as otherwise
indicated) by aggregate principal balance as of the Cut-off Date.
The Mortgage Rate on each Mortgage Loan will adjust semi-annually on a
date specified in the related Mortgage Note (the "Adjustment Date"). For
approximately ____% of the Mortgage Loans, by aggregate principal balance as of
the Cut-off Date, the first Adjustment Date occurred prior to the Cut-off Date.
On each Adjustment Date, the Mortgage Rate on a Mortgage Loan will be
adjusted to equal the sum (rounded to either the nearest or next highest
multiple of _____%) of (a) a rate per annum equal to the monthly weighted
average cost of funds for members of the Federal Home Loan Bank of San Francisco
(the "FHLB of San Francisco") as published by the FHLB of San Francisco (the
"Cost of Funds Index" or "Index") and as most recently available as of the day
45 days prior to such Adjustment Date or, in the event that such Index is no
longer available, an index selected by the Master Servicer and reasonably
acceptable to the Trustee that
S-10
<PAGE>
is based on comparable information, and (b) the related Note Margin, subject to
the following limitations. The Mortgage Rate on the Mortgage Loan on any
Adjustment Date may not increase or decrease by more than the Periodic Rate Cap
applicable to such Mortgage Loan and, over the life of such Mortgage Loan,
generally may not exceed the Mortgage Rate at origination plus the Lifetime Rate
Cap, or be less than the Mortgage Rate at origination minus any Lifetime Rate
Floor, applicable to such Mortgage Loan. No Mortgage Loan provides for payment
caps on any Adjustment Date which would result in deferred interest or negative
amortization. Effective with the first payment due date on a Mortgage Loan after
an Adjustment Date therefor, the monthly principal and interest payment will be
adjusted to an amount that will fully amortize the then outstanding principal
balance of such Mortgage Loan at its stated maturity and pay interest at the
adjusted Mortgage Rate. Because the amortization schedule of each Mortgage Loan
will be recalculated semi-annually, any partial prepayments thereof will not
reduce the term to maturity of such Mortgage Loan. An increase in the Mortgage
Rate on a Mortgage Loan will result in a larger monthly payment and in a larger
percentage of such monthly payment being allocated to interest and a smaller
percentage being allocated to principal, and conversely, a decrease in the
Mortgage Rate on the Mortgage Loan will result in a lower monthly payment and in
a larger percentage of each monthly payment being allocated to principal and a
smaller percentage being allocated to interest.
The Cost of Funds Index reflects the monthly weighted average cost of
funds of savings and loan associations and savings banks, the home offices of
which are located in Arizona, California and Nevada, that are member
institutions of the FHLB of San Francisco, as computed from statistics tabulated
and published by the FHLB of San Francisco. The FHLB of San Francisco normally
announces the Cost of Funds Index on or near the last working day of the month
following the month in which the cost of funds was incurred. The Index is
available through a variety of sources, including, without limitation, Telerate,
The Wall Street Journal and USA Today.
Listed below are the historical values of the Cost of Funds Index since
1988. Such values may fluctuate significantly over time and may not increase or
decrease in a constant pattern from period to period. The following does not
purport to be representative of future values of the Index. No assurance can be
given as to the Index value to be applied on any future Adjustment Date.
COST OF FUNDS INDEX
Month 1990 1991 1992 1993 1994 1995
===== ===== ===== ====== ====== ====== =====
January..........
February.........
March............
April............
May..............
June.............
July.............
August...........
September........
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<PAGE>
October..........
November.........
December.........
The initial Mortgage Rate in effect on a Mortgage Loan generally will
be lower than the sum of the Index that would have been applicable at
origination and the Note Margin. Absent a decline in the Index subsequent to
origination of a Mortgage Loan, the related Mortgage Rate will generally
increase on the first Adjustment Date following origination of such Mortgage
Loan. The repayment of such Mortgage Loans will be dependent on the ability of
the Mortgagor to make larger Monthly Payments following adjustments of the
Mortgage Rate. Moreover, because the maximum Mortgage Rate on any Mortgage Loan
is determined by adding the Lifetime Rate Cap to the Mortgage Rate at
origination, irrespective of the Index that would have been applicable at
origination, the maximum Mortgage Rate on a Mortgage Loan will generally be less
than the sum of the Index and the Note Margin that would have been applicable at
origination plus the Lifetime Rate Cap. Mortgage Loans that have the same
initial Mortgage Rate may not always bear interest at the same Mortgage Rate
because the Mortgage Loans may have different Adjustment Dates (and the Mortgage
Rate therefore may reflect different Index values), different Note Margins,
different Lifetime Rate Caps and different Lifetime Rate Floors, if any.
The Mortgage Loans will have approximately the following
characteristics as of the Cutoff Date:
Number of Mortgage Loans.........................
Mortgage Rates:
Weighted Average.............................
Range........................................
Range of Net Mortgage Rates.......................
Note Margins:
Weighted Average.............................
Range........................................
Maximum Mortgage Rates:
Weighted Average.............................
Range........................................
Maximum Net Mortgage Rates (1):
Weighted Average.............................
Range........................................
Weighted Average Months to Next Adjustment Date after ____________, 19__ (2)....
=======
(1) The difference between the maximum Net Mortgage Rate and the Net
Mortgage Rate as of the Cut-off Date may be less than the Lifetime Rate
Cap.
(2) The Weighted Average Months to the next Adjustment Date is equal to the
weighted average of the number of months until the Adjustment Date next
following _____________, 19__.
S-12
<PAGE>
The Mortgage Loans in the Mortgage Pool will have the following
characteristics as of the Cut-off Date (expressed as a percentage of the
aggregate principal balance of the Mortgage Loans having such characteristics
relative to the aggregate principal balance of all Mortgage Loans in the
Mortgage Pool):
The Mortgage Loans will have had individual principal balances
at origination of at least $__________ but not more than $__________.
None of the Mortgage Loans in the Mortgage Pool will have been
originated prior to _____________, 19__ or will have a scheduled
maturity later than ____________, ____. No Mortgage Loan in the
Mortgage Pool will have an unexpired term to stated maturity as of the
Cut-off Date of less than __ years and __ months. The weighted average
remaining term to stated maturity of the Mortgage Loans in the Mortgage
Pool as of the Cut-off Date will be approximately ____ years and __
months. The weighted average Adjustment Date of the Mortgage Loans in
the Mortgage Pool next following the Cut-off Date is ____________,
19__.
Approximately _____% of the Mortgage Loans will have
Loan-to-Value Ratios at origination exceeding 80% but less than or
equal to 90%, and approximately ____% of the Mortgage Loans will have
Loan-to-Value Ratios exceeding 90%. The weighted average Loan-to-Value
Ratio at origination, as of the Cut-off Date, is approximately
-----%.
At least _____% of such Mortgage Loans will be secured by fee
simple interests in detached one- to four-family dwelling units with
the remaining units being secured by fee simple interests in attached
planned unit developments, condominiums or townhouses.
Approximately _____% of the Mortgage Loans in the Mortgage
Pool will be secured by Mortgaged Properties located in California.
No more than _____% of the Mortgage Loans in the Mortgage Pool
will be secured by Mortgaged Properties located in any one zip code
area in California, and no more than ____% will be secured by Mortgaged
Properties located in any one zip code area outside California.
No more than _____% of the Mortgage Loans were equity
refinance mortgage loans made to mortgagors who used less than the
entire amount of the proceeds to refinance an existing mortgage loan.
The weighted average Loan-to-Value Ratio at origination of such
Mortgage Loans, as of the Cut-off Date, is approximately ______%.
Approximately ____% of the Mortgage Loans were made to Mortgagors who
used the entire proceeds to refinance an existing Mortgage Loan.
No Mortgage Loan provides for deferred interest or negative
amortization.
Approximately ____% of the Mortgage Loans in the Mortgage Pool
will have been underwritten under a reduced loan documentation program.
The weighted average
S-13
<PAGE>
Loan-to-Value Ratio at origination of the Mortgage Loans in the
Mortgage Pool which were underwritten under such reduced loan
documentation program will be approximately ____% and no more than
approximately ____% of such Mortgage Loans will be secured by Mortgaged
Properties located in California. See "Servicing Agreement--The Master
Servicer" herein.
No more than ____% of the Mortgage Loans will be secured by
vacation or second homes. No more than ____% of the Mortgage Loans will
be secured by one- to four-story condominium units. No Mortgage Loans
will be secured by condominium units in buildings of five or more
stories.
None of the Mortgage Loans in the Mortgage Pool will be
Buydown Mortgage Loans.
The following table sets forth the number and aggregate principal
balance as of the Cut-off Date of Mortgage Loans having their next Adjustment
Dates in the month described therein. The table also indicates the approximate
percentage of Mortgage Loans in the Mortgage Pool with an Adjustment Date in
each such month.
S-14
<PAGE>
MONTH OF NUMBER OF AGGREGATE PERCENTAGE OF
ADJUSTMENT DATE MORTGAGE LOANS PRINCIPAL BALANCE MORTGAGE POOL
- --------------- -------------- ----------------- -------------
Total...........
The following table sets forth the number and aggregate principal
balance of Mortgage Loans having unpaid principal balances in the ranges
described therein as of the Cut-off Date. The table also indicates the
approximate weighted average Mortgage Rate and the approximate weighted average
Loan-to-Value Ratio at origination of the Mortgage Loans in each given range, as
of the Cut-off Date.
WEIGHTED
AVERAGE
NUMBER WEIGHTED ORIGINAL
OF AGGREGATE AVERAGE LOAN-TO-
MORTGAGE PRINCIPAL MORTGAGE VALUE
PRINCIPAL BALANCE LOANS BALANCE RATE RATIO
- ----------------- -------- --------- -------- --------
Total, Average or
Weighted Average.......... _______ $____________ ________% _______%
[Specific information with respect to the Mortgage Loans will be
available to purchasers of the Bonds on or before the time of issuance of such
Bonds. If not included in the Prospectus Supplement, such information will be
included in the Form 8-K.]
UNDERWRITING
[Underwriting standards as appropriate.]
DELINQUENCY AND FORECLOSURE EXPERIENCE
Based solely upon information provided by the Master Servicer, the
following tables summarize, for the respective dates indicated, the delinquency,
forbearance, foreclosure, bankruptcy and REO property status with respect to all
mortgage loans originated or acquired
S-15
<PAGE>
by the Sellers that were originated as of the date three months prior to the
date indicated. The indicated periods of delinquency are based on the number of
days past due on a contractual basis. The monthly payments under all of such
mortgage loans are due on the first day of each calendar month.
S-16
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995 AT DECEMBER 31, 1994
-------------------- --------------------
NUMBER PRINCIPAL NUMBER PRINCIPAL
OF LOANS AMOUNT OF LOANS AMOUNT
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total Loans Outstanding.......................... $ $
DELINQUENCY(1)
Period of Delinquency:
31-60 Days.............................. $ $
61-90 Days..............................
91-120 Days or More.....................
Total Delinquencies........................... $ $
=== = ===== == =
Delinquencies as a Percentage of
Total Loans Outstanding.......................... % % % %
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995 AT DECEMBER 31, 1994
-------------------- --------------------
NUMBER PRINCIPAL NUMBER PRINCIPAL
OF LOANS AMOUNT OF LOANS AMOUNT
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
FORBEARANCE LOANS(2)................. $ $
Forbearance Loans as a
Percentage of Total Loans
Outstanding.......................... % %
FORECLOSURES PENDING(3).............. $ $
Foreclosures Pending as a
Percentage of Total Loans
Outstanding.......................... % % % %
BANKRUPTCIES PENDING(4).............. $ $
Bankruptcies Pending as a
Percentage of Total Loans
Outstanding.......................... % % % %
Total Delinquencies plus
Forbearance Loans, Foreclosures
Pending and Bankruptcies
Pending.............................. $ $
Total Delinquencies plus
Forbearance Loans, Foreclosures
Pending and Bankruptcies Pending
as a Percentage of Total Loans
Outstanding.......................... % % % %
REO PROPERTIES(5).................... $ $
REO Properties as a
Percentage of Total Loans
Outstanding.......................... % % % %
</TABLE>
S-17
<PAGE>
(1) The delinquency balances, percentages and numbers set forth under this
heading exclude (a) delinquent mortgage loans that were subject to
forbearance agreements with the related mortgagors at the respective
dates indicated ("Forbearance Loans"), (b) delinquent mortgage loans
that were in foreclosure at the respective dates indicated
("Foreclosure Loans"), (c) delinquent mortgage loans as to which the
related mortgagor was in bankruptcy proceedings at the respective dates
indicated ("Bankruptcy Loans") and (d) REO properties that have been
purchased upon foreclosure of the related mortgage loans. All
Forbearance Loans, Foreclosure Loans, Bankruptcy Loans and REO
properties have been segregated into the sections of the table entitled
"Forbearance Loans," "Foreclosures Pending," "Bankruptcies Pending" and
"REO Properties," respectively, and are not included in the "31-60
Days," "61-90 Days," "91-120 Days or More" and "Total Delinquencies"
sections of the table. See the section of the table entitled "Total
Delinquencies plus Forbearance Loans, Foreclosures Pending and
Bankruptcies Pending" for total delinquency balances, percentages and
numbers which include Forbearance Loans, Foreclosure Loans and
Bankruptcy Loans, and see the section of the table entitled "REO
Properties" for delinquency balances, percentages and numbers related
to REO properties that have been purchased upon foreclosure of the
related mortgage loans.
(2) For each of the Forbearance Loans, the Master Servicer has entered into
a written forbearance agreement with the related mortgagor, based on
the Master Servicer's determination that the mortgagor is temporarily
unable to make the scheduled monthly payment on such mortgage loan.
Prior to entering into each forbearance agreement, the Master Servicer
confirmed the continued employment status of the mortgagor and found
the payment history of such mortgagor to be satisfactory. There can be
no assurance that the mortgagor will be able to make the payments as
required by the forbearance agreement, and any failure to make such
payments will constitute a delinquency. None of the Mortgage Loans
included in the Mortgage Pool are Forbearance Loans.
(3) Mortgage loans that are in foreclosure but as to which the mortgaged
property has not been liquidated at the respective dates indicated. It
is generally the Master Servicer's policy, with respect to mortgage
loans originated by the Seller, to commence foreclosure proceedings
when a mortgage loan is between 31 and 60 days delinquent.
(4) Mortgage loans as to which the related mortgagor is in bankruptcy
proceedings at the respective dates indicated.
(5) REO properties that have been purchased upon foreclosure of the related
mortgage loans, including mortgaged properties that were purchased by
the Seller after the respective dates indicated.
The above data on delinquency, forbearance, foreclosure, bankruptcy and
REO property status are calculated on the basis of the total mortgage loans
originated or acquired by the Seller's that were originated as of the date three
months prior to the date indicated. However, the total amount of mortgage loans
on which the above data are based includes many mortgage loans which were not,
as of the respective dates indicated, outstanding long enough to give rise to
some of the indicated periods of delinquency or to foreclosure or bankruptcy
proceedings or REO property status. In the absence of such mortgage loans, the
delinquency, forbearance, foreclosure, bankruptcy and REO property percentages
indicated above would be higher and could be substantially higher. Because the
Mortgage Pool will consist of a fixed group of Mortgage Loans, the actual
delinquency, forbearance, foreclosure, bankruptcy and REO property
S-18
<PAGE>
percentages with respect to the Mortgage Pool may therefore be expected to be
higher, and may be substantially higher, than the percentages indicated above.
The information set forth in the preceding paragraphs concerning ____
and _____ has been provided by [Names of Sellers].
ADDITIONAL INFORMATION
The description in this Prospectus Supplement of the Mortgage Pool and
the Mortgaged Properties is based upon the Mortgage Pool as constituted at the
close of business on the Cut-off Date, as adjusted for the scheduled principal
payments due on or before such date. Prior to the issuance of the Bonds,
Mortgage Loans may be removed from the Mortgage Pool as a result of incomplete
documentation or otherwise, if the Company deems such removal necessary or
appropriate. A limited number of other mortgage loans may be added to the
Mortgage Pool prior to the issuance of the Bonds. The Company believes that the
information set forth herein will be substantially representative of the
characteristics of the Mortgage Pool as it will be constituted at the time the
Bonds are issued although the range of Mortgage Rates and maturities and certain
other characteristics of the Mortgage Loans in the Mortgage Pool may vary.
A Current Report on Form 8-K will be available to purchasers of the
Bonds and will be filed, together with the Servicing Agreement, the Trust
Agreement and the Indenture, with the Securities and Exchange Commission within
fifteen days after the initial issuance of the Bonds. In the event Mortgage
Loans are removed from or added to the Mortgage Pool as set forth in the
preceding paragraph, such removal or addition will be noted in the Current
Report on Form 8-K.
See "The Mortgage Pools" and "Certain Legal Aspects of Mortgage Loans"
in the Prospectus.
THE ISSUER
GENERAL
The Imperial CMB Trust 19_-_, is a business trust formed under the laws
of the State of [Delaware] pursuant to the Trust Agreement dated as of _____ 1,
19__ between the Company and ________________, as the Owner Trustee for the
transactions described in this Prospectus Supplement. The Trust Agreement
constitutes the "governing instrument" under the laws of the State of [Delaware]
relating to business trusts. After its formation, the Issuer will not engage in
any activity other than (i) acquiring and holding the Mortgage Loans and the
other assets of the Issuer and proceeds therefrom, (ii) issuing the Bonds and
the Certificates, (iii) making payments on the Bonds and the Certificates and
(iv) engaging in other activities that are necessary, suitable or convenient to
accomplish the foregoing or are incidental thereto or connected therewith.
The assets of the Issuer will consist of the Mortgage Loans and certain
related assets.
S-19
<PAGE>
The Issuer's principal offices are in ___________, Delaware, in care of
________________, as Owner Trustee, at the address listed below.
THE OWNER TRUSTEE
_______________ is the Owner Trustee under the Trust Agreement.
__________________ is a [Delaware] banking corporation and its principal offices
are located at ____________________.
Neither the Owner Trustee nor any director, officer or employee of the
Owner Trustee will be under any liability to the Issuer or the Securityholders
for any action taken or for refraining from the taking of any action in good
faith pursuant to the Trust Agreement or for errors in judgment; provided,
however, that none of the Owner Trustee and any director, officer or employee
thereof will be protected against any liability which would otherwise be imposed
by reason of willful malfeasance, bad faith or negligence in the performance of
duties or by reason of reckless disregard of obligations and duties under the
Trust Agreement. All persons into which the Owner Trustee may be merged or with
which it may be consolidated or any person resulting from such merger or
consolidation shall be the successor of the Owner Trustee under the Trust
Agreement.
THE INSURER
[Insert Description of Insurer as Appropriate.]
DESCRIPTION OF THE SECURITIES
GENERAL
The Bonds will be issued pursuant to the Indenture dated as of
________, between the Issuer and _________, as Indenture Trustee. The
Certificates will be issued pursuant to the Trust Agreement dated as of
____________, between the Company and _____________, as Owner Trustee. The
following summaries describe certain provisions of the Securities, the Indenture
and the Trust Agreement. The summaries do not purport to be complete and are
subject to, and qualified in their entirety by reference to, the provisions of
the applicable agreement. Only the Bonds are offered hereby.
The Bonds will be secured by the Trust Fund pledged by the Issuer to
the Indenture Trustee pursuant to the Indenture which will consist of: (i) the
Mortgage Loans; (ii) collections in respect of principal of the Mortgage Loans
received after the applicable Cut-Off Date and collections in respect of
interest on the Mortgage Loans from the Cut-Off Date relating to the Mortgage
Loan; (iii) the amounts on deposit in the Custodial Account allocated to the
Mortgage Loans, the Funding Account and the Payment Account (excluding net
earnings thereon, except with respect to the Funding Account); (iv) the Policy;
(v) certain hazard insurance policies maintained by the Mortgagors or by or on
behalf of the Master Servicer or related subservicer in respect of the Mortgage
Loans and (vi) an assignment of the Company's rights under the Purchase
Agreement and the Servicing Agreement.
S-20
<PAGE>
The Bonds will be issued in denominations of $1,000 and integral
multiples in excess thereof. See "--Book-Entry Securities" below.
BOOK-ENTRY SECURITIES
General. Beneficial Owners that are not Participants or Intermediaries
(as defined in the Prospectus) but desire to purchase, sell or otherwise
transfer ownership of, or other interests in, the related Book-Entry Securities
may do so only through Participants and Intermediaries. In addition, Beneficial
Owners will receive all payments of principal of and interest on the related
Book-Entry Securities from the Paying Agent (as defined in the Prospectus)
through DTC and Participants. Accordingly, Beneficial Owners may experience
delays in their receipt of payments. Unless and until Definitive Securities are
issued for the related Book-Entry Securities, it is anticipated that the only
registered Bondholder of such Book-Entry Securities will be Cede, as nominee of
DTC. Beneficial Owners will not be recognized by the Indenture Trustee or the
Master Servicer as Bondholders, as such term is used in the Indenture, and
Beneficial Owners will be permitted to receive information furnished to
Bondholders and to exercise the rights of Bondholders only indirectly through
DTC, its Participants and Intermediaries.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
of Book-Entry Securities among Participants and to receive and transmit payments
of principal of, and interest on, such BookEntry Securities. Participants and
Intermediaries with which Beneficial Owners have accounts with respect to such
Book-Entry Securities similarly are required to make book-entry transfers and
receive and transmit such payments on behalf of their respective Beneficial
Owners. Accordingly, although Beneficial Owners will not possess physical
certificates evidencing their interests in the Book-Entry Securities, the Rules
provide a mechanism by which Beneficial Owners, through their Participants and
Intermediaries, will receive payments and will be able to transfer their
interests in the Book-Entry Securities.
None of the Company, the Master Servicer, the Insurer or the Indenture
Trustee will have any liability for any actions taken by DTC or its nominee,
including, without limitation, actions for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the Book-Entry
Securities held by Cede, as nominee for DTC, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Definitive Securities. Definitive Securities will be issued to
Beneficial Owners or their nominees, respectively, rather than to DTC or its
nominee, only under the limited conditions set forth in the Prospectus under
"Description of the Securities--Form of Securities."
Upon the occurrence of an event described in the Prospectus in the
third paragraph under "Description of the Securities--Form of Securities," the
Indenture Trustee is required to notify, through DTC, Participants who have
ownership of Book-Entry Securities as indicated on the records of DTC of the
availability of Definitive Securities for their Book-Entry Securities. Upon
surrender by DTC of the definitive certificates representing the Book-Entry
Securities and upon receipt of instructions from DTC for re-registration, the
Indenture Trustee will reissue the BookEntry Securities as Definitive Securities
issued in the respective principal amounts owned by
S-21
<PAGE>
individual Beneficial Owners, and thereafter the Indenture Trustee will
recognize the holders of such Definitive Securities as Bondholders under the
Indenture.
For additional information regarding DTC and the Book-Entry Securities,
see "Description of the Bonds--Form of Bonds" in the Prospectus.]
PAYMENTS
Payments on the Bonds will be made by the Indenture Trustee or the
Paying Agent on the _____ day of each month or, if such day is not a Business
Day, then the next succeeding Business Day, commencing in __________. Payments
on the Bonds will be made to the persons in whose names such Bonds are
registered at the close of business on the day prior to each Payment Date or, if
the Bonds are no longer Book-Entry Securities, on the Record Date. See
"Description of the Bonds--Payments" in the Prospectus. Payments will be made by
check or money order mailed (or upon the request of a Holder owning Bonds having
denominations aggregating at least $_________, by wire transfer or otherwise) to
the address of the person entitled thereto (which, in the case of Book-Entry
Securities, will be DTC or its nominee) as it appears on the Security Register
in amounts calculated as described herein on the Determination Date. However,
the final payment in respect of the Bonds will be made only upon presentation
and surrender thereof at the office or the agency of the Indenture Trustee
specified in the notice to Holders of such final payment. A "Business Day" is
any day other than (i) a Saturday or Sunday or (ii) a day on which banking
institutions in the State of ___________ are required or authorized by law to be
closed.
INTEREST ON THE BONDS
Interest payments will be made on the Bonds and the Certificates on
each Payment Date at the Bond Rate and Certificate Rate, respectively, for the
related Interest Period. The "Bond Rate" for an Interest Period will generally
equal the sum of [(a) LIBOR determined as specified herein, as of the second
LIBOR Business Day prior to the first day of such Interest Period (or as of two
LIBOR Business Days prior to the Closing Date, in the case of the first Interest
Period)] plus (b) ___% per annum. The "Certificate Rate" for an Interest Period
will generally equal the sum of [(a) LIBOR, determined as specified herein, as
of the second LIBOR Business Day prior to the first day of such Interest Period
(or as of two LIBOR Business Days prior to the Closing Date, in the case of the
first Interest Period)] plus (b) the percentage specified in the Trust
Agreement. Notwithstanding the foregoing, in no event will the Bond Rate or
Certificate Rate in respect of the Securities on any Payment Date exceed a rate
equal to the weighted average of the Loan Rates (net of the applicable Servicing
Fee Rate) (adjusted to an effective rate reflecting accrued interest calculated
on the basis of the actual number of days in the Collection Period commencing in
the month in which such Interest Period commences and a year assumed to consist
of 360 days).
Interest on the Securities in respect of any Payment Date will accrue
on the applicable Security Balance from the preceding Payment Date (or in the
case of the first Payment Date, from the Closing Date) through the day preceding
such Payment Date (each such period, an "Interest Period") on the basis of the
actual number of days in the Interest Period and a 360-day
S-22
<PAGE>
year. Interest payments on the Securities will be funded from P&I Collections
[and with respect to the Bonds, if necessary, from draws on the Policy.
[On each Payment Date, LIBOR shall be established by the Indenture
Trustee and as to any Interest Period, LIBOR will equal the rate for United
States dollar deposits for one month which appears on the Telerate Screen Page
3750 as of 11:00 A.M., London time, on the second LIBOR Business Day prior to
the first day of such Interest Period. "Telerate Screen Page 3750" means the
display designated as page 3750 on the Telerate Service (or such other page as
may replace page 3750 on that service for the purpose of displaying London
interbank offered rates of major banks). If such rate does not appear on such
page (or such other page as may replace that page on that service, or if such
service is no longer offered, such other service for displaying LIBOR or
comparable rates as may be selected by the Indenture Trustee after consultation
with the Master Servicer), the rate will be the Reference Bank Rate. The
"Reference Bank Rate" will be determined on the basis of the rates at which
deposits in U.S. Dollars are offered by the reference banks (which shall be
three major banks that are engaged in transactions in the London interbank
market, selected by _________) as of 11:00 A.M., London time, on the day that is
two LIBOR Business Days prior to the immediately preceding Payment Date to prime
banks in the London interbank market for a period of one month in amounts
approximately equal to the Aggregate Security Balance then outstanding. The
Indenture Trustee will request the principal London office of each of the
reference banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate will be the arithmetic mean of the quotations.
If on such date fewer than two quotations are provided as requested, the rate
will be the arithmetic mean of the rates quoted by one or more major banks in
New York City, selected by the Indenture Trustee after consultation with the
Master Servicer, as of 11:00 A.M., New York City time, on such date for loans in
U.S. Dollars to leading European banks for a period of one month in amounts
approximately equal to the Aggregate Security Balance then outstanding. If no
such quotations can be obtained, the rate will be LIBOR for the prior Payment
Date. "LIBOR Business Day" means any day other than (i) a Saturday or a Sunday
or (ii) a day on which banking institutions in the State of [New York] or in the
city of London, England are required or authorized by law to be closed.]
PRINCIPAL PAYMENTS ON THE BONDS
During the Funding Period, no principal payments will be due and
payable on the Bonds and distributable on the Certificates except in respect of
any Liquidation Loss Amounts. On each Payment Date after the Funding Period,
other than the Payment Date in _________, principal payments except as provided
below will be due and payable on the Bonds and distributable on the Certificates
in an amount equal to the applicable Security Percentage of the Principal
Collection Distribution Amount (as defined below) for such Payment Date, and in
the aggregate equal to such Principal Collection Distribution Amount, together
with any Liquidation Loss Amounts. On the Payment Date in ______, principal will
be due and payable on the Bonds and distributable on the Certificates in amounts
equal to the Security Balance for each such Security on such Payment Date. In no
event will principal payments on the Bonds or principal distributions on the
Certificates on any Payment Date exceed the Security Balance thereof on such
date.
S-23
<PAGE>
ALLOCATION OF P&I COLLECTIONS
The Master Servicer on behalf of the Issuer will establish an account
(the "Distribution Account") into which the Master Servicer will deposit P&I
Collections for each Payment Date on the Business Day prior thereto. The
Distribution Account will be an Eligible Account. Amounts on deposit in the
Distribution Account will be invested in Eligible Investments maturing on or
before the Business Day prior to the related Payment Date.
On each Payment Date, P&I Collections will be allocated from the
Distribution Account in the following order of priority:
(i) if such Payment Date is during the Funding Period, an amount
equal to the Principal Collections for such Payment Date shall
be deposited in the Funding Account;
(ii) to the Bonds, the sum of the following:
(a) as payment for the accrued interest due and any overdue
accrued interest at the Bond Rate (as defined herein) on the Security
Balance (as defined herein) of the Bonds;
(b) if such Payment Date is after the Funding Period, an
amount equal to the Principal Collection Distribution Amount, applied
to reduce the Security Balance of the Bonds;
(c) an amount equal to 100% of the Liquidation Loss Amounts,
together with any such Liquidation Loss Amounts remaining undistributed
from any preceding month; provided, that any Liquidation Loss Amount
shall not be required to be paid to the extent that the Liquidation
Loss Amount was reflected in the reduction of the Outstanding Reserve
Amount; and
(d) an additional amount to be applied to reduce the Security
Balance (each such amount, a "Additional Principal Distribution
Amount"), to the extent necessary to bring the Outstanding Reserve
Amount up to the Reserve Amount Target; and
(iii) the remaining amount, if any, of the P&I Collections shall be
allocated to the Certificates.
For any Payment Date, the "Principal Collection Distribution Amount"
will equal (i) Principal Collections for such Payment Date.
"Liquidation Loss Amount" means with respect to any Liquidated Mortgage
Loan, the unrecovered Principal Balance thereof at the end of the related
Collection Period in which such Mortgage Loan became a Liquidated Mortgage Loan,
after giving effect to the Net Liquidation Proceeds allocable to such Principal
Balance in connection therewith.
S-24
<PAGE>
A "Liquidated Mortgage Loan" means, as to any Payment Date, any
Mortgage Loan in respect of which the Master Servicer has determined, based on
the servicing procedures specified in the Servicing Agreement, as of the end of
the preceding Collection Period that all liquidation proceeds which it expects
to recover with respect to the disposition of the related Mortgaged Property
have been recovered.
As of the Closing Date, the Reserve Amount Target is equal to at least
___% of the CutOff Date Pool Balance. The Reserve Amount Target may be increased
or reduced from time to time pursuant to the terms of the Operating Agreement,
with the consent of the Rating Agencies and the Indenture Trustee. To the extent
the Reserve Amount Target is reduced on any Payment Date, the amount of the
Principal Collections distributed pursuant to clause (ii)(b) will be reduced on
such Payment Date and on each subsequent Payment Date to the extent the
remaining Outstanding Reserve Amount is in excess of the reduced Reserve Amount
Target until the Outstanding Reserve Amount equals the Reserve Amount Target.
The Indenture Trustee will establish the Payment Account into which the
Master Servicer will deposit the portion of the P&I Collections allocable to the
Mortgage Loan for each Payment Date on the Business Day prior thereto. The
Payment Account will be an Eligible Account. Amounts on deposit in the Payment
Account will be invested in Eligible Investments maturing on or before the
Business Day prior to the related Payment Date.
On each Payment Date, amounts in the Payment Account, will be allocated
to the Securities in the following order of priority:
(i) as payment for the accrued interest due and any overdue accrued
interest on the applicable Security Balance of the Bonds and the Certificates;
(ii) as principal on the Bonds and the Certificates, pro rata, based on
the outstanding Security Balances, if such Payment Date is after the Funding
Period, an amount equal to the Principal Collection Distribution Amount for such
Payment Date;
(iii) as principal on the Bonds and the Certificates, pro rata, based on
the outstanding Security Balances, up to the applicable Security Percentage of
Liquidation Loss Amounts for the related Collection Period, together with the
applicable Security Percentage of Carryover Liquidation Loss Amounts which are
Liquidation Loss Amounts for all previous Collection Periods with respect to
which payments of principal have not previously been made on the Bonds and the
Certificates Outstanding Reserve;
(iv) as payment for the premium for the Policy;
(v) to reimburse prior draws made on the Policy (with interest
thereon);
(vi) as principal on the Bonds and the Certificates, pro rata, based on
the outstanding Security Balances thereof, up to the Additional Principal
Distribution Amount for such Payment Date;
S-25
<PAGE>
(vii) any other amounts owed to the Insurer pursuant to the Insurance
Agreement; and
(viii) any remaining amounts to the Designated Certificates.
The "Security Balance" of any Security on any day is, with respect to
the Bonds and the Certificates, the respective initial balance thereof as of the
Closing Date, in each case reduced by all payments of principal thereon as of
such day. With respect to any Payment Date and Security, the "Security
Percentage" is the percentage equivalent of a fraction the numerator of which
the Security Balance of such Security immediately prior to such Payment Date and
the denominator of which is the aggregate of the Security Balances of all
Securities (the "Aggregate Security Balance") immediately prior to such date.
Except as provided below, payments pursuant to clause (i) will be
allocated to the Bonds and the Certificates pro rata based on the amount of
interest each such Security is entitled to receive pursuant to such clause.
Except as provided below, payments pursuant to clauses (ii), (iii) and (vi) will
constitute payments of principal and will be allocated among the Bonds and
Certificates pro rata based on the outstanding Security Balances.
For any Payment Date as to which a Insurer Default has occurred and is
continuing the priorities of distribution described above will be adjusted such
that amounts to be distributed on the Certificates in respect of interest and
principal will be subordinated to the payment of interest and principal on the
Bonds. A "Insurer Default" shall have occurred if the Insurer fails to make a
payment required under the Policy in accordance with its terms.
An "Amortization Event" will be deemed to occur upon (i) the occurrence
of certain events relating to a violation of the Seller's obligations under the
Mortgage Loan Purchase Agreement, (ii) the occurrence of certain events of
bankruptcy, insolvency or receivership relating to the Seller or the Master
Servicer, (iii) the Issuer becomes subject to regulation as an investment
company within the meaning of the Investment Company Act of 1940, as amended, or
(iv) the aggregate of all draws under the Policy exceeds __________;
Notwithstanding the foregoing, if a conservator, receiver or
trustee-in-bankruptcy is appointed for the Seller, the conservator, receiver or
trustee-in-bankruptcy may have the power to prevent the commencement of the
Amortization Period.
OUTSTANDING RESERVE AMOUNT
The distribution of the Additional Principal Distribution Amount, if
any, to the Securities, will create the Outstanding Reserve Amount. The
Outstanding Reserve Amount, if any, will be available to absorb any Liquidation
Loss Amounts that are allocated to the Mortgage Loans and not covered by
Principal Collections and Interest Collections. Any Liquidation Loss Amounts
allocable to the Securityholders and not covered by such overcollateralization
will be covered by draws on the Policy to the extent provided herein. The
"Outstanding Reserve Amount" on any Payment Date is the amount, if any, by which
the sum of the Pool Balance as of the end of the related Collection Period and
the amounts, if any, on deposit in the Funding Account in
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respect of Principal Collections on such Payment Date exceed the Aggregate
Security Balance on such day (after giving effect to all amounts payable and
allocable to principal on the Securities and deposits to and withdrawals from
the Funding Account that are applied to reduce the Security Balances on such
Payment Date).
To the extent that such overcollateralization is insufficient or not
available to absorb Liquidation Loss Amounts, payments are not made under the
Policy and the Security Balance of the Certificates is reduced to zero, a
Bondholder may incur a loss.
FUNDING ACCOUNT; FUNDING PERIOD
The Funding Account will be an Eligible Account (as defined herein)
established by the Master Servicer on behalf of the Issuer on the Closing Date.
On each Payment Date during the Funding Period, Principal Collections for such
Payment Date will be deposited in the Funding Account. During the Funding
Period, amounts on deposit in the Funding Account in respect of Principal
Collections will be used to purchase Subsequent Mortgage Loans. Any amount in
respect of Principal Collections remaining on deposit in the Funding Account on
the last Payment Date of the Funding Period (after giving effect to the purchase
of any Subsequent Mortgage Loans on such date) will be paid to the
Securityholders on such Payment Date, as principal, pro rata based on the
outstanding Security Balances immediately prior to such Payment Date. Except
with respect to such Principal Collections remaining on deposit in the Funding
Account on the last Payment Date of the Funding Period, Securityholders will not
receive any payments in respect of Principal Collections during the Funding
Period.
The Funding Period is the period commencing on the Closing Date and
ending on the earlier of (x) the Payment Date in ___________ and (y) the
occurrence of an Amortization Event.
THE PAYING AGENT
The Paying Agent shall initially be the [Indenture Trustee], together
with any successor thereto. The Paying Agent shall have the revocable power to
withdraw funds from the Payment Account for the purpose of making payments to
the Securityholders.
MATURITY
The Bonds will be payable in full on ___________. In addition, the
Issuer will pay the Bonds in full upon the exercise by the Master Servicer of
its option to purchase the assets of the Issuer after the Pool Balance is
reduced to an amount less than or equal to $________ (___% of the initial Pool
Balance). The purchase price will be equal to the sum of the outstanding Pool
Balance and accrued and unpaid interest thereon at the weighted average of the
Loan Rates through the day preceding the Payment Date on which the Bonds are
paid in full together with all amounts due and owing to the Insurer.
[OPTIONAL RETRANSFERS OF MORTGAGE LOANS TO THE SELLER
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Subject to the conditions specified in the Purchase Agreement and the
Operating Agreement, at any time after the end of the Revolving Period, the
Seller may, but shall not be obligated to, remove on the last Business Day of
any Collection Period from the Trust Fund, the entire Principal Balance of
certain Mortgage Loans without notice to the Securityholders for cash in an
amount equal to such Principal Balance (which will be included in Principal
Collections for the following Payment Dates) plus an accrued interest
adjustment. Mortgage Loans so designated will only be removed upon satisfaction
of certain conditions specified in the Operating Agreement, including: (i) no
Amortization Event has occurred; (ii) such removal may not reduce the
Outstanding Reserve Amount below the Reserve Amount Target; (iii) the Seller
shall have delivered to the Trustee a "Mortgage Loan Schedule" containing a list
of all Mortgage Loans remaining in the Trust Fund after such removal; (iv) the
Seller shall represent and warrant that no selection procedures reasonably
believed by the Seller to be adverse to the interests of the Securityholders or
the Insurer were used by the Seller in selecting such Mortgage Loans; (v) each
Rating Agency shall have been notified of the proposed retransfer and shall not
have notified the Seller that such retransfer would result in a reduction or
withdrawal of the ratings of the Securities without regard to the Policy; and
(vi) the Seller shall have delivered to the Trustee and the Insurer an officer's
certificate confirming the conditions set forth in clauses (i) through (v)
above.]
DESCRIPTION OF THE POLICY
On the Closing Date, the Insurer will issue the Policy in favor of the
[Owner Trustee on behalf of the Issuer]. The Policy will unconditionally and
irrevocably guarantee principal payments on the Bonds plus accrued and unpaid
interest due on the Bonds. On each Payment Date, a draw will be made on the
Policy equal to the sum of (a) the amount by which the sum of interest accrued
at (i) the Bond Rate on the outstanding Security Balance of the Bonds and (b)
the amount (the "Guaranteed Principal Payment Amount"), if any, [by which the
Aggregate Security Balance of the Bonds exceeds the sum of the Pool Balance at
the end of the related Collection Period and the amount, if any, on deposit in
the Funding Account in respect of Principal Collections on such date (after
giving effect to all amounts paid and allocable to principal on the Bonds and
deposits to and withdrawals from the Funding Account that are applied to reduce
the Security Balances on such Payment Date)]. Pursuant to the terms of [the
Indenture], draws under the Policy in respect of the Guaranteed Principal
Payment Amount will be paid on the Bonds by the Indenture Trustee, as principal
pro rata, based on the outstanding Security Balances thereof. In addition, the
Policy will guarantee the payment of the outstanding Security Balance of each
Bond on the Payment Date in _____________ (after giving effect to all other
amounts paid and allocable to principal on such Payment Date). In the absence of
payments under the Policy, Bondholders will directly bear the credit and other
risks associated with their investment to the extent such risks are not covered
by the Certificates. The Policy does not guarantee any payments to the
Certificates.
CERTAIN PREPAYMENT AND YIELD CONSIDERATIONS
The yield to maturity of the Bonds will depend on the price paid by the
holder for such Bond, the Loan Rate and the rate and timing of principal
payments (including payments in
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excess of required installments, prepayments or terminations, liquidations and
repurchases) on the Mortgage Loans and the allocation thereof.
In general, if a Bond is purchased at a premium over its face amount
and payments of principal on such Bond occur at a rate faster than anticipated
at the time of purchase, the purchaser's actual yield to maturity will be lower
than that assumed at the time of purchase. Conversely, if a Bond is purchased at
a discount from its face amount and payments of principal on such Bond occur at
a rate slower than that assumed at the time of purchase, the purchaser's actual
yield to maturity will be lower than that originally anticipated.
The rate and timing of defaults on the Mortgage Loans will also affect
the rate and timing of principal payments on the Mortgage Loans and thus the
yield on the Bonds. There can be no assurance as to the rate of losses or
delinquencies on any of the Mortgage Loans, however, such losses and
delinquencies may be expected to be higher than those of traditional first lien
mortgage loans. To the extent that any losses are incurred on any of the
Mortgage Loans that are not covered by [the Certificates or] the Policy, holders
of the Bonds will bear all risk of such losses resulting from default by
Mortgagors. See "Risk Factors--Limitations, Reduction and Substitution of Credit
Enhancement" in the Prospectus. Even where the Policy covers all losses incurred
on the Mortgage Loans, the effect of losses may be to increase prepayment
experience on the Mortgage Loans, thus reducing average weighted life and
affecting yield to maturity.
[With respect to ___ Mortgage Loans representing ___% of the Cut-off
Date Pool Balance, the Mortgage Rate at origination is below the rate that would
result from the sum of the then-applicable Index and Gross Margin. Under the
applicable underwriting standards, Mortgagors under such Mortgage Loans are
generally qualified based on an assumed payment which reflects a rate
significantly lower than the maximum rate. The repayment of any such Mortgage
Loan may thus be dependent on the ability of the mortgagor to make larger
interest payments following the adjustment of the Mortgage Rate.]
With respect to the Mortgage Loans required minimum monthly payments
are equal to [the amount of interest currently accruing thereon,] and therefore
are not expected to significantly amortize the outstanding principal amounts of
the Mortgage Loans prior to maturity. As a result, a borrower will generally be
required to pay a substantial principal amount at the maturity of a Mortgage
Loan. Such Mortgage Loans pose a greater risk of default than fully-amortizing
mortgage loans, because the Mortgagor's ability to make such a substantial
payment at maturity will generally depend on the Mortgagor's ability to obtain
refinancing of the Mortgage Loans or to sell the Mortgaged Property prior to the
maturity of the Mortgage Loan. See "Yield and Prepayment Considerations" in the
Prospectus and "Risk Factors" herein.
There can be no assurance as to the rate of principal payments on the
Mortgage Loans. The rate of principal payments may fluctuate substantially from
time to time. Generally, home equity loans are not viewed by mortgagors as
permanent financing. Due to the unpredictable nature of both principal payments,
the rates of principal payments on the Mortgage Loans may be much more volatile
than for typical first lien mortgage loans.
DESCRIPTION OF THE PURCHASE AGREEMENT
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The Mortgage Loans to be transferred to the Issuer by the Company were
or will be purchased by the Company from [Name of Master Servicer] (the
"Seller") pursuant to the Purchase Agreement. Under the Purchase Agreement, the
Seller has agreed to transfer to the Company the Initial Mortgage Loans.
Pursuant to an assignment by the Company executed on the Closing Date, upon such
transfer to the Company, the Initial Mortgage Loans will be transferred by the
Company to the Issuer, as well as the Company's rights in, to and under the
Purchase Agreement, which will include the right to purchase the Subsequent
Mortgage Loans. The following summary describes certain terms of the form of the
Purchase Agreement and is qualified in its entirety by reference to the form of
Purchase Agreement.
TRANSFER OF MORTGAGE LOANS
Pursuant to the Purchase Agreement, the Seller will transfer and assign
to the Company all of its right, title and interest in and to the Mortgage
Loans, the related mortgage note, mortgages and other related documents
(collectively, the "Related Documents"). The purchase price of the Mortgage
Loans is a specified percentage of the face amount thereof as of the time of
transfer and is payable by the Company, as provided in the Purchase Agreement.
Subsequent Mortgage Loans will be transferred to the Issuer. The
transfer of a Subsequent Mortgage Loan is subject to the following additional
conditions: (i) each Subsequent Mortgage Loan must meet the general criteria for
eligibility under the Purchase Agreement; and (ii) the Seller shall have
delivered prior written notice of the addition of the Subsequent Mortgage Loans
to the Insurer, the Rating Agencies and the Company and shall have received the
consent of the Insurer and the Rating Agencies.
The Purchase Agreement will require that, within the time period
specified therein, the Seller, acting at the Company's request, deliver to
____________________ (the "Custodian") (as the Issuer's agent for such purpose)
the Mortgage Loans and the Related Documents. In lieu of delivery of original
mortgages, the Seller may deliver true and correct copies thereof which have
been certified as to authenticity by the appropriate county recording office
where such mortgage is recorded. In addition, under the terms of the Purchase
Agreement, the Seller will be required to record assignments of mortgages
relating to such Mortgage Loans.
REPRESENTATIONS AND WARRANTIES
The Seller will represent and warrant to the Company that, among other
things, as of _________________, it is duly organized and in good standing and
that it has the authority to consummate the transactions contemplated by the
Purchase Agreement.
The Seller will also represent and warrant to the Company, that, among
other things, (a) the information with respect to the Initial Mortgage Loans set
forth in the schedule attached to the Purchase Agreement is true and correct in
all material respects and (b) immediately prior to the sale of the Initial
Mortgage Loans to the Company, the Seller was the sole owner and holder of the
Initial Mortgage Loans free and clear of any and all liens and security
interests. The Seller will also represent and warrant to the Company, that,
among other things, as of ______________, (a) the Purchase Agreement constitutes
a legal, valid and binding obligation
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of the Seller and (b) the Purchase Agreement constitutes a valid transfer and
assignment to the Company of all right, title and interest of the Seller in and
to the Initial Mortgage Loans and the proceeds thereof. Such representations and
warranties will also be made by the Seller with respect to the Subsequent
Mortgage Loans as of the date of transfer to the Issuer. The benefit of the
representations and warranties made to the Company by the Seller in the Purchase
Agreement will be assigned by the Company to the Issuer and by the Issuer to the
Indenture Trustee in the Indenture.
Within ____ days of the Closing Date, the Custodian will review or
cause to be reviewed the Mortgage Loans and the Related Documents and if any
Mortgage Loan or Related Document is found to be defective in any material
respect and such defect is not cured within ____ days following notification
thereof to the Seller and the Issuer by the Custodian, the Seller will be
obligated under the Purchase Agreement to deposit the Transfer Price into the
Custodial Account. In lieu of any such deposit, the Seller may substitute an
Eligible Substitute Loan. Any such purchase or substitution will result in the
removal of such Defective Loan from the Trust Fund and the lien of the
Indenture. The obligation of the Seller to remove a Defective Loan from the
Trust Fund is the sole remedy regarding any defects in the Mortgage Loans and
Related Documents available to the Indenture Trustee or the Bondholders against
the Seller.
With respect to any Mortgage Loan, the "Transfer Price" is equal to the
Principal Balance of such Mortgage Loan at the time of any removal described
above plus accrued and unpaid interest thereon to the date of removal. In
connection with the substitution of an Eligible Substitute Loan, the Seller will
be required to deposit in the Custodial Account an amount (the "Substitution
Adjustment Amount") equal to the excess of the Principal Balance of the related
Defective Loan over the Principal Balance of such Eligible Substitute Loan.
An "Eligible Substitute Loan" is a mortgage loan substituted by the
Issuer for a Defective Loan which must, on the date of such substitution, (i)
have an outstanding Principal Balance (or in the case of a substitution of more
than one Mortgage Loan for a Defective Loan, an aggregate Principal Balance),
not in excess of the Principal Balance relating to such Defective Loan; (ii)
have a Loan Rate, Net Loan Rate and Gross Margin no lower than and not more than
1% in excess of the Loan Rate, Net Loan Rate and Gross Margin, respectively, of
such Defective Loan; (iii) have a Combined Loan-to-Value Ratio at the time of
substitution no higher than that of the Defective Loan at the time of
substitution; (iv) have a remaining term to maturity not more than one year
earlier and not later than the remaining term to maturity of the Defective Loan;
(v) comply with each representation and warranty as to the Mortgage Loans set
forth in the Purchase Agreement (deemed to be made as of the date of
substitution); and (vi) satisfy certain other conditions specified in the
Indenture.
In addition the Seller will be obligated to deposit the Transfer Price
or substitute an Eligible Substitute Loan with respect to a Mortgage Loan as to
which there is a breach of a representation or warranty in the Purchase
Agreement.
Mortgage Loans required to be removed from the Trust Fund as described
in the preceding paragraphs are referred to as "Defective Loans."
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ASSIGNMENT TO THE ISSUER
The Seller expressly acknowledges and consents to the Company's
transfer of its rights relating to the Mortgage Loans and its obligation to pay
for the Subsequent Mortgage Loans under the Purchase Agreement to the Issuer,
the Issuer's pledge of its interest in the Purchase Agreement to the Indenture
Trustee and the enforcement by the Indenture Trustee of any such right or remedy
against the Seller.
DESCRIPTION OF THE SERVICING AGREEMENT
The following summary describes certain terms of the Servicing
Agreement, dated as of ________ 1, 19__ between the Company and the Master
Servicer. The summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the provisions of the Servicing
Agreement. Whenever particular sections or defined terms of the Servicing
Agreement are referred to, such sections or defined terms are thereby
incorporated herein by reference.
P&I COLLECTIONS
The Master Servicer shall establish and maintain an account (the
"Custodial Account") in which the Master Servicer shall deposit or cause to be
deposited any amounts representing payments on and any collections received in
respect of the Mortgage Loans received by it subsequent to the Cut-Off Date. The
Custodial Account shall be an Eligible Account. On the _____ day of each month
or if such day is not a Business Day, the next succeeding Business Day (the
"Determination Date"), the Master Servicer will notify the Indenture Trustee of
the amount of P&I Collections to be included in funds available distribution to
the Mortgage Loan for the related Payment Date.
"Eligible Investments" are specified in the Servicing Agreement and are
limited to investments which meet the criteria of the Rating Agencies from time
to time as being consistent with their then current ratings of the Securities.
On the Business Day prior to each Payment Date, the Master Servicer
will make the following withdrawals from the Custodial Account and deposit such
amounts as follows:
(i) if such Payment Date is during the Funding Period, to the Eligible
Account established and maintained by ___________ (the "Funding Account"),
Principal Collections;
(ii) to the Distribution Account, an amount equal to the P&I
Collections for such Payment Date (other than any portion thereof deposited in
the Funding Account pursuant to (i) above); and
(iii) to pay to itself or the Seller various reimbursement amounts and
other amounts as provided in the Servicing Agreement.
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As to any Payment Date, "P&I Collections" will equal the sum of (a)
Interest Collections for such Payment Date and (b) Principal Collections for
such date.
All collections on the Mortgage Loans will generally be allocated
between amounts collected in respect of interest and amounts collected in
respect of principal. As to any Payment Date, "Interest Collections" will be
equal to the sum of (i) the amounts collected during the related Collection
Period, including Net Liquidation Proceeds (as defined below), allocated to
interest, reduced by the Servicing Fees for such Collection Period, (ii) the
interest portion of the Transfer Price for any Defective Loans and (iii) net
investment earnings on amounts on deposit in the Funding Account. As to any
Payment Date, "Principal Collections" will be equal to the sum of (i) the amount
collected during the related Collection Period, including Net Liquidation
Proceeds (as defined herein) allocated to principal and (ii) the principal
portion of the Transfer Price for any Defective Loans and any Substitution
Adjustment Amounts.
As to any Payment Date other than the first Payment Date, the
"Collection Period" is the calendar month preceding the month of such Payment
Date and in the case of the first Payment Date the period from the Cut-Off Date
to ___________.
"Net Liquidation Proceeds" with respect to a Mortgage Loan are the
proceeds (excluding amounts drawn on the Policy) received in connection with the
liquidation of any Mortgage Loan, whether through trustee's sale, foreclosure
sale or otherwise, reduced by related expenses, but not including the portion,
if any, of such amount that exceeds the Principal Balance of the Mortgage Loan
at the end of the Collection Period immediately preceding the Collection Period
in which such Mortgage Loan became a Liquidated Mortgage Loan.
With respect to any date, the "Pool Balance" will be equal to the
aggregate of the Principal Balances of all Mortgage Loans as of such date. The
Principal Balance of a Mortgage Loan (other than a Liquidated Mortgage Loan) on
any day is equal to the Cut-Off Date Principal Balance thereof, minus all
collections credited against the Principal Balance of such Mortgage Loan prior
to such day. The Principal Balance of a Liquidated Mortgage Loan after final
recovery of related Liquidation Proceeds shall be zero.
COLLECTION AND OTHER SERVICING PROCEDURES ON MORTGAGE LOANS
The Master Servicer will make reasonable efforts to collect all
payments called for under the Mortgage Loans and will, consistent with the
Servicing Agreement, follow such collection procedures as it follows from time
to time with respect to the home equity loans in its servicing portfolio
comparable to the Mortgage Loans. Consistent with the above, the Master Servicer
may in its discretion waive any late payment charge or any assumption or other
fee or charge that may be collected in the ordinary course of servicing the
Mortgage Loans.
With respect to the Mortgage Loans, the Master Servicer may arrange
with a borrower a schedule for the payment of interest due and unpaid for a
period, provided that any such arrangement is consistent with the Master
Servicer's policies with respect to home equity mortgage loans.
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REALIZATION UPON DEFAULTED MORTGAGE LOANS
The Master Servicer will foreclose upon or otherwise comparably convert
to ownership Mortgaged Properties securing such of the Mortgage Loans as come
into default when in accordance with applicable servicing procedures under the
Servicing Agreement, no satisfactory arrangements can be made for the collection
of delinquent payments. In connection with such foreclosure or other conversion,
the Master Servicer will follow such practices as it deems necessary or
advisable and as are in keeping with its general subordinate mortgage servicing
activities, provided the Master Servicer will not be required to expend its own
funds in connection with foreclosure or other conversion, correction of default
on a related senior mortgage loan or restoration of any property unless, in its
sole judgment, such foreclosure, correction or restoration will increase Net
Liquidation Proceeds. The Master Servicer will be reimbursed out of Liquidation
Proceeds for advances of its own funds as liquidation expenses before any Net
Liquidation Proceeds are distributed to Securityholders.
EVIDENCE AS TO COMPLIANCE
The Servicing Agreement provides for delivery on or before March 31 in
each year, beginning in March 31, 19__, to the Indenture Trustee of an annual
statement signed by an officer of the Master Servicer to the effect that the
Master Servicer has fulfilled its material obligations under the Servicing
Agreement throughout the preceding calendar year, except as specified in such
statement.
On or before March 31 of each year, beginning March 31, 19__, the
Master Servicer will furnish a report prepared by a firm of nationally
recognized independent public accountants (who may also render other services to
the Master Servicer) to the Indenture Trustee to the effect that such firm has
examined certain documents and the records relating to servicing of the Mortgage
Loans under the Servicing Agreement for the preceding calendar year and that, on
the basis of such examination, such firm believes that such servicing was
conducted in compliance with the Servicing Agreement except for (a) such
exceptions as such firm believes to be immaterial and (b) such other exceptions
as shall be set forth in such report.
CERTAIN MATTERS REGARDING THE MASTER SERVICER
The Servicing Agreement provides that the Master Servicer may not
resign from its obligations and duties thereunder, except in connection with a
permitted transfer of servicing, unless (i) such duties and obligations are no
longer permissible under applicable law or are in material conflict by reason of
applicable law with any other activities of a type and nature presently carried
on by it or its affiliate or (ii) upon the satisfaction of the following
conditions: (a) the Master Servicer has proposed a successor servicer to the
Issuer and the Indenture Trustee in writing and such proposed successor servicer
is reasonably acceptable to the Issuer and the Indenture Trustee; (b) the Rating
Agencies have confirmed to the Issuer and the Indenture Trustee that the
appointment of such proposed successor servicer as the Master Servicer will not
result in the reduction or withdrawal of the then current rating of the
Securities; and (c) such proposed successor servicer is reasonably acceptable to
the Insurer. No such resignation will
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become effective until the Indenture Trustee or a successor servicer has assumed
the Master Servicer's obligations and duties under the Servicing Agreement.
The Master Servicer may perform any of its duties and obligations under
the Servicing Agreement through one or more subservicers or delegates, which may
be affiliates of the Master Servicer. Notwithstanding any such arrangement, the
Master Servicer will remain liable and obligated to the Issuer for the Master
Servicer's duties and obligations under the Servicing Agreement, without any
diminution of such duties and obligations and as if the Master Servicer itself
were performing such duties and obligations.
The Servicing Agreement provides that the Master Servicer will
indemnify the Owner Trustee and the Indenture Trustee, as the case may be, from
and against any loss, liability or expense, imposed by reason of its willful
misfeasance, bad faith or gross negligence in the performance of its duties
under the Servicing Agreement or by reason of its reckless disregard of its
obligations and duties under the Servicing Agreement. The Servicing Agreement
provides that neither the Master Servicer nor its directors, officers, employees
or agents will be under any other liability to the Owner Trustee, the Indenture
Trustee, or any other person for any action taken or for refraining from taking
any action pursuant to the Servicing Agreement. The Master Servicer and any
director or officer or employee or agent of the Master Servicer shall be
indemnified by the Issuer and held harmless against any loss, liability or
expense incurred in connection with any legal action relating to the Servicing
Agreement or the Securities, other than any loss, liability or expense related
to any specific Mortgage Loan or Mortgage Loans (except as any such loss,
liability or expense shall be otherwise reimbursable pursuant to the Servicing
Agreement) and any loss, liability or expense incurred by reason of its willful
misfeasance, bad faith or gross negligence in the performance of its duties
thereunder or by reason of its reckless disregard of its obligations and duties
thereunder. In addition, the Servicing Agreement provides that the Master
Servicer will not be under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its servicing responsibilities under the
Servicing Agreement and which in its opinion may expose it to any expense or
liability. The Master Servicer may, in its sole discretion, undertake any such
legal action which it may deem necessary or desirable with respect to the
Servicing Agreement and the rights and duties of the parties thereto.
Any corporation into which the Master Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Master Servicer shall be a party, or any corporation
succeeding to the business of the Master Servicer shall be the successor of the
Master Servicer hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything in the Servicing
Agreement to the contrary notwithstanding.
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EVENTS OF SERVICING TERMINATION
"Events of Servicing Termination" will consist of: (i) any failure by
the Master Servicer to (a) deposit in the Custodial Account, Funding Account or
Payment Account any deposit required to be made under the Servicing Agreement or
(b) to pay when due any amount payable by it under the terms of the Insurance
Agreement, which failure continues unremedied for three Business Days after the
giving of written notice of such failure to the Master Servicer by the Issuer or
Indenture Trustee, or to the Master Servicer, the Issuer and the Indenture
Trustee by the Insurer; (ii) any failure by the Master Servicer duly to observe
or perform in any material respect any other of its covenants or agreements in
the Servicing Agreement or Insurance Agreement which, in each case, materially
and adversely affects the interests of the Securityholders or the Insurer and
continues unremedied for ____ days or ____ days, respectively, after the giving
of written notice of such failure to the Master Servicer by the Issuer or the
Indenture Trustee, or to the Master Servicer, the Issuer and the Indenture
Trustee by the Insurer; (iii) certain events of insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings relating to
the Master Servicer and certain actions by the Master Servicer indicating
insolvency, reorganization or inability to pay its obligations; or (iv) any
merger, consolidation, or combination with another entity and the surviving
entity thereof or corporate successor is not rated at least investment grade by
the Rating Agencies. Under the above circumstances, the Indenture Trustee with
the consent of the Insurer or the Insurer may deliver written notice to the
Master Servicer terminating all the rights and obligations of the Master
Servicer under the Servicing Agreement. Under certain other circumstances, the
Insurer with the consent of 51% of the outstanding principal amount of the Bonds
and the Certificates may terminate all the rights and obligations of the Master
Servicer under the Servicing Agreement.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (i) above for the applicable periods referred to
therein or referred to under clause (ii) above for the applicable periods
referred to therein, shall not constitute an Event of Servicing Termination if
such delay or failure could not be prevented by the exercise of reasonable
diligence by the Master Servicer and such delay or failure was caused by an act
of God or other similar occurrence. Upon the occurrence of any such event the
Master Servicer shall not be relieved from using reasonable efforts to perform
its obligations in a timely manner in accordance with the terms of the Servicing
Agreement and the Master Servicer shall provide the Issuer, the Insurer and the
Indenture Trustee prompt notice of such failure or delay by it, together with a
description of its efforts to so perform its obligations.
RIGHTS UPON AN EVENT OF SERVICING TERMINATION
So long as an Event of Servicing Termination remains unremedied, the
Indenture Trustee with the consent of the Insurer or the Insurer may terminate
all of the rights and obligations of the Master Servicer under the Servicing
Agreement and in and to the Mortgage Loans, whereupon the Indenture Trustee will
succeed to all the responsibilities, duties and liabilities of the Master
Servicer under the Servicing Agreement and will be entitled to similar
compensation arrangements. In the event that the Indenture Trustee would be
obligated to succeed the Master Servicer but is unwilling or unable so to act,
it may appoint, or petition a court of competent
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<PAGE>
jurisdiction for the appointment of, an established housing and home finance
institution or other mortgage loan or home equity loan servicer with all
licenses and permits required to perform its obligations under the Servicing
Agreement and having a net worth of at least $25,000,000 and acceptable to the
Insurer to act as successor to the Master Servicer under the Servicing
Agreement. Pending such appointment, the Indenture Trustee will be obligated to
act in such capacity unless prohibited by law. Such successor will be entitled
to receive the same compensation that the Master Servicer would otherwise have
received (or such lesser compensation as the Issuer and such successor may
agree). A receiver or conservator for the Master Servicer may be empowered to
prevent the termination and replacement of the Master Servicer where the only
Event of Servicing Termination that has occurred is an Insolvency Event.
AMENDMENT
The Servicing Agreement may be amended from time to time by the Master
Servicer, the Issuer and the Indenture Trustee, [with the consent of the
Insurer,] provided that the Rating Agencies confirm in writing that such
amendment will not result in a downgrading or a withdrawal of the rating then
assigned to the Securities.
DESCRIPTION OF THE INDENTURE
The following summary describes certain terms of the Indenture. The
summary does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the provisions of the Indenture. Whenever particular
sections or defined terms of the Indenture are referred to, such sections or
defined terms are thereby incorporated herein by reference.
THE TRUST FUND
Simultaneously with the issuance of the Bonds, the Issuer will pledge
the Trust Fund to the Indenture Trustee as collateral for the Bonds.
REPORTS TO HOLDERS
The Indenture Trustee will mail to each Holder of Bonds, at its address
listed on the Security Register maintained with the Indenture Trustee a report
setting forth certain amounts relating to the Bonds for each Payment Date, among
other things:
(i) the amount of principal, if any, payable on such Payment Date to
Securityholders separately stating the portion thereof in respect of Liquidation
Loss Amounts, Carryover Liquidation Loss Amounts and Additional Principal
Distribution Amount and stating the amount of any remaining Carryover
Liquidation Loss Amounts;
(ii) the amount of interest payable on such Payment Date to
Securityholders separately stating the portion thereof in respect of overdue
accrued interest and stating the amount of remaining overdue accrued interest;
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<PAGE>
(iii) the Security Balance of the Securities after giving effect to the
payment of principal on such Payment Date;
(iv) P&I Collections for the related Collection Period;
(v) the aggregate Principal Balance of the Mortgage Loans as of last
day of the related Collection Period;
[(vi) the amount paid, if any, under the Policy separately stating the
portion thereof included in (i) and (ii) above; and]
(vii) the Outstanding Reserve Amount after giving effect to the payment
of principal on the Securities on such Payment Date.
In the case of information furnished pursuant to clauses (i) and (ii)
above, the amounts shall be expressed as a dollar amount per $1,000 in face
amount of Bonds.
CERTAIN COVENANTS
The Indenture will provide that the Issuer may not consolidate with or
merge into any other entity, unless (i) the entity formed by or surviving such
consolidation or merger is organized under the laws of the United States, any
state or the District of Columbia, (ii) such entity expressly assumes the
Issuer's obligation to make due and punctual payments upon the Bonds and the
performance or observance of any agreement and covenant of the Issuer under the
Indenture, (iii) no Event of Default shall have occurred and be continuing
immediately after such merger or consolidation, (iv) the Issuer has been advised
that the ratings of the Securities then in effect would not be reduced or
withdrawn by any Rating Agency as a result of such merger or consolidation, (v)
any action that is necessary to maintain the lien and security interest created
by the Indenture is taken and (vi) the Issuer has received an Opinion of Counsel
to the effect that such consolidation or merger would have no material adverse
tax consequence to the Issuer or to any Bondholder or Certificateholder. The
Issuer will not, among other things, (i) except as expressly permitted by the
Indenture, sell, transfer, exchange or otherwise dispose of any of the assets of
the Issuer, (ii) claim any credit on or make any deduction from the principal
and interest payable in respect of the Bonds (other than amounts withheld under
the Code or applicable state law) or assert any claim against any present or
former holder of Bonds because of the payment of taxes levied or assessed upon
the Issuer, (iii) permit the validity or effectiveness of the Indenture to be
impaired or permit any person to be released from any covenants or obligations
with respect to the Bonds under the Indenture except as may be expressly
permitted thereby or (iv) permit any lien, charge excise, claim, security
interest, mortgage or other encumbrance to be created on or extend to or
otherwise arise upon or burden the assets of the Issuer or any part thereof, or
any interest therein or the proceeds thereof. The Issuer may not engage in any
activity other than as specified under "The Issuer" herein.
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<PAGE>
MODIFICATION OF INDENTURE
With the consent of the holders of a majority of each of the
outstanding Bonds and the Insurer, the Issuer and the Indenture Trustee may
execute a supplemental indenture to add provisions to, change in any manner or
eliminate any provisions of, the Indenture, or modify (except as provided below)
in any manner the rights of the Bondholders. Without the consent of the holder
of each outstanding Bond affected thereby, however, no supplemental indenture
will: (i) change the due date of any installment of principal of or interest on
any Bond or reduce the principal amount thereof, the interest rate specified
thereon or the redemption price with respect thereto or change any place of
payment where or the coin or currency in which any Bond or any interest thereon
is payable; (ii) impair the right to institute suit for the enforcement of
certain provisions of the Indenture regarding payment; (iii) reduce the
percentage of the aggregate amount of the outstanding Bonds, the consent of the
holders of which is required for any supplemental indenture or the consent of
the holders of which is required for any waiver of compliance with certain
provisions of the Indenture or of certain defaults thereunder and their
consequences as provided for in the Indenture; (iv) modify or alter the
provisions of the Indenture regarding the voting of Bonds held by the Issuer,
the Company or an affiliate of any of them; (v) decrease the percentage of the
aggregate principal amount of Bonds required to amend the sections of the
Indenture which specify the applicable percentage of aggregate principal amount
of the Bonds necessary to amend the Indenture or certain other related
agreements; (vi) modify any of the provisions of the Indenture in such manner as
to affect the calculation of the amount of any payment of interest of principal
due on any Bond (including the calculation of any of the individual components
of such calculation); or (vii) permit the creation of any lien ranking prior to
or, except as otherwise contemplated by the Indenture, on a parity with the lien
of the Indenture with respect to any of the collateral for the Bonds or, except
as otherwise permitted or contemplated in the Indenture, terminate the lien of
the Indenture on any such collateral or deprive the holder of any Bond of the
security afforded by the lien of the Indenture.
The Issuer and the Indenture Trustee may also enter into supplemental
indentures, with the consent of the Insurer and without obtaining the consent of
the Bondholders, for the purpose of, among other things, to cure any ambiguity
or to correct or supplement any provision in the Indenture that may be
inconsistent with any other provision therein.
CERTAIN MATTERS REGARDING THE INDENTURE TRUSTEE AND THE ISSUER
Neither the Issuer, the Indenture Trustee nor any director, officer or
employee of the Issuer or the Indenture Trustee will be under any liability to
the Issuer or the related Bondholders for any action taken or for refraining
from the taking of any action in good faith pursuant to the Indenture or for
errors in judgment; provided, however, that none of the Indenture Trustee, the
Issuer and any director, officer or employee thereof will be protected against
any liability which would otherwise be imposed by reason of willful malfeasance,
bad faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties under the Indenture. Subject to certain
limitations set forth in the Indenture, the Indenture Trustee and any director,
officer, employee or agent of the Indenture Trustee shall be indemnified by the
Issuer and held harmless against any loss, liability or expense incurred in
connection with investigating, preparing to defend or defending any legal
action, commenced or threatened, relating to the Indenture other than any loss,
liability or expense incurred by
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<PAGE>
reason of willful malfeasance, bad faith or negligence in the performance of its
duties under such Indenture or by reason of reckless disregard of its
obligations and duties under the Indenture. All persons into which the Indenture
Trustee may be merged or with which it may be consolidated or any person
resulting from such merger or consolidation shall be the successor of the
Indenture Trustee under each Indenture.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, the Bonds [will][will not] be treated
as having been issued with "original issue discount" (as defined in the
Prospectus). See "Certain Federal Income Tax Consequences" in the Prospectus.
Prospective investors in the Bonds should see "Certain Federal Income
Tax Consequences" and "State and Other Tax Consequences" in the Prospectus for a
discussion of the application of certain federal income and state and local tax
laws to the Issuer and purchasers of the Bonds.
ERISA CONSIDERATIONS
Any fiduciary or other investor of Plan assets that proposes to acquire
or hold the Bonds on behalf of or with Plan assets of any Plan should consult
with its counsel with respect to the potential applicability of the fiduciary
responsibility provisions of ERISA and the prohibited transaction provisions of
ERISA and the Code to the proposed investment. See "ERISA Considerations" in the
Prospectus.
LEGAL INVESTMENT
The Bonds will constitute "mortgage related securities" for purposes of
SMMEA so long as they are rated in the highest two rating categories by a Rating
Agency. See "Legal Investment" in the Prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to the Underwriter, and the
Underwriter has agreed to purchase from the Company, the Bonds.
The Company has been advised by the Underwriter that it proposes to
initially offer the Bonds to the public at the offering price set forth herein
and to certain dealers at such price less a discount not in excess of ___% of
the Bond denominations. [The Underwriter may allow and such dealers may reallow
a discount not in excess of ___% of the Bond denominations to certain other
dealers. After the initial public offering, the public offering price, such
concessions and such discounts may be changed.]
The Company has been advised by the Underwriter that it presently
intends to make a market in the Bonds offered hereby; however, it is not
obligated to do so, any market-making
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<PAGE>
may be discontinued at any time, and there can be no assurance that an active
public market for the Bonds will develop.
The Underwriting Agreement provides that the Company will indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, or contribute payments the Underwriter may be required
to make in respect thereof.
LEGAL MATTERS
Certain legal matters with respect to the Bonds will be passed upon for
the Company by [Thacher Proffitt & Wood], New York, New York and for the
Underwriter by ________________, New York, New York.
RATINGS
It is a condition to issuance that the Bonds be rated "___" by
_______________ and "___" by ___________________. The Company has not requested
a rating on the Bonds by any rating agency other than _______________ and
_______________. However, there can be no assurance as to whether any other
rating agency will rate the Bonds, or, if it does, what rating would be assigned
by any such other rating agency. A rating on the Bonds by another rating agency,
if assigned at all, may be lower than the ratings assigned to the Bonds by
___________ and ___________________________. A securities rating addresses the
likelihood of the receipt by holders of Bonds of distributions on the Mortgage
Loans. The rating takes into consideration the structural, legal and tax aspects
associated with the Bonds. The ratings on the Bonds do not, however, constitute
statements regarding the possibility that Holders might realize a lower than
anticipated yield. A securities rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. Each securities rating should be evaluated
independently of similar ratings on different securities.
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<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representations not contained in this Prospectus Supplement and
the Prospectus and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company or by the
Underwriter. This Prospectus Supplement and the Prospectus do not constitute an
offer to sell, or a solicitation of an offer to buy, the securities offered
hereby to anyone in any jurisdiction in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make any such offer or solicitation. Neither the delivery of this Prospectus
Supplement and the Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that information herein or therein is
correct as of any time since the date of this Prospectus Supplement or the
Prospectus.
TABLE OF CONTENTS
[To be updated] PAGE
----
Prospectus Supplement
Summary.............................................. S-
Risk Factors......................................... S-
Description of the Mortgage Pool..................... S-
Servicing of the Mortgage Loans...................... S-
The Issuer........................................... S-
The Owner Trustee.................................... S-
Description of the Securities........................ S-
Description of the Purchase
Agreement....................................... S-
Assignment to the Issuer............................. S-
Description of the Servicing
Agreement....................................... S-
Description of the Indenture......................... S-
Certain Federal Income Tax
Consequences.................................... S-
ERISA Considerations................................. S-
Legal Investment..................................... S-
Method of Distribution............................... S-
Legal Matters........................................ S-
Ratings.............................................. S-
Prospectus
Summary of Prospectus ...............................
Risk Factors.........................................
The Mortgage Pools...................................
Servicing of Mortgage Loans..........................
Description of Credit Enhancement....................
Purchase Obligations.................................
Primary Mortgage Insurance, Hazard
Insurance; Claims Thereunder.......................
The Company..........................................
ICI Funding Corporation..............................
The Agreements.......................................
Yield Considerations.................................
Maturity and Prepayment Considerations
Certain Legal Aspects of Mortgage Loans
Certain Federal Income Tax
Consequences....................................
State and Other Tax Consequences.....................
ERISA Considerations.................................
Legal Investment Matters ............................
Use of Proceeds......................................
Methods of Distribution..............................
Legal Matters........................................
Financial Information................................
Rating...............................................
Index of Principal Definitions.......................
<PAGE>
================================
IMH Assets Corp.
Imperial CMB Trust
19__-__
$__________
Collateralized
Mortgage Bonds
Series 199_-_
______________
PROSPECTUS SUPPLEMENT
______________
__________________________
______, 19__
[UNDERWRITER]
================================
<PAGE>
Subject to Completion Dated June 21, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PRELIMINARY PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
PROSPECTUS
Collateralized Mortgage Bonds
IMH Assets Corp.
The collateralized mortgage bonds (the "Bonds") offered hereby and by the
supplements hereto (each, a "Prospectus Supplement") will be offered from time
to time in series.
Each series of Bonds will represent indebtedness of the related trust fund (with
respect to any series, the "Trust Fund") to be established by IMH Assets Corp.
(the "Company") pursuant to a trust agreement (the "Trust Agreement") and will
be secured by certain assets deposited therein. Each Trust Fund for a series of
Bonds and the related Certificates (as defined herein, and together with the
Bonds, the "Securities") will consist primarily of a segregated pool (a
"Mortgage Pool") of one- to four-family and/or multifamily residential first
and/or junior mortgage loans or manufactured housing conditional sales contracts
and installment loan agreements (collectively, the "Mortgage Loans") or
interests therein, acquired by the Company from one or more affiliated or
unaffiliated institutions (the "Sellers"). See "The Mortgage Pools." The
Mortgage Loans and other assets in each Trust Fund will be pledged pursuant to
an indenture (the "Indenture") to secure a series of Bonds to the extent and as
more fully described herein and in the related Prospectus Supplement.
Information regarding the Bonds of a series, and the general characteristics of
the Mortgage Loans and other assets in the related Trust Fund, will be set forth
in the related Prospectus Supplement.
Each series of Bonds will include one or more classes. Each class of Bonds of
any series will represent the right, which right may be senior or subordinate to
the rights of one or more of the other classes of Securities to receive a
specified portion of payments of principal or interest (or both) on the Mortgage
Loans and other assets in the related Trust Fund in the manner described herein
and in the related Prospectus Supplement. A series may include one or more
classes of Bonds entitled to principal distributions, with disproportionate,
nominal or no interest distributions, or to interest distributions, with
disproportionate, nominal or no principal distributions. A series may include
two or more classes of Bonds which differ as to the timing, sequential order,
priority of payment, pass-through rate or amount of distributions of principal
or interest or both.
THE COMPANY'S ONLY OBLIGATIONS WITH RESPECT TO A SERIES OF BONDS WILL BE
PURSUANT TO CERTAIN REPRESENTATIONS AND WARRANTIES MADE BY THE COMPANY, EXCEPT
AS PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT. THE MASTER SERVICER (THE
"MASTER SERVICER") FOR ANY SERIES OF BONDS WILL BE NAMED IN THE RELATED
PROSPECTUS SUPPLEMENT. THE PRINCIPAL OBLIGATIONS OF THE MASTER SERVICER WILL BE
PURSUANT TO ITS CONTRACTUAL SERVICING OBLIGATIONS (WHICH INCLUDE ITS LIMITED
OBLIGATION TO MAKE CERTAIN ADVANCES IN THE EVENT OF DELINQUENCIES IN PAYMENTS ON
THE RELATED MORTGAGE LOANS). SEE "DESCRIPTION OF THE BONDS."
If so specified in the related Prospectus Supplement, the Trust Fund for a
series of Bonds may include any one or any combination of a financial guaranty
insurance policy, mortgage pool insurance policy, letter of credit, bankruptcy
bond, special hazard insurance policy, reserve fund or other form of credit
support. In addition to or in lieu of the foregoing, credit enhancement may be
provided by means of subordination of one or more classes of Bonds or by
Overcollateralization (as defined herein). See "Description of Credit
Enhancement."
The rate of payment of principal of each class of Bonds entitled to a portion of
principal payments on the Mortgage Loans and other assets in the related
Mortgage Pool will depend on the priority of payment of such class and the rate
and timing of principal payments (including by reason of prepayments, defaults,
liquidations and repurchases of Mortgage Loans) on such Mortgage Loans and other
assets. A rate of principal payment slower or faster than that anticipated may
affect the yield on a class of Bonds in the manner described herein and in the
related Prospectus Supplement. See "Yield Considerations."
Bonds of a series will be characterized for federal income tax purposes as debt
instruments. No election will be made to treat a Trust Fund or a designated
portion thereof as a real estate mortgage investment conduit ("REMIC") for
federal income tax purposes. See "Certain Federal Income Tax Consequences"
herein.
Prospective investors should review the information appearing under the caption
"Risk Factors" herein and such information as may be set forth under the caption
"Risk Factors" in the related Prospectus Supplement before purchasing any Bond.
PROCEEDS OF THE ASSETS IN THE RELATED TRUST FUND AND PAYMENTS UNDER ANY BOND
INSURANCE POLICY ARE THE SOLE SOURCE OF PAYMENTS ON THE BONDS. THE BONDS DO NOT
REPRESENT AN INTEREST IN OR OBLIGATION OF THE COMPANY, THE MASTER SERVICER OR
ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE BONDS OF ANY SERIES NOR THE
UNDERLYING MORTGAGE LOANS WILL BE GUARANTEED OR INSURED BY ANY GOVERNMENTAL
AGENCY OR INSTRUMENTALITY OR BY THE COMPANY, THE MASTER SERVICER OR ANY OF THEIR
RESPECTIVE AFFILIATES, UNLESS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS
SUPPLEMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Bonds may be offered through one or more different methods, including
offerings through underwriters, as more fully described under "Methods of
Distribution" and in the related Prospectus Supplement.
There will be no secondary market for the Bonds of any series prior to the
offering thereof. There can be no assurance that a secondary market for any of
the Bonds will develop or, if it does develop, that it will continue. The Bonds
will not be listed on any securities exchange.
Retain this Prospectus for future reference. This Prospectus may not be used to
consummate sales of securities offered hereby unless accompanied by a Prospectus
Supplement.
The date of this Prospectus is July __, 1996.
-1-
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND ANY PROSPECTUS
SUPPLEMENT WITH RESPECT HERETO AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON. THIS PROSPECTUS AND ANY PROSPECTUS
SUPPLEMENT WITH RESPECT HERETO DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE BONDS OFFERED
HEREBY AND THEREBY OR AN OFFER OF SUCH BONDS TO ANY PERSON IN ANY STATE OR OTHER
JURISDICTION IN WHICH SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE; HOWEVER, IF ANY MATERIAL CHANGE OCCURS WHILE
THIS PROSPECTUS IS REQUIRED BY LAW TO BE DELIVERED, THIS PROSPECTUS WILL BE
AMENDED OR SUPPLEMENTED ACCORDINGLY.
TABLE OF CONTENTS
CAPTION PAGE
- ------- ----
SUMMARY OF PROSPECTUS....................................................... 4
RISK FACTORS................................................................ 14
THE MORTGAGE POOLS.......................................................... 17
General................................................................... 17
The Mortgage Loans........................................................ 18
Underwriting Standards.................................................... 23
Qualifications of Originators and Sellers................................. 25
Representations by Sellers................................................ 25
SERVICING OF MORTGAGE LOANS................................................. 27
General................................................................... 27
The Master Servicer....................................................... 28
Collection and Other Servicing Procedures;
Mortgage Loan Modifications............................................... 28
Subservicers.............................................................. 30
Special Servicers......................................................... 31
Servicing and Other Compensation and
Payment of Expenses; Spread............................................... 33
Evidence as to Compliance................................................. 34
General................................................................... 34
Form of Bonds............................................................. 36
Assignment of Trust Fund Assets........................................... 37
Collection Account........................................................ 39
Distributions............................................................. 43
Distributions of Interest and Principal on the
Bonds..................................................................... 44
Funding Account........................................................... 45
Distributions on the Bonds in Respect of
Prepayment Premiums or in Respect
of Equity Participations.................................................. 45
Allocation of Losses and Shortfalls....................................... 45
Advances.................................................................. 46
Reports to Bondholders.................................................... 46
DESCRIPTION OF CREDIT ENHANCEMENT........................................... 48
General................................................................... 48
Financial Guaranty Insurance Policy....................................... 49
Subordinate Securities.................................................... 49
Letter of Credit.......................................................... 50
Mortgage Pool Insurance Policies.......................................... 50
Special Hazard Insurance Policies......................................... 52
Bankruptcy Bonds.......................................................... 53
Overcollateralization..................................................... 53
Reserve Funds............................................................. 53
Maintenance of Credit Enhancement......................................... 54
Reduction or Substitution of Credit
Enhancement............................................................... 56
PURCHASE OBLIGATIONS........................................................ 57
PRIMARY MORTGAGE INSURANCE, HAZARD
INSURANCE;
CLAIMS THEREUNDER........................................................... 57
General................................................................... 57
Primary Mortgage Insurance Policies....................................... 57
Hazard Insurance Policies................................................. 59
FHA Insurance............................................................. 60
THE COMPANY................................................................. 61
ICI FUNDING CORPORATION..................................................... 61
THE AGREEMENTS.............................................................. 61
Events of Default; Rights Upon Event of
Default................................................................... 61
Amendment................................................................. 63
Termination; Redemption of Bonds.......................................... 64
The Owner Trustee......................................................... 64
The Indenture Trustee..................................................... 65
YIELD CONSIDERATIONS........................................................ 65
MATURITY AND PREPAYMENT
CONSIDERATIONS.............................................................. 67
CERTAIN LEGAL ASPECTS OF MORTGAGE
LOANS....................................................................... 69
Single Family Loans and Multifamily Loans................................. 69
Contracts................................................................. 70
Foreclosure on Mortgages.................................................. 72
Repossession with respect to Contracts.................................... 73
Rights of Redemption...................................................... 74
Anti-Deficiency Legislation and Other
Limitations on Lenders.................................................... 75
Junior Mortgages.......................................................... 77
Consumer Protection Laws with respect to
Contracts................................................................. 77
Environmental Legislation................................................. 78
Enforceability of Certain Provisions...................................... 78
Subordinate Financing..................................................... 79
Applicability of Usury Laws............................................... 80
Alternative Mortgage Instruments.......................................... 80
Formaldehyde Litigation with respect to
Contracts................................................................. 81
Soldiers' and Sailors' Civil Relief Act of
1940...................................................................... 81
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES................................................................ 82
General................................................................... 82
STATE AND OTHER TAX CONSEQUENCES............................................ 88
ERISA CONSIDERATIONS........................................................ 89
Tax-Exempt Investors...................................................... 90
LEGAL INVESTMENT MATTERS.................................................... 90
USE OF PROCEEDS............................................................. 91
METHODS OF DISTRIBUTION..................................................... 91
LEGAL MATTERS............................................................... 93
FINANCIAL INFORMATION....................................................... 93
RATING...................................................................... 93
INDEX OF PRINCIPAL DEFINITIONS.............................................. 94
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<PAGE>
UNTIL 90 DAYS AFTER THE DATE OF EACH PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE RELATED BONDS, WHETHER OR NOT PARTICIPATING IN THE
DISTRIBUTION THEREOF, MAY BE REQUIRED TO DELIVER THIS PROSPECTUS AND THE RELATED
PROSPECTUS SUPPLEMENT. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Such reports and other information filed by the Company can
be inspected and copied at the public reference facilities maintained by the
Commission at its Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549, and its Regional Offices located as follows: Chicago Regional
Office, 500 West Madison, 14th Floor, Chicago, Illinois 60661; New York Regional
Office, Seven World Trade Center, New York, New York 10048. Copies of such
material can also be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Company does not intend to send any financial reports to Bondholders.
This Prospectus does not contain all of the information set forth in
the Registration Statement (of which this Prospectus forms a part) and exhibits
thereto which the Company has filed with the Commission under the Securities Act
of 1933 (the "Securities Act") and to which reference is hereby made.
REPORTS TO BONDHOLDERS
The Master Servicer or other designated person will be required to
provide periodic unaudited reports concerning each Trust Fund to all registered
holders of Bonds of the related series. See "Description of the Bonds--Reports
to Bondholders."
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein and in the related Prospectus Supplement
by reference all documents and reports filed or caused to be filed by the
Company with respect to a Trust Fund pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, prior to the termination of the offering of the Bonds
of the related series. The Company will provide or cause to be provided without
charge to each person to whom this Prospectus is delivered in connection with
the offering of one or more classes of Bonds, upon written or oral request of
such person, a copy of any or all such reports incorporated herein by reference,
in each case to the extent such reports relate to one or more of such classes of
such Bonds, other than the exhibits to such documents, unless such exhibits are
specifically incorporated by reference in such documents. Requests should be
directed in writing to IMH Assets Corp., 20371 Irvine Avenue, Suite 200, Santa
Ana Heights, California 92707, or by telephone at (714) 556-0122. The Company
has determined that its financial statements will not be material to the
offering of any Bonds.
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SUMMARY OF PROSPECTUS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to each series of Bonds contained in the Prospectus
Supplement to be prepared and delivered in connection with the offering of Bonds
of such series. Capitalized terms used in this summary that are not otherwise
defined shall have the meanings ascribed thereto elsewhere in this Prospectus.
An index indicating where certain capitalized terms used herein are defined
appears at the end of this Prospectus.
Securities Offered...........Collateralized mortgage bonds (the "Bonds"). The
Bonds offered hereby and by the various Prospectus
Supplements with respect hereto will be offered
from time to time in series.
Company......................IMH Assets Corp. (the "Company"), a limited-
purpose wholly owned subsidiary of Imperial Credit
Mortgage Holdings, Inc. ("Imperial Holdings") and
an affiliate of ICI Funding Corporation ("ICI
Funding"). See "The Company."
Issuer.......................The Issuer with respect to a series of Bonds will
be the Company or an owner trust established by it
for the purpose of issuing one or more series of
Bonds. Each such owner trust will be created
pursuant to a trust agreement (the "Trust
Agreement") between the Company, acting as
depositor, and the Owner Trustee. Each series of
Bonds will represent indebtedness of the Issuer and
will be issued pursuant to an indenture between the
Issuer and the Indenture Trustee (the "Indenture")
whereby the Issuer will pledge the Trust Fund to
secure the Bonds under the lien of the Indenture.
As to each series of Bonds where the Issuer is an
owner trust, the ownership of the Trust Fund will
be evidenced by certificates (the "Certificates,"
and together with the Bonds, the "Securities")
issued under the Trust Agreement, which are not
offered hereby. The Bonds will represent
nonrecourse obligations solely of the Issuer, and
the proceeds of the Trust Fund will be the sole
source of payments on the Bonds, except as
described herein and in the related Prospectus
Supplement.
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Master Servicer..............The master servicer (the "Master Servicer"), if
any, for a series of Bonds will be specified in the
related Prospectus Supplement and may be ICI
Funding or another affiliate of the Company. See
"ICI Funding Corporation" and "Servicing of
Mortgage Loans--The Master Servicer."
Special Servicer.............The special servicer (the "Special Servicer"), if
any, for a series of Bonds will be specified, or
the circumstances under which a Special Servicer
will be appointed will be described, in the related
Prospectus Supplement. Any Special Servicer may be
an affiliate of the Company. See "Servicing of
Mortgage Loans--Special Servicers."
Administrator................An entity may be named as the Administrator in the
related Prospectus Supplement, if required in
addition to or in lieu of the Master Servicer or
Servicer for a series of Bonds (the
"Administrator").
Indenture Trustee............The Indenture Trustee for each series of Bonds will
be specified in the related Prospectus Supplement
(the "Indenture Trustee").
Owner Trustee................As to each series of Bonds where the Issuer in an
owner trust, the Owner Trustee for each related
Trust Fund will be specified in the related
Prospectus Supplement (the "Owner Trustee").
The Bonds....................Each series of Bonds will include one or more
classes of Bonds which will represent indebtedness
secured by a segregated pool of Mortgage Loans
(exclusive of any portion of interest payments (the
"Spread") relating to each Mortgage Loan retained
by the Company or any of its affiliates) or
interests therein and certain other assets as
described below (collectively, a "Trust Fund").
Except for certain Strip Bonds (as hereinafter
described), each series of Bonds, or class of Bonds
in the case of a series consisting of two or more
classes, will have a stated principal balance and
will be entitled to distributions of interest based
on a specified interest rate or rates (each, a
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<PAGE>
"Interest Rate"). Each series or class of Bonds may
have a different Interest Rate, which may be a
fixed, variable or adjustable Interest Rate, or any
combination of two or more such Interest Rates. The
related Prospectus Supplement will specify the
Interest Rate or Rates for each series or class of
Bonds, or the initial Interest Rate or Rates and
the method for determining subsequent changes to
the Interest Rate or Rates.
A series may include one or more classes of Bonds
("Strip Bonds") entitled (i) to principal
distributions, with disproportionate, nominal or no
interest distributions, or (ii) to interest
distribu- tions, with disproportionate, nominal or
no principal distributions. In addition, a series
may include two or more classes of Bonds which
differ as to timing, sequential order, priority of
payment, pass-through rate or amount of
distributions of principal or interest or both, or
as to which distributions of principal or interest
or both on any class may be made upon the
occurrence of specified events, in accordance with
a schedule or formula, or on the basis of
collections from designated portions of the
Mortgage Pool, which series may include one or more
classes of Bonds ("Accrual Bonds"), as to which
certain accrued interest will not be distributed
but rather will be added to the principal balance
thereof on each Distribution Date, as hereinafter
defined, in the manner described in the related
Prospectus Supplement.
Each series of Bonds will be senior in right of
payment to the related Certificates (if any). If so
provided in the related Prospectus Supplement, a
series of Bonds may include one or more classes of
Bonds (collectively, the "Senior Bonds") which are
senior to one or more classes of Bonds
(collectively with the Certificates, the
"Subordinate Securities") in respect of certain
distributions of principal and interest and
allocations of losses on Mortgage Loans. In
addition, certain classes of Senior (or
Subordinate) Bonds may be senior to other classes
of Senior (or
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<PAGE>
Subordinate) Bonds in respect of such distributions
or losses. See "Description of the Bonds."
The Bonds will not be guaranteed or insured by any
governmental agency or instrumentality, by the
Company, the Master Servicer or any of their
respective affiliates or by any other person,
unless otherwise specified in the related
Prospectus Supplement.
The Mortgage Pools...........Unless otherwise specified in the related
Prospectus Supplement, each Trust Fund will consist
primarily of a segregated pool (a "Mortgage Pool")
of mortgage loans and/or manufactured housing
conditional sales and installment loan agreements
(collectively, the "Mortgage Loans") or interests
therein. Unless otherwise specified in the related
Prospectus Supplement, each Mortgage Loan will be
secured by a first or junior lien on or security
interest in (i) a one- to four-family residential
property, (ii) a residential property consisting of
five or more rental or cooperatively-owned dwelling
units or (iii) a new or used manufactured home
(each, a "Mortgaged Property"). The Mortgaged
Properties may be located in any one of the 50
states, the District of Columbia or the
Commonwealth of Puerto Rico. For a description of
the types of Mortgage Loans that may be included in
the Mortgage Pools, see "The Mortgage Pools--The
Mortgage Loans." The Mortgage Loans will not be
guaranteed or insured by the Company, any of its
affiliates or, unless otherwise specified in the
related Prospectus Supplement, by any governmental
agency or instrumentality or any other person.
If specified in the related Prospectus Supplement,
Mortgage Loans which are converting or converted
from an adjustable-rate to a fixed-rate or certain
Mortgage Loans for which the Mortgage Rate has been
reset may be repurchased by the Company or
purchased by the related Master Servicer, the
applicable Seller or another party, or a designated
remarketing agent will use
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its best efforts to arrange the sale thereof as
further described herein.
If so specified in the related Prospectus
Supplement, some Mortgage Loans may be delinquent
or non-performing as of the date of their deposit
in the related Trust Fund.
Unless otherwise specified in the related
Prospectus Supplement, each Mortgage Loan included
in a Trust Fund will have been selected by the
Company from among those purchased, either directly
or indirectly, from a prior holder thereof (a
"Seller"), which prior holder may or may not be the
originator of such Mortgage Loan and may be an
affiliate of the Company.
A Current Report on Form 8-K will be available upon
request to purchasers of the Bonds of the related
series and will be filed, together with the related
Servicing Agreement, Trust Agreement (if any) and
Indenture, with the Securities and Exchange
Commission within fifteen days after such initial
issuance.
Interest Distributions.......Except as otherwise specified herein or in the
related Prospectus Supplement, interest on each
class of Bonds of each series, other than Strip
Bonds or Accrual Bonds (prior to the time when
accrued interest becomes payable thereon), will
accrue at the applicable Interest Rate (which may
be a fixed, variable or adjustable rate or any
combination thereof) on such class's principal
balance outstanding from time to time and will be
remitted on the 25th day (or, if such day is not a
business day, on the next succeeding business day)
of each month, commencing with the month following
the month in which the Cut-off Date (as defined in
the applicable Prospectus Supplement) occurs (each,
a "Distribution Date"). Distributions, if any, with
respect to interest on Strip Bonds will be
calculated and made on each Distribution Date as
described herein and in the related Prospectus
Supplement. Interest that has accrued but is not
yet payable on any Accrual Bonds will be added to
the principal balance of
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<PAGE>
such class on each Distribution Date, and will
thereafter bear interest at the applicable Interest
Rate. Distributions of interest with respect to one
or more classes of Bonds (or, in the case of a
class of Accrual Bonds, accrued interest to be
added to the principal balance thereof) may be
reduced as a result of the occurrence of certain
delinquencies not covered by advances, losses,
prepayments and other contingencies described
herein and in the related Prospectus Supplement.
See "Yield Considerations" and "Description of the
Bonds."
Principal Distributions......Except as otherwise specified in the related
Prospectus Supplement, principal distributions on
the Bonds of each series will be payable on each
Distribution Date, commencing with the Distribution
Date in the month following the month in which the
Cut-off Date occurs, to the holders of the Bonds of
such series, or of the class or classes of Bonds
then entitled thereto, on a pro rata basis among
all such Bonds or among the Bonds of any such
class, in proportion to their respective
outstanding principal balances, or in the priority
and manner otherwise specified in the related
Prospectus Supplement. Strip Bonds with no
principal balance will not receive distributions in
respect of principal. Distributions of principal
with respect to any series of Bonds, or with
respect to one or more classes included therein,
may be reduced to the extent of certain
delinquencies not covered by advances or losses not
covered by the applicable form of credit
enhancement. In addition, if specified in the
related Prospectus Supplement, a series of Bonds
may provide for a period during which all or a
portion of the principal collections on the
Mortgage Loans are reinvested in additional
Mortgage Loans or are accumulated in a trust
account pending commencement of an amortization
period. See "The Mortgage Pools," "Maturity and
Prepayment Considerations" and "Description of the
Bonds."
Funding Account..............If so specified in the related Prospectus
Supplement, a portion of the proceeds of the sale
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of one or more Classes of Bonds of a series or a
portion of collections on the Mortgage Loans in
respect of principal may be deposited in a
segregated account to be applied to acquire
additional Mortgage Loans from the Sellers, subject
to the limitations set forth herein under
"Description of the Bonds-Funding Account." Monies
on deposit in the Funding Account and not applied
to acquire such additional Mortgage Loans within
the time set forth in the related Trust Agreement
or other applicable agreement may be treated as
principal and applied in the manner described in
the related Prospectus Supplement.
Credit Enhancement...........If so specified in the Prospectus Supplement, the
Trust Fund with respect to any series of Bonds may
include any one or any combination of a financial
guaranty insurance policy, mortgage pool insurance
policy, letter of credit, special hazard insurance
policy, bankruptcy bond, reserve fund or other type
of credit support to provide partial coverage for
certain defaults and losses relating to the
Mortgage Loans. Credit support also will be
provided in the form of subordination of the
Certificates (if applicable) and also may be
provided in the form of subordination of one or
more classes of Bonds in a series under which
losses are first allocated to any Subordinate
Securities up to a specified limit or in the form
of Overcollateralization. Unless otherwise
specified in the related Prospectus Supplement, any
form of credit enhancement will have certain
limitations and exclusions from coverage
thereunder, which will be described in the related
Prospectus Supplement. Losses not covered by any
form of credit enhancement will be borne by the
holders of the related Bonds (or certain classes
thereof). To the extent not set forth herein, the
amount and types of coverage, the identification of
any entity providing the coverage, the terms of any
subordination and related information will be set
forth in the Prospectus Supplement relating to a
series of Bonds. See "Description of Credit
Enhancement" and "Subordination."
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Advances.....................If and to the extent described in the related
Prospectus Supplement, and subject to any
limitations specified therein, the Master Servicer
for any Trust Fund will be obligated to make, or
have the option of making, certain advances with
respect to delinquent scheduled payments on the
Mortgage Loans in such Trust Fund. Any such advance
made by the Master Servicer with respect to a
Mortgage Loan is recoverable by it as described
herein under "Description of the Bonds--Advances"
either from recoveries on or in respect of the
specific Mortgage Loan or, with respect to any
advance subsequently determined to be
nonrecoverable from recoveries on or in respect of
the specific Mortgage Loan, out of funds otherwise
distributable to the holders of the related series
of Bonds, which may include the holders of any
Senior Bonds of such series. If and to the extent
provided in the Prospectus Supplement for a series
of Bonds, the Master Servicer will be entitled to
receive interest on its advances for the period
that they are outstanding payable from amounts in
the related Trust Fund.
Optional Termination.........The Master Servicer, the Company or a person
specified in the related Prospectus Supplement may
at its option either (i) effect early retirement of
a series of Bonds through the purchase of the
assets in the related Trust Fund or (ii) purchase,
in whole but not in part, the Bonds specified in
the related Prospectus Supplement; in each case
under the circumstances and in the manner set forth
herein under "The Agreements--Termination;
Retirement of Bonds" and in the related Prospectus
Supplement.
Legal Investment............At the date of issuance, as to each series, each
class of Bonds will be rated at the request of the
Company in one of the four highest rating
categories by one or more nationally recognized
statistical rating agencies (each, a "Rating
Agency"). Unless otherwise specified in the related
Prospectus Supplement, each class of Bonds that is
rated in one of the two highest rating categories
by at least one Rating Agency will constitute
"mortgage related securities" for
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<PAGE>
purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA").
Investors whose investment authority is subject to
legal restrictions should consult their own legal
advisors to determine whether and to what extent
the Bonds of any series constitute legal
investments for them. See "Legal Investment
Matters."
ERISA Considerations.........A fiduciary of an employee benefit plan and certain
other retirement plans and arrangements, including
individual retirement accounts and annuities, Keogh
plans, and collective investment funds and separate
accounts in which such plans, accounts, annuities
or arrangements are invested, that is subject to
the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975 of the
Code (each, a "Plan") should carefully review with
its legal advisors whether the purchase or holding
of Bonds could give rise to a transaction that is
prohibited or is not otherwise permissible either
under ERISA or Section 4975 of the Code. Investors
are advised to consult their counsel and to review
"ERISA Considerations" herein and in the related
Prospectus Supplement.
Certain Federal Income
Tax Consequences...........n the opinion of Tax Counsel (as defined herein),
for federal income tax purposes, the Bonds will
constitute indebtedness of the Issuer.
Bonds held by a mutual savings bank or domestic
building and loan association will not represent
interests in "qualifying real property loans"
within the meaning of Code section 593(d); (ii)
Bonds held by a domestic building and loan
association will not constitute "loans...secured by
an interest in real property" within the meaning of
Code section 7701(a)(19)(C)(v); and (iii) Bonds
held by a real estate investment trust will not
constitute "real estate assets" within the meaning
of Code section 856(c)(5)(A) and interest on Bonds
will not be considered "interest on obligations
secured by mortgages on real property" within the
meaning of Code section 856(c)(3)(B).
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Investors are advised to consult their tax advisors
and to review "Certain Federal Income Tax
Consequences" herein and in the related Prospec-
tus Supplement. See "Certain Federal Income Tax
Consequences."
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RISK FACTORS
Investors should consider, among other things, the following factors in
connection with the purchase of the Bonds:
LIMITED LIQUIDITY. There can be no assurance that a secondary market
for the Bonds of any series will develop or, if it does develop, that it will
provide Bondholders with liquidity of investment or that it will continue for
the life of the Bonds of any series. The Prospectus Supplement for any series of
Bonds may indicate that an underwriter specified therein intends to establish a
secondary market in such Bonds, however no underwriter will be obligated to do
so. The Bonds will not be listed on any securities exchange.
LIMITED OBLIGATIONS. The Bonds will evidence an obligation of the
related Trust Fund to remit certain payments to the registered holder thereof.
The Bonds will not represent an interest in or obligation of the Company, the
Master Servicer or any of their respective affiliates. The only obligations of
the foregoing entities with respect to the Bonds and the Mortgage Loans will be
the obligations (if any) of the Company pursuant to certain limited
representations and warranties made with respect to the Mortgage Loans, the
Master Servicer's servicing obligations under the related Servicing Agreement
(including, if and to the extent described in the related Prospectus Supplement,
its limited obligation to make certain advances in the event of delinquencies on
the Mortgage Loans) and, if and to the extent expressly described in the related
Prospectus Supplement, certain limited obligations of the Master Servicer in
connection with a Purchase Obligation or an agreement to purchase or act as
remarketing agent with respect to a Convertible Mortgage Loan upon conversion to
a fixed rate. Unless otherwise specified in the related Prospectus Supplement,
neither the Bonds nor the underlying Mortgage Loans will be guaranteed or
insured by any governmental agency or instrumentality, by the Company, the
Master Servicer or any of their respective affiliates or by any other person.
Proceeds of the assets included in the related Trust Fund for each series of
Bonds (including the Mortgage Loans and any form of credit enhancement) will be
the sole source of payments on the Bonds, and there will be no recourse to the
Company, the Master Servicer or any other entity in the event that such proceeds
are insufficient or otherwise unavailable to make all payments provided for
under the Bonds.
LIMITATIONS, REDUCTION AND SUBSTITUTION OF CREDIT ENHANCEMENT. With
respect to each series of Bonds, credit enhancement will be provided in limited
amounts to cover certain types of losses on the underlying Mortgage Loans.
Credit enhancement will be provided in one or more of the forms referred to
herein, including, but not limited to: subordination of any Certificates and any
Subordinate Securities of the same series; a Financial Guaranty Insurance
Policy; a Letter of Credit; a Purchase Obligation; a Mortgage Pool Insurance
Policy; a Special Hazard Insurance Policy; a Bankruptcy Bond;
Overcollateralization; a Reserve Fund; or any combination thereof. See
"Subordination" and "Description of Credit Enhancement" herein. Regardless of
the form of credit enhancement provided, the amount of coverage will be limited
in amount and in most cases will be subject to periodic reduction in accordance
with a schedule or formula. Furthermore, such credit enhancements may provide
only very limited coverage as to certain types of losses or risks, and may
provide no coverage as to certain other types of losses or risks. In the event
losses exceed the amount of coverage provided by any credit enhancement or
losses of a type not covered by any credit enhancement occur, such losses will
be borne by the holders of the related Bonds (or certain classes thereof). The
Company, the Master Servicer or other specified person will generally be
permitted to reduce, terminate or substitute all or a portion of the credit
enhancement for any series of Bonds, if each applicable Rating Agency indicates
that the then-current rating(s) thereof will not be adversely affected. The
rating(s) of any series of Bonds by any applicable Rating Agency may be lowered
following the initial issuance thereof as a result of the downgrading of the
obligations of any applicable credit support provider, or as a result of losses
on the related Mortgage Loans in excess of the levels contemplated by such
Rating Agency at the time of its initial rating analysis. Neither the Company,
the Master Servicer nor any of their respective affiliates will have any
obligation
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to replace or supplement any credit enhancement, or to take any other action to
maintain any rating(s) of any series of Bonds. See "Description of Credit
Enhancement--Reduction of Credit Enhancement."
INVESTMENT IN THE BONDS. An investment in securities such as the Bonds
that are secured by mortgage loans and/or manufactured housing conditional sales
contracts and installment loan agreements may be affected by, among other
things, a decline in real estate values and changes in the borrowers' financial
condition. No assurance can be given that values of the Mortgaged Properties
have remained or will remain at their levels on the dates of origination of the
related Mortgage Loans. If the residential real estate market should experience
an overall decline in property values such that the outstanding balances of the
Mortgage Loans, and any secondary financing on the Mortgaged Properties, in a
particular Mortgage Pool become equal to or greater than the value of the
Mortgaged Properties, the actual rates of delinquencies, foreclosures and losses
could be higher than those now generally experienced in the mortgage lending
industry. In addition, in the case of Mortgage Loans that are subject to
negative amortization, due to the addition to principal balance of Deferred
Interest, the principal balances of such Mortgage Loans could be increased to an
amount equal to or in excess of the value of the underlying Mortgaged
Properties, thereby increasing the likelihood of default. To the extent that
such losses are not covered by any reserve fund or instrument of credit
enhancement in the related Trust Fund, holders of Bonds of the series evidencing
interests in the related Mortgage Pool will bear all risk of loss resulting from
default by Mortgagors and will have to look primarily to the value of the
Mortgaged Properties for recovery of the outstanding principal and unpaid
interest on the defaulted Mortgage Loans. Certain of the types of loans which
may be included in the Mortgage Pools may involve additional uncertainties not
present in traditional types of loans. For example, certain of the Mortgage
Loans provide for escalating or variable payments by the borrower under the
Mortgage Loan (the "Mortgagor"), as to which the Mortgagor is generally
qualified on the basis of the initial payment amount. In some instances,
Mortgagors may not be able to make their loan payments as such payments increase
and thus the likelihood of default will increase. In addition to the foregoing,
certain geographic regions of the United States from time to time will
experience weaker regional economic conditions and housing markets, and,
consequently, will experience higher rates of loss and delinquency than will be
experienced on mortgage loans generally. For example, a region's economic
condition and housing market may be directly, or indirectly, adversely affected
by natural disasters or civil disturbances such as earthquakes, hurricanes,
floods, eruptions or riots. The economic impact of any of these types of events
may also be felt in areas beyond the region immediately affected by the disaster
or disturbance. The Mortgage Loans securing certain series of Bonds may be
concentrated in these regions, and such concentration may present risk
considerations in addition to those generally present for similar
mortgage-backed securities without such concentration. Moreover, as described
below, any Mortgage Loan for which a breach of a representation or warranty
exists will remain in the related Trust Fund in the event that a Seller is
unable, or disputes its obligation, to repurchase such Mortgage Loan and such a
breach does not also constitute a breach of any representation made by any other
person. In such event, any resulting losses will be borne by the related form of
credit enhancement, to the extent available.
Certain of the Mortgage Loans included in a Trust Fund, particularly
those secured by Multifamily Properties, may not be fully amortizing (or may not
amortize at all) over their terms to maturity and, thus, will require
substantial payments of principal and interest (that is, balloon payments) at
their stated maturity. Mortgage Loans of this type involve a greater degree of
risk than self-amortizing loans because the ability of a Mortgagor to make a
balloon payment typically will depend upon its ability either to fully refinance
the loan or to sell the related Mortgaged Property at a price sufficient to
permit the Mortgagor to make the balloon payment. The ability of a Mortgagor to
accomplish either of these goals will be affected by a number of factors,
including the value of the related Mortgaged Property, the level of available
mortgage rates at the time of sale or refinancing, the Mortgagor's equity in the
related Mortgaged Property, prevailing general economic conditions, the
availability of credit for loans secured by comparable real properties and, in
the case of Multifamily Properties, the financial condition and operating
history of the Mortgagor and the related Mortgaged Property, tax laws and rent
control laws.
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It is anticipated that some or all of the Mortgage Loans included in
any Trust Fund, particularly Mortgage Loans secured by Multifamily Properties,
will be nonrecourse loans or loans for which recourse may be restricted or
unenforceable. As to those Mortgage Loans, recourse in the event of Mortgagor
default will be limited to the specific real property and other assets, if any,
that were pledged to secure the Mortgage Loan. However, even with respect to
those Mortgage Loans that provide for recourse against the Mortgagor and its
assets generally, there can be no assurance that enforcement of such recourse
provisions will be practicable, or that the other assets of the Mortgagor will
be sufficient to permit a recovery in respect of a defaulted Mortgage Loan in
excess of the liquidation value of the related Mortgaged Property.
Mortgage Loans made on the security of Multifamily Properties may
entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with loans made on the
security of Single Family Properties. The ability of a borrower to repay a loan
secured by an income-producing property typically is dependent primarily upon
the successful operation of such property rather than upon the existence of
independent income or assets of the borrower; thus, the value of an
income-producing property is directly related to the net operating income
derived from such property. If the net operating income of the property is
reduced (for example, if rental or occupancy rates decline or real estate tax
rates or other operating expenses increase), the borrower's ability to repay the
loan may be impaired. In addition, the concentration of default, foreclosure and
loss risk for a pool of Mortgage Loans secured by Multifamily Properties may be
greater than for a pool of Mortgage Loans secured by Single Family Properties of
comparable aggregate unpaid principal balance because the pool of Mortgage Loans
secured by Multifamily Properties is likely to consist of a smaller number of
higher balance loans.
Additional special risks associated with particular types of Mortgage
Loans will be specified in the related Prospectus Supplement.
YIELD AND PREPAYMENT CONSIDERATIONS. The yield to maturity of the Bonds
of each series will depend on, among other things, the rate and timing of
principal payments (including prepayments, liquidations due to defaults, and
repurchases due to conversion of ARM Loans to fixed interest rate loans or
breaches of representations and warranties) on the related Mortgage Loans and
the price paid by Bondholders. Such yield may be adversely affected by a higher
or lower than anticipated rate of prepayments on the related Mortgage Loans. The
yield to maturity on Strip Bonds will be extremely sensitive to the rate of
prepayments on the related Mortgage Loans. In addition, the yield to maturity on
certain other types of classes of Bonds, including Accrual Bonds, Bonds with a
Interest Rate which fluctuates inversely with an index or certain other classes
in a series including more than one class of Bonds, may be relatively more
sensitive to the rate of prepayment on the related Mortgage Loans than other
classes of Bonds. Prepayments are influenced by a number of factors, including
prevailing mortgage market interest rates, local and regional economic
conditions and homeowner mobility. See "Yield Considerations" and "Maturity and
Prepayment Considerations" herein.
ERISA CONSIDERATIONS. Generally, ERISA applies to investments made by
employee benefit plans and transactions involving the assets of such plans. Due
to the complexity of regulations that govern such plans, prospective investors
that are subject to ERISA are urged to consult their own counsel regarding
consequences under ERISA of acquisition, ownership and disposition of the Bonds
of any series. See "ERISA Considerations".
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THE MORTGAGE POOLS
GENERAL
Unless otherwise specified in the related Prospectus Supplement, each
Mortgage Pool will consist primarily of Mortgage Loans, minus the Spread, if
any, or any other interest retained by the Company or any affiliate of the
Company. The Mortgage Loans may consist of Single Family Loans, Multifamily
Loans and Contracts, each as described below.
The Mortgage Loans (other than the Contracts) will be evidenced by
promissory notes ("Mortgage Notes") and secured by mortgages, deeds of trust or
other similar security instruments ("Mortgages") that, in each case, create a
first or junior lien on the related Mortgagor's fee or leasehold interest in the
related Mortgaged Property. The Mortgaged Properties for such loans may consist
of attached or detached one-family dwelling units, two- to four-family dwelling
units, condominiums, townhouses, row houses, individual units in planned-unit
developments and certain other individual dwelling units (a "Single Family
Property" and the related loans, "Single Family Loans"), which in each case may
be owner-occupied or may be a vacation, second or non-owner-occupied home. The
Mortgaged Properties for such loans may also consist of residential properties
consisting of five or more rental or cooperativelyowned dwelling units in
high-rise, mid-rise or garden apartment buildings or projects ("Multifamily
Properties" and the related loans, "Multifamily Loans").
The "Contracts" will consist of manufactured housing conditional sales
contracts and installment loan agreements each secured by a Manufactured Home.
The "Manufactured Homes" securing the Contracts will consist of manufactured
homes within the meaning of 42 United States Code, Section 5402(6), which
defines a "manufactured home" as "a structure, transportable in one or more
sections, which in the traveling mode, is eight body feet or more in width or
forty body feet or more in length, or, when erected on site, is three hundred
twenty or more square feet, and which is built on a permanent chassis and
designed to be used as a dwelling with or without a permanent foundation when
connected to the required utilities, and includes the plumbing, heating, air
conditioning, and electrical systems contained therein; except that such term
shall include any structure which meets all the requirements of this paragraph
except the size requirements and with respect to which the manufacturer
voluntarily files a certification required by the Secretary of Housing and Urban
Development and complies with the standards established under this chapter."
Mortgaged Properties may be located in any one of the 50 states, the
District of Columbia or the Commonwealth of Puerto Rico.
The Mortgage Loans will not be guaranteed or insured by the Company,
any of its affiliates or, unless otherwise specified in the related Prospectus
Supplement, by any governmental agency or instrumentality or other person.
However, if so specified in the related Prospectus Supplement, the Mortgage
Loans may be insured by the Federal Housing Administration (the "FHA" and such
loans, "FHA Loans"). See "Description of Primary Insurance Policies--FHA
Insurance."
A Mortgage Pool may include Mortgage Loans that are delinquent or
non-performing as of the date the related series of Bonds is issued. In that
case, the related Prospectus Supplement will set forth, as to each such Mortgage
Loan, available information as to the period of such delinquency or
non-performance and any other information relevant for a prospective purchaser
to make an investment decision.
Each Mortgage Loan will be selected by the Company for inclusion in a
Mortgage Pool from among those purchased by the Company, either directly or
through its affiliates, from banks, savings and loan associations, mortgage
bankers, investment banking firms, the Resolution Trust Corporation (the
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"RTC"), the Federal Deposit Insurance Corporation (the "FDIC") and other
mortgage loan originators or sellers not affiliated with the Company
("Unaffiliated Sellers") or from affiliates of the Company such as ICI Funding
("Affiliated Sellers"; Unaffiliated Sellers and Affiliated Sellers are
collectively referred to herein as "Sellers"). If a Mortgage Pool is composed of
Mortgage Loans acquired by the Company directly from Unaffiliated Sellers, the
related Prospectus Supplement will specify the extent of Mortgage Loans so
acquired. The characteristics of the Mortgage Loans are as described in the
related Prospectus Supplement. Other mortgage loans available for purchase by
the Company may have characteristics which would make them eligible for
inclusion in a Mortgage Pool but were not selected for inclusion in such
Mortgage Pool.
Under certain circumstances, the Mortgage Loans to be included in a
Mortgage Pool will be delivered either directly or indirectly to the Company by
one or more Sellers identified in the related Prospectus Supplement,
concurrently with the issuance of the related series of Bonds (a "Designated
Seller Transaction"). Such Bonds may be sold in whole or in part to any such
Seller in exchange for the related Mortgage Loans, or may be offered under any
of the other methods described herein under "Methods of Distribution." The
related Prospectus Supplement for a Mortgage Pool composed of Mortgage Loans
acquired by the Company pursuant to a Designated Seller Transaction will
generally include information, provided by the related Seller, about the Seller,
the Mortgage Loans and the underwriting standards applicable to the Mortgage
Loans. None of the Company or, unless it is the Seller, ICI Funding or any of
their affiliates will make any representation or warranty with respect to such
Mortgage Loans, or any representation as to the accuracy or completeness of such
information provided by the Seller.
THE MORTGAGE LOANS
Unless otherwise specified below or in the related Prospectus
Supplement, each of the Mortgage Loans will be a type of mortgage loan described
or referred to in paragraphs numbered (1) through (8) below:
(1) Fixed-rate, fully-amortizing mortgage loans (which may
include mortgage loans converted from adjustable-rate mortgage loans or
otherwise modified) providing for level monthly payments of principal
and interest and terms at origination or modification of not more than
approximately 15 years;
(2) Fixed-rate, fully-amortizing mortgage loans (which may
include mortgage loans converted from adjustable-rate mortgage loans or
otherwise modified) providing for level monthly payments of principal
and interest and terms at origination or modification of more than 15
years, but not more than approximately 25 or 30 years;
(3) Fully-amortizing adjustable-rate mortgage loans ("ARM
Loans") having an original or modified term to maturity of not more
than approximately 25 or 30 years with a related interest rate (a
"Mortgage Rate") which generally adjusts initially either three months,
six months or one, three, five or seven years subsequent to the initial
payment date, and thereafter at either three-month, six-month, one-year
or other intervals (with corresponding adjustments in the amount of
monthly payments) over the term of the mortgage loan to equal the sum
of a fixed percentage set forth in the related Mortgage Note (the "Note
Margin") and an index*. The
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* The index (the "Index") for a particular Mortgage Pool will be
specified in the related Prospectus Supplement and may include one of the
following indexes: (i) the weekly average yield on U.S. Treasury securities
adjusted to a constant maturity of either six months or one year, (ii) the
weekly auction average investment yield of U.S. Treasury bills of six months,
(iii) the daily Bank Prime Loan rate made available by the Federal Reserve
Board, (iv) the cost of funds of member institutions for the Federal Home Loan
Bank of San Francisco, (v) the interbank offered rates for U.S. dollar deposits
in the London market, each calculated as of a date prior to each scheduled
interest rate adjustment date which will be specified in the related Prospectus
Supplement or (vi) any other index described in the related Prospectus
Supplement.
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related Prospectus Supplement will set forth the relevant index and the
highest, lowest and weighted average Note Margin with respect to the
ARM Loans in the related Mortgage Pool. The related Prospectus
Supplement will also indicate any periodic or lifetime limitations on
changes in any per annum Mortgage Rate at the time of any adjustment.
If specified in the related Prospectus Supplement, an ARM Loan may
include a provision that allows the Mortgagor to convert the adjustable
Mortgage Rate to a fixed rate at some point during the term of such ARM
Loan generally not later than six to ten years subsequent to the
initial payment date;
(4) Negatively-amortizing ARM Loans having original or
modified terms to maturity of not more than approximately 25 or 30
years with Mortgage Rates which generally adjust initially on the
payment date referred to in the related Prospectus Supplement, and on
each of certain periodic payment dates thereafter, to equal the sum of
the Note Margin and the index. The scheduled monthly payment will be
adjusted as and when described in the related Prospectus Supplement to
an amount that would fully amortize the Mortgage Loan over its
remaining term on a level debt service basis; provided that increases
in the scheduled monthly payment may be subject to certain limitations
as specified in the related Prospectus Supplement. If an adjustment to
the Mortgage Rate on a Mortgage Loan causes the amount of interest
accrued thereon in any month to exceed the scheduled monthly payment on
such mortgage loan, the resulting amount of interest that has accrued
but is not then payable ("Deferred Interest") will be added to the
principal balance of such Mortgage Loan;
(5) Fixed-rate, graduated payment mortgage loans having
original or modified terms to maturity of not more than approximately
15 years with monthly payments during the first year calculated on the
basis of an assumed interest rate which is a specified percentage below
the Mortgage Rate on such mortgage loan. Such monthly payments increase
at the beginning of the second year by a specified percentage of the
monthly payment during the preceding year and each year thereafter to
the extent necessary to amortize the mortgage loan over the remainder
of its approximately 15-year term. Deferred Interest, if any, will be
added to the principal balance of such mortgage loans;
(6) Fixed-rate, graduated payment mortgage loans having
original or modified terms to maturity of not more than approximately
25 or 30 years with monthly payments during the first year calculated
on the basis of an assumed interest rate which is a specified
percentage below the Mortgage Rate. Such monthly payments increase at
the beginning of the second year by a specified percentage of the
monthly payment during the preceding year and each year thereafter to
the extent necessary to fully amortize the mortgage loan within its
approximately 25- or 30- year term. Deferred Interest, if any, will be
added to the principal balance of such mortgage loan;
(7) Mortgage loans ("Balloon Loans") having payment terms
similar to those described in one of the preceding paragraphs numbered
(1) through (6), calculated on the basis of an assumed amortization
term, but providing for a payment (a "Balloon Payment") of all
outstanding principal and interest to be made at the end of a specified
term that is shorter than such assumed amortization term; or
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(8) Another type of mortgage loan described in the related
Prospectus Supplement.
If provided in the related Prospectus Supplement, certain of the
Mortgage Pools may contain Single Family and Multifamily Loans secured by junior
liens, and the related senior liens ("Senior Liens") may not be included in the
Mortgage Pool. The primary risk to holders of such Mortgage Loans secured by
junior liens is the possibility that adequate funds will not be received in
connection with a foreclosure of the related Senior Liens to satisfy fully both
the Senior Liens and the Mortgage Loan. In the event that a holder of a Senior
Lien forecloses on a Mortgaged Property, the proceeds of the foreclosure or
similar sale will be applied first to the payment of court costs and fees in
connection with the foreclosure, second to real estate taxes, third in
satisfaction of all principal, interest, prepayment or acceleration penalties,
if any, and any other sums due and owing to the holder of the Senior Liens. The
claims of the holders of the Senior Liens will be satisfied in full out of
proceeds of the liquidation of the related Mortgaged Property, if such proceeds
are sufficient, before the Trust Fund as holder of the junior lien receives any
payments in respect of the Mortgage Loan. If the Master Servicer were to
foreclose on any such Mortgage Loan, it would do so subject to any related
Senior Liens. In order for the debt related to the Mortgage Loan to be paid in
full at such sale, a bidder at the foreclosure sale of such Mortgage Loan would
have to bid an amount sufficient to pay off all sums due under the Mortgage Loan
and the Senior Liens or purchase the Mortgaged Property subject to the Senior
Liens. In the event that such proceeds from a foreclosure or similar sale of the
related Mortgaged Property are insufficient to satisfy all Senior Liens and the
Mortgage Loan in the aggregate, the Trust Fund, as the holder of the junior
lien, and, accordingly, holders of one or more classes of the Bonds of the
related series bear (i) the risk of delay in distributions while a deficiency
judgment against the borrower is obtained and (ii) the risk of loss if the
deficiency judgment is not realized upon. Moreover, deficiency judgments may not
be available in certain jurisdictions or the Mortgage Loan may be nonrecourse.
In addition, a junior mortgagee may not foreclose on the property securing a
junior mortgage unless it forecloses subject to the senior mortgages.
If so specified in the related Prospectus Supplement, a Mortgage Loan
may contain a prohibition on prepayment (the period of such prohibition, a
"Lock-out Period" and its date of expiration, a "Lockout Expiration Date") or
require payment of a premium or a yield maintenance penalty (a "Prepayment
Penalty"). A Multifamily Loan may also contain a provision that entitles the
lender to a share of profits realized from the operation or disposition of the
related Mortgaged Property (an "Equity Participation"). If the holders of any
class or classes of Bonds of a series will be entitled to all or a portion of an
Equity Participation, the related Prospectus Supplement will describe the Equity
Participation and the method or methods by which distributions in respect
thereof will be made to such holders.
Certain information, including information regarding loan-to-value
ratios (each, a "Loan-to-Value Ratio") at origination (unless otherwise
specified in the related Prospectus Supplement) of the Mortgage Loans underlying
each series of Bonds, will be supplied in the related Prospectus Supplement. In
the case of most Mortgage Loans, the "Loan-to-Value Ratio" at origination is
defined generally as the ratio, expressed as a percentage, of the principal
amount of the Mortgage Loan at origination (or, if appropriate, at the time of
an appraisal subsequent to origination), plus, in the case of a Mortgage Loan
secured by a junior lien, the outstanding principal balance of the related
Senior Liens, to the Value of the related Mortgaged Property. Unless otherwise
specified in the related Prospectus Supplement, the "Value" of a Mortgaged
Property securing a Single Family or Multifamily Mortgage Loan will generally be
equal to the lesser of (x) the appraised value determined in an appraisal
obtained at origination of such Mortgage Loan, if any, or, if the related
Mortgaged Property has been appraised subsequent to origination, the value
determined in such subsequent appraisal and (y) the sales price for the related
Mortgaged Property (except in certain circumstances in which there has been a
subsequent appraisal). In the case of certain refinanced, modified or converted
Single Family or Multifamily Loans, unless otherwise specified in the related
Prospectus Supplement, the "Value" of the related Mortgaged Property will be
equal to the lesser of (x) the appraised value of the related Mortgaged Property
determined at
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origination or in an appraisal, if any, obtained at the time of refinancing,
modification or conversion and (y) the sales price of the related Mortgage
Property or, if the Mortgage Loan is not a rate and term refinance Mortgage Loan
and if the Mortgaged Property was owned for a relatively short period of time
prior to refinancing, modification or conversion, the sum of the sales price of
the related Mortgaged Property plus the added value of any improvements. Certain
Mortgage Loans which are subject to negative amortization will have
Loan-to-Value Ratios which will increase after origination as a result of such
negative amortization. Unless otherwise specified in the related Prospectus
Supplement, for purposes of calculating the Loan-to-Value Ratio of a Contract
relating to a new Manufactured Home, the "Value" is no greater than the sum of a
fixed percentage of the list price of the unit actually billed by the
manufacturer to the dealer (exclusive of freight to the dealer site), including
"accessories" identified in the invoice (the "Manufacturer's Invoice Price"),
plus the actual cost of any accessories purchased from the dealer, a delivery
and set-up allowance, depending on the size of the unit, and the cost of state
and local taxes, filing fees and up to three years prepaid hazard insurance
premiums. Unless otherwise specified in the related Prospectus Supplement, with
respect to a used Manufactured Home, the "Value" is the least of the sale price,
the appraised value, and the National Automobile Dealer's Association book value
plus prepaid taxes and hazard insurance premiums. The appraised value of a
Manufactured Home is based upon the age and condition of the manufactured
housing unit and the quality and condition of the mobile home park in which it
is situated, if applicable. Manufactured Homes are less likely than other types
of housing to experience appreciation in value and more likely to experience
depreciation in value over time.
The Mortgage Loans may be "equity refinance" Mortgage Loans, as to
which a portion of the proceeds are used to refinance an existing mortgage loan,
and the remaining proceeds may be retained by the Mortgagor or used for purposes
unrelated to the Mortgaged Property. Alternatively, the Mortgage Loans may be
"rate and term refinance" Mortgage Loans, as to which substantially all of the
proceeds (net of related costs incurred by the Mortgagor) are used to refinance
an existing mortgage loan or loans (which may include a junior lien) primarily
in order to change the interest rate or other terms thereof. The Mortgage Loans
may be mortgage loans which have been consolidated and/or have had various terms
changed, mortgage loans which have been converted from adjustable rate mortgage
loans to fixed rate mortgage loans, or construction loans which have been
converted to permanent mortgage loans. In addition, a Mortgaged Property may be
subject to secondary financing at the time of origination of the Mortgage Loan
or thereafter.
If provided for in the related Prospectus Supplement, a Mortgage Pool
may contain ARM Loans which allow the Mortgagors to convert the adjustable rates
on such Mortgage Loans to a fixed rate at some point during the life of such
Mortgage Loans (each such Mortgage Loan, a "Convertible Mortgage Loan"),
generally not later than six to ten years subsequent to the date of origination,
depending upon the length of the initial adjustment period. If specified in the
related Prospectus Supplement, upon any conversion, the Company, the related
Master Servicer, the applicable Seller or a third party will purchase the
converted Mortgage Loan as and to the extent set forth in the related Prospectus
Supplement. Alternatively, if specified in the related Prospectus Supplement,
the Company or the related Master Servicer (or another party specified therein)
may agree to act as remarketing agent with respect to such converted Mortgage
Loans and, in such capacity, to use its best efforts to arrange for the sale of
converted Mortgage Loans under specified conditions. Upon the failure of any
party so obligated to purchase any such converted Mortgage Loan, the inability
of any remarketing agent to arrange for the sale of the converted Mortgage Loan
and the unwillingness of such remarketing agent to exercise any election to
purchase the converted Mortgage Loan for its own account, the related Mortgage
Pool will thereafter include both fixed rate and adjustable rate Mortgage Loans.
If provided for in the related Prospectus Supplement, certain of the
Mortgage Loans may be subject to temporary buydown plans ("Buydown Mortgage
Loans") pursuant to which the monthly payments made by the Mortgagor during the
early years of the Mortgage Loan (the "Buydown Period")
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will be less than the scheduled monthly payments on the Mortgage Loan, the
resulting difference to be made up from (i) an amount (such amount, exclusive of
investment earnings thereon, being hereinafter referred to as "Buydown Funds")
contributed by the seller of the Mortgaged Property or another source and placed
in a custodial account (the "Buydown Account"), (ii) if the Buydown Funds are
contributed on a present value basis, investment earnings on such Buydown Funds
or (iii) additional buydown funds to be contributed over time by the Mortgagor's
employer or another source. See "Description of the Bonds--Payments on Mortgage
Loans; Deposits to Collection Account." Generally, the Mortgagor under each
Buydown Mortgage Loan will be qualified at the applicable lower monthly payment.
Accordingly, the repayment of a Buydown Mortgage Loan is dependent on the
ability of the Mortgagor to make larger level monthly payments after the Buydown
Funds have been depleted and, for certain Buydown Mortgage Loans, during the
Buydown Period.
The Prospectus Supplement for each series of Bonds will contain
information as to the type of Mortgage Loans that will be included in the
related Mortgage Pool. Each Prospectus Supplement applicable to a series of
Bonds will include certain information, generally as of the Cut-off Date and to
the extent then available to the Company, on an approximate basis, as to (i) the
aggregate principal balance of the Mortgage Loans, (ii) the type of property
securing the Mortgage Loans, (iii) the original or modified terms to maturity of
the Mortgage Loans, (iv) the range of principal balances of the Mortgage Loans
at origination or modification, (v) the earliest origination or modification
date and latest maturity date of the Mortgage Loans, (vi) the Loan-to-Value
Ratios of the Mortgage Loans, (vii) the Mortgage Rate or range of Mortgage Rates
borne by the Mortgage Loans, (viii) if any of the Mortgage Loans are ARM Loans,
the applicable Index, the range of Note Margins and the weighted average Note
Margin, (ix) the geographical distribution of the Mortgage Loans, (x) the number
of Buydown Mortgage Loans, if applicable, and (xi) the percent of ARM Loans
which are convertible to fixed-rate mortgage loans, if applicable. A Current
Report on Form 8-K will be available upon request to holders of the related
series of Bonds and will be filed, together with the related Master Servicing
Agreement, Trust Agreement and Indenture, with the Securities and Exchange
Commission within fifteen days after the initial issuance of such Bonds. In the
event that Mortgage Loans are added to or deleted from the Trust Fund after the
date of the related Prospectus Supplement, such addition or deletion will be
noted in the Current Report on Form 8-K.
The Company will cause the Mortgage Loans constituting each Mortgage
Pool to be assigned, without recourse, to the Indenture Trustee named in the
related Prospectus Supplement, for the benefit of the holders of all of the
Securities of a series (the "Securityholders"). Except to the extent that
servicing of any Mortgage Loan is to be transferred to a Special Servicer, the
Master Servicer named in the related Prospectus Supplement will service the
Mortgage Loans, directly or through other mortgage servicing institutions
("Subservicers"), pursuant to a Servicing Agreement and will receive a fee for
such services. See "Servicing of Mortgage Loans," "Description of the Bonds" and
"The Agreements." With respect to those Mortgage Loans serviced by the Master
Servicer through a Subservicer, the Master Servicer will remain liable for its
servicing obligations under the related Servicing Agreement as if the Master
Servicer alone were servicing such Mortgage Loans. The Master Servicer's
obligations with respect to the Mortgage Loans will consist principally of its
contractual servicing obligations under the related Servicing Agreement
(including its obligation to enforce certain purchase and other obligations of
Subservicers and Sellers, as more fully described herein under
"--Representations by Sellers" below, "Servicing of Mortgage
Loans--Subservicers," and "Description of the Bonds--Assignment of Trust Fund
Assets," and, if and to the extent set forth in the related Prospectus
Supplement, its obligation to make certain cash advances in the event of
delinquencies in payments on or with respect to the Mortgage Loans as described
herein under "Description of the Bonds--Advances"). In addition to or in lieu of
the Master Servicer for a series of Bonds, the related Prospectus Supplement may
identify an Administrator for the Trust Fund. The Administrator may be an
affiliate of the Company. All references herein to "Master Servicer" and any
discussions of the servicing and administration functions of the Master Servicer
will also apply to the Administrator to the extent applicable.
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UNDERWRITING STANDARDS
Mortgage Loans to be included in a Mortgage Pool will have been
purchased by the Company, either directly or indirectly from Sellers. Such
Mortgage Loans will generally have been originated in accordance with
underwriting standards acceptable to the Company and generally described below
or such alternative underwriting criteria as may be described in the related
Prospectus Supplement. However, in some cases, particularly those involving
Unaffiliated Sellers, the Company may not be able to establish the underwriting
standards used in the origination of the related Mortgage Loans. In those cases,
the related Prospectus Supplement will include a statement to such effect and
will reflect what, if any, reunderwriting of the related Mortgage Loans was done
by the Company or any of its affiliates.
Unless otherwise specified in the related Prospectus Supplement, the
underwriting standards to be used in originating the Mortgage Loans are
primarily intended to assess the creditworthiness of the Mortgagor, the value of
the Mortgaged Property and the adequacy of such property as collateral for the
Mortgage Loan.
The primary considerations in underwriting a Single Family Loan or
Contract are the Mortgagor's employment stability and whether the Mortgagor has
sufficient monthly income available (i) to meet the Mortgagor's monthly
obligations on the proposed Mortgage Loan (generally determined on the basis of
the monthly payments due in the year of origination) and other expenses related
to the home (such as property taxes and hazard insurance) and (ii) to meet
monthly housing expenses and other financial obligations and monthly living
expenses. However, the Loan-to-Value Ratio of the Mortgage Loan is another
critical factor. In addition, a Mortgagor's credit history and repayment
ability, as well as the type and use of the Mortgaged Property, are also
considerations.
In the case of the Multifamily Loans, lenders typically look to the
Debt Service Coverage Ratio of a loan as an important measure of the risk of
default on such a loan. Unless otherwise defined in the related Prospectus
Supplement, the "Debt Service Coverage Ratio" of a Multifamily Loan at any given
time is the ratio of (i) the Net Operating Income of the related Mortgaged
Property for a twelve-month period to (ii) the annualized scheduled payments on
the Mortgage Loan and on any other loan that is secured by a lien on the
Mortgaged Property prior to the lien of the related Mortgage. Unless otherwise
defined in the related Prospectus Supplement, "Net Operating Income" means, for
any given period, the total operating revenues derived from a Multifamily
Property during such period, minus the total operating expenses incurred in
respect of such property during such period other than (i) non-cash items such
as depreciation and amortization, (ii) capital expenditures and (iii) debt
service on loans (including the related Mortgage Loan) secured by liens on such
property. The Net Operating Income of a Multifamily Property will fluctuate over
time and may or may not be sufficient to cover debt service on the related
Mortgage Loan at any given time. As the primary source of the operating revenues
of a Multifamily Property, rental income (and maintenance payments from
tenant-stockholders of a cooperatively owned Multifamily Property) may be
affected by the condition of the applicable real estate market and/or area
economy. Increases in operating expenses due to the general economic climate or
economic conditions in a locality or industry segment, such as increases in
interest rates, real estate tax rates, energy costs, labor costs and other
operating expenses, and/or to changes in governmental rules, regulations and
fiscal policies, may also affect the risk of default on a Multifamily Loan.
Lenders also look to the Loan-to-Value Ratio of a Multifamily Loan as a measure
of risk of loss if a property must be liquidated following a default.
It is expected that each prospective Mortgagor will complete a mortgage
loan application that includes information with respect to the applicant's
liabilities, income, credit history, employment history and personal
information. One or more credit reports on each applicant from national credit
reporting companies will generally be required. The report typically contains
information relating to such matters as credit history with local and national
merchants and lenders, installment debt payments and any record
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of defaults, bankruptcies, repossessions, or judgments. In the case of a
Multifamily Loan, the Mortgagor will also be required to provide certain
information regarding the related Multifamily Property, including a current rent
roll and operating income statements (which may be pro forma and unaudited). In
addition, the originator will generally also consider the location of the
Multifamily Property, the availability of competitive lease space and rental
income of comparable properties in the relevant market area, the overall economy
and demographic features of the geographic area and the Mortgagor's prior
experience in owning and operating properties similar to the Multifamily
Properties.
Unless otherwise specified in the related Prospectus Supplement,
Mortgaged Properties will be appraised by licensed appraisers. The appraiser
will generally address neighborhood conditions, site and zoning status and
condition and valuation of improvements. In the case of Single Family
Properties, the appraisal report will generally include a reproduction cost
analysis (when appropriate) based on the current cost of constructing a similar
home and a market value analysis based on recent sales of comparable homes in
the area. With respect to Multifamily Properties, the appraisal must specify
whether an income analysis, a market analysis or a cost analysis was used. An
appraisal employing the income approach to value analyzes a property's projected
net cash flow, capitalization and other operational information in determining
the property's value. The market approach to value analyzes the prices paid for
the purchase of similar properties in the property's area, with adjustments made
for variations between those other properties and the property being appraised.
The cost approach to value requires the appraiser to make an estimate of land
value and then determine the current cost of reproducing the improvements less
any accrued depreciation. In any case, the value of the property being financed,
as indicated by the appraisal, must be such that it currently supports, and is
anticipated to support in the future, the outstanding loan balance. Unless
otherwise specified in the related Prospectus Supplement, all appraisals are
required to conform to the Uniform Standards of Professional Appraisal Practice
and the Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") and must be on forms acceptable to the Federal National Mortgage
Association ("FNMA") and/or the Federal Home Loan Mortgage Corporation
("FHLMC").
Notwithstanding the foregoing, Loan-to-Value Ratios will not
necessarily constitute an accurate measure of the risk of liquidation loss in a
pool of Mortgage Loans. For example, the value of a Mortgaged Property as of the
date of initial issuance of the related series of Bonds may be less than the
Value determined at loan origination, and will likely continue to fluctuate from
time to time based upon changes in economic conditions and the real estate
market. Moreover, even when current, an appraisal is not necessarily a reliable
estimate of value for a Multifamily Property. As stated above, appraised values
of Multifamily Properties are generally based on the market analysis, the cost
analysis, the income analysis, or upon a selection from or interpolation of the
values derived from such approaches. Each of these appraisal methods can present
analytical difficulties. It is often difficult to find truly comparable
properties that have recently been sold; the replacement cost of a property may
have little to do with its current market value; and income capitalization is
inherently based on inexact projections of income and expenses and the selection
of an appropriate capitalization rate. Where more than one of these appraisal
methods are used and provide significantly different results, an accurate
determination of value and, correspondingly, a reliable analysis of default and
loss risks, is even more difficult.
If so specified in the related Prospectus Supplement, the underwriting
of a Multifamily Loan may also include environmental testing. Under the laws of
certain states, contamination of real property may give rise to a lien on the
property to assure the costs of cleanup. In several states, such a lien has
priority over an existing mortgage lien on such property. In addition, under the
laws of some states and under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), a lender may be liable, as an
"owner" or "operator", for costs of addressing releases or threatened releases
of hazardous substances at a property, if agents or employees of the lender have
become sufficiently involved in the operations of the borrower, regardless of
whether or not the environmental damage or threat was caused by the borrower or
a prior owner. A lender also risks such
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liability on foreclosure of the mortgage. See "Certain Legal Aspects of Mortgage
Loans--Environmental Legislation".
With respect to any FHA Loan the Mortgage Loan Seller will be required
to represent that it has complied with the applicable underwriting policies of
the FHA. See "Description of Primary Insurance Policies--FHA Insurance".
To the extent relevant and available, the related Prospectus Supplement
will include delinquency and foreclosure experience for the applicable
Seller(s).
QUALIFICATIONS OF ORIGINATORS AND SELLERS
Unless otherwise specified in the related Prospectus Supplement, each
Mortgage Loan will be originated, directly or through mortgage brokers and
correspondents, by a savings and loan association, savings bank, commercial
bank, credit union, insurance company, or similar institution which is
supervised and examined by a federal or state authority, or by a mortgagee
approved by the Secretary of Housing and Urban Development pursuant to sections
203 and 211 of the National Housing Act of 1934, as amended (the "Housing Act").
Except with respect to Designated Seller Transactions or unless otherwise
specified in the related Prospectus Supplement, each Seller must satisfy certain
criteria as to financial stability evaluated on a case-by-case basis by the
Company.
REPRESENTATIONS BY SELLERS
Unless otherwise specified in the related Prospectus Supplement, each
Seller will have made representations and warranties in respect of the Mortgage
Loans sold by such Seller and evidenced by a series of Bonds. In the case of
Mortgage Loans, such representations and warranties will generally include,
among other things, that as to each such Mortgage Loan: (i) any required hazard
and primary mortgage insurance policies were effective at the origination of
such Mortgage Loan, and each such policy remained in effect on the date of
purchase of such Mortgage Loan from the Seller by or on behalf of the Company;
(ii) with respect to each Mortgage Loan other than a Contract, either (A) a
title insurance policy insuring (subject only to permissible title insurance
exceptions) the lien status of the Mortgage was effective at the origination of
such Mortgage Loan and such policy remained in effect on the date of purchase of
the Mortgage Loan from the Seller by or on behalf of the Company or (B) if the
Mortgaged Property securing such Mortgage Loan is located in an area where such
policies are generally not available, there is in the related mortgage file an
attorney's certificate of title indicating (subject to such permissible
exceptions set forth therein) the first lien status of the mortgage; (iii) the
Seller has good title to such Mortgage Loan and such Mortgage Loan was subject
to no offsets, defenses or counterclaims except as may be provided under the
Relief Act and except to the extent that any buydown agreement exists for a
Buydown Mortgage Loan; (iv) there are no mechanics' liens or claims for work,
labor or material affecting the related Mortgaged Property which are, or may be
a lien prior to, or equal with, the lien of the related Mortgage (subject only
to permissible title insurance exceptions); (v) the related Mortgaged Property
is free from damage and in good repair; (vi) there are no delinquent tax or
assessment liens against the related Mortgaged Property; (vii) such Mortgage
Loan is not more than 30 days' delinquent as to any scheduled payment of
principal and/or interest; (viii) if a Primary Insurance Policy is required with
respect to such Mortgage Loan, such Mortgage Loan is the subject of such a
policy; and (ix) such Mortgage Loan was made in compliance with, and is
enforceable under, all applicable local, state and federal laws in all material
respects. In the event of a breach of a Seller's representation or warranty that
materially adversely affects the interests of the Securityholders in a Mortgage
Loan, unless otherwise specified in the related Prospectus Supplement, the
related Seller will be obligated to cure the breach or repurchase or, if
permitted, replace such Mortgage Loan as described below. However, there can be
no assurance that a Seller will honor its obligation to repurchase or, if
permitted, replace any Mortgage Loan as to which such a breach of a
representation or warranty arises.
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All of the representations and warranties of a Seller in respect of a
Mortgage Loan will have been made as of the date on which such Mortgage Loan was
purchased from the Seller by or on behalf of the Company; the date as of which
such representations and warranties were made will be a date prior to the date
of initial issuance of the related series of Bonds or, in the case of a
Designated Seller Transaction, will be the date of closing of the related sale
by the applicable Seller. A substantial period of time may have elapsed between
the date as of which the representations and warranties were made and the later
date of initial issuance of the related series of Bonds. Accordingly, the
Seller's purchase obligation (or, if specified in the related Prospectus
Supplement, limited replacement option) described below will not arise if,
during the period commencing on the date of sale of a Mortgage Loan by the
Seller, an event occurs that would have given rise to such an obligation had the
event occurred prior to sale of the affected Mortgage Loan. Unless otherwise
specified in the related Prospectus Supplement, the only representations and
warranties to be made for the benefit of holders of Bonds in respect of any
related Mortgage Loan relating to the period commencing on the date of sale of
such Mortgage Loan by the Seller to or on behalf of the Company will be certain
limited representations of the Company and the Master Servicer described under
"Description of the Bonds--Assignment of Trust Fund Assets" below.
The Company will assign to the Indenture Trustee for the benefit of the
holders of the related series of Securities all of its right, title and interest
in each agreement by which it purchased a Mortgage Loan from a Seller insofar as
such agreement relates to the representations and warranties made by such Seller
in respect of such Mortgage Loan and any remedies provided for with respect to
any breach of such representations and warranties. If a Seller cannot cure a
breach of any representation or warranty made by it in respect of a Mortgage
Loan which materially and adversely affects the interests of the Securityholders
therein within a specified period after having discovered or received notice of
such breach, then, unless otherwise specified in the related Prospectus
Supplement, such Seller will be obligated to purchase such Mortgage Loan at a
price (the "Purchase Price") set forth in the related Servicing Agreement which
Purchase Price will generally be equal to the principal balance thereof as of
the date of purchase plus accrued and unpaid interest through or about the date
of purchase at the related Mortgage Rate (net of any portion of such interest
payable to such Seller in respect of master servicing compensation, special
servicing compensation or subservicing compensation, as applicable, and the
Spread, if any).
Unless otherwise specified in the related Prospectus Supplement, as to
any Mortgage Loan required to be purchased by an Affiliated Seller as provided
above, rather than repurchase the Mortgage Loan, the Seller will be entitled, at
its sole option, to remove such Mortgage Loan (a "Deleted Mortgage Loan") from
the Trust Fund and substitute in its place another Mortgage Loan of like kind (a
"Qualified Substitute Mortgage Loan"). Except as otherwise provided in the
related Prospectus Supplement, any Qualified Substitute Mortgage Loan generally
will, on the date of substitution, (i) have an outstanding principal balance,
after deduction of the principal portion of the monthly payment due in the month
of substitution, not in excess of the outstanding principal balance of the
Deleted Mortgage Loan (the amount of any shortfall to be deposited in the
Collection Account by the Master Servicer in the month of substitution for
distribution to the Bondholders), (ii) have a Mortgage Rate and a Net Mortgage
Rate not less than (and not more than one percentage point greater than) the
Mortgage Rate and Net Mortgage Rate, respectively, of the Deleted Mortgage Loan
as of the date of substitution, (iii) have a Loan-to-Value Ratio at the time of
substitution no higher than that of the Deleted Mortgage Loan at the time of
substitution, (iv) have a remaining term to maturity not greater than (and not
more than one year less than) that of the Deleted Mortgage Loan, (v) comply with
all of the representations and warranties made by such Affiliated Seller as of
the date of substitution, and (vi) be covered under a primary insurance policy
if such Mortgage Loan has a Loan-to-Value Ratio greater than 80%. The related
purchase agreement may include additional requirements relating to ARM Loans or
other specific types of Mortgage Loans, or additional provisions relating to
meeting the foregoing requirements on an aggregate basis where a number of
substitutions occur contemporaneously. Unless otherwise specified in the related
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Prospectus Supplement, an Unaffiliated Seller will have no option to substitute
for a Mortgage Loan that it is obligated to repurchase in connection with a
breach of a representation and warranty.
The Master Servicer will be required under the applicable Servicing
Agreement to use reasonable efforts to enforce this purchase or substitution
obligation for the benefit of the Indenture Trustee and the Securityholders,
following such practices it would employ in its good faith business judgment and
which are normal and usual in its general mortgage servicing activities;
provided, however, that this purchase or substitution obligation will not become
an obligation of the Master Servicer in the event the applicable Seller fails to
honor such obligation. In instances where a Seller is unable, or disputes its
obligation, to purchase affected Mortgage Loans, the Master Servicer, employing
the standards set forth in the preceding sentence, may negotiate and enter into
one or more settlement agreements with such Seller that could provide for, among
other things, the purchase of only a portion of the affected Mortgage Loans. Any
such settlement could lead to losses on the Mortgage Loans which would be borne
by the related Securities. In accordance with the above described practices, the
Master Servicer will not be required to enforce any purchase obligation of a
Seller arising from any misrepresentation by the Seller, if the Master Servicer
determines in the reasonable exercise of its business judgment that the matters
related to such misrepresentation did not directly cause or are not likely to
directly cause a loss on the related Mortgage Loan. If the Seller fails to
repurchase and no breach of any other party's representations has occurred, the
Seller's purchase obligation will not become an obligation of the Company or any
other party. In the case of a Designated Seller Transaction where the Seller
fails to repurchase a Mortgage Loan and neither the Company nor any other entity
has assumed the representations and warranties, such repurchase obligation of
the Seller will not become an obligation of the Company or any other party.
Unless otherwise specified in the related Prospectus Supplement, the foregoing
obligations will constitute the sole remedies available to Securityholders or
the Indenture Trustee for a breach of any representation by a Seller or for any
other event giving rise to such obligations as described above.
Neither the Company nor the Master Servicer will be obligated to
purchase a Mortgage Loan if a Seller defaults on its obligation to do so, and no
assurance can be given that the Sellers will carry out such purchase
obligations. Such a default by a Seller is not a default by the Company or by
the Master Servicer. However, to the extent that a breach of the representations
and warranties of a Seller also constitutes a breach of a representation made by
the Company or the Master Servicer, as described below under "Description of the
Bonds--Assignment of Trust Fund Assets," the Company or the Master Servicer may
have a purchase or substitution obligation. Any Mortgage Loan not so purchased
or substituted for shall remain in the related Trust Fund and any losses related
thereto shall be allocated to the related credit enhancement, to the extent
available, and otherwise to one or more classes of the related series of Bonds.
If a person other than a Seller makes the representations and
warranties referred to in the first paragraph of this "--Representations by
Sellers" section, or a person other than a Seller is responsible for
repurchasing or replacing any Mortgage Loan in connection with a breach of such
representations and warranties, the identity of such person will be specified in
the related Prospectus Supplement.
SERVICING OF MORTGAGE LOANS
GENERAL
The Mortgage Loans included in each Mortgage Pool will be serviced and
administered pursuant to a Servicing Agreement. A form of Servicing Agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. However, the provisions of each Servicing Agreement will
vary depending upon the nature of the related Mortgage Pool. The following
summaries describe certain servicing-related provisions that may appear in a
Servicing Agreement for a Mortgage
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Pool that includes Mortgage Loans. The related Prospectus Supplement will
describe any servicingrelated provision of such a Servicing Agreement that
materially differs from the description thereof contained in this Prospectus.
The summaries herein do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
related Servicing Agreement and the description of such provisions in the
related Prospectus Supplement.
THE MASTER SERVICER
The master servicer (the "Master Servicer"), if any, for a series of
Bonds will be named in the related Prospectus Supplement and may be an affiliate
of the Company. The Master Servicer is required to maintain a fidelity bond and
errors and omissions policy with respect to its officers and employees and other
persons acting on behalf of the Master Servicer in connection with its
activities under a Servicing Agreement.
COLLECTION AND OTHER SERVICING PROCEDURES; MORTGAGE LOAN MODIFICATIONS
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer for any Mortgage Pool, directly or through Subservicers, will be
obligated under the Servicing Agreement to service and administer the Mortgage
Loans in such Mortgage Pool for the benefit of the related Securityholders, in
accordance with applicable law and the terms of such Servicing Agreement, such
Mortgage Loans and any instrument of credit enhancement included in the related
Trust Fund, and, to the extent consistent with the foregoing, in the same manner
as would prudent institutional mortgage lenders servicing comparable mortgage
loans for their own account in the jurisdictions where the related Mortgaged
Properties are located. Subject to the foregoing, the Master Servicer will have
full power and authority to do any and all things in connection with such
servicing and administration that it may deem necessary and desirable.
As part of its servicing duties, a Master Servicer will be required to
make reasonable efforts to collect all payments called for under the terms and
provisions of the Mortgage Loans that it services and will be obligated to
follow such collection procedures as it would follow with respect to mortgage
loans that are comparable to such Mortgage Loans and held for its own account,
provided such procedures are consistent with the terms of the related Servicing
Agreement, including the servicing standard specified therein and generally
described in the preceding paragraph (as such may be more particularly described
in the related Prospectus Supplement, the "Servicing Standard"), and do not
impair recovery under any instrument of credit enhancement included in the
related Trust Fund. Consistent with the foregoing, the Master Servicer will be
permitted, in its discretion, to waive any Prepayment Premium, late payment
charge or other charge in connection with any Mortgage Loan.
Under a Servicing Agreement, a Master Servicer will be granted certain
discretion to extend relief to Mortgagors whose payments become delinquent. In
the case of Single Family Loans and Contracts, a Master Servicer may, among
other things, grant a period of temporary indulgence (generally up to four
months) to a Mortgagor or may enter into a liquidating plan providing for
repayment by such Mortgagor of delinquent amounts within a specified period
(generally up to one year) from the date of execution of the plan. However,
unless otherwise specified in the related Prospectus Supplement, the Master
Servicer must first determine that any such waiver or extension will not impair
the coverage of any related insurance policy or materially adversely affect the
security for such Mortgage Loan. In addition, unless otherwise specified in the
related Prospectus Supplement, if a material default occurs or a payment default
is reasonably foreseeable with respect to a Multifamily Loan, the Master
Servicer will be permitted, subject to any specific limitations set forth in the
related Servicing Agreement and described in the related Prospectus Supplement,
to modify, waive or amend any term of such Mortgage Loan, including deferring
payments, extending the stated maturity date or otherwise adjusting the payment
schedule, provided that such modification, waiver or amendment (i) is reasonably
likely to produce a greater recovery with
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respect to such Mortgage Loan on a present value basis than would liquidation
and (ii) will not adversely affect the coverage under any applicable instrument
of credit enhancement.
In the case of Multifamily Loans, a Mortgagor's failure to make
required Mortgage Loan payments may mean that operating income is insufficient
to service the mortgage debt, or may reflect the diversion of that income from
the servicing of the mortgage debt. In addition, a Mortgagor under a Multifamily
Loan that is unable to make Mortgage Loan payments may also be unable to make
timely payment of taxes and otherwise to maintain and insure the related
Mortgaged Property. In general, the related Master Servicer will be required to
monitor any Multifamily Loan that is in default, evaluate whether the causes of
the default can be corrected over a reasonable period without significant
impairment of the value of the related Mortgaged Property, initiate corrective
action in cooperation with the Mortgagor if cure is likely, inspect the related
Mortgaged Property and take such other actions as are consistent with the
Servicing Standard. A significant period of time may elapse before the Master
Servicer is able to assess the success of any such corrective action or the need
for additional initiatives. The time within which the Master Servicer can make
the initial determination of appropriate action, evaluate the success of
corrective action, develop additional initiatives, institute foreclosure
proceedings and actually foreclose (or accept a deed to a Mortgaged Property in
lieu of foreclosure) on behalf of the Securityholders of the related series may
vary considerably depending on the particular Multifamily Loan, the Mortgaged
Property, the Mortgagor, the presence of an acceptable party to assume the
Multifamily Loan and the laws of the jurisdiction in which the Mortgaged
Property is located. If a Mortgagor files a bankruptcy petition, the Master
Servicer may not be permitted to accelerate the maturity of the related
Multifamily Loan or to foreclose on the Mortgaged Property for a considerable
period of time. See "Certain Legal Aspects of Mortgage Loans."
Certain of the Mortgage Loans in a Mortgage Pool may contain a
due-on-sale clause that entitles the lender to accelerate payment of the
Mortgage Loan upon any sale or other transfer of the related Mortgaged Property
made without the lender's consent. Certain of the Multifamily Loans in a
Mortgage Pool may also contain a due-on-encumbrance clause that entitles the
lender to accelerate the maturity of the Mortgage Loan upon the creation of any
other lien or encumbrance upon the Mortgaged Property. In any case in which
property subject to a Single Family Loan or Contract is being conveyed by the
Mortgagor, unless the related Prospectus Supplement provides otherwise, the
Master Servicer will in general be obligated, to the extent it has knowledge of
such conveyance, to exercise its rights to accelerate the maturity of such
Mortgage Loan under any due-on-sale clause applicable thereto, but only if the
exercise of such rights is permitted by applicable law and only to the extent it
would not adversely affect or jeopardize coverage under any Primary Insurance
Policy or applicable credit enhancement arrangements. If the Master Servicer is
prevented from enforcing such due-on-sale clause under applicable law or if the
Master Servicer determines that it is reasonably likely that a legal action
would be instituted by the related Mortgagor to avoid enforcement of such
due-on-sale clause, the Master Servicer will enter into an assumption and
modification agreement with the person to whom such property has been or is
about to be conveyed, pursuant to which such person becomes liable under the
Mortgage Loan subject to certain specified conditions. The original Mortgagor
may be released from liability on a Single Family Loan or Contract if the Master
Servicer shall have determined in good faith that such release will not
adversely affect the collectability of the Mortgage Loan. Unless otherwise
provided in the related Prospectus Supplement, the Master Servicer will
determine whether to exercise any right the Owner Trustee may have under any
due-on-sale or due-on-encumbrance provision in a Multifamily Loan in a manner
consistent with the Servicing Standard. Unless otherwise specified in the
related Prospectus Supplement, the Master Servicer will be entitled to retain as
additional servicing compensation any fee collected in connection with the
permitted transfer of a Mortgaged Property. See "Certain Legal Aspects of
Mortgage Loans--Enforceability of Certain Provisions." FHA Loans contain no such
clause and may be assumed by the purchaser of the mortgaged property.
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Mortgagors may, from time to time, request partial releases of the
Mortgaged Properties, easements, consents to alteration or demolition and other
similar matters. The Master Servicer may approve such a request if it has
determined, exercising its good faith business judgment in the same manner as it
would if it were the owner of the related Mortgage Loan, that such approval will
not adversely affect the security for, or the timely and full collectability of,
the related Mortgage Loan. Any fee collected by the Master Servicer for
processing such request will be retained by the Master Servicer as additional
servicing compensation.
In the case of Single Family and Multifamily Loans secured by junior
liens on the related Mortgaged Properties, unless otherwise provided in the
related Prospectus Supplement, the Master Servicer will be required to file (or
cause to be filed) of record a request for notice of any action by a superior
lienholder under the Senior Lien for the protection of the related Indenture
Trustee's interest, where permitted by local law and whenever applicable state
law does not require that a junior lienholder be named as a party defendant in
foreclosure proceedings in order to foreclose such junior lienholder's equity of
redemption. Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer also will be required to notify any superior lienholder in
writing of the existence of the Mortgage Loan and request notification of any
action (as described below) to be taken against the Mortgagor or the Mortgaged
Property by the superior lienholder. If the Master Servicer is notified that any
superior lienholder has accelerated or intends to accelerate the obligations
secured by the related Senior Lien, or has declared or intends to declare a
default under the mortgage or the promissory note secured thereby, or has filed
or intends to file an election to have the related Mortgaged Property sold or
foreclosed, then, unless otherwise specified in the related Prospectus
Supplement, the Master Servicer will be required to take, on behalf of the
related Trust Fund, whatever actions are necessary to protect the interests of
the related Securityholders, and/or to preserve the security of the related
Mortgage Loan. Unless otherwise specified in the related Prospectus Supplement,
the Master Servicer will be required to advance the necessary funds to cure the
default or reinstate the superior lien, if such advance is in the best interests
of the related Securityholders and the Master Servicer determines such advances
are recoverable out of payments on or proceeds of the related Mortgage Loan.
The Master Servicer for any Mortgage Pool will also be required to
perform other customary functions of a servicer of comparable loans, including
maintaining escrow or impound accounts for payment of taxes, insurance premiums
and similar items, or otherwise monitoring the timely payment of those items;
adjusting Mortgage Rates on ARM Loans; maintaining Buydown Accounts; supervising
foreclosures and similar proceedings; managing Mortgage Properties acquired
through or in lieu of foreclosure (each, an "REO Property"); and maintaining
servicing records relating to the Mortgage Loans in such Mortgage Pool. Unless
otherwise specified in the related Prospectus Supplement, the Master Servicer
will be responsible for filing and settling claims in respect of particular
Mortgage Loans under any applicable instrument of credit enhancement. See
"Description of Credit Enhancement."
SUBSERVICERS
A Master Servicer may delegate its servicing obligations in respect of
the Mortgage Loans serviced by it to one or more third-party servicers (each, a
"Subservicer"), but the Master Servicer will remain liable for such obligations
under the related Servicing Agreement unless otherwise provided in the related
Prospectus Supplement. Unless otherwise provided in the related Prospectus
Supplement, the Master Servicer will be solely liable for all fees owed by it to
any Subservicer, irrespective of whether the Master Servicer's compensation
pursuant to the related Servicing Agreement is sufficient to pay such fees. Each
Subservicer will be entitled to reimbursement for certain expenditures which it
makes, generally to the same extent as would the Master Servicer for making the
same expenditures. See "--Servicing and Other Compensation and Payment of
Expenses; Spread" below and "Description of the Bonds--The Collection Account."
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SPECIAL SERVICERS
If and to the extent specified in the related Prospectus Supplement, a
special servicer (a "Special Servicer") may be a party to the related Servicing
Agreement or may be appointed by the Master Servicer or another specified party
to perform certain specified duties in respect of servicing the related Mortgage
Loans that would otherwise be performed by the Master Servicer (for example, the
workout and/or foreclosure of defaulted Mortgage Loans). The rights and
obligations of any Special Servicer will be specified in the related Prospectus
Supplement, and the Master Servicer will be liable for the performance of a
Special Servicer only if, and to the extent, set forth in such Prospectus
Supplement.
REALIZATION UPON OR SALE OF DEFAULTED MORTGAGE LOANS
Except as described below or in the related Prospectus Supplement, the
Master Servicer will be required, in a manner consistent with the Servicing
Standard, to foreclose upon or otherwise comparably convert the ownership of
properties securing such of the Mortgage Loans in the related Mortgage Pool as
come into and continue in default and as to which no satisfactory arrangements
can be made for collection of delinquent payments. In connection therewith, the
Master Servicer will be authorized to institute foreclosure proceedings,
exercise any power of sale contained in the related Mortgage, obtain a deed in
lieu of foreclosure, or otherwise acquire title to the related Mortgaged
Property, by operation of law or otherwise, if such action is consistent with
the Servicing Standard. The Master Servicer's actions in this regard must be
conducted, however, in a manner that will permit recovery under any instrument
of credit enhancement included in the related Trust Fund. In addition, the
Master Servicer will not be required to expend its own funds in connection with
any foreclosure or to restore any damaged property unless it shall determine
that (i) such foreclosure and/or restoration will increase the proceeds of
liquidation of the Mortgage Loan to the related Securityholders after
reimbursement to itself for such expenses and (ii) such expenses will be
recoverable to it from related Insurance Proceeds, Liquidation Proceeds or
amounts drawn out of any fund or under any instrument constituting credit
enhancement (respecting which it shall have priority for purposes of withdrawal
from the Collection Account in accordance with the Servicing Agreement).
Notwithstanding the foregoing, unless otherwise specified in the
related Prospectus Supplement, the Master Servicer may not acquire title to any
Multifamily Property securing a Mortgage Loan or take any other action that
would cause the related Indenture Trustee, for the benefit of Securityholders of
the related series, or any other specified person to be considered to hold title
to, to be a "mortgagee-inpossession" of, or to be an "owner" or an "operator" of
such Mortgaged Property within the meaning of certain federal environmental
laws, unless the Master Servicer has previously determined, based on a report
prepared by a person who regularly conducts environmental audits (which report
will be an expense of the Trust Fund), that either:
(i) the Mortgaged Property is in compliance with applicable
environmental laws and regulations or, if not, that taking such actions
as are necessary to bring the Mortgaged Property into compliance
therewith is reasonably likely to produce a greater recovery on a
present value basis than not taking such actions; and
(ii) there are no circumstances or conditions present at the
Mortgaged Property that have resulted in any contamination for which
investigation, testing, monitoring, containment, clean-up or
remediation could be required under any applicable environmental laws
and regulations or, if such circumstances or conditions are present for
which any such action could be required, taking such actions with
respect to the Mortgaged Property is reasonably likely to produce a
greater recovery on a present value basis than not taking such actions.
See "Certain Legal Aspects of Mortgage Loans--Environmental
Legislation."
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In addition, unless otherwise specified in the related Prospectus
Supplement, the Master Servicer will not be obligated to foreclose upon or
otherwise convert the ownership of any Single Family Property securing a
Mortgage Loan if it has received notice or has actual knowledge that such
property may be contaminated with or affected by hazardous wastes or hazardous
substances; however, no environmental testing will generally be required. The
Master Servicer will not be liable to the Bondholders of the related series if,
based on its belief that no such contamination or effect exists, the Master
Servicer forecloses on a Mortgaged Property and takes title to such Mortgaged
Property, and thereafter such Mortgaged Property is determined to be so
contaminated or affected.
With respect to a Mortgage Loan in default, the Master Servicer may
pursue foreclosure (or similar remedies) concurrently with pursuing any remedy
for a breach of a representation and warranty. However, the Master Servicer is
not required to continue to pursue both such remedies if it determines that one
such remedy is more likely to result in a greater recovery. Upon the first to
occur of final liquidation (by foreclosure or otherwise) and a repurchase or
substitution pursuant to a breach of a representation and warranty, such
Mortgage Loan will be removed from the related Trust Fund if it has not been
removed previously. The Master Servicer may elect to treat a defaulted Mortgage
Loan as having been finally liquidated if substantially all amounts expected to
be received in connection therewith have been received. Any additional
liquidation expenses relating to such Mortgage Loan thereafter incurred will be
reimbursable to the Master Servicer (or any Subservicer) from any amounts
otherwise distributable to holders of Securities of the related series, or may
be offset by any subsequent recovery related to such Mortgage Loan.
Alternatively, for purposes of determining the amount of related Liquidation
Proceeds to be distributed to Securityholders, the amount of any Realized Loss
or the amount required to be drawn under any applicable form of credit support,
the Master Servicer may take into account minimal amounts of additional receipts
expected to be received, as well as estimated additional liquidation expenses
expected to be incurred in connection with such defaulted Mortgage Loan. With
respect to certain series of Bonds, if so provided in the related Prospectus
Supplement, the applicable form of credit enhancement may provide, to the extent
of coverage thereunder, that a defaulted Mortgage Loan will be removed from the
Trust Fund prior to the final liquidation thereof. In addition, a Servicing
Agreement may grant to the Master Servicer, a Special Servicer, a provider of
credit enhancement and/or the holder or holders of certain classes of Securities
of the related series a right of first refusal to purchase from the Trust Fund,
at a predetermined purchase price (which, if insufficient to fully fund the
entitlements of Securityholders to principal and interest thereon, will be
specified in the related Prospectus Supplement), any Mortgage Loan as to which a
specified number of scheduled payments are delinquent. Furthermore, a Servicing
Agreement may authorize the Master Servicer to sell any defaulted Mortgage Loan
if and when the Master Servicer determines, consistent with the Servicing
Standard, that such a sale would produce a greater recovery to Securityholders
on a present value basis than would liquidation of the related Mortgaged
Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure, deed in lieu of foreclosure or otherwise, the deed or certificate
of sale will be issued to the Indenture Trustee or to its nominee on behalf of
Securityholders of the related series. Notwithstanding any such acquisition of
title and cancellation of the related Mortgage Loan, such Mortgage Loan (an "REO
Mortgage Loan") will be considered for most purposes to be an outstanding
Mortgage Loan held in the Trust Fund until such time as the Mortgaged Property
is sold and all recoverable Liquidation Proceeds and Insurance Proceeds have
been received with respect to such defaulted Mortgage Loan (a "Liquidated
Mortgage Loan"). For purposes of calculations of amounts distributable to
Securityholders in respect of an REO Mortgage Loan, unless otherwise specified
in the related Prospectus Supplement, the amortization schedule in effect at the
time of any such acquisition of title (before any adjustment thereto by reason
of any bankruptcy or any similar proceeding or any moratorium or similar waiver
or grace period) will be deemed to have continued in effect (and, in the case of
an ARM Loan, such amortization schedule will be deemed to have adjusted in
accordance with any interest rate changes occurring on any adjustment date
therefor) so long as such REO Mortgage Loan is considered to remain in the Trust
Fund.
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If Liquidation Proceeds collected with respect to a defaulted Mortgage
Loan are less than the outstanding principal balance of the defaulted Mortgage
Loan plus interest accrued thereon plus the aggregate amount of reimbursable
expenses incurred by the Master Servicer with respect to such Mortgage Loan, and
the shortfall is not covered under any applicable instrument or fund
constituting credit enhancement, the Trust Fund will realize a loss in the
amount of such difference. The Master Servicer will be entitled to reimburse
itself from the Liquidation Proceeds recovered on any defaulted Mortgage Loan,
prior to the distribution of such Liquidation Proceeds to Securityholders,
amounts that represent unpaid servicing compensation in respect of the Mortgage
Loan, unreimbursed servicing expenses incurred with respect to the Mortgage Loan
and any unreimbursed advances of delinquent payments made with respect to the
Mortgage Loan. If so provided in the related Prospectus Supplement, the
applicable form of credit enhancement may provide for reinstatement subject to
certain conditions in the event that, following the final liquidation of a
Mortgage Loan and a draw under such credit enhancement, subsequent recoveries
are received. In addition, if a gain results from the final liquidation of a
defaulted Mortgage Loan or an REO Mortgage Loan which is not required by law to
be remitted to the related Mortgagor, the Master Servicer will be entitled to
retain such gain as additional servicing compensation unless the related
Prospectus Supplement provides otherwise. For a description of the Master
Servicer's (or other specified person's) obligations to maintain and make claims
under applicable forms of credit enhancement and insurance relating to the
Mortgage Loans, see "Description of Credit Enhancement" and "Primary Mortgage
Insurance, Hazard Insurance; Claims Thereunder."
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES; SPREAD
The principal servicing compensation to be paid to the Master Servicer
in respect of its master servicing activities for a series of Bonds will be
equal to the percentage per annum described in the related Prospectus Supplement
(which may vary under certain circumstances) of the outstanding principal
balance of each Mortgage Loan, and such compensation will be retained by it on a
monthly or other periodic basis from collections of interest on such Mortgage
Loan in the related Trust Fund at the time such collections are deposited into
the applicable Collection Account. In addition, unless otherwise specified in
the related Prospectus Supplement, the Master Servicer will retain all
Prepayment Premiums, assumption fees and late payment charges, to the extent
collected from Mortgagors, and any benefit which may accrue as a result of the
investment of funds in the applicable Collection Account. Any additional
servicing compensation will be described in the related Prospectus Supplement.
Any Subservicer will receive a portion of the Master Servicer's compensation as
its sub-servicing compensation.
In addition to amounts payable to any Subservicer, the Master Servicer
will pay or cause to be paid certain ongoing expenses associated with each Trust
Fund and incurred by it in connection with its responsibilities under the
Servicing Agreement, including, if so specified in the related Prospectus
Supplement, payment of any fee or other amount payable in respect of any
alternative credit enhancement arrangements, payment of the fees and
disbursements of the Owner Trustee and the Indenture Trustee, any custodian
appointed by the Owner Trustee and the Bond Registrar, and payment of expenses
incurred in enforcing the obligations of Subservicers and Sellers. The Master
Servicer will be entitled to reimbursement of expenses incurred in enforcing the
obligations of Subservicers and Sellers under certain limited circumstances. In
addition, the Master Servicer will be entitled to reimbursements for certain
expenses incurred by it in connection with Liquidated Mortgage Loans and in
connection with the restoration of Mortgaged Properties, such right of
reimbursement being prior to the rights of Securityholders to receive any
related Liquidation Proceeds or Insurance Proceeds. If and to the extent so
provided in the related Prospectus Supplement, the Master Servicer will be
entitled to receive interest on amounts advanced to cover such reimbursable
expenses for the period that such advances are outstanding at the rate specified
in such Prospectus Supplement, and the Master Servicer will be entitled to
payment of such interest periodically from general collections on the Mortgage
Loans in the related Trust Fund prior to any payment to Securityholders or as
otherwise provided in the related Servicing Agreement and described in such
Prospectus Supplement.
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The Prospectus Supplement for a series of Bonds will specify whether
there will be any Spread retained. Any such Spread will be a specified portion
of the interest payable on each Mortgage Loan in a Mortgage Pool and will not be
part of the related Trust Fund. Any such Spread will be established on a
loan-by-loan basis and the amount thereof with respect to each Mortgage Loan in
a Mortgage Pool will be specified on an exhibit to the related Servicing
Agreement. Any partial recovery of interest in respect of a Mortgage Loan will
be allocated between the owners of any Spread and the holders of classes of
Securities entitled to payments of interest as provided in the related
Prospectus Supplement and the applicable Servicing Agreement.
If and to the extent provided in the related Prospectus Supplement, the
Master Servicer may be required to apply a portion of the servicing compensation
otherwise payable to it in respect of any period to any Prepayment Interest
Shortfalls resulting from Mortgagor prepayments during such period. See "Yield
Considerations."
EVIDENCE AS TO COMPLIANCE
Each Servicing Agreement will provide that on or before a specified
date in each year, beginning the first such date that is at least a specified
number of months after the Cut-off Date, a firm of independent public
accountants will furnish a statement to the Company and the Indenture Trustee to
the effect that, on the basis of an examination by such firm conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC, the
servicing of mortgage loans under agreements (including the related Servicing
Agreement) substantially similar to each other was conducted in compliance with
such agreements except for such significant exceptions or errors in records
that, in the opinion of the firm, the Uniform Single Attestation Program for
Mortgage Bankers or the Audit Program for Mortgages serviced for FHLMC requires
it to report. In rendering its statement such firm may rely, as to the matters
relating to the direct servicing of mortgage loans by Subservicers, upon
comparable statements for examinations conducted substantially in compliance
with the Uniform Single Attestation Program for Mortgage Bankers or the Audit
Program for Mortgages serviced for FHLMC (rendered within one year of such
statement) of firms of independent public accountants with respect to those
Subservicers which also have been the subject of such an examination.
Each Servicing Agreement will also provide for delivery to the
Indenture Trustee, on or before a specified date in each year, of an annual
statement signed by one or more officers of the Master Servicer to the effect
that, to the best knowledge of each such officer, the Master Servicer has
fulfilled in all material respects its obligations under the Servicing Agreement
throughout the preceding year or, if there has been a material default in the
fulfillment of any such obligation, such statement shall specify each such known
default and the nature and status thereof. Such statement may be provided as a
single form making the required statements as to more than one Servicing
Agreement.
Unless otherwise specified in the related Prospectus Supplement, copies
of the annual accountants' statement and the annual statement of officers of a
Master Servicer may be obtained by Bondholders without charge upon written
request to the Master Servicer or the Indenture Trustee.
DESCRIPTION OF THE BONDS
GENERAL
The Bonds will be issued in series. Each series of Bonds (or, in
certain instances, two or more series of Bonds) will be issued pursuant to an
Indenture between the Company and the Indenture Trustee, similar to the form
filed as an exhibit to the Registration Statement of which this Prospectus is a
part.
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Each Indenture, Trust Agreement and Servicing Agreement will be filed with the
Securities and Exchange Commission as an exhibit to a Current Report on Form
8-K. The following summaries (together with additional summaries under "The
Agreements" below) describe certain provisions relating to the Bonds common to
each of the Agreements. The summaries do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all of the
provisions of the Agreements for each Trust Fund and the related Prospectus
Supplement. Wherever particular sections or defined terms of the Agreements are
referred to herein, such sections or defined terms are thereby incorporated
herein by reference.
Unless otherwise specified in the related Prospectus Supplement, Bonds
of each series covered by a particular Indenture will evidence indebtedness of
the related Issuer secured by a separate Trust Fund. A Trust Fund will consist
of, to the extent provided in the Indenture: (i) such Mortgage Loans (and the
related mortgage documents) or interests therein underlying a particular series
of Bonds as from time to time are subject to the Indenture, exclusive of, if
specified in the related Prospectus Supplement, any Spread or other interest
retained by the Company or any of its affiliates with respect to each such
Mortgage Loan; (ii) such assets including, without limitation, all payments and
collections in respect of the Mortgage Loans due after the related Cut-off Date,
as from time to time are identified as deposited in respect thereof in the
related Collection Account as described below; (iii) any property acquired in
respect of Mortgage Loans in the Trust Fund, whether through foreclosure of such
Mortgage Loans or by deed in lieu of foreclosure or otherwise; (iv) hazard
insurance policies, Primary Insurance Policies and FHA insurance policies, if
any, maintained in respect of Mortgage Loans in the Trust Fund and certain
proceeds of such policies; (v) certain rights of the Company under any Mortgage
Loan Purchase Agreement, including in respect of any representations and
warranties therein; and (vi) any combination, as and to the extent specified in
the related Prospectus Supplement, of a Financial Guaranty Insurance Policy,
Letter of Credit, Purchase Obligation, Mortgage Pool Insurance Policy, Special
Hazard Insurance Policy, Bankruptcy Bond or other type of credit enhancement as
described under "Description of Credit Enhancement." To the extent that any
Trust Fund includes certificates of interest or participations in Mortgage
Loans, the related Prospectus Supplement will describe the material terms and
conditions of such certificates or participations.
Each series of Bonds may consist of any one or a combination of the
following: (i) a single class of Bonds; (ii) two or more classes of Bonds, one
or more classes of which will be senior ("Senior Bonds") in right of payment to
one or more of the other classes of Bonds and to the related Certificates, if
any (collectively, the "Subordinate Securities"), and as to which certain
classes of Bonds may be senior to other classes of Senior Bonds or Subordinate
Securities, as described in the respective Prospectus Supplement (any such
series, a "Senior/Subordinate Series"); (iii) two or more classes of Bonds, one
or more classes ("Strip Bonds") of which will be entitled to (a) principal
distributions, with disproportionate, nominal or no interest distributions or
(b) interest distributions, with disproportionate, nominal or no principal
distributions; (iv) two or more classes of Bonds which differ as to the timing,
sequential order, rate, pass-through rate or amount of distributions of
principal or interest or both, or as to which distributions of principal or
interest or both on any such class may be made upon the occurrence of specified
events, in accordance with a schedule or formula (including "planned
amortization classes" and "targeted amortization classes"), or on the basis of
collections from designated portions of the Mortgage Pool, and which classes may
include one or more classes of Bonds ("Accrual Bonds") with respect to which
certain accrued interest will not be distributed but rather will be added to the
principal balance thereof on each Distribution Date for the period described in
the related Prospectus Supplement; or (v) other types of classes of Bonds, as
described in the related Prospectus Supplement. As to each series, all Bonds
offered hereby (the "Bonds") will be rated in one of the four highest rating
categories by one or more Rating Agencies. Credit support for the Bonds of each
series may be provided by a Financial Guaranty Insurance Policy, Mortgage Pool
Insurance Policy, Special Hazard Insurance Policy, Bankruptcy Bond, Letter of
Credit, Purchase Obligation, Overcollateralization, Reserve Fund or other
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credit enhancement as described under "Description of Credit Enhancement," by
the subordination of one or more other classes of Subordinate Securities or by
any combination of the foregoing.
FORM OF BONDS
Unless otherwise specified in the related Prospectus Supplement, the
Bonds of each series will be issued as physical certificates in fully registered
form only in the denominations specified in the related Prospectus Supplement,
and will be transferrable and exchangeable at the corporate trust office of the
registrar (the "Bond Registrar") named in the related Prospectus Supplement. No
service charge will be made for any registration of exchange or transfer of
Bonds, but the Indenture Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge. The term "Bondholder" or "Holder" as
used herein refers to the entity whose name appears on the records of the Bond
Registrar (consisting of or including the "Bond Register") as the registered
holder of a Bond, except as otherwise indicated in the related Prospectus
Supplement.
If so specified in the related Prospectus Supplement, specified classes
of a series of Bonds will be initially issued through the book-entry facilities
of The Depository Trust Company ("DTC"). As to any such class of Bonds ("DTC
Registered Bonds"), the record Holder of such Bonds will be DTC's nominee. DTC
is a limited-purpose trust company organized under the laws of the State of New
York, which holds securities for its participating organizations
("Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in the
accounts of Participants. Participants include securities brokers and dealers,
banks, trust companies and clearing corporations and may include certain other
organizations. Other institutions that are not Participants but clear through or
maintain a custodial relationship with Participants (such institutions,
"Intermediaries") have indirect access to DTC's clearance system.
Unless otherwise specified in the related Prospectus Supplement, no
person acquiring an interest in any DTC Registered Bonds (each such person, a
"Beneficial Owner") will be entitled to receive a Bond representing such
interest in registered, certificated form, unless either (i) DTC ceases to act
as depository in respect thereof and a successor depository is not obtained, or
(ii) the Company elects in its sole discretion to discontinue the registration
of such Bonds through DTC. Prior to any such event, Beneficial Owners will not
be recognized by the Indenture Trustee or the Master Servicer as Holders of the
related Bonds for purposes of the related Indenture, and Beneficial Owners will
be able to exercise their rights as owners of such Bonds only indirectly through
DTC, Participants and Intermediaries. Any Beneficial Owner that desires to
purchase, sell or otherwise transfer any interest in DTC Registered Bonds may do
so only through DTC, either directly if such Beneficial Owner is a Participant
or indirectly through Participants and, if applicable, Intermediaries. Pursuant
to the procedures of DTC, transfers of the beneficial ownership of any DTC
Registered Bonds will be required to be made in minimum denominations specified
in the related Prospectus Supplement. The ability of a Beneficial Owner to
pledge DTC Registered Bonds to persons or entities that are not Participants in
the DTC system, or to otherwise act with respect to such Bonds, may be limited
because of the lack of physical certificates evidencing such Bonds and because
DTC may act only on behalf of Participants.
Distributions in respect of the DTC Registered Bonds will be forwarded
by the Indenture Trustee or other specified person to DTC, and DTC will be
responsible for forwarding such payments to Participants, each of which will be
responsible for disbursing such payments to the Beneficial Owners it represents
or, if applicable, to Intermediaries. Accordingly, Beneficial Owners may
experience delays in the receipt of payments in respect of their Bonds. Under
DTC's procedures, DTC will take actions permitted to be taken by Holders of any
class of DTC Registered Bonds under the Indenture only at the direction of one
or more Participants to whose account the DTC Registered Bonds are credited and
whose aggregate holdings represent no less than any minimum amount of Percentage
Interests or voting rights required therefor. DTC may take conflicting actions
with respect to any action of Holders of Bonds of
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any Class to the extent that Participants authorize such actions. None of the
Master Servicer, the Company, the Indenture Trustee or any of their respective
affiliates will have any liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the DTC Registered
Bonds, or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
ASSIGNMENT OF TRUST FUND ASSETS
At the time of issuance of a series of Bonds, the Company will assign,
or cause to be assigned, to the related Indenture Trustee (or its nominee),
without recourse, the Mortgage Loans being included in the related Trust Fund,
together with, unless otherwise specified in the related Prospectus Supplement,
all principal and interest received on or with respect to such Mortgage Loans
after the Cut-off Date, other than principal and interest due on or before the
Cut-off Date. If specified in the related Prospectus Supplement, the Company or
any of its affiliates may retain the Spread, if any, for itself or transfer the
same to others. Each Mortgage Loan will be identified in a schedule appearing as
an exhibit to the related Servicing Agreement. Such schedule will include, among
other things, information as to the principal balance of each Mortgage Loan in
the related Trust Fund as of the Cut-off Date, as well as information respecting
the Mortgage Rate, the currently scheduled monthly payment of principal and
interest, the maturity of the Mortgage Note and the Loan-to-Value Ratio at
origination or modification (without regard to any secondary financing).
As to each series of Bonds, the foregoing assignment of the Mortgage
Loans to the Indenture Trustee will be made for the purpose of granting a
security interest in the Mortgage Loans to the Indenture Trustee to secure the
Bonds. As to any series of Bonds where the Issuer is an owner trust, immediately
prior to such pledge to the Indenture Trustee, the Company will convey ownership
of the Mortgage Loans to the Owner Trustee pursuant to the Trust Agreement.
In addition, unless otherwise specified in the related Prospectus
Supplement, the Company will, as to each Mortgage Loan (other than Contracts),
deliver, or cause to be delivered, to the related Indenture Trustee (or to the
custodian described below) the Mortgage Note endorsed, without recourse, either
in blank or to the order of the Indenture Trustee (or a nominee thereof), the
Mortgage with evidence of recording indicated thereon (except for any Mortgage
not returned from the public recording office), an assignment of the Mortgage in
blank or to the Indenture Trustee (or a nominee thereof) in recordable form,
together with any intervening assignments of the Mortgage with evidence of
recording thereon (except for any such assignment not returned from the public
recording office), and, if applicable, any riders or modifications to such
Mortgage Note and Mortgage, together with certain other documents at such times
as set forth in the related Servicing Agreement. Such assignments may be blanket
assignments covering Mortgages on Mortgaged Properties located in the same
county, if permitted by law. Notwithstanding the foregoing, a Trust Fund may
include Mortgage Loans where the original Mortgage Note is not delivered to the
Indenture Trustee if the Company delivers, or causes to be delivered, to the
related Indenture Trustee (or the custodian) a copy or a duplicate original of
the Mortgage Note, together with an affidavit certifying that the original
thereof has been lost or destroyed. In addition, if the Company cannot deliver,
with respect to any Mortgage Loan, the Mortgage or any intervening assignment
with evidence of recording thereon concurrently with the execution and delivery
of the related Servicing Agreement because of a delay caused by the public
recording office, the Company will deliver, or cause to be delivered, to the
related Indenture Trustee (or the custodian) a true and correct photocopy of
such Mortgage or assignment as submitted for recording. The Company will
deliver, or cause to be delivered, to the related Indenture Trustee (or the
custodian) such Mortgage or assignment with evidence of recording indicated
thereon after receipt thereof from the public recording office. If the Company
cannot deliver, with respect to any Mortgage Loan, the Mortgage or any
intervening assignment with evidence of recording thereon concurrently with the
execution and delivery of the related Servicing Agreement because such Mortgage
or assignment has been lost, the Company
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will deliver, or cause to be delivered, to the related Indenture Trustee (or the
custodian) a true and correct photocopy of such Mortgage or assignment with
evidence of recording thereon. Assignments of the Mortgage Loans to the
Indenture Trustee (or a nominee thereof) will be recorded in the appropriate
public recording office, except in states where, in the opinion of counsel
acceptable to the Indenture Trustee, such recording is not required to protect
the Indenture Trustee's interests in the Mortgage Loan against the claim of any
subsequent transferee or any successor to or creditor of the Company or the
originator of such Mortgage Loan, or except as otherwise specified in the
related Prospectus Supplement as to any series of Bonds. In addition, unless
specified in the related Prospectus Supplement, the Company will, as to each
Contract, deliver, or cause to be delivered, the original Contract endorsed,
without recourse, to the order of the Indenture Trustee and copies of documents
and instruments related to the Contract and the security interest in the
Manufactured Home securing the Contract, together with a blanket assignment to
the Indenture Trustee of all Contracts in the related Trust Fund and such
documents and instruments. In order to give notice of the right, title and
interest of the Bondholders to the Contracts, the Company will cause to be
executed and delivered to the Indenture Trustee a UCC-1 financing statement
identifying the Indenture Trustee as the secured party and identifying all
Contracts as collateral.
The Indenture Trustee (or the custodian hereinafter referred to) will
hold such documents in trust for the benefit of the related Securityholders, and
generally will review such documents within 90 days after receipt thereof in the
case of documents delivered concurrently with the execution and delivery of the
related Indenture, and within the time period specified in the related Indenture
in the case of all other documents delivered. Unless otherwise specified in the
related Prospectus Supplement, if any such document is found to be missing or
defective in any material respect, the Indenture Trustee (or such custodian)
will be required to promptly so notify the Master Servicer, the Company, and the
related Seller. If the related Seller does not cure the omission or defect
within a specified period after notice is given thereto by the Indenture
Trustee, and such omission or defect materially and adversely affects the
interests of Securityholders in the affected Mortgage Loan, then, unless
otherwise specified in the related Prospectus Supplement, the related Seller
will be obligated to purchase such Mortgage Loan from the Indenture Trustee at
its Purchase Price (or, if and to the extent it would otherwise be permitted to
do so for a breach of representation and warranty as described under "The
Mortgage Pools--Representations of Sellers," to substitute for such Mortgage
Loan). The Indenture Trustee will be obligated to enforce this obligation of the
Seller to the extent described above under "The Mortgage Pools--Representations
by Sellers," but there can be no assurance that the applicable Seller will
fulfill its obligation to purchase (or substitute for) the affected Mortgage
Loan as described above. Unless otherwise specified in the related Prospectus
Supplement, neither the Master Servicer nor the Company will be obligated to
purchase or substitute for such Mortgage Loan if the Seller defaults on its
obligation to do so. Unless otherwise specified in the related Prospectus
Supplement, this purchase or substitution obligation constitutes the sole remedy
available to the related Securityholders and the related Indenture Trustee for
omission of, or a material defect in, a constituent document. Any affected
Mortgage Loan not so purchased or substituted for shall remain in the related
Trust Fund.
The Indenture Trustee will be authorized at any time to appoint one or
more custodians pursuant to a custodial agreement to hold title to the Mortgage
Loans in any Mortgage Pool, and to maintain possession of and, if applicable, to
review, the documents relating to such Mortgage Loans, in any case as the agent
of the Indenture Trustee. The identity of any such custodian to be appointed on
the date of initial issuance of the Bonds will be set forth in the related
Prospectus Supplement. Any such custodian may be an affiliate of the Company or
the Master Servicer.
With respect to the Mortgage Loans in a Mortgage Pool, except in the
case of a Designated Seller Transaction or unless otherwise specified in the
related Prospectus Supplement, the Company will make certain representations and
warranties as to the types and geographical concentrations of such Mortgage
Loans and as to the accuracy, in all material respects, of certain identifying
information furnished to the related Indenture Trustee in respect of each such
Mortgage Loan (E.G., original Loan-to-Value Ratio,
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principal balance as of the Cut-off Date, Mortgage Rate and maturity). Upon a
breach of any such representation which materially and adversely affects the
interests of the Securityholders in a Mortgage Loan, the Company will be
obligated to cure the breach in all material respects, to purchase the Mortgage
Loan at its Purchase Price or, unless otherwise specified in the related
Prospectus Supplement, to substitute for such Mortgage Loan a Qualified
Substitute Mortgage Loan in accordance with the provisions for such substitution
by Affiliated Sellers as described above under "The Mortgage
Pools--Representations by Sellers." However, the Company will not be required to
repurchase or substitute for any Mortgage Loan in connection with a breach of a
representation and warranty if the substance of any such breach also constitutes
fraud in the origination of the related Mortgage Loan. Unless otherwise
specified in the related Prospectus Supplement, this purchase or substitution
obligation constitutes the sole remedy available to Securityholders or the
Indenture Trustee for such a breach of representation by the Company. Any
Mortgage Loan not so purchased or substituted for shall remain in the related
Trust Fund.
Pursuant to the related Servicing Agreement, the Master Servicer for
any Mortgage Pool, either directly or through Subservicers, will service and
administer the Mortgage Loans included in such Mortgage Pool and assigned to the
related Indenture Trustee as more fully set forth under "Servicing of Mortgage
Loans." The Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the Servicing Agreement.
COLLECTION ACCOUNT
GENERAL. The Master Servicer and/or the Indenture Trustee will, as to
each Trust Fund, establish and maintain or cause to be established and
maintained one or more separate accounts for the collection of payments on the
related Mortgage Loans constituting such Trust Fund (collectively, the
"Collection Account"), which will be established so as to comply with the
standards of each Rating Agency that has rated any one or more classes of Bonds
of the related series. A Collection Account may be maintained either as an
interest-bearing or a non-interest-bearing account, and the funds held therein
may be held as cash or invested in United States government securities and other
investment grade obligations specified in the related Servicing Agreement or
Indenture ("Permitted Investments"). Unless otherwise provided in the related
Prospectus Supplement, any interest or other income earned on funds in the
Collection Account will be paid to the related Master Servicer or Indenture
Trustee as additional compensation. If permitted by such Rating Agency or
Agencies and so specified in the related Prospectus Supplement, a Collection
Account may contain funds relating to more than one series of mortgage
pass-through certificates and may contain other funds representing payments on
mortgage loans owned by the related Master Servicer or serviced by it on behalf
of others.
DEPOSITS. Unless otherwise provided in the related Servicing Agreement
or Indenture and described in the related Prospectus Supplement, the related
Master Servicer, Indenture Trustee or Special Servicer will be required to
deposit or cause to be deposited in the Collection Account for each Trust Fund
within a certain period following receipt (in the case of collections and
payments), the following payments and collections received, or advances made, by
the Master Servicer, the Indenture Trustee or any Special Servicer subsequent to
the Cut-off Date with respect to the Mortgage Loans in such Trust Fund (other
than payments due on or before the Cut-off Date):
(i) all payments on account of principal, including principal
prepayments, on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage
Loans, including any default interest collected, in each case net of
any portion thereof retained by the Master Servicer, any Special
Servicer or Sub-Servicer as its servicing compensation or as
compensation to the Indenture Trustee, and further net of any Spread;
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(iii) all proceeds received under any hazard, title, primary
mortgage, FHA or other insurance policy that provides coverage with
respect to a particular Mortgaged Property or the related Mortgage Loan
(other than proceeds applied to the restoration of the property or
released to the related borrower in accordance with the customary
servicing practices of the Master Servicer (or, if applicable, a
Special Servicer) and/or the terms and conditions of the related
Mortgage (collectively, "Insurance Proceeds") and all other amounts
received and retained in connection with the liquidation of defaulted
Mortgage Loans or property acquired in respect thereof, by foreclosure
or otherwise ("Liquidation Proceeds"), together with the net operating
income (less reasonable reserves for future expenses) derived from the
operation of any Mortgaged Properties acquired by the Trust Fund
through foreclosure or otherwise;
(iv) any amounts paid under any instrument or drawn from any
fund that constitutes credit enhancement for the related series of
Bonds as described under "Description of Credit Enhancement";
(v) any advances made as described under "--Advances" below;
(vi) any Buydown Funds (and, if applicable, investment
earnings thereon) required to be paid to Bondholders, as described
below;
(vii) all proceeds of any Mortgage Loan purchased (or, in the
case of a substitution, certain amounts representing a principal
adjustment) by the Master Servicer, the Company, a Seller or any other
person pursuant to the terms of the related Servicing Agreement as
described under "The Mortgage Pools--Representations by Sellers,"
"Servicing of Mortgage Loans--Realization Upon and Sale of Defaulted
Mortgage Loans," "--Assignment of Trust Fund Assets" above, "The
Servicing Agreement--Termination" and "Purchase Obligations";
(viii) any amounts paid by the Master Servicer to cover
Prepayment Interest Shortfalls arising out of the prepayment of
Mortgage Loans as described under "Servicing of Mortgage
Loans--Servicing and Other Compensation and Payment of Expenses;
Spread";
(ix) to the extent that any such item does not constitute
additional servicing compensation to the Master Servicer or a Special
Servicer, any payments on account of modification or assumption fees,
late payment charges, Prepayment Premiums or Equity Participations on
the Mortgage Loans;
(x) any amount required to be deposited by the Master Servicer
or the Indenture Trustee in connection with losses realized on
investments for the benefit of the Master Servicer or the Indenture
Trustee, as the case may be, of funds held in the Collection Account;
and
(xi) any other amounts required to be deposited in the
Collection Account as provided in the related Servicing Agreement and
described herein or in the related Prospectus Supplement.
With respect to each Buydown Mortgage Loan, the Master Servicer will be
required to deposit the related Buydown Funds provided to it in a Buydown
Account which will comply with the requirements set forth herein with respect to
the Collection Account. Unless otherwise specified in the related Prospectus
Supplement, the terms of all Buydown Mortgage Loans provide for the contribution
of Buydown Funds in an amount equal to or exceeding either (i) the total
payments to be made from such funds pursuant to the related buydown plan or (ii)
if such Buydown Funds are to be deposited on a discounted basis, that amount of
Buydown Funds which, together with investment earnings thereon at a rate as will
support the scheduled level of payments due under the Buydown Mortgage Loan.
Neither the Master Servicer nor the Company will be obligated to add to any such
discounted Buydown Funds
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any of its own funds should investment earnings prove insufficient to maintain
the scheduled level of payments. To the extent that any such insufficiency is
not recoverable from the Mortgagor or, in an appropriate case, from the Seller,
distributions to Bondholders may be affected. With respect to each Buydown
Mortgage Loan, the Master Servicer will be required monthly to withdraw from the
Buydown Account and deposit in the Collection Account as described above the
amount, if any, of the Buydown Funds (and, if applicable, investment earnings
thereon) for each Buydown Mortgage Loan that, when added to the amount due from
the Mortgagor on such Buydown Mortgage Loan, equals the full monthly payment
which would be due on the Buydown Mortgage Loan if it were not subject to the
buydown plan. The Buydown Funds will in no event be a part of the related Trust
Fund.
If the Mortgagor on a Buydown Mortgage Loan prepays such Mortgage Loan
in its entirety during the Buydown Period, the Master Servicer will be required
to withdraw from the Buydown Account and remit to the Mortgagor or such other
designated party in accordance with the related buydown plan any Buydown Funds
remaining in the Buydown Account. If a prepayment by a Mortgagor during the
Buydown Period together with Buydown Funds will result in full prepayment of a
Buydown Mortgage Loan, the Master Servicer will generally be required to
withdraw from the Buydown Account and deposit in the Collection Account the
Buydown Funds and investment earnings thereon, if any, which together with such
prepayment will result in a prepayment in full; provided that Buydown Funds may
not be available to cover a prepayment under certain Mortgage Loan programs. Any
Buydown Funds so remitted to the Master Servicer in connection with a prepayment
described in the preceding sentence will be deemed to reduce the amount that
would be required to be paid by the Mortgagor to repay fully the related
Mortgage Loan if the Mortgage Loan were not subject to the buydown plan. Any
investment earnings remaining in the Buydown Account after prepayment or after
termination of the Buydown Period will be remitted to the related Mortgagor or
such other designated party pursuant to the agreement relating to each Buydown
Mortgage Loan (the "Buydown Agreement"). If the Mortgagor defaults during the
Buydown Period with respect to a Buydown Mortgage Loan and the property securing
such Buydown Mortgage Loan is sold in liquidation (either by the Master
Servicer, the Primary Insurer, the insurer under the Mortgage Pool Insurance
Policy (the "Pool Insurer") or any other insurer), the Master Servicer will be
required to withdraw from the Buydown Account the Buydown Funds and all
investment earnings thereon, if any, and either deposit the same in the
Collection Account or, alternatively, pay the same to the Primary Insurer or the
Pool Insurer, as the case may be, if the Mortgaged Property is transferred to
such insurer and such insurer pays all of the loss incurred in respect of such
default.
WITHDRAWALS. Unless otherwise provided in the related Servicing
Agreement or Indenture and described in the related Prospectus Supplement, a
Master Servicer, Indenture Trustee or Special Servicer may make withdrawals from
the Collection Account for each Trust Fund for any of the following purposes:
(i) to make distributions to the related Securityholders on
each Distribution Date;
(ii) to reimburse the Master Servicer or any other specified
person for unreimbursed amounts advanced by it as described under
"--Advances" below in respect of Mortgage Loans in the Trust Fund, such
reimbursement to be made out of amounts received which were identified
and applied by the Master Servicer as late collections of interest (net
of related servicing fees) on and principal of the particular Mortgage
Loans with respect to which the advances were made or out of amounts
drawn under any form of credit enhancement with respect to such
Mortgage Loans;
(iii) to reimburse the Master Servicer or a Special Servicer
for unpaid servicing fees earned by it and certain unreimbursed
servicing expenses incurred by it with respect to Mortgage Loans in the
Trust Fund and properties acquired in respect thereof, such
reimbursement to be made out of amounts that represent Liquidation
Proceeds and Insurance Proceeds collected on the
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particular Mortgage Loans and properties, and net income collected on
the particular properties, with respect to which such fees were earned
or such expenses were incurred or out of amounts drawn under any form
of credit enhancement with respect to such Mortgage Loans and
properties;
(iv) to reimburse the Master Servicer or any other specified
person for any advances described in clause (ii) above made by it and
any servicing expenses referred to in clause (iii) above incurred by it
which, in the good faith judgment of the Master Servicer or such other
person, will not be recoverable from the amounts described in clauses
(ii) and (iii), respectively, such reimbursement to be made from
amounts collected on other Mortgage Loans in the Trust Fund or, if and
to the extent so provided by the related Servicing Agreement and
described in the related Prospectus Supplement, only from that portion
of amounts collected on such other Mortgage Loans that is otherwise
distributable on one or more classes of Subordinate Securities of the
related series;
(v) if and to the extent described in the related
Prospectus Supplement, to pay the Master Servicer, a Special Servicer
or another specified entity (including a provider of credit
enhancement) interest accrued on the advances described in clause (ii)
above made by it and the servicing expenses described in clause (iii)
above incurred by it while such remain outstanding and unreimbursed;
(vi) to pay for costs and expenses incurred by the Trust
Fund for environmental site assessments performed with respect to
Multifamily Properties that constitute security for defaulted Mortgage
Loans, and for any containment, clean-up or remediation of hazardous
wastes and materials present on such Mortgaged Properties, as described
under "Servicing of Mortgage Loans--Realization Upon Defaulted Mortgage
Loans";
(vii) to reimburse the Master Servicer, the Company, or any
of their respective directors, officers, employees and agents, as the
case may be, for certain expenses, costs and liabilities incurred
thereby, as and to the extent described under "The Servicing
Agreement--Certain Matters Regarding the Master Servicer and the
Company";
(viii) if and to the extent described in the related
Prospectus Supplement, to pay the fees of the Owner Trustee and the
Indenture Trustee;
(ix) to reimburse the Owner Trustee or the Indenture Trustee
or any of its directors, officers, employees and agents, as the case
may be, for certain expenses, costs and liabilities incurred thereby,
as and to the extent described under "The Agreements";
(x) to pay the Master Servicer or the Indenture Trustee, as
additional compensation, interest and investment income earned in
respect of amounts held in the Collection Account;
(xi) to pay (generally from related income) for costs
incurred in connection with the operation, management and maintenance
of any Mortgaged Property acquired by the Trust Fund by foreclosure or
otherwise;
(xii) to pay for the cost of an independent appraiser or
other expert in real estate matters retained to determine a fair sale
price for a defaulted Mortgage Loan or a property acquired in respect
thereof in connection with the liquidation of such Mortgage Loan or
property;
(xiii) to pay for the cost of various opinions of counsel
obtained pursuant to the related Indenture for the benefit of the
related Bondholders;
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(xiv) to pay to itself, the Company, a Seller or any other
appropriate person all amounts received with respect to each Mortgage
Loan purchased, repurchased or removed from the Trust Fund pursuant to
the terms of the related Servicing Agreement and not required to be
distributed as of the date on which the related Purchase Price is
determined;
(xv) to make deposits to the Funding Account in the amounts
and in the manner provided in the related Agreement, if applicable;
(xvi) to make any other withdrawals permitted by the related
Servicing Agreement and described in the related Prospectus Supplement;
and
(xvii) to clear and terminate the Collection Account upon the
termination of the Trust Fund.
DISTRIBUTIONS
Distributions on the Bonds of each series will be made by or on behalf
of the related Indenture Trustee or Master Servicer on each Distribution Date as
specified in the related Prospectus Supplement from the Available Distribution
Amount for such series and such Distribution Date. Unless otherwise provided in
the related Prospectus Supplement, the "Available Distribution Amount" for any
series of Bonds and any Distribution Date will refer to the total of all
payments or other collections (or advances in lieu thereof) on, under or in
respect of the Mortgage Loans and any other assets included in the related Trust
Fund that are available for distribution to the Bondholders of such series on
such date. The particular components of the Available Distribution Amount for
any series on each Distribution Date will be more specifically described in the
related Prospectus Supplement.
Except as otherwise specified in the related Prospectus Supplement,
distributions on the Bonds of each series (other than the final distribution in
retirement of any such Bond) will be made to the persons in whose names such
Bonds are registered at the close of business on the last business day of the
month preceding the month in which the applicable Distribution Date occurs (the
"Record Date"), and the amount of each distribution will be determined as of the
close of business on the date (the "Determination Date") specified in the
related Prospectus Supplement. All distributions with respect to each class of
Bonds on each Distribution Date will be allocated PRO RATA among the outstanding
Bonds in such class. Payments will be made either by wire transfer in
immediately available funds to the account of a Bondholder at a bank or other
entity having appropriate facilities therefor, if such Bondholder has provided
the Indenture Trustee or other person required to make such payments with wiring
instructions no later than five business days prior to the related Record Date
or such other date specified in the related Prospectus Supplement (and, if so
provided in the related Prospectus Supplement, such Bondholder holds Bonds in
the requisite amount or denomination specified therein), or by check mailed to
the address of such Bondholder as it appears on the Bond Register; provided,
however, that the final distribution in retirement of any class of Bonds will be
made only upon presentation and surrender of such Bonds at the location
specified in the notice to Bondholders of such final distribution. Payments will
be made to each Bondholder in accordance with such holder's Percentage Interest
in a particular class. The ("Percentage Interest") represented by a Bond of a
particular class will be equal to the percentage obtained by dividing the
initial principal balance or notional amount of such Bond by the aggregate
initial amount or notional balance of all the Bonds of such class. In addition,
amounts remaining in the Payment Account on each Payment Date after payments on
the Bonds will be applied for the purposes set forth in the Agreements, as
described in the related Prospectus Supplement, including distributions on the
related Certificates or release to the Company. Any amounts so distributed on
the Certificates or released to the Company will be released from the lien of
the Indenture.
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DISTRIBUTIONS OF INTEREST AND PRINCIPAL ON THE BONDS
Each class of Bonds of each series may have a different Interest Rate,
which may be fixed, variable or adjustable, or any combination of two or more
such rates. The related Prospectus Supplement will specify the Interest Rate or,
in the case of a variable or adjustable Interest Rate, the method for
determining the Interest Rate, for each class. Unless otherwise specified in the
related Prospectus Supplement, interest on the Bonds of each series will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Distributions of interest in respect of the Bonds of any class (other
than any class of Accrual Bonds and other than any class of Strip Bonds that is
not entitled to any distributions of interest) will be made on each Distribution
Date based on the Accrued Bond Interest for such class and such Distribution
Date, subject to the sufficiency of the portion of the Available Distribution
Amount allocable to such class on such Distribution Date. Prior to the time
interest is distributable on any class of Accrual Bonds, the amount of Accrued
Bond Interest otherwise distributable on such class will be added to the
principal balance thereof on each Distribution Date. With respect to each class
of Bonds (other than certain classes of Strip Bonds), "Accrued Bond Interest"
for each Distribution Date will be equal to interest at the applicable Interest
Rate accrued for a specified period (generally one month) on the outstanding
principal balance thereof immediately prior to such Distribution Date. Unless
otherwise provided in the related Prospectus Supplement, Accrued Bond Interest
for each Distribution Date on Strip Bonds entitled to distributions of interest
will be similarly calculated except that it will accrue on a notional amount
that is either (i) based on the principal balances of some or all of the
Mortgage Loans in the related Trust Fund or (ii) equal to the principal balances
of one or more other classes of Bonds of the same series. Reference to such a
notional amount with respect to a class of Strip Bonds is solely for convenience
in making certain calculations and does not represent the right to receive any
distribution of principal. If so specified in the related Prospectus Supplement,
the amount of Accrued Bond Interest that is otherwise distributable on (or, in
the case of Accrual Bonds, that may otherwise be added to the principal balance
of) one or more classes of the Bonds of a series will be reduced to the extent
that any Prepayment Interest Shortfalls, as described under "Yield
Considerations", exceed the amount of any sums (including, if and to the extent
specified in the related Prospectus Supplement, the Master Servicer's servicing
compensation) that are applied to offset such shortfalls. The particular manner
in which such shortfalls will be allocated among some or all of the classes of
Bonds of that series will be specified in the related Prospectus Supplement. The
related Prospectus Supplement will also describe the extent to which the amount
of Accrued Bond Interest that is otherwise distributable on (or, in the case of
Accrual Bonds, that may otherwise be added to the principal balance of) a class
of Bonds may be reduced as a result of any other contingencies, including
delinquencies, losses and Deferred Interest on or in respect of the related
Mortgage Loans or application of the Relief Act with respect to such Mortgage
Loans. Unless otherwise provided in the related Prospectus Supplement, any
reduction in the amount of Accrued Bond Interest otherwise distributable on a
class of Bonds by reason of the allocation to such class of a portion of any
Deferred Interest on or in respect of the related Mortgage Loans will result in
a corresponding increase in the principal balance of such class.
As and to the extent described in the related Prospectus Supplement,
distributions of principal with respect to a series of Bonds will be made on
each Distribution Date to the holders of the class or classes of Bonds of such
series entitled thereto until the principal balance(s) of such Bonds have been
reduced to zero. In the case of a series of Bonds which includes two or more
classes of Bonds, the timing, sequential order, priority of payment or amount of
distributions in respect of principal, and any schedule or formula or other
provisions applicable to the determination thereof (including distributions
among multiple classes of Senior Bonds or Subordinate Securities), shall be as
set forth in the related Prospectus Supplement. Distributions of principal with
respect to one or more classes of Bonds may be made at a rate that is faster
(and, in some cases, substantially faster) than the rate at which payments or
other collections of principal are received on the Mortgage Loans in the related
Trust Fund, may not
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commence until the occurrence of certain events, such as the retirement of one
or more other classes of Bonds of the same series, or may be made at a rate that
is slower (and, in some cases, substantially slower) than the rate at which
payments or other collections of principal are received on such Mortgage Loans.
In addition, distributions of principal with respect to one or more classes of
Bonds may be made, subject to available funds, based on a specified principal
payment schedule and, with respect to one or more classes of Bonds, may be
contingent on the specified principal payment schedule for another class of the
same series and the rate at which payments and other collections of principal on
the Mortgage Loans in the related Trust Fund are received. In addition, if so
specified in the related Prospectus Supplement, a series of Bonds may provide
for a period during which all or a portion of the principal collections on the
Mortgage Loans otherwise available for payment to the Bonds are reinvested in
additional Mortgage Loans or accumulated in a trust account pending the
commencement of an amortization period specified in the related Prospectus
Supplement or the occurrence of certain events specified in the related
Prospectus Supplement.
FUNDING ACCOUNT
If so specified in the related Prospectus Supplement, the Trust
Agreement or other agreement may provide for the transfer by the Sellers of
additional Mortgage Loans to the related Trust after the Closing Date. Such
additional Mortgage Loans will be required to conform to the requirements set
forth in the related Agreement or other agreement providing for such transfer.
As specified in the related Prospectus Supplement, such transfer may be funded
by the establishment of a Funding Account (a "Funding Account"). If a Funding
Account is established, all or a portion of the proceeds of the sale of one or
more classes of Bonds of the related series or a portion of collections on the
Mortgage Loans in respect of principal will be deposited in such account to be
released as additional Mortgage Loans are transferred. Unless otherwise
specified in the related Prospectus Supplement, a Funding Account will be
required to be maintained as an Eligible Account, all amounts therein will be
required to be invested in Permitted Investments and the amount held therein
shall at no time exceed 25% of the aggregate outstanding principal balance of
the Bonds. Unless otherwise specified in the related Prospectus Supplement, the
related Agreement or other agreement providing for the transfer of additional
Mortgage Loans will provide that all such transfers must be made within 9 months
(as to amounts representing proceeds of the sale of the Securities) or 12 months
(as to amounts representing principal collections on the Mortgage Loans) after
the Closing Date, and that amounts set aside to fund such transfers (whether in
a Funding Account or otherwise) and not so applied within the required period of
time will be deemed to be principal prepayments and applied in the manner set
forth in such Prospectus Supplement.
DISTRIBUTIONS ON THE BONDS IN RESPECT OF PREPAYMENT PREMIUMS OR IN RESPECT OF
EQUITY PARTICIPATIONS
If so provided in the related Prospectus Supplement, Prepayment
Premiums or payments in respect of Equity Participations received on or in
connection with the Mortgage Assets in any Trust Fund will be distributed on
each Distribution Date to the holders of the class of Bonds of the related
series entitled thereto in accordance with the provisions described in such
Prospectus Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
The amount of any losses or shortfalls in collections on the Mortgage
Loans in any Trust Fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of credit enhancement) will be allocated
among the respective classes of Bonds of the related series in the priority and
manner, and subject to the limitations, specified in the related Prospectus
Supplement. As described in the related Prospectus Supplement, such allocations
may result in reductions in the entitlements to interest and/or principal
balances of one or more such classes of Bonds, or may be effected simply by a
prioritization of payments among such classes of Bonds.
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ADVANCES
If and to the extent provided in the related Prospectus Supplement, and
subject to any limitations specified therein, the related Master Servicer may be
obligated to advance, or have the option of advancing, on or before each
Distribution Date, from its or their own funds or from excess funds held in the
related Collection Account that are not part of the Available Distribution
Amount for the related series of Bonds for such Distribution Date, an amount up
to the aggregate of any payments of principal (other than the principal portion
of any Balloon Payments) and interest that were due on or in respect of such
Mortgage Loans during the related Due Period and were delinquent on the related
Determination Date. Unless otherwise provided in the related Prospectus
Supplement, a "Due Period" is the period between Distribution Dates, and
scheduled payments on the Mortgage Loans in any Trust Fund that became due
during a given Due Period will, to the extent received by the related
Determination Date or advanced by the related Master Servicer or other specified
person, be distributed on the Distribution Date next succeeding such
Determination Date.
Advances are intended to maintain a regular flow of scheduled interest
and principal payments to holders of the class or classes of Bonds entitled
thereto, rather than to guarantee or insure against losses. Accordingly, all
advances made from the Master Servicer's own funds will be reimbursable out of
related recoveries on the Mortgage Loans (including amounts received under any
fund or instrument constituting credit enhancement) respecting which such
advances were made (as to any Mortgage Loan, "Related Proceeds") and such other
specific sources as may be identified in the related Prospectus Supplement,
including in the case of a series that includes one or more classes of
Subordinate Securities, collections on other Mortgage Loans in the related Trust
Fund that would otherwise be distributable to the holders of one or more classes
of such Subordinate Securities. No advance will be required to be made by the
Master Servicer if, in the good faith judgment of the Master Servicer, such
advance would not be recoverable from Related Proceeds or another specifically
identified source (any such advance, a "Nonrecoverable Advance"); and, if
previously made by a Master Servicer, a Nonrecoverable Advance will be
reimbursable from any amounts in the related Collection Account prior to any
distributions being made to the related series of Securities.
If advances have been made from excess funds in a Collection Account,
the Master Servicer that advanced such funds will be required to replace such
funds in the Collection Account on any future Distribution Date to the extent
that funds then in the Collection Account are insufficient to permit full
distributions to Securityholders on such date. If so specified in the related
Prospectus Supplement, the obligation of a Master Servicer to make advances may
be secured by a cash advance reserve fund or a surety bond. If applicable,
information regarding the characteristics of, and the identity of any obligor
on, any such surety bond, will be set forth in the related Prospectus
Supplement.
If any person other than the Master Servicer has any obligation to make
advances as described above, the related Prospectus Supplement will identify
such person.
If and to the extent so provided in the related Prospectus Supplement,
any entity making advances will be entitled to receive interest thereon for the
period that such advances are outstanding at the rate specified in such
Prospectus Supplement, and such entity will be entitled to payment of such
interest periodically from general collections on the Mortgage Loans in the
related Trust Fund prior to any payment to Securityholders or as otherwise
provided in the related Indenture and described in such Prospectus Supplement.
REPORTS TO BONDHOLDERS
With each distribution to Bondholders of a particular class of Bonds,
the related Master Servicer or Indenture Trustee will forward or cause to be
forwarded to each holder of record of such class of
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Bonds a statement or statements with respect to the related Trust Fund setting
forth the information specifically described in the related Indenture, which
generally will include the following as applicable except as otherwise provided
therein:
(i) the amount, if any, of such distribution allocable to
principal;
(ii) the amount, if any, of such distribution allocable to
interest;
(iii) the amount, if any, of such distribution allocable to
(A) Prepayment Premiums and (B) payments on account of Equity
Participations;
(iv) with respect to a series consisting of two or more
classes, the outstanding principal balance or notional amount of each
class after giving effect to the distribution of principal on such
Distribution Date;
(v) the amount of servicing compensation received by the
related Master Servicer (and, if payable directly out of the related
Trust Fund, by any Special Servicer and any Sub-Servicer);
(vi) the aggregate amount of advances included in the
distributions on such Distribution Date, and the aggregate amount of
unreimbursed advances at the close of business on such Distribution
Date;
(vii) the aggregate principal balance of the Mortgage Loans in
the related Mortgage Pool on, or as of a specified date shortly prior
to, such Distribution Date;
(viii) the number and aggregate principal balance of any
Mortgage Loans in the related Mortgage Pool in respect of which (A) one
scheduled payment is delinquent, (B) two scheduled payments are
delinquent, (C) three or more scheduled payments are delinquent and (D)
foreclosure proceedings have been commenced;
(ix) the book value of any real estate acquired by such Trust
Fund through foreclosure or grant of a deed in lieu of foreclosure;
(x) the balance of the Reserve Fund, if any, at the close of
business on such Distribution Date;
(xi) the amount of coverage under any Financial Guaranty
Insurance Policy, Letter of Credit, Mortgage Pool Insurance Policy or
other form of credit enhancement covering default risk as of the close
of business on the applicable Determination Date and a description of
any credit enhancement substituted therefor;
(xii) the Special Hazard Amount, Fraud Loss Amount and
Bankruptcy Amount as of the close of business on the applicable
Distribution Date and a description of any change in the calculation of
such amounts; and
(xiii) in the case of Bonds benefiting from alternative credit
enhancement arrangements described in a Prospectus Supplement, the
amount of coverage under such alternative arrangements as of the close
of business on the applicable Determination Date.
In the case of information furnished pursuant to subclauses (i)-(iii)
above, the amounts will be expressed as a dollar amount per minimum denomination
of the relevant class of Bonds or per a specified portion of such minimum
denomination. In addition to the information described above, reports to
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Bondholders will contain such other information as is set forth in the
applicable Indenture, which may include, without limitation, prepayments,
reimbursements to Subservicers and the Master Servicer and losses borne by the
related Trust Fund.
In addition, within a reasonable period of time after the end of each
calendar year, the Master Servicer or Indenture Trustee will furnish a report to
each holder of record of a class of Bonds at any time during such calendar year
which, among other things, will include information as to the aggregate of
amounts reported pursuant to subclauses (i)-(iii) above for such calendar year
or, in the event such person was a holder of record of a class of Bonds during a
portion of such calendar year, for the applicable portion of such a year.
DESCRIPTION OF CREDIT ENHANCEMENT
GENERAL
Unless otherwise provided in the applicable Prospectus Supplement,
credit support with respect to the Bonds of each series may be comprised of one
or more of the following components. Each component will have a dollar limit
and, unless otherwise specified in the related Prospectus Supplement, will
provide coverage with respect to certain losses on the related Mortgage Loans
(as more particularly described in the related Prospectus Supplement, "Realized
Losses") that are (i) attributable to the Mortgagor's failure to make any
payment of principal or interest as required under the Mortgage Note, but not
including Special Hazard Losses, Extraordinary Losses or other losses resulting
from damage to a Mortgaged Property, Bankruptcy Losses or Fraud Losses (any such
loss, a "Defaulted Mortgage Loss"); (ii) of a type generally covered by a
Special Hazard Insurance Policy (as defined below) (any such loss, a "Special
Hazard Loss"); (iii) attributable to certain actions which may be taken by a
bankruptcy court in connection with a Mortgage Loan, including a reduction by a
bankruptcy court of the principal balance of or the Mortgage Rate on a Mortgage
Loan or an extension of its maturity (any such loss, a "Bankruptcy Loss"); and
(iv) incurred on defaulted Mortgage Loans as to which there was fraud in the
origination of such Mortgage Loans (any such loss, a "Fraud Loss"). Unless
otherwise specified in the related Prospectus Supplement, Defaulted Mortgage
Losses, Special Hazard Losses, Bankruptcy Losses and Fraud Losses in excess of
the amount of coverage provided therefor and losses occasioned by war, civil
insurrection, certain governmental actions, nuclear reaction and certain other
risks ("Extraordinary Losses") will not be covered. To the extent that the
credit support for the Bonds of any series is exhausted, the holders thereof
will bear all further risks of loss not otherwise insured against.
As set forth below and in the applicable Prospectus Supplement, (i)
coverage with respect to Defaulted Mortgage Losses may be provided by one or
more of a Financial Guaranty Insurance Policy, a Letter of Credit or a Mortgage
Pool Insurance Policy, (ii) coverage with respect to Special Hazard Losses may
be provided by one or more of a Financial Guaranty Insurance Policy, a Letter of
Credit or a Special Hazard Insurance Policy (any instrument, to the extent
providing such coverage, a "Special Hazard Instrument"), (iii) coverage with
respect to Bankruptcy Losses may be provided by one or more of a Financial
Guaranty Insurance Policy, Letter of Credit or a Bankruptcy Bond and (iv)
coverage with respect to Fraud Losses may be provided by one or more of a
Financial Guaranty Insurance Policy, Letter of Credit, Mortgage Pool Insurance
Policy or mortgage repurchase bond. In addition, if provided in the applicable
Prospectus Supplement, in lieu of or in addition to any or all of the foregoing
arrangements, credit enhancement may be in the form of a Reserve Fund to cover
such losses, in the form of subordination provided by the Certificates (if
applicable) and one or more classes of Subordinate Securities to provide credit
support to one or more classes of Senior Bonds, or in the form of
Overcollateralization, or in the form of a specified entity's agreement to
repurchase certain Mortgage Loans or fund certain losses pursuant to a Purchase
Obligation, which obligations may be supported by a Letter of Credit, surety
bonds or other types of insurance policies, certain other secured or unsecured
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corporate guarantees or in such other form as may be described in the related
Prospectus Supplement, or in the form of a combination of two or more of the
foregoing. The credit support may be provided by an assignment of the right to
receive certain cash amounts, a deposit of cash into a Reserve Fund or other
pledged assets, or by banks, insurance companies, guarantees or any combination
thereof identified in the applicable Prospectus Supplement.
The amounts and type of credit enhancement arrangement as well as the
provider thereof, if applicable, with respect to the Bonds of each series will
be set forth in the related Prospectus Supplement. To the extent provided in the
applicable Prospectus Supplement and the Indenture, the credit enhancement
arrangements may be periodically modified, reduced and substituted for based on
the aggregate outstanding principal balance of the Mortgage Loans covered
thereby. See "Description of Credit Enhancement--Reduction or Substitution of
Credit Enhancement." If specified in the applicable Prospectus Supplement,
credit support for the Bonds of one series may cover the Bonds of one or more
other series.
The descriptions of any insurance policies or bonds described in this
Prospectus or any Prospectus Supplement and the coverage thereunder do not
purport to be complete and are qualified in their entirety by reference to the
actual forms of such policies, copies of which are available upon request.
FINANCIAL GUARANTY INSURANCE POLICY
If so specified in the related Prospectus Supplement, a financial
guaranty insurance policy or surety bond (a "Financial Guaranty Insurance
Policy") may be obtained and maintained for a class or series of Bonds. The
issuer of the Financial Guaranty Insurance Policy (the "Insurer") will be
described in the related Prospectus Supplement and a copy of the form of
Financial Guaranty Insurance Policy will be filed with the related Current
Report on Form 8-K.
Unless otherwise specified in the related Prospectus Supplement, a
Financial Guaranty Insurance Policy will be unconditional and irrevocable and
will guarantee to holders of the applicable Bonds that an amount equal to the
full amount of payments due to such holders will be received by the Indenture
Trustee or its agent on behalf of such holders for payment on each Payment Date.
The specific terms of any Financial Guaranty Insurance Policy will be set forth
in the related Prospectus Supplement. A Financial Guaranty Insurance Policy may
have limitations and generally will not insure the obligation of the Sellers or
the Master Servicer to purchase or substitute for a defective Mortgage Loan and
will not guarantee any specific rate of principal prepayments. Unless otherwise
specified in the related Prospectus Supplement, the Insurer will be subrogated
to the rights of each holder to the extent the Insurer makes payments under the
Financial Guaranty Insurance Policy.
SUBORDINATE SECURITIES
With respect to each series of Bonds, the related Certificates, if any,
will be subordinate thereto as described in the Prospectus Supplement. If so
specified in the related Prospectus Supplement, one or more classes of Bonds of
a series may be Subordinate Securities. To the extent specified in the related
Prospectus Supplement, the rights of the holders of Subordinate Securities to
receive distributions from the Collection Account on any Distribution Date will
be subordinated to the corresponding rights of the holders of Senior Bonds. If
so provided in the related Prospectus Supplement, the subordination of a class
may apply only in the event of (or may be limited to) certain types of losses or
shortfalls. The related prospectus Supplement will set forth information
concerning the manner and amount of subordination provided by a class or classes
of Subordinate Securities in a series and the circumstances under which such
subordination will be available. The Bonds of any series may include one or more
classes of Subordinate Securities.
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If the Mortgage Loans in any Trust Fund are divided into separate
groups, each supporting a separate class or classes of Bonds of the related
series, credit enhancement may be provided by crosssupport provisions requiring
that distributions be made on Senior Bonds evidencing interests in one group of
Mortgage Loans prior to distributions on Subordinate Securities evidencing
interests in a different group of Mortgage Loans within the Trust Fund. The
Prospectus Supplement for a series that includes a cross-support provision will
describe the manner and conditions for applying such provisions.
LETTER OF CREDIT
If any component of credit enhancement as to the Bonds of any series is
to be provided by a letter of credit (the "Letter of Credit"), a bank (the
"Letter of Credit Bank") will deliver to the related Indenture Trustee an
irrevocable Letter of Credit. The Letter of Credit may provide direct coverage
with respect to the Mortgage Loans or, if specified in the related Prospectus
Supplement, support an entity's obligation pursuant to a Purchase Obligation to
make certain payments to the related Indenture Trustee with respect to one or
more components of credit enhancement. The Letter of Credit Bank, as well as the
amount available under the Letter of Credit with respect to each component of
credit enhancement, will be specified in the applicable Prospectus Supplement.
If so specified in the related Prospectus Supplement, the Letter of Credit may
permit draws only in the event of certain types of losses and shortfalls. The
Letter of Credit may also provide for the payment of advances which the Master
Servicer would be obligated to make with respect to delinquent monthly mortgage
payments. The amount available under the Letter of Credit will, in all cases, be
reduced to the extent of the unreimbursed payments thereunder and may otherwise
be reduced as described in the related Prospectus Supplement. The Letter of
Credit will expire on the expiration date set forth in the related Prospectus
Supplement, unless earlier terminated or extended in accordance with its terms.
MORTGAGE POOL INSURANCE POLICIES
Any Mortgage Pool Insurance Policy obtained by the Company for each
Trust Fund will be issued by the Pool Insurer named in the applicable Prospectus
Supplement. Each Mortgage Pool Insurance Policy will, subject to the limitations
described below, cover Defaulted Mortgage Losses in an amount equal to a
percentage specified in the applicable Prospectus Supplement of the aggregate
principal balance of the Mortgage Loans on the Cut-off Date. As set forth under
"Maintenance of Credit Enhancement," the Master Servicer will use reasonable
efforts to maintain the Mortgage Pool Insurance Policy and to present claims
thereunder to the Pool Insurer on behalf of itself, the related Indenture
Trustee and the related Bondholders. The Mortgage Pool Insurance Policies,
however, are not blanket policies against loss, since claims thereunder may only
be made respecting particular defaulted Mortgage Loans and only upon
satisfaction of certain conditions precedent described below. Unless specified
in the related Prospectus Supplement, the Mortgage Pool Insurance Policies may
not cover losses due to a failure to pay or denial of a claim under a Primary
Insurance Policy, irrespective of the reason therefor.
Each Mortgage Pool Insurance Policy will generally provide that no
claims may be validly presented thereunder unless, among other things, (i) any
required Primary Insurance Policy is in effect for the defaulted Mortgage Loan
and a claim thereunder has been submitted and settled, (ii) hazard insurance on
the property securing such Mortgage Loan has been kept in force and real estate
taxes and other protection and preservation expenses have been paid by the
Master Servicer, (iii) if there has been physical loss or damage to the
Mortgaged Property, it has been restored to its condition (reasonable wear and
tear excepted) at the Cut-off Date and (iv) the insured has acquired good and
merchantable title to the Mortgaged Property free and clear of liens except
certain permitted encumbrances. Upon satisfaction of these conditions, the Pool
Insurer will have the option either (a) to purchase the property securing the
defaulted Mortgage Loan at a price equal to the principal balance thereof plus
accrued and unpaid interest at the applicable Mortgage Rate to the date of
purchase and certain expenses incurred by the Master Servicer, Special Servicer
or Subservicer on behalf of the related Indenture Trustee and Bondholders, or
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(b) to pay the amount by which the sum of the principal balance of the defaulted
Mortgage Loan plus accrued and unpaid interest at the Mortgage Rate to the date
of payment of the claim and the aforementioned expenses exceeds the proceeds
received from an approved sale of the Mortgaged Property, in either case net of
certain amounts paid or assumed to have been paid under any related Primary
Insurance Policy. Bondholders will experience a shortfall in the amount of
interest payable on the related Bonds in connection with the payment of claims
under a Mortgage Pool Insurance Policy because the Pool Insurer is only required
to remit unpaid interest through the date a claim is paid rather than through
the end of the month in which such claim is paid. In addition, the Bondholders
will also experience losses with respect to the related Bonds in connection with
payments made under a Mortgage Pool Insurance Policy to the extent that the
Master Servicer expends funds to cover unpaid real estate taxes or to repair the
related Mortgaged Property in order to make a claim under a Mortgage Pool
Insurance Policy, as those amounts will not be covered by payments under such
policy and will be reimbursable to the Master Servicer from funds otherwise
payable to the Bondholders. If any Mortgaged Property securing a defaulted
Mortgage Loan is damaged and proceeds, if any (see "Special Hazard Insurance
Policies" below for risks which are not covered by such policies), from the
related hazard insurance policy or applicable Special Hazard Instrument are
insufficient to restore the damaged property to a condition sufficient to permit
recovery under the Mortgage Pool Insurance Policy, the Master Servicer is not
required to expend its own funds to restore the damaged property unless it
determines (x) that such restoration will increase the proceeds to one or more
classes of Bondholders on liquidation of the Mortgage Loan after reimbursement
of the Master Servicer for its expenses and (y) that such expenses will be
recoverable by it through Liquidation Proceeds or Insurance Proceeds.
Unless otherwise specified in the related Prospectus Supplement, a
Mortgage Pool Insurance Policy (and certain Primary Insurance Policies) will
likely not insure against loss sustained by reason of a default arising from,
among other things, (i) fraud or negligence in the origination or servicing of a
Mortgage Loan, including misrepresentation by the Mortgagor, the Seller or other
persons involved in the origination thereof, or (ii) failure to construct a
Mortgaged Property in accordance with plans and specifications. Depending upon
the nature of the event, a breach of representation made by a Seller may also
have occurred. Such a breach, if it materially and adversely affects the
interests of Bondholders and cannot be cured, would give rise to a purchase
obligation on the part of the Seller, as more fully described under "The
Mortgage Pools--Representations by Sellers." However, such an event would not
give rise to a breach of a representation and warranty or a purchase obligation
on the part of the Company or Master Servicer.
The original amount of coverage under each Mortgage Pool Insurance
Policy will be reduced over the life of the related series of Bonds by the
aggregate dollar amount of claims paid less the aggregate of the net amounts
realized by the Pool Insurer upon disposition of all foreclosed properties. The
amount of claims paid includes certain expenses incurred by the Master Servicer,
Special Servicer or Subservicer as well as accrued interest on delinquent
Mortgage Loans to the date of payment of the claim. Accordingly, if aggregate
net claims paid under any Mortgage Pool Insurance Policy reach the original
policy limit, coverage under that Mortgage Pool Insurance Policy will be
exhausted and any further losses will be borne by holders of the related series
of Bonds. In addition, unless the Master Servicer could determine that an
advance in respect of a delinquent Mortgage Loan would be recoverable to it from
the proceeds of the liquidation of such Mortgage Loan or otherwise, the Master
Servicer would not be obligated to make an advance respecting any such
delinquency since the advance would not be ultimately recoverable to it from
either the Mortgage Pool Insurance Policy or from any other related source. See
"Description of the Bonds--Advances."
Since each Mortgage Pool Insurance Policy will require that the
property subject to a defaulted Mortgage Loan be restored to its original
condition prior to claiming against the Pool Insurer, such policy will not
provide coverage against hazard losses. As set forth under "Primary Mortgage
Insurance, Hazard Insurance; Claims Thereunder," the hazard policies covering
the Mortgage Loans typically
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exclude from coverage physical damage resulting from a number of causes and,
even when the damage is covered, may afford recoveries which are significantly
less than full replacement cost of such losses. Further, no coverage in respect
of Special Hazard Losses, Fraud Losses or Bankruptcy Losses will cover all
risks, and the amount of any such coverage will be limited. See "Special Hazard
Insurance Policies" below. As a result, certain hazard risks will not be insured
against and will therefore be borne by the related Bondholders.
SPECIAL HAZARD INSURANCE POLICIES
Any insurance policy covering Special Hazard Losses (a "Special Hazard
Insurance Policy") obtained by the Company for a Trust Fund will be issued by
the insurer named in the applicable Prospectus Supplement. Each Special Hazard
Insurance Policy will, subject to limitations described below, protect holders
of the related series of Bonds from (i) losses due to direct physical damage to
a Mortgaged Property other than any loss of a type covered by a hazard insurance
policy or a flood insurance policy, if applicable, and (ii) losses from partial
damage caused by reason of the application of the co-insurance clauses contained
in hazard insurance policies ("Special Hazard Losses"). See "Primary Mortgage
Insurance, Hazard Insurance; Claims Thereunder." However, a Special Hazard
Insurance Policy will not cover losses occasioned by war, civil insurrection,
certain governmental actions, errors in design, faulty workmanship or materials
(except under certain circumstances), nuclear reaction, chemical contamination,
waste by the Mortgagor and certain other risks. Aggregate claims under a Special
Hazard Insurance Policy will be limited to the amount set forth in the related
Prospectus Supplement and will be subject to reduction as described in such
related Prospectus Supplement. A Special Hazard Insurance Policy will provide
that no claim may be paid unless hazard and, if applicable, flood insurance on
the property securing the Mortgage Loan has been kept in force and other
protection and preservation expenses have been paid by the Master Servicer.
Subject to the foregoing limitations, a Special Hazard Insurance Policy
will provide that, where there has been damage to property securing a foreclosed
Mortgage Loan (title to which has been acquired by the insured) and to the
extent such damage is not covered by the hazard insurance policy or flood
insurance policy, if any, maintained by the Mortgagor or the Master Servicer,
Special Servicer or the Subservicer, the insurer will pay the lesser of (i) the
cost of repair or replacement of such property or (ii) upon transfer of the
property to the insurer, the unpaid principal balance of such Mortgage Loan at
the time of acquisition of such property by foreclosure or deed in lieu of
foreclosure, plus accrued interest at the Mortgage Rate to the date of claim
settlement and certain expenses incurred by the Master Servicer, Special
Servicer or Subservicer with respect to such property. If the property is
transferred to a third party in a sale approved by the issuer of the Special
Hazard Insurance Policy (the "Special Hazard Insurer"), the amount that the
Special Hazard Insurer will pay will be the amount under (ii) above reduced by
the net proceeds of the sale of the property. No claim may be validly presented
under the Special Hazard Insurance Policy unless hazard insurance on the
property securing a defaulted Mortgage Loan has been kept in force and other
reimbursable protection, preservation and foreclosure expenses have been paid
(all of which must be approved in advance by the Special Hazard Insurer). If the
unpaid principal balance plus accrued interest and certain expenses is paid by
the insurer, the amount of further coverage under the related Special Hazard
Insurance Policy will be reduced by such amount less any net proceeds from the
sale of the property. Any amount paid as the cost of repair of the property will
further reduce coverage by such amount. Restoration of the property with the
proceeds described under (i) above will satisfy the condition under each
Mortgage Pool Insurance Policy that the property be restored before a claim
under such Mortgage Pool Insurance Policy may be validly presented with respect
to the defaulted Mortgage Loan secured by such property. The payment described
under (ii) above will render presentation of a claim in respect of such Mortgage
Loan under the related Mortgage Pool Insurance Policy unnecessary. Therefore, so
long as a Mortgage Pool Insurance Policy remains in effect, the payment by the
insurer under a Special Hazard Insurance Policy of the cost of repair or of the
unpaid principal balance of the related Mortgage Loan plus accrued interest and
certain expenses will not affect
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the total Insurance Proceeds paid to Bondholders, but will affect the relative
amounts of coverage remaining under the related Special Hazard Insurance Policy
and Mortgage Pool Insurance Policy.
As and to the extent set forth in the applicable Prospectus Supplement,
coverage in respect of Special Hazard Losses for a series of Bonds may be
provided, in whole or in part, by a type of Special Hazard Instrument other than
a Special Hazard Insurance Policy or by means of the special hazard
representation of the Company.
BANKRUPTCY BONDS
In the event of a personal bankruptcy of a Mortgagor, it is possible
that the bankruptcy court may establish the value of the Mortgaged Property of
such Mortgagor at an amount less than the then outstanding principal balance of
the Mortgage Loan secured by such Mortgaged Property (a "Deficient Valuation").
The amount of the secured debt could then be reduced to such value, and, thus,
the holder of such Mortgage Loan would become an unsecured creditor to the
extent the outstanding principal balance of such Mortgage Loan exceeds the value
assigned to the Mortgaged Property by the bankruptcy court. In addition, certain
other modifications of the terms of a Mortgage Loan can result from a bankruptcy
proceeding, including a reduction in the amount of the Monthly Payment on the
related Mortgage Loan (a "Debt Service Reduction"; Debt Service Reductions and
Deficient Valuations, collectively referred to herein as Bankruptcy Losses). See
"Certain Legal Aspects of Mortgage Loans and Related Matters--Anti-Deficiency
Legislation and Other Limitations on Lenders." Any Bankruptcy Bond to provide
coverage for Bankruptcy Losses for proceedings under the federal Bankruptcy Code
obtained by the Company for a Trust Fund will be issued by an insurer named in
the applicable Prospectus Supplement. The level of coverage under each
Bankruptcy Bond will be set forth in the applicable Prospectus Supplement.
OVERCOLLATERALIZATION
If so specified in the related Prospectus Supplement, interest
collections on the Mortgage Loans may exceed interest payments on the Securities
for the related Payment Date (such excess referred to as "Excess Interest").
Such Excess Interest may be deposited into a Reserve Fund or applied as a
payment of principal on the Bonds. To the extent Excess Interest is applied as
principal payments on the Bonds, the effect will be to reduce the principal
balance of the Bonds relative to the outstanding balance of the Revolving Credit
Loans, thereby creating "Overcollateralization" and additional protection to the
Bondholders, as specified in the related Prospectus Supplement. If so provided
in the related Prospectus Supplement, Overcollateralization may also be provided
as to any series of Bonds by the issuance of Bonds in an initial aggregate
principal amount (together with the related Certificates, if any) which is less
than the aggregate principal amount of the related Mortgage Loans.
RESERVE FUNDS
If so provided in the related Prospectus Supplement, the Company will
deposit or cause to be deposited in an account (a "Reserve Fund") any
combination of cash, one or more irrevocable letters of credit or one or more
Permitted Investments in specified amounts, or any other instrument satisfactory
to the relevant Rating Agency or Agencies, which will be applied and maintained
in the manner and under the conditions specified in such Prospectus Supplement.
In the alternative or in addition to such deposit, to the extent described in
the related Prospectus Supplement, a Reserve Fund may be funded through
application of all or a portion of amounts otherwise payable on any related
Subordinate Securities, from the Spread or otherwise. To the extent that the
funding of the Reserve Fund is dependent on amounts otherwise payable on related
Subordinate Securities, Spread or other cash flows attributable to the related
Mortgage Loans or on reinvestment income, the Reserve Fund may provide less
coverage than initially expected if the cash flows or reinvestment income on
which such funding is dependent are lower than
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anticipated. In addition, with respect to any series of Bonds as to which credit
enhancement includes a Letter of Credit, if so specified in the related
Prospectus Supplement, under certain circumstances the remaining amount of the
Letter of Credit may be drawn by the Indenture Trustee and deposited in a
Reserve Fund. Amounts in a Reserve Fund may be distributed to Bondholders, or
applied to reimburse the Master Servicer for outstanding advances, or may be
used for other purposes, in the manner and to the extent specified in the
related Prospectus Supplement. Unless otherwise provided in the related
Prospectus Supplement, any such Reserve Fund will not be deemed to be part of
the related Trust Fund. If set forth in the related Prospectus Supplement, a
Reserve Fund may provide coverage to more than one series of Bonds.
In connection with the establishment of any Reserve Fund, unless
otherwise specified in the related Prospectus Supplement, the Reserve Fund will
be structured so that the Indenture Trustee will have a perfected security
interest for the benefit of the Bondholders in the assets in the Reserve Fund.
However, to the extent that the Company, any affiliate thereof or any other
entity has an interest in any Reserve Fund, in the event of the bankruptcy,
receivership or insolvency of such entity, there could be delays in withdrawals
from the Reserve Fund and corresponding payments to the Bondholders which could
adversely affect the yield to investors on the related Bonds.
Amounts deposited in any Reserve Fund for a series will be invested in
Permitted Investments by, or at the direction of, and for the benefit of the
Master Servicer or any other person named in the related Prospectus Supplement.
MAINTENANCE OF CREDIT ENHANCEMENT
To the extent that the applicable Prospectus Supplement does not
expressly provide for alternative credit enhancement arrangements in lieu of
some or all of the arrangements mentioned below, the following paragraphs shall
apply.
If a Letter of Credit or alternate form of credit enhancement has been
obtained for a series of Bonds, the Master Servicer will be obligated to
exercise reasonable efforts to keep or cause to be kept such Letter of Credit
(or an alternate form of credit support) in full force and effect throughout the
term of the applicable Indenture, unless coverage thereunder has been exhausted
through payment of claims or otherwise, or substitution therefor is made as
described below under "--Reduction or Substitution of Credit Enhancement."
Unless otherwise specified in the applicable Prospectus Supplement, if a Letter
of Credit obtained for a series of Bonds is scheduled to expire prior to the
date the final distribution on such Bonds is made and coverage under such Letter
of Credit has not been exhausted and no substitution has occurred, the Indenture
Trustee will draw the amount available under the Letter of Credit and maintain
such amount in trust for such Bondholders.
If a Mortgage Pool Insurance Policy has been obtained for a series of
Bonds, the Master Servicer will be obligated to exercise reasonable efforts to
keep such Mortgage Pool Insurance Policy (or an alternate form of credit
support) in full force and effect throughout the term of the applicable
Indenture, unless coverage thereunder has been exhausted through payment of
claims or until such Mortgage Pool Insurance Policy is replaced in accordance
with the terms of the applicable Indenture. Unless otherwise provided in the
related Prospectus Supplement, the Master Servicer will agree to pay the
premiums for each Mortgage Pool Insurance Policy on a timely basis. In the event
the Pool Insurer ceases to be a Qualified Insurer (such term being defined to
mean a private mortgage guaranty insurance company duly qualified as such under
the laws of the state of its incorporation and each state having jurisdiction
over the insurer in connection with the Mortgage Pool Insurance Policy and
approved as an insurer by FHLMC, FNMA or any successor entity) because it ceases
to be qualified under any such law to transact such insurance business or
coverage is terminated for any reason other than exhaustion of such coverage,
the Master Servicer will use reasonable efforts to obtain from another Qualified
Insurer a replacement
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insurance policy comparable to the Mortgage Pool Insurance Policy with a total
coverage equal to the then outstanding coverage of such Mortgage Pool Insurance
Policy, provided that, if the cost of the replacement policy is greater than the
cost of such Mortgage Pool Insurance Policy, the coverage of the replacement
policy will, unless otherwise agreed to by the Company, be reduced to a level
such that its premium rate does not exceed the premium rate on such Mortgage
Pool Insurance Policy. In the event that the Pool Insurer ceases to be a
Qualified Insurer because it ceases to be approved as an insurer by FHLMC, FNMA
or any successor entity, the Master Servicer will be obligated to review, not
less often than monthly, the financial condition of the Pool Insurer with a view
toward determining whether recoveries under the Mortgage Pool Insurance Policy
are jeopardized for reasons related to the financial condition of the Pool
Insurer. If the Master Servicer determines that recoveries are so jeopardized,
it will be obligated to exercise its best reasonable efforts to obtain from
another Qualified Insurer a replacement insurance policy as described above,
subject to the same cost limit. Any losses associated with any reduction or
withdrawal in rating by an applicable Rating Agency shall be borne by the
related Bondholders.
In lieu of the Master Servicer's obligation to maintain a Letter of
Credit, Mortgage Pool Insurance Policy or other form of credit enhancement as
provided above, the Master Servicer may obtain a substitute Letter of Credit,
Mortgage Pool Insurance Policy or an alternate form of credit enhancement. If
the Master Servicer obtains such a substitute Letter of Credit, Mortgage Pool
Insurance Policy or other form of credit enhancement, it will maintain and keep
such Letter of Credit, Mortgage Pool Insurance Policy or alternate form of
credit enhancement in full force and effect as provided herein. Prior to its
obtaining any substitute Letter of Credit, Mortgage Pool Insurance Policy or
alternate form of credit enhancement, the Master Servicer will obtain written
confirmation from the Rating Agency or Agencies that rated the related series of
Bonds that the substitution of such Mortgage Pool Insurance Policy, Letter of
Credit, or alternate form of credit enhancement for the existing credit
enhancement will not adversely affect the then-current ratings assigned to such
Bonds by such Rating Agency or Agencies.
If a Special Hazard Instrument has been obtained for a series of Bonds,
the Master Servicer will also be obligated to exercise reasonable efforts to
maintain and keep such Special Hazard Instrument in full force and effect
throughout the term of the applicable Indenture, unless coverage thereunder has
been exhausted through payment of claims or otherwise or substitution therefor
is made as described below under "--Reduction or Substitution of Credit
Enhancement." If the Special Hazard Instrument takes the form of a Special
Hazard Insurance Policy, such policy will provide coverage against risks of the
type described herein under "Description of Credit Enhancement--Special Hazard
Insurance Policies." The Master Servicer may obtain a substitute Special Hazard
Instrument for the existing Special Hazard Instrument if prior to such
substitution the Master Servicer obtains written confirmation from the Rating
Agency or Agencies that rated the related Bonds that such substitution shall not
adversely affect the then-current ratings assigned to such Bonds by such Rating
Agency or Agencies.
If a Bankruptcy Bond has been obtained for a series of Bonds, the
Master Servicer will be obligated to exercise reasonable efforts to maintain and
keep such Bankruptcy Bond in full force and effect throughout the term of the
Indenture, unless coverage thereunder has been exhausted through payment of
claims or substitution therefor is made as described below under "--Reduction or
Substitution of Credit Enhancement." The Master Servicer may obtain a substitute
Bankruptcy Bond or other credit enhancement for the existing Bankruptcy Bond if
prior to such substitution the Master Servicer obtains written confirmation from
the Rating Agency or Agencies that rated the related Bonds that such
substitution shall not adversely affect the then-current ratings assigned to
such Bonds by such Rating Agency or Agencies. See "--Bankruptcy Bonds" above.
The Master Servicer, on behalf of itself, the Indenture Trustee and
Bondholders, will provide the Indenture Trustee information required for the
Indenture Trustee to draw under the Letter of Credit and will present claims to
the provider of any Purchase Obligation, to each Pool Insurer, to the issuer of
each
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Special Hazard Insurance Policy or other Special Hazard Instrument, to the
issuer of each Bankruptcy Bond and, in respect of defaulted Mortgage Loans for
which there is no Subservicer, to each Primary Insurer and take such reasonable
steps as are necessary to permit recovery under such Letter of Credit, Purchase
Obligation, insurance policies or comparable coverage respecting defaulted
Mortgage Loans or Mortgage Loans which are the subject of a bankruptcy
proceeding. Additionally, the Master Servicer will present such claims and take
such steps as are reasonably necessary to provide for the performance by the
provider of the Purchase Obligation of its Purchase Obligation. As set forth
above, all collections by the Master Servicer under any Purchase Obligation, any
Mortgage Pool Insurance Policy, any Primary Insurance Policy or any Bankruptcy
Bond and, where the related property has not been restored, any Special Hazard
Instrument, are to be deposited in the related Collection Account, subject to
withdrawal as described above. All draws under any Letter of Credit are also to
be deposited in the related Collection Account. In those cases in which a
Mortgage Loan is serviced by a Subservicer, the Subservicer, on behalf of
itself, the Indenture Trustee and the Bondholders will present claims to the
Primary Insurer, and all collections thereunder shall initially be deposited in
a subservicing account that generally meets the requirements for the Collection
Account prior to being delivered to the Master Servicer for deposit in the
related Collection Account.
If any property securing a defaulted Mortgage Loan is damaged and
proceeds, if any, from the related hazard insurance policy or any applicable
Special Hazard Instrument are insufficient to restore the damaged property to a
condition sufficient to permit recovery under any Financial Guaranty Insurance
Policy, Letter of Credit, Mortgage Pool Insurance Policy or any related Primary
Insurance Policy, the Master Servicer is not required to expend its own funds to
restore the damaged property unless it determines (i) that such restoration will
increase the proceeds to one or more classes of Bondholders on liquidation of
the Mortgage Loan after reimbursement of the Master Servicer for its expenses
and (ii) that such expenses will be recoverable by it through Liquidation
Proceeds or Insurance Proceeds. If recovery under any Financial Guaranty
Insurance Policy, Letter of Credit, Mortgage Pool Insurance Policy, other credit
enhancement or any related Primary Insurance Policy is not available because the
Master Servicer has been unable to make the above determinations, has made such
determinations incorrectly or recovery is not available for any other reason,
the Master Servicer is nevertheless obligated to follow such normal practices
and procedures (subject to the preceding sentence) as it deems necessary or
advisable to realize upon the defaulted Mortgage Loan and in the event such
determination has been incorrectly made, is entitled to reimbursement of its
expenses in connection with such restoration.
REDUCTION OR SUBSTITUTION OF CREDIT ENHANCEMENT
Unless otherwise specified in the Prospectus Supplement, the amount of
credit support provided pursuant to any form of credit enhancements (including,
without limitation, a Financial Guaranty Insurance Policy, Mortgage Pool
Insurance Policy, Special Hazard Insurance Policy, Bankruptcy Bond, Letter of
Credit, Overcollateralization, Reserve Fund, Purchase Obligation, or any
alternative form of credit enhancement) may be reduced under certain specified
circumstances. In most cases, the amount available pursuant to any form of
credit enhancement will be subject to periodic reduction in accordance with a
schedule or formula on a nondiscretionary basis pursuant to the terms of the
related Indenture. Additionally, in most cases, such form of credit support (and
any replacements therefor) may be replaced, reduced or terminated, and the
formula used in calculating the amount of coverage with respect to Bankruptcy
Losses, Special Hazard Losses or Fraud Losses may be changed, without the
consent of the Bondholders, upon the written assurance from each applicable
Rating Agency that the then-current rating of the related series of Bonds will
not be adversely affected. Furthermore, in the event that the credit rating of
any obligor under any applicable credit enhancement is downgraded, the credit
rating(s) of the related series of Bonds may be downgraded to a corresponding
level, and, unless otherwise specified in the related Prospectus Supplement, the
Master Servicer will not be obligated to obtain replacement credit support in
order to restore the rating(s) of the related series of Bonds. The Master
Servicer will also be permitted to replace such credit support with other credit
enhancement instruments issued by obligors
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whose credit ratings are equivalent to such downgraded level and in lower
amounts which would satisfy such downgraded level, provided that the
then-current rating(s) of the related series of Bonds are maintained. Where the
credit support is in the form of a Reserve Fund, a permitted reduction in the
amount of credit enhancement will result in a release of all or a portion of the
assets in the Reserve Fund to the Company, the Master Servicer or such other
person that is entitled thereto. Any assets so released will not be available
for distributions in future periods.
PURCHASE OBLIGATIONS
With respect to certain types of Mortgage Loans to be included in any
Mortgage Pool, if specified in the related Prospectus Supplement, the Mortgage
Loans may be sold subject to a Purchase Obligation as described below that would
become applicable on a specified date or upon the occurrence of a specified
event. For example, with respect to certain types of ARM Loans as to which the
Mortgage Rate is fixed for the first five years, a Purchase Obligation may apply
on the first date that the Mortgage Rate of such Mortgage Loan is adjusted, and
such obligation may apply to the Mortgage Loans or to the related Bonds
themselves, or to a corresponding Purchase Obligation of the Company or another
person as specified in the related Prospectus Supplement. With respect to any
Purchase Obligation, such obligation will be an obligation of an entity (which
may include a bank or other financial institution or an insurance company)
specified in the related Prospectus Supplement, and an instrument evidencing
such obligation (a "Purchase Obligation") shall be delivered to the related
Indenture Trustee for the benefit of the Bondholders to the related series.
The specific terms and conditions applicable to any Purchase Obligation
will be described in the related Prospectus Supplement, including the purchase
price, the timing of and any limitations and conditions to any such purchase.
Any Purchase Obligation will be payable solely to the Indenture Trustee for the
benefit of the Bondholders of the related series and will be nontransferable.
Unless otherwise provided in the related Prospectus Supplement, each Purchase
Obligation will be a general unsecured obligation of the provider thereof, and
prospective purchasers of Bonds must look solely to the credit of such entity
for payment under the Purchase Obligation.
PRIMARY MORTGAGE INSURANCE, HAZARD INSURANCE;
CLAIMS THEREUNDER
GENERAL
Each Mortgage Loan will be required to be covered by a hazard insurance
policy (as described below) and, if required as described below, a Primary
Insurance Policy. The following is only a brief description of certain insurance
policies and does not purport to summarize or describe all of the provisions of
these policies. Such insurance is subject to underwriting and approval of
individual Mortgage Loans by the respective insurers. The descriptions of any
insurance policies described in this Prospectus or any Prospectus Supplement and
the coverage thereunder do not purport to be complete and are qualified in their
entirety by reference to such forms of policies, sample copies of which are
available upon request.
PRIMARY MORTGAGE INSURANCE POLICIES
Unless otherwise specified in the related Prospectus Supplement, (i)
each Single Family Loan having a Loan-to-Value Ratio at origination of over 80%
is required by the Company to be covered by a primary mortgage guaranty
insurance policy (a "Primary Insurance Policy") insuring against default on such
Mortgage Loan as to at least the principal amount thereof exceeding 75% of the
Value of the related
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Mortgaged Property at origination of the Mortgage Loan, unless and until the
principal balance of the Mortgage Loan is reduced to a level that would produce
a Loan-to-Value Ratio equal to or less than at least 80%, and (ii) the Company
will represent and warrant that, to the best of the Company's knowledge, such
Mortgage Loans are so covered. However, the foregoing standard may vary
significantly depending on the characteristics of the Mortgage Loans and the
applicable underwriting standards. A Mortgage Loan will not be considered to be
an exception to the foregoing standard if no Primary Insurance Policy was
obtained at origination but the Mortgage Loan has amortized to below an 80%
Loan-to-Value Ratio level as of the applicable Cut-off Date. Mortgage Loans
which are subject to negative amortization will only be covered by a Primary
Insurance Policy if such coverage was so required upon their origination,
notwithstanding that subsequent negative amortization may cause such Mortgage
Loan's Loan-to-Value Ratio (based on the then-current balance) to subsequently
exceed the limits which would have required such coverage upon their
origination. Multifamily Loans will not be covered by a Primary Insurance
Policy, regardless of the related Loan-to-Value Ratio.
While the terms and conditions of the Primary Insurance Policies issued
by one primary mortgage guaranty insurer (a "Primary Insurer") will differ from
those in Primary Insurance Policies issued by other Primary Insurers, each
Primary Insurance Policy will in general provide substantially the following
coverage. The amount of the loss as calculated under a Primary Insurance Policy
covering a Mortgage Loan (herein referred to as the "Loss") will generally
consist of the unpaid principal amount of such Mortgage Loan and accrued and
unpaid interest thereon and reimbursement of certain expenses, less (i) rents or
other payments collected or received by the insured (other than the proceeds of
hazard insurance) that are derived from the related Mortgaged Property, (ii)
hazard insurance proceeds in excess of the amount required to restore such
Mortgaged Property and which have not been applied to the payment of the
Mortgage Loan, (iii) amounts expended but not approved by the Primary Insurer,
(iv) claim payments previously made on such Mortgage Loan and (v) unpaid
premiums and certain other amounts.
The Primary Insurer will generally be required to pay either: (i) the
insured percentage of the Loss; (ii) the entire amount of the Loss, after
receipt by the Primary Insurer of good and merchantable title to, and possession
of, the Mortgaged Property; or (iii) at the option of the Primary Insurer under
certain Primary Insurance Policies, the sum of the delinquent monthly payments
plus any advances made by the insured, both to the date of the claim payment
and, thereafter, monthly payments in the amount that would have become due under
the Mortgage Loan if it had not been discharged plus any advances made by the
insured until the earlier of (a) the date the Mortgage Loan would have been
discharged in full if the default had not occurred or (b) an approved sale.
As conditions precedent to the filing or payment of a claim under a
Primary Insurance Policy, in the event of default by the Mortgagor, the insured
will typically be required, among other things, to: (i) advance or discharge (a)
hazard insurance premiums and (b) as necessary and approved in advance by the
Primary Insurer, real estate taxes, protection and preservation expenses and
foreclosure and related costs; (ii) in the event of any physical loss or damage
to the Mortgaged Property, have the Mortgaged Property restored to at least its
condition at the effective date of the Primary Insurance Policy (ordinary wear
and tear excepted); and (iii) tender to the Primary Insurer good and
merchantable title to, and possession of, the Mortgaged Property.
For any Bonds offered hereunder, the Master Servicer will maintain or
cause each Subservicer to maintain, as the case may be, in full force and effect
and to the extent coverage is available a Primary Insurance Policy with regard
to each Single Family Loan for which such coverage is required under the
standard described above, provided that such Primary Insurance Policy was in
place as of the Cut-off Date and the Company had knowledge of such Primary
Insurance Policy. In the event that the Company gains knowledge that as of the
Closing Date, a Mortgage Loan had a Loan-to-Value Ratio at origination in excess
of 80% and was not the subject of a Primary Insurance Policy (and was not
included in any exception to such standard disclosed in the related Prospectus
Supplement) and that such Mortgage Loan
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has a then current Loan-to-Value Ratio in excess of 80%, then the Master
Servicer is required to use reasonable efforts to obtain and maintain a Primary
Insurance Policy to the extent that such a policy is obtainable at a reasonable
price. The Master Servicer or, in the case of a Designated Seller Transaction,
the Seller will not cancel or refuse to renew any such Primary Insurance Policy
in effect at the time of the initial issuance of a series of Bonds that is
required to be kept in force under the applicable Servicing Agreement unless the
replacement Primary Insurance Policy for such cancelled or non-renewed policy is
maintained with an insurer whose claims-paying ability is acceptable to the
Rating Agency or Agencies that rated such series of Bonds for mortgage
pass-through certificates having a rating equal to or better than the highest
then-current rating of any class of such series of Bonds. For further
information regarding the extent of coverage under any Mortgage Pool Insurance
Policy or Primary Insurance Policy, see "Description of Credit
Enhancement--Mortgage Pool Insurance Policies."
HAZARD INSURANCE POLICIES
The terms of the Mortgage Loans require each Mortgagor to maintain a
hazard insurance policy for their Mortgage Loan. Additionally, the Servicing
Agreement will require the Master Servicer to cause to be maintained for each
Mortgage Loan a hazard insurance policy providing for no less than the coverage
of the standard form of fire insurance policy with extended coverage customary
in the state in which the property is located. Unless otherwise specified in the
related Prospectus Supplement, such coverage generally will be in an amount
equal to the lesser of the principal balance owing on such Mortgage Loan or 100%
of the insurable value of the improvements securing the Mortgage Loan except
that, if generally available, such coverage must not be less than the minimum
amount required under the terms thereof to fully compensate for any damage or
loss on a replacement cost basis. The ability of the Master Servicer to ensure
that hazard insurance proceeds are appropriately applied may be dependent on its
being named as an additional insured under any hazard insurance policy and under
any flood insurance policy referred to below, or upon the extent to which
information in this regard is furnished to the Master Servicer by Mortgagors or
Subservicers.
As set forth above, all amounts collected by the Master Servicer under
any hazard policy (except for amounts to be applied to the restoration or repair
of the Mortgaged Property or released to the Mortgagor in accordance with the
Master Servicer's normal servicing procedures) will be deposited in the related
Collection Account. The Servicing Agreement will provide that the Master
Servicer may satisfy its obligation to cause hazard policies to be maintained by
maintaining a blanket policy insuring against losses on the Mortgage Loans. If
such blanket policy contains a deductible clause, the Master Servicer will
deposit in the applicable Collection Account all sums which would have been
deposited therein but for such clause.
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements on the property by
fire, lightning, explosion, smoke, windstorm, hail, riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies relating to the Mortgage Loans will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by respective state laws, and
most such policies typically do not cover any physical damage resulting from the
following: war, revolution, governmental actions, floods and other water-related
causes, earth movement (including earthquakes, landslides and mudflows), nuclear
reactions, wet or dry rot, vermin, rodents, insects or domestic animals, theft
and, in certain cases, vandalism. The foregoing list is merely indicative of
certain kinds of uninsured risks and is not intended to be all-inclusive. Where
the improvements securing a Mortgage Loan are located in a federally designated
flood area at the time of origination of such Mortgage Loan, the Servicing
Agreement requires the Master Servicer to cause to be maintained for each such
Mortgage Loan serviced, flood insurance (to the extent available) in an amount
equal in general to the lesser of the
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amount required to compensate for any loss or damage on a replacement cost basis
or the maximum insurance available under the federal flood insurance program.
The hazard insurance policies covering the Mortgaged Properties
typically contain a co-insurance clause which in effect requires the insured at
all times to carry insurance of a specified percentage (generally 80% to 90%) of
the full replacement value of the improvements on the property in order to
recover the full amount of any partial loss. If the insured's coverage falls
below this specified percentage, such clause generally provides that the
insurer's liability in the event of partial loss does not exceed the greater of
(i) the replacement cost of the improvements damaged or destroyed less physical
depreciation or (ii) such proportion of the loss as the amount of insurance
carried bears to the specified percentage of the full replacement cost of such
improvements.
Since the amount of hazard insurance that Mortgagors are required to
maintain on the improvements securing the Mortgage Loans may decline as the
principal balances owing thereon decrease, and since residential properties have
historically appreciated in value over time, hazard insurance proceeds could be
insufficient to restore fully the damaged property in the event of a partial
loss. See "Description of Credit Enhancement--Special Hazard Insurance Policies"
for a description of the limited protection afforded by any Special Hazard
Insurance Policy against losses occasioned by hazards which are otherwise
uninsured against (including losses caused by the application of the
co-insurance clause described in the preceding paragraph).
Under the terms of the Mortgage Loans, Mortgagors are generally
required to present claims to insurers under hazard insurance policies
maintained on the Mortgaged Properties. The Master Servicer, on behalf of the
Indenture Trustee and Bondholders, is obligated to present claims under any
Special Hazard Insurance Policy or other Special Hazard Instrument and any
blanket insurance policy insuring against hazard losses on the Mortgaged
Properties. However, the ability of the Master Servicer to present such claims
is dependent upon the extent to which information in this regard is furnished to
the Master Servicer or the Subservicers by Mortgagors.
FHA INSURANCE
The FHA is responsible for administering various federal programs,
including mortgage insurance, authorized under The Housing Act and the United
States Housing Act of 1937, as amended.
There are two primary FHA insurance programs that are available for
multifamily mortgage loans. Sections 221(d)(3) and (d)(4) of the Housing Act
allow the Department of Housing and Urban Development ("HUD") to insure mortgage
loans that are secured by newly constructed and substantially rehabilitated
multifamily rental projects. Section 244 of the Housing Act provides for
co-insurance of such mortgage loans made under Sections 221(d)(3) and (d)(4) by
HUD/FHA and a HUD-approved co-insurer. Generally the term of such a mortgage
loan may be up to 40 years and the ratio of the loan amount to property
replacement cost can be up to 90%.
Section 223(f) of the Housing Act allows HUD to insure mortgage loans
made for the purchase or refinancing of existing apartment projects which are at
least three years old. Section 244 also provides for co-insurance of mortgage
loans made under Section 223(f). Under Section 223(f), the loan proceeds cannot
be used for substantial rehabilitation work, but repairs may be made for up to,
in general, the greater of 15% of the value of the project or a dollar amount
per apartment unit established from time to time by HUD. In general the loan
term may not exceed 35 years and a loan to value ratio of no more than 85% is
required for the purchase of a project and 70% for the refinancing of a project.
HUD has the option, in most cases, to pay insurance claims in cash or
in debentures issued by HUD. Presently, claims are being paid in cash, and
claims have not been paid in debentures since 1965.
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HUD debentures issued in satisfaction of FHA insurance claims bear interest at
the applicable HUD debenture interest rate. Unless otherwise provided in the
related Prospectus Supplement, the Master Servicer will be obligated to purchase
any such debenture issued in satisfaction of a defaulted FHA insured Mortgage
Loan serviced by it for an amount equal to the principal amount of any such
debenture.
The Master Servicer will be required to take such steps as are
reasonably necessary to keep FHA insurance in full force and effect.
THE COMPANY
The Company is a limited-purpose wholly-owned subsidiary of Imperial
Credit Mortgage Holdings, Inc. The Company was incorporated in the State of
California on ___________ __, 1996. The Company was organized for the purpose of
serving as a private secondary mortgage market conduit.
The Company maintains its principal office at 20371 Irvine Avenue,
Suite 200, Santa Ana Heights, California 92707. Its telephone number is (909)
788-7808.
ICI FUNDING CORPORATION
ICI Funding Corporation ("ICI Funding") is the parent of the Company
and may from time to time be a Seller or act as Master Servicer with respect to
a Mortgage Pool. ICI Funding is a mortgage banking conduit that acquires
conventional one-to four-family residential mortgage loans nationwide. ICI
Funding is a non-consolidating subsidiary of Imperial Holdings, Inc., a publicly
traded real estate investment trust ("REIT"). ICI Funding primarily acquires
mortgage loans from approved correspondents. At March 31, 1996, ICI Funding had
approximately 62 employees. ICI Funding's executive offices are located at 20371
Irvine Avenue, Suite 200, Santa Ana Heights, California 92707, and its telephone
number is (714) 556-0122.
Prior to November 1995, ICI Funding was a division of Imperial Credit
Industries, Inc. ("ICII"), a California corporation. ICII is a publicly traded
mortgage banking company. In November 1995, ICII restructured its operations
pursuant to which ICI Funding became a separate corporation and ICII
contributed, among other things, all of the outstanding nonvoting preferred
stock of ICI Funding, which represents 99% of the economic interest in ICI
Funding, to Imperial Holdings, in exchange for approximately 10% of the common
stock of Imperial Holdings. All of the outstanding shares of common stock of ICI
Funding were retained by ICII.
THE AGREEMENTS
The following summaries describe certain provisions of the Trust
Agreement, the Indenture and Servicing Agreement relating to a series of Bonds
(each, an "Agreement" and, collectively, the "Agreements"). The summaries do not
purport to be complete and are qualified entirely by reference to the actual
terms of the Agreements relating to a series of Bonds.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
SERVICING AGREEMENT
A "Servicing Default" under the Servicing Agreement in respect of a
series of Securities, unless otherwise specified in the Prospectus Supplement,
generally will include: (i) any failure by the Master
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Servicer to make a required deposit to the Collection Account or, if the Master
Servicer is so required, to distribute to the holders of any class of Securities
of such series any required payment which continues unremedied for five business
days after the giving of written notice of such failure to the Master Servicer
by the Indenture Trustee or the Issuer; (ii) any failure by the Master Servicer
duly to observe or perform in any material respect any other of its covenants or
agreements in the Servicing Agreement with respect to such series of Securities
which continues unremedied for 45 days after the giving of written notice of
such failure to the Master Servicer by the Indenture Trustee or the Issuer (or
the Pool Insurer, if applicable); (iii) certain events of insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings regarding the Master Servicer and certain actions by the Master
Servicer indicating its insolvency or inability to pay its obligations and (iv)
any other Servicing Default as set forth in the Servicing Agreement.
So long as a Servicing Default remains unremedied, either the Company
or the Indenture Trustee may (except as otherwise provided for in the related
Agreement with respect to the Pool Insurer, if applicable), by written
notification to the Master Servicer and to the Issuer or the Indenture Trustee
or Trust Fund, as applicable, terminate all of the rights and obligations of the
Master Servicer under the Servicing Agreement (other than any right of the
Master Servicer as Securityholder and other than the right to receive servicing
compensation and expenses for servicing the Mortgage Loans during any period
prior to the date of such termination), whereupon the Indenture Trustee will
succeed to all responsibilities, duties and liabilities of the Master Servicer
under such Servicing Agreement (other than the obligation to purchase Mortgage
Loans under certain circumstances) and will be entitled to similar compensation
arrangements. In the event that the Indenture Trustee would be obligated to
succeed the Master Servicer but is unwilling so to act, it may appoint (or if it
is unable so to act, it shall appoint) or petition a court of competent
jurisdiction for the appointment of an approved mortgage servicing institution
with a net worth of at least $10,000,000 to act as successor to the Master
Servicer under the Servicing Agreement (unless otherwise set forth in the
Servicing Agreement). Pending such appointment, the Indenture Trustee is
obligated to act in such capacity. The Indenture Trustee and such successor may
agree upon the servicing compensation to be paid, which in no event may be
greater than the compensation to the initial Master Servicer under the Servicing
Agreement.
INDENTURE
An "Event of Default" under the Indenture in respect of each series of
Bonds, unless otherwise specified in the Prospectus Supplement, generally will
include: (i) a default for five days or more in the payment of any principal of
or interest on any Bond of such series; (ii) failure to perform any other
covenant of the Company or the Trust Fund in the Indenture which continues for a
period of thirty days after notice thereof is given in accordance with the
procedures described in the related Prospectus Supplement (and if the Pool
Insurer defaults in the performance of its obligations, if applicable); (iii)
any representation or warranty made by the Company or the Trust Fund in the
Indenture or in any certificate or other writing delivered pursuant thereto or
in connection therewith with respect to or affecting such series having been
incorrect in a material respect as of the time made, and such breach is not
cured within thirty days after notice thereof is given in accordance with the
procedures described in the related Prospectus Supplement; (iv) certain events
of bankruptcy, insolvency, receivership or liquidation of the Company or the
Trust Fund (and if the Pool Insurer defaults in the performance of its
obligations, if applicable); or (v) any other Event of Default provided with
respect to Bonds of that series.
If an Event of Default with respect to the Bonds of any series at the
time outstanding occurs and is continuing, either the Indenture Trustee, the
Pool Insurer (if applicable) or the holders of a majority of the then aggregate
outstanding amount of the Bonds of such series may declare the principal amount
(or, if the Bonds of that series are Accrual Bonds, such portion of the
principal amount as may be specified in the terms of that series, as provided in
the related Prospectus Supplement) of all the Bonds of such series to be due and
payable immediately. Such declaration may, under certain circumstances,
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be rescinded and annulled by the holders of a majority in aggregate outstanding
amount of the related Bonds.
If following an Event of Default with respect to any series of Bonds,
the Bonds of such series have been declared to be due and payable, the Indenture
Trustee (with the consent of the Pool Insurer, if applicable) may, in its
discretion, notwithstanding such acceleration, elect to maintain possession of
the collateral securing the Bonds of such series and to continue to apply
payments on such collateral as if there had been no declaration of acceleration
if such collateral continues to provide sufficient funds for the payment of
principal of and interest on the Bonds of such series as they would have become
due if there had not been such a declaration. In addition, the Indenture Trustee
may not sell or otherwise liquidate the collateral securing the Bonds of a
series following an Event of Default, unless (a) the holders of 100% of the then
aggregate outstanding amount of the Bonds of such series consent to such sale,
(b) the proceeds of such sale or liquidation are sufficient to pay in full the
principal of and accrued interest, due and unpaid, on the outstanding Bonds of
such series (and to reimburse the Pool Insurer, if applicable) at the date of
such sale or (c) the Indenture Trustee determines that such collateral would not
be sufficient on an ongoing basis to make all payments on such Bonds as such
payments would have become due if such Bonds had not been declared due and
payable, and the Indenture Trustee obtains the consent of the holders of 66 2/3%
of the then aggregate outstanding amount of the Bonds of such series (and the
Pool Insurer, if applicable).
In the event that the Indenture Trustee liquidates the collateral in
connection with an Event of Default, the Indenture provides that the Indenture
Trustee will have a prior lien on the proceeds of any such liquidation for
unpaid fees and expenses. As a result, upon the occurrence of such an Event of
Default, the amount available for payments to the Bondholders would be less than
would otherwise be the case. However, the Indenture Trustee may not institute a
proceeding for the enforcement of its lien except in connection with a
proceeding for the enforcement of the lien of the Indenture for the benefit of
the Bondholders after the occurrence of such an Event of Default.
Unless otherwise specified in the related Prospectus Supplement, in the
event the principal of the Bonds of a series is declared due and payable, as
described above, the holders of any such Bonds issued at a discount from par may
be entitled to receive no more than an amount equal to the unpaid principal
amount thereof less the amount of such discount that is unamortized.
No Securityholder generally will have any right under a Trust Agreement
or Indenture to institute any proceeding with respect to such Agreement unless
(a) such holder previously has given to the Indenture Trustee written notice of
default and the continuance thereof, (b) the holders of Securities of any class
evidencing not less than 25% of the aggregate Percentage Interests constituting
such class (i) have made written request upon the Indenture Trustee to institute
such proceeding in its own name as Indenture Trustee thereunder and (ii) have
offered to the Indenture Trustee reasonable indemnity, (c) the Indenture Trustee
has neglected or refused to institute any such proceeding for 60 days after
receipt of such request and indemnity and (d) no direction inconsistent with
such written request has been given to the Indenture Trustee during such 60 day
period by the Holders of a majority of the Bond Balances of such class (except
as otherwise provided for in the related Agreement with respect to the Pool
Insurer). However, the Indenture Trustee will be under no obligation to exercise
any of the trusts or powers vested in it by the applicable Agreement or to
institute, conduct or defend any litigation thereunder or in relation thereto at
the request, order or direction of any of the holders of Securities covered by
such Agreement, unless such Securityholders have offered to the Indenture
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby.
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AMENDMENT
Unless otherwise stated in the related Prospectus Supplement, each
Agreement may be amended by the parties thereto (except as otherwise provided
for in the related Agreement with respect to the Pool Insurer) without the
consent of any of the holders of Securities covered by such Agreement, (i) to
cure any ambiguity; (ii) to correct or supplement any provision therein which
may be inconsistent with any other provision therein or to correct any error;
(iii) to change the timing and/or nature of deposits in the Collection Account
or to change the name in which the Collection Account is maintained (except that
(a) deposits to the Payment Account may not occur later than the related Payment
Date, (b) such change may not adversely affect in any material respect the
interests of any Securityholder, as evidenced by an opinion of counsel, and (c)
such change may not adversely affect the then-current rating of any rated
Securities, as evidenced by a letter from each applicable Rating Agency); or
(iv) to make any other provisions with respect to matters or questions arising
under such Agreement which are not materially inconsistent with the provisions
thereof, so long as such action will not adversely affect in any material
respect the interests of any Securityholder.
Unless otherwise stated in the related Prospectus Supplement, each
Agreement may also be amended by the parties thereto (except as otherwise
provided for in the related Agreement with respect to the Pool Insurer) with the
consent of the holders of Securities of each class affected thereby evidencing,
in each case, not less than 66% of the aggregate Percentage Interests
constituting such class for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of such Agreement or of
modifying in any manner the rights of the related Securityholders, except that
no such amendment may (i) reduce in any manner the amount of, or delay the
timing of, payments received on Mortgage Loans which are required to be paid on
a Security of any class without the consent of the holder of such Security, (ii)
impair the right of any Securityholder to institute suit for the enforcement of
the provisions of the Agreements or (iii) reduce the percentage of Securities of
any class the holders of which are required to consent to any such amendment
unless the holders of all Securities of such class have consented to the change
in such percentage.
TERMINATION; REDEMPTION OF BONDS
TRUST AGREEMENT
The obligations created by the Trust Agreement for each series of
Securities (other than certain limited payment and notice obligations of the
Owner Trustee and the Company, respectively) will terminate upon the payment to
the related Securityholders (including, the Bonds issued pursuant to the related
Indenture) of all amounts held by the Master Servicer and required to be paid to
Securityholders following the earlier of (i) the final payment or other
liquidation or disposition (or any advance with respect thereto) of the last
Mortgage Loan subject thereto and all property acquired upon foreclosure or deed
in lieu of foreclosure of any such Mortgage Loan and (ii) the purchase by the
Master Servicer or the Company from the Trust Fund for such series of all
remaining Mortgage Loans and all property acquired in respect of such Mortgage
Loans.
INDENTURE
The Indenture will be discharged with respect to a series of Bonds
(except with respect to certain continuing rights specified in the Indenture)
upon the distribution to Bondholders of all amounts required to be distributed
pursuant to the Indenture.
THE OWNER TRUSTEE
The Owner Trustee under the Trust Agreement will be named in the
related Prospectus Supplement. The commercial bank or trust company serving as
Owner Trustee may have normal banking relationships with the Company and/or its
affiliates, including Imperial Holdings.
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The Owner Trustee may resign at any time, in which event the
Administrator or the Indenture Trustee will be obligated to appoint a successor
owner trustee as set forth in the Agreements. The Administrator or the Indenture
Trustee may also remove the Owner Trustee if the Owner Trustee ceases to be
eligible to continue as such under the Trust Agreement or if the Owner Trustee
becomes insolvent. Upon becoming aware of such circumstances, the Administrator
or the Indenture Trustee will be obligated to appoint a successor Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a successor
Owner Trustee will not become effective until acceptance of the appointment by
the successor Owner Trustee.
THE INDENTURE TRUSTEE
The Indenture Trustee under the Indenture will be named in the related
Prospectus Supplement. The commercial bank or trust company serving as Indenture
Trustee may have normal banking relationships with the Company and/or its
affiliates, including Imperial Holdings.
The Indenture Trustee may resign at any time, in which event the
Company, the Owner Trustee or the Administrator will be obligated to appoint a
successor indenture trustee as set forth in the Indenture. The Company, the
Owner Trustee or the Administrator as set forth in the Indenture may also remove
the Indenture Trustee if the Indenture Trustee ceases to be eligible to continue
as such under the Indenture or if the Indenture Trustee becomes insolvent. Upon
becoming aware of such circumstances, the Company, the Owner Trustee or the
Administrator will be obligated to appoint a successor Indenture Trustee. If so
specified in the Indenture, the Indenture Trustee may also be removed at any
time by the holders of a majority principal balance of the Bonds. Any
resignation or removal of the Indenture Trustee and appointment of a successor
Indenture Trustee will not become effective until acceptance of the appointment
by the successor Indenture Trustee.
YIELD CONSIDERATIONS
The yield to maturity of an Bond will depend on the price paid by the
holder for such Bond, the Interest Rate on any such Bond entitled to payments of
interest (which Interest Rate may vary if so specified in the related Prospectus
Supplement) and the rate and timing of principal payments (including
prepayments, defaults, liquidations and repurchases) on the Mortgage Loans and
the allocation thereof to reduce the principal balance of such Bond (or notional
amount thereof if applicable) and other factors.
A class of Bonds may be entitled to payments of interest at a fixed
Interest Rate, a variable Interest Rate or adjustable Interest Rate, or any
combination of such Interest Rates, each as specified in the related Prospectus
Supplement. A variable Interest Rate may be calculated based on the weighted
average of the Mortgage Rates (in each case, net of the per annum rate or rates
applicable to the calculation of servicing and administrative fees and any
Spread (each, a "Net Mortgage Rate")) of the related Mortgage Loans for the
month preceding the Distribution Date if so specified in the related Prospectus
Supplement. As will be described in the related Prospectus Supplement, the
aggregate payments of interest on a class of Bonds, and the yield to maturity
thereon, will be affected by the rate of payment of principal on the Bonds (or
the rate of reduction in the notional balance of Bonds entitled only to payments
of interest) and, in the case of Bonds evidencing interests in ARM Loans, by
changes in the Net Mortgage Rates on the ARM Loans. See "Maturity and Prepayment
Considerations" below. The yield on the Bonds will also be affected by
liquidations of Mortgage Loans following Mortgagor defaults and by purchases of
Mortgage Loans in the event of breaches of representations made in respect of
such Mortgage Loans by the Company, the Master Servicer and others, or
conversions of ARM Loans to a fixed interest rate. See "The Mortgage
Pools--Representations by Sellers" and "Descriptions of the Bonds--Assignment of
Trust Fund Assets" above. Holders of certain Strip Bonds or a class of Bonds
having a Interest Rate that varies based on the weighted average Mortgage Rate
of the underlying
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Mortgage Loans will be affected by disproportionate prepayments and repurchases
of Mortgage Loans having higher Net Mortgage Rates or rates applicable to the
Strip Bonds, as applicable.
With respect to any series of Bonds, a period of time will elapse
between the date upon which payments on the related Mortgage Loans are due and
the Distribution Date on which such payments are passed through to Bondholders.
That delay will effectively reduce the yield that would otherwise be produced if
payments on such Mortgage Loans were distributed to Bondholders on or near the
date they were due.
In general, if a class of Bonds is purchased at initial issuance at a
premium and payments of principal on the related Mortgage Loans occur at a rate
faster than anticipated at the time of purchase, the purchaser's actual yield to
maturity will be lower than that assumed at the time of purchase. Conversely, if
a class of Bonds is purchased at initial issuance at a discount and payments of
principal on the related Mortgage Loans occur at a rate slower than that assumed
at the time of purchase, the purchaser's actual yield to maturity will be lower
than that originally anticipated. The effect of principal prepayments,
liquidations and purchases on yield will be particularly significant in the case
of a series of Bonds having a class entitled to payments of interest only or to
payments of interest that are disproportionately high relative to the principal
payments to which such class is entitled. Such a class will likely be sold at a
substantial premium to its principal balance and any faster than anticipated
rate of prepayments will adversely affect the yield to holders thereof. In
certain circumstances extremely rapid prepayments may result in the failure of
such holders to recoup their original investment. In addition, the yield to
maturity on certain other types of classes of Bonds, including Accrual Bonds,
Bonds with a Interest Rate which fluctuates inversely with or at a multiple of
an index or certain other classes in a series including more than one class of
Bonds, may be relatively more sensitive to the rate of prepayment on the related
Mortgage Loans than other classes of Bonds.
The timing of changes in the rate of principal payments on or
repurchases of the Mortgage Loans may significantly affect an investor's actual
yield to maturity, even if the average rate of principal payments experienced
over time is consistent with an investor's expectation. In general, the earlier
a prepayment of principal on the underlying Mortgage Loans or a repurchase
thereof, the greater will be the effect on an investor's yield to maturity. As a
result, the effect on an investor's yield of principal payments and repurchases
occurring at a rate higher (or lower) than the rate anticipated by the investor
during the period immediately following the issuance of a series of Bonds would
not be fully offset by a subsequent like reduction (or increase) in the rate of
principal payments.
When a principal prepayment in full is made on a Mortgage Loan, the
borrower is generally charged interest only for the period from the due date of
the preceding scheduled payment up to the date of such prepayment, instead of
for the full accrual period, that is, the period from the due date of the
preceding scheduled payment up to the due date for the next scheduled payment.
In addition, a partial principal prepayment may likewise be applied as of a date
prior to the next scheduled due date (and, accordingly, be accompanied by
interest thereon for less than the full accrual period). However, interest
accrued on any series of Bonds and distributable thereon on any Distribution
Date will generally correspond to interest accrued on the principal balance of
Mortgage Loans for their respective full accrual periods. Consequently, if a
prepayment on any Mortgage Loan is distributable to Bondholders on a particular
Distribution Date, but such prepayment is not accompanied by interest thereon
for the full accrual period, the interest charged to the borrower (net of
servicing and administrative fees and any Spread) may be less (such shortfall, a
"Prepayment Interest Shortfall") than the corresponding amount of interest
accrued and otherwise payable on the Bonds of the related series. If and to the
extent that any such shortfall is allocated to a class of Bonds, the yield
thereon will be adversely affected. The Prospectus Supplement for a series of
Bonds will describe the manner in which any such shortfalls will be allocated
among the classes of such Bonds. If so specified in the related Prospectus
Supplement, the Master Servicer will be required to apply some or all of its
servicing compensation for the corresponding
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period to offset the amount of any such shortfalls. The related Prospectus
Supplement will also describe any other amounts available to offset such
shortfalls. See Servicing of Mortgage Loans--Servicing and Other Compensation
and Payment of Expenses; Spread".
The rate of defaults on the Mortgage Loans will also affect the rate
and timing of principal payments on the Mortgage Loans and thus the yield on the
Bonds. In general, defaults on Single Family Loans are expected to occur with
greater frequency in their early years. However, there is a risk that Mortgage
Loans, including Multifamily Loans, that require Balloon Payments may default at
maturity, or that the maturity of such a Mortgage Loan may be extended in
connection with a workout. The rate of default on Single Family Loans which are
refinance or limited documentation mortgage loans, and on Mortgage Loans,
including Multifamily Loans, with high Loan-to-Value Ratios, may be higher than
for other types of Mortgage Loans. Furthermore, the rate and timing of
prepayments, defaults and liquidations on the Mortgage Loans will be affected by
the general economic condition of the region of the country in which the related
Mortgaged Properties are located. The risk of delinquencies and loss is greater
and prepayments are less likely in regions where a weak or deteriorating economy
exists, as may be evidenced by, among other factors, increasing unemployment or
falling property values. See "Risk Factors."
With respect to certain Mortgage Loans including ARM Loans, the
Mortgage Rate at origination may be below the rate that would result if the
index and margin relating thereto were applied at origination. Under the
applicable underwriting standards, the Mortgagor under each Mortgage Loan
generally will be qualified, or the Mortgage Loan otherwise approved, on the
basis of the Mortgage Rate in effect at origination. The repayment of any such
Mortgage Loan may thus be dependent on the ability of the mortgagor to make
larger level monthly payments following the adjustment of the Mortgage Rate. In
addition, the periodic increase in the amount paid by the Mortgagor of a Buydown
Mortgage Loan during or at the end of the applicable Buydown Period may create a
greater financial burden for the Mortgagor, who might not have otherwise
qualified for a mortgage under applicable underwriting guidelines, and may
accordingly increase the risk of default with respect to the related Mortgage
Loan.
The Mortgage Rates on certain ARM Loans subject to negative
amortization generally adjust monthly and their amortization schedules adjust
less frequently. During a period of rising interest rates as well as immediately
after origination (initial Mortgage Rates are generally lower than the sum of
the Indices applicable at origination and the related Bond Margins), the amount
of interest accruing on the principal balance of such Mortgage Loans may exceed
the amount of the minimum scheduled monthly payment thereon. As a result, a
portion of the accrued interest on negatively amortizing Mortgage Loans may
become Deferred Interest which will be added to the principal balance thereof
and will bear interest at the applicable Mortgage Rate. The addition of any such
Deferred Interest to the principal balance of any related class or classes of
Bonds will lengthen the weighted average life thereof and may adversely affect
yield to holders thereof, depending upon the price at which such Bonds were
purchased. In addition, with respect to certain ARM Loans subject to negative
amortization, during a period of declining interest rates, it might be expected
that each minimum scheduled monthly payment on such a Mortgage Loan would exceed
the amount of scheduled principal and accrued interest on the principal balance
thereof, and since such excess will be applied to reduce the principal balance
of the related class or classes of Bonds, the weighted average life of such
Bonds will be reduced and may adversely affect yield to holders thereof,
depending upon the price at which such Bonds were purchased.
MATURITY AND PREPAYMENT CONSIDERATIONS
As indicated above under "The Mortgage Pools," the original terms to
maturity of the Mortgage Loans in a given Mortgage Pool will vary depending upon
the type of Mortgage Loans included in such Mortgage Pool. The Prospectus
Supplement for a series of Bonds will contain information with respect to the
types and maturities of the Mortgage Loans in the related Mortgage Pool. Unless
otherwise
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specified in the related Prospectus Supplement, all of the Mortgage Loans may be
prepaid without penalty in full or in part at any time. The prepayment
experience with respect to the Mortgage Loans in a Mortgage Pool will affect the
life and yield of the related series of Bonds.
With respect to Balloon Loans, payment of the Balloon Payment (which,
based on the amortization schedule of such Mortgage Loans, is expected to be a
substantial amount) will generally depend on the Mortgagor's ability to obtain
refinancing of such Mortgage Loans or to sell the Mortgaged Property prior to
the maturity of the Balloon Loan. The ability to obtain refinancing will depend
on a number of factors prevailing at the time refinancing or sale is required,
including, without limitation, real estate values, the Mortgagor's financial
situation, prevailing mortgage loan interest rates, the Mortgagor's equity in
the related Mortgaged Property, tax laws and prevailing general economic
conditions. Unless otherwise specified in the related Prospectus Supplement,
none of the Company, the Master Servicer, or any of their affiliates will be
obligated to refinance or repurchase any Mortgage Loan or to sell the Mortgaged
Property.
The extent of prepayments of principal of the Mortgage Loans may be
affected by a number of factors, including, without limitation, solicitations
and the availability of mortgage credit, the relative economic vitality of the
area in which the Mortgaged Properties are located and, in the case of
Multifamily Loans, the quality of management of the Mortgage Properties, the
servicing of the Mortgage Loans, possible changes in tax laws and other
opportunities for investment. In addition, the rate of principal payments on the
Mortgage Loans may be affected by the existence of Lock-out Periods and
requirements that principal prepayments be accompanied by Prepayment Premiums,
as well as due-on-sale and due-on-encumbrance provisions, and by the extent to
which such provisions may be practicably enforced. See "Servicing of Mortgage
Loans--Collection and Other Servicing Procedures" and "Certain Legal Aspects of
the Mortgage Loans--Enforceability of Certain Provisions" for a description of
certain provisions of the Indenture and certain legal developments that may
affect the prepayment experience on the Mortgage Loans.
The rate of prepayment on a pool of mortgage loans is also affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
coupon, a borrower may have an increased incentive to refinance its mortgage
loan. In addition, as prevailing market interest rates decline, even borrowers
with ARM Loans that have experienced a corresponding interest rate decline may
have an increased incentive to refinance for purposes of either (i) converting
to a fixed rate loan and thereby "locking in" such rate or (ii) taking advantage
of the initial "teaser rate" (a mortgage interest rate below what it would
otherwise be if the applicable index and gross margin were applied) on another
adjustable rate mortgage loan. Moreover, although the Mortgage Rates on ARM
Loans will be subject to periodic adjustments, such adjustments generally will,
unless otherwise specified in the related Prospectus Supplement, (i) not
increase or decrease such Mortgage Rates by more than a fixed percentage amount
on each adjustment date, (ii) not increase such Mortgage Rates over a fixed
percentage amount during the life of any ARM Loan and (iii) be based on an index
(which may not rise and fall consistently with mortgage interest rates) plus the
related Bond Margin (which may be different from margins being used at the time
for newly originated adjustable rate mortgage loans). As a result, the Mortgage
Rates on the ARM Loans at any time may not equal the prevailing rates for
similar, newly originated adjustable rate mortgage loans. In certain rate
environments, the prevailing rates on fixed-rate mortgage loans may be
sufficiently low in relation to the then-current Mortgage Rates on ARM Loans
that the rate of prepayment may increase as a result of refinancings. There can
be no certainty as to the rate of prepayments on the Mortgage Loans during any
period or over the life of any series of Bonds.
If the applicable Agreement for a series of Bonds provides for a
Funding Account or other means of funding the transfer of additional Mortgage
Loans to the related Trust Fund, as described under "Description of the
Bonds--Funding Account" herein, and the Trust Fund is unable to acquire such
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additional Mortgage Loans within any applicable time limit, the amounts set
aside for such purpose may be applied as principal payments on one or more
classes of Bonds of such series. See "Risk Factors--Yield and Prepayment
Considerations."
There can be no assurance as to the rate of prepayment of the Mortgage
Loans. The Company is not aware of any publicly available statistics relating to
the principal prepayment experience of diverse portfolios of mortgage loans such
as the Mortgage Loans over an extended period of time. All statistics known to
the Company that have been compiled with respect to prepayment experience on
mortgage loans indicate that while some mortgage loans may remain outstanding
until their stated maturities, a substantial number will be paid prior to their
respective stated maturities. No representation is made as to the particular
factors that will affect the prepayment of the Mortgage Loans or as to the
relative importance of such factors.
Under certain circumstances, the Master Servicer, the Company or a
person specified in the related Prospectus Supplement may have the option to
purchase the assets in a Trust Fund and effect early retirement of the related
series of Bonds. See "The Agreements--Termination; Retirement of Bonds."
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains summaries of certain legal aspects of
mortgage loans that are general in nature. Because such legal aspects are
governed in part by applicable state law (which laws may differ substantially),
the summaries do not purport to be complete nor to reflect the laws of any
particular state nor to encompass the laws of all states in which the Mortgaged
Properties may be situated. The summaries are qualified in their entirety by
reference to the applicable federal and state laws governing the Mortgage Loans.
SINGLE FAMILY LOANS AND MULTIFAMILY LOANS
GENERAL. Each Single Family and Multifamily Loan will be evidenced by a
note or bond and secured by an instrument granting a security interest in real
property, which may be a mortgage, deed of trust or a deed to secure debt,
depending upon the prevailing practice and law in the state in which the related
Mortgaged Property is located. Mortgages, deed of trust and deeds to secure debt
are herein collectively referred to as "mortgages". A mortgage creates a lien
upon, or grants a title interest in, the real property covered thereby, and
represents the security for the repayment of the indebtedness customarily
evidenced by a promissory note. The priority of the lien created or interest
granted will depend on the terms of the mortgage and, in some cases, on the
terms of separate subordination agreements or intercreditor agreements with
others that hold interests in the real property, the knowledge of the parties to
the mortgage and, generally, the order of recordation of the mortgage in the
appropriate public recording office. However, the lien of a recorded mortgage
will generally be subordinate to laterarising liens for real estate taxes and
assessments and other charges imposed under governmental police powers.
TYPES OF MORTGAGE INSTRUMENTS. There are two parties to a mortgage: a
mortgagor (the borrower and usually the owner of the subject property) and a
mortgagee (the lender). In contrast, a deed of trust is a three-party
instrument, among a trustor (the equivalent of a borrower), a trustee to whom
the real property is conveyed, and a beneficiary (the lender) for whose benefit
the conveyance is made. Under a deed of trust, the trustor grants the property,
irrevocably until the debt is paid, in trust and generally with a power of sale,
to the trustee to secure repayment of the indebtedness evidenced by the related
note. A deed to secure debt typically has two parties. The borrower, or grantor,
conveys title to the real property to the grantee, or lender, generally with a
power of sale, until such time as the debt is repaid. In a case where the
borrower is a land trust, there would be an additional party because legal title
to the
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property is held by a land trustee under a land trust agreement for the benefit
of the borrower. At origination of a mortgage loan involving a land trust, the
borrower executes a separate undertaking to make payments on the mortgage note.
The mortgagee's authority under a mortgage, the trustee's authority under a deed
of trust and the grantee's authority under a deed to secure debt are governed by
the express provisions of the related instrument, the law of the state in which
the real property is located, certain federal laws (including, without
limitation, the Relief Act) and, in some deed of trust transactions, the
directions of the beneficiary.
LEASES AND RENTS. Mortgages that encumber income-producing multifamily
properties often contain an assignment of rents and leases, pursuant to which
the borrower assigns to the lender the borrower's right, title and interest as
landlord under each lease and the income derived therefrom, while (unless rents
are to be paid directly to the lender) retaining a revocable license to collect
the rents for so long as there is no default. If the borrower defaults, the
license terminates and the lender is entitled to collect the rents. Local law
may require that the lender take possession of the property and/or obtain a
court-appointed receiver before becoming entitled to collect the rents.
CONTRACTS
Under the laws of most states, manufactured housing constitutes
personal property and is subject to the motor vehicle registration laws of the
state or other jurisdiction in which the unit is located. In a few states, where
certificates of title are not required for manufactured homes, security
interests are perfected by the filing of a financing statement under Article 9
of the UCC which has been adopted by all states. Such financing statements are
effective for five years and must be renewed at the end of each five years. The
certificate of title laws adopted by the majority of states provide that
ownership of motor vehicles and manufactured housing shall be evidenced by a
certificate of title issued by the motor vehicles department (or a similar
entity) of such state. In the states that have enacted certificate of title
laws, a security interest in a unit of manufactured housing, so long as it is
not attached to land in so permanent a fashion as to become a fixture, is
generally perfected by the recording of such interest on the certificate of
title to the unit in the appropriate motor vehicle registration office or by
delivery of the required documents and payment of a fee to such office,
depending on state law.
The Master Servicer will be required under the related Servicing
Agreement to effect such notation or delivery of the required documents and
fees, and to obtain possession of the certificate of title, as appropriate under
the laws of the state in which any Manufactured Home is registered. In the event
the Master Servicer fails, due to clerical errors or otherwise, to effect such
notation or delivery, or files the security interest under the wrong law (for
example, under a motor vehicle title statute rather than under the UCC, in a few
states), the Indenture Trustee may not have a first priority security interest
in the Manufactured Home securing a Contract. As manufactured homes have become
larger and often have been attached to their sites without any apparent
intention by the borrowers to move them, courts in many states have held that
manufactured homes may, under certain circumstances, become subject to real
estate title and recording laws. As a result, a security interest in a
manufactured home could be rendered subordinate to the interests of other
parties claiming an interest in the home under applicable state real estate law.
In order to perfect a security interest in a manufactured home under real estate
laws, the holder of the security interest must file either a "fixture filing"
under the provisions of the UCC or a real estate mortgage under the real estate
laws of the state where the home is located. These filings must be made in the
real estate records office of the county where the home is located. Generally,
Contracts will contain provisions prohibiting the obligor from permanently
attaching the Manufactured Home to its site. So long as the obligor does not
violate this agreement, a security interest in the Manufactured Home will be
governed by the certificate of title laws or the UCC, and the notation of the
security interest on the certificate of title or the filing of a UCC financing
statement will be effective to maintain the priority of the security interest in
the Manufactured Home. If, however, a Manufactured Home is permanently
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attached to its site, other parties could obtain an interest in the Manufactured
Home that is prior to the security interest originally retained by the Seller
and transferred to the Company.
The Company will assign or cause to be assigned a security interest in
the Manufactured Homes to the Indenture Trustee, on behalf of the Bondholders.
Unless otherwise specified in the related Prospectus Supplement, neither the
Company, the Master Servicer nor the Indenture Trustee will amend the
certificates of title to identify the Indenture Trustee, on behalf of the
Bondholders, as the new secured party and, accordingly, the Company or the
Seller will continue to be named as the secured party on the certificates of
title relating to the Manufactured Homes. In most states, such assignment is an
effective conveyance of such security interest without amendment of any lien
noted on the related certificate of title and the new secured party succeeds to
the Company's rights as the secured party. However, in some states there exists
a risk that, in the absence of an amendment to the certificate of title, such
assignment of the security interest might not be held effective against
creditors of the Company or Seller.
In the absence of fraud, forgery or permanent affixation of the
Manufactured Home to its site by the Manufactured Home owner, or administrative
error by state recording officials, the notation of the lien of the Company on
the certificate of title or delivery of the required documents and fees will be
sufficient to protect the Indenture Trustee against the rights of subsequent
purchasers of a Manufactured Home or subsequent lenders who take a security
interest in the Manufactured Home. If there are any Manufactured Homes as to
which the Company has failed to perfect or cause to be perfected the security
interest assigned to the Trust Fund, such security interest would be subordinate
to, among others, subsequent purchasers for value of Manufactured Homes and
holders of perfected security interests. There also exists a risk in not
identifying the Indenture Trustee, on behalf of the Bondholders, as the new
secured party on the certificate of title that, through fraud or negligence, the
security interest of the Indenture Trustee could be released.
In the event that the owner of a Manufactured Home moves it to a state
other than the state in which such Manufactured Home initially is registered,
under the laws of most states the perfected security interest in the
Manufactured Home would continue for four months after such relocation and
thereafter until the owner re-registers the Manufactured Home in such state. If
the owner were to relocate a Manufactured Home to another state and re-register
the Manufactured Home in such state, and if the Company did not take steps to
re-perfect its security interest in such state, the security interest in the
Manufactured Home would cease to be perfected. A majority of states generally
require surrender of a certificate of title to re-register a Manufactured Home;
accordingly, the Company must surrender possession if it holds the certificate
of title to such Manufactured Home or, in the case of Manufactured Homes
registered in states that provide for notation of lien, the Company would
receive notice of surrender if the security interest in the Manufactured Home is
noted on the certificate of title. Accordingly, the Company would have the
opportunity to re-perfect its security interest in the Manufactured Home in the
state of relocation. In states that do not require a certificate of title for
registration of a manufactured home, re-registration could defeat perfection.
Similarly, when an obligor under a manufactured housing conditional sales
contract sells a manufactured home, the obligee must surrender possession of the
certificate of title or it will receive notice as a result of its lien noted
thereon and accordingly will have an opportunity to require satisfaction of the
related manufactured housing conditional sales contract before release of the
lien. Under each related Servicing Agreement, the Master Servicer will be
obligated to take such steps, at the Master Servicer's expense, as are necessary
to maintain perfection of security interests in the Manufactured Homes.
Under the laws of most states, liens for repairs performed on a
Manufactured Home take priority even over a perfected security interest. The
Company will obtain the representation of the related Seller that it has no
knowledge of any such liens with respect to any Manufactured Home securing a
Contract. However, such liens could arise at any time during the term of a
Contract. No notice will be given to the Indenture Trustee or Bondholders in the
event such a lien arises.
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FORECLOSURE ON MORTGAGES
Foreclosure of a deed of trust is generally accomplished by a
non-judicial trustee's sale under a specific provision in the deed of trust
which authorizes the trustee to sell the property upon any default by the
borrower under the terms of the note or deed of trust. In addition to any notice
requirements contained in a deed of trust, in some states, the trustee must
record a notice of default and send a copy to the borrower trustor and to any
person who has recorded a request for a copy of notice of default and notice of
sale. In addition, the trustee must provide notice in some states to any other
individual having an interest of record in the real property, including any
junior lienholders. If the deed of trust is not reinstated within a specified
period, a notice of sale must be posted in a public place and, in most states,
published for a specific period of time in one or more newspapers. In addition,
some state laws require that a copy of the notice of sale be posted on the
property and sent to all parties having an interest of record in the real
property.
Foreclosure of a mortgage is generally accomplished by judicial action.
Generally, the action is initiated by the service of legal pleadings upon all
parties having an interest of record in the real property. Delays in completion
of the foreclosure may occasionally result from difficulties in locating
necessary parties. Judicial foreclosure proceedings are often not contested by
any of the applicable parties. If the mortgagee's right to foreclose is
contested, the legal proceedings necessary to resolve the issue can be
time-consuming.
In some states, the borrower-trustor has the right to reinstate the
loan at any time following default until shortly before the trustee's sale. In
general, in such states, the borrower, or any other person having a junior
encumbrance on the real estate, may, during a reinstatement period, cure the
default by paying the entire amount in arrears plus the costs and expenses
incurred in enforcing the obligation.
In the case of foreclosure under either a mortgage or a deed of trust,
the sale by the referee or other designated officer or by the trustee is a
public sale. However, because of the difficulty a potential buyer at the sale
would have in determining the exact status of title and because the physical
condition of the property may have deteriorated during the foreclosure
proceedings, it is uncommon for a third party to purchase the property at a
foreclosure sale. Rather, it is common for the lender to purchase the property
from the trustee or referee for a credit bid less than or equal to the unpaid
principal amount of the mortgage or deed of trust, accrued and unpaid interest
and the expense of foreclosure. Generally, state law controls the amount of
foreclosure costs and expenses, including attorneys' fees, which may be
recovered by a lender. Thereafter, subject to the right of the borrower in some
states to remain in possession during the redemption period, the lender will
assume the burdens of ownership, including obtaining hazard insurance and making
such repairs at its own expense as are necessary to render the property suitable
for sale. The lender will commonly obtain the services of a real estate broker
and pay the broker's commission in connection with the sale of the property.
Depending upon market conditions, the ultimate proceeds of the sale of the
property may not equal the lender's investment in the property and, in some
states, subject to the terms of the loan, the lender may be entitled to a
deficiency judgment.
Any loss may be reduced by the receipt of any mortgage insurance proceeds.
A junior mortgagee may not foreclose on the property securing a junior
mortgage unless it forecloses subject to the senior mortgages, in which case it
must either pay the entire amount due on the senior mortgages to the senior
mortgagees prior to or at the time of the foreclosure sale or undertake the
obligation to make payments on the senior mortgages in the event the mortgagor
is in default thereunder, in either event adding the amounts expended to the
balance due on the junior loan, and may be subrogated to the rights of the
senior mortgagees. In addition, in the event that the foreclosure of a junior
mortgage triggers the enforcement of a "due-on-sale" clause, the junior
mortgagee may be required to pay the full amount of the senior mortgages to the
senior mortgagees. Accordingly, with respect to those Single
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Family and Multifamily Loans which are junior mortgage loans, if the lender
purchases the property, the lender's title will be subject to all senior liens
and claims and certain governmental liens. The proceeds received by the referee
or trustee from the sale are applied first to the costs, fees and expenses of
sale and then in satisfaction of the indebtedness secured by the mortgage or
deed of trust under which the sale was conducted. Any remaining proceeds are
generally payable to the holders of junior mortgages or deeds of trust and other
liens and claims in order of their priority, whether or not the borrower is in
default. Any additional proceeds are generally payable to the mortgagor or
trustor. The payment of the proceeds to the holders of junior mortgages may
occur in the foreclosure action of the senior mortgagee or may require the
institution of separate legal proceeds.
In foreclosure, courts have imposed general equitable principles. The
equitable principles are generally designed to relieve the borrower from the
legal effect of its defaults under the loan documents. Examples of judicial
remedies that have been fashioned include judicial requirements that the lender
undertake affirmative and expensive actions to determine the causes for the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's judgment and have required that lenders reinstate loans or recast
payment schedules in order to accommodate borrowers who are suffering from
temporary financial disability. In other cases, courts have limited the right of
a lender to foreclose if the default under the mortgage instrument is not
monetary, such as the borrower's failure to adequately maintain the property or
the borrower's execution of a second mortgage or deed of trust affecting the
property. Finally, some courts have been faced with the issue of whether or not
federal or state constitutional provisions reflecting due process concerns for
adequate notice require that borrowers under deeds of trust or mortgages receive
notices in addition to the statutorily-prescribed minimums. For the most part,
these cases have upheld the notice provisions as being reasonable or have found
that the sale by a trustee under a deed of trust, or under a mortgage having a
power of sale, does not involve sufficient state action to afford constitutional
protection to the borrower.
REPOSSESSION WITH RESPECT TO CONTRACTS
GENERAL. Repossession of manufactured housing is governed by state law.
A few states have enacted legislation that requires that the debtor be given an
opportunity to cure its default (typically 30 days to bring the account current)
before repossession can commence. So long as a manufactured home has not become
so attached to real estate that it would be treated as a part of the real estate
under the law of the state where it is located, repossession of such home in the
event of a default by the obligor will generally be governed by the UCC (except
in Louisiana). Article 9 of the UCC provides the statutory framework for the
repossession of manufactured housing. While the UCC as adopted by the various
states may vary in certain small particulars, the general repossession procedure
established by the UCC is as follows:
(i) Except in those states where the debtor must receive
notice of the right to cure a default, repossession can commence
immediately upon default without prior notice. Repossession may be
effected either through self-help (peaceable retaking without court
order), voluntary repossession or through judicial process
(repossession pursuant to court-issued writ of replevin). The self-help
and/or voluntary repossession methods are more commonly employed, and
are accomplished simply by retaking possession of the manufactured
home. In cases in which the debtor objects or raises a defense to
repossession, a court order must be obtained from the appropriate state
court, and the manufactured home must then be repossessed in accordance
with that order. Whether the method employed is self-help, voluntary
repossession or judicial repossession, the repossession can be
accomplished either by an actual physical removal of the manufactured
home to a secure location for refurbishment and resale or by removing
the occupants and their belongings from the manufactured home and
maintaining possession of the manufactured home on the location where
the occupants were residing. Various factors may affect
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whether the manufactured home is physically removed or left on
location, such as the nature and term of the lease of the site on which
it is located and the condition of the unit. In many cases, leaving the
manufactured home on location is preferable, in the event that the home
is already set up, because the expenses of retaking and redelivery will
be saved. However, in those cases where the home is left on location,
expenses for site rentals will usually be incurred.
(ii) Once repossession has been achieved, preparation for
the subsequent disposition of the manufactured home can commence. The
disposition may be by public or private sale provided the method,
manner, time, place and terms of the sale are commercially reasonable.
(iii) Sale proceeds are to be applied first to repossession
expenses (expenses incurred in retaking, storage, preparing for sale to
include refurbishing costs and selling) and then to satisfaction of the
indebtedness. While some states impose prohibitions or limitations on
deficiency judgments if the net proceeds from resale do not cover the
full amount of the indebtedness, the remainder may be sought from the
debtor in the form of a deficiency judgement in those states that do
not prohibit or limit such judgments. The deficiency judgment is a
personal judgment against the debtor for the shortfall. Occasionally,
after resale of a manufactured home and payment of all expenses and
indebtedness, there is a surplus of funds. In that case, the UCC
requires the party suing for the deficiency judgment to remit the
surplus to the debtor. Because the defaulting owner of a manufactured
home generally has very little capital or income available following
repossession, a deficiency judgment may not be sought in many cases or,
if obtained, will be settled at a significant discount in light of the
defaulting owner's strained financial condition.
LOUISIANA LAW. Any contract secured by a manufactured home located in
Louisiana will be governed by Louisiana law rather than Article 9 of the UCC.
Louisiana laws provide similar mechanisms for perfection and enforcement of
security interests in manufactured housing used as collateral for an installment
sale contract or installment loan agreement.
Under Louisiana law, a manufactured home that has been permanently
affixed to real estate will nevertheless remain subject to the motor vehicle
registration laws unless the obligor and any holder of a security interest in
the property execute and file in the real estate records for the parish in which
the property is located a document converting the unit into real property. A
manufactured home that is converted into real property but is then removed from
its site can be converted back to personal property governed by the motor
vehicle registration laws if the obligor executes and files various documents in
the appropriate real estate records and all mortgagees under real estate
mortgages on the property and the land to which it was affixed file releases
with the motor vehicle commission.
So long as a manufactured home remains subject to the Louisiana motor
vehicle laws, liens are recorded on the certificate of title by the motor
vehicle commissioner and repossession can be accomplished by voluntary consent
of the obligor, executory process (repossession proceedings which must be
initiated through the courts but which involve minimal court supervision) or a
civil suit for possession. In connection with a voluntary surrender, the obligor
must be given a full release from liability for all amounts due under the
contract. In executory process repossessions, a sheriff's sale (without court
supervision) is permitted, unless the obligor brings suit to enjoin the sale,
and the lender is prohibited from seeking a deficiency judgment against the
obligor unless the lender obtained an appraisal of the manufactured home prior
to the sale and the property was sold for at least two-thirds of its appraised
value.
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RIGHTS OF REDEMPTION
SINGLE FAMILY PROPERTIES AND MULTIFAMILY Properties. The purposes of a
foreclosure action in respect of a Single Family Property or Multifamily
Property are to enable the lender to realize upon its security and to bar the
borrower, and all persons who have interests in the property that are
subordinate to that of the foreclosing lender, from exercise of their "equity of
redemption". The doctrine of equity of redemption provides that, until the
property encumbered by a mortgage has been sold in accordance with a properly
conducted foreclosure and foreclosure sale, those having interests that are
subordinate to that of the foreclosing lender have an equity of redemption and
may redeem the property by paying the entire debt with interest. Those having an
equity of redemption must generally be made parties and joined in the
foreclosure proceeding in order for their equity of redemption to be terminated.
The equity of redemption is a common-law (non-statutory) right which
should be distinguished from post-sale statutory rights of redemption. In some
states, after sale pursuant to a deed of trust or foreclosure of a mortgage, the
borrower and foreclosed junior lienors are given a statutory period in which to
redeem the property. In some states, statutory redemption may occur only upon
payment of the foreclosure sale price. In other states, redemption may be
permitted if the former borrower pays only a portion of the sums due. The effect
of a statutory right of redemption is to diminish the ability of the lender to
sell the foreclosed property because the exercise of a right of redemption would
defeat the title of any purchase through a foreclosure. Consequently, the
practical effect of the redemption right is to force the lender to maintain the
property and pay the expenses of ownership until the redemption period has
expired. In some states, a post-sale statutory right of redemption may exist
following a judicial foreclosure, but not following a trustee's sale under a
deed of trust.
MANUFACTURED HOMES. While state laws do not usually require notice to
be given to debtors prior to repossession, many states do require delivery of a
notice of default and of the debtor's right to cure defaults before
repossession. The law in most states also requires that the debtor be given
notice of sale prior to the resale of the home so that the owner may redeem at
or before resale. In addition, the sale must comply with the requirements of the
UCC.
ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS
SINGLE FAMILY LOANS AND MULTIFAMILY Loans. Certain states have imposed
statutory prohibitions which limit the remedies of a beneficiary under a deed of
trust or a mortgagee under a mortgage. In some states including California,
statutes limit the right of the beneficiary or mortgagee to obtain a deficiency
judgment against the borrower following foreclosure. A deficiency judgment is a
personal judgment against the former borrower equal in most cases to the
difference between the net amount realized upon the public sale of the real
property and the amount due to the lender. In the case of a Mortgage Loan
secured by a property owned by a trust where the Mortgage Note is executed on
behalf of the trust, a deficiency judgment against the trust following
foreclosure or sale under a deed of trust, even if obtainable under applicable
law, may be of little value to the mortgagee or beneficiary if there are no
trust assets against which such deficiency judgment may be executed. In the case
of a Mortgage Loan secured by a property owned by a trust where the Mortgage
Note is executed on behalf of the trust, a deficiency judgment against the trust
following foreclosure or sale under a deed of trust, even if obtainable under
applicable law, may be of little value to the mortgagee or beneficiary if there
are no trust assets against which such deficiency judgment may be executed.
Other statutes require the beneficiary or mortgagee to exhaust the security
afforded under a deed of trust or mortgage by foreclosure in an attempt to
satisfy the full debt before bringing a personal action against the borrower. In
certain other states, the lender has the option of bringing a personal action
against the borrower on the debt without first exhausting such security; however
in some of these states, the lender, following judgment on such personal action,
may be deemed to have elected a remedy and may be precluded from exercising
remedies with respect to the security. Consequently, the practical effect of the
election requirement, in those states permitting such election, is that lenders
will usually proceed against the security first rather than bringing a personal
action against the borrower. Finally, in certain other states,
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statutory provisions limit any deficiency judgment against the former borrower
following a foreclosure to the excess of the outstanding debt over the fair
value of the property at the time of the public sale. The purpose of these
statutes is generally to prevent a beneficiary or mortgagee from obtaining a
large deficiency judgment against the former borrower as a result of low or no
bids at the judicial sale.
In addition to laws limiting or prohibiting deficiency judgments,
numerous other federal and state statutory provisions, including the federal
bankruptcy laws and state laws affording relief to debtors, may interfere with
or affect the ability of the secured mortgage lender to realize upon collateral
or enforce a deficiency judgment. For example, under the federal Bankruptcy
Code, as amended from time to time (Title 11 of the United States Code) (the
"Bankruptcy Code"), virtually all actions (including foreclosure actions and
deficiency judgment proceedings) to collect a debt are automatically stayed upon
the filing of the bankruptcy petition and, often, no interest or principal
payments are made during the course of the bankruptcy case. The delay and the
consequences thereof caused by such automatic stay can be significant. Also,
under the Bankruptcy Code, the filing of a petition in a bankruptcy by or on
behalf of a junior lienor may stay the senior lender from taking action to
foreclose out of such junior lien. Moreover, with respect to federal bankruptcy
law, a court with federal bankruptcy jurisdiction may permit a debtor through
his or her Chapter 11 or Chapter 13 rehabilitative plan to cure a monetary
default in respect of a mortgage loan on a debtor's residence by paying
arrearage within a reasonable time period and reinstating the original mortgage
loan payment schedule even though the lender accelerated the mortgage loan and
final judgment of foreclosure had been entered in state court (provided no sale
of the residence had yet occurred) prior to the filing of the debtor's petition.
Some courts with federal bankruptcy jurisdiction have approved plans, based on
the particular facts of the reorganization case, that effected the curing of a
mortgage loan default by paying arrearage over a number of years.
Courts with federal bankruptcy jurisdiction have also indicated that
the terms of a mortgage loan secured by property of the debtor may be modified.
These courts have allowed modifications that include reducing the amount of each
monthly payment, changing the rate of interest, altering the repayment schedule,
forgiving all or a portion of the debt and reducing the lender's security
interest to the value of the residence, thus leaving the lender a general
unsecured creditor for the difference between the value of the residence and the
outstanding balance of the loan. Generally, however, the terms of a mortgage
loan secured only by a mortgage on real property that is the debtor's principal
residence may not be modified pursuant to a plan confirmed pursuant to Chapter
13 except with respect to mortgage payment arrearages, which may be cured within
a reasonable time period.
In the case of income-producing multifamily properties, federal
bankruptcy law may also have the effect of interfering with or affecting the
ability of the secured lender to enforce the borrower's assignment of rents and
leases related to the mortgaged property. Under Section 362 of the Bankruptcy
Code, the lender will be stayed from enforcing the assignment, and the legal
proceedings necessary to resolve the issue could be time-consuming, with
resulting delays in the lender's receipt of the rents.
Certain tax liens arising under the Internal Revenue Code of 1986, as
amended (the "Code"), may in certain circumstances provide priority over the
lien of a mortgage or deed of trust. In addition, substantive requirements are
imposed upon mortgage lenders in connection with the origination and the
servicing of single family mortgage loans by numerous federal and some state
consumer protection laws. These laws include the federal Truth-in-Lending Act,
Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, Fair Credit
Billing Act, Fair Credit Reporting Act and related statutes. These federal laws
impose specific statutory liabilities upon lenders who originate mortgage loans
and who fail to comply with the provisions of the law. In some cases, this
liability may affect assignees of the mortgage loans.
CONTRACTS. In addition to the laws limiting or prohibiting deficiency
judgments, numerous other statutory provisions, including federal bankruptcy
laws and related state laws, may interfere with or affect
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the ability of a lender to realize upon collateral and/or enforce a deficiency
judgment. For example, in a Chapter 13 proceeding under the federal bankruptcy
law, a court may prevent a lender from repossessing a home, and, as part of the
rehabilitation plan, reduce the amount of the secured indebtedness to the market
value of the home at the time of bankruptcy (as determined by the court),
leaving the party providing financing as a general unsecured creditor for the
remainder of the indebtedness. A bankruptcy court may also reduce the monthly
payments due under a contract or change the rate of interest and time of
repayment of the indebtedness.
JUNIOR MORTGAGES
Some of the Mortgage Loans may be secured by junior mortgages or deeds
of trust, which are junior to senior mortgages or deeds of trust which are not
part of the Trust Fund. The rights of the Bondholders as the holders of a junior
deed of trust or a junior mortgage are subordinate in lien priority and in
payment priority to those of the holder of the senior mortgage or deed of trust,
including the prior rights of the senior mortgagee or beneficiary to receive and
apply hazard insurance and condemnation proceeds and, upon default of the
mortgagor, to cause a foreclosure on the property. Upon completion of the
foreclosure proceedings by the holder of the senior mortgage or the sale
pursuant to the deed of trust, the junior mortgagee's or junior beneficiary's
lien will be extinguished unless the junior lienholder satisfies the defaulted
senior loan or asserts its subordinate interest in a property in foreclosure
proceedings. See "--Foreclosure on Mortgages" above.
Furthermore, the terms of the junior mortgage or deed of trust are
subordinate to the terms of the senior mortgage or deed of trust. In the event
of a conflict between the terms of the senior mortgage or deed of trust and the
junior mortgage or deed of trust, the terms of the senior mortgage or deed of
trust will govern generally. Upon a failure of the mortgagor or trustor to
perform any of its obligations, the senior mortgagee or beneficiary, subject to
the terms of the senior mortgage or deed of trust, may have the right to perform
the obligation itself. Generally, all sums so expended by the mortgagee or
beneficiary become part of the indebtedness secured by the mortgage or deed of
trust. To the extent a senior mortgagee expends such sums, such sums will
generally have priority over all sums due under the junior mortgage.
CONSUMER PROTECTION LAWS WITH RESPECT TO CONTRACTS
Numerous federal and state consumer protection laws impose substantial
requirements upon creditors involved in consumer finance. These laws include the
federal Truth-in-Lending Act, Regulation "Z", the Equal Credit Opportunity Act,
Regulation "B", the Fair Credit Reporting Act, and related statutes. These laws
can impose specific statutory liabilities upon creditors who fail to comply with
their provisions. In some cases, this liability may affect an assignee's ability
to enforce a contract.
Manufactured housing contracts often contain provisions obligating the
obligor to pay late charges if payments are not timely made. In certain cases,
federal and state law may specifically limit the amount of late charges that may
be collected. Unless otherwise provided in the related Prospectus Supplement,
under the related Servicing Agreement, late charges will be retained by the
Master Servicer as additional servicing compensation, and any inability to
collect these amounts will not affect payments to Bondholders.
Courts have imposed general equitable principles upon repossession and
litigation involving deficiency balances. These equitable principles are
generally designed to relieve a consumer from the legal consequences of a
default.
In several cases, consumers have asserted that the remedies provided to
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the
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Constitution of the United States. For the most part, courts have upheld the
notice provisions of the UCC and related laws as reasonable or have found that
the repossession and resale by the creditor does not involve sufficient state
action to afford constitutional protection to consumers.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade
Commission (the "FTC Rule") has the effect of subjecting a seller (and certain
related creditors and their assignees) in a consumer credit transaction and any
assignee of the creditor to all claims and defenses which the debtor in the
transaction could assert against the seller of the goods. Liability under the
FTC Rule is limited to the amounts paid by a debtor on the contract, and the
holder of the contract may also be unable to collect amounts still due
thereunder. Most of the Contracts in a Trust Fund will be subject to the
requirements of the FTC Rule. Accordingly, the Trust Fund, as holder of the
Contracts, will be subject to any claims or defenses that the purchaser of the
related manufactured home may assert against the seller of the manufactured
home, subject to a maximum liability equal to the amounts paid by the obligor on
the Contract.
ENVIRONMENTAL LEGISLATION
Certain states impose a statutory lien for associated costs on property
that is the subject of a cleanup action by the state on account of hazardous
wastes or hazardous substances released or disposed of on the property. Such a
lien will generally have priority over all subsequent liens on the property and,
in certain of these states, will have priority over prior recorded liens
including the lien of a mortgage. In addition, under federal environmental
legislation and under state law in a number of states, a secured party which
takes a deed in lieu of foreclosure or acquires a mortgaged property at a
foreclosure sale or becomes involved in the operation or management of a
property so as to be deemed an "owner" or "operator" of the property may be
liable for the costs of cleaning up a contaminated site. Although such costs
could be substantial, it is unclear whether they would be imposed on a lender
(such as a Trust Fund) secured by residential real property. In the event that
title to a Mortgaged Property securing a Mortgage Loan in a Trust Fund was
acquired by the Trust Fund and cleanup costs were incurred in respect of the
Mortgaged Property, the holders of the Bonds of the related series might realize
a loss if such costs were required to be paid by the Trust Fund.
ENFORCEABILITY OF CERTAIN PROVISIONS
TRANSFER OF SINGLE FAMILY PROPERTIES AND MULTIFAMILY Properties. Unless
the related Prospectus Supplement indicates otherwise, the Single Family Loans
and Multifamily Loans generally contain due-on-sale clauses. These clauses
permit the lender to accelerate the maturity of the loan if the borrower sells,
transfers or conveys the property. The enforceability of these clauses has been
the subject of legislation or litigation in many states, and in some cases the
enforceability of these clauses was limited or denied. However, the Garn-St
Germain Depository Institutions Act of 1982 (the "Garn-St Germain Act") preempts
state constitutional, statutory and case law that prohibits the enforcement of
due-on-sale clauses and permits lenders to enforce these clauses in accordance
with their terms, subject to certain limited exceptions. The Garn-St Germain Act
does "encourage" lenders to permit assumption of loans at the original rate of
interest or at some other rate less than the average of the original rate and
the market rate.
The Garn-St Germain Act also sets forth nine specific instances in
which a mortgage lender covered by the Garn-St Germain Act may not exercise a
due-on-sale clause, notwithstanding the fact that a transfer of the property may
have occurred. These include intra-family transfers, certain transfers by
operation of law, leases of fewer than three years and the creation of a junior
encumbrance. Regulations promulgated under the Garn-St Germain Act also prohibit
the imposition of a prepayment penalty upon the acceleration of a loan pursuant
to a due-on-sale clause.
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The inability to enforce a due-on-sale clause may result in a mortgage
loan bearing an interest rate below the current market rate being assumed by the
buyer rather than being paid off, which may have an impact upon the average life
of the Mortgage Loans and the number of Mortgage Loans which may be outstanding
until maturity.
TRANSFER OF MANUFACTURED HOMES. Generally, manufactured housing
contracts contain provisions prohibiting the sale or transfer of the related
manufactured homes without the consent of the obligee on the contract and
permitting the acceleration of the maturity of such contracts by the obligee on
the contract upon any such sale or transfer that is not consented to. Unless
otherwise provided in the related Prospectus Supplement, the Master Servicer
will, to the extent it has knowledge of such conveyance or proposed conveyance,
exercise or cause to be exercised its rights to accelerate the maturity of the
related Contracts through enforcement of due-on-sale clauses, subject to
applicable state law. In certain cases, the transfer may be made by a delinquent
obligor in order to avoid a repossession proceeding with respect to a
Manufactured Home.
In the case of a transfer of a Manufactured Home as to which the Master
Servicer desires to accelerate the maturity of the related Contract, the Master
Servicer's ability to do so will depend on the enforceability under state law of
the due-on-sale clause. The Garn-St Germain Act preempts, subject to certain
exceptions and conditions, state laws prohibiting enforcement of due-on-sale
clauses applicable to the Manufactured Homes. Consequently, in some cases the
Master Servicer may be prohibited from enforcing a due-on-sale clause in respect
of certain Manufactured Homes.
LATE PAYMENT CHARGES AND PREPAYMENT RESTRICTIONS. Mortgage notes and
mortgages, as well as manufactured housing conditional sales contracts and
installment loan agreements, may contain provisions that obligate the borrower
to pay a late charge or additional interest if payments are not timely made, and
in some circumstances, may prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment fees or yield
maintenance penalties. In certain states, there are or may be specific
limitations upon the late charges which a lender may collect from a borrower for
delinquent payments. Certain states also limit the amounts that a lender may
collect from a borrower as an additional charge if the loan is prepaid. In
addition, the enforceability of provisions that provide for prepayment fees or
penalties upon an involuntary prepayment is unclear under the laws of many
states.
SUBORDINATE FINANCING
When the mortgagor encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the mortgagor
may have difficulty servicing and repaying multiple loans. In addition, if the
junior loan permits recourse to the mortgagor (as junior loans often do) and the
senior loan does not, a mortgagor may be more likely to repay sums due on the
junior loan than those on the senior loan. Second, acts of the senior lender
that prejudice the junior lender or impair the junior lender's security may
create a superior equity in favor of the junior lender. For example, if the
mortgagor and the senior lender agree to an increase in the principal amount of
or the interest rate payable on the senior loan, the senior lender may lose its
priority to the extent an existing junior lender is harmed or the mortgagor is
additionally burdened. Third, if the mortgagor defaults on the senior loan
and/or any junior loan or loans, the existence of junior loans and actions taken
by junior lenders can impair the security available to the senior lender and can
interfere with or delay the taking of action by the senior lender. Moreover, the
bankruptcy of a junior lender may operate to stay foreclosure or similar
proceeds by the senior lender.
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APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary
Control Act of 1980, enacted in March 1980 ("Title V"), provides that state
usury limitations shall not apply to certain types of residential first mortgage
loans originated by certain lenders after March 31, 1980. A similar federal
statute was in effect with respect to mortgage loans made during the first three
months of 1980. The Office of Thrift Supervision is authorized to issue rules
and regulations and to publish interpretations governing implementation of Title
V. The statute authorized any state to reimpose interest rate limits by
adopting, before April 1, 1983, a law or constitutional provision which
expressly rejects application of the federal law. In addition, even where Title
V is not so rejected, any state is authorized by the law to adopt a provision
limiting discount points or other charges on mortgage loans covered by Title V.
Certain states have taken action to reimpose interest rate limits or to limit
discount points or other charges.
Title V also provides that, subject to the following conditions, state
usury limitations shall not apply to any loan that is secured by a first lien on
certain kinds of manufactured housing. The Contracts would be covered if they
satisfy certain conditions, among other things, governing the terms of any
prepayments, late charges and deferral fees and requiring a 30-day notice period
prior to instituting any action leading to repossession of or foreclosure with
respect to the related unit. Title V authorized any state to reimpose
limitations on interest rates and finance charges by adopting before April 1,
1983 a law or constitutional provision which expressly rejects application of
the federal law. Fifteen states adopted such a law prior to the April 1, 1983
deadline. In addition, even where Title V was not so rejected, any state is
authorized by the law to adopt a provision limiting discount points or other
charges on loans covered by Title V. In any state in which application of Title
V was expressly rejected or a provision limiting discount points or other
charges has been adopted, no Contract which imposes finance charges or provides
for discount points or charges in excess of permitted levels has been included
in the Trust Fund.
As indicated above under "The Mortgage Pools--Representations by
Sellers," each Seller of a Mortgage Loan will have represented that such
Mortgage Loan was originated in compliance with then applicable state laws,
including usury laws, in all material respects. However, the Mortgage Rates on
the Mortgage Loans will be subject to applicable usury laws as in effect from
time to time.
ALTERNATIVE MORTGAGE INSTRUMENTS
Alternative mortgage instruments, including adjustable rate mortgage
loans and early ownership mortgage loans, originated by non-federally chartered
lenders have historically been subjected to a variety of restrictions. Such
restrictions differed from state to state, resulting in difficulties in
determining whether a particular alternative mortgage instrument originated by a
state-chartered lender was in compliance with applicable law. These difficulties
were alleviated substantially as a result of the enactment of Title VIII of the
Garn-St Germain Act ("Title VIII"). Title VIII provides that, notwithstanding
any state law to the contrary, state-chartered banks may originate alternative
mortgage instruments in accordance with regulations promulgated by the
Comptroller of the Currency with respect to origination of alternative mortgage
instruments by national banks, state-chartered credit unions may originate
alternative mortgage instruments in accordance with regulations promulgated by
the National Credit Union Administration with respect to origination of
alternative mortgage instruments by federal credit unions, and all other
non-federally chartered housing creditors, including state-chartered savings and
loan associations, state-chartered savings banks and mutual savings banks and
mortgage banking companies, may originate alternative mortgage instruments in
accordance with the regulations promulgated by the Federal Home Loan Bank Board,
predecessor to the Office of Thrift Supervision, with respect to origination of
alternative mortgage instruments by federal savings and loan associations. Title
VIII provides that any state may reject applicability of the provisions of Title
VIII by adopting, prior
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to October 15, 1985, a law or constitutional provision expressly rejecting the
applicability of such provisions. Certain states have taken such action.
FORMALDEHYDE LITIGATION WITH RESPECT TO CONTRACTS
A number of lawsuits are pending in the United States alleging personal
injury from exposure to the chemical formaldehyde, which is present in many
building materials, including such components of manufactured housing as plywood
flooring and wall paneling. Some of these lawsuits are pending against
manufacturers of manufactured housing, suppliers of component parts, and related
persons in the distribution process. The Company is aware of a limited number of
cases in which plaintiffs have won judgments in these lawsuits.
Under the FTC Rule, which is described above under "Consumer Protection
Laws", the holder of any Contract secured by a Manufactured Home with respect to
which a formaldehyde claim has been successfully asserted may be liable to the
obligor for the amount paid by the obligor on the related Contract and may be
unable to collect amounts still due under the Contract. In the event an obligor
is successful in asserting such a claim, the related Bondholders could suffer a
loss if (i) the related Seller fails or cannot be required to repurchase the
affected Contract for a breach of representation and warranty and (ii) the
Master Servicer or the Indenture Trustee were unsuccessful in asserting any
claim of contribution or subrogation on behalf of the Bondholders against the
manufacturer or other persons who were directly liable to the plaintiff for the
damages. Typical products liability insurance policies held by manufacturers and
component suppliers of manufactured homes may not cover liabilities arising from
formaldehyde in manufactured housing, with the result that recoveries from such
manufacturers, suppliers or other persons may be limited to their corporate
assets without the benefit of insurance.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended (the "Relief Act"), a Mortgagor who enters military service after the
origination of such Mortgagor's Mortgage Loan (including a Mortgagor who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such Mortgagor's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
individuals who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard, and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to Mortgagors
who enter military service (including reservists who are called to active duty)
after origination of the related Mortgage Loan, no information can be provided
as to the number of loans that may be affected by the Relief Act. Application of
the Relief Act would adversely affect, for an indeterminate period of time, the
ability of the Master Servicer to collect full amounts of interest on certain of
the Mortgage Loans. Any shortfall in interest collections resulting from the
application of the Relief Act or similar legislation or regulations, which would
not be recoverable from the related Mortgage Loans, would result in a reduction
of the amounts distributable to the holders of the related Bonds, and would not
be covered by advances or, unless otherwise specified in the related Prospectus
Supplement, by any Letter of Credit or any other form of credit enhancement
provided in connection with the related series of Bonds. In addition, the Relief
Act imposes limitations that would impair the ability of the Master Servicer to
foreclose on an affected Mortgage Loan or enforce rights under a Contract during
the Mortgagor's period of active duty status, and, under certain circumstances,
during an additional three month period thereafter. Thus, in the event that the
Relief Act or similar legislation or regulations applies to any Mortgage Loan
which goes into default, there may be delays in payment and losses on the
related Bonds in connection therewith. Any other interest shortfalls, deferrals
or forgiveness of payments on the Mortgage Loans resulting from similar
legislation or regulations may result in delays in payments or losses to
Bondholders of the related series.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of certain anticipated material
federal income tax consequences of the purchase, ownership and disposition of
the Bonds offered hereunder. This discussion has been prepared with the advice
of Thacher Proffitt & Wood, counsel to the Company. This discussion is directed
solely to Bondholders that hold the Bonds as capital assets within the meaning
of Section 1221 of the Code and does not purport to discuss all federal income
tax consequences that may be applicable to particular categories of investors,
some of which (such as banks, insurance companies and foreign investors) may be
subject to special rules. Further, the authorities on which this discussion, and
the opinion referred to below, are based are subject to change or differing
interpretations, which could apply retroactively. Taxpayers and preparers of tax
returns should be aware that under applicable Treasury regulations a provider of
advice on specific issues of law is not considered an income tax return preparer
unless the advice (i) is given with respect to events that have occurred at the
time the advice is rendered and is not given with respect to the consequences of
contemplated actions, and (ii) is directly relevant to the determination of an
entry on a tax return. Accordingly, taxpayers should consult their tax advisors
and tax return preparers regarding the preparation of any item on a tax return,
even where the anticipated tax treatment has been discussed herein. In addition
to the federal income tax consequences described herein, potential investors
should consider the state and local tax consequences, if any, of the purchase,
ownership and disposition of the Bonds. See "State and Other Tax Consequences."
Bondholders are advised to consult their tax advisors concerning the federal,
state, local or other tax consequences to them of the purchase, ownership and
disposition of the Bonds offered hereunder.
Taxable mortgage pool ("TMP") rules enacted as part of the Tax Reform
Act of 1986 treat certain arrangements that securitize real estate mortgages as
taxable corporations. An entity will be characterized as a TMP if (i)
substantially all of its assets are debt obligations and more than 50 percent of
such debt obligations consist of real estate mortgages or interests therein,
(ii) the entity is the obligor under debt obligations with two or more
maturities, and (iii) payments on the debt obligations referred to in (ii) bear
a relationship to payments on the debt obligations referred to in (i).
Furthermore, a group of assets held by an entity can be treated as a separate
TMP if the assets are expected to produce significant cash flow that will
support one or more of the entity's issues of debt obligation.
It is possible that the Issuer or a portion of the Issuer relating to
the ownership of the Mortgage Loans and the issuance of the Bonds could be
treated as a TMP. The related Prospectus Supplement for each series of Bonds
will discuss whether the Issuer is anticipated to be characterized as a TMP for
federal income tax purposes. Such characterization would require that the Issuer
be treated as a "separate" corporation and not includible with any other
corporation, therefore subjecting the Issuer to corporate income tax. However,
because the Issuer is also a "qualified REIT subsidiary" (as defined in Section
856(i)(2) of the Code) of Imperial Holdings, which itself is a REIT,
characterization of the Issuer as a TMP would result only in the shareholders of
the Company being required to include in income, as "excess inclusion" income,
some or all of their allocable share of the Issuer's net income that would be
excess inclusion income, if any, if the Issuer were treated as a REMIC. Such
characterization would not result in entity-level, corporate income taxation
with respect to the Issuer. If the Issuer were to fail to continue to be treated
as a "qualified REIT subsidiary" by reason of the Company's failure to continue
to qualify as a REIT for federal income tax purposes, or for any other reason,
the net income of the Issuer would be subject to corporate income tax and the
Issuer would not be permitted to be included on a consolidated income tax return
of another corporate entity. No assurance can be given with regard to the
prospective qualification of the Issuer as a "qualified REIT subsidiary" or of
the Company as a REIT for federal income tax purposes.
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Upon the issuance of the Bonds, Thacher Proffitt & Wood ("Tax
Counsel"), counsel to the Company, will deliver its opinion generally to the
effect that, for federal income tax purposes, assuming compliance with all
provisions of the Indenture and certain related documents, the Bonds will be
treated as indebtedness. The following discussion is based in part upon the
rules governing original issue discount that are set forth in Sections 1271-1273
and 1275 of the Code and in the Treasury regulations issued thereunder (the "OID
Regulations"). For purposes of this tax discussion, references to a "Bondholder"
or a "holder" are to the beneficial owner of a Bond.
STATUS AS REAL PROPERTY LOANS. Bonds held by a mutual savings bank or
domestic building and loan association will not represent interests in
"qualifying real property loans" within the meaning of Code section 593(d); (ii)
Bonds held by a domestic building and loan association will not constitute
"loans...secured by an interest in real property" within the meaning of Code
section 7701(a)(19)(C)(v); and (iii) Bonds held by a real estate investment
trust will not constitute "real estate assets" within the meaning of Code
section 856(c)(5)(A) and interest on Bonds will not be considered "interest on
obligations secured by mortgages on real property" within the meaning of Code
section 856(c)(3)(B).
INTEREST AND ORIGINAL ISSUE DISCOUNT. The related Prospectus Supplement
for a series of Bonds will disclose whether such Bonds are anticipated to be
issued with original issue discount. Any holders of Bonds issued with original
issue discount generally will be required to include original issue discount in
income as it accrues, in accordance with the method described below, in advance
of the receipt of the cash attributable to such income. In addition, Section
1272(a)(6) of the Code provides special rules applicable to any class of Bonds
issued with original issue discount. Regulations have not been issued under that
section.
Under the OID Regulations, a holder of a Bond issued with a DE MINIMIS
amount of original issue discount must include such discount in income, on a PRO
RATA basis, as principal payments are made on the Bond. Stated interest on the
Bonds will be taxable to a Bondholder as ordinary interest income when received
or accrued in accordance with such Bondholder's method of tax accounting.
Section 1272(a)(6) of the Code requires that a prepayment assumption
(the "Prepayment Assumption") be used with respect to the collateral underlying
debt instruments in computing the accrual of original issue discount if payments
under such debt instruments may be accelerated by reason of prepayments of other
obligations securing such debt instruments, and that adjustments be made in the
amount and rate of accrual of such discount to reflect differences between the
actual prepayment rate and the Prepayment Assumption. The Prepayment Assumption
is to be determined in a manner prescribed in Treasury regulations; as noted
above, those regulations have not been issued. The Conference Committee Report
(the "Committee Report") accompanying the Tax Reform Act of 1986 indicates that
the regulations will provide that the Prepayment Assumption used with respect to
a Bond must be the same as that used in pricing the initial offering of such
Bond. The Prepayment Assumption used by the Issuer in reporting original issue
discount for each series of Bonds will be consistent with this standard and will
be disclosed in the related Prospectus Supplement. However, no representation
will be made that the Mortgage Loans will in fact prepay at a rate conforming to
the Prepayment Assumption or at any other rate.
The original issue discount, if any, on a Bond would be the excess of
its stated redemption price at maturity over its issue price. The issue price of
a particular class of Bonds will be the first cash price at which a substantial
amount of Bonds of that class is sold (excluding sales to bond houses, brokers
and underwriters). If less than a substantial amount of a particular class of
Bonds is sold for cash on or prior to the date of their initial issuance (the
"Closing Date"), the issue price for such class will be treated as the fair
market value of such class on the Closing Date. Under the OID Regulations, the
stated redemption price of a Bond is equal to the total of all payments to be
made on such Bond other than
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"qualified stated interest." "Qualified stated interest" includes interest that
is unconditionally payable at least annually at a single fixed rate, or in the
case of a variable rate debt instrument, at a "qualified floating rate," an
"objective rate," a combination of a single fixed rate and one or more
"qualified floating rates" or one "qualified inverse floating rate," or a
combination of "qualified floating rates" that generally does not operate in a
manner that accelerates or defers interest payments on such Bond.
In the case of Bonds bearing adjustable interest rates, the
determination of the total amount of original issue discount and the timing of
the inclusion thereof will vary according to the characteristics of such Bonds.
If the original issue discount rules apply to such Bonds, the related Prospectus
Supplement will describe the manner in which such rules will be applied by the
Issuer with respect to those Bonds in preparing information returns to the
Bondholders and the Internal Revenue Service ("IRS").
Certain classes of the Bonds may provide for the first interest payment
with respect to such Bonds to be made more than one month after the date of
issuance, a period which is longer than the subsequent monthly intervals between
interest payments. Assuming the "accrual period" (as defined below) for original
issue discount is each monthly period that ends on a Distribution Date, in some
cases, as a consequence of this "long first accrual period," some or all
interest payments may be required to be included in the stated redemption price
of the Bond and accounted for as original issue discount.
In addition, if the accrued interest to be paid on the first
Distribution Date is computed with respect to a period that begins prior to the
Closing Date, a portion of the purchase price paid for a Bond will reflect such
accrued interest. In such cases, information returns to the Bondholders and the
IRS will be based on the position that the portion of the purchase price paid
for the interest accrued with respect to periods prior to the Closing Date is
treated as part of the overall purchase price of such Bond (and not as a
separate asset the purchase price of which is recovered entirely out of interest
received on the next Distribution Date) and that portion of the interest paid on
the first Distribution Date in excess of interest accrued for a number of days
corresponding to the number of days from the Closing Date to the first
Distribution Date should be included in the stated redemption price of such
Bond. However, the OID Regulations state that all or some portion of such
accrued interest may be treated as a separate asset the cost of which is
recovered entirely out of interest paid on the first Distribution Date. It is
unclear how an election to do so would be made under the OID Regulations and
whether such an election could be made unilaterally by a Bondholder.
Notwithstanding the general definition of original issue discount,
original issue discount on a Bond will be considered to be DE MINIMIS if it is
less than 0.25% of the stated redemption price of the Bond multiplied by its
weighted average maturity. For this purpose, the weighted average maturity of
the Bond is computed as the sum of the amounts determined, as to each payment
included in the stated redemption price of such Bond, by multiplying (i) the
number of complete years (rounding down for partial years) from the issue date
until such payment is expected to be made (presumably taking into account the
Prepayment Assumption) by (ii) a fraction, the numerator of which is the amount
of the payment, and the denominator of which is the stated redemption price at
maturity of such Bond. Under the OID Regulations, original issue discount of
only a DE MINIMIS amount (other than DE MINIMIS original issue discount
attributable to a so-called "teaser" interest rate or an initial interest
holiday) will be included in income as each payment of stated principal is made,
based on the product of the total amount of such DE MINIMIS original issue
discount and a fraction, the numerator of which is the amount of such principal
payment and the denominator of which is the outstanding stated principal amount
of the Bond. The OID Regulations also would permit a Bondholder to elect to
accrue DE MINIMIS original issue discount into income currently based on a
constant yield method. See "--Market Discount" for a description of such
election under the OID Regulations.
If original issue discount on a Bond is in excess of a DE MINIMIS
amount, the holder of such Bond must include in ordinary gross income the sum of
the "daily portions" of original issue discount for each
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day during its taxable year on which it held such Bond, including the purchase
date but excluding the disposition date. In the case of an original holder of a
Bond, the daily portions of original issue discount will be determined as
follows.
As to each "accrual period," that is, unless otherwise stated in the
related Prospectus Supplement, each period that ends on a date that corresponds
to a Distribution Date and begins on the first day following the immediately
preceding accrual period (or in the case of the first such period, begins on the
Closing Date), a calculation will be made of the portion of the original issue
discount that accrued during such accrual period. The portion of original issue
discount that accrues in any accrual period will equal the excess, if any, of
(i) the sum of (A) the present value, as of the end of the accrual period, of
all of the distributions remaining to be made on the Bond, if any, in future
periods and (B) the distributions made on such Bond during the accrual period of
amounts included in the stated redemption price, over (ii) the adjusted issue
price of such Bond at the beginning of the accrual period. The present value of
the remaining distributions referred to in the preceding sentence will be
calculated (1) assuming that distributions on the Bonds will be received in
future periods based on the Mortgage Loans being prepaid at a rate equal to the
Prepayment Assumption and (2) using a discount rate equal to the original yield
to maturity of the Bond. For these purposes, the original yield to maturity of
the Bond will be calculated based on its issue price and assuming that
distributions on the Bond will be made in all accrual periods based on the
Mortgage Loans being prepaid at a rate equal to the Prepayment Assumption. The
adjusted issue price of a Bond at the beginning of any accrual period will equal
the issue price of such Bond, increased by the aggregate amount of original
issue discount that accrued with respect to such Bond in prior accrual periods,
and reduced by the amount of any distributions made on such Bond in prior
accrual periods of amounts included in its stated redemption price. The original
issue discount accruing during any accrual period, computed as described above,
will be allocated ratably to each day during the accrual period to determine the
daily portion of original issue discount for such day.
A subsequent purchaser of a Bond that purchases such Bond at a price
(excluding any portion of such price attributable to accrued qualified stated
interest) less than its remaining stated redemption price will also be required
to include in gross income the daily portions of any original issue discount
with respect to such Bond. However, each such daily portion will be reduced, if
such cost is in excess of its "adjusted issue price," in proportion to the ratio
such excess bears to the aggregate original issue discount remaining to be
accrued on such Bond. The adjusted issue price of a Bond on any given day equals
the sum of (i) the adjusted issue price (or, in the case of the first accrual
period, the issue price) of such Bond at the beginning of the accrual period
which includes such day and (ii) the daily portions of original issue discount
for all days during such accrual period prior to such day.
MARKET DISCOUNT. A Bondholder that purchases a Bond at a market
discount, that is, in the case of a Bond issued without original issue discount,
at a purchase price less than its remaining stated principal amount, or in the
case of a Bond issued with original issue discount, at a purchase price less
than its adjusted issue price will recognize gain upon receipt of each
distribution representing stated redemption price. In particular, under Section
1276 of the Code, such a Bondholder generally will be required to allocate the
portion of each such distribution representing stated redemption price first to
accrued market discount not previously included in income, and to recognize
ordinary income to that extent. A Bondholder may elect to include market
discount in income currently as it accrues rather than including it on a
deferred basis in accordance with the foregoing. If made, such election will
apply to all market discount bonds acquired by such Bondholder on or after the
first day of the first taxable year to which such election applies. In addition,
the OID Regulations permit a Bondholder to elect to accrue all interest,
discount (including DE MINIMIS market or original issue discount) and premium in
income as interest, based on a constant yield method. If such an election were
made with respect to a Bond with market discount, the Bondholder would be deemed
to have made an election to include currently market discount in income with
respect to all other debt instruments having market discount that such
Bondholder acquires during the taxable year of the election or thereafter, and
possibly previously acquired
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instruments. Similarly, a Bondholder that made this election for a Bond that is
acquired at a premium would be deemed to have made an election to amortize bond
premium with respect to all debt instruments having amortizable bond premium
that such Bondholder owns or acquires. See "-Premium" below. Each of these
elections to accrue interest, discount and premium with respect to a Bond on a
constant yield method or as interest would be irrevocable.
However, market discount with respect to a Bond will be considered to
be DE MINIMIS for purposes Section 1276 of the Code if such market discount is
less than 0.25% of the remaining stated redemption price of such Bond multiplied
by the number of complete years to maturity remaining after the date of its
purchase. In interpreting a similar rule with respect to original issue discount
on obligations payable in installments, the OID Regulations refer to the
weighted average maturity of obligations, and it is likely that the same rule
will be applied with respect to market discount, presumably taking into account
the Prepayment Assumption. If market discount is treated as DE MINIMIS under
this rule, it appears that the actual discount would be treated in a manner
similar to original issue discount of a DE MINIMIS amount. See "-Original Issue
Discount" above. Such treatment would result in discount being included in
income at a slower rate than discount would be required to be included in income
using the method described above.
Section 1276(b)(3) of the Code specifically authorizes the Treasury
Department to issue regulations providing for the method for accruing market
discount on debt instruments, the principal of which is payable in more than one
installment. Until regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. The Committee Report indicates
that in each accrual period market discount on Bonds should accrue, at the
Bondholder's option: (i) on the basis of a constant yield method, (ii) in the
case of a Bond issued without original issue discount, in an amount that bears
the same ratio to the total remaining market discount as the stated interest
paid in the accrual period bears to the total amount of stated interest
remaining to be paid on the Bonds as of the beginning of the accrual period or
(iii) in the case of a Bond issued with original issue discount, in an amount
that bears the same ratio to the total remaining market discount as the original
issue discount accrued in the accrual period bears to the total original issue
discount remaining on the Bond at the beginning of the accrual period. Moreover,
the Prepayment Assumption used in calculating the accrual of original issue
discount is also used in calculating the accrual of market discount. Because the
regulations referred to in this paragraph have not been issued, it is not
possible to predict what effect such regulations might have on the tax treatment
of a Bond purchased at a discount in the secondary market.
To the extent that Bonds provide for monthly or other periodic
distributions throughout their term, the effect of these rules may be to require
market discount to be includible in income at a rate that is not significantly
slower than the rate at which such discount would accrue if it were original
issue discount. Moreover, in any event a holder of a Bond generally will be
required to treat a portion of any gain on the sale or exchange of such Bond as
ordinary income to the extent of the market discount accrued to the date of
disposition under one of the foregoing methods, less any accrued market discount
previously reported as ordinary income.
Further, under Section 1277 of the Code, a holder of a Bond may be
required to defer a portion of its interest deductions for the taxable year
attributable to any indebtedness incurred or continued to purchase or carry a
Bond purchased with market discount. For these purposes, the DE MINIMIS rule
referred to above applies. Any such deferred interest expense would not exceed
the market discount that accrues during such taxable year and is, in general,
allowed as a deduction not later than the year in which such market discount is
includible in income. If such holder elects to include market discount in income
currently as it accrues on all market discount instruments acquired by such
holder in that taxable year or thereafter, the interest deferral rule described
above will not apply.
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PREMIUM. A Bond purchased at a cost (excluding any portion of such cost
attributable to accrued qualified stated interest) greater than its remaining
stated redemption price will be considered to be purchased at a premium. The
holder of such a Bond may elect under Section 171 of the Code to amortize such
premium under the constant yield method over the remaining term of the Bond. If
made, such an election will apply to all debt instruments having amortizable
bond premium that the holder owns or subsequently acquires. Amortizable premium
will be treated as an offset to interest income on the related Bond, rather than
as a separate interest deduction. The OID Regulations also permit Bondholders to
elect to include all interest, discount and premium in income based on a
constant yield method, further treating the Bondholder as having made the
election to amortize premium generally. See "-Market Discount" above. The
Committee Report states that the same rules that apply to accrual of market
discount (which rules may require use of a prepayment assumption in accruing
market discount with respect to Bonds without regard to whether such Bonds have
original issue discount) would also apply in amortizing bond premium under
Section 171 of the Code.
REALIZED LOSSES. Under Section 166 of the Code, both corporate holders
of the Bonds and noncorporate holders of the Bonds that acquire such Bonds in
connection with a trade or business should be allowed to deduct, as ordinary
losses, any losses sustained during a taxable year in which their Bonds become
wholly or partially worthless as the result of one or more realized losses on
the Mortgage Loans. However, it appears that a noncorporate holder that does not
acquire a Bond in connection with a trade or business will not be entitled to
deduct a loss under Section 166 of the Code until such holder's Bond becomes
wholly worthless (i.e., until its outstanding principal balance has been reduced
to zero) and that the loss will be characterized as a short-term capital loss.
Each holder of a Bond will be required to accrue interest and original
issue discount with respect to such Bond, without giving effect to any
reductions in distributions attributable to defaults or delinquencies on the
Mortgage Loans until it can be established that any such reduction ultimately
will not be recoverable. As a result, the amount of taxable income reported in
any period by the holder of a Bond could exceed the amount of economic income
actually realized by the holder in such period. Although the holder of a Bond
eventually will recognize a loss or reduction in income attributable to
previously accrued and included income that, as the result of a realized loss,
ultimately will not be realized, the law is unclear with respect to the timing
and character of such loss or reduction in income.
SALES OF BONDS. If a Bond is sold, the selling Bondholder will
recognize gain or loss equal to the difference between the amount realized on
the sale and its adjusted basis in the Bond. The adjusted basis of a Bond
generally will equal the cost of such Bond to such Bondholder, increased by
income reported by such Bondholder with respect to such Bond (including original
issue discount and market discount income) and reduced (but not below zero) by
any amortized premium and any distributions on such bond received by such
Bondholder. Except as provided in the following two paragraphs, any such gain or
loss will be capital gain or loss, provided such Bond is held as a capital asset
(generally, property held for investment) within the meaning of Section 1221 of
the Code. The Code as of the date of this Prospectus provides for a top marginal
tax rate of 39.6% for individuals and a maximum marginal rate for long-term
capital gains of individuals of 28%. No such rate differential exists for
corporations. In addition, the distinction between a capital gain or loss and
ordinary income or loss remains relevant for other purposes.
Gain recognized on the sale of a Bond by a seller who purchased such
Bond at a market discount will be taxable as ordinary income in an amount not
exceeding the portion of such discount that accrued during the period such Bond
was held by such holder, reduced by any market discount included in income under
the rules described above under "-Market Discount" and "-Premium."
A portion of any gain from the sale of a Bond that might otherwise be
capital gain may be treated as ordinary income to the extent that such Bond is
held as part of a "conversion transaction" within the meaning of Section 1258 of
the Code. A conversion transaction generally is one in which the taxpayer
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has taken two or more positions in the same or similar property that reduce or
eliminate market risk, if substantially all of the taxpayer's return is
attributable to the time value of the taxpayer's net investment in such
transaction. The amount of gain so realized in a conversion transaction that is
recharacterized as ordinary income generally will not exceed the amount of
interest that would have accrued on the taxpayer's net investment at 120% of the
appropriate "applicable Federal rate" (which rate is computed and published
monthly by the IRS) at the time the taxpayer enters into the conversion
transaction, subject to appropriate reduction for prior inclusion of interest
and other ordinary income items from the transaction.
Finally, a taxpayer may elect to have net capital gain taxed at
ordinary income rates rather than capital gains rates in order to include such
net capital gain in total net investment income for the taxable year, for
purposes of the rule that limits the deduction of interest on indebtedness
incurred to purchase or carry property held for investment to a taxpayer's net
investment income.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Payments of interest and
principal, as well as payments of proceeds from the sale of Bonds, may be
subject to the "backup withholding tax" under Section 3406 of the Code at a rate
of 31% if recipients of such payments fail to furnish to the payor certain
information, including their taxpayer identification numbers, or otherwise fail
to establish an exemption from such tax. Any amounts deducted and withheld from
a distribution to a recipient would be allowed as a credit against such
recipient's federal income tax. Furthermore, certain penalties may be imposed by
the IRS on a recipient of payments that is required to supply information but
that does not do so in the proper manner.
The Issuer will report to the Holders and to the IRS for each calendar
year the amount of any "reportable payments" during such year and the amount of
tax withheld, if any, with respect to payments on the Bonds.
TAX TREATMENT OF FOREIGN INVESTORS. Interest paid on a Bond to a
nonresident alien individual, foreign partnership or foreign corporation that
has no connection with the United States other than holding Bonds
("Nonresidents"), such interest will normally qualify as portfolio interest
(except where (i) the recipient is a holder, directly or by attribution, of 10%
or more of the capital or profits interest in the Company, or (ii) the recipient
is a controlled foreign corporation to which the Company is a related person)
and will be exempt from federal income tax. Upon receipt of appropriate
ownership statements, the Issuer normally will be relieved of obligations to
withhold tax from such interest payments. These provisions supersede the
generally applicable provisions of United States law that would otherwise
require the issuer to withhold at a 30% rate (unless such rate were reduced or
eliminated by an applicable tax treaty) on, among other things, interest and
other fixed or determinable, annual or periodic income paid to Nonresidents. For
these purposes a Bondholder may be considered to be related to the Company by
holding a Bond or by having common ownership with any other holder of a Bond or
any affiliate thereof.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in
"Certain Federal Income Tax Consequences", potential investors should consider
the state and local tax consequences of the acquisition, ownership, and
disposition of the Bonds offered hereunder. State tax law may differ
substantially from the corresponding federal tax law, and the discussion above
does not purport to describe any aspect of the tax laws of any state or other
jurisdiction. Therefore, prospective investors should consult their own tax
advisors with respect to the various tax consequences of investments in the
certificates offered hereunder.
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ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code impose certain requirements on employee benefit plans
and on certain other retirement plans and arrangements, including individual
retirement accounts and annuities, Keogh plans and collective investment funds
and separate accounts (and, as applicable, insurance company general accounts)
in which such plans, accounts or arrangements are invested that are subject to
the fiduciary responsibility provisions of ERISA and Section 4975 of the Code
("Plans") and on persons who are fiduciaries with respect to such Plans in
connection with the investment of Plan assets. Certain employee benefit plans,
such as governmental plans (as defined in ERISA Section 3(32)), and, if no
election has been made under Section 410(d) of the Code, church plans (as
defined in Section 3(33) of ERISA) are not subject to ERISA requirements.
Accordingly, assets of such plans may be invested in Bonds without regard to the
ERISA considerations described below, subject to the provisions of other
applicable federal and state law. Any such plan which is qualified and exempt
from taxation under Sections 401(a) and 501(a) of the Code, however, is subject
to the prohibited transaction rules set forth in Section 503 of the Code.
ERISA generally imposes on Plan fiduciaries certain general fiduciary
requirements, including those of investment prudence and diversification and the
requirement that a Plan's investments be made in accordance with the documents
governing the Plan. In addition, Section 406 of ERISA and Section 4975 of the
Code prohibit a broad range of transactions involving assets of a Plan and
persons (parties in interest under ERISA and disqualified persons under the
Code, collectively, "Parties in Interest") who have certain specified
relationships to the Plan unless a statutory or administrative exemption is
available. Certain Parties in Interest that participate in a prohibited
transaction may be subject to an excise tax imposed pursuant to Section 4975 of
the Code or a penalty imposed pursuant to Section 502(i) of ERISA, unless a
statutory or administrative exemption is available. These prohibited
transactions generally are set forth in Section 406 of ERISA and Section 4975 of
the Code.
The Trust Fund, the Company, any underwriter, the Owner Trustee, the
Indenture Trustee, the Master Servicer, any Administrator, any Servicer, any
provider of credit support or any of their affiliates may be considered to be or
may become Parties in Interest (or Disqualified Persons) with respect to certain
Plans. Prohibited transactions under Section 406 of ERISA and Section 4975 of
the Code may arise if a Bond is acquired by a Plan with respect to which such
persons are Parties in Interest (or Disqualified Persons) unless such
transactions are subject to one or more statutory or administrative exemptions,
such as: Prohibited Transaction Class Exemption ("PTCE") 75-1, which exempts
certain transactions involving Plans and certain broker-dealers, reporting
dealers and banks; PTCE 90-1, which exempts certain transactions between
insurance company separate accounts and Parties in Interest (or Disqualified
Persons); PTCE 91-38, which exempts certain transactions between bank collective
investment funds and Parties in Interest (or Disqualified Persons); PTCE 95-60,
which exempts certain transactions between insurance company general accounts
and Parties in Interest (or Disqualified Persons); or PTCE 84-14, which exempts
certain transactions effected on behalf of a Plan by a "qualified professional
asset manager". There can be no assurance that any of these class exemptions
will apply with respect to any particular Plan investment in Bonds or, even if
it were deemed to apply, that any exemption would apply to all prohibited
transactions that may occur in connection with such investment. Accordingly,
prior to making an investment in the Bonds, investing Plans should determine
whether the Trust Fund, the Company, any underwriter, the Owner Trustee, the
Indenture Trustee, the Master Servicer, any Administrator, any Servicer, any
provider of credit support or any of their affiliates is a Party in Interest (or
Disqualified Person) with respect to such Plan and, if so, whether such
transaction is subject to one or more statutory or administrative exemptions.
Any Plan fiduciary considering whether to invest in Bonds on behalf of
a Plan should consult with its counsel regarding the applicability of the
fiduciary responsibility and prohibited transaction provisions of ERISA and the
Code to such investment. Each Plan fiduciary also should
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<PAGE>
determine whether, under the general fiduciary standards of investment prudence
and diversification, an investment in the Bonds is appropriate for the Plan
considering the overall investment policy of the Plan and the composition of the
Plan's investment portfolio as well as whether such investment is permitted
under the governing Plan instruments.
TAX-EXEMPT INVESTORS
A Plan that is exempt from federal income taxation pursuant to Section
501 of the Code (a "Tax-Exempt Investor") nonetheless will be subject to federal
income taxation to the extent that its income is "unrelated business taxable
income" ("UBTI") within the meaning of Section 512 of the Code.
LEGAL INVESTMENT MATTERS
Each class of Bonds offered hereby and by the related Prospectus
Supplement will be rated at the date of issuance in one of the four highest
rating categories by at least one Rating Agency. Unless otherwise specified in
the related Prospectus Supplement, each such class that is rated in one of the
two highest rating categories by at least one Rating Agency will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"), and, as such, will be legal investments for
persons, trusts, corporations, partnerships, associations, business trusts and
business entities (including depository institutions, life insurance companies
and pension funds) created pursuant to or existing under the laws of the United
States or of any State whose authorized investments are subject to state
regulation to the same extent that, under applicable law, obligations issued by
or guaranteed as to principal and interest by the United States or any agency or
instrumentality thereof constitute legal investments for such entities. Under
SMMEA, if a State enacted legislation on or prior to October 3, 1991
specifically limiting the legal investment authority of any such entities with
respect to "mortgage related securities," such securities will constitute legal
investments for entities subject to such legislation only to the extent provided
therein. Certain States have enacted legislation which overrides the preemption
provisions of SMMEA. SMMEA provides, however, that in no event will the
enactment of any such legislation affect the validity of any contractual
commitment to purchase, hold or invest in "mortgage related securities," or
require the sale or other disposition of such securities, so long as such
contractual commitment was made or such securities acquired prior to the
enactment of such legislation.
SMMEA also amended the legal investment authority of
federally-chartered depository institutions as follows: federal savings and loan
associations and federal savings banks may invest in, sell or otherwise deal
with "mortgage related securities" without limitation as to the percentage of
their assets represented thereby, federal credit unions may invest in such
securities, and national banks may purchase such securities for their own
account without regard to the limitations generally applicable to investment
securities set forth in 12 U.S.C. 24 (Seventh), subject in each case to such
regulations as the applicable federal regulatory authority may prescribe.
The Federal Financial Institutions Examination Council has issued a
supervisory policy statement (the "Policy Statement") applicable to all
depository institutions, setting forth guidelines for and significant
restrictions on investments in "high-risk mortgage securities." The Policy
Statement has been adopted by the Federal Reserve Board, the Office of the
Comptroller of the Currency, the FDIC and the OTS with an effective date of
February 10, 1992. The Policy Statement generally indicates that a mortgage
derivative product will be deemed to be high risk if it exhibits greater price
volatility than a standard fixed rate thirty-year mortgage security. According
to the Policy Statement, prior to purchase, a depository institution will be
required to determine whether a mortgage derivative product that it is
considering acquiring is high-risk, and if so that the proposed acquisition
would reduce the institution's overall interest rate risk. Reliance on analysis
and documentation obtained from a securities dealer or
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<PAGE>
other outside party without internal analysis by the institution would be
unacceptable. There can be no assurance as to which classes of Bonds will be
treated as high-risk under the Policy Statement.
The predecessor to the Office of Thrift Supervision ("OTS") issued a
bulletin, entitled, "Mortgage Derivative Products and Mortgage Swaps", which is
applicable to thrift institutions regulated by the OTS. The bulletin established
guidelines for the investment by savings institutions in certain "high-risk"
mortgage derivative securities and limitations on the use of such securities by
insolvent, undercapitalized or otherwise "troubled" institutions. According to
the bulletin, such "high-risk" mortgage derivative securities include securities
having certain specified characteristics, which may include certain classes of
Bonds. In addition, the National Credit Union Administration has issued
regulations governing federal credit union investments which prohibit investment
in certain specified types of securities, which may include certain classes of
Bonds. Similar policy statements have been issued by regulators having
jurisdiction over other types of depository institutions.
Certain classes of Bonds offered hereby, including any class that is
not rated in one of the two highest rating categories by at least one Rating
Agency, will not constitute "mortgage related securities" for purposes of SMMEA.
Any such class of Bonds will be identified in the related Prospectus Supplement.
Prospective investors in such classes of Bonds, in particular, should consider
the matters discussed in the following paragraph.
There may be other restrictions on the ability of certain investors
either to purchase certain classes of Bonds or to purchase any class of Bonds
representing more than a specified percentage of the investors' assets. The
Company will make no representations as to the proper characterization of any
class of Bonds for legal investment or other purposes, or as to the ability of
particular investors to purchase any class of Bonds under applicable legal
investment restrictions. These uncertainties may adversely affect the liquidity
of any class of Bonds. Accordingly, all investors whose investment activities
are subject to legal investment laws and regulations, regulatory capital
requirements or review by regulatory authorities should consult with their own
legal advisors in determining whether and to what extent the Bonds of any class
thereof constitute legal investments or are subject to investment, capital or
other restrictions, and, if applicable, whether SMMEA has been overridden in any
jurisdiction relevant to such investor.
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement,
substantially all of the net proceeds to be received from the sale of Bonds will
be applied by the Company to finance the purchase of, or to repay short-term
loans incurred to finance the purchase of, the Mortgage Loans in the respective
Mortgage Pools or will be used by the Company for general corporate purposes.
The Company expects that it will make additional sales of securities similar to
the Bonds from time to time, but the timing and amount of any such additional
offerings will be dependent upon a number of factors, including the volume of
mortgage loans purchased by the Company, prevailing interest rates, availability
of funds and general market conditions.
METHODS OF DISTRIBUTION
The Bonds offered hereby and by the related Prospectus Supplements will
be offered in series through one or more of the methods described below. The
Prospectus Supplement prepared for each series will describe the method of
offering being utilized for that series and will state the net proceeds to the
Company from such sale.
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<PAGE>
The Company intends that Bonds will be offered through the following
methods from time to time and that offerings may be made concurrently through
more than one of these methods or that an offering of the Bonds of a particular
series may be made through a combination of two or more of these methods.
Such methods are as follows:
1. By negotiated firm commitment or best efforts underwriting
and public re-offering by underwriters;
2. By placements by the Company with institutional investors
through dealers; and
3. By direct placements by the Company with institutional
investors.
In addition, if specified in the related Prospectus Supplement, the
Bonds of any series may be offered in whole or in part in exchange for the
Mortgage Loans (and other assets, if applicable) that would comprise the
Mortgage Pool in respect of such Bonds.
If underwriters are used in a sale of any Bonds (other than in
connection with an underwriting on a best efforts basis), such Bonds will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at fixed
public offering prices or at varying prices to be determined at the time of sale
or at the time of commitment therefor. Such underwriters may be broker-dealers
affiliated with the Company whose identities and relationships to the Company
will be as set forth in the related Prospectus Supplement. The managing
underwriter or underwriters with respect to the offer and sale of the Bonds of a
particular series will be set forth on the cover of the Prospectus Supplement
relating to such series and the members of the underwriting syndicate, if any,
will be named in such Prospectus Supplement.
In connection with the sale of the Bonds, underwriters may receive
compensation from the Company or from purchasers of such Bonds in the form of
discounts, concessions or commissions. Underwriters and dealers participating in
the distribution of the Bonds may be deemed to be underwriters in connection
with such Bonds, and any discounts or commissions received by them from the
Company and any profit on the resale of Bonds by them may be deemed to be
underwriting discounts and commissions under the Securities Act of 1933, as
amended (the "Securities Act").
It is anticipated that the underwriting agreement pertaining to the
sale of Bonds of any series will provide that the obligations of the
underwriters will be subject to certain conditions precedent, that the
underwriters will be obligated to purchase all such Bonds if any are purchased
(other than in connection with an underwriting on a best efforts basis) and
that, in limited circumstances, the Company will indemnify the several
underwriters and the underwriters will indemnify the Company against certain
civil liabilities, including liabilities under the Securities Act or will
contribute to payments required to be made in respect thereof.
The Prospectus Supplement with respect to any series offered by
placements through dealers will contain information regarding the nature of such
offering and any agreements to be entered into between the Company and
purchasers of Bonds of such series.
The Company anticipates that the Bonds offered hereby will be sold
primarily to institutional investors or sophisticated non-institutional
investors. Purchasers of Bonds, including dealers, may, depending on the facts
and circumstances of such purchases, be deemed to be "underwriters" within the
meaning of the Securities Act in connection with reoffers and sales by them of
such Bonds. Holders of Bonds should consult with their legal advisors in this
regard prior to any such reoffer or sale.
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<PAGE>
LEGAL MATTERS
Unless otherwise specified in the related Prospectus Supplement,
certain legal matters, including certain federal income tax matters, in
connection with the Bonds of each series will be passed upon for the Company by
Thacher Proffitt & Wood, New York, New York.
FINANCIAL INFORMATION
A new Trust fund will be formed with respect to each series of Bonds,
and no Trust Fund will engage in any business activities or have any assets or
obligations prior to the issuance of the related series of Bonds. Accordingly,
no financial statements with respect to any Trust Fund will be included in this
Prospectus or in the related Prospectus Supplement.
RATING
It is a condition to the issuance of any class of Bonds that they shall
have been rated not lower than investment grade, that is, in one of the four
highest rating categories, by at least one Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by the holders thereof of all collections on the underlying mortgage
assets to which such holders are entitled. These ratings address the structural,
legal and issuer-related aspects associated with such certificates, the nature
of the underlying mortgage assets and the credit quality of the guarantor, if
any. Ratings on mortgage pass-through certificates do not represent any
assessment of the likelihood of principal prepayments by borrowers or of the
degree by which such prepayments might differ from those originally anticipated.
As a result, Bondholders might suffer a lower than anticipated yield, and, in
addition, holders of stripped interest certificates in extreme cases might fail
to recoup their initial investments.
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<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
PAGE
----
1986 Act ............................................................82
Accrual Bonds .........................................................6, 35
Accrued Bond Interest.........................................................44
Administrator .............................................................5
Affiliated Sellers............................................................18
Agreements ............................................................61
ARM Loans ............................................................18
Available Distribution Amount.................................................43
Balloon Loans ............................................................19
Balloon Payment ............................................................19
Bankruptcy Code ............................................................76
Bankruptcy Loss ............................................................48
Beneficial Owner ............................................................36
Bond Register ............................................................36
Bond Registrar ............................................................36
Bondholder ............................................................36
Bonds ......................................................1, 4, 35
Buydown Account ............................................................22
Buydown Agreement ............................................................41
Buydown Funds ............................................................22
Buydown Mortgage Loans........................................................21
Buydown Period ............................................................21
CERCLA ............................................................24
Certificates .............................................................4
Closing Date ............................................................83
Code ............................................................76
Collection Account............................................................39
Commission .............................................................3
Company ..........................................................1, 4
Contracts ............................................................17
Convertible Mortgage Loan.....................................................21
Debt Service Coverage Ratio...................................................23
Debt Service Reduction........................................................53
Defaulted Mortgage Loss.......................................................48
Deferred Interest ............................................................19
Deficient Valuation...........................................................53
Deleted Mortgage Loan.........................................................26
Designated Seller Transaction.................................................18
Determination Date............................................................43
Distribution Date .............................................................8
DTC ............................................................36
DTC Registered Bonds..........................................................36
Due Period ............................................................46
Equity Participation..........................................................20
ERISA ........................................................12, 89
Event of Default ............................................................62
Excess Interest ............................................................53
Exchange Act .............................................................3
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Extraordinary Losses..........................................................48
FDIC ............................................................18
FHA ............................................................17
FHA Loans ............................................................17
FHLMC ............................................................24
Financial Guaranty Insurance Policy...........................................49
FIRREA ............................................................24
FNMA ............................................................24
Fraud Loss ............................................................48
FTC Rule ............................................................78
Funding Account ............................................................45
Garn-St Germain Act...........................................................78
Holder ............................................................36
Housing Act ............................................................25
HUD ............................................................60
ICI Funding .........................................................4, 61
ICII ............................................................61
Imperial Holdings .............................................................4
Indenture ..........................................................1, 4
Indenture Trustee .............................................................5
Index ............................................................18
Insurance Proceeds............................................................40
Insurer ............................................................49
Interest Rate .............................................................6
Intermediaries ............................................................36
IRS ............................................................84
Letter of Credit ............................................................50
Letter of Credit Bank.........................................................50
Liquidated Mortgage Loan......................................................32
Liquidation Proceeds..........................................................40
Loan-to-Value Ratio...........................................................20
Lock-out Expiration Date......................................................20
Lock-out Period ............................................................20
Loss ............................................................58
Manufactured Homes............................................................17
Manufacturer's Invoice Price..................................................21
Master Servicer ......................................................1, 5, 28
Mortgage Loans ..........................................................1, 5
Mortgage Notes ............................................................17
Mortgage Pool ..........................................................1, 7
Mortgage Rate ............................................................18
Mortgaged Property.............................................................7
Mortgages ............................................................17
Mortgagor ............................................................15
Multifamily Loans ............................................................17
Multifamily Properties........................................................17
Multifamily Property...........................................................7
Net Mortgage Rate ............................................................65
Net Operating Income..........................................................23
Nonrecoverable Advance........................................................46
Nonresidents ............................................................88
Note Margin ............................................................18
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<PAGE>
OID Regulations ............................................................83
OTS ............................................................91
Overcollateralization.........................................................53
Owner Trust .............................................................4
Owner Trustee .............................................................4
Participants ............................................................36
Parties in Interest...........................................................89
Percentage Interest...........................................................43
Permitted Investments.........................................................39
Plan ........................................................12, 89
Policy Statement ............................................................90
Pool Insurer ............................................................41
Prepayment Interest Shortfall.................................................66
Prepayment Penalty............................................................20
Primary Insurance Policy......................................................57
Primary Insurer ............................................................58
Prospectus Supplement..........................................................1
PTCE ............................................................89
Purchase Obligation...........................................................57
Purchase Price ............................................................26
Qualified Substitute Mortgage Loan............................................26
Rating Agency ............................................................11
Realized Losses ............................................................48
Record Date ............................................................43
REIT ............................................................61
Related Proceeds ............................................................46
Relief Act ............................................................81
REMIC .............................................................1
REO Mortgage Loan ............................................................32
REO Property ............................................................30
Reserve Fund ............................................................53
RTC ............................................................18
Securities ..........................................................1, 4
Securities Act .........................................................3, 92
Securityholders ............................................................22
Seller .............................................................8
Sellers .........................................................1, 18
Senior Bonds .........................................................6, 35
Senior Liens ............................................................20
Senior/Subordinate Series.....................................................35
Servicing Default ............................................................61
Servicing Standard............................................................28
Single Family Loans...........................................................17
Single Family Property........................................................17
SMMEA ........................................................12, 90
Special Hazard Instrument.....................................................48
Special Hazard Insurance Policy...............................................52
Special Hazard Insurer........................................................52
Special Hazard Loss...........................................................48
Special Hazard Losses.........................................................52
Special Servicer .........................................................5, 31
Spread .............................................................5
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Strip Bonds .........................................................6, 35
Subordinate Securities.....................................................6, 35
Subservicer ............................................................30
Subservicers ............................................................22
Tax Counsel ............................................................83
Title V ............................................................80
Title VIII ............................................................80
TMP ............................................................82
Trust Agreement ..........................................................1, 4
Trust Fund ..........................................................1, 5
Unaffiliated Sellers..........................................................18
Value ............................................................20
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (ITEM 14 OF FORM S-3).
The expenses expected to be incurred in connection with the issuance
and distribution of the Bonds being registered, other than underwriting
compensation, are as set forth below. All such expenses, except for the filing
fee, are estimated.
Filing Fee for Registration Statement................$ 344.83
Legal Fees and Expenses.............................. *
Accounting Fees and Expenses......................... *
Trustee's Fees and Expenses
(including counsel fees)...................... *
Printing and Engraving Fees.......................... *
Rating Agency Fees................................... *
Miscellaneous........................................ *
--------
Total ..............................................$ 344.83
==========
* To be provided by amendment.
INDEMNIFICATION OF DIRECTORS AND OFFICERS (ITEM 15 OF FORM S-3).
The Servicing Agreements and the Trust Agreements will provide that no
director, officer, employee or agent of the Registrant is liable to the Trust
Fund or the Bondholders, except for such person's own willful misfeasance, bad
faith or gross negligence in the performance of duties or reckless disregard of
obligations and duties. The Servicing Agreements and the Trust Agreements will
further provide that, with the exceptions stated above, a director, officer,
employee or agent of the Registrant is entitled to be indemnified against any
loss, liability or expense incurred in connection with legal action relating to
such and related Bonds other than such expenses related to particular Mortgage
Loans.
Any underwriters who execute an Underwriting Agreement in the form
filed as Exhibit 1.1 to this Registration Statement will agree to indemnify the
Registrant's directors and its officers who signed this Registration Statement
against certain liabilities which might arise under the Securities Act of 1933
from certain information furnished to the Registrant by or on behalf of such
indemnifying party.
Section 317 of the California Corporations Code allows for the
indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). Article VI of the Registrant's
Articles of Incorporation (Exhibit 3.1 hereto) and Article XI of the
Registrant's Bylaws (Exhibit 3.2 hereto) provide for indemnification of the
Registrant's directors, officers, employees and other agents to the extent and
under the circumstances permitted by the California Corporations Code. The
Registrant has also entered into agreements with its directs and
<PAGE>
-2-
executive officers that would require the Registrant, among other things, to
indemnify them against certain liabilities that may arise by reason of their
status or service as directors to the fullest extent not prohibited by law.
EXHIBITS (ITEM 16 OF FORM S-3).
Exhibits--
1.1 -- Form of Underwriting Agreement.
3.1 -- Amended Articles of Incorporation.
3.2 -- By-Laws.
4.1 -- Form of Servicing Agreement.
4.2 -- Form of Trust Agreement.
4.3 -- Form of Indenture.
5.1 -- Opinion of Thacher Proffitt & Wood with respect to
legality.
8.1 -- Opinion of Thacher Proffitt & Wood with respect to
certain tax matters (included with Exhibit 5.1).
23.1 -- Consent of Thacher Proffitt & Wood (included as part
of Exhibit 5.1 and Exhibit 8.1).
24.1 -- Power of Attorney.
- -----------------
UNDERTAKINGS (ITEM 17 OF FORM S-3).
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or
the most recent post-effective amendment hereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in this
Registration Statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section
<PAGE>
-3-
13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in this Registration Statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
initial BONA FIDE offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(j) The Registrant hereby undertakes to file an application for the purpose of
determining the eligibility of the trustee to act under subsection (a) of
Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Trust
Indenture Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Southern
Pacific Secured Assets Corp. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3, reasonably
believes that the security rating requirement contained in Transaction
Requirement B.5 of Form S-3 will be met by the time of the sale of the
securities registered hereunder, and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
city of Santa Ana Heights, State of California, on the 21st day of June, 1996.
IMH ASSETS CORP.
By: /s/ William Ashmore
------------------------
Name: William Ashmore
Title: Director and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ William Ashmore Director and June 21, 1996
- ---------------------------
William Ashmore President
(Principal Executive
Officer)
/s/ Richard Johnson Director, Chief Financial June 21, 1996
- ---------------------------
Richard Johnson Officer and Secretary
(Principal Financial Officer
and Principal Accounting
Officer)
/s/ Lee Bromiley Director June 21, 1996
- ---------------------------
Lee Bromiley
<PAGE>
EXHIBIT INDEX
LOCATION OF
EXHIBIT
IN SEQUENTIAL
NUMBER DESCRIPTION NUMBERING SYSTEM
1.1 Form of Underwriting Agreement.
3.1 Amended Certificate of Incorporation.
3.2 By-Laws.
4.1 Form of Servicing Agreement.
4.2 Form of Trust Agreement.
4.3 Form of Indenture.
5.1 Opinion of Thacher Proffitt & Wood
with respect to legality.
8.1 Opinion of Thacher Proffitt & Wood with
respect to certain tax matters (included
as part of Exhibit 5.1).
23.1 Consent of Thacher Proffitt & Wood
(included as part of Exhibit 5.1).
24.1 Power of Attorney.
EXHIBIT 1.1
IMH ASSETS CORP.
$____________ (Approximately) ___%
Collateralized Mortgage Bonds, Series 199_-_
UNDERWRITING AGREEMENT
________________, 199_
[Name of Underwriter]
[Address of Underwriter]
Ladies and Gentlemen:
IMH Assets Corp., a California corporation (the "Company"), proposes to
sell to you (also referred to herein as the "Underwriter") Collateralized
Mortgage Bonds, Series 199_-__, (the "Bonds"), having the aggregate principal
amount and [Pass-Through Rate] set forth above. The Bonds will evidence
represent indebtedness of the related Trust Fund (as defined in the Trust
Agreement referred to below) to be established by the Company. Each Trust Fund
will consist primarily of a pool (the "Pool") of conventional, adjustable-rate,
one- to four-family residential mortgage loans (the "Mortgage Loans") as
described in the Prospectus Supplement (as hereinafter defined) to be sold by
the Company. The Mortgage Loans are being master serviced pursuant to a
Servicing Agreement dated as of _____________, 199_ (the "Cut-off Date") between
the Company as company and ________________________________, as master servicer
(the "Master Servicer").
The Bonds will be issued pursuant to an indenture (the "Indenture") to
be dated as of __________________, 199_ (the "Cut-off Date") between Imperial
CMB Trust 199_-__ (the "Issuer") and [Name of Indenture Trustee], as indenture
trustee (the "Indenture Trustee") and will represent indebtedness of the Issuer.
The Bonds are described more fully in the Basic Prospectus and the Prospectus
Supplement (each as hereinafter defined) which the Company has furnished to you.
<PAGE>
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1. REPRESENTATIONS, WARRANTIES AND COVENANTS.
1.1 The Company represents and warrants to, and agrees with
you that:
(a) The Company has filed with the Securities and
Exchange Commission (the "Commission") a registration statement (No.
333-____) on Form S-3 for the registration under the Securities Act of
1933, as amended (the "Act"), of Collateralized Mortgage Bonds
(issuable in series), including the Bonds, which registration statement
has become effective, and a copy of which, as amended to the date
hereof, has heretofore been delivered to you. The Company proposes to
file with the Commission pursuant to Rule 424(b) under the rules and
regulations of the Commission under the Act (the "1933 Act
Regulations") a supplement dated __________, 199_ (the "Prospectus
Supplement"), to the prospectus dated __________, 199_ (the "Basic
Prospectus"), relating to the Bonds and the method of distribution
thereof. Such registration statement (No. 333-____) including exhibits
thereto and any information incorporated therein by reference, as
amended at the date hereof, is hereinafter called the "Registration
Statement"; and the Basic Prospectus and the Prospectus Supplement and
any information incorporated therein by reference, together with any
amendment thereof or supplement thereto authorized by the Company on or
prior to the Closing Date for use in connection with the offering of
the Bonds, are hereinafter called the "Prospectus". Any preliminary
form of the Prospectus Supplement which has heretofore been filed
pursuant to Rule 424, or prior to the effective date of the
Registration Statement pursuant to Rule 402(a), or 424(a) is
hereinafter called a "Preliminary Prospectus Supplement."
(b) The Registration Statement has become effective,
and the Registration Statement as of the effective date (the "Effective
Date"), and the Prospectus, as of the date of the Prospectus
Supplement, complied in all material respects with the applicable
requirements of the Act and the 1933 Act Regulations; and the
Registration Statement, as of the Effective Date, did not contain any
untrue statement of a material fact and did not omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and the Prospectus, as of the date of
the Prospectus Supplement, did not, and as of the Closing Date will
not, contain an untrue statement of a material fact and did not and
will not omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company makes no
representations or warranties as to the information contained in or
omitted from the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto relating to the information
identified by underlining or other highlighting as shown in Exhibit E
(the "Excluded Information"); and provided, further, that the Company
makes no representations or warranties as to either (i) any information
in any Computational Materials or ABS Term Sheets (each as hereinafter
defined) required to be provided by the Underwriter to the Company
pursuant to Section 4.2, except to the extent of any information set
forth therein that constitutes Pool Information (as defined below),
(ii) as to any information contained in or omitted from the portions of
the Prospectus identified by underlining or other highlighting as shown
in Exhibit F (the "Underwriter
<PAGE>
-3-
Information"), or (iii) as to any information contained in or omitted
from the Statement of Eligibility and Qualification on Form T-1 of the
Indenture Trustee under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). As used herein, "Pool Information" means
information with respect to the characteristics of the Mortgage
Loansand administrative and servicing fees, as provided by or on behalf
of the Company to the Underwriter in final form and set forth in the
Prospectus Supplement. The Company acknowledges that, except for any
Computational Materials, the Underwriter Information constitutes the
only information furnished in writing by you or on your behalf for use
in connection with the preparation of the Registration Statement, any
preliminary prospectus or the Prospectus, and you confirm that the
Underwriter Information is correct.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of California and has the requisite corporate power to own its
properties and to conduct its business as presently conducted by it.
(d) This Agreement has been duly authorized, executed and
delivered by the Company.
(e) As of the Closing Date (as defined herein) the Bonds will
conform in all material respects to the description thereof contained
in the Prospectus and the representations and warranties of the Company
in the Indenture will be true and correct in all material respects.
1.2 The Underwriter represents and warrants to and agrees with
the Company that:
(a) The Underwriter has no present knowledge or
expectation that it will be unable to pay any United States taxes owed
by it so long as any of the Bonds remain outstanding.
(b) The Underwriter has no present knowledge or
expectation that it will become insolvent or subject to a bankruptcy
proceeding for so long as any of the Bonds remain outstanding.
(c) The Underwriter hereby certifies that (i) with
respect to any classes of Bonds issued in authorized denominations or
Percentage Interests of less than $25,000 or 20%, as the case may be,
the fair market value of each such Bond sold to any person on the date
of initial sale thereof by the Underwriter will not be less than
$100,000, and (ii) with respect to each class of Bonds to be maintained
on the book-entry records of The Depository Trust Company ("DTC"), the
interest in each such class of Bonds sold to any person on the date of
initial sale thereof by the Underwriter will not be less than an
initial Bond Principal Balance of $25,000.
<PAGE>
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(d) The Underwriter will use its best reasonable
efforts to cause Trepp & Co. to issue a commitment letter, prior to the
Closing Date, to DTC stating that Trepp & Co. will value the DTC
Registered Bonds (hereinafter defined) on an ongoing basis subsequent
to the Closing Date.
(e) The Underwriter will have funds available at
__________________ _______________, in the Underwriter's account at
such bank at the time all documents are executed and the closing of the
sale of the Bonds is completed, except for the transfer of funds and
the delivery of the Bonds. Such funds will be available for immediate
transfer into the account of the Company maintained at such bank.
(i) As of the date hereof and as of the Closing Date,
the Underwriter has complied with all of its obligations hereunder
including Section 4.2, and, with respect to all Computational Materials
and ABS Term Sheets provided by the Underwriter to the Company pursuant
to Section 4.2, if any, such Computational Materials and ABS Term
Sheets are accurate in all material respects when read in conjunction
with the Prospectus Supplement (taking into account the assumptions
explicitly set forth in the Computational Materials, except to the
extent of any errors therein that are caused by errors in the Pool
Information). The Computational Materials and ABS Term Sheets provided
by the Underwriter to the Company constitute a complete set of all
Computational Materials and ABS Term Sheets that are required to be
filed with the Commission.
2. PURCHASE AND SALE. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to you, and you agree to purchase from the Company, the Bonds at
a price equal to __________% of the aggregate principal balance of the Bonds as
of the Closing Date. There will be added to the purchase price of the Bonds an
amount equal to interest accrued thereon from the Cut-off Date to but not
including the Closing Date.
3. DELIVERY AND PAYMENT. Delivery of and payment for the Bonds shall be
made at the office of Thacher Proffitt & Wood at 10:00 a.m., New York City time,
on ______________, 199_ or such later date as you shall designate, which date
and time may be postponed by agreement between you and the Company (such date
and time of delivery and payment for the Bonds being herein called the "Closing
Date"). Delivery of the Bonds (the "Definitive Bonds")) shall be made to you
through the Depository Trust Company ("DTC") (such Bonds, the "DTC Registered
Bonds"), and delivery of the Definitive Bonds shall be made in registered,
certified form, in each case against payment by you of the purchase price
thereof to or upon the order of the Company by wire transfer in immediately
available funds. The Definitive Bonds shall be registered in such names and in
such denominations as you may request not less than two business days in advance
of the Closing Date. The Company agrees to have the Definitive Bonds available
for inspection, checking and packaging by you in New York, New York not later
than 1:00 p.m. on the business day prior to the Closing Date.
<PAGE>
-5-
4. OFFERING BY UNDERWRITER.
4.1 It is understood that you propose to offer the Bonds for
sale to the public as set forth in the Prospectus and you agree that all such
offers and sales by you shall be made in compliance with all applicable laws and
regulations.
4.2 It is understood that you may prepare and provide to
prospective investors certain Computational Materials (as defined below) in
connection with your offering of the Bonds, subject to the following conditions:
(a) The Underwriter shall comply with all applicable
laws and regulations in connection with the use of Computational
Materials, including the NoAction Letter of May 20, 1994 issued by the
Commission to Kidder, Peabody Acceptance Corporation I, Kidder, Peabody
& Co. Incorporated and Kidder Structured Asset Corporation, as made
applicable to other issuers and underwriters by the Commission in
response to the request of the Public Securities Association dated May
24, 1994 (collectively, the "Kidder/PSA Letter") as well as the PSA
Letter referred to below. The Underwriter shall comply with all
applicable laws and regulations in connection with the use of ABS Term
Sheets, including the No-Action Letter of February 17, 1995 issued by
the Commission to the Public Securities Association (the "PSA Letter"
and, together with the Kidder/PSA Letter, the "No-Action Letters").
(b) For purposes hereof, "Computational Materials" as
used herein shall have the meaning given such term in the No-Action
Letters, but shall include only those Computational Materials that have
been prepared or delivered to prospective investors by or at the
direction of the Underwriter. For purposes hereof, "ABS Term Sheets"
and "Collateral Term Sheets" as used herein shall have the meanings
given such terms in the PSA Letter but shall include only those ABS
Term Sheets or Collateral Term Sheets that have been prepared or
delivered to prospective investors by or at the direction of the
Underwriter.
(c) All Computational Materials and ABS Term Sheets
provided to prospective investors that are required to be filed
pursuant to the No-Action Letters shall bear a legend on each page
including the following statement:
"THE INFORMATION HEREIN HAS BEEN PROVIDED SOLELY BY
[Underwriter]. NEITHER THE ISSUER OF THE BondS NOR ANY OF ITS
AFFILIATES MAKES ANY REPRESENTATION AS TO THE ACCURACY OR
COMPLETENESS OF THE INFORMATION HEREIN. THE INFORMATION HEREIN
IS PRELIMINARY, AND WILL BE SUPERSEDED BY THE APPLICABLE
PROSPECTUS SUPPLEMENT AND BY ANY OTHER INFORMATION
SUBSEQUENTLY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.
<PAGE>
-6-
In the case of Collateral Term Sheets, such legend shall also include
the following statement:
"THE INFORMATION CONTAINED HEREIN WILL BE
SUPERSEDED BY THE DESCRIPTION OF THE MORTGAGE
POOL CONTAINED IN THE PROSPECTUS SUPPLEMENT RELATING TO THE
BondS AND [Except with respect to the initial Collateral Term
Sheet prepared by the Underwriter] SUPERSEDES ALL INFORMATION
CONTAINED IN ANY COLLATERAL TERM SHEETS RELATING TO THE
MORTGAGE POOL PREVIOUSLY PROVIDED BY [the Underwriter]."
The Company shall have the right to require additional specific legends
or notations to appear on any Computational Materials or ABS Term
Sheets, the right to require changes regarding the use of terminology
and the right to determine the types of information appearing therein.
Notwithstanding the foregoing, this subsection (c) will be satisfied if
all such Computational Materials and ABS Term Sheets bear a legend in
the form set forth in Exhibit I hereto.
(d) The Underwriter shall provide the Company with
representative forms of all Computational Materials and ABS Term Sheets
prior to their first use, to the extent such forms have not previously
been approved by the Company for use by the Underwriter. The
Underwriter shall provide to the Company, for filing on Form 8-K as
provided in Section 5.9, copies (in such format as required by the
Company) of all Computational Materials that are required to be filed
with the Commission pursuant to the No-Action Letters. The Underwriter
may provide copies of the foregoing in a consolidated or aggregated
form including all information required to be filed. All Computational
Materials and ABS Term Sheets described in this subsection (d) must be
provided to the Company not later than 10:00 a.m. New York time one
business day before filing thereof is required pursuant to the terms of
this Agreement. The Underwriter agrees that it will not provide to any
investor or prospective investor in the Bonds any Computational
Materials or ABS Term Sheets on or after the day on which Computational
Materials and ABS Term Sheets are required to be provided to the
Company pursuant to this Section 4.2(d) (other than copies of
Computational Materials or ABS Term Sheets previously submitted to the
Company in accordance with this Section 4.2(d) for filing pursuant to
Section 5.9), unless such Computational Materials or ABS Term Sheets
are preceded or accompanied by the delivery of a Prospectus to such
investor or prospective investor.
(e) All information included in the Computational
Materials shall be generated based on substantially the same
methodology and assumptions that are used to generate the information
in the Prospectus Supplement as set forth therein; provided that the
Computational Materials and ABS Term Sheets or ABS Term Sheets, as the
case may be, may include information based on alternative assumptions
if specified therein. If any Computational Materials or ABS Term Sheets
that are required to be filed were based on assumptions with respect to
the Pool that differ from the final Pool Information in any material
respect or on Bond structuring terms that were revised prior to the
printing of the Prospectus, the Underwriter shall prepare revised
<PAGE>
-7-
Computational Materials or ABS Term Sheets, as the case may be, based
on the final Pool Information and structuring assumptions, circulate
such revised Computational Materials and ABS Term Sheets to all
recipients of the preliminary versions thereof that indicated orally to
the Underwriter they would purchase all or any portion of the Bonds and
include such revised Computational Materials and ABS Term Sheets
(marked, "as revised") in the materials delivered to the Company
pursuant to subsection (d) above.
(f) The Company shall not be obligated to file any
Computational Materials that have been determined to contain any
material error or omission. In the event that any Computational
Materials or ABS Terms Sheets are determined, within the period which
the Prospectus relating to the Bonds is required to be delivered under
the Act, to contain a material error or omission, the Underwriter shall
prepare a corrected version of such Computational Materials or ABS Term
Sheets, shall circulate such corrected Computational Materials to all
recipients of the prior versions thereof that indicated orally to the
Underwriter they would purchase all or any portion of the Bonds and
shall deliver copies of such corrected Computational Materials and ABS
Term Sheets (marked, "as corrected") to the Company for filing with the
Commission in a subsequent Form 8-K submission (subject to the
Company's obtaining an accountant's comfort letter in respect of such
corrected Computational Materials, which shall be at the expense of the
Underwriter), provided that if any such letter is required to be
revised solely because of a change in the Pool Information, fifty
percent of any additional expenses for such letter resulting from the
change in Pool Information shall be paid by each of the Underwriter and
the Company.
(g) If the Underwriter does not provide any
Computational Materials or ABS Term Sheets to the Company pursuant to
subsection (d) above, the Underwriter shall be deemed to have
represented, as of the Closing Date, that it did not provide any
prospective investors with any information in written or electronic
form in connection with the offering of the Bonds that is required to
be filed with the Commission in accordance with the No-Action Letters,
and the Underwriter shall provide the Company with a certification to
that effect on the Closing Date.
(h) In the event of any delay in the delivery by the
Underwriter to the Company of all Computational Materials and ABS Term
Sheets required to be delivered in accordance with subsection (d)
above, or in the delivery of the accountant's comfort letter in respect
thereof pursuant to Section 5.9, the Company shall have the right to
delay the release of the Prospectus to investors or to the Underwriter,
to delay the Closing Date and to take other appropriate actions in each
case as necessary in order to allow the Company to comply with its
agreement set forth in Section 5.9 to file the Computational Materials
and ABS Term Sheets by the time specified therein.
<PAGE>
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(i) The Underwriter represents that it has in place,
and covenants that it shall maintain internal controls and procedures
which it reasonably believes to be sufficient to ensure full compliance
with all applicable legal requirements of the NoAction Letters with
respect to the generation and use of Computational Materials and ABS
Term Sheets in connection with the offering of the Bonds.
4.3 You further agree that on or prior to the sixth day after
the Closing Date, you shall provide the Company with a certificate,
substantially in the form of Exhibit G attached hereto, setting forth (i) in the
case of each class of Bonds, (a) if less than 10% of the aggregate principal
balance of such class of Bonds has been sold to the public as of such date, the
value calculated pursuant to clause (b)(iii) of Exhibit G hereto, or, (b) if 10%
or more of such class of Bonds has been sold to the public as of such date but
no single price is paid for at least 10% of the aggregate principal balance of
such class of Bonds, then the weighted average price at which the Bonds of such
class were sold expressed as a percentage of the principal balance of such class
of Bonds sold, or (c) the first single price at which at least 10% of the
aggregate principal balance of such class of Bonds was sold to the public, (ii)
the prepayment assumption used in pricing each class of Bonds, and (iii) such
other information as to matters of fact as the Company may reasonably request to
enable it to comply with its reporting requirements with respect to each class
of Bonds to the extent such information can in the good faith judgment of the
Underwriter be determined by it.
5. AGREEMENTS. The Company agrees with you that:
5.1 Before amending or supplementing the Registration
Statement or the Prospectus with respect to the Bonds, the Company will furnish
you with a copy of each such proposed amendment or supplement.
5.2 The Company will cause the Prospectus Supplement to be
transmitted to the Commission for filing pursuant to Rule 424(b) under the Act
by means reasonably calculated to result in filing with the Commission pursuant
to said rule.
5.3 If, during the period after the first date of the public
offering of the Bonds in which a prospectus relating to the Bonds is required to
be delivered under the Act, any event occurs as a result of which it is
necessary to amend or supplement the Prospectus, as then amended or
supplemented, in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
or if it shall be necessary to amend or supplement the Prospectus to comply with
the Act or the 1933 Act Regulations, the Company promptly will prepare and
furnish, at its own expense, to you, either amendments or supplements to the
Prospectus so that the statements in the Prospectus as so amended or
supplemented will not, in the light of the circumstances when the Prospectus is
delivered to a purchaser, be misleading or so that the Prospectus will comply
with law.
5.4 The Company will furnish to you, without charge, a copy of
the Registration Statement (including exhibits thereto) and, so long as delivery
of a prospectus by an underwriter or dealer may be required by the Act, as many
copies of the Prospectus, any
<PAGE>
-9-
documents incorporated by reference therein and any amendments and supplements
thereto as you may reasonably request.
5.5 [The Company agrees, so long as the Bonds shall be
outstanding, or until such time as you shall cease to maintain a secondary
market in the Bonds, whichever first occurs, to deliver to you the annual
statement as to compliance delivered to the Trustee pursuant to Section [___] of
the Pooling and Servicing Agreement and the annual statement of a firm of
independent public accountants furnished to the Trustee pursuant to Section 3.19
of the Pooling and Servicing Agreement, as soon as such statements are furnished
to the Company.]
5.6 The Company will endeavor to arrange for the qualification
of the Bonds for sale under the laws of such jurisdictions as you may reasonably
designate and will maintain such qualification in effect so long as required for
the initial distribution of the Bonds; provided, however, that the Company shall
not be required to qualify to do business in any jurisdiction where it is not
now so qualified or to take any action that would subject it to general or
unlimited service of process in any jurisdiction where it is not now so subject.
5.7 If the transactions contemplated by this Agreement are
consummated, the Company will pay or cause to be paid all expenses incident to
the performance of the obligations of the Company under this Agreement, and will
reimburse you for any reasonable expenses (including reasonable fees and
disbursements of counsel) reasonably incurred by you in connection with
qualification of the Bonds for sale and determination of their eligibility for
investment under the laws of such jurisdictions as you have reasonably requested
pursuant to Section 5.6 above and the printing of memoranda relating thereto,
for any fees charged by investment rating agencies for the rating of the Bonds,
and for expenses incurred in distributing the Prospectus (including any
amendments and supplements thereto) to the Underwriter. Except as herein
provided, you shall be responsible for paying all costs and expenses incurred by
you, including the fees and disbursements of your counsel, in connection with
the purchase and sale of the Bonds.
5.8 If, during the period after the Closing Date in which a
prospectus relating to the Bonds is required to be delivered under the Act, the
Company receives notice that a stop order suspending the effectiveness of the
Registration Statement or preventing the offer and sale of the Bonds is in
effect, the Company will advise you of the issuance of such stop order.
5.9 The Company shall file the Computational Materials and ABS
Term Sheets (if any) provided to it by the Underwriter under Section 4.2(d) with
the Commission pursuant to a Current Report on Form 8-K by 10:00 a.m. on the
morning the Prospectus is delivered to the Underwriter or, the case of any
Collateral Term Sheet required to be filed prior to such date, by 10:00 a.m. on
the second business day following the first day on which such Collateral Term
Sheet has been sent to a prospective investor; provided, however, that prior to
such filing of the Computational Materials and ABS Term Sheets (other than any
Collateral Term Sheets that are not based on the Pool Information) by the
Company, the Underwriter must comply with its obligations pursuant to Section
4.2 and the Company must receive a letter from ___________________________,
certified public accountants, satisfactory in form and substance
<PAGE>
-10-
to the Company and its counsel, to the effect that such accountants have
performed certain specified procedures, all of which have been agreed to by the
Company, as a result of which they determined that all information that is
included in the Computational Materials (if any) provided by the Underwriter to
the Company for filing on Form 8-K, as provided in Section 4.2 and this Section
5.9, is accurate without exception. The foregoing letter shall be at the sole
expense of the Underwriter. The Company shall file any corrected Computational
Materials described in Section 4.2(f) as soon as practicable following receipt
thereof. The Company also will file with the Commission within fifteen days of
the issuance of the Bonds a Current Report on Form 8-K (for purposes of filing
the Master Servicing Agreement and the Indenture).
6. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITER. The Underwriter's
obligation to purchase the Bonds shall be subject to the following conditions:
6.1 No stop order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceedings for that purpose
shall be pending or, to the knowledge of the Company, threatened by the
Commission; and the Prospectus Supplement shall have been filed or transmitted
for filing, by means reasonably calculated to result in a filing with the
Commission pursuant to Rule 424(b) under the Act.
6.2 Since _________ 1, 199_ there shall have been no material
adverse change (not in the ordinary course of business) in the condition of the
Company.
6.3 The Company shall have delivered to you a certificate,
dated the Closing Date, of the President, a Senior Vice President or a Vice
President of the Company to the effect that the signer of such certificate has
examined this Agreement, the Prospectus, the Master Servicing Agreement and the
Indenture and various other closing documents, and that, to the best of his or
her knowledge after reasonable investigation:
(a) the representations and warranties of the Company
in this Agreement and in the [Indenture] are true and correct in all
material respects; and
(b) the Company has, in all material respects,
complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied hereunder at or prior to the
Closing Date.
6.4 You shall have received the opinions of Thacher Proffitt &
Wood, special counsel for the Company, dated the Closing Date and substantially
to the effect set forth in Exhibit A-1 and Exhibit A-2, and the opinion of [Name
of Counsel], general counsel for the Company, dated the Closing Date and
substantially to the effect set forth in Exhibit B.
6.5 You shall have received from ________________________,
counsel for the Underwriter, an opinion dated the Closing Date in form and
substance satisfactory to the Underwriter.
<PAGE>
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6.6 The Underwriter shall have received from
________________________, certified public accountants, a letter dated the date
hereof and satisfactory in form and substance to the Underwriter and the
Underwriter's counsel, to the effect that they have performed certain specified
procedures, all of which have been agreed to by the Underwriter, as a result of
which they determined that certain information of an accounting, financial or
statistical nature set forth in the Prospectus Supplement under the captions
["Description of the Mortgage Pool", "Master Servicing Agreement", "Description
of the Bonds" and "Certain Yield and Prepayment Considerations"] agrees with the
records of the Company excluding any questions of legal interpretation.
6.7 The Bonds shall have been rated "AAA" by [Names of Rating
Agencies].
6.8 You shall have received the opinion of [Trustee's
Counsel], dated the Closing Date, substantially to the effect set forth in
Exhibit C.
6.9 You shall have received the opinion of [Company's
Counsel], general counsel of the Company, dated the Closing Date, substantially
to the effect set forth in Exhibit D.
6.10 You shall have received from Thacher Proffitt & Wood,
special counsel to the Company, and from [Company's Counsel], general counsel to
the Company, reliance letters with respect to any opinions delivered to [Names
of Rating Agencies].
The Company will furnish you with conformed copies of the above opinions,
certificates, letters and documents as you reasonably request.
7. INDEMNIFICATION AND CONTRIBUTION.
7.1 The Company agrees to indemnify and hold harmless you and
each person, if any, who controls you within the meaning of either Section 15 of
the Act or Section 20 of the Securities Exchange Act of 1934, from and against
any and all losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement for the registration of the Bonds as originally filed or
in any amendment thereof or other filing incorporated by reference therein, or
in the Prospectus or incorporated by reference therein (if used within the
period set forth in Section 5.3 hereof and as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages, or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon any information
with respect to which the Underwriter has agreed to indemnify the Company
pursuant to Section 7.2; provided, that neither the Company, or you will be
liable in any case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein relating to the Excluded
Information.
<PAGE>
-12-
7.2 You agree to indemnify and hold harmless the Company, its
directors or officers and any person controlling the Company to the same extent
as the indemnity set forth in clause 7.1 above from the Company to you, but only
with respect to (i) the Underwriter Information and (ii) the Computational
Materials and ABS Term Sheets, except to the extent of any errors in the
Computational Materials or ABS Term Sheets that are caused by errors in the Pool
Information. In addition, you agree to indemnify and hold harmless the Company
its directors or officers and any person controlling the Company against any and
all losses, claims, damages, liabilities and expenses (including, without
limitation, reasonable attorneys' fees) caused by, resulting from, relating to,
or based upon any legend regarding original issue discount on any Bond resulting
from incorrect information provided by the Underwriter in the certificates
described in Section 4.3 hereof.
7.3 In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either clause 7.1 or 7.2, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the reasonable fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the reasonable fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees
and expenses of more than one separate firm for all such indemnified parties.
Such firm shall be designated in writing by you, in the case of parties
indemnified pursuant to clause 7.1 and by the Company, in the case of parties
indemnified pursuant to clause 7.2. The indemnifying party may, at its option,
at any time upon written notice to the indemnified party, assume the defense of
any proceeding and may designate counsel reasonably satisfactory to the
indemnified party in connection therewith provided that the counsel so
designated would have no actual or potential conflict of interest in connection
with such representation. Unless it shall assume the defense of any proceeding
the indemnifying party shall not be liable for any settlement of any proceeding,
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. If the indemnifying party assumes the defense of
any proceeding, it shall be entitled to settle such proceeding with the consent
of the indemnified party or, if such settlement provides for release of the
indemnified party in connection with all matters relating to the proceeding
which have been asserted against the indemnified party in such proceeding by the
other parties to such settlement, without the consent of the indemnified party.
<PAGE>
-13-
7.4 If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under clause 7.1 or 7.2 hereof or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities, in
such proportion as is appropriate to reflect not only the relative benefits
received by the Company on the one hand and the Underwriter on the other from
the offering of the Bonds but also the relative fault of the Company on the one
hand and of the Underwriter, on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand and of the Underwriter on the other shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the
Underwriter, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
7.5 The Company and the Underwriter agree that it would not be
just and equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation or by any other method of allocation which does not take
account of the considerations referred to in clause 7.4, above. The amount paid
or payable by an indemnified party as a result of the losses, claims, damages
and liabilities referred to in this Section 7 shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim except where the indemnified party is
required to bear such expenses pursuant to clause 7.4; which expenses the
indemnifying party shall pay as and when incurred, at the request of the
indemnified party, to the extent that the indemnifying party believes that it
will be ultimately obligated to pay such expenses. In the event that any
expenses so paid by the indemnifying party are subsequently determined to not be
required to be borne by the indemnifying party hereunder, the party which
received such payment shall promptly refund the amount so paid to the party
which made such payment. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
7.6 The indemnity and contribution agreements contained in
this Section 7 and the representations and warranties of the Company in this
Agreement shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by the
Underwriter or on behalf of the Underwriter or any person controlling the
Underwriter or by or on behalf of the Company and its respective directors or
officers or any person controlling the Company and (iii) acceptance of and
payment for any of the Bonds.
8. TERMINATION. This Agreement shall be subject to termination by
notice given to the Company, if the sale of the Bonds provided for herein is not
consummated because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform their respective
obligations under this Agreement. If you terminate this Agreement in accordance
<PAGE>
-14-
with this Section 8, the Company will reimburse you for all reasonable
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been reasonably incurred by the Underwriter in connection with
the proposed purchase and sale of the Bonds.
9. CERTAIN REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The
respective agreements, representations, warranties, indemnities and other
statements of the Company or the officers of the Company, and you set forth in
or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation, or statement as to the results thereof, made by
you or on your behalf or made by or on behalf of the Company or any of its
officers, directors or controlling persons, and will survive delivery of and
payment for the Bonds.
10. NOTICES. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Underwriter will be mailed,
delivered or telegraphed and confirmed to you at
________________________________________________________________________,
Attention: ____________________________ or if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at IMH Assets Corp., 20371
Irvine Avenue, [Suite 200,] Santa Ana Heights, California 92707.
11. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7 hereof, and their
successors and assigns, and no other person will have any right or obligation
hereunder.
12. APPLICABLE LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of New York.
13. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, which taken together
shall constitute one and the same instrument.
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
letter and your acceptance shall represent a binding agreement between the
Company and you.
Very truly yours,
IMH ASSETS CORP.
By:
------------------------------
Name:
Title:
The foregoing Underwriting Agreement
is hereby confirmed and accepted as of
the date first above written.
By:
-------------------------------
Name:
Title:
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
IMPERIAL CREDIT SECURED ASSETS CORP.
Kasey Hannah certifies that:
1. She is the sole incorporator of IMPERIAL CREDIT SECURED ASSETS CORP., a
California corporation.
2. She hereby adopts the following amendment of the articles of
incorporation of this corporation:
Article I to the Articles of Incorporation of this corporation to read
as follows:
I
The name of the corporation shall be IMH ASSETS CORP.
3. No directors were named in the original articles of incorporation and
none have been elected.
4. No shares have been issued.
I further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of my own knowledge.
Date: April 12, 1996
/s/ Kasey Hannah
-------------------
Kasey Hannah
<PAGE>
ARTICLES OF INCORPORATION
OF
IMPERIAL CREDIT SECURED ASSETS CORP.
A California corporation
I
The name of the corporation shall be Imperial Credit Secured Assets
Corp.
II
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust business or the
practice of a profession permitted to be incorporated by the California
Corporations Code. Notwithstanding the foregoing, the nature of the business or
purposes to be conducted or promoted by the corporation is limited to the
following activities and none other:
A. To acquire, own, hold, transfer, assign, pledge and otherwise
deal with the following (the "Mortgage Collateral"); (i) (a)
"fully modified passthrough" mortgage-backed certificates
guaranteed as to timely payment of principal and interest by
the Government National Mortgage Association; (b) Guaranteed
Mortgage Pass-Through Certificates issued and guaranteed as to
timely payment of principal and interest by the Federal
National Mortgage Association; (c) Mortgage Participation
Certificates issued and guaranteed as to timely payment of
interest and principal, in most cases, by the Federal Home
Loan Mortgage Corporation (collectively, the "Agency
Certificates"); (d) securities representing interests in
Agency Certificates; or (e) mortgage pass-through certificates
or mortgage collateralized bonds issued by any other entity
with respect to or secured by a pool of mortgage loans
(collectively, "Certificates") which are either owned by the
corporation or granted by a Borrower (as defined below) to
secure payment of Mortgage Backed Notes (as defined below);
(ii) mortgage notes and related mortgages, or interests
therein (including, but not limited to, participation
certificates with respect to such mortgage notes or related
mortgages) ("Pledged Mortgages"), which are either owned by
the corporation or granted by a Borrower to secure payment of
a Mortgaged Backed Note; (iii) mortgage backed notes
evidencing loans made by the corporation to commercial banks,
saving and loan associations and savings banks, the deposits
of which are insured by the Federal Deposit Insurance
Corporation ("FDIC"), affiliates of FDIC insured institutions,
and other entities which are not FDIC insured institutions but
are
1
<PAGE>
engaged directly, or through the owners of such entities or
their affiliates, in mortgage financing, origination or
funding activities (e.g., mortgage bankers, home builders and
state agencies), or to any other entity (collectively, the
"Borrowers"), which loans are secured by Pledged Mortgages or
Certificates ("Mortgage Backed Notes"); and (iv) real property
and any improvements thereon, including commercial,
multifamily and residential properties ("Properties);
B. To authorize, issue, hold, retain an interest in (including a
subordinated interest), sell, deliver or otherwise deal with
(i) bonds or other evidences of indebtedness ("Bonds") that
are secured by a pledge or other assignment of Mortgage
Collateral, reserve funds, guaranteed investment contracts,
letters of credit, insurance contracts, surety bonds or any
other credit enhancement device (collectively, the
"Collateral"), and are rated in one of the three highest
categories as may be designated by any nationally recognized
statistical rating agency, or (ii) mortgage pass-through
certificates which evidence an interest in pools of mortgage
loans or other Mortgage Collateral ("Pass-Through
Certificates") that are rated in one of the three highest
categories as may be designated by any nationally recognized
statistical rating agency; provided that one or more classes
of Bonds or Pass Through Certificates of a series issued by
the corporation may be subordinate to other Bonds or
Pass-Through Certificates of such series and need not be so
rated;
C. To serve as settlor or depositor of one or more trusts formed
to authorize, issue, sell and deliver Bonds, Pass-Through
Certificates or other certificates of interest that are
secured by a pledge or other assignment of, or represent an
interest in, the Collateral and are rated in one of the three
highest categories available by any nationally recognized
rating agency; provided that one or more classes of an issue
of such securities by such trust may be subordinate to other
securities of such issue and not so rated;
D. To do all such things as are reasonable or necessary to enable
the corporation to carry out any of the activities specified
in paragraphs A, B and C of this Article II, including
entering into loan agreements, indentures, pooling agreements,
insurance agreements, servicing agreements, reimbursement
agreements, issuing debt (subject to the provisions of this
Article II and Article VIII hereof) and selling residual
interests in Mortgage Collateral or selling certificates of
participation or beneficial interests in any trust for which
the corporation serves as depositor or settlor.
III
The name and address in this state of the corporation's agent for
service of process is: Richard Johnson, 20371 Irvine Ave. #104, Santa Ana
Heights, CA 92707.
2
<PAGE>
IV
The total number of shares which this corporation is authorized to
issue is Ten Thousand (10,000).
V
The liability of directors of the corporation for monetary damages
shall be eliminated to the fullest extent of the law.
VI
The corporation is authorized to provide indemnification of its agents
(as defined in Section 317 of the California Corporations Code) for breach of
duty to the corporation and its shareholders through by-law provisions or
through agreements with its agents or both, in excess of the indemnification
otherwise permitted by Section 317 of the California Corporations Code, subject
to the limits on excess indemnification set forth in Section 204 of the
California Corporations Code.
VII
The affirmative unanimous vote of the holders of all of the
corporation's outstanding common stock and the unanimous vote of the whole board
of directors (including the Independent Director) at any meeting of the board of
directors shall be necessary (i) for the amendment of Articles II, VII, VIII, IX
and X of these Articles of Incorporation and for the amendment of the by-laws of
the corporation; or (ii) before the corporation may take any action to institute
proceedings to have itself adjudicated as bankrupt or insolvent, or consent to
the institution of bankruptcy or insolvency proceedings against it, or seek or
consent to the entry of any order for relief or the appointment of a receiver,
trustee, or other similar official for it or for any substantial part of its
property, or seek liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
make any general assignment for the benefit of creditors, or take any corporate
action in furtherance of any of the actions set forth above in this paragraph.
VIII
Notwithstanding any other provision of these Articles of Incorporation
and any provision of law which otherwise so empowers the corporation, the
corporation shall not perform any act in contravention of any of the following:
A. The corporation shall not (i) consolidate or merge with or
into any other entity or person or transfer its properties and
assets substantially as an entirety to any
3
<PAGE>
entity; or (ii) engage in any other action that bears on
whether the separate legal identity of the corporation will be
respected, including, without limitation (a) holding itself
out as being liable for the debts of any other party, (b)
forming, or causing to be formed, any subsidiaries, or (c)
acting other than in its corporate name and through its duly
authorized officers or agents;
B. The corporation shall not engage in any joint activity or
transaction of any kind with or for the benefit of any Related
Company (as defined below), including loans to or from any
Related Company and any guarantee of the indebtedness of any
Related Company, except for (i) entering into the agreements
referenced in Article II hereof; (ii) purchasing management
services and leasing office space or equipment, in each case
only to the extent necessary for the conduct of the
corporation's business; and (iii) payment of lawful dividends
and capital distributions to its shareholder or shareholders;
C. The corporation shall not create, incur, assume, guarantee or
in any manner become liable in respect of any indebtedness,
except as stated in Article II hereof, other than trade
payables and expense accruals incurred in the ordinary course
of business and which are incident to the business purpose of
the corporation as stated in Article II; and
D. The corporation shall not commingle its funds and assets with
those of any Related Company.
"Related Company" means the shareholder or shareholders of
this corporation or any entity other than this corporation now or hereafter
controlled directly or indirectly by, or under direct or indirect common control
with, the shareholders of this corporation.
IX
The corporation shall (A) maintain its financial and accounting books
and records separate from those of any other entity or person, (B) pay from its
assets all obligations and indebtedness of any kind incurred by it, and shall
not pay from its assets any obligations or indebtedness of any other entity or
person, (C) transact all business with any Related Party on an arms-length
basis, (D) prepare or cause to be prepared separate tax returns and financial
statements, or if part of a consolidated group, then it will be shown as a
separate member of such group, and (E) observe all corporate formalities
required by these Articles of Incorporation, by-laws and the laws of the State
of California.
X
The corporation shall at all times have at least one director (an
"Independent Director") who shall not have been, at the time of his or her
appointment or at any time in the five (5) years preceding such appointment, (A)
a stockholder, director, officer or an employee of any
4
<PAGE>
Related Company or affiliate or subsidiary thereof, (B) a customer of or a
supplier to any Related Company or any affiliate or subsidiary thereof, (C) a
person or other entity controlling any such stockholder, director, officer,
employee, supplier or customer, or (D) a member of the immediate family of any
such stockholder, director, officer, employee, supplier or customer of any
Related Company or such subsidiary or affiliate thereof. As used herein, the
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person or
other entity, whether through ownership of voting securities, by contract or
otherwise.
Dated: May 2, 1996
-----------------------------------
Kasey Hannah, Sole Incorporator
I hereby declare that I am the person who executed the foregoing
Articles of Incorporation, which execution is my act and deed.
-----------------------------------
Kasey Hannah, Sole Incorporator
5
EXHIBIT 3.2
BY-LAWS
OF
IMH ASSETS CORP.
a California Corporation
<PAGE>
Table of Contents
PAGE
----
ARTICLE I
OFFICES.................................. 1
Section 1. PRINCIPAL OFFICE.......................................... 1
Section 2. OTHER OFFICES.............................................. 1
ARTICLE II
DIRECTORS - MANAGEMENT.......................... 1
Section 1. RESPONSIBILITY OF BOARD OF DIRECTORS........................ 1
Section 2. STANDARD OF CARE............................................ 1
Section 3. NUMBER AND QUALIFICATION OF DIRECTORS....................... 2
Section 4. ELECTION AND TERM OF OFFICE OF DIRECTORS.................... 2
Section 5. VACANCIES................................................... 2
Section 6. REMOVAL OF DIRECTORS........................................ 3
Section 7. NOTICE, PLACE AND MANNER OF MEETINGS........................ 3
Section 8. ANNUAL MEETINGS............................................. 3
Section 9. SPECIAL MEETINGS - NOTICES - WAIVERS........................ 3
Section 10. ACTION WITHOUT A MEETING BY WRITTEN CONSENT................. 4
Section 11. QUORUM...................................................... 4
Section 12. NOTICE OF ADJOURNMENT....................................... 4
Section 13. COMPENSATION OF DIRECTORS................................... 4
Section 14. COMMITTEES.................................................. 4
Section 15. ADVISORY DIRECTORS.......................................... 4
ARTICLE III
OFFICERS.................................. 5
Section 1. OFFICERS.................................................... 5
Section 2. ELECTION.................................................... 5
Section 3. SUBORDINATE OFFICERS, ETC................................... 5
Section 4. REMOVAL AND RESIGNATION OF OFFICERS......................... 5
Section 5. VACANCIES................................................... 5
Section 6. CHAIRMAN OF THE BOARD....................................... 5
Section 7. PRESIDENT................................................... 6
Section 8. VICE PRESIDENTS............................................. 6
Section 9. SECRETARY................................................... 6
Section 10. CHIEF FINANCIAL OFFICER..................................... 6
<PAGE>
PAGE
----
ARTICLE IV
SHAREHOLDERS' MEETINGS.......................... 7
Section 1. PLACE OF MEETINGS.......................................... 7
Section 2. ANNUAL MEETINGS............................................ 7
Section 3. SPECIAL MEETINGS........................................... 7
Section 4. NOTICE OF MEETINGS - REPORTS............................... 7
Section 5. WAIVER OF NOTICE OR CONSENT BY ABSENT
SHAREHOLDER................................................ 8
Section 6. SHAREHOLDERS ACTING WITHOUT A MEETING-
ELECTION OF DIRECTORS...................................... 8
Section 7. OTHER ACTIONS WITHOUT A MEETING............................ 9
Section 8. QUORUM..................................................... 9
Section 9. VOTING..................................................... 10
Section 10. PROXIES.................................................... 10
Section 11. ORGANIZATION............................................... 10
Section 12. INSPECTORS OF ELECTION..................................... 10
ARTICLE V
CERTIFICATES AND TRANSFER OF SHARES................... 11
Section 1. CERTIFICATES FOR SHARES.................................... 11
Section 2. TRANSFER ON THE BOOKS...................................... 11
Section 3. LOST OR DESTROYED CERTIFICATES............................. 11
Section 4. TRANSFER AGENTS AND REGISTRARS............................. 11
Section 5. CLOSING STOCK TRANSFER BOOKS - RECORD DATE................. 12
Section 6. LEGEND CONDITION........................................... 12
ARTICLE VI
RECORDS - REPORTS - INSPECTION...................... 12
Section 1. RECORDS.................................................... 12
Section 2. INSPECTION OF BOOKS AND RECORDS............................ 12
Section 3. CERTIFICATION AND INSPECTION OF BY- LAWS................... 13
Section 4. CHECKS, DRAFTS, ETC........................................ 13
Section 5. CONTRACTS, ETC. -- HOW EXECUTED............................ 13
ARTICLE VII
ANNUAL REPORTS.............................. 13
Section 1. WAIVER OF ANNUAL REPORTS TO SHAREHOLDER.................... 13
<PAGE>
PAGE
----
ARTICLE VIII
AMENDMENTS TO BY-LAWS.......................... 13
Section 1. AMENDMENTS................................................. 13
Section 2. RECORD OF AMENDMENTS....................................... 14
ARTICLE IX
CORPORATE SEAL.............................. 14
ARTICLE X
CORPORATE LOANS............................. 14
Section 1. LIMITATION ON CORPORATE LOANS AND
GUARANTEES................................................. 14
Section 2. PERMISSIBLE CORPORATE LOANS AND GUARANTEES................. 14
ARTICLE XI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS............................. 15
Section 1. AGENTS, PROCEEDINGS, AND EXPENSES.......................... 15
Section 2. ACTIONS OTHER THAN BY THE CORPORATION...................... 15
Section 3. ACTIONS BY THE CORPORATION................................. 16
Section 4. SUCCESSFUL DEFENSE BY AGENT................................ 16
Section 5. REQUIRED APPROVAL.......................................... 16
Section 6. ADVANCE OF EXPENSES........................................ 17
Section 7. OTHER RIGHTS AUTHORIZED.................................... 17
Section 8. LIMITATIONS................................................ 17
Section 9. INSURANCE.................................................. 17
Section 10. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT
PLAN....................................................... 17
Section 11. RIGHT TO INDEMNITY CONTINUES............................... 18
ARTICLE XII
MISCELLANEOUS.............................. 18
Section 1. REPRESENTATION OF SHARES IN OTHER
CORPORATIONS............................................... 18
Section 2. SUBSIDIARY CORPORATIONS.................................... 18
Section 3. ACCOUNTING YEAR............................................ 18
<PAGE>
BY-LAWS
OF
IMH ASSETS CORP.
a California corporation
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office for the transaction
of business of the corporation is hereby fixed and located at
The location may be changed by approval of a majority of the authorized
Directors, and additional offices may be established and maintained at such
other place or places, either within or outside California, as the Board of
Directors may from time to time designate.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any
time be established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
Section 1. RESPONSIBILITY OF BOARD OF DIRECTORS. Subject to the
provisions of the General Corporation Law and to any limitations in the Articles
of Incorporation of the corporation relating to action required to be approved
by the Shareholders, as that term is defined in Section 153 of the California
Corporations Code (hereafter "Code"), or by the outstanding shares, as that term
is defined in Section 152 of the Code, the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board of Directors (hereafter "Board"). The Board may
delegate the management of the day-to-day operation of the business of the
corporation to a management company or other person, provided that the business
and affairs of the corporation shall be managed and all corporate powers shall
be exercised under the ultimate direction of the Board.
Section 2. STANDARD OF CARE. Each Director shall perform the duties of
a Director, including the duties as a member of any committee of the Board upon
which the irector may serve, in good faith, in a manner such Director believes
to be in the best interests of the corporation, and with such care, including
reasonable inquiry, as an ordinary prudent person in a like position would use
under similar circumstances.
<PAGE>
Section 3. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number
of Directors shall be no less than three (3) or more than seven (7) provided,
however, that (1) before shares are issued, the number may be one, (2) before
shares are issued, the number may be two, (3) so long as the corporation has
only one shareholder, the number may be one, (4) so long as the corporation has
only one shareholder, the number may be two, and (5) so long as the corporation
has only two shareholders, the number may be two. The indefinite number of
directors may be changed, or a definite number fixed without provision for an
indefinate number, by an amendment to this by-law duly adopted by the vote or
written consent of holders of a majority of the outstanding shares entitled to
vote; provided, however, that an amendment reducing the number or the minimum
number of directors to a number less than five (5) cannot be adopted if the
votes cast against its adoption at a meeting of the shareholders, or the shares
not consenting in the case of action by written consent, are equal to more than
16 2/3% of the outstanding shares entitled to vote. No amendment may change the
stated maximum number of authorized directors to a number greater than two times
the stated minimum number of directors minus one. Directors need not be
shareholders.
Section 4. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be
elected at each annual meeting of the Shareholders to hold office until the next
annual meeting. Each Director, including a Director elected to fill a vacancy,
shall hold office until the expiration of the term for which elected and until a
successor has been elected and qualified.
Section 5. VACANCIES. Vacancies in the Board may be filled at a meeting
by a majority of the remaining Directors, though less than a quorum, by the
unanimous written consent of the directors then in office or by a sole remaining
Director, except that a vacancy created by the removal of a director by the vote
or written consent of the Shareholders or by court order may be filled only by
(i) the vote of a majority of the shares entitled to vote represented at a duly
held meeting at which a quorum is present, or (ii) the written consent of
holders of a majority of the outstanding shares entitled to vote. Each Director
so elected shall hold office until the next annual meeting of the Shareholders
and until a successor has been elected and qualified.
A vacancy or vacancies in the Board shall exist (i) in the event of the
death, resignation, or removal of any Director; (ii) if the Board by resolution
declares vacant the office of a Director who has been declared of unsound mind
by an order of court or convicted of a felony; (iii) if the authorized number of
Directors is increased; or (iv) if the shareholders fail, at any meeting of
shareholders at which any Director or Directors are elected, to elect the number
of Directors to be voted for at that meeting.
The Shareholders may elect a Director or Directors at any time to fill
any vacancy or vacancies not filled by the Directors, but any such election by
written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
Any Director may resign effective on giving written notice to the
Chairman of the Board, the President, the Secretary, or the Board, unless the
notice specifies a later time for that
2
<PAGE>
resignation to become effective. If the resignation of a Director is effective
at a future time, the Board may elect a successor to take office when the
resignation becomes effective.
No reduction of the authorized number of Directors shall have the
effect of removing any Director before that Director's term of office expires.
Section 6. REMOVAL OF DIRECTORS. The entire Board of Directors or any
individual Director may be removed from office as provided by Sections 303 and
304 of the Code. Any such vacancy or vacancies thereby created shall be filled
by a majority vote of the Directors, provided, however, if there are no
Directors remaining in office, then by a majority vote of the shares entitled to
vote represented at a special meeting at which a quorum is present, or, by the
written consent of holders of a majority of the outstanding shares entitled to
vote.
Section 7. NOTICE, PLACE AND MANNER OF MEETINGS. Meetings of the Board
of Directors may be called by the Chairman of the Board, or the President, or
any Vice President, or the Secretary, or any two (2) Directors and shall be held
at the principal office of the corporation, unless some other place is
designated in the notice of the meeting. Members of the Board may participate in
a meeting through use of a conference telephone or similar communications
equipment so long as all members participating in such a meeting can hear one
another. Accurate minutes of any meeting of the Board or any committee thereof,
shall be maintained by the Secretary or other Officer designated for that
purpose.
Section 8. ANNUAL MEETINGS. The annual meeting of the Board shall be
held immediately following the adjournment of the annual meeting of the
Shareholders.
Section 9. SPECIAL MEETINGS - NOTICES - WAIVERS. Special meetings of
the Board may be called at any time by the President or, if he or she is absent,
unable, or refuses to act, by any Vice President or the Secretary or by any two
(2) Directors, or by one (1) Director if only one is provided.
At least forty-eight (48) hours notice of the time and place of special
meetings shall be delivered personally to the Directors or personally
communicated to them by a corporate Officer by telephone or telegraph. If the
notice is sent to a Director by letter, it shall be addressed to him or her at
his or her address as it is shown upon the records of the corporation, or if it
is not so shown on such records or is not readily ascertainable, at the place in
which the meetings of the Directors are regularly held. In case such notice is
mailed, it shall be deposited in the United States mail, postage prepaid, in the
place in which the principal office of the corporation is located at least four
(4) days prior to the time of the holding of the meeting. Such mailing,
telegraphing, telephoning or delivery as above provided shall be due, legal and
personal notice to such Director.
If (i) all or a majority of the Directors are present at any Directors'
meeting and said meeting is not properly called or noticed as set forth in these
By-Laws and all directors, including those not present, sign a waiver of notice
of such meeting or a consent to holding the
3
<PAGE>
meeting or an approval of the minutes thereof, whether prior to or after the
holding of such meeting, which said waiver, consent or approval shall be filed
with the Secretary of the corporation, or, (ii) a Director attends a meeting
without notice but without protesting, prior thereto or at its commencement, the
lack of notice, then the transactions thereof are as valid as if had at a
meeting regularly called and noticed.
Section 10. ACTION WITHOUT A MEETING BY WRITTEN CONSENT. Any action
required or permitted to be taken by the board of directors may be taken without
a meeting, if all members of the board individually or collectively consent in
writing to that action. Any action by written consent shall have the same effect
as a unanimous vote of the board of directors. All such written consents shall
be filed with the minutes of the proceedings of the board of directors.
Section 11. QUORUM. A majority of the number of Directors as fixed by
these ByLaws shall be necessary to constitute a quorum for the transaction of
business, and the action of a majority of the Directors present at any meeting
at which there is a quorum, when duly assembled, is valid as a corporate act;
provided that a minority of the Directors, in the absence of a quorum, may
adjourn from time to time, but may not transact any business. A meeting at which
a quorum is initially present may continue to transact business, notwithstanding
the withdrawal of Directors, if any action taken is approved by a majority of
the required quorum for such meeting.
Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given to absent Directors if the time
and place be fixed at the meeting adjourned and held within twenty-four (24)
hours, but if adjourned more than twenty-four (24) hours, notice shall be given
to all Directors not present at the time of the adjournment.
Section 13. COMPENSATION OF DIRECTORS. Directors, as such, shall not
receive any stated salary for their services, but by resolution of the Board a
fixed sum and expense of attendance, if any, may be allowed for attendance at
each regular and special meeting of the Board; provided that nothing herein
contained shall be construed to preclude any Director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 14. COMMITTEES. Committees of the Board may be appointed by
resolution passed by a majority of the whole Board. Committees shall be composed
of two (2) or more members of the Board, and shall have such powers of the Board
as may be expressly delegated to it by resolution of the Board, except those
powers expressly made non-delegable by Section 311 of the Code.
Section 15. ADVISORY DIRECTORS. The Board may, from time to time, elect
up to three persons to be Advisory Directors who shall not by such appointment
be members of the Board or have voting power. Advisory Directors shall be
available from time to time to perform special assignments specified by the
Board, to attend meetings of the Board upon invitation and to furnish
consultation to the Board. The period during which the title shall be held may
be
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prescribed by the Board. If no period is prescribed, the title shall be held at
the pleasure of the Board. Such Advisory members may receive such compensation
as the Board may determine.
ARTICLE III
OFFICERS
Section 1. OFFICERS. The Officers of the corporation shall be a
Chairman of the Board or a President or both; a Secretary, and a Chief Financial
Officer. The corporation may also have, at the discretion of the Board, one or
more Vice Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other Officers as may be appointed in accordance with the
provisions of Section 3 of this Article III. Any number of offices may be held
by the same person.
Section 2. ELECTION. The Officers of the corporation, except such
Officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article, shall be elected annually by the Board, and each
shall hold office until he or she shall resign or shall be removed or otherwise
disqualified to serve, or a successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board may appoint such other
Officers as the business of the corporation may require, each of whom shall hold
office for such period, have such authority and perform such duties as are
provided in these By-Laws or as the Board may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights,
if any, of an Officer under any contract of employment, any Officer may be
removed, either with or without cause, by the Board, at any regular or special
meeting of the Board, or, except in case of an Officer chosen by the Board, by
any Officer upon whom such power of removal may be conferred by the Board.
Any Officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the Officer is a
party.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the By- Laws for regular appointments to that office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
officer be elected, shall, if present, preside at meetings of the Board and
exercise and perform such other powers and duties as may be from time to time
assigned by the Board or prescribed by these By-Laws. If there is no President,
the Chairman of the Board shall in addition be the
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Chief Executive Officer of the corporation and shall have the powers and duties
prescribed in Section 7 of this Article III.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board to the Chairman of the Board, if there be such an
officer, the President shall be the Chief Executive Officer of the corporation
unless otherwise provided by the Board. The President shall, subject to the
control of the Board, have general supervision, direction and control of the
business and Officers of the corporation. He or she shall preside at all
meetings of the Shareholders and in the absence of the Chairman of the Board, or
if there be none, at all meetings of the Board. The President shall be ex
officio a member of all the standing committees, including the Executive
Committee, if any, and shall have the general powers and duties of management
usually vested in the office of President of a corporation, and shall have such
other powers and duties as may be prescribed by the Board or these By-Laws.
Section 8. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board, or if not ranked, the Vice President designated by the Board, shall
perform all the duties of the President, and when so acting shall have all the
powers of, and be subject to, all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board or these
By-Laws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a
book of minutes at the principal office or such other place as the Board may
order, of all meetings of Directors and Shareholders, with the time and place of
holding, whether regular or special, and if special, how authorized, the notice
thereof given, the names of those present at Directors' meetings, the number of
shares present or represented at Shareholders' meetings and the proceedings
thereof.
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the names of the Shareholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the Shareholders and of the Board required by these By-Laws or by
law to be given. He or she shall keep, or cause to be kept, the seal of the
corporation in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board or by these ByLaws.
Section 10. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
keep and maintain, or cause to be kept and maintained in accordance with
generally accepted accounting principles, adequate and correct accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains,
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losses, capital, earnings (or surplus) and shares. The books of account shall at
all reasonable times be open to inspection by any Director.
This Officer or his designee shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the Board. He or she shall disburse the
funds of the corporation as may be ordered by the Board, shall render to the
President and Directors, whenever they request it, an account of all of his or
her transactions and of the financial condition of the corporation, and shall
have such other powers and perform such other duties as may be prescribed by the
Board or these By-Laws.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 1. PLACE OF MEETINGS. All meetings of the Shareholders shall be
held at the principal office of the corporation unless some other appropriate
and convenient location be designated for that purpose from time to time by the
Board.
Section 2. ANNUAL MEETINGS. The annual meeting of the Shareholders
shall be held, each year, on such date and at such time as is determined by the
Board of Directors.
At the annual meeting, the Shareholders shall elect a Board of
Directors, consider reports of the affairs of the corporation and transact such
other business as may be properly brought before said meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the Shareholders may
be called at any time by the Board of Directors, the Chairman of the Board, the
President, a Vice President, the Secretary, or by one or more Shareholders
holding not less than one-tenth (1/10) of the voting power of the corporation.
Except as provided hereafter, notice shall be given as for the annual meeting.
Upon receipt of a written request addressed to the Chairman, President,
Vice President, or Secretary, mailed or delivered personally to such Officer by
any person (other than the Board) entitled to call a special meeting of
Shareholders, such Officer shall cause notice to be given, to the Shareholders
entitled to vote, that a meeting will be held at a time requested by the person
or persons calling the meeting, not less than thirty-five (35) nor more than
sixty (60) days after receipt of such request. If such notice is not given
within twenty (20) days after receipt of such request, the persons calling the
meeting may give notice thereof in the manner provided by these By-Laws or apply
to the Superior Court as provided in Section 305(c) of the Code.
Section 4. NOTICE OF MEETINGS - REPORTS. Notice of meetings, annual or
special, shall be given in writing not less than ten (10) nor more than sixty
(60) days before the date of the meeting to Shareholders entitled to vote
thereat. Such notice shall be given by the
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Secretary or the Assistant Secretary, or if there be no such Officer, or in the
case of his or her neglect or refusal, by any Director or Shareholder.
Such notices or any reports shall be given personally or by mail or
other means of written communication as provided in Section 601 of the Code and
shall be sent to the Shareholder's address appearing on the books of the
corporation, or supplied by him or her to the corporation for the purpose of
notice, and in the absence thereof, as provided in said Section 601.
Notice of any meeting of Shareholders shall specify the place, the day
and the hour of meeting, and (i) in case of a special meeting, the general
nature of the business to be transacted and no other business may be transacted,
or (ii) in the case of an annual meeting, those matters which the Board at date
of mailing, intends to present for action by the Shareholders. At any meetings
where Directors are to be elected, notice shall include the names of the
nominees, if any, intended at date of notice to be presented by management for
election.
If a Shareholder supplied no address, notice shall be deemed to have
been given if mailed to the place where the principal office of the corporation,
in California, is situated, or published at least once in some newspaper of
general circulation in the County of said principal office.
Notice shall be deemed given at the time it is delivered personally or
deposited in the mail or sent by other means of written communication. The
Officer giving such notice or report shall prepare and file an affidavit or
declaration thereof.
When a meeting is adjourned for forty-five (45) days or more, notice of
the adjourned meeting shall be given as in the case of an original meeting,
provided, however, it shall not be necessary to give any notice of adjournment
or of the business to be transacted at an adjourned meeting other than by
announcement at the meeting at which such adjournment is taken.
Section 5. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDER. The
transactions of any meeting of Shareholders, however called and noticed, shall
be as valid as though said transactions occurred at a meeting duly held after
regular call and notice, if a quorum be present either in person or by proxy,
and if, either before or after the meeting, each of the Shareholders entitled to
vote, not present in person or by proxy, sign a written waiver of notice, or a
consent to the holding of such meeting or an approval of the minutes thereof.
All such waivers, consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting. Attendance shall
constitute a waiver of notice, unless objection shall be made as provided in
Section 601(e) of the Code.
Section 6. SHAREHOLDERS ACTING WITHOUT A MEETING-ELECTION OF DIRECTORS.
Any action which may be taken at a meeting of the Shareholders, may be taken
without a meeting or notice of meeting if authorized by a writing signed by all
of the Shareholders entitled to vote at a meeting for such purpose, and filed
with the Secretary of the corporation, provided, further, that while ordinarily
Directors can only be elected by unanimous written consent under Section 603(d)
of the Code, if the Directors fail to fill a vacancy, then a
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Director to fill that vacancy may be elected by the written consent of persons
holding a majority of shares entitled to vote for the election of Directors.
Section 7. OTHER ACTIONS WITHOUT A MEETING. Unless otherwise provided
in the Code, any action which may be taken at any annual or special meeting of
Shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, signed by the holders of
the outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted.
Unless the consents of all Shareholders entitled to vote have been
solicited in writing,
(1) Notice of any Shareholder approval pursuant to Sections
310, 317, 1201 or 2007 of the Code without a meeting by less than
unanimous written consent shall be given at least ten (10) days before
the consummation of the action authorized by such approval, and
(2) Prompt notice shall be given of the taking of any other
corporate action approved by Shareholders without a meeting by less
than unanimous written consent, to each of those Shareholders entitled
to vote who have not consented in writing.
Any Shareholder giving a written consent, or the Shareholder's
proxyholders, or a transferee of the shares of a personal representative of the
Shareholder or their respective proxyholders, may revoke the consent by a
writing received by the corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the Secretary of the corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary of the corporation.
Section 8. QUORUM. The holders of a majority of the shares entitled to
vote thereat, present in person, or represented by proxy, shall constitute a
quorum at all meetings of the Shareholders for the transaction of business
except as otherwise provided by law, by the Articles of Incorporation of the
corporation, or by these By-Laws. If, however, such majority shall not be
present or represented at any meeting of the Shareholders, the Shareholders
entitled to vote thereat, present in person, or by proxy, shall have the power
to adjourn the meeting from time to time, until the requisite amount of voting
shares shall be present. At such adjourned meeting at which the requisite amount
of voting shares shall be represented, any business may be transacted which
might have been transacted at a meeting as originally notified.
If a quorum be initially present, the Shareholders may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum, if any action taken is approved by a
majority of the Shareholders required to initially constitute a quorum.
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Section 9. VOTING. Only persons in whose names shares entitled to vote
stand on the stock records of the corporation on the day of any meeting of
Shareholders, unless some other day be fixed by the Board for the determination
of Shareholders of record, and then on such other day, shall be entitled to vote
at such meeting.
Provided that prior to the voting at a meeting, a candidate's name has
been placed in nomination and one or more Shareholders has given notice at the
meeting of the Shareholder's intent to cumulate the Shareholder's votes, every
Shareholder entitled to vote at any election for Directors of any corporation
for profit may cumulate their votes and give one candidate a number of votes
equal to the number of Directors to be elected multiplied by the number of votes
to which his or her shares are entitled, or distribute his or her votes on the
same principle among as many candidates as he or she thinks fit. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
candidates in nomination.
The candidates receiving the highest number of votes up to the number
of Directors to be elected are elected.
The Board of Directors may fix a time in the future not exceeding
thirty (30) days nor less than ten (10) preceding the date of any meeting of
Shareholders or the date fixed for the payment of any dividend or distribution,
or for the allotment of rights, or when any change or conversion or exchange of
shares shall go into effect, as a record date for the determination of the
Shareholders entitled to notice of and to vote at any such meeting, or entitled
to receive any such dividend or distribution, or any allotment of rights, or to
exercise the rights in respect to any such change, conversion or exchange of
shares. In such case only Shareholders of record on the date so fixed shall be
entitled to notice of and to vote at such meeting, or to receive such dividends,
distribution or allotment of rights, or to exercise such rights, as the case may
be notwithstanding any transfer of any share on the books of the corporation
after any record date fixed as aforesaid. The Board of Directors may close the
books of the corporation against transfers of shares during the whole or any
part of such period.
Section 10. PROXIES. Every Shareholder entitled to vote, or to execute
consents, may do so, either in person or by written proxy, executed in
accordance with the provisions of Sections 604 and 705 of the Code and filed
with the Secretary of the corporation.
Section 11. ORGANIZATION. The President, or in the absence of the
President, any Vice President, shall call the meeting of the Shareholders to
order, and shall act as chairman of the meeting. In the absence of the President
and all of the Vice Presidents, Shareholders shall appoint a chairman for such
meeting. The Secretary of the corporation shall act as Secretary of all meetings
of the Shareholders, but in the absence of the Secretary at any meeting of the
Shareholders, the presiding Officer may appoint any person to act as Secretary
of the meeting.
Section 12. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders the Board of Directors may, if they so elect, appoint inspectors of
election to act at such meeting or any adjournment thereof. If inspectors of
election be not so appointed, or
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if any persons so appointed fail to appear or refuse to act, the chairman of any
such meeting may, and on the request of any Shareholder or his or her proxy
shall, make such appointment at the meeting in which case the number of
inspectors shall be either one (1) or three (3) as determined by a majority of
the Shareholders represented at the meeting.
ARTICLE V
CERTIFICATES AND TRANSFER OF SHARES
Section 1. CERTIFICATES FOR SHARES. Certificates for shares shall be of
such form and device as the Board may designate and shall state the name of the
record holder of the shares represented thereby; its number; date of issuance;
the number of shares for which it is issued; a statement of the rights,
privileges, preferences and restrictions, if any; a statement as to the
redemption or conversion, if any; a statement of liens or restrictions upon
transfer or voting, if any; if the shares be assessable or, if assessments are
collectible by personal action, a plain statement of such facts.
All certificates shall be signed in the name of the corporation by the
Chairman of the Board or Vice Chairman of the Board or the President or Vice
President and by the Chief Financial Officer or an Assistant Treasurer or the
Secretary or any Assistant Secretary, certifying the number of shares and the
class or series of shares owned by the Shareholder.
Any or all of the signatures on the certificate may be facsimile. In
case any Officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed on a certificate shall have ceased to be that Officer,
transfer agent, or registrar before that certificate is issued, it may be issued
by the corporation with the same effect as if that person were an Officer,
transfer agent, or registrar at the date of issue.
Section 2. TRANSFER ON THE BOOKS. Upon surrender to the Secretary or
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 3. LOST OR DESTROYED CERTIFICATES. Any person claiming a
certificate of stock to be lost or destroyed shall make an affidavit or
affirmation of that fact and shall, if the Directors so require, give the
corporation a bond of indemnity, in form and with one or more sureties
satisfactory to the Board, in at least double the value of the stock represented
by said certificate, whereupon a new certificate may be issued in the same tenor
and for the same number of shares as the one alleged to be lost or destroyed.
Section 4. TRANSFER AGENTS AND REGISTRARS. The Board may appoint one or
more transfer agents or transfer clerks, and one or more registrars, which shall
be an incor-
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porated bank or trust company, either domestic or foreign, who shall be
appointed at such times and places as the requirements of the corporation may
necessitate and the Board may designate.
Section 5. CLOSING STOCK TRANSFER BOOKS - RECORD DATE. In order that
the corporation may determine the Shareholders entitled to notice of any meeting
or to vote or entitled to receive payment of any dividend or other distribution
or allotment of any rights or entitled to exercise any rights in respect of any
other lawful action, the Board may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days prior to the date of
such meeting nor more than sixty (60) days prior to any other action.
If no record date is fixed, the record date for determining
Shareholders entitled to notice of or to vote at a meeting of Shareholders shall
be at the close of business on the business day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held. The record
date for determining Shareholders entitled to give consent to corporate action
in writing without a meeting, when no prior action by the Board is necessary,
shall be the day on which the first written consent is given.
The record date for determining Shareholders for any other purpose
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto, or the sixtieth (60th) day prior to the date of
such other action, whichever is later.
Section 6. LEGEND CONDITION. In the event any shares of the corporation
are issued pursuant to a permit or exemption therefrom requiring the imposition
of a legend condition, the person or persons issuing or transferring said shares
shall make said legend appear on the certificate and on the stub relating
thereto in the stock record book and shall not be required to transfer any
shares free of such legend unless an amendment to such permit or a new permit be
first issued so authorizing such a deletion.
ARTICLE VI
RECORDS - REPORTS - INSPECTION
Section 1. RECORDS. The corporation shall maintain, in accordance with
generally accepted accounting principles, adequate and correct accounts, books
and records of its business and properties. All of such books, records and
accounts shall be kept at its principal office in the State of California, as
fixed by the Board from time to time.
Section 2. INSPECTION OF BOOKS AND RECORDS. All books and records
provided for in Section 1500 of the Code shall be open to inspection by the
Directors and Shareholders from time to time and in the manner provided in
Section 1600 through 1602, inclusive, of the Code.
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Section 3. CERTIFICATION AND INSPECTION OF BY- LAWS. The original or a
copy of these By-Laws, as amended from time to time, certified by the Secretary,
shall be kept at the corporation's principal office and shall be open to
inspection by the Shareholders of the corporation at all reasonable times during
office hours.
Section 4. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board.
Section 5. CONTRACTS, ETC. -- HOW EXECUTED. The Board, except as
otherwise provided by these By-Laws, may authorize any Officer or Officers,
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the corporation. Such authority may be general or
confined to specific instances. Unless so authorized by the Board, no Officer,
agent or employee shall have any power or authority to bind the corporation by
any contract or agreement, or to pledge its credit, or to render it liable for
any purpose or to any amount, except as provided in Section 313 of the Code.
ARTICLE VII
ANNUAL REPORTS
Section 1. WAIVER OF ANNUAL REPORTS TO SHAREHOLDER. The annual report
to Shareholders referred to in Section 1501 of the Code is expressly waived so
long as the corporation shall have less than one hundred (100) Shareholders.
However, nothing herein shall be interpreted as prohibiting the Board from
issuing annual or other periodic reports to the Shareholders of the corporation
as they consider appropriate.
ARTICLE VIII
AMENDMENTS TO BY-LAWS
Section 1. AMENDMENTS. After initial By-Laws of the corporation shall
have been adopted by the incorporator or incorporators of the corporation, the
By-Laws may be amended or repealed or new By-Laws may be adopted by the
shareholders entitled to exercise a majority of the voting power or by the Board
of Directors; provided, however, that the Board of Directors shall have no
control over any By-Law which changes the authorized number of directors of the
corporation; provided, further, than any control over the By-Laws herein vested
in the Board of Directors shall be subject to the authority of the aforesaid
shareholders to amend or repeal the By-Laws or to adopt new By-Laws; and
provided further than any By-Law amendment or new By-law which changes the
minimum number of directors to fewer than five shall require authorization by
the greater proportion of voting power of the shareholders as hereinbefore set
forth.
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Section 2. RECORD OF AMENDMENTS. Whenever an amendment or new By-Law is
adopted, it shall be copied in the book of By-Laws with the original By-Laws, in
the appropriate place. If any By-Law is repealed, the fact of repeal with the
date of the meeting at which the repeal was enacted or written assent was filed
shall be stated in said book.
ARTICLE IX
CORPORATE SEAL
The corporate seal shall be circular in form, and shall have inscribed
thereon the name of the corporation, the date of its incorporation, and the word
"California".
ARTICLE X
CORPORATE LOANS
Section 1. LIMITATION ON CORPORATE LOANS AND GUARANTEES. Except as
provided in Section 2 of this Article X, the corporation shall not make any loan
of money or property to, or guaranty the obligation of, any director or officer
of the corporation or its parent or subsidiary, unless the transaction, or an
employee benefit plan authorizing such loans or guarantees, after disclosure of
the right under such a plan to include officers or directors,
(a) is approved by the vote of a majority of the shares, with the
shares owned by the director or officer, or by the director or
officer then eligible to participate in such plan not being
entitled to vote thereon, or
(b) is approved by the unanimous vote of the shareholders.
Section 2. PERMISSIBLE CORPORATE LOANS AND GUARANTEES. Notwithstanding
the provisions of Section 1 of this Article X:
(a) the Board alone is authorized to and may approve a loan of
money or property to, or guaranty the obligation of, any
officer, whether or not a director, or an employee benefit
plan authorizing such a loan or guaranty to an officer, by a
vote sufficient without counting the vote of any interested
director or directors if: (i) the corporation has outstanding
shares held of record by 100 or more persons (determined as
provided in Section 605 of the Code) on the date of approval
by the Board; and (ii) the Board determines that such a loan
or guaranty or plan may reasonably be expected to benefit the
corporation;
(b) the corporation may make any loan of money or property to, or
guaranty the obligation of, any person upon the security of
shares of the corporation, if the loan or guaranty is: (i)
otherwise adequately secured; (ii) made pursuant to an
employee benefit plan permitted by Section 408 of the Code;
(iii) approved by
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the shareholders with the shares owned by the borrower not
entitled to vote; or (iv) approved by the unanimous vote of
the shareholders;
(c) the corporation may advance money to a director or officer of
the corporation or of its parent or any subsidiary for any
expenses reasonably anticipated to be incurred in the
performance of the duties of such director or officer,
provided that in the absence of such advance such director or
officer would be entitled to be reimbursed for such expenses
by the corporation, its parent or any subsidiary; and
(d) the corporation may make any payment of premiums, in whole or
in part, on a life insurance policy on the life of any
director or officer so long as repayment to the corporation of
the amount paid by it is secured by the proceeds of the policy
and its cash surrender value.
ARTICLE XI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS, AND EXPENSES. For the purposes of this
Article, "agent" means any person who is or was a director, officer, employee,
or other agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise, or
was a director, officer, employee, or agent of a foreign or domestic corporation
which was a predecessor corporation of the corporation or of another enterprise
at the request of such predecessor corporation; "proceeding" means any
threatened, pending or completed action or proceeding, whether civil, criminal,
administrative, or investigative; and "expenses" includes, without limitation,
attorneys' fees and any expenses of establishing a right to indemnification
under Section 4 or Section 5(c) of this Article.
Section 2. ACTIONS OTHER THAN BY THE CORPORATION. The corporation shall
indemnify any person who was or is a party, or is threatened to be made a party,
to any proceeding (other than an action by or in the right of the corporation to
procure a judgment in its favor) by reason of the fact that such person is or
was an agent of the corporation, against expenses, judgments, fines, settlements
and other amounts actually and reasonably incurred in connection with such
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in the best interests of the corporation and, in the
case of a criminal proceeding, had no reasonable cause to believe the conduct of
such person was unlawful. The termination of any proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in the best
interests of the corporation or that the person had reasonable cause to believe
that the persons' conduct was unlawful.
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Section 3. ACTIONS BY THE CORPORATION. The corporation shall indemnify
any person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person is or was
an agent of the corporation, against expenses actually and reasonably incurred
by such person in connection with the defense or settlement of such action if
such person acted in good faith, in a manner such person believed to be in the
best interests of the corporation. No indemnification shall be made under this
Section 3 for any of the following:
(a) In respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation and its shareholders,
unless and only to the extent that the court in which such proceeding is or was
pending shall determine upon application that, in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for the
expenses which the court shall determine; or
(b) Of amounts paid in settling or otherwise disposing of a pending
action without court approval; or
(c) Of expenses incurred in defending a pending action which is settled
or otherwise disposed of without court approval.
Section 4. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
the corporation has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article, or in defense of any claim,
issue, or matter therein, the agent shall be indemnified against expenses
actually and reasonably incurred by the agent in connection therewith.
Section 5. REQUIRED APPROVAL. Except as provided in Section 4 of this
Article, any indemnification under this Article shall be made by the corporation
only if authorized in the specific case, upon a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of this
Article; by any of the following:
(a) A majority vote of a quorum consisting of directors who are not
parties to such proceeding; or
(b) If such a quorum of directors is not obtainable, by independent
legal counsel in a written opinion; or
(c) Approval of the shareholders, with the shares owned by the person
to be indemnified not being entitled to vote thereon. For the purposes of this
subsection, "approval of the shareholders" means approved or ratified by the
affirmative vote of a majority of the shares of the corporation represented and
voting at a duly held meeting at which a quorum is present (which shares voting
affirmatively shall also constitute at least a majority of the required
16
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quorum) or by the written consent signed by the holders of a majority of the
outstanding shares entitled to vote, which written consent shall be procedurally
procured in the manner provided by law; or
(d) The court in which the proceeding is or was pending upon
application made by the corporation or the agent of the attorney or other person
rendering services in connection with the defense, whether or not such
application by the agent, attorney, or other person is opposed by the
corporation.
Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by the corporation before the final disposition of
the proceedings on receipt of an undertaking by or on behalf of the agent to
repay the amount of the advance unless it shall be determined ultimately that
the agent is entitled to be indemnified as authorized in this Article.
Section 7. OTHER RIGHTS AUTHORIZED. The indemnification provided by
this Article shall not be exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
shareholders, or vote of disinterested directors or otherwise, both as to action
in an official capacity and as to action in another capacity while holding such
office, to the extent such additional rights to indemnification are authorized
in the Articles of Incorporation of the corporation. Nothing contained in this
Section shall affect any right to indemnification to which persons other than
directors and officers of the corporation or any subsidiary hereof may be
entitled by contract or otherwise.
Section 8. LIMITATIONS. No indemnification or advance shall be made
under under this Article, except as provided in Section 4 or Section 5(c), in
any circumstance where it appears:
(a) That it would be inconsistent with a provision of the articles,
by-laws, a resolution of the shareholders or an agreement in effect at the time
of the accrual of the alleged cause of action asserted in the proceeding in
which the expenses were incurred or other amounts were paid, which prohibits or
otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
Section 9. INSURANCE. Upon and in the event of a determination by the
board of directors of the corporation to purchase such insurance, the
corporation shall purchase and maintain insurance on behalf of any agent of the
corporation against any liability asserted against or incurred by the agent in
such capacity or arising out of the agent's status as such whether or not the
corporation would have the power to indemnify the agent against that liability
under the provisions of this Section.
Section 10. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This
Article does not apply to any proceeding against any trustee, investment
manager, or other
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fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of the corporation as defined in Section
1 of this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise, which shall be enforceable to the
extent permitted by applicable law other than this Article.
Section 11. RIGHT TO INDEMNITY CONTINUES. The rights to indemnity
provided for in this Article shall continue as to a person who has ceased to be
a director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of the person.
ARTICLE XII
MISCELLANEOUS
Section 1. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of
other corporations standing in the name of the corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
corporation by the Chairman of the Board, the President or any Vice President
and the Secretary or an Assistant Secretary.
Section 2. SUBSIDIARY CORPORATIONS. Shares of the corporation owned by
a subsidiary shall not be entitled to vote on any matter. A subsidiary for these
purposes is defined as a corporation, the shares of which possessing more than
25% of the total combined voting power of all classes of shares entitled to
vote, are owned directly or indirectly through one or more subsidiaries.
Section 3. ACCOUNTING YEAR. The accounting year of the corporation
shall be a calendar year unless otherwise fixed by resolution of the Board.
CERTIFICATE OF SECRETARY OF ADOPTION OF BYLAWS:
I, the undersigned, do hereby certify:
That I am the Secretary of IMH ASSETS CORP. a California corporation,
that the foregoing By-Laws, comprising nineteen (19) pages, constitute the
By-Laws of said corporation as duly adopted by Action of the Incorporator of the
corporation on April__, 1996.
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IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of said corporation on this ___ day of April 1996.
By:________________________________
Richard Johnson
19
EXHIBIT 4.1
================================================================================
[NAME OF SERVICER],
as Servicer,
and
IMH ASSETS CORP.
as Company
----------------------
SERVICING AGREEMENT
Dated as of _______________
----------------------
Adjustable-Rate Mortgage Loans
Imperial CMB Trust Series 19__-__
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
Section 1.01. DEFINITIONS................................................. 1
Section 1.02. OTHER DEFINITIONAL PROVISIONS............................... 1
Section 1.03. INTEREST CALCULATIONS....................................... 2
ARTICLE II
Representations and Warranties
Section 2.01. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER...... 3
Representations and Warranties of the Company.............. 4
Section 2.03. ENFORCEMENT OF REPRESENTATIONS AND WARRANTIES.............. 4
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. THE SERVICER................................................. 6
Section 3.02. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS................. 7
Section 3.03. WITHDRAWALS FROM THE COLLECTION ACCOUNT...................... 9
Section 3.04. MAINTENANCE OF HAZARD INSURANCE; PROPERTY PROTECTION
EXPENSES..................................................... 11
Section 3.05. MODIFICATION AGREEMENTS...................................... 11
Section 3.06. TRUST ESTATE; RELATED DOCUMENTS.............................. 12
Section 3.07. REALIZATION UPON DEFAULTED MORTGAGE LOANS.................... 13
Section 3.08. COMPANY AND INDENTURE TRUSTEE TO COOPERATE................... 14
Section 3.09. SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY
SERVICER..................................................... 15
Section 3.10. ANNUAL STATEMENT AS TO COMPLIANCE............................ 15
Section 3.11. ANNUAL SERVICING REPORT...................................... 16
Section 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING THE MORTGAGE LOANS................................. 16
Section 3.13. MAINTENANCE OF CERTAIN SERVICING INSURANCE POLICIES.......... 16
Section 3.14. INFORMATION REQUIRED BY THE INTERNAL REVENUE SERVICE
GENERALLY AND REPORTS OF FORECLOSURES AND ABANDONMENTS
OF MORTGAGED PROPERTY........................................ 17
Section 3.15. OPTIONAL REPURCHASE OF DEFAULTED MORTGAGE LOANS.............. 17
ARTICLE IV
i
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PAGE
Servicing Certificate
Section 4.01. STATEMENTS TO SECURITYHOLDERS................................ 18
ARTICLE V
Distribution and Payment Accounts
Section 5.01. DISTRIBUTION ACCOUNT......................................... 20
Section 5.02. PAYMENT ACCOUNT.............................................. 20
ARTICLE VI
The Servicer
Section 6.01. LIABILITY OF THE SERVICER.................................... 22
Section 6.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER................................. 22
Section 6.03. LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS........... 22
Section 6.04. SERVICER NOT TO RESIGN....................................... 23
Section 6.05. DELEGATION OF DUTIES......................................... 23
Section 6.06. SERVICER TO PAY INDENTURE TRUSTEE'S AND OWNER
TRUSTEE'S FEES AND EXPENSES;
INDEMNIFICATION.............................................. 24
ARTICLE VII
Default
Section 7.01. SERVICING DEFAULT............................................ 26
Section 7.02. INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR........... 28
Section 7.03. NOTIFICATION TO SECURITYHOLDERS.............................. 29
ARTICLE VIII
Miscellaneous Provisions
Section 8.01. AMENDMENT.................................................... 30
Section 8.02. GOVERNING LAW................................................ 30
Section 8.03. NOTICES...................................................... 30
Section 8.04. SEVERABILITY OF PROVISIONS................................... 30
Section 8.05. THIRD-PARTY BENEFICIARIES.................................... 30
ii
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PAGE
Section 8.06. COUNTERPARTS................................................. 31
Section 8.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS..................... 31
Section 8.08. TERMINATION UPON PURCHASE BY THE SERVICER OR
LIQUIDATION OF ALL MORTGAGE LOANS............................ 31
Section 8.09. CERTAIN MATTERS AFFECTING THE INDENTURE TRUSTEE.............. 31
[Section 8.10. AUTHORITY OF THE ADMINISTRATOR............................... 32
EXHIBIT A - MORTGAGE LOAN SCHEDULE...........................................A-1
EXHIBIT B - POWER OF ATTORNEY................................................B-1
EXHIBIT C - CERTIFICATE PURSUANT TO SECTION 3.08.............................C-1
EXHIBIT D - FORM OF REQUEST FOR RELEASE......................................D-1
Schedule 1 - Mortgage Insurance Component Schedule...........................S-1
iii
<PAGE>
This Servicing Agreement, dated as of _______________, between [Name of
Servicer], as Servicer (the "Servicer") and IMH Assets Corp., as Company (the
"Company"),
W I T N E S S E T H T H A T:
WHEREAS, IMH Assets Corp., will create Imperial CMB Trust Series
19__-__, an owner trust (the "Issuer") under Delaware law, and will transfer the
Mortgage Loans and all of its rights under the Mortgage Loan Purchase Agreement
to the Issuer,;
WHEREAS, pursuant to the terms of a Trust Agreement dated as of
_______________ (the "Owner Trust Agreement") between the Company, as depositor,
and ______________________, as owner trustee (the "Owner Trustee"), the Company
will sell the Mortgage Collateral to Issuer in exchange for the cash proceeds of
the Securities;
WHEREAS, pursuant to the terms of the Trust Agreement between the
Depositor and the Owner Trustee, the Issuer will issue and transfer to or at the
direction of the Depositor, the Collateralized Mortgage Certificates, Series
199_-__ (the "Certificates");
WHEREAS, pursuant to the terms of an Indenture dated as of
_______________ (the "Indenture") between the Issuer and the Indenture Trustee,
the Issuer will issue and transfer to or at the direction of the Purchaser the
Collateralized Mortgage Bonds, Series 199_-__ (the "Bonds"), consisting of the
Bonds and secured by the Mortgage Collateral;
WHEREAS, pursuant to the terms of the Mortgage Loan Purchase Agreement,
the Company will acquire the Initial Loans; and
WHEREAS, pursuant to the terms of this Servicing Agreement, the
Servicer will service the Mortgage Loans directly or through one or more
Subservicers;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. DEFINITIONS. For all purposes of this Servicing
Agreement, except as otherwise expressly provided herein or unless the context
otherwise requires, capitalized terms not otherwise defined herein shall have
the meanings assigned to such terms in the Definitions contained in Appendix A
to the Indenture which is incorporated by reference herein. All other
capitalized terms used herein shall have the meanings specified herein.
Section 1.02. OTHER DEFINITIONAL PROVISIONS. (a) All terms defined in
this Servicing Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein.
<PAGE>
(b) As used in this Servicing Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Servicing Agreement or in any such certificate or other
document, and accounting terms partly defined in this Servicing Agreement or in
any such certificate or other document, to the extent not defined, shall have
the respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in this
Servicing Agreement or in any such certificate or other document are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Servicing Agreement or in any such
certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Servicing Agreement shall refer to this Servicing
Agreement as a whole and not to any particular provision of this Servicing
Agreement; Section and Exhibit references contained in this Servicing Agreement
are references to Sections and Exhibits in or to this Servicing Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation".
(d) The definitions contained in this Servicing Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
Section 1.03. INTEREST CALCULATIONS. All calculations of interest
hereunder that are made in respect of the Principal Balance of a Mortgage Loan
shall be made on a daily basis using a 365-day year. All calculations of
interest on the Securities shall be made on the basis of the actual number of
days in an Interest Period and a year assumed to consist of 360 days. The
calculation of the Servicing Fee shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All dollar amounts calculated hereunder
shall be rounded to the nearest penny with one-half of one penny being rounded
down.
2
<PAGE>
ARTICLE II
Representations and Warranties
Section 2.01. REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICER.
The Servicer represents and warrants to Company, the Issuer and for the benefit
of the Indenture Trustee, as pledgee of the Mortgage Collateral, and the
Securityholders, as of the Cut-Off Date, [the date of the Servicing Agreement],
the Closing Date [and any Deposit Date], that:
(i) The Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of [_______]
and has the corporate power to own its assets and to transact the
business in which it is currently engaged. The Servicer is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business
transacted by it or properties owned or leased by it requires such
qualification and in which the failure to so qualify would have a
material adverse effect on the business, properties, assets, or
condition (financial or other) of the Servicer;
(ii) The Servicer has the power and authority to make,
execute, deliver and perform this Servicing Agreement and all of the
transactions contemplated under this Servicing Agreement, and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Servicing Agreement. When executed and delivered,
this Servicing Agreement will constitute the legal, valid and binding
obligation of the Servicer enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies;
(iii) The Servicer is not required to obtain the consent of
any other Person or any consent, license, approval or authorization
from, or registration or declaration with, any governmental authority,
bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Servicing Agreement,
except for such consent, license, approval or authorization, or
registration or declaration, as shall have been obtained or filed, as
the case may be;
(iv) The execution and delivery of this Servicing Agreement
and the performance of the transactions contemplated hereby by the
Servicer will not violate any provision of any existing law or
regulation or any order or decree of any court applicable to the
Servicer or any provision of the Certificate of Incorporation or Bylaws
of the Servicer, or constitute a material breach of any mortgage,
indenture, contract or other agreement to which the Servicer is a party
or by which the Servicer may be bound; and
(v) No litigation or administrative proceeding of or before
any court, tribunal or governmental body is currently pending, or to
the knowledge of the Servicer threatened, against the Servicer or any
of its properties or with respect to this Servicing Agreement or the
Bonds or the Certificates which in the opinion of the Servicer has a
reasonable likelihood of resulting in a material adverse effect on the
transactions contemplated by this Servicing Agreement.
3
<PAGE>
The foregoing representations and warranties shall survive any
termination of the Servicer hereunder.
Section 2.02. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to the Servicer for the benefit of the
Indenture Trustee, as pledgee of the Mortgage Collateral, and the
Securityholders, as of the Cut-Off Date, the Closing Date and any Deposit Date,
that:
(i) The Company is a corporation in good standing under the
laws of the State of California;
(ii) The Company has full power, authority and legal right to
execute and deliver this Servicing Agreement and to perform its
obligations under this Servicing Agreement, and has taken all necessary
action to authorize the execution, delivery and performance by it of
this Servicing Agreement; and
(iii) The execution and delivery by the Company of this
Servicing Agreement and the performance by the Company of its
obligations under this Servicing Agreement will not violate any
provision of any law or regulation governing the Company or any order,
writ, judgment or decree of any court, arbitrator or governmental
authority or agency applicable to the Company or any of its assets.
Such execution, delivery, authentication and performance will not
require the authorization, consent or approval of, the giving of notice
to, the filing or registration with, or the taking of any other action
with respect to, any governmental authority or agency regulating the
activities of limited liability companies. Such execution, delivery,
authentication and performance will not conflict with, or result in a
breach or violation of, any mortgage, deed of trust, lease or other
agreement or instrument to which the Company is bound.
Section 2.03. ENFORCEMENT OF REPRESENTATIONS AND WARRANTIES. The
Servicer, on behalf of and subject to the direction of the Indenture Trustee, as
pledgee of the Mortgage Collateral, or the Credit Enhancer, shall enforce the
representations and warranties of the Seller pursuant to the Mortgage Loan
Purchase Agreement. Upon the discovery by the Seller, the Servicer, the
Indenture Trustee, the Credit Enhancer, the Company or any Custodian of a breach
of any of the representations and warranties made in the Mortgage Loan Purchase
Agreement, in respect of any Mortgage Loan which materially and adversely
affects the interests of the Securityholders or the Credit Enhancer, the party
discovering such breach shall give prompt written notice to the other parties
(any Custodian being so obligated under a Custodial Agreement). The Servicer
shall promptly notify the Seller of such breach and request that, pursuant to
the terms of the Mortgage Loan Purchase Agreement, the Seller either (i) cure
such breach in all material respects within 45 days (with respect to a breach of
the representations and warranties contained in Section 3.1(a) of the Mortgage
Loan Purchase Agreement) or 90 days (with respect to a breach of the
representations and warranties contained in Section 3.1(b) of the Mortgage Loan
Purchase Agreement) from the date the Seller was notified of such breach or (ii)
purchase such Mortgage Loan from the Company at the price and in the manner set
forth in Section 3.1(b) of the Mortgage Loan Purchase Agreement; PROVIDED that
the Seller shall, subject to the conditions set forth in the Mortgage Loan
Purchase Agreement, have the option to substitute an Eligible Substitute
Mortgage Loan or Loans for such Mortgage Loan. In the event that the Seller
elects
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<PAGE>
to substitute one or more Eligible Substitute Mortgage Loans pursuant to Section
3.1(b) of the Mortgage Loan Purchase Agreement, the Seller shall deliver to the
Company with respect to such Eligible Substitute Mortgage Loans, the original
Mortgage Note, the Mortgage, and such other documents and agreements as are
required by the Mortgage Loan Purchase Agreement. No substitution will be made
in any calendar month after the Determination Date for such month. Payments due
with respect to Eligible Substitute Mortgage Loans in the month of substitution
shall not be transferred to the Company and will be retained by the Servicer and
remitted by the Servicer to the Seller on the next succeeding Payment Date
provided a payment has been received by the Company for such month in respect of
the Mortgage Loan to be removed. The Servicer shall amend or cause to be amended
the Mortgage Loan Schedule to reflect the removal of such Mortgage Loan and the
substitution of the Eligible Substitute Mortgage Loans and the Servicer shall
promptly deliver the amended Mortgage Loan Schedule to the Owner Trustee and
Indenture Trustee.
It is understood and agreed that the obligation of the Seller to cure
such breach or purchase or substitute for such Mortgage Loan as to which such a
breach has occurred and is continuing shall constitute the sole remedy
respecting such breach available to the Company and the Indenture Trustee, as
pledgee of the Mortgage Collateral, against the Seller. In connection with the
purchase of or substitution for any such Mortgage Loan by the Seller, the
Company shall assign to the Seller all of the right, title and interest in
respect of the Mortgage Loan Purchase Agreement applicable to such Mortgage
Loan. Upon receipt of the Repurchase Price, or upon completion of such
substitution, the applicable Custodian shall deliver the Mortgage Files to the
Servicer, together with all relevant endorsements and assignments.
5
<PAGE>
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. THE SERVICER. (a) The Servicer shall service and
administer the Mortgage Loans in the same manner as would prudent institutional
mortgage lenders servicing comparable mortgage loans for their own account in
the jurisdictions where the related MOrtgaged Properties are located and in a
manner consistent with the terms of this Servicing Agreement and which shall be
normal and usual in its general mortgage servicing activities and shall have
full power and authority, acting alone or through a subservicer, to do any and
all things in connection with such servicing and administration which it may
deem necessary or desirable, it being understood, however, that the Servicer
shall at all times remain responsible to the Company, the Indenture Trustee, as
pledgee of the Mortgage Collateral, and the Securityholders for the performance
of its duties and obligations hereunder in accordance with the terms hereof and
the servicing standard set forth above. Without limiting the generality of the
foregoing, the Servicer shall continue, and is hereby authorized and empowered
by the Company and the Indenture Trustee, as pledgee of the Mortgage Collateral,
to execute and deliver, on behalf of itself, the Company, the Securityholders
and the Indenture 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 Mortgage Loans and with respect
to the Mortgaged Properties. The Company, the Indenture Trustee and the
Custodian, as applicable, shall furnish the Servicer with any powers of attorney
and other documents necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties hereunder. On the Closing Date, the
Company shall deliver to the Servicer a power of attorney substantially in the
form of Exhibit B hereto.
If the Mortgage relating to a Mortgage Loan did not have a lien senior
on the related Mortgaged Property as of the Cut-Off Date, then the Servicer, in
such capacity, may not consent to the placing of a lien senior to that of the
Mortgage on the related Mortgaged Property. If the Mortgage relating to a
Mortgage Loan had a lien senior to the Mortgage Loan on the related Mortgaged
Property as of the Cut-Off Date, then the Servicer, in such capacity, may
consent to the refinancing of such senior lien; PROVIDED that (i) the resulting
Combined Loan-to-Value Ratio of such Mortgage Loan is no higher than the
Combined Loan-to-Value Ratio prior to such refinancing and (ii) the interest
rate for the loan evidencing the refinanced senior lien on the date of such
refinancing is no higher than the interest rate on the loan evidencing the
existing senior lien immediately prior to the date of such refinancing.
The relationship of the Servicer (and of any successor to the Servicer
as servicer under this Servicing Agreement) to the Company under this Servicing
Agreement is intended by the parties to be that of an independent contractor and
not that of a joint venturer, partner or agent.
(b) The Servicer has entered into Initial Subservicing Agreements with
the Initial Subservicers for the servicing and administration of the Mortgage
Loans and may enter into additional Subservicing Agreements with Subservicers
for the servicing and administration of certain of the Mortgage Loans.
References in this Servicing Agreement to
6
<PAGE>
actions taken or to be taken by the Servicer in servicing the Mortgage Loans
include actions taken or to be taken by a Subservicer on behalf of the Servicer
and any amount received by such Subservicer in respect of a Mortgage Loan shall
be deemed to have been received by the Servicer whether or not actually received
by the Servicer. Each Subservicing Agreement will be upon such terms and
conditions as are not inconsistent with this Servicing Agreement and as the
Servicer and the Subservicer have agreed. With the approval of the Servicer, a
Subservicer may delegate its servicing obligations to third-party servicers, but
such Subservicers will remain obligated under the related Subservicing
Agreements. The Servicer and the Subservicer may enter into amendments to the
related Subservicing Agreements; PROVIDED, HOWEVER, that any such amendments
shall be consistent with and not violate the provisions of this Servicing
Agreement. The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions thereof and without any
limitation by virtue of this Servicing Agreement; PROVIDED, HOWEVER, that in the
event of termination of any Subservicing Agreement by the Servicer or the
Subservicer, the Servicer shall either act as servicer of the related Mortgage
Loan or enter into a Subservicing Agreement with a successor Subservicer which
will be bound by the terms of the related Subservicing Agreement. The Servicer
shall be entitled to enter into any agreement with a Subservicer for
indemnification of the Servicer and nothing contained in this Servicing
Agreement shall be deemed to limit or modify such indemnification.
In the event that the rights, duties and obligations of the Servicer
are terminated hereunder, any successor to the Servicer in its sole discretion
may, to the extent permitted by applicable law, terminate the existing
Subservicing Agreement with any Subservicer in accordance with the terms of the
applicable Subservicing Agreement or assume the terminated Servicer's rights and
obligations under such subservicing arrangements which termination or assumption
will not violate the terms of such arrangements.
As part of its servicing activities hereunder, the Servicer, for the
benefit of the Company, shall use reasonable efforts to enforce the obligations
of each Subservicer under the related Subservicing Agreement, to the extent that
the non-performance of any such obligation would have material and adverse
effect on a Mortgage Loan. Such enforcement, including, without limitation, the
legal prosecution of claims, termination of Subservicing Agreements and the
pursuit of other appropriate remedies, shall be in such form and carried out to
such an extent and at such time as the Servicer, in its good faith business
judgment, would require were it the owner of the related Mortgage Loans. The
Servicer shall pay the costs of such enforcement at its own expense, and shall
be reimbursed therefor only (i) from a general recovery resulting from such
enforcement to the extent, if any, that such recovery exceeds all amounts due in
respect of the related Mortgage Loan or (ii) from a specific recovery of costs,
expenses or attorneys fees against the party against whom such enforcement is
directed.
Section 3.02. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS. (a) The
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Mortgage Loans, and shall, to the extent such
procedures shall be consistent with this Servicing Agreement, follow such
collection procedures as shall be normal and usual in its general mortgage
servicing activities. Consistent with the foregoing, and without limiting the
generality of the foregoing, the Servicer may in its discretion (i) waive any
late payment charge, penalty interest or other fees which may be collected in
the ordinary course of servicing such Mortgage Loan and (ii) arrange with a
Mortgagor a schedule
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for the payment of principal and interest due and unpaid; PROVIDED such
arrangement is consistent with the Servicer's policies with respect to home
equity mortgage loans; PROVIDED, FURTHER, that notwithstanding such arrangement
such Mortgage Loans will be included in the information regarding delinquent
Mortgage Loans set forth in the Servicing Certificate. The Servicer may also
extend the Due Date for payment due on a Mortgage Loan, PROVIDED, HOWEVER, that
the Servicer shall first determine that any such waiver or extension will not
adversely affect the lien of the related Mortgage. Consistent with the terms of
this Servicing Agreement, the Servicer may also waive, modify or vary any term
of any Mortgage Loan or consent to the postponement of strict compliance with
any such term or in any manner grant indulgence to any Mortgagor if in the
Servicer's determination such waiver, modification, postponement or indulgence
is not materially adverse to the interests of the Securityholders or the Credit
Enhancer, PROVIDED, HOWEVER, that the Servicer may not modify or permit any
Subservicer to modify any Mortgage Loan (including without limitation any
modification that would change the Mortgage Rate, forgive the payment of any
principal or interest (unless in connection with the liquidation of the related
Mortgage Loan) or extend the final maturity date of such Mortgage Loan) unless
such Mortgage Loan is in default or, in the judgment of the Servicer, such
default is reasonably foreseeable.
(b) The Servicer shall establish an account (the "Collection Account")
in which the Servicer shall deposit or cause to be deposited any amounts
representing payments on and any collections in respect of the Mortgage Loans
received by it subsequent to the Cut-Off Date as to any Initial Loan or the
related Deposit Date as to any Additional Loan (other than in respect of the
payments referred to in the following paragraph) within __ Business Day[s]
following receipt thereof (or otherwise on or prior to the Closing Date),
including the following payments and collections received or made by it (without
duplication):
(i) all payments of principal of or interest on the Mortgage
Loans received by the Servicer from the respective Subservicer, net of
any portion of the interest thereof retained by the Subservicer as
Subservicing Fees;
(ii) the aggregate Repurchase Price of the Mortgage Loans
purchased by the Servicer pursuant to Section 3.15;
(iii) Net Liquidation Proceeds net of any related Foreclosure
Profit;
(iv) all proceeds of any Mortgage Loans repurchased by the
Seller pursuant to the Mortgage Loan Purchase Agreement, and all
Substitution Adjustment Amounts required to be deposited in connection
with the substitution of an Eligible Substitute Mortgage Loan pursuant
to the Mortgage Loan Purchase Agreement;
(v) insurance proceeds, other than Net Liquidation Proceeds,
resulting from any insurance policy maintained on a Mortgaged Property;
and
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(vi) amounts required to be paid by the Servicer pursuant to
Section 8.08.
PROVIDED, HOWEVER, that with respect to each Collection Period, the Servicer
shall be permitted to retain from payments in respect of interest on the
Mortgage Loans, the Servicing Fee for such Collection Period. The foregoing
requirements respecting deposits to the Collection Account are exclusive, it
being understood that, without limiting the generality of the foregoing, the
Servicer need not deposit in the Collection Account amounts representing
Foreclosure Profits, fees (including annual fees) or late charge penalties,
payable by Mortgagors, or amounts received by the Servicer for the accounts of
Mortgagors for application towards the payment of taxes, insurance premiums,
assessments and similar items. In the event any amount not required to be
deposited in the Collection Account is so deposited, the Servicer may at any
time withdraw such amount from the Collection Account, any provision herein to
the contrary notwithstanding. The Collection Account may contain funds that
belong to one or more trust funds created for the notes or certificates of other
series and may contain other funds respecting payments on mortgage loans
belonging to the Servicer or serviced or serviced by it on behalf of others.
Notwithstanding such commingling of funds, the Servicer shall keep records that
accurately reflect the funds on deposit in the Collection Account that have been
identified by it as being attributable to the Mortgage Loans and shall hold all
collections in the Collection Account to the extent they represent collections
on the Mortgage Loans for the benefit of the Company, the Indenture Trustee, the
Securityholders and the Credit Enhancer, as their interests may appear. The
Servicer shall remit all Foreclosure Profits to itself as additional servicing
compensation.
The Servicer may cause the institution maintaining the Collection
Account to invest any funds in the Collection Account in Eligible Investments
(including obligations of the Servicer or any of its Affiliates, if such
obligations otherwise qualify as Eligible Investments), which shall mature not
later than the Business Day next preceding the Payment Date and shall not be
sold or disposed of prior to its maturity. Except as provided above, all income
and gain realized from any such investment shall be for the benefit of the
Servicer and shall be subject to its withdrawal or order from time to time. The
amount of any losses incurred in respect of the principal amount of any such
investments shall be deposited in the Collection Account by the Servicer out of
its own funds immediately as realized.
(c) The Servicer will require each Subservicer to hold all funds
constituting collections on the Mortgage Loans, pending remittance thereof to
the Servicer, in one or more accounts meeting the requirements of an Eligible
Account, and invested in Eligible Investments, unless, all such collections are
remitted on a daily basis to the Servicer for deposit into the Collection
Account.
Section 3.03. WITHDRAWALS FROM THE COLLECTION ACCOUNT. The Servicer
shall, from time to time as provided herein, make withdrawals from the
Collection Account of amounts on deposit therein pursuant to Section 3.02 that
are attributable to the Mortgage Loans for the following purposes:
(i) to deposit in the Distribution Account, on the Business
Day prior to each Payment Date, an amount equal to the Security
Collections required to be distributed on such Payment Date;
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(ii) to the extent deposited to the Collection Account, to
reimburse itself or the related Subservicer for previously unreimbursed
expenses incurred in maintaining individual insurance policies pursuant
to Section 3.04, or Liquidation Expenses, paid pursuant to Section 3.07
or otherwise reimbursable pursuant to the terms of this Servicing
Agreement (to the extent not payable pursuant to Section 3.09), such
withdrawal right being limited to amounts received on particular
Mortgage Loans (other than any Repurchase Price in respect thereof)
which represent late recoveries of the payments for which such advances
were made, or from related Liquidation Proceeds or the proceeds of the
purchase of such Mortgage Loan;
(iii) to pay to itself out of each payment received on account
of interest on a Mortgage Loan as contemplated by Section 3.09, an
amount equal to the related Servicing Fee (to the extent not retained
pursuant to Section 3.02), and to pay to any Subservicer any
Subservicing Fees not previously withheld by the Subservicer;
(iv) to the extent deposited in the Collection Account to pay
to itself as additional servicing compensation any interest or
investment income earned on funds deposited in the Collection Account
and Payment Account that it is entitled to withdraw pursuant to
Sections 3.02(b) and 5.01;
(v) to the extent deposited in the Collection Account, to pay
to itself as additional servicing compensation any Foreclosure Profits;
(vi) to pay to itself or the Seller, with respect to any
Mortgage Loan or property acquired in respect thereof that has been
purchased or otherwise transferred to the Seller, the Servicer or other
entity, all amounts received thereon and not required to be distributed
to Securityholders as of the date on which the related Purchase Price
or Repurchase Price is determined;
(vii) to withdraw any other amount deposited in the Collection
Account that was not required to be deposited therein pursuant to
Section 3.02;
(viii) to pay to the Seller the amount, if any, deposited in
the Collection Account by the Indenture Trustee upon release thereof
from the Funding Account representing payments for Additional Loans;
and
(ix) after the occurrence of an Amortization Event, to pay to
the Seller, the Excluded Amount.
Since, in connection with withdrawals pursuant to clauses (iii), (iv), (vi) and
(vii), the Servicer's entitlement thereto is limited to collections or other
recoveries on the related Mortgage Loan, the Servicer shall keep and maintain
separate accounting, on a Mortgage Loan by Mortgage Loan basis, for the purpose
of justifying any withdrawal from the Collection Account pursuant to such
clauses. Notwithstanding any other provision of this Servicing Agreement, the
Servicer shall be entitled to reimburse itself for any previously unreimbursed
expenses incurred pursuant to Section 3.07 or otherwise reimbursable pursuant to
the terms of this Servicing Agreement that the Servicer determines to be
otherwise nonrecoverable (except with respect to any Mortgage
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Loan as to which the Repurchase Price has been paid), by withdrawal from the
Collection Account of amounts on deposit therein attributable to the Mortgage
Loans on any Business Day prior to the Payment Date succeeding the date of such
determination.
Section 3.04. MAINTENANCE OF HAZARD INSURANCE; PROPERTY PROTECTION
EXPENSES. The Servicer shall cause to be maintained for each Mortgage Loan
hazard insurance naming the Servicer or related Subservicer as loss payee
thereunder providing extended coverage in an amount which is at least equal to
the lesser of (i) the maximum insurable value of the improvements securing such
Mortgage Loan from time to time or (ii) the combined principal balance owing on
such Mortgage Loan and any mortgage loan senior to such Mortgage Loan from time
to time. The Servicer shall also cause to be maintained on property acquired
upon foreclosure, or deed in lieu of foreclosure, of any Mortgage Loan, fire
insurance with extended coverage in an amount which is at least equal to the
amount necessary to avoid the application of any co-insurance clause contained
in the related hazard insurance policy. Amounts collected by the Servicer under
any such policies (other than amounts to be applied to the restoration or repair
of the related Mortgaged Property or property thus acquired or amounts released
to the Mortgagor in accordance with the Servicer's normal servicing procedures)
shall be deposited in the Collection Account to the extent called for by Section
3.02. In cases in which any Mortgaged Property is located at any time during the
life of a Mortgage Loan in a federally designated flood area, the hazard
insurance to be maintained for the related Mortgage Loan shall include flood
insurance (to the extent available). All such flood insurance shall be in
amounts equal to the lesser of (i) the amount required to compensate for any
loss or damage to the Mortgaged Property on a replacement cost basis and (ii)
the maximum amount of such insurance available for the related Mortgaged
Property under the national flood insurance program (assuming that the area in
which such Mortgaged Property is located is participating in such program). The
Servicer shall be under no obligation to require that any Mortgagor maintain
earthquake or other additional insurance and shall be under no obligation itself
to maintain any such additional insurance on property acquired in respect of a
Mortgage Loan, other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance. If
the Servicer shall obtain and maintain a blanket policy consistent with its
general mortgage servicing activities insuring against hazard losses on all of
the Mortgage Loans, it shall conclusively be deemed to have satisfied its
obligations as set forth in the first sentence of this Section 3.04, it being
understood and agreed that such policy may contain a deductible clause, in which
case the Servicer shall, in the event that there shall not have been maintained
on the related Mortgaged Property a policy complying with the first sentence of
this Section 3.04 and there shall have been a loss which would have been covered
by such policy, deposit in the Collection Account the amount not otherwise
payable under the blanket policy because of such deductible clause. Any such
deposit by the Servicer shall be made on the last Business Day of the Collection
Period in the month in which payments under any such policy would have been
deposited in the Collection Account. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Servicer agrees to
present, on behalf of itself, the Company, the Issuer, the Indenture Trustee and
the Securityholders, claims under any such blanket policy.
Section 3.05. MODIFICATION AGREEMENTS. The Servicer or the related
Subservicer, as the case may be, shall be entitled to (A) execute assumption
agreements, substitution agreements, and instruments of satisfaction or
cancellation or of partial or full release or discharge, or any other document
contemplated by this Servicing Agreement and other comparable instruments with
respect to the Mortgage Loans and with respect to the Mortgaged Properties
subject to the Mortgages (and the Company shall promptly execute any such
documents on request of the Servicer) and (B) approve the granting of an
easement thereon in favor of another Person, any
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alteration or demolition of the related Mortgaged Property or other similar
matters, if it has determined, exercising its good faith business judgment in
the same manner as it would if it were the owner of the related Mortgage Loan,
that the security for, and the timely and full collectability of, such Mortgage
Loan would not be adversely affected thereby. A partial release pursuant to this
Section 3.05 shall be permitted only if the Combined Loan-to-Value Ratio for
such Mortgage Loan after such partial release does not exceed the Combined
Loan-to-Value Ratio for such Mortgage Loan as of the Cut-Off Date. Any fee
collected by the Servicer or the related Subservicer for processing such request
will be retained by the Servicer or such Subservicer as additional servicing
compensation.
Section 3.06. TRUST ESTATE; RELATED DOCUMENTS. (a) When required by the
provisions of this Servicing Agreement, the Company shall execute instruments to
release property from the terms of this Servicing Agreement, or convey the
Company's interest in the same, in a manner and under circumstances which are
not inconsistent with the provisions of this Servicing Agreement. No party
relying upon an instrument executed by the Company as provided in this Article
III shall be bound to ascertain the Company's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
(b) If from time to time the Servicer shall deliver to the Company or
the related Custodian copies of any written assurance, assumption agreement or
substitution agreement or other similar agreement pursuant to Section 3.05, the
Company or the related Custodian shall check that each of such documents
purports to be an original executed copy (or a copy of the original executed
document if the original executed copy has been submitted for recording and has
not yet been returned) and, if so, shall file such documents, and upon receipt
of the original executed copy from the applicable recording office or receipt of
a copy thereof certified by the applicable recording office shall file such
originals or certified copies with the Related Documents. If any such documents
submitted by the Servicer do not meet the above qualifications, such documents
shall promptly be returned by the Company or the related Custodian to the
Servicer, with a direction to the Servicer to forward the correct documentation.
(c) Upon Company Request accompanied by an Officers' Certificate of the
Servicer pursuant to Section 3.09 of this Servicing Agreement to the effect that
a Mortgage Loan has been the subject of a final payment or a prepayment in full
and the related Mortgage Loan has been terminated or that substantially all
Liquidation Proceeds which have been determined by the Servicer in its
reasonable judgment to be finally recoverable have been recovered, and upon
deposit to the Collection Account of such final monthly payment, prepayment in
full together with accrued and unpaid interest to the date of such payment with
respect to such Mortgage Loan or, if applicable, Liquidation Proceeds, the
Company shall promptly release the Related Documents to the Servicer, along with
such documents as the Servicer or the Mortgagor may request as contemplated by
the Servicing Agreement to evidence satisfaction and discharge of such Mortgage
Loan. If from time to time and as appropriate for the servicing or foreclosure
of any Mortgage Loan, the Servicer requests the Company or the related Custodian
to release the Related Documents and delivers to the Company or the related
Custodian a trust receipt reasonably satisfactory to the Company or the related
Custodian and signed by a Responsible Officer of the Servicer, the Company or
the related Custodian shall release the Related Documents to the Servicer. If
such Mortgage Loans shall be liquidated and the Company or the
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related Custodian receives a certificate from the Servicer as provided above,
then, upon request of the Company or the related Custodian shall release the
trust receipt to the Servicer.
Section 3.07. REALIZATION UPON DEFAULTED MORTGAGE LOANS. With respect
to such of the Mortgage Loans as come into and continue in default, the Servicer
will decide whether to foreclose upon the Mortgaged Properties securing such
Mortgage Loans or write off the unpaid principal balance of the Mortgage Loans
as bad debt; PROVIDED that if the Servicer has actual knowledge that any
Mortgaged Property is affected by hazardous or toxic wastes or substances and
that the acquisition of such Mortgaged Property would not be commercially
reasonable, then the Servicer will not cause the Company to acquire title to
such Mortgaged Property in a foreclosure or similar proceeding. In connection
with such foreclosure or other conversion, the Servicer shall follow such
practices (including, in the case of any default on a related senior mortgage
loan, the advancing of funds to correct such default) and procedures as it shall
deem necessary or advisable and as shall be normal and usual in its general
mortgage servicing activities; PROVIDED that the Servicer shall not be liable in
any respect hereunder if the Servicer is acting in connection with any such
foreclosure or attempted foreclosure which is not completed or other conversion
in a manner that is consistent with the provisions of this Servicing Agreement.
The foregoing is subject to the proviso that the Servicer shall not be required
to expend its own funds in connection with any foreclosure or attempted
foreclosure which is not completed or towards the correction of any default on a
related senior mortgage loan or restoration of any property unless it shall
determine that such expenditure will increase Net Liquidation Proceeds. In the
event of a determination by the Servicer that any such expenditure previously
made pursuant to this Section 3.07 will not be reimbursable from Net Liquidation
Proceeds, the Servicer shall be entitled to reimbursement of its funds so
expended pursuant to Section 3.03.
Notwithstanding any provision of this Servicing Agreement, a Mortgage
Loan may be deemed to be finally liquidated if substantially all amounts
expected by the Servicer to be received in connection with the related defaulted
Mortgage Loan have been received; PROVIDED, HOWEVER, any subsequent collections
with respect to any such Mortgage Loan shall be deposited to the Collection
Account. For purposes of determining the amount of any Liquidation Proceeds or
Insurance Proceeds, or other unscheduled collections, the Servicer may take into
account minimal amounts of additional receipts expected to be received or any
estimated additional liquidation expenses expected to be incurred in connection
with the related defaulted Mortgage Loan.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Company and the Indenture Trustee as their interests may
appear, or to their respective nominee on behalf of Securityholders.
Notwithstanding any such acquisition of title and cancellation of the related
Mortgage Loan, such Mortgaged Property shall (except as otherwise expressly
provided herein) be considered to be an outstanding Mortgage Loan held as an
asset of the Company until such time as such property shall be sold. Consistent
with the foregoing for purposes of all calculations hereunder, so long as such
Mortgaged Property shall be considered to be an outstanding Mortgage Loan it
shall be assumed that, notwithstanding that the indebtedness evidenced by the
related Mortgage Note shall have been discharged, such Mortgage Note in effect
at the time of any such acquisition of title before any adjustment thereto by
reason of any
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bankruptcy or similar proceeding or any moratorium or similar waiver or grace
period will remain in effect.
Any proceeds from foreclosure proceedings or the purchase or repurchase
of any Mortgage Loan pursuant to the terms of this Servicing Agreement, as well
as any recovery resulting from a collection of Liquidation Proceeds or Insurance
Proceeds, will be applied in the following order of priority: first, to
reimburse the Servicer or the related Subservicer in accordance with Section
3.07; second, to all Servicing Fees payable therefrom; third, to the extent of
accrued and unpaid interest on the related Mortgage Loan, at the Net Mortgage
Rate to the Due Date prior to the Payment Date on which such amounts are to be
deposited in the Payment Account; fourth, as a recovery of principal on the
Mortgage Loan; and fifth, to Foreclosure Profits.
Section 3.08. COMPANY AND INDENTURE TRUSTEE TO COOPERATE. On or before
each Payment Date, the Servicer will notify the Indenture Trustee or the
relevant Custodian, with a copy to the Company, of the termination of or the
payment in full and the termination of any Mortgage Loan during the preceding
Collection Period, which notification shall be by a certification in
substantially the form attached hereto as Exhibit C (which certification shall
include a statement to the effect that all amounts received in connection with
such payment which are required to be deposited in the Collection Account
pursuant to Section 3.02 have been so deposited or credited) of a Servicing
Officer. Upon receipt of payment in full, the Servicer is authorized to execute,
pursuant to the authorization contained in Section 3.01, if the assignments of
Mortgage have been recorded as required under the Mortgage Loan Purchase
Agreement, an instrument of satisfaction regarding the related Mortgage, which
instrument of satisfaction shall be recorded by the Servicer if required by
applicable law and be delivered to the Person entitled thereto. It is understood
and agreed that any expenses incurred in connection with such instrument of
satisfaction or transfer shall be reimbursed from amounts deposited in the
Collection Account. From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, the Indenture Trustee or the relevant
Custodian shall, upon request of the Servicer and delivery to the Indenture
Trustee or relevant Custodian, with a copy to the Company, of a Request for
Release, in the form annexed hereto as Exhibit D, signed by a Servicing Officer,
release or cause to be released the related Mortgage File to the Servicer and
the Company and Indenture Trustee shall promptly execute such documents, in the
forms provided by the Servicer, as shall be necessary for the prosecution of any
such proceedings or the taking of other servicing actions. Such trust receipt
shall obligate the Servicer to return the Mortgage File to the Indenture Trustee
or the related Custodian (as specified in such receipt) when the need therefor
by the Servicer no longer exists unless the Mortgage Loan shall be liquidated,
in which case, upon receipt of a certificate of a Servicing Officer similar to
that hereinabove specified, the trust receipt shall be released to the Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the assignments of
Mortgage in accordance with the provisions of the Mortgage Loan Purchase
Agreement, the Company shall, if so requested in writing by the Servicer,
promptly execute an appropriate assignment in the form provided by the Servicer
to assign such Mortgage Loan for the purpose of collection to the Servicer (any
such assignment shall unambiguously indicate that the assignment is for the
purpose of collection only), and, upon such assignment, such assignee for
collection will thereupon bring all required
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actions in its own name and otherwise enforce the terms of the Mortgage Loan and
deposit or credit the Net Liquidation Proceeds, exclusive of Foreclosure
Profits, received with respect thereto in the Collection Account. In the event
that all delinquent payments due under any such Mortgage Loan are paid by the
Mortgagor and any other defaults are cured then the assignee for collection
shall promptly reassign such Mortgage Loan to the Company and return all Related
Documents to the place where the related Mortgage File was being maintained.
In connection with the Company's obligation to cooperate as provided in
this Section 3.08 and all other provisions of this Servicing Agreement requiring
the Company to authorize or permit any actions to be taken with respect to the
Mortgage Loans, the Indenture Trustee, as pledgee of the Mortgage Collateral in
the Company, expressly agrees, on behalf of the Company, to take all such
actions on behalf of the Company and to promptly execute and return all
instruments reasonably required by the Servicer in connection therewith;
PROVIDED that if the Servicer shall request a signature of the Indenture
Trustee, on behalf of the Company, the Servicer will deliver to the Indenture
Trustee an Officer's Certificate stating that such signature is necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties under this Servicing Agreement.
Section 3.09. SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY
SERVICER. The Servicer shall be entitled to receive the Servicing Fee in
accordance with Section 3.03 as compensation for its services in connection with
servicing the Mortgage Loans. Moreover, additional servicing compensation in the
form of late payment charges and certain other receipts not required to be
deposited in the Collection Account as specified in Section 3.02 shall be
retained by the Servicer. The Servicer shall be required to pay all expenses
incurred by it in connection with its activities hereunder (including payment of
all other fees and expenses not expressly stated hereunder to be for the account
of the Securityholders, including, without limitation, the fees and expenses of
the Administrator, Owner Trustee, Indenture Trustee and any Custodian) and shall
not be entitled to reimbursement therefor except as specifically provided
herein.
Section 3.10. ANNUAL STATEMENT AS TO COMPLIANCE. (a) The Servicer will
deliver to the Company, the Issuer and the Indenture Trustee, with a copy to the
Credit Enhancer, on or before ________ of each year, beginning ________, ____,
an Officer's Certificate stating that (i) a review of the activities of the
Servicer during the preceding fiscal year and of its performance under this
Servicing Agreement has been made under such officer's supervision, (ii) to the
best of such officer's knowledge, based on such review, the Servicer has
fulfilled all its material obligations under this Servicing Agreement in all
material respects throughout such fiscal year, or, if there has been a material
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof and (iii) to the best of
such officer's knowledge, based on consultation with counsel, any continuation
Uniform Commercial Code financing statement or other Uniform Commercial Code
financing statement during the preceding fiscal year which the Servicer
determined was necessary to be filed was filed in order to continue protection
of the interest of the Company in the Mortgage Loans. In addition, the Servicer
shall deliver or cause each Subservicer to deliver to the Indenture Trustee, the
Company, the Issuer, the Depositor and the Credit Enhancer a copy of each
certification, accountant's report or other document upon which the foregoing
Officer's Certificate is based with respect to such Subservicer's performance.
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(b) The Servicer shall deliver to the Company, the Issuer and the
Indenture Trustee, with a copy to the Credit Enhancer, promptly after having
obtained knowledge thereof, but in no event later than five Business Days
thereafter, written notice by means of an Officer's Certificate of any event
which with the giving of notice or the lapse of time or both, would become a
Servicer of Default.
Section 3.11. ANNUAL SERVICING REPORT. On or before ________ of each
year, beginning ________, ____, the Servicer at its expense shall cause a firm
of nationally recognized independent public accountants (who may also render
other services to the Servicer) to furnish a report to the Company, the Issuer,
the Indenture Trustee, the Depositor, the Credit Enhancer and each Rating Agency
to the effect that such firm has examined certain documents and records relating
to the servicing of mortgage loans by the Servicer during the most recent
calendar year then ended under servicing agreements (including this Servicing
Agreement) substantially similar to this Servicing Agreement and that such
examination, which has been conducted substantially in compliance with the audit
guide for audits of non-supervised mortgagees approved by the Department of
Housing and Urban Development for use by independent public accountants (to the
extent that the procedures in such audit guide are applicable to the servicing
obligations set forth in such agreements), has disclosed no items of
noncompliance with the provisions of this Servicing Agreement which, in the
opinion of such firm, are material, except for such items of noncompliance as
shall be set forth in such report. In rendering such statement, such firm may
rely, as to matters relating to direct servicing of mortgage loans by
Subservicers, upon comparable statements for examinations conducted
substantially in the manner described above (rendered within one year of such
statement) of independent public accountants with respect to the related
Subservicer. For purposes of such statement, such firm may conclusively assume
that all servicing agreements among the Company and the Servicer relating to
home equity mortgage loans are substantially similar one to another except for
any such servicing agreement which, by its terms, specifically states otherwise.
Section 3.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
THE MORTGAGE LOANS. Whenever required by statute or regulation, the Servicer
shall provide to the Credit Enhancer, any Securityholder upon reasonable request
(or a regulator for a Securityholder) or the Indenture Trustee, reasonable
access to the documentation regarding the Mortgage Loans such access being
afforded without charge but only upon reasonable request and during normal
business hours at the offices of the Servicer. Nothing in this Section 3.12
shall derogate from the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors and the failure
of the Servicer to provide access as provided in this Section 3.12 as a result
of such obligation shall not constitute a breach of this Section 3.12.
Section 3.13. MAINTENANCE OF CERTAIN SERVICING INSURANCE POLICIES. The
Servicer shall during the term of its service as servicer maintain in force (i)
a policy or policies of insurance covering errors and omissions in the
performance of its obligations as servicer hereunder and (ii) a fidelity bond in
respect of its officers, employees or agents. Each such policy or policies and
bond shall be at least equal to the coverage that would be required by FNMA or
FHLMC, whichever is greater, for Persons performing servicing for mortgage loans
purchased by such entity.
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Section 3.14. INFORMATION REQUIRED BY THE INTERNAL REVENUE SERVICE
GENERALLY AND REPORTS OF FORECLOSURES AND ABANDONMENTS OF MORTGAGED PROPERTY.
The Servicer shall prepare and deliver all federal and state information reports
when and as required by all applicable state and federal income tax laws. In
particular, with respect to the requirement under Section 6050J of the Code to
the effect that the Servicer or Subservicer shall make reports of foreclosures
and abandonments of any mortgaged property for each year beginning in ____, the
Servicer or Subservicer shall file reports relating to each instance occurring
during the previous calendar year in which the Servicer (i) on behalf of the
Company, acquires an interest in any Mortgaged Property through foreclosure or
other comparable conversion in full or partial satisfaction of a Mortgage Loan,
or (ii) knows or has reason to know that any Mortgaged Property has been
abandoned. The reports from the Servicer or Subservicer shall be in form and
substance sufficient to meet the reporting requirements imposed by Section 6050J
and Section 6050H (reports relating to mortgage interest received) of the Code.
Section 3.15. OPTIONAL REPURCHASE OF DEFAULTED MORTGAGE LOANS.
Notwithstanding any provision in Section 3.07 to the contrary, the Servicer may
repurchase any Mortgage Loan delinquent in payment for a period of 60 days or
longer for a price equal to the Repurchase Price.
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ARTICLE IV
Servicing Certificate
Section 4.01. STATEMENTS TO SECURITYHOLDERS. (a) With respect to each
Payment Date, the Servicer shall forward to the Indenture Trustee and the
Indenture Trustee pursuant to Section 3.26 of the Indenture shall forward or
cause to be forwarded by mail to each Certificateholder, Bondholder, the Credit
Enhancer, the Depositor, the Owner Trustee, the Certificate Paying Agent and
each Rating Agency, a statement setting forth the following information as to
the Bonds and Certificates, to the extent applicable:
(i) the aggregate amount of (a) Security Interest Collections
with respect to the Bonds and the Certificates, (b) aggregate Security
Principal Collections with respect to the Bonds and the Certificates
and (c) Security Collections for the related Collection Period with
respect to the Bonds and the Certificates;
(ii) the amount of such distribution to the Securityholders of
the Bonds and the Certificates applied to reduce the principal balance
thereof and separately stating the portion thereof in respect of the
Accelerated Principal Distribution Amount and the amount to be
deposited in the Funding Account on such Payment Date;
(iii) the amount of such distribution to the Securityholders
of the Bonds and the Certificates allocable to interest and separately
stating the portion thereof in respect of overdue accrued interest;
(iv) the Credit Enhancement Draw Amount, if any, for such
Payment Date and the aggregate amount of prior draws thereunder not yet
reimbursed;
(v) the aggregate Principal Balance of (a) the ________ Loans,
(b) the ______ Loans, (c) the _________ Loans, as of the end of the
preceding Collection Period and (d) all of the Mortgage Loans;
(vi) the number and aggregate Principal Balances of Mortgage
Loans (a) as to which the Minimum Monthly Payment is delinquent for
30-59 days, 60-89 days, 90- 179 days and 180 or more days, respectively
and (b) that have become REO, in each case as of the end of the
preceding Collection Period; PROVIDED, HOWEVER, that such information
will not be provided on the statements relating to the first Payment
Date;
(vii) the Weighted Average Net Mortgage Rate for the related
Collection Period and the Weighted Average Net Mortgage Rate for (a)
the ________ Loans, (b) the _______Loans and (c) the _________ Loans
for the related Collection Period;
(viii) the Special Capital Distribution Amount and the
Required Special Capital Distribution Amount, in each case as the end
of the related Collection Period; and
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(ix) the aggregate amount of Additional Loans acquired during
the previous Collection Period with amounts in respect of Net Principal
Collections from the Funding Account;
(x) the aggregate Liquidation Loss Amounts with respect to the
related Collection Period, the amount of any remaining Carryover Loss
Amount with respect to the Bonds and Certificates, respectively, and
the aggregate of the Liquidation Loss Amounts from all Collection
Periods to date expressed as a percentage of the sum of (a) the Cut-Off
Date Pool Balance and (b) the amount by which the Pool Balance as of
the latest date that the Additional Loans have been transferred to the
Company exceeds the Cut-Off Date Pool Balance;
(xi) any unpaid interest on the Bonds and Certificates,
respectively, after such Distribution Date;
(xii) the aggregate Principal Balance of each Class of Bonds
and of the Certificates after giving effect to the distribution of
principal on such Payment Date;
(xiii) the respective Security Percentage applicable to the
Bonds and Certificates, after application of payments made on such
Payment Date; and
(xiv) the amount distributed pursuant to Section 3.05(a)(xi)
of the Indenture on such Payment Date.
In the case of information furnished pursuant to clauses (ii) and (iii)
above, the amounts shall be expressed as an aggregate dollar amount per Bond or
Certificate with a $1,000 denomination.
Prior to the close of business on the Business Day next succeeding each
Determination Date, the Servicer shall furnish a written statement to the
Company, the Owner Trustee, the Depositor, the Certificate Paying Agent and the
Indenture Trustee setting forth (i) all the foregoing information, (ii) the
aggregate amounts required to be withdrawn from the Collection Account and
deposited into the Payment Account on the Business Day preceding the Payment
Date pursuant to Section 3.03 and (iii) the amounts (A) withdrawn from the
Payment Account and deposited to the Funding Account pursuant to Section 8.02(b)
of the Indenture and (B) withdrawn from the Funding Account and deposited to the
Collection Account pursuant to Section 8.02(c)(i) of the Indenture. The
determination by the Servicer of such amounts shall, in the absence of obvious
error, be presumptively deemed to be correct for all purposes hereunder and the
Owner Trustee and Indenture Trustee shall be protected in relying upon the same
without any independent check or verification. In addition, upon the Company's
written request, the Servicer shall promptly furnish information reasonably
requested by the Company that is reasonably available to the Servicer to enable
the Company to perform its federal and state income tax reporting obligations.
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ARTICLE V
Distribution and Payment Accounts
Section 5.01. DISTRIBUTION ACCOUNT. The Servicer shall establish and
maintain a separate trust account (the "Distribution Account") titled "Imperial
CMB Trust Series 199_-_, [for the benefit of the Bondholders, the
Certificateholders and the Credit Enhancer pursuant to the Indenture, dated as
of _______________, between Imperial CMB Trust Series 199_-_ and [Name of
Indenture Trustee]. The Distribution Account shall be an Eligible Account. On
the Business Day prior to each Payment Date, (i) amounts deposited into the
Distribution Account pursuant to Section 3.03(i) hereof will be distributed by
the Servicer in accordance with Section ____ of the [Trust] Agreement, and (ii)
the portion of such amounts then distributable with respect to the Mortgage
Collateral shall be deposited into the Payment Account. [The Servicer shall
invest or cause the institution maintaining the Distribution Account to invest
the funds in the Distribution Account in Eligible Investments designated in the
name of the [Servicer], which shall mature not later than the Business Day next
preceding the Payment Date next following the date of such investment (except
that (i) any investment in the institution with which the Distribution Account
is maintained may mature on such Payment Date and (ii) any other investment may
mature on such Payment Date if the Servicer shall advance funds on such Payment
Date to the Payment Account in the amount payable on such investment on such
Payment Date, pending receipt thereof to the extent necessary to make
distributions on the Securities) and shall not be sold or disposed of prior to
maturity. All income and gain realized from any such investment shall be for the
benefit of the Servicer and shall be subject to its withdrawal or order from
time to time. The amount of any losses incurred in respect of any such
investments shall be deposited in the Distribution Account by the Servicer out
of its own funds immediately as realized.]
Section 5.02. PAYMENT ACCOUNT. The Indenture Trustee shall establish
and maintain a separate trust account (the "Payment Account") titled
"__________________________________, as Indenture Trustee, for the benefit of
the Bondholders, the Certificate Paying Agent and the Credit Enhancer pursuant
to the Indenture, dated as of _______________, between Imperial CMB Trust Series
199_-__ and __________________________________". The Payment Account shall be an
Eligible Account. On each Payment Date, amounts on deposit in the Payment
Account will be distributed by the Indenture Trustee in accordance with Section
3.05 of the Indenture. The Indenture Trustee shall, upon written request from
the Servicer, invest or cause the institution maintaining the Payment Account to
invest the funds in the Payment Account in Eligible Investments designated in
the name of the Indenture Trustee, which shall mature not later than the
Business Day next preceding the Payment Date next following the date of such
investment (except that (i) any investment in the institution with which the
Payment Account is maintained may mature on such Payment Date and (ii) any other
investment may mature on such Payment Date if the Indenture Trustee shall
advance funds on such Payment Date to the Payment Account in the amount payable
on such investment on such Payment Date, pending receipt thereof to the extent
necessary to make distributions on the Securities) and shall not be sold or
disposed of prior to maturity. All income and gain realized from any such
investment shall be for the benefit of the Servicer and shall be subject to its
withdrawal or order from time to time. The amount of any losses incurred in
respect of any such investments shall
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be deposited in the Payment Account by the Servicer out of its own funds
immediately as realized.
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ARTICLE VI
The Servicer
Section 6.01. LIABILITY OF THE SERVICER. The Servicer shall be liable
in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Servicer herein.
Section 6.02. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER. Any corporation into which the Servicer may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Servicer
shall be a party, or any corporation succeeding to the business of the Servicer,
shall be the successor of the Servicer, 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.
The Servicer may assign its rights and delegate its duties and
obligations under this Servicing Agreement; PROVIDED that the Person accepting
such assignment or delegation shall be a Person which is qualified to service
mortgage loans on behalf of FNMA or FHLMC, is reasonably satisfactory to the
Indenture Trustee (as pledgee of the Mortgage Collateral), the Company and the
Credit Enhancer, is willing to service the Mortgage Loans and executes and
delivers to the Indenture Trustee and the Company an agreement, in form and
substance reasonably satisfactory to the Credit Enhancer, the Indenture Trustee
and the Company, which contains an assumption by such Person of the due and
punctual performance and observance of each covenant and condition to be
performed or observed by the Servicer under this Servicing Agreement; PROVIDED
further that each Rating Agency's rating of the Securities in effect immediately
prior to such assignment and delegation will not be qualified, reduced, or
withdrawn as a result of such assignment and delegation (as evidenced by a
letter to such effect from each Rating Agency) or considered to be below
investment grade without taking into account the Credit Enhancement Instrument.
Section 6.03. LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.
Neither the Servicer nor any of the directors or officers or employees or agents
of the Servicer shall be under any liability to the Company, the Issuer, the
Owner Trustee, the Indenture Trustee or the Securityholders for any action taken
or for refraining from the taking of any action in good faith pursuant to this
Servicing Agreement, PROVIDED, HOWEVER, that this provision shall not protect
the Servicer or any such Person against any liability which would otherwise be
imposed by reason of its willful misfeasance, bad faith or gross negligence in
the performance of its duties hereunder or by reason of its reckless disregard
of its obligations and duties hereunder. The Servicer and any director or
officer or employee or agent of the Servicer may rely in good faith on any
document of any kind PRIMA FACIE properly executed and submitted by any Person
respecting any matters arising hereunder. The Servicer and any director or
officer or employee or agent of the Servicer shall be indemnified by the Company
and held harmless against any loss, liability or expense incurred in connection
with any legal action relating to this Servicing Agreement or the Securities,
including any amount paid to the Owner Trustee or the Indenture Trustee pursuant
to Section 6.06(b), other than any loss, liability or expense related to any
specific Mortgage Loan or Mortgage Loans (except as any such loss, liability or
expense shall
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be otherwise reimbursable pursuant to this Servicing Agreement) and any loss,
liability or expense incurred by reason of its willful misfeasance, bad faith or
gross negligence in the performance of its duties hereunder or by reason of its
reckless disregard of its obligations and duties hereunder. The Servicer shall
not be under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its duties to service the Mortgage Loans in
accordance with this Servicing Agreement, and which in its opinion may involve
it in any expense or liability; PROVIDED, HOWEVER, that the Servicer may in its
sole discretion undertake any such action which it may deem necessary or
desirable in respect of this Servicing Agreement, and the rights and duties of
the parties hereto and the interests of the Securityholders hereunder. In such
event, the reasonable legal expenses and costs of such action and any liability
resulting therefrom shall be expenses, costs and liabilities of the Company, and
the Servicer shall be entitled to be reimbursed therefor. The Servicer's right
to indemnity or reimbursement pursuant to this Section 6.03 shall survive any
resignation or termination of the Servicer pursuant to Section 6.04 or 7.01 with
respect to any losses, expenses, costs or liabilities arising prior to such
resignation or termination (or arising from events that occurred prior to such
resignation or termination).
Section 6.04. SERVICER NOT TO RESIGN. Subject to the provisions of
Section 6.02, the Servicer shall not resign from the obligations and duties
hereby imposed on it except (i) upon determination that the performance of its
obligations or duties hereunder are no longer permissible under applicable law
or are in material conflict by reason of applicable law with any other
activities carried on by it or its subsidiaries or Affiliates, the other
activities of the Servicer so causing such a conflict being of a type and nature
carried on by the Servicer or its subsidiaries or Affiliates at the date of this
Servicing Agreement or (ii) upon satisfaction of the following conditions: (a)
the Servicer has proposed a successor servicer to the Company, the Administrator
and the Indenture Trustee in writing and such proposed successor servicer is
reasonably acceptable to the Company, the Administrator, the Indenture Trustee
and the Credit Enhancer; (b) each Rating Agency shall have delivered a letter to
the Company, the Credit Enhancer and the Indenture Trustee prior to the
appointment of the successor servicer stating that the proposed appointment of
such successor servicer as Servicer hereunder will not result in the reduction
or withdrawal of the then current rating of the Securities; and (c) such
proposed successor servicer is reasonably acceptable to the Credit Enhancer, as
evidenced by a letter to the Company and the Indenture Trustee; PROVIDED,
HOWEVER, that no such resignation by the Servicer shall become effective until
such successor servicer or, in the case of (i) above, the Indenture Trustee, as
pledgee of the Mortgage Collateral, shall have assumed the Servicer's
responsibilities and obligations hereunder or the Indenture Trustee, as pledgee
of the Mortgage Collateral, shall have designated a successor servicer in
accordance with Section 7.02. Any such resignation shall not relieve the
Servicer of responsibility for any of the obligations specified in Sections 7.01
and 7.02 as obligations that survive the resignation or termination of the
Servicer. The Servicer shall have no claim (whether by subrogation or otherwise)
or other action against any Securityholder or the Credit Enhancer for any
amounts paid by the Servicer pursuant to any provision of this Servicing
Agreement. Any such determination permitting the resignation of the Servicer
shall be evidenced by an Opinion of Counsel to such effect delivered to the
Indenture Trustee and the Credit Enhancer.
Section 6.05. DELEGATION OF DUTIES. In the ordinary course of business,
the Servicer at any time may delegate any of its duties hereunder to any Person,
including any of its Affiliates,
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who agrees to conduct such duties in accordance with standards comparable to
those with which the Servicer complies pursuant to Section 3.01. Such delegation
shall not relieve the Servicer of its liabilities and responsibilities with
respect to such duties and shall not constitute a resignation within the meaning
of Section 6.04.
Section 6.06. SERVICER TO PAY INDENTURE TRUSTEE'S AND OWNER TRUSTEE'S
FEES AND EXPENSES; INDEMNIFICATION. (a) The Servicer covenants and agrees to pay
to the Owner Trustee, the Indenture Trustee and any co-trustee of the Indenture
Trustee from time to time, and the Owner Trustee, the Indenture Trustee and any
such co-trustee shall be entitled to, reasonable compensation (which shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust) for all services rendered by each of them in the execution of
the trusts created under the Trust Agreement and the Indenture and in the
exercise and performance of any of the powers and duties under the Trust
Agreement or the Indenture, as the case may be, of the Owner Trustee, the
Indenture Trustee and any co-trustee, and the Servicer will pay or reimburse the
Indenture Trustee and any co-trustee upon request for all reasonable expenses,
disbursements and advances incurred or made by the Indenture Trustee or any
co-trustee in accordance with any of the provisions of this Servicing Agreement
except any such expense, disbursement or advance as may arise from its
negligence or bad faith.
(b) The Servicer agrees to indemnify the Indenture Trustee and the
Owner Trustee for, and to hold the Indenture Trustee and the Owner Trustee, as
the case may be, harmless against, any loss, liability or expense incurred
without negligence or willful misconduct on its part, arising out of, or in
connection with, the acceptance and administration of the Company and the assets
thereof, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against any claim in connection with the exercise
or performance of any of its powers or duties under any Basic Document, provided
that:
(i) with respect to any such claim, the Indenture Trustee or
Owner Trustee, as the case may be, shall have given the Servicer
written notice thereof promptly after the Indenture Trustee or Owner
Trustee, as the case may be, shall have actual knowledge thereof;
(ii) while maintaining control over its own defense, the
Company, the Indenture Trustee or Owner Trustee, as the case may be,
shall cooperate and consult fully with the Servicer in preparing such
defense; and
(iii) notwithstanding anything in this Servicing Agreement to
the contrary, the Servicer shall not be liable for settlement of any
claim by the Indenture Trustee or the Owner Trustee, as the case may
be, entered into without the prior consent of the Servicer, which
consent shall not be unreasonably withheld.
No termination of this Servicing Agreement shall affect the obligations created
by this Section 6.06 of the Servicer to indemnify the Indenture Trustee and the
Owner Trustee under the conditions and to the extent set forth herein.
Notwithstanding the foregoing, the indemnification provided by the
Servicer in this Section 6.06(b) shall not pertain to any loss, liability or
expense of the Indenture Trustee or the
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Owner Trustee, including the costs and expenses of defending itself against any
claim, incurred in connection with any actions taken by the Indenture Trustee or
the Owner Trustee at the direction of the Bondholders or Certificateholders, as
the case may be, pursuant to the terms of this Servicing Agreement.
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ARTICLE VII
Default
Section 7.01. SERVICING DEFAULT. If any one of the following events
("Servicing Default")shall occur and be continuing:
(i) Any failure by the Servicer to deposit in the Collection
Account, the Funding Account or Payment Account any deposit required to
be made under the terms of this Servicing Agreement which continues
unremedied for a period of five Business Days after the date upon which
written notice of such failure shall have been given to the Servicer by
the Company, the Issuer or the Indenture Trustee or to the Servicer,
the Company, the Issuer and the Indenture Trustee by the Credit
Enhancer; or
(ii) Failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of
the Servicer set forth in the Securities or in this Servicing
Agreement, which failure, in each case, materially and adversely
affects the interests of Securityholders or the Credit Enhancer and
which continues unremedied for a period of 45 days after the date on
which written notice of such failure, requiring the same to be
remedied, and stating that such notice is a "Notice of Default"
hereunder, shall have been given to the Servicer by the Company, the
Issuer or the Indenture Trustee or to the Servicer, the Company, the
Issuer and the Indenture Trustee by the Credit Enhancer; or
(iii) The entry against the Servicer of a decree or order by a
court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, conservatorship, receivership,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for
a period of 60 consecutive days; or
(iv) The Servicer shall voluntarily go into liquidation,
consent to the appointment of a conservator, receiver, liquidator or
similar person in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of its property,
or a decree or order of a court, agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator,
receiver, liquidator or similar person in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings,
or for the winding-up or liquidation of its affairs, shall have been
entered against the Servicer and such decree or order shall have
remained in force undischarged, unbonded or unstayed for a period of 60
days; or the Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage
of any applicable insolvency or reorganization statute, make an
assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations; or
(v) Any failure by the Seller (so long as the Seller is the
Servicer) or the Servicer, as the case may be, to pay when due any
amount payable by it under the
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terms of the Insurance Agreement which continues unremedied for a
period of three (3) Business Days after the date upon which written
notice of such failure shall have been given to the Seller (so long as
the Seller is the Servicer) or the Servicer, as the case may be; or
(vi) Failure on the part of the Seller or the Servicer to duly
perform in any material respect any covenant or agreement set forth in
the Insurance Agreement, which failure in each case materially and
adversely affects the interests of the Credit Enhancer and continues
unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have
been given to the Depositor, the Indenture Trustee, the Seller or the
Servicer, as the case may be, by the Credit Enhancer.
then, and in every such case, other than that set forth in (vi) hereof, so long
as a Servicing Default shall not have been remedied by the Servicer, either the
Company, subject to the direction of the Indenture Trustee as pledgee of the
Mortgage Collateral, with the consent of the Credit Enhancer, or the Credit
Enhancer, by notice then given in writing to the Servicer (and to the Company
and the Issuer if given by the Credit Enhancer) and in the case of the event set
forth in (vi) hereof, the Credit Enhancer with the consent of Securityholders at
least 51% of the aggregate Principal Balance of the Bonds and the Certificates
may terminate all of the rights and obligations of the Servicer as servicer
under this Servicing Agreement other than its right to receive servicing
compensation and expenses for servicing the Mortgage Loans hereunder during any
period prior to the date of such termination and the Company, subject to the
direction of the Indenture Trustee as pledgee of the Mortgage Collateral, with
the consent of the Credit Enhancer, or the Credit Enhancer may exercise any and
all other remedies available at law or equity. Any such notice to the Servicer
shall also be given to each Rating Agency, the Credit Enhancer, the Company and
the Issuer. On or after the receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Servicing Agreement, whether with
respect to the Securities or the Mortgage Loans or otherwise, shall pass to and
be vested in the Company, subject to the direction of the Indenture Trustee as
pledgee of the Mortgage Collateral, pursuant to and under this Section 7.01;
and, without limitation, the Company is hereby authorized and empowered to
execute and deliver, on behalf of the 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 and endorsement of each
Mortgage Loan and related documents, or otherwise. The Servicer agrees to
cooperate with the Company in effecting the termination of the responsibilities
and rights of the Servicer hereunder, including, without limitation, the
transfer to the Indenture Trustee for the administration by it of all cash
amounts relating to the Mortgage Loans that shall at the time be held by the
Servicer and to be deposited by it in the Collection Account, or that have been
deposited by the Servicer in the Collection Account or thereafter received by
the Servicer with respect to the Mortgage Loans. All reasonable costs and
expenses (including, but not limited to, attorneys' fees) incurred in connection
with amending this Servicing Agreement to reflect such succession as Servicer
pursuant to this Section 7.01 shall be paid by the predecessor Servicer (or if
the predecessor Servicer is the Indenture Trustee, the initial Servicer) upon
presentation of reasonable documentation of such costs and expenses.
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Notwithstanding any termination of the activities of the Servicer
hereunder, the Servicer shall be entitled to receive, out of any late collection
of a payment on a Mortgage Loan which was due prior to the notice terminating
the Servicer's rights and obligations hereunder and received after such notice,
that portion to which the Servicer would have been entitled pursuant to Sections
3.03 and 3.09 as well as its Servicing Fee in respect thereof, and any other
amounts payable to the Servicer hereunder the entitlement to which arose prior
to the termination of its activities hereunder.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 7.01(i) or under Section 7.01(ii) after the applicable grace
periods specified in such Sections, shall not constitute a Servicer Default if
such delay or failure could not be prevented by the exercise of reasonable
diligence by the Servicer and such delay or failure was caused by an act of God
or the public enemy, acts of declared or undeclared war, public disorder,
rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes,
earthquakes, floods or similar causes. The preceding sentence shall not relieve
the Servicer from using reasonable efforts to perform its respective obligations
in a timely manner in accordance with the terms of this Servicing Agreement and
the Servicer shall provide the Indenture Trustee, the Credit Enhancer and the
Securityholders with notice of such failure or delay by it, together with a
description of its efforts to so perform its obligations. The Servicer shall
immediately notify the Indenture Trustee, the Credit Enhancer and the Owner
Trustee in writing of any Servicer Default.
Section 7.02. INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR. (a)
On and after the time the Servicer receives a notice of termination pursuant to
Section 7.01 or sends a notice pursuant to Section 6.04, the Indenture Trustee
on behalf of the Bondholders shall be the successor in all respects to the
Servicer in its capacity as servicer under this Servicing Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof. Nothing in this Servicing Agreement or in
the Trust Agreement shall be construed to permit or require the Indenture
Trustee to (i) succeed to the responsibilities, duties and liabilities of the
initial Servicer in its capacity as Seller under the Mortgage Loan Purchase
Agreement, (ii) be responsible or accountable for any act or omission of the
Servicer prior to the issuance of a notice of termination hereunder, (iii)
require or obligate the Indenture Trustee, in its capacity as successor
Servicer, to purchase, repurchase or substitute any Mortgage Loan, (iv) fund any
losses on any Eligible Investment directed by any other Servicer, or (v) be
responsible for the representations and warranties of the Servicer. As
compensation therefor, the Indenture Trustee shall be entitled to such
compensation as the Servicer would have been entitled to hereunder if no such
notice of termination had been given. Notwithstanding the above, (i) if the
Indenture Trustee is unwilling to act as successor Servicer, or (ii) if the
Indenture Trustee is legally unable so to act, the Indenture Trustee on behalf
of the Mortgage Collateral holders may (in the situation described in clause
(i)) or shall (in the situation described in clause (ii)) appoint or petition a
court of competent jurisdiction to appoint any established housing and home
finance institution, bank or other mortgage loan or home equity loan servicer
having a net worth of not less than $10,000,000 as the successor to the Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Servicer hereunder; PROVIDED that any such successor
Servicer shall be acceptable to the Credit Enhancer, as evidenced by the Credit
Enhancer's prior written consent which consent shall not be unreasonably
withheld and provided further that the appointment of any such successor
Servicer will not result in the qualification,
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reduction or withdrawal of the ratings assigned to the Securities by the Rating
Agencies. Pending appointment of a successor to the Servicer hereunder, unless
the Indenture Trustee is prohibited by law from so acting, the Indenture Trustee
shall act in such capacity as hereinabove provided. In connection with such
appointment and assumption, the successor shall be entitled to receive
compensation out of payments on Mortgage Loans in an amount equal to the
compensation which the Servicer would otherwise have received pursuant to
Section 3.09 (or such lesser compensation as the Indenture Trustee and such
successor shall agree). The appointment of a successor Servicer shall not affect
any liability of the predecessor Servicer which may have arisen under this
Servicing Agreement prior to its termination as Servicer (including, without
limitation, the obligation to purchase Mortgage Loans pursuant to Section 3.01,
to pay any deductible under an insurance policy pursuant to Section 3.04 or to
indemnify the Indenture Trustee pursuant to Section 6.06), nor shall any
successor Servicer be liable for any acts or omissions of the predecessor
Servicer or for any breach by such Servicer of any of its representations or
warranties contained herein or in any related document or agreement. The
Indenture Trustee and such successor shall take such action, consistent with
this Servicing Agreement, as shall be necessary to effectuate any such
succession.
(b) Any successor, including the Indenture Trustee on behalf of the
Bondholders, to the Servicer as servicer shall during the term of its service as
servicer (i) continue to service and administer the Mortgage Loans for the
benefit of the Securityholders, (ii) maintain in force a policy or policies of
insurance covering errors and omissions in the performance of its obligations as
Servicer hereunder and a fidelity bond in respect of its officers, employees and
agents to the same extent as the Servicer is so required pursuant to Section
3.13.
(c) Any successor Servicer, including the Indenture Trustee on behalf
of the Mortgage Collateral holders, shall not be deemed in default or to have
breached its duties hereunder if the predecessor Servicer shall fail to deliver
any required deposit to the Collection Account or otherwise cooperate with any
required servicing transfer or succession hereunder.
Section 7.03. NOTIFICATION TO SECURITYHOLDERS. Upon any termination or
appointment of a successor to the Servicer pursuant to this Article VII or
Section 6.04, the Indenture Trustee shall give prompt written notice thereof to
the Securityholders, the Credit Enhancer, the Company, the Issuer and each
Rating Agency.
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<PAGE>
ARTICLE VIII
Miscellaneous Provisions
Section 8.01. AMENDMENT. This Servicing Agreement may be amended from
time to time by the parties hereto, provided that any amendment be accompanied
by a letter from the Rating Agencies that the amendment will not result in the
downgrading or withdrawal of the rating then assigned to the Securities and the
consent of the Credit Enhancer and the Indenture Trustee.
Section 8.02. GOVERNING LAW. THIS SERVICING AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 8.03. NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by certified mail, return receipt requested,
to (a) in the case of the Servicer, [Name and Address of Servicer], (b) in the
case of the Credit Enhancer, ________________, ________, ______________,
Attention: _________________, ___________________________, (c) in the case of
[Moody's, ___________, 4th Floor, 99 Church Street, New York, New York 10007],
(d) in the case of [Standard & Poor's, 26 Broadway, 15th Floor, New York, New
York 10004, Attention: Residential Mortgage Surveillance Group], (e) in the case
of the Owner Trustee, the Corporate Trust Office, and (f) in the case of the
Issuer, to Imperial CMB Trust Series 199_-__, c/o ______________________,
__________________, __________, ______________, Attention:
__________________________, with a copy to the Administrator at ______________
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party. [Any notice required or permitted to be
mailed to a Securityholder shall be given by first class mail, postage prepaid,
at the address of such Securityholder as shown in the Register. Any notice so
mailed within the time prescribed in this Servicing Agreement shall be
conclusively presumed to have been duly given, whether or not the Securityholder
receives such notice. Any notice or other document required to be delivered or
mailed by the Indenture Trustee to any Rating Agency shall be given on a
reasonable efforts basis and only as a matter of courtesy and accommodation and
the Indenture Trustee shall have no liability for failure to delivery such
notice or document to any Rating Agency.]
Section 8.04. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Servicing Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Servicing Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Servicing
Agreement or of the Securities or the rights of the Securityholders thereof.
Section 8.05. THIRD-PARTY BENEFICIARIES. This Servicing Agreement will
inure to the benefit of and be binding upon the parties hereto, the
Securityholders, the Credit Enhancer, the Owner Trustee, the Indenture Trustee
and their respective successors and permitted assigns.
30
<PAGE>
Except as otherwise provided in this Servicing Agreement, no other Person will
have any right or obligation hereunder.
Section 8.06. COUNTERPARTS. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 8.07. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 8.08. TERMINATION UPON PURCHASE BY THE SERVICER OR LIQUIDATION
OF ALL MORTGAGE LOANS. The respective obligations and responsibilities of the
Servicer and the Company created hereby shall terminate upon the last action
required to be taken by the Issuer pursuant to the Trust Agreement and by the
Indenture Trustee pursuant to the Indenture following the earlier of:
(i) the date on or before which the Indenture or Trust
Agreement is terminated, or
(ii) the purchase by the Servicer from the Company of all
Mortgage Loans and all property acquired in respect of any Mortgage
Loan at a price equal to the greater of (a) 100% of the unpaid
Principal Balance of each Mortgage Loan, plus accrued and unpaid
interest thereon at the Weighted Average Net Mortgage Rate up to the
day preceding the Payment Date on which such amounts are to be
distributed to Securityholders, plus any amounts due and owing to the
Credit Enhancer under the Insurance Agreement and (b) the fair market
value of the Mortgage Loans as determined by two bids from competitive
participants in the adjustable home equity loan market.
The right of the Servicer to purchase the assets of the Company pursuant to
clause (ii) above is conditioned upon the Pool Balance as of the Final Scheduled
Payment Date being less than ten percent of the aggregate of the Cut-Off Date
Principal Balances of the Mortgage Loans. If such right is exercised by the
Servicer, the Servicer shall deposit the amount calculated pursuant to clause
(ii) above with the Indenture Trustee pursuant to Section 4.10 of the Indenture
and, upon the receipt of such deposit, the Indenture Trustee or relevant
Custodian shall release to the Servicer, the files pertaining to the Mortgage
Loans being purchased.
The Servicer, at its expense, shall prepare and deliver to the
Indenture Trustee and the Owner Trustee for execution, at the time the Mortgage
Loans are to be released to the Servicer, appropriate documents assigning each
such Mortgage Loan from the Company to the Servicer or the appropriate party.
Section 8.09. CERTAIN MATTERS AFFECTING THE INDENTURE TRUSTEE. For all
purposes of this Servicing Agreement, in the performance of any of its duties or
in the exercise of any of its powers hereunder, the Indenture Trustee shall be
subject to and entitled to the benefits of Article VI of the Indenture.
31
<PAGE>
[Section 8.10. AUTHORITY OF THE ADMINISTRATOR. Each of the parties to
this Agreement acknowledges that the Issuer and the Owner Trustee have each
appointed the Administrator to act as its agent to perform the duties and
obligations of the Issuer hereunder. Unless otherwise instructed by the Issuer
or the Owner Trustee, copies of all notices, requests, demands and other
documents to be delivered to the Issuer or the Owner Trustee pursuant to the
terms hereof shall be delivered to the Administrator. Unless otherwise
instructed by the Issuer or the Owner Trustee, all notices, requests, demands
and other documents to be executed or delivered, and any action to be taken, by
the Issuer or the Owner Trustee pursuant to the terms hereof may be executed,
delivered and/or taken by the Administrator pursuant to the Administration
Agreement.]
32
<PAGE>
IN WITNESS WHEREOF, the Servicer and the Company have caused this
Servicing Agreement to be duly executed by their respective officers or
representatives all as of the day and year first above written.
[NAME OF SERVICER],
as Servicer
By________________________________
Title:
IMH ASSETS CORP.
as Company
By________________________________
Title:
<PAGE>
EXHIBIT D
FORM OF REQUEST FOR RELEASE
DATE:
TO:
RE: REQUEST FOR RELEASE OF DOCUMENTS
In connection with your administration of the Mortgage Collateral, we request
the release of the Mortgage File described below.
Servicing Agreement Dated:
Series #:
Account #:
Pool #:
Loan #:
Borrower Name(s):
Reason for Document Request: (circle one) Mortgage Loan
Prepaid in Full
Mortgage Loan Repurchased
"We hereby certify that all amounts received or to be received in connection
with such payments which are required to be deposited have been or will be so
deposited as provided in the Servicing Agreement."
- -------------------------------------
[Name of Servicer]
Authorized Signature
******************************************************************
TO CUSTODIAN/INDENTURE TRUSTEE: Please acknowledge this request, and check off
documents being enclosed with a copy of this form. You should retain this form
for your files in accordance with the terms of the Servicing Agreement.
Enclosed Documents: [ ] Promissory Note
[ ] Primary Insurance Policy
[ ] Mortgage or Deed of Trust
[ ] Assignment(s) of Mortgage or
Deed of Trust
[ ] Title Insurance Policy
[ ] Other: __________________
___________________
Name
___________________
Title
___________________
Date
EXHIBIT 4.2
================================================================================
IMH ASSETS CORP.
as Depositor
and
----------------------,
as Owner Trustee
-----------------------------------------
TRUST AGREEMENT
Dated as of ________________
------------------------------------------
$_________ Collateralized Mortgage Certificates,
Series 199_-__
================================================================================
<PAGE>
Table of Contents
Section Page
ARTICLE I
DEFINITIONS............................... 1
1.01. DEFINITIONS.......................................................... 1
1.02. OTHER DEFINITIONAL PROVISIONS........................................ 1
ARTICLE II
ORGANIZATION............................... 3
2.01. NAME................................................................. 3
2.02. OFFICE............................................................... 3
2.03. PURPOSES AND POWERS.................................................. 3
2.04. APPOINTMENT OF OWNER TRUSTEE......................................... 3
2.05. INITIAL CAPITAL CONTRIBUTION OF OWNER TRUST ESTATE................... 4
2.06. DECLARATION OF TRUST................................................. 4
2.07. LIABILITY OF THE HOLDER OF THE CERTIFICATES.......................... 4
2.08. TITLE TO TRUST PROPERTY.............................................. 4
2.09. SITUS OF TRUST....................................................... 5
2.10. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR...................... 5
2.11. PAYMENT OF TRUST FEES................................................ 6
ARTICLE III
CONVEYANCE OF THE MORTGAGE COLLATERAL; CERTIFICATES........... 7
3.01. CONVEYANCE OF THE MORTGAGE COLLATERAL................................ 7
3.02. INITIAL OWNERSHIP.................................................... 7
3.03. THE CERTIFICATES..................................................... 7
3.04. AUTHENTICATION OF CERTIFICATES....................................... 7
3.05. REGISTRATION OF AND LIMITATIONS ON TRANSFER AND EXCHANGE OF
CERTIFICATES........................................................ 8
3.06. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.................... 9
3.07. PERSONS DEEMED CERTIFICATEHOLDERS.................................... 10
3.08. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES............ 10
3.09. MAINTENANCE OF OFFICE OR AGENCY...................................... 10
3.10. CERTIFICATE PAYING AGENT............................................. 10
3.11. OWNERSHIP............................................................ 12
ARTICLE IV
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SECTION PAGE
AUTHORITY AND DUTIES OF OWNER TRUSTEE....................... 13
4.01. GENERAL AUTHORITY.................................................... 13
4.02. GENERAL DUTIES....................................................... 13
4.03. ACTION UPON INSTRUCTION.............................................. 13
4.04. NO DUTIES EXCEPT AS SPECIFIED UNDER SPECIFIED DOCUMENTS OR IN
INSTRUCTIONS........................................................ 14
4.05. RESTRICTIONS......................................................... 14
4.06. PRIOR NOTICE TO CERTIFICATEHOLDERS WITH RESPECT TO CERTAIN
MATTERS............................................................. 14
4.07. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO CERTAIN MATTERS..........15
4.08. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO BANKRUPTCY...............15
4.09. RESTRICTIONS ON CERTIFICATEHOLDERS' POWER.............................15
4.10. MAJORITY CONTROL......................................................16
ARTICLE V
APPLICATION OF TRUST FUNDS........................................... 17
5.01. DISTRIBUTIONS.........................................................17
5.02. METHOD OF PAYMENT.....................................................17
5.03. SIGNATURE ON RETURNS..................................................17
5.04. STATEMENTS TO CERTIFICATEHOLDERS......................................18
5.05. TAX REPORTING; TAX ELECTIONS..........................................18
ARTICLE VI
CONCERNING THE OWNER TRUSTEE......................................... 19
6.01. ACCEPTANCE OF TRUSTS AND DUTIES.......................................19
6.02. FURNISHING OF DOCUMENTS...............................................20
6.03. REPRESENTATIONS AND WARRANTIES........................................20
6.04. RELIANCE; ADVICE OF COUNSEL...........................................21
6.05. NOT ACTING IN INDIVIDUAL CAPACITY.....................................21
6.06. OWNER TRUSTEE NOT LIABLE FOR CERTIFICATES OR RELATED DOCUMENTS........21
6.07. OWNER TRUSTEE MAY OWN CERTIFICATES AND BONDS..........................22
ARTICLE VII
COMPENSATION OF OWNER TRUSTEE........................................ 23
7.01. OWNER TRUSTEE'S FEES AND EXPENSES.....................................23
7.02. INDEMNIFICATION.......................................................23
ARTICLE VIII
ii
<PAGE>
TERMINATION OF TRUST AGREEMENT........................... 25
8.01. TERMINATION OF TRUST AGREEMENT........................................25
8.02. DISSOLUTION UPON BANKRUPTCY OF THE HOLDER OF THE DESIGNATED
CERTIFICATE..........................................................26
ARTICLE IX
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES............... 27
9.01. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE............................27
9.02. REPLACEMENT OF OWNER TRUSTEE..........................................27
9.03. SUCCESSOR OWNER TRUSTEE...............................................28
9.04. MERGER OR CONSOLIDATION OF OWNER TRUSTEE..............................28
9.05. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.........................28
ARTICLE X
MISCELLANEOUS................................... 30
10.01. AMENDMENTS............................................................30
10.02. NO LEGAL TITLE TO OWNER TRUST ESTATE..................................31
10.03. LIMITATIONS ON RIGHTS OF OTHERS.......................................31
10.04. NOTICES...............................................................31
10.05. SEVERABILITY..........................................................32
10.06. SEPARATE COUNTERPARTS.................................................32
10.07. SUCCESSORS AND ASSIGNS................................................32
10.08. NO PETITION...........................................................32
10.9. NO RECOURSE...........................................................32
10.10. HEADINGS..............................................................33
10.11. GOVERNING LAW.........................................................33
10.12. INTEGRATION...........................................................33
Signatures ...................................................................40
EXHIBIT
Exhibit A - Form of Certificate..............................................A-1
Exhibit B - Certificate of Trust of Imperial CMB Trust ......................B-1
Exhibit C - Form of Certificate of Non-Foreign Status........................C-1
Exhibit D - Form of Investment Letter........................................D-1
Exhibit E - Form of Investment Letter for Certificates.......................E-1
iii
<PAGE>
This Trust Agreement, dated as of ________________ (as amended from
time to time, this "Trust Agreement"), between IMH Assets Corp., a California
corporation, as Depositor (the "Depositor") and ______________________, a
Delaware ___________________, as Owner Trustee (the "Owner Trustee"),
WITNESSETH THAT:
In consideration of the mutual agreements herein contained, the
Depositor and the Owner Trustee agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS. For all purposes of this Trust Agreement,
except as otherwise expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Indenture. All other capitalized terms used herein
shall have the meanings specified herein.
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Trust Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As used in this Trust Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Trust Agreement or in any such certificate or other document,
and accounting terms partly defined in this Trust Agreement or in any such
certificate or other document to the extent not defined, shall have the
respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in this Trust
Agreement or in any such certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Trust Agreement or in any such certificate or
other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Trust Agreement shall refer to this Trust Agreement as
a whole and not to any particular provision of this Trust Agreement; Section and
Exhibit references contained in this Trust Agreement are references to Sections
and Exhibits in or to this Trust Agreement unless otherwise specified; and the
term "including" shall mean "including without limitation".
(d) The definitions contained in this Trust Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
<PAGE>
(e) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
2
<PAGE>
ARTICLE II
ORGANIZATION
Section 2.01. NAME. The trust created hereby (the "Trust") shall be
known as "Imperial CMB Trust Series 199_-_," in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
Section 2.02. OFFICE. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in Delaware
as the Owner Trustee may designate by written notice to the Certificateholders
and the Depositor.
Section 2.03. PURPOSES AND POWERS. The purpose of the Trust is to
engage in the following activities:
(i) to issue the Bonds pursuant to the Indenture and the
Certificates pursuant to this Trust Agreement and to sell the Bonds and
the Certificates;
(ii) to pay the organizational, start-up and transactional
expenses of the Trust;
(iii) to assign, grant, transfer, pledge and convey the
Mortgage Collateral pursuant to the Indenture and to hold, manage and
distribute to the Certificateholders pursuant to Section 5.01 any
portion of the Mortgage Collateral released from the Lien of, and
remitted to the Trust pursuant to the Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto or connected therewith,
including, without limitation, to accept additional contributions of
equity that are not subject to the Lien of the Indenture; and
(vi) subject to compliance with the Basic Documents, to engage
in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions
to the Certificateholders and the Bondholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Trust Agreement or the
Basic Documents [while any Bond is outstanding and without regard to the Bonds
and] [without the consent of __% of the Certificateholders].
Section 2.04. APPOINTMENT OF OWNER TRUSTEE. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
3
<PAGE>
Section 2.05. INITIAL CAPITAL CONTRIBUTION OF OWNER TRUST ESTATE. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Trust,
as of the date hereof, the sum of $1. The Owner Trustee hereby acknowledges
receipt in trust from the Depositor, as of the date hereof, of the foregoing
contribution, which shall constitute the initial corpus of the Trust and shall
be deposited in the Certificate Distribution Account. The Owner Trustee also
acknowledges on behalf of the trust receipt of the Mortgage Collateral and a
Surety Bond assigned to the Trust pursuant to Section 3.01, which shall
constitute the Owner Trust Estate.
Section 2.06. DECLARATION OF TRUST. The Owner Trustee hereby declares
that it shall hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Certificateholders,
subject to the obligations of the Trust under the Basic Documents. It is the
intention of the parties hereto that the Trust constitute a business trust under
the Business Trust Statute and that this Trust Agreement constitute the
governing instrument of such business trust. It is the intention of the parties
hereto that, for income and franchise tax purposes, the Trust shall be treated
as a corporation, with the assets of the corporation being the Owner Trust
Estate, the [equity interest in the corporation] being the Certificates and the
Bonds being debt of the corporation and the provisions of this Agreement shall
be interpreted to further this intention. Except as otherwise provided in this
Trust Agreement, the rights of the Certificateholders will be those of [equity
owners of the Trust] formed under the Delaware [corporation law]. The parties
agree that, unless otherwise required by appropriate tax authorities, the Trust
will file or cause to be filed annual or other necessary returns, reports and
other forms consistent with the characterization of the Trust as a corporation
for such tax purposes. Effective as of the date hereof, the Owner Trustee shall
have all rights, powers and duties set forth herein and in the Business Trust
Statute with respect to accomplishing the purposes of the Trust.
Section 2.07. LIABILITY OF THE HOLDER OF THE CERTIFICATES. (a) The
Holders of the Certificates shall be liable directly to and shall indemnify any
injured party for all losses, claims, damages, liabilities and expenses of the
Trust (including Expenses, to the extent not paid out of the Owner Trust Estate)
to the extent that the Holders of the Certificates would be liable if the Trust
were a corporation under [Delaware corporate law]; provided, however, that the
Holders of the Certificates shall not be liable for payments required to be made
on the Bonds or the Certificates, or for any losses incurred by a
Certificateholder in the capacity of an investor in the Certificates or a
Bondholder in the capacity of an investor in the Bonds. The Holders of the
Certificates shall be liable for any entity level taxes imposed on the Trust. In
addition, any third party creditors of the Trust, including the Credit Enhancer
(other than in connection with the obligations described in the preceding
sentence for which the Holders of the Certificates shall not be liable) shall be
deemed third party beneficiaries of this paragraph. The obligations of the
Holders of the Certificates under this paragraph shall be evidenced by the
Certificates.
(b) Subject to subsection (a) above, the Certificateholders shall be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware.
Section 2.08. TITLE TO TRUST PROPERTY. Legal title to the Owner Trust
Estate shall be vested at all times in the Trust as a separate legal entity
except where applicable law in any jurisdiction requires title to any part of
the Owner Trust Estate to be vested in a trustee or
4
<PAGE>
trustees, in which case title shall be deemed to be vested in the Owner Trustee,
a co-trustee and/or a separate trustee, as the case may be.
Section 2.09. SITUS OF TRUST. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the State of Delaware or the
State of ________. The Trust shall not have any employees in any state other
than Delaware; provided, however, that nothing herein shall restrict or prohibit
the Owner Trustee from having employees within or without the State of Delaware
or taking actions outside the State of Delaware in order to comply with Section
2.03. Payments will be received by the Trust only in Delaware, New York or
________, and payments will be made by the Trust only from Delaware, New York or
________. The only office of the Trust will be at the Corporate Trust Office in
Delaware.
Section 2.10. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR. The
Depositor hereby represents and warrants to the Owner Trustee that:
(i) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of California,
with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted.
(ii) The Depositor is duly qualified to do business as a
foreign corporation in good standing and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or
lease of its property or the conduct of its business shall require such
qualifications and in which the failure to so qualify would have a
material adverse effect on the business, properties, assets or
condition (financial or other) of the Depositor.
(iii) The Depositor has the power and authority to execute and
deliver this Trust Agreement and to carry out its terms; the Depositor
has full power and authority to sell and assign the property to be sold
and assigned to and deposited with the Trust as part of the Trust and
the Depositor has duly authorized such sale and assignment and deposit
to the Trust by all necessary corporate action; and the execution,
delivery and performance of this Trust Agreement have been duly
authorized by the Depositor by all necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Trust Agreement and the fulfillment of the terms hereof do not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or bylaws of the Depositor, or any
indenture, agreement or other instrument to which the Depositor is a
party or by which it is bound; nor result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement or other instrument (other than pursuant to
the Basic Documents); nor violate any law or, to the best of the
Depositor's knowledge, any order, rule or regulation applicable to the
Depositor of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties.
5
<PAGE>
Section 2.11. PAYMENT OF TRUST FEES. The Owner Trustee shall cause the
Administrator (i) to pay the Trust's fees and expenses incurred with respect to
the performance of the Trust's duties under the Indenture from amounts received
pursuant to Section 3.05(x) under the Indenture and (ii) to notify the
Certificate Paying Agent of such fees and expenses incurred thereunder.
6
<PAGE>
ARTICLE III
CONVEYANCE OF THE MORTGAGE COLLATERAL;
CERTIFICATES
Section 3.01. CONVEYANCE OF THE MORTGAGE COLLATERAL. The Depositor,
concurrently with the execution and delivery hereof, does hereby transfer,
convey, sell and assign to the Trust, on behalf of the Holders of the Bonds and
the Certificates and the Credit Enhancer, without recourse, all its right, title
and interest in and to the Mortgage Collateral. The Depositor will also provide
the Trust with a Surety Bond.
The parties hereto intend that the transaction set forth herein be a
sale by the Depositor to the Trust of all of its right, title and interest in
and to the Mortgage Collateral. In the event that the transaction set forth
herein is not deemed to be a sale, the Depositor hereby grants to the Trust a
security interest in all of its right, title and interest in, to and under the
Owner Trust Estate, all distributions thereon and all proceeds thereof; and this
Trust Agreement shall constitute a security agreement under applicable law.
Section 3.02. INITIAL OWNERSHIP. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.05 and until the conveyance
of the Mortgage Collateral pursuant to Section 3.01 and the issuance of the
Certificates, the Depositor shall be the sole Certificateholder.
Section 3.03. THE CERTIFICATES. The Certificates shall be issued in
minimum denominations of $[250,000] and in integral multiples of $10,000 in
excess thereof; except for one Certificate that may not be in an integral
multiple of $10,000; provided, however, that the Designated Certificate issued
pursuant to Section 3.11 may be issued in the amount of $_________. The
Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of an authorized officer of the Owner Trustee and authenticated in the
manner provided in Section 3.04. Certificates bearing the manual or facsimile
signatures of individuals who were, at the time when such signatures shall have
been affixed, authorized to sign on behalf of the Trust, shall be validly issued
and entitled to the benefit of this Trust Agreement, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
authentication and delivery of such Certificates or did not hold such offices at
the date of authentication and delivery of such Certificates. A Person shall
become a Certificateholder and shall be entitled to the rights and subject to
the obligations of a Certificateholder hereunder upon such Person's acceptance
of a Certificate duly registered in such Person's name, pursuant to Section
3.05.
A transferee of a Certificate shall become a Certificateholder and
shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Certificate
duly registered in such transferee's name pursuant to and upon satisfaction of
the conditions set forth in Section 3.05.
Section 3.04. AUTHENTICATION OF CERTIFICATES. Concurrently with the
acquisition of the Mortgage Collateral by the Trust, the Owner Trustee shall
cause the Certificates in an aggregate principal amount equal to the Initial
Principal Balance of the Certificates to be executed on
7
<PAGE>
behalf of the Trust, authenticated and delivered to or upon the written order of
the Depositor, signed by its chairman of the board, its president or any vice
president, without further corporate action by the Depositor, in authorized
denominations. No Certificate shall entitle its holder to any benefit under this
Trust Agreement or be valid for any purpose unless there shall appear on such
Certificate a certificate of authentication substantially in the form set forth
in Exhibit A, executed by the Owner Trustee or ____________________, by manual
signature; such authentication shall constitute conclusive evidence that such
Certificate shall have been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
Section 3.05. REGISTRATION OF AND LIMITATIONS ON TRANSFER AND EXCHANGE
OF CERTIFICATES. The Certificate Registrar shall keep or cause to be kept, at
the office or agency maintained pursuant to Section 3.09, a Certificate Register
in which, subject to such reasonable regulations as it may prescribe, the [Owner
Trustee] shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. _____________________________
shall be the initial Certificate Registrar. If the Certificate Registrar resigns
or is removed, the Owner Trustee shall appoint a successor Certificate
Registrar.
Subject to satisfaction of the conditions set forth below and to the
provisions of Section 3.11 with respect to the Designated Certificate, upon
surrender for registration of transfer of any Certificate at the office or
agency maintained pursuant to Section 3.09, the Owner Trustee shall execute,
authenticate and deliver (or shall cause __________________________________ as
its authenticating agent to authenticate and deliver) in the name of the
designated transferee or transferees, one or more new Certificates in authorized
denominations of a like aggregate amount dated the date of authentication by the
Owner Trustee or any authenticating agent. At the option of a Holder,
Certificates may be exchanged for other Certificates of authorized denominations
of a like aggregate amount upon surrender of the Certificates to be exchanged at
the office or agency maintained pursuant to Section 3.09.
Every Certificate presented or surrendered for registration of transfer
or exchange shall be accompanied by a written instrument of transfer in form
satisfactory to the Certificate Registrar duly executed by the Holder or such
Holder's attorney duly authorized in writing. Each Certificate surrendered for
registration of transfer or exchange shall be cancelled and subsequently
disposed of by the Certificate Registrar in accordance with its customary
practice.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
No Person shall become a Certificateholder until it shall establish its
non-foreign status by submitting to the Certificate Paying Agent an IRS Form W-9
and the Certificate of NonForeign Status set forth in Exhibit C hereto.
No transfer of a Certificate shall be made unless such transfer is
exempt from the registration requirements of the Securities Act and any
applicable state securities laws or is made in accordance with said Act and
laws. In the event of any such transfer, the Certificate
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Registrar or the Depositor shall prior to such transfer require the transferee
to execute (i) (a) an investment letter (in substantially the form attached
hereto as Exhibit D) in form and substance reasonably satisfactory to the
Certificate Registrar and the Depositor certifying to the Trust, the Owner
Trustee, the Certificate Registrar and the Depositor that such transferee is a
"qualified institutional buyer" under Rule 144A under the Securities Act, or (b)
solely with respect to the Designated Certificate, an investment letter (in
substantially the form attached hereto as Exhibit E), acceptable to and in form
and substance reasonably satisfactory to the Certificate Registrar and the
Depositor, which investment letters shall not be an expense of the Trust, the
Owner Trustee, the Certificate Registrar, the Servicer or the Depositor and (ii)
the Certificate of NonForeign Status (in substantially the form attached hereto
as Exhibit C) acceptable to and in form and substance reasonably satisfactory to
the Certificate Registrar and the Depositor, which certificate shall not be an
expense of the Trust, the Owner Trustee, the Certificate Registrar or the
Depositor. The Holder of a Certificate desiring to effect such transfer shall,
and does hereby agree to, indemnify the Trust, the Owner Trustee, the
Certificate Registrar, the Servicer and the Depositor against any liability that
may result if the transfer is not so exempt or is not made in accordance with
such federal and state laws.
No transfer of a Certificate shall be made unless the Certificate
Registrar shall have received either (i) a representation letter from the
proposed transferee of such Certificate to the effect that such proposed
transferee is not an employee benefit plan subject to the fiduciary
responsibility provisions of ERISA, or Section 4975 of the Code, or a Person
acting on behalf of any such plan or using the assets of any such plan, which
representation letter shall not be an expense of the Trust, Owner Trustee, the
Certificate Registrar, the Servicer or the Depositor or (ii) in the case of any
such certificate presented for registration in the name of an employee benefit
plan subject to the fiduciary responsibility provisions of ERISA, or Section
4975 of the Code (or comparable provisions of any subsequent enactments), or a
trustee of any such plan, or any other Person who is using the assets of any
such plan to effect such acquisition, an Opinion of Counsel, in form and
substance reasonably satisfactory to, and addressed and delivered to, the Trust,
the Certificate Registrar and the Depositor, to the effect that the purchase or
holding of such Certificate will not result in the assets of the Owner Trust
Estate being deemed to be "plan assets" and subject to the fiduciary
responsibility provisions of ERISA or the prohibited transaction provisions of
the Code, will not constitute or result in a prohibited transaction within the
meaning of Section 406 or Section 407 of ERISA or Section 4975 of the Code, and
will not subject the Trust, the Owner Trustee, the Certificate Registrar or the
Depositor to any obligation or liability (including obligations or liabilities
under ERISA or Section 4975 of the Code) in addition to those explicitly
undertaken in this Trust Agreement which Opinion of Counsel shall not be an
expense of the Trust, the Owner Trustee, the Certificate Registrar or Depositor.
Section 3.06. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a)
any mutilated Certificate shall be surrendered to the Certificate Registrar, or
if the Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there shall be delivered
to the Certificate Registrar and the Owner Trustee such security or indemnity as
may be required by them to save each of them harmless, then in the absence of
notice to the Certificate Registrar or the Owner Trustee that such Certificate
has been acquired by a bona fide purchaser, the Owner Trustee shall execute on
behalf of the Trust and the Owner Trustee or ________________, as the Trust's
authenticating agent, shall authenticate and deliver,
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in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like tenor and denomination. In connection
with the issuance of any new Certificate under this Section 3.06, the Owner
Trustee or the Certificate Registrar may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Certificate issued pursuant to this Section 3.06 shall
constitute conclusive evidence of ownership in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
Section 3.07. PERSONS DEEMED CERTIFICATEHOLDERS. Prior to due
presentation of a Certificate for registration of transfer, the Owner Trustee,
the Certificate Registrar or any Certificate Paying Agent may treat the Person
in whose name any Certificate is registered in the Certificate Register as the
owner of such Certificate for the purpose of receiving distributions pursuant to
Section 5.02 and for all other purposes whatsoever, and none of the Trust, the
Owner Trustee, the Certificate Registrar or any Paying Agent shall be bound by
any notice to the contrary.
Section 3.08. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES. The Certificate Registrar shall furnish or cause to be furnished to
the Depositor or the Owner Trustee, within 15 days after receipt by the
Certificate Registrar of a written request therefor from the Depositor or the
Owner Trustee, a list, in such form as the Depositor or the Owner Trustee, as
the case may be, may reasonably require, of the names and addresses of the
Certificateholders as of the most recent Record Date. Each Holder, by receiving
and holding a Certificate, shall be deemed to have agreed not to hold any of the
Trust, the Depositor, the Holder of the Designated Certificate, the Certificate
Registrar or the Owner Trustee accountable by reason of the disclosure of its
name and address, regardless of the source from which such information was
derived.
Section 3.09. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee on
behalf of the Trust, shall maintain in the Borough of Manhattan, The City of New
York, an office or offices or agency or agencies where Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Owner Trustee in respect of the Certificates and the
Basic Documents may be served. The Owner Trustee initially designates the
Corporate Trust Office of the Owner Trustee as its office for such purposes. The
Owner Trustee shall give prompt written notice to the Depositor, the Holder of
the Designated Certificate and the Certificateholders of any change in the
location of the Certificate Register or any such office or agency.
Section 3.10. CERTIFICATE PAYING AGENT. (a) The Certificate Paying
Agent shall make distributions to Certificateholders from the Certificate
Distribution Account on behalf of the Trust in accordance with the provisions of
the Certificates and Section 5.01 hereof from payments remitted to the
Certificate Paying Agent by the Indenture Trustee pursuant to Section 3.05 of
the Indenture. The Trust hereby appoints __________________ as Certificate
Paying Agent and _________________ hereby accepts such appointment and further
agrees that it will be bound by the provisions of this Trust Agreement relating
to the Certificate Paying Agent and shall:
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(i) hold all sums held by it for the payment of amounts due
with respect to the Certificates in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided;
(ii) give the Owner Trustee notice of any default by the Trust
of which it has actual knowledge in the making of any payment required
to be made with respect to the Certificates;
(iii) at any time during the continuance of any such default,
upon the written request of the Owner Trustee forthwith pay to the
Owner Trustee on behalf of the Trust all sums so held in Trust by such
Certificate Paying Agent;
(iv) immediately resign as Certificate Paying Agent and
forthwith pay to the Owner Trustee on behalf of the Trust all sums held
by it in trust for the payment of Certificates if at any time it ceases
to meet the standards required to be met by the Certificate Paying
Agent at the time of its appointment;
(v) comply with all requirements of the Code with respect to
the withholding from any payments made by it on any Certificates of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith; and
(vi) deliver to the Owner Trustee a copy of the report to
Certificateholders prepared with respect to each Payment Date by the
Servicer pursuant to Section 4.01 of the Servicing Agreement.
(b) On the second LIBOR Business Day immediately preceding (i) the
Closing Date in the case of the first Interest Period and (ii) the first day of
each succeeding Interest Period, the Certificate Paying Agent shall determine
LIBOR and the Certificate Rate for such Interest Period and shall inform the
Servicer and the Depositor at their respective facsimile numbers given to the
Certificate Paying Agent in writing thereof.
(c) The Trust may revoke such power and remove the Certificate Paying
Agent if the Administrator determines in its sole discretion that the
Certificate Paying Agent shall have failed to perform its obligations under this
Trust Agreement in any material respect. __________________ shall be permitted
to resign as Certificate Paying Agent upon 30 days written notice to the Owner
Trustee; provided ________________ is also resigning as Paying Agent under the
Indenture at such time. In the event that ___________________ shall no longer be
the Certificate Paying Agent under this Trust Agreement and Paying Agent under
the Indenture, the Administrator shall appoint a successor to act as Certificate
Paying Agent (which shall be a bank or trust company) and which shall also be
the successor Paying Agent under the Indenture. The Administrator shall cause
such successor Certificate Paying Agent or any additional Certificate Paying
Agent appointed by the Administrator to execute and deliver to the Owner Trustee
an instrument to the effect set forth in this Section 3.10 as it relates to the
Certificate Paying Agent. The Certificate Paying Agent shall return all
unclaimed funds to the Trust and upon removal of a Certificate Paying Agent such
Certificate Paying Agent shall also return all funds in its possession to the
Trust. The provisions of Sections 6.01, 6.03, 6.04 and
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7.01 shall apply to the Certificate Paying Agent to the extent applicable. Any
reference in this Agreement to the Certificate Paying Agent shall include any
co-paying agent unless the context requires otherwise.
(d) The Certificate Paying Agent shall establish and maintain with
itself a trust account (the "Certificate Distribution Account") in which the
Certificate Paying Agent shall, deposit, on the same day as it is received from
the Indenture Trustee, each remittance received by the Certificate Paying Agent
with respect to payments made pursuant to the Indenture. The Certificate Paying
Agent shall make all distributions of principal of and interest on the
Certificates, from moneys on deposit in the Certificate Distribution Account.
[Section 3.11. OWNERSHIP. The Certificates shall, for income and
franchise tax purposes, be treated as the equity interest of the Trust. The
Certificates shall not be transferred unless (a) the transferee shall be an
Affiliate of the Seller, unless the prior written consent of the Credit Enhancer
is obtained, which will not be unreasonably withheld, (b) the applicable
provisions of Section 3.05 are satisfied, (c) the Certificate Registrar receives
an Opinion of Counsel to the effect that the transfer of the Certificates shall
not cause the Trust to be subject to an entity level tax and (d) the Rating
Agencies shall consent to such transfer.]
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ARTICLE IV
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 4.01. GENERAL AUTHORITY. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is to be
a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party and any
amendment or other agreement or instrument described herein, in each case, in
such form as the Administrator shall approve, as evidenced conclusively by the
Owner Trustee's execution thereof. In addition to the foregoing, the Owner
Trustee is authorized, but shall not be obligated, to take all actions required
of the Trust pursuant to the Basic Documents. The Owner Trustee is further
authorized from time to time to take such action as the Administrator directs
with respect to the Basic Documents.
Section 4.02. GENERAL DUTIES. It shall be the duty of the Owner Trustee
to discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Trust Agreement and the Basic Documents to which the Trust is
a party and to administer the Trust in the interest of the Certificateholders,
subject to the Basic Documents and in accordance with the provisions of this
Trust Agreement. Notwithstanding the foregoing, the Owner Trustee shall be
deemed to have discharged its duties and responsibilities hereunder and under
the Basic Documents to the extent the Administrator has agreed in the
Administration Agreement to perform such acts or to discharge such duties of the
Owner Trustee or the Trust hereunder or under any Basic Document, and the Owner
Trustee shall not be held liable for the default or failure of the Administrator
to carry out its obligations under the Administration Agreement.
Section 4.03. ACTION UPON INSTRUCTION. (a) Subject to Article IV and in
accordance with the terms of the Basic Documents, the Certificateholders may by
written instruction direct the Owner Trustee in the management of the Trust.
Such direction may be exercised at any time by written instruction of the
Certificateholders pursuant to Article IV.
(b) Notwithstanding the foregoing, the Owner Trustee shall not be
required to take any action hereunder or under any Basic Document if the Owner
Trustee shall have reasonably determined, or shall have been advised by counsel,
that such action is likely to result in liability on the part of the Owner
Trustee or is contrary to the terms hereof or of any Basic Document or is
otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Trust Agreement or
under any Basic Document, or in the event that the Owner Trustee is unsure as to
the application of any provision of this Trust Agreement or any Basic Document
or any such provision is ambiguous as to its application, or is, or appears to
be, in conflict with any other applicable provision, or in the event that this
Trust Agreement permits any determination by the Owner Trustee or is silent or
is incomplete as to the course of action that the Owner Trustee is required to
take with respect to a particular set of facts, the Owner Trustee shall promptly
give notice (in such form as shall be appropriate under the circumstances) to
the Certificateholders (with a copy to the Credit Enhancer) requesting
instruction as to the course of action to be adopted, and to the extent the
Owner Trustee acts in good faith in accordance with any written instruction of
the
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Certificateholders received, the Owner Trustee shall not be liable on account of
such action to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or refrain
from taking such action not inconsistent with this Trust Agreement or the Basic
Documents, as it shall deem to be in the best interests of the
Certificateholders, and the Owner Trustee shall have no liability to any Person
for such action or inaction.
Section 4.04. NO DUTIES EXCEPT AS SPECIFIED UNDER SPECIFIED DOCUMENTS
OR IN INSTRUCTIONS. The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Trust Agreement, (ii) in accordance with the Basic
Documents and (iii) in accordance with any document or instruction delivered to
the Owner Trustee pursuant to Section 4.03; and no implied duties or obligations
shall be read into this Trust Agreement or any Basic Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Securities and Exchange Commission filing
for the Trust or to record this Trust Agreement or any Basic Document. The Owner
Trustee nevertheless agrees that it will, at its own cost and expense, promptly
take all action as may be necessary to discharge any liens on any part of the
Owner Trust Estate that result from actions by, or claims against, the Owner
Trustee that are not related to the ownership or the administration of the Owner
Trust Estate.
Section 4.05. RESTRICTIONS. (a) The Owner Trustee shall not take any
action (x) that is inconsistent with the purposes of the Trust set forth in
Section 2.03 or (y) that, to the actual knowledge of the Owner Trustee, would
result in the Trust becoming taxable as a corporation for federal income tax
purposes. The Certificateholders shall not direct the Owner Trustee to take
action that would violate the provisions of this Section 4.06.
(b) The Owner Trustee shall not convey or transfer any of the Trust's
properties or assets, including those included in the Trust Estate, to any
person unless (a) it shall have received an Opinion of Counsel to the effect
that such transaction will not have any material adverse tax consequence to the
Trust or any Certificateholder and (b) such conveyance or transfer shall not
violate the provisions of Section 3.16(b) of the Indenture.
Section 4.06. PRIOR NOTICE TO CERTIFICATEHOLDERS WITH RESPECT TO
CERTAIN MATTERS. With respect to the following matters, the Owner Trustee shall
not take action unless at least 30 days before the taking of such action, the
Owner Trustee shall have notified the Certificateholders in writing of the
proposed action and the Certificateholders shall not have notified the Owner
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Trustee in writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims
or lawsuits brought in connection with the collection of cash distributions due
and owing under the Mortgage Collateral) and the compromise of any action, claim
or lawsuit brought by or against the Trust (except with respect to the
aforementioned claims or lawsuits for collection of cash distributions due and
owing under the Mortgage Collateral);
(b) the election by the Trust to file an amendment to the Certificate
of Trust (unless such amendment is required to be filed under the Business Trust
Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Bondholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Bondholder is not required and such
amendment materially adversely affects the interest of the Certificateholders;
(e) the amendment, change or modification of the Administration
Agreement, except to cure any ambiguity or to amend or supplement any provision
in a manner or add any provision that would not materially adversely affect the
interests of the Certificateholders; or
(f) the appointment pursuant to the Indenture of a successor Bond
Registrar, Paying Agent or Indenture Trustee or pursuant to this Trust Agreement
of a successor Certificate Registrar or Certificate Paying Agent or the consent
to the assignment by the Bond Registrar, Paying Agent, Indenture Trustee,
Certificate Registrar or Certificate Paying Agent of its obligations under the
Indenture or this Trust Agreement, as applicable.
Section 4.07. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO CERTAIN
MATTERS. The Owner Trustee shall not have the power, except upon the direction
of the Certificateholders, and with the consent of the Credit Enhancer, to (a)
remove the Administrator under the Administration Agreement pursuant to Section
8 thereof, (b) appoint a successor Administrator pursuant to Section 8 of the
Administration Agreement, (c) remove the Servicer under the Servicing Agreement
pursuant to Sections 7.01 and 8.05 thereof or (d) except as expressly provided
in the Basic Documents, sell the Mortgage Collateral after the termination of
the Indenture. The Owner Trustee shall take the actions referred to in the
preceding sentence only upon written instructions signed by the
Certificateholders and with the consent of the Credit Enhancer.
Section 4.08. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO BANKRUPTCY.
The Owner Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Certificateholders and with the consent of the Credit Enhancer and the delivery
to the Owner Trustee by each such Certificateholder of a certificate certifying
that such Certificateholder reasonably believes that the Trust is insolvent.
Section 4.09. RESTRICTIONS ON CERTIFICATEHOLDERS' POWER. The
Certificateholders shall not direct the Owner Trustee to take or to refrain from
taking any action if such action or inaction
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would be contrary to any obligation of the Trust or the Owner Trustee under this
Trust Agreement or any of the Basic Documents or would be contrary to Section
2.03, nor shall the Owner Trustee be obligated to follow any such direction, if
given.
Section 4.10. MAJORITY CONTROL. Except as expressly provided herein,
any action that may be taken by the Certificateholders under this Trust
Agreement may be taken by the Holders of Certificates evidencing not less than a
majority of the outstanding Principal Balance of the Certificates. Except as
expressly provided herein, any written notice of the Certificateholders
delivered pursuant to this Trust Agreement shall be effective if signed by
Holders of Certificates evidencing not less than a majority of the outstanding
Principal Balance of the Certificates at the time of the delivery of such
notice.
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ARTICLE V
APPLICATION OF TRUST FUNDS
Section 5.01. DISTRIBUTIONS. (a) On each Payment Date, the Certificate
Paying Agent shall distribute to the Certificateholders all funds on deposit in
the Certificate Distribution Account and available therefor (as provided in
Section 3.05 of the Indenture), as principal and the Certificate Distribution
Amount for such Payment Date. All distributions made pursuant to this Section
shall be made on a pro rata basis to the Certificateholders based on the
Certificate Principal Balances thereof; provided however that any amount on
deposit in the Certificate Distribution Account relating to a payment to the
Certificate Paying Agent pursuant to Section 3.05(xi) of the Indenture shall be
distributed solely to the Designated Certificate.
(b) In the event that any withholding tax is imposed on the
distributions (or allocations of income) to a Certificateholder, such tax shall
reduce the amount otherwise distributable to the Certificateholder in accordance
with this Section 5.01. The Certificate Paying Agent is hereby authorized and
directed to retain or cause to be retained from amounts otherwise distributable
to the Certificateholders sufficient funds for the payment of any tax that is
legally owed by the Trust (but such authorization shall not prevent the Owner
Trustee from contesting any such tax in appropriate proceedings, and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings). The amount of any withholding tax imposed with respect to a
Certificateholder shall be treated as cash distributed to such Certificateholder
at the time it is withheld by the Certificate Paying Agent and remitted to the
appropriate taxing authority. If there is a possibility that withholding tax is
payable with respect to a distribution (such as a distribution to a non-U.S.
Certificateholder), the Certificate Paying Agent may in its sole discretion
withhold such amounts in accordance with this paragraph (b).
(c) All calculations of the Certificate Distribution Amount on the
Certificates shall be made on the basis of the actual number of days in an
Interest Period and a year assumed to consist of 360 days.
(d) Distributions to Certificateholders shall be subordinated to the
creditors of the Trust, including the Bondholders.
Section 5.02. METHOD OF PAYMENT. Subject to Section 8.01(c),
distributions required to be made to Certificateholders on any Payment Date as
provided in Section 5.01 shall be made to each Certificateholder of record on
the preceding Record Date either by, in the case of any Certificateholder owning
Certificates having denominations aggregating at least $1,000,000, wire
transfer, in immediately available funds, to the account of such Holder at a
bank or other entity having appropriate facilities therefor, if such
Certificateholder shall have provided to the Certificate Registrar appropriate
written instructions at least five Business Days prior to such Payment Date or,
if not, by check mailed to such Certificateholder at the address of such Holder
appearing in the Certificate Register.
Section 5.03. SIGNATURE ON RETURNS. The Owner Trustee shall sign on
behalf of the Trust the tax returns of the Trust.
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Section 5.04. STATEMENTS TO CERTIFICATEHOLDERS. On each Payment Date,
the Certificate Paying Agent shall send to each Certificateholder the statement
or statements provided to the Owner Trustee and the Certificate Paying Agent by
the Servicer pursuant to Section 4.01 of the Servicing Agreement with respect to
such Distribution Date.
Section 5.05. TAX REPORTING; TAX ELECTIONS. The Holder of the
Certificate shall cause the Trust to file federal and state income tax returns
and information statements as a corporation for each of its taxable years.
Within 90 days after the end of each calendar year, the Holder of the Designated
Certificate shall cause the Trust to provide to each Certificateholder an
Internal Revenue Service "K-1" or any successor schedule and supplemental
information, if required by law, to enable each Certificateholder to file its
federal and state income tax returns. The Holder of the Designated Certificate
may from time to time make and revoke such tax elections with respect to the
Trust as it deems necessary or desirable in its sole discretion to carry out the
business of the Trust or the purposes of this Trust Agreement if permitted by
applicable law. Notwithstanding the foregoing, an election under Section 754 of
the Code shall not be made without the written consent of a majority in interest
of the Holders of the Certificates. The Holder of the Designated Certificate
shall serve as tax matters partner for the Trust.
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ARTICLE VI
CONCERNING THE OWNER TRUSTEE
Section 6.01. ACCEPTANCE OF TRUSTS AND DUTIES. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Trust Agreement. The
Owner Trustee and the Certificate Paying Agent also agree to disburse all moneys
actually received by it constituting part of the Owner Trust Estate upon the
terms of the Basic Documents and this Trust Agreement. The Owner Trustee shall
not be answerable or accountable hereunder or under any Basic Document under any
circumstances, except (i) for its own willful misconduct, negligence or bad
faith or negligent failure to act or (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 6.03 expressly made by the Owner
Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) The Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of the
Administrator or the Certificateholders;
(b) No provision of this Trust Agreement or any Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights, duties or powers
hereunder or under any Basic Document if the Owner Trustee shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured or provided to it;
(c) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Bonds;
(d) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Trust Agreement or for the due execution hereof
by the Depositor or the Holder of the Designated Certificate or for the form,
character, genuineness, sufficiency, value or validity of any of the Owner Trust
Estate, or for or in respect of the validity or sufficiency of the Basic
Documents, the Bonds, the Certificates, other than the certificate of
authentication on the Certificates, if executed by the Owner Trustee and the
Owner Trustee shall in no event assume or incur any liability, duty, or
obligation to any Bondholder or to any Certificateholder, other than as
expressly provided for herein or expressly agreed to in the Basic Documents;
(e) The execution, delivery, authentication and performance by it of
this Trust Agreement will not require the authorization, consent or approval of,
the giving of notice to, the filing or registration with, or the taking of any
other action with respect to, any governmental authority or agency;
(f) The Owner Trustee shall not be liable for the default or misconduct
of the Administrator, the Holder of the Designated Certificate, the Depositor,
Indenture Trustee or the Servicer under any of the Basic Documents or otherwise
and the Owner Trustee shall have no obligation or liability to perform the
obligations of the Trust under this Trust Agreement or the
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Basic Documents that are required to be performed by the Administrator under the
Administration Agreement, the Indenture Trustee under the Indenture or the
Seller under the Mortgage Loan Purchase Agreement; and
(g) The Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it or duties imposed by this Trust Agreement, or
to institute, conduct or defend any litigation under this Trust Agreement or
otherwise or in relation to this Trust Agreement or any Basic Document, at the
request, order or direction of any of the Certificateholders, unless such
Certificateholders have offered to the Owner Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities that may be
incurred by the Owner Trustee therein or thereby. The right of the Owner Trustee
to perform any discretionary act enumerated in this Trust Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its negligence or willful misconduct in the
performance of any such act.
Section 6.02. FURNISHING OF DOCUMENTS. The Owner Trustee shall furnish
to the Securityholders promptly upon receipt of a written reasonable request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Trust under the Basic Documents.
Section 6.03. REPRESENTATIONS AND WARRANTIES. The Owner Trustee hereby
represents and warrants to the Depositor, for the benefit of the
Certificateholders, that:
(a) It is a banking corporation duly organized and validly existing in
good standing under the laws of the State of Delaware. It has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Trust Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Trust Agreement, and this Trust Agreement
will be executed and delivered by one of its officers who is duly authorized to
execute and deliver this Trust Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Trust
Agreement, nor the consummation by it of the transactions contemplated hereby
nor compliance by it with any of the terms or provisions hereof will contravene
any federal or Delaware law, governmental rule or regulation governing the
banking or trust powers of the Owner Trustee or any judgment or order binding on
it, or constitute any default under its charter documents or bylaws or any
indenture, mortgage, contract, agreement or instrument to which it is a party or
by which any of its properties may be bound.
(d) This Trust Agreement, assuming due authorization, execution and
delivery by the Owner Trustee and the Depositor, constitutes a valid, legal and
binding obligation of the Owner Trustee, enforceable against it in accordance
with the terms hereof subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the enforcement of
creditors' rights generally and to general principles of equity, regardless of
whether such enforcement is considered in a proceeding in equity or at law;
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(e) The Owner Trustee is not in default with respect to any order or
decree of any court or any order, regulation or demand of any Federal, state,
municipal or governmental agency, which default might have consequences that
would materially and adversely affect the condition (financial or other) or
operations of the Owner Trustee or its properties or might have consequences
that would materially adversely affect its performance hereunder;
(f) No litigation is pending or, to the best of the Owner Trustee's
knowledge, threatened against the Owner Trustee which would prohibit its
entering into this Trust Agreement or performing its obligations under this
Trust Agreement;
Section 6.04. RELIANCE; ADVICE OF COUNSEL. (a) The Owner Trustee shall
incur no liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond, or
other document or paper believed by it to be genuine and believed by it to be
signed by the proper party or parties. The Owner Trustee may accept a certified
copy of a resolution of the board of directors or other governing body of any
corporate party as conclusive evidence that such resolution has been duly
adopted by such body and that the same is in full force and effect. As to any
fact or matter the method of determination of which is not specifically
prescribed herein, the Owner Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the treasurer
or other authorized officers of the relevant party, as to such fact or matter
and such certificate shall constitute full protection to the Owner Trustee for
any action taken or omitted to be taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Trust Agreement or the
Basic Documents, the Owner Trustee (i) may act directly or through its agents,
attorneys, custodians or nominees (including persons acting under a power of
attorney) pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents,
attorneys , custodians or nominees (including persons acting under a power of
attorney) if such persons have been selected by the Owner Trustee with
reasonable care, and (ii) may consult with counsel, accountants and other
skilled persons to be selected with reasonable care and employed by it. The
Owner Trustee shall not be liable for anything done, suffered or omitted in good
faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such Persons and not contrary to this Trust
Agreement or any Basic Document.
Section 6.05. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided in
this Article VII, in accepting the trusts hereby created ______________________
acts solely as Owner Trustee hereunder and not in its individual capacity, and
all Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by this Trust Agreement or any Basic Document shall
look only to the Owner Trust Estate for payment or satisfaction thereof.
Section 6.06. OWNER TRUSTEE NOT LIABLE FOR CERTIFICATES OR RELATED
DOCUMENTS. The recitals contained herein and in the Certificates (other than the
signatures of the Owner Trustee on the Certificates) shall be taken as the
statements of the Depositor, and the Owner Trustee assumes no responsibility for
the correctness thereof. The Owner Trustee makes no representations as to the
validity or sufficiency of this Trust Agreement, of any Basic Document or of the
Certificates (other than the signatures of the Owner Trustee on the
Certificates) or the
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Bonds, or of any Related Documents. The Owner Trustee shall at no time have any
responsibility or liability with respect to the sufficiency of the Owner Trust
Estate or its ability to generate the payments to be distributed to
Certificateholders under this Trust Agreement or the Bondholders under the
Indenture, including, the compliance by the Depositor or the Seller with any
warranty or representation made under any Basic Document or in any related
document or the accuracy of any such warranty or representation, or any action
of the Administrator, the Certificate Paying Agent, the Certificate Registrar or
the Indenture Trustee taken in the name of the Owner Trustee.
Section 6.07. OWNER TRUSTEE MAY OWN CERTIFICATES AND BONDS. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Certificates or Bonds and may deal with the Depositor, the Seller, the
Certificate Paying Agent, the Certificate Registrar, the Administrator and the
Indenture Trustee in transactions with the same rights as it would have if it
were not Owner Trustee.
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ARTICLE VII
COMPENSATION OF OWNER TRUSTEE
Section 7.01. OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee
shall receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof, and the Owner Trustee shall be
reimbursed for its reasonable expenses hereunder and under the Basic Documents,
including the reasonable compensation, expenses and disbursements of such
agents, representatives, experts and counsel as the Owner Trustee may reasonably
employ in connection with the exercise and performance of its rights and its
duties hereunder and under the Basic Documents pursuant to Section 3.08 of the
Servicing Agreement.
Section 7.02. INDEMNIFICATION. The Holder of the Designated Certificate
shall indemnify, defend and hold harmless the Owner Trustee and its successors,
assigns, agents and servants (collectively, the "Indemnified Parties") from and
against, any and all liabilities, obligations, losses, damages, taxes, claims,
actions and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by, or
asserted against the Owner Trustee or any Indemnified Party in any way relating
to or arising out of this Trust Agreement, the Basic Documents, the Owner Trust
Estate, the administration of the Owner Trust Estate or the action or inaction
of the Owner Trustee hereunder, provided, that:
(i) the Holder of the Designated Certificate shall not be
liable for or required to indemnify an Indemnified Party from and
against Expenses arising or resulting from the Owner Trustee's willful
misconduct, negligence or bad faith or as a result of any inaccuracy of
a representation or warranty contained in Section 6.03 expressly made
by the Owner Trustee;
(ii) with respect to any such claim, the Indemnified Party
shall have given the Holder of the Designated Certificate written
notice thereof promptly after the Indemnified Party shall have actual
knowledge thereof;
(iii) while maintaining control over its own defense, the
Holder of the Designated Certificate shall consult with the Indemnified
Party in preparing such defense; and
(iv) notwithstanding anything in this Agreement to the
contrary, the Holder of the Designated Certificate shall not be liable
for settlement of any claim by an Indemnified Party entered into
without the prior consent of the Holder of the Designated Certificate
which consent shall not be unreasonably withheld.
The indemnities contained in this Section shall survive the resignation
or termination of the Owner Trustee or the termination of this Trust Agreement.
In the event of any claim, action or proceeding for which indemnity will be
sought pursuant to this Section, the Owner Trustee's choice of legal counsel, if
other than the legal counsel retained by the Owner Trustee in connection with
the execution and delivery of this Trust Agreement, shall be subject to the
approval of the Holder of the Designated Certificate, which approval shall not
be unreasonably withheld.
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In addition, upon written notice to the Owner Trustee and with the consent of
the Owner Trustee which consent shall not be unreasonably withheld, the Holder
of the Designated Certificate has the right to assume the defense of any claim,
action or proceeding against the Owner Trustee.
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ARTICLE VIII
TERMINATION OF TRUST AGREEMENT
Section 8.01. TERMINATION OF TRUST AGREEMENT. (a) This Trust Agreement
(other than Article VIII) and the Trust shall terminate and be of no further
force or effect upon the earliest of (i) upon the final distribution of all
moneys or other property or proceeds of the Owner Trust Estate in accordance
with the terms of the Indenture and this Trust Agreement, (ii) the Payment Date
in ____________, (iii) at the time provided in Section 8.02 or (iv) purchase by
the Servicer of all Mortgage Loans pursuant to Section 8.08 of the Servicing
Agreement. The bankruptcy, liquidation, dissolution, death or incapacity of any
Certificateholder, other than the Holder of the Designated Certificate as
described in Section 8.02, shall not (x) operate to terminate this Trust
Agreement or the Trust or (y) entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of all or any part of the
Trust or the Owner Trust Estate or (z) otherwise affect the rights, obligations
and liabilities of the parties hereto.
(b) Except as provided in Section 8.01(a), none of the Depositor, the
Holder of the Designated Certificate or any other Certificateholder shall be
entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Payment Date
upon which Certificateholders shall surrender their Certificates to the
Certificate Paying Agent for payment of the final distribution and cancellation,
shall be given by the Certificate Paying Agent by letter to Certificateholders
and the Credit Enhancer mailed within five Business Days of receipt of notice of
such termination from the Administrator, stating (i) the Payment Date upon or
with respect to which final payment of the Certificates shall be made upon
presentation and surrender of the Certificates at the office of the Certificate
Paying Agent therein designated, (ii) the amount of any such final payment and
(iii) that the Record Date otherwise applicable to such Payment Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office of the Certificate Payment Agent therein specified.
The Certificate Paying Agent shall give such notice to the Owner Trustee and the
Certificate Registrar at the time such notice is given to Certificateholders.
Upon presentation and surrender of the Certificates, the Certificate Paying
Agent shall cause to be distributed to Certificateholders amounts distributable
on such Payment Date pursuant to Section 5.01.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Certificate Paying Agent shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. Subject to applicable laws with respect to escheat of funds, if within
one year following the Payment Date on which final payment of the Certificates
was to have been made pursuant to Section 3.03 of the Indenture, all the
Certificates shall not have been surrendered for cancellation, the Certificate
Paying Agent may take appropriate steps, or may appoint an agent to take
appropriate steps, to contact the remaining Certificateholders concerning
surrender of their Certificates, and the cost thereof shall be paid out of the
funds and other assets that shall remain subject to this Trust Agreement. Any
funds remaining in the Certificate Distribution Account
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after exhaustion of such remedies shall be distributed by the Certificate Paying
Agent to the Holder of the Designated Certificate.
(d) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be cancelled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810(c) of the Business Trust Statute.
Section 8.02. DISSOLUTION UPON BANKRUPTCY OF THE HOLDER OF THE
DESIGNATED CERTIFICATE. In the event that an Insolvency Event shall occur with
respect to the Holder of the Designated Certificate, this Trust Agreement and
the Trust shall be terminated in accordance with Section 8.01, 90 days after the
date of such Insolvency Event, unless, before the end of such 90- day period,
the Owner Trustee shall have received written instructions from (a) if no Credit
Enhancer Default shall have occurred and be continuing, Holders of Certificates
(other than the Holder of the Designated Certificate) representing more than 50%
of the Principal Balance of the Certificates (not including the Principal
Balance of the Designated Certificate), to the effect that such Holders
disapprove of the termination of the Trust or (b) if a Credit Enhancer Default
shall have occurred and be continuing, (i) each of the Holders of Certificates
and (ii) each of the Holders of the Bonds, to the effect that such Holders
disapprove of the termination of the Trust. Promptly after the occurrence of any
Insolvency Event with respect to the Holder of the Designated Certificate (A)
the Holder of the Designated Certificate shall give the Indenture Trustee, the
Credit Enhancer and the Owner Trustee written notice of such Insolvency Event,
(B) the Owner Trustee shall, upon the receipt of such written notice from the
Holder of the Designated Certificate, give prompt written notice to the
Certificateholders of the occurrence of such event and (C) the Indenture Trustee
shall give prompt written notice of such event to the Bondholders; provided,
however, that any failure to give a notice required by this sentence shall not
prevent or delay, in any manner, a termination of the Trust pursuant to the
first sentence of this Section 8.02. Upon a termination pursuant to this
Section, the Owner Trustee shall direct the Indenture Trustee promptly to sell
the assets of the Trust (other than the Payment Account) in a commercially
reasonable manner and on commercially reasonable terms. The proceeds of any such
sale of the assets of the Trust shall be deposited to the Payment Account for
distribution in accordance with Section 5.04(b) of the Indenture.
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ARTICLE IX
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 9.01. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner
Trustee shall at all times be a corporation satisfying the provisions of Section
3807(a) of the Business Trust Statute; authorized to exercise corporate trust
powers; having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authorities; and
having (or having a parent that has) a rating of at least Baa3 by [Moody's]. If
such corporation shall publish reports of condition at least annually pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Owner Trustee shall cease to be eligible in accordance with
the provisions of this Section 9.01, the Owner Trustee shall resign immediately
in the manner and with the effect specified in Section 9.02.
Section 9.02. REPLACEMENT OF OWNER TRUSTEE. The Owner Trustee may at
any time resign and be discharged from the trusts hereby created by giving 30
days prior written notice thereof to the Administrator, the Credit Enhancer and
the Depositor. Upon receiving such notice of resignation, the Administrator
shall promptly appoint a successor Owner Trustee with the consent of the Credit
Enhancer which will not be unreasonably withheld, by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Owner Trustee and to the successor Owner Trustee. If no successor Owner Trustee
shall have been so appointed and have accepted appointment within 30 days after
the giving of such notice of resignation, the resigning Owner Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 9.01 and shall fail to resign after
written request therefor by the Administrator, or if at any time the Owner
Trustee shall be legally unable to act, or shall be adjudged bankrupt or
insolvent, or a receiver of the Owner Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Owner
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Administrator may remove the Owner
Trustee. If the Administrator shall remove the Owner Trustee under the authority
of the immediately preceding sentence, the Administrator shall promptly appoint
a successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the outgoing Owner Trustee so removed and one
copy to the successor Owner Trustee, and shall pay all fees owed to the outgoing
Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 9.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.
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Section 9.03. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee
appointed pursuant to Section 9.02 shall execute, acknowledge and deliver to the
Administrator and to its predecessor Owner Trustee an instrument accepting such
appointment under this Trust Agreement, and thereupon the resignation or removal
of the predecessor Owner Trustee shall become effective, and such successor
Owner Trustee, without any further act, deed or conveyance, shall become fully
vested with all the rights, powers, duties and obligations of its predecessor
under this Trust Agreement, with like effect as if originally named as Owner
Trustee. The predecessor Owner Trustee shall upon payment of its fees and
expenses deliver to the successor Owner Trustee all documents and statements and
monies held by it under this Trust Agreement; and the Administrator and the
predecessor Owner Trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties and
obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section 9.03 unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 9.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section 9.03, the Administrator shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Bondholders and the Rating
Agencies. If the Administrator shall fail to mail such notice within 10 days
after acceptance of such appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Administrator.
Section 9.04. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any Person into
which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any Person
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding;
provided, that such Person shall be eligible pursuant to Section 9.01 and,
provided, further, that the Owner Trustee shall mail notice of such merger or
consolidation to the Rating Agencies.
Section 9.05. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Trust Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Owner Trust Estate may at the time be located, the Administrator and
the Owner Trustee acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the
Administrator and Owner Trustee to act as co-trustee, jointly with the Owner
Trustee, or as separate trustee or trustees, of all or any part of the Owner
Trust Estate, and to vest in such Person, in such capacity, such title to the
Trust or any part thereof and, subject to the other provisions of this Section,
such powers, duties, obligations, rights and trusts as the Administrator and the
Owner Trustee may consider necessary or desirable. If the Administrator shall
not have joined in such appointment within 15 days after the receipt by it of a
request so to do, the Owner Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee
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under this Trust Agreement shall be required to meet the terms of eligibility as
a successor Owner Trustee pursuant to Section 9.01 and no notice of the
appointment of any co-trustee or separate trustee shall be required pursuant to
Section 9.03.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed by the
Owner Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any particular act or acts are
to be performed, the Owner Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Owner Trust Estate or any
portion thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the direction of
the Owner Trustee;
(b) No trustee under this Trust Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Trust Agreement;
and
(c) The Administrator and the Owner Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Trust
Agreement and the conditions of this Article. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Owner Trustee or separately, as may be provided therein,
subject to all the provisions of this Trust Agreement, specifically including
every provision of this Trust Agreement relating to the conduct of, affecting
the liability of, or affording protection to, the Owner Trustee. Each such
instrument shall be filed with the Owner Trustee and a copy thereof given to the
Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Trust Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor co-trustee or separate trustee.
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ARTICLE X
MISCELLANEOUS
Section 10.01. AMENDMENTS. (a) This Trust Agreement may be amended from
time to time by the parties hereto as specified in this Section [, provided that
any amendment, except as provided in subparagraph (e) below, be accompanied by
an Opinion of Counsel to the Owner Trustee to the effect that such amendment (i)
complies with the provisions of this Section and (ii) will not cause the Trust
to be subject to an entity level tax].
(b) If the purpose of the amendment (as detailed therein) is to correct
any mistake, eliminate any inconsistency, cure any ambiguity or deal with any
matter not covered (i.e. to give effect to the intent of the parties and, if
applicable, to the expectations of the Holders), it shall not be necessary to
obtain the consent of any Holders, but the Owner Trustee shall be furnished with
(A) a letter from the Rating Agencies that the amendment will not result in the
downgrading or withdrawal of the rating then assigned to any Security and (B) an
Opinion of Counsel to the effect that such action will not adversely affect in
any material respect the interests of any Holders, and the consent of the Credit
Enhancer shall be obtained.
(c) If the purpose of the amendment is to prevent the imposition of any
federal or state taxes at any time that any Security is outstanding (i.e.
technical in nature), it shall not be necessary to obtain the consent of any
Holder, but the Owner Trustee shall be furnished with an Opinion of Counsel that
such amendment is necessary or helpful to prevent the imposition of such taxes
and is not materially adverse to any Holder and the consent of the Credit
Enhancer shall be obtained.
(d) If the purpose of the amendment is to add or eliminate or change
any provision of the Trust Agreement other than as contemplated in (b) and (c)
above, the amendment shall require (A) an Opinion of Counsel to the effect that
such action will not adversely affect in any material respect the interests of
any Holders and (B) either (a) a letter from the Rating Agency that the
amendment will not result in the downgrading or withdrawal of the rating then
assigned to any security or (b) the consent of Holders of Certificates
evidencing a majority of the Principal Balance of the Certificates and the
Indenture Trustee; provided, however, that no such amendment shall (i) reduce in
any manner the amount of, or delay the timing of, payments received that are
required to be distributed on any Certificate without the consent of the related
Certificateholder and the Credit Enhancer, or (ii) reduce the aforesaid
percentage of Certificates the Holders of which are required to consent to any
such amendment, without the consent of the Holders of all such Certificates then
outstanding.
(e) If the purpose of the amendment is to provide for the holding of
any of the Certificates in book-entry form, it shall require the consent of
Holders of all such Certificates then outstanding; provided, that the Opinion of
Counsel specified in subparagraph (a) above shall not be required.
(f) If the purpose of the amendment is to provide for the issuance of
additional certificates representing an interest in the Trust, it shall not be
necessary to obtain the consent of any Holder, but the Owner Trustee shall be
furnished with (A) an Opinion of Counsel to the
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effect that such action will not adversely affect in any material respect the
interests of any Holders and (B) a letter from the Rating Agencies that the
amendment will not result in the downgrading or withdrawal of the rating then
assigned to any Security and the consent of the Credit Enhancer shall be
obtained.
(g) Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee, the
Credit Enhancer and each of the Rating Agencies. It shall not be necessary for
the consent of Certificateholders or the Indenture Trustee pursuant to this
Section 10.01 to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents (and any other consents of
Certificateholders provided for in this Trust Agreement or in any other Basic
Document) and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the Owner
Trustee may prescribe.
(h) In connection with the execution of any amendment to any agreement
to which the Trust is a party, other than this Trust Agreement, the Owner
Trustee shall be entitled to receive and conclusively rely upon an Opinion of
Counsel to the effect that such amendment is authorized or permitted by the
documents subject to such amendment and that all conditions precedent in the
Basic Documents for the execution and delivery thereof by the Trust or the Owner
Trustee, as the case may be, have been satisfied.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State of the State of Delaware.
Section 10.02. NO LEGAL TITLE TO OWNER TRUST ESTATE. The
Certificateholders shall not have legal title to any part of the Owner Trust
Estate. The Certificateholders shall be entitled to receive distributions with
respect to their undivided beneficial interest therein only in accordance with
Articles V and IX. No transfer, by operation of law or otherwise, of any right,
title or interest of the Certificateholders to and in their ownership interest
in the Owner Trust Estate shall operate to terminate this Trust Agreement or the
trusts hereunder or entitle any transferee to an accounting or to the transfer
to it of legal title to any part of the Owner Trust Estate
Section 10.03. LIMITATIONS ON RIGHTS OF OTHERS. Except for Section
2.07, the provisions of this Trust Agreement are solely for the benefit of the
Owner Trustee, the Depositor, the Holder of the Designated Certificate, the
Certificateholders, the Administrator, the Credit Enhancer and, to the extent
expressly provided herein, the Indenture Trustee and the Bondholders, and
nothing in this Trust Agreement (other than Section 2.07), whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Owner Trust Estate or under or in respect of this
Trust Agreement or any covenants, conditions or provisions contained herein.
Section 10.04. NOTICES. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt , if
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to the Owner Trustee, addressed to the Corporate Trust Office; if to the
Depositor, addressed to IMH Assets Corp., 20371 Irvine Avenue, Suite 200, Santa
Ana Heights, California 92707; Attention: _________________; if to the Credit
Enhancer, addressed to ___________, Attention: _________________, if to the
Rating Agencies, addressed to ________________________ Attention: __________or,
as to each party, at such other address as shall be designated by such party in
a written notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed within the
time prescribed in this Trust Agreement shall be conclusively presumed to have
been duly given, whether or not the Certificateholder receives such notice.
(c) A copy of any notice delivered to the Owner Trustee or the Trust
shall also be delivered to the Depositor and the Administrator.
Section 10.05. SEVERABILITY. Any provision of this Trust Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 10.06. SEPARATE COUNTERPARTS. This Trust Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
Section 10.07. SUCCESSORS AND ASSIGNS. All representations, warranties,
covenants and agreements contained herein shall be binding upon, and inure to
the benefit of, each of the Depositor, the Owner Trustee and its successors and
each Certificateholder and its successors and permitted assigns, all as herein
provided and the Credit Enhancer. Any request, notice, direction, consent,
waiver or other instrument or action by a Certificateholder shall bind the
successors and assigns of such Certificateholder.
[Section 10.08. NO PETITION. The Owner Trustee, by entering into this
Trust Agreement and each Certificateholder, by accepting a Certificate, hereby
covenant and agree that they will not at any time institute against the
Depositor or the Trust, or join in any institution against the Depositor or the
Trust of, any bankruptcy proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations to the
Certificates, the Bonds, this Trust Agreement or any of the Basic Documents.]
Section 10.9. NO RECOURSE. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Depositor, the Holder of the Designated Certificate, the
Seller, the Administrator, the Owner Trustee, the Indenture Trustee or any
Affiliate thereof and no recourse may be had against such parties or their
assets, except
32
<PAGE>
as may be expressly set forth or contemplated in this Trust Agreement, the
Certificates or the Basic Documents.
Section 10.10. HEADINGS. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
Section 10.11. GOVERNING LAW. THIS TRUST AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 10.12. INTEGRATION. This Trust Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understanding pertaining thereto.
33
<PAGE>
IN WITNESS WHEREOF, the Depositor and the Owner Trustee have caused
their names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.
IMH ASSETS CORP.
By:_________________________________
Name:
Title:
______________________, not in its individual capacity
but solely as Owner Trustee,
By:_________________________________
Name:
Title:
Acknowledged and Agreed:
__________, as Certificate
Registrar and Certificate
Paying Agent
By:_________________________________
Name:
Title:
34
<PAGE>
EXHIBIT A
[Form of Certificate]
[Face]
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR
IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER
SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 3.05 OF THE TRUST AGREEMENT REFERRED TO HEREIN.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE CERTIFI- CATE REGISTRAR
SHALL HAVE RECEIVED EITHER (I) A REPRESENTATION LETTER FROM THE TRANSFEREE OF
THIS CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT
PLAN SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR A PERSON ACTING
ON BEHALF OF ANY SUCH PLAN OR USING THE ASSETS OF ANY SUCH PLAN, OR (II) IF THIS
CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN SUBJECT TO THE
FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA, OR SECTION 4975 OF THE CODE (OR
COMPARABLE PROVISIONS OF ANY SUBSEQUENT ENACTMENTS), OR A TRUSTEE OF ANY SUCH
PLAN, OR ANY OTHER PERSON WHO IS USING THE ASSETS OF ANY SUCH PLAN TO EFFECT
SUCH ACQUISITION, AN OPINION OF COUNSEL TO THE EFFECT THAT THE PURCHASE OR
HOLDING OF THIS CERTIFICATE WILL NOT RESULT IN THE ASSETS OF THE OWNER TRUST
ESTATE BEING DEEMED TO BE "PLAN ASSETS" AND SUBJECT TO THE FIDUCIARY
RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED TRANSACTION PROVISIONS OF
THE CODE, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE
MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE, AND
WILL NOT SUBJECT THE OWNER TRUSTEE OR THE DEPOSITOR TO ANY OBLIGATION OR
LIABILITY.
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE CERTIFI- CATE REGISTRAR
SHALL HAVE RECEIVED A CERTIFICATE OF NON-FOREIGN STATUS CERTIFYING AS TO THE
TRANSFEREE'S STATUS AS A U.S. PERSON OR CORPORATION UNDER U.S. LAW.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE SELLER,
THE DEPOSITOR, THE SERVICER, THE INDENTURE TRUSTEE,
<PAGE>
OR THE OWNER TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS EXPRESSLY
PROVIDED IN THE TRUST AGREEMENT OR THE BASIC DOCUMENTS.
A-2
<PAGE>
Certificate No.
Original principal amount ("Denomination") of this
Certificate: $---------
Aggregate Denominations of all Certificates: $
Pass-Through Rate: Floating
Cut-Off Date:
First Payment Date
___________, ____
CUSIP NO. __________
Imperial CMB Trust Series 199_-_
Evidencing a fractional undivided equity interest in the Owner Trust
Estate, the property of which consists primarily of the Mortgage Collateral in
_________________________, a corporation sold by
IMH ASSETS CORP., AS DEPOSITOR
This certifies that [name of Holder] is the registered owner of the
Percentage Interest represented hereby in the Imperial CMB Trust Series 199_-_
(the "Trust").
The Trust was created pursuant to an Trust Agreement dated as of
________________ (as amended and supplemented from time to time, the "Trust
Agreement") between the Depositor and ______________________, as owner trustee
(as amended and supplemented from time to time, the "Owner Trustee", which term
includes any successor entity under the Trust Agreement), a summary of certain
of the pertinent provisions of which is set forth hereinafter. This 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 Certificate by
virtue of the acceptance hereof assents and by which such Holder is bound.
This Certificate is one of a duly authorized issue of Collateralized
Mortgage Certificates, Series 199_-__ (herein called the "Certificates") issued
under the Trust Agreement to which reference is hereby made for a statement of
the respective rights thereunder of the Depositor, the Owner Trustee and the
Holders of the Certificates and the terms upon which the Certificates are
executed and delivered. All terms used in this Certificate which are defined in
the Trust Agreement shall have the meanings assigned to them in the Trust
Agreement. The Owner Trust Estate consists of the Mortgage Collateral in the
Imperial CMB Trust Series 199_-____ and a Surety Bond. The rights of the Holders
of the Certificates are subordinated to the rights of the Holders of the Bonds,
as set forth in the [Indenture].
A-3
<PAGE>
There will be distributed on the [twentieth] day of each month or, if
such [twentieth] day is not a Business Day, the next Business Day (each, a
"Payment Date"), commencing in _____________, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day of
the month preceding the month of such Payment Date (the "Record Date"), such
Certificateholder's Percentage Interest (obtained by dividing the Denomination
of this Certificate by the aggregate Denominations of all Certificates) in the
amount to be distributed to Certificateholders on such Payment Date.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Payment Account that
have been released from the Lien of the Indenture for payment hereunder and that
neither the Owner Trustee in its individual capacity nor the Depositor is
personally liable to the Certificateholders for any amount payable under this
Certificate or the Trust Agreement or, except as expressly provided in the Trust
Agreement, subject to any liability under the Trust Agreement.
The Holder of this Certificate acknowledges and agrees that its rights
to receive distributions in respect of this Certificate are subordinated to the
rights of the Bondholders as described in the Indenture, dated as of _________,
____, between the Trust and __________________________________, as Indenture
Trustee (the "Indenture").
It is the intent of the Depositor and the Certificateholders that, for
purposes of federal income, state and local income and single business tax and
any other income taxes, the Trust will be treated as a corporation. The
Depositor and each Certificateholder, by acceptance of a Certificate, agree to
treat, and to take no action inconsistent with the treatment of, the
Certificates for such tax purposes as an equity interest in a corporation.
Each Certificateholder, by its acceptance of a Certificate, covenants
and agrees that such Certificateholder will not at any time institute against
the Depositor, or join in any institution against the Depositor or the Trust of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Certificates, the Bonds, the Trust Agreement or any of the Basic Documents.
Distributions on this Certificate will be made as provided in the Trust
Agreement by the Certificate Paying Agent by wire transfer or check mailed to
the Certificateholder of record in the Certificate Register without the
presentation or surrender of this Certificate or the making of any notation
hereon. Except as otherwise provided in the Trust Agreement and notwithstanding
the above, the final distribution on this Certificate will be made after due
notice by the Certificate Paying Agent of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
maintained by the Certificate Registrar for that purpose by the Trust in the
Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
A-4
<PAGE>
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, or an authenticating
agent by manual signature, this Certificate shall not entitle the Holder hereof
to any benefit under the Trust Agreement or be valid for any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
A-5
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Certificate to be duly executed.
IMPERIAL CMB TRUST SERIES 19__-_
by _____________________, not in its
individual capacity but solely as Owner
Trustee
Dated:
--------------------
Authorized Signatory
Certificate of Authentication
This is one of the Certificates referred to in the within mentioned Trust
Agreement.
- ----------------------,
not in its individual capacity
but solely as Owner Trustee
By:______________________________
Authorized Signatory
or __________________________________,
as Authenticating Agent of the Trust
By:______________________________
Authorized Signatory
A-6
<PAGE>
[REVERSE OF CERTIFICATE]
The Certificates do not represent an obligation of, or an interest in,
the Depositor, the Seller, the Servicer, the Indenture Trustee, the Owner
Trustee or any Affiliates of any of them and no recourse may be had against such
parties or their assets, except as expressly set forth or contemplated herein or
in the Trust Agreement or the Basic Documents. In addition, this Certificate is
not guaranteed by any governmental agency or instrumentality and is limited in
right of payment to certain collections and recoveries with respect to the
Mortgage Collateral, all as more specifically set forth herein. A copy of the
Trust Agreement may be examined by any Certificateholder upon written request
during normal business hours at the principal office of the Depositor and at
such other places, if any, designated by the Depositor.
The Trust Agreement permits the amendment thereof as specified below,
provided that any amendment be accompanied by the consent of the Credit Enhancer
and an Opinion of Counsel to the Owner Trustee to the effect that such amendment
complies with the provisions of the Trust Agreement and will not cause the Trust
to be subject to an entity level tax. If the purpose of the amendment is to
correct any mistake, eliminate any inconsistency, cure any ambiguity or deal
with any matter not covered, it shall not be necessary to obtain the consent of
any Holder, but the Owner Trustee shall be furnished with a letter from the
Rating Agencies that the amendment will not result in the downgrading or
withdrawal of the rating then assigned to any Security. If the purpose of the
amendment is to prevent the imposition of any federal or state taxes at any time
that any Security is outstanding, it shall not be necessary to obtain the
consent of the any Holder, but the Owner Trustee shall be furnished with an
Opinion of Counsel that such amendment is necessary or helpful to prevent the
imposition of such taxes and is not materially adverse to any Holder. If the
purpose of the amendment is to add or eliminate or change any provision of the
Trust Agreement, other than as specified in the preceding two sentences, the
amendment shall require either (a) a letter from the Rating Agencies that the
amendment will not result in the downgrading or withdrawal of the rating then
assigned to any Security or (b) the consent of Holders of the Certificates
evidencing a majority of the Percentage Interests of the Certificates and the
Indenture Trustee; PROVIDED, HOWEVER, that no such amendment shall (i) reduce in
any manner the amount of, or delay the time of, payments received that are
required to be distributed on any Certificate without the consent of the related
Certificateholder, or (ii) reduce the aforesaid percentage of Certificates the
Holders of which are required to consent to any such amendment without the
consent of the Holders of all such Certificates then outstanding.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Trust in the Borough of Manhattan, The City of New York, accompanied by a
written instrument of transfer in form satisfactory to the Certificate Registrar
duly executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same aggregate interest in the Trust will be issued to the
designated transferee. The initial Certificate Registrar appointed under the
Trust Agreement is __________________________________.
A-7
<PAGE>
Except as provided in the Trust Agreement, the Certificates are
issuable only in minimum denominations of $10,000 and in integral multiples of
$10,000 in excess thereof, except for one Certificate that may not be in an
integral multiple of $10,000. As provided in the Trust Agreement and subject to
certain limitations therein set forth, Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same aggregate
denomination, as requested by the Holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but the
Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Certificate Paying Agent, the Certificate
Registrar and any agent of the Owner Trustee, the Certificate Paying Agent, or
the Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Owner Trustee,
the Certificate Paying Agent, the Certificate Registrar or any such agent shall
be affected by any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate (i) upon the final distribution of all
moneys or other property or proceeds of the Owner Trust Estate in accordance
with the terms of the Indenture and the Trust Agreement, (ii) the Payment Date
in ____________, or (iii) upon the bankruptcy or insolvency of the Holder of the
Designated Certificate and the satisfaction of other conditions specified in
Section 8.02 of the Trust Agreement.
A-8
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- --------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
- --------------------------------------------------------------------------------
to transfer said Certificate on the books of the Certificate Registrar, with
full power of substitution in the premises.
Dated:
___________________________________________*/
Signature Guaranteed:
____________________________*/
_________________
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-9
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Certificate Paying Agent:
Distribution shall be made by wire transfer in immediately available
funds to _______________________________________________________________________
________________________________ for theaccount of ____________________________,
account number ______________, or, if mailed by check, to ______________.
Applicable statements should be mailed to__________________.
______________________________
Signature of assignee or agent
(for authorization of wire
transfer only)
A-10
<PAGE>
EXHIBIT B
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
IMPERIAL CMB TRUST SERIES 199_-_
THIS Certificate of Trust of Imperial CMB Trust Series 199_-_
(the "Trust"), dated ___________, ____, is being duly executed and filed by
______________________, a Delaware banking corporation, as trustee, to form a
business trust under the Delaware Business Trust Act (12 DEL. CODE, ss. 3801 ET
SEQ.).
1. NAME. The name of the business trust formed hereby is Imperial CMB
Trust ---- Series 199_-_.
2. DELAWARE TRUSTEE. The name and business address of the trustee of
the Trust in the State of Delaware is ______________________,
__________________, __________, ______________, Attention:
______________________________.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
----------------------,
not in its individual capacity but solely as
owner trustee under a Trust Agreement
dated as of _________, ____,
By:________________________________
Name:
Title:
B-1
<PAGE>
EXHIBIT C
[FORM OF RULE 144A INVESTMENT REPRESENTATION]
Description of Rule 144A Securities, including numbers:
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
The undersigned seller, as registered holder (the "Seller"), intends to
transfer the Rule 144A Securities described above to the undersigned buyer (the
"Buyer").
1. In connection with such transfer and in accordance with the
agreements pursuant to which the Rule 144A Securities were issued, the Seller
hereby certifies the following facts: Neither the Seller nor anyone acting on
its behalf has offered, transferred, pledged, sold or otherwise disposed of the
Rule 144A Securities, any interest in the Rule 144A Securities or any other
similar security to, or solicited any offer to buy or accept a transfer, pledge
or other disposition of the Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security from, or otherwise approached or
negotiated with respect to the Rule 144A Securities, any interest in the Rule
144A Securities or any other similar security with, any person in any manner, or
made any general solicitation by means of general advertising or in any other
manner, or taken any other action, that would constitute a distribution of the
Rule 144A Securities under the Securities Act of 1933, as amended (the "1933
Act"), or that would render the disposition of the Rule 144A Securities a
violation of Section 5 of the 1933 Act or require registration pursuant thereto,
and that the Seller has not offered the Rule 144A Securities to any person other
than the Buyer or another "qualified institutional buyer" as defined in Rule
144A under the 1933 Act.
2. The Buyer warrants and represents to, and covenants with, the Owner
Trustee and the Depositor (as defined in the Trust Agreement (the "Agreement"),
dated as of _________, ____ between IMH Assets Corp., as Depositor and
______________________, as Owner Trustee pursuant to Section 3.05 of the
Agreement and __________________________________ as indenture trustee, as
follows:
a. The Buyer understands that the Rule 144A Securities have
not been registered under the 1933 Act or the securities laws of any
state.
b. The Buyer considers itself a substantial, sophisticated
institutional investor having such knowledge and experience in
financial and business matters that it is capable of evaluating the
merits and risks of investment in the Rule 144A Securities.
c. The Buyer has been furnished with all information regarding
the Rule 144A Securities that it has requested from the Seller, the
Indenture Trustee, the Owner Trustee or the Servicer.
C-1
<PAGE>
d. Neither the Buyer nor anyone acting on its behalf has
offered, transferred, pledged, sold or otherwise disposed of the Rule
144A Securities, any interest in the Rule 144A Securities or any other
similar security to, or solicited any offer to buy or accept a
transfer, pledge or other disposition of the Rule 144A Securities, any
interest in the Rule 144A Securities or any other similar security
from, or otherwise approached or negotiated with respect to the Rule
144A Securities, any interest in the Rule 144A Securities or any other
similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or
taken any other action, that would constitute a distribution of the
Rule 144A Securities under the 1933 Act or that would render the
disposition of the Rule 144A Securities a violation of Section 5 of the
1933 Act or require registration pursuant thereto, nor will it act, nor
has it authorized or will it authorize any person to act, in such
manner with respect to the Rule 144A Securities.
e. The Buyer is a "qualified institutional buyer" as that term
is defined in Rule 144A under the 1933 Act and has completed either of
the forms of certification to that effect attached hereto as Annex 1 or
Annex 2. The Buyer is aware that the sale to it is being made in
reliance on Rule 144A. The Buyer is acquiring the Rule 144A Securities
for its own account or the accounts of other qualified institutional
buyers, understands that such Rule 144A Securities may be resold,
pledged or transferred only (i) to a person reasonably believed to be a
qualified institutional buyer that purchases for its own account or for
the account of a qualified institutional buyer to whom notice is given
that the resale, pledge or transfer is being made in reliance on Rule
144A, or (ii) pursuant to another exemption from registration under the
1933 Act.
[3. The Buyer warrants and represents to, and covenants with, the
Seller, the Indenture Trustee, Owner Trustee, Servicer and the Depositor that
either (1) the Buyer is (A) not an employee benefit plan (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or a plan (within the meaning of Section 4975(e)(1) of the Internal
Revenue Code of 1986 ("Code")), which (in either case) is subject to ERISA or
Section 4975 of the Code (both a "Plan"), and (B) is not directly or indirectly
purchasing the Rule 144A Securities on behalf of, as investment manager of, as
named fiduciary of, as trustee of, or with "plan assets" of a Plan, or (2) the
Buyer understands that registration of transfer of any Rule 144A Securities to
any Plan, or to any Person acting on behalf of any Plan, will not be made unless
such Plan delivers an opinion of its counsel, addressed and satisfactory to the
Certificate Registrar and the Depositor, to the effect that the purchase and
holding of the Rule 144A Securities by, on behalf of or with "plan assets" of
any Plan would not constitute or result in a prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code, and would not subject the
Depositor, the Servicer, the Indenture Trustee or the Trust to any obligation or
liability (including liabilities under ERISA or Section 4975 of the Code) in
addition to those undertaken in the Agreement or any other liability.]
4. This document may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same document.
C-2
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this document as
of the date set forth below.
_______________________________ ____________________________________
Print Name of Seller Print Name of Buyer
By:____________________________ By:_________________________________
Name: Name:
Title: Title:
Taxpayer Identification: Taxpayer Identification:
No.____________________________ No.________________________
Date:__________________________ Date:______________________
C-3
<PAGE>
ANNEX 1 TO EXHIBIT C
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule
144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
2. In connection with purchases by the Buyer, the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because (i) the Buyer owned and/or invested on a
discretionary basis $______________________1 in securities (except for the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A) and (ii)
the Buyer satisfies the criteria in the category marked below.
___ CORPORATION, ETC. The Buyer is a corporation (other than a bank,
savings and loan ------------------ association or similar
institution), Massachusetts or similar business trust, partnership,
or charitable organization described in Section 501(c)(3) of the
Internal Revenue Code.
___ BANK. The Buyer (a) is a national bank or banking institution
organized under the laws of any State, territory or the District of
Columbia, the business of which is substantially confined to banking
and is supervised by the State or territorial banking commission or
similar official or is a foreign bank or equivalent institution, and
(b) has an audited net worth of at least $25,000,000 as demonstrated
in its latest annual financial statements, A COPY OF WHICH IS
ATTACHED HERETO.
- --------
1 Buyer must own and/or invest on a discretionary basis at least $100,000,000 in
securities unless Buyer is a dealer, and, in that case, Buyer must own and/or
invest on a discretionary basis at least $10,000,000 in securities.
C-4
<PAGE>
___ SAVINGS AND LOAN. The Buyer (a) is a savings and loan association,
building and loan association, cooperative bank, homestead
association or similar institution, which is supervised and examined
by a State or Federal authority having supervision over any such
institutions or is a foreign savings and loan association or
equivalent institution and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial
statements.
___ BROKER-DEALER. The Buyer is a dealer registered pursuant to Section
15 of the Securities Exchange Act of 1934.
___ INSURANCE COMPANY. The Buyer is an insurance company whose primary
and predominant business activity is the writing of insurance or the
reinsuring of risks underwritten by insurance companies and which is
subject to supervision by the insurance commissioner or a similar
official or agency of a State or territory or the District of
Columbia.
___ STATE OR LOCAL PLAN. The Buyer is a plan established and maintained
by a State, its political subdivisions, or any agency or
instrumentality of the State or its political subdivisions, for the
benefit of its employees.
___ ERISA PLAN. The Buyer is an employee benefit plan within the meaning
of Title I of the Employee Retirement Income Security Act of 1974.
___ INVESTMENT ADVISER. The Buyer is an investment adviser registered
under the Investment Advisers Act of 1940.
___ SBIC. The Buyer is a Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d)
of the Small Business Investment Act of 1958.
___ BUSINESS DEVELOPMENT COMPANY. The Buyer is a business development
company as defined in Section 202(a)(22) of the Investment Advisers
Act of 1940.
___ TRUST FUND. The Buyer is a trust fund whose trustee is a bank or
trust company and whose participants are exclusively (a) plans
established and maintained by a State, its political subdivisions,
or any agency or instrumentality of the State or its political
subdivisions, for the benefit of its employees, or (b) employee
benefit plans within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, but is not a trust fund that
includes as participants individual retirement accounts or H.R. 10
plans.
3. The term "SECURITIES" as used herein DOES NOT INCLUDE (i) securities
of issuers that are affiliated with the Buyer, (ii) securities that are part of
an unsold allotment to or subscription by the Buyer, if the Buyer is a dealer,
(iii) bank deposit notes and certificates of deposit, (iv) loan participations,
(v) repurchase agreements, (vi) securities owned but subject to a repurchase
agreement and (vii) currency, interest rate and commodity swaps.
C-5
<PAGE>
4. For purposes of determining the aggregate amount of securities owned
and/or invested on a discretionary basis by the Buyer, the Buyer used the cost
of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934.
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.
___ ___ Will the Buyer be purchasing the Rule 144A
Yes No Securities only for the Buyer's own account?
6. If the answer to the foregoing question is "no", the Buyer agrees
that, in connection with any purchase of securities sold to the Buyer for the
account of a third party (including any separate account) in reliance on Rule
144A, the Buyer will only purchase for the account of a third party that at the
time is a "qualified institutional buyer" within the meaning of Rule 144A. In
addition, the Buyer agrees that the Buyer will not purchase securities for a
third party unless the Buyer has obtained a current representation letter from
such third party or taken other appropriate steps contemplated by Rule 144A to
conclude that such third party independently meets the definition of "qualified
institutional buyer" set forth in Rule 144A.
7. The Buyer will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Buyer's purchase of Rule 144A Securities will
constitute a reaffirmation of this certification as of the date of such
purchase.
____________________________________
Print Name of Buyer
By:_________________________________
Name:
Title:
Date:_______________________________
C-6
<PAGE>
ANNEX 2 TO EXHIBIT C
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers That Are Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule
144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because Buyer is part of a Family of
Investment Companies (as defined below), is such an officer of the Adviser.
2. In connection with purchases by Buyer, the Buyer is a "qualified
institutional buyer" as defined in SEC Rule 144A because (i) the Buyer is an
investment company registered under the Investment Company Act of 1940, and (ii)
as marked below, the Buyer alone, or the Buyer's Family of Investment Companies,
owned at least $100,000,000 in securities (other than the excluded securities
referred to below) as of the end of the Buyer's most recent fiscal year. For
purposes of determining the amount of securities owned by the Buyer or the
Buyer's Family of Investment Companies, the cost of such securities was used.
____ The Buyer owned $___________________ in securities (other than the
excluded securities referred to below) as of the end of the Buyer's
most recent fiscal year (such amount being calculated in accordance
with Rule 144A).
____ The Buyer is part of a Family of Investment Companies which owned in
the aggregate $______________ in securities (other than the excluded
securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with
Rule 144A).
3. The term "FAMILY OF INVESTMENT COMPANIES" as used herein means two
or more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
4. The term "SECURITIES" as used herein does not include (i) securities
of issuers that are affiliated with the Buyer or are part of the Buyer's Family
of Investment Companies, (ii) bank deposit notes and certificates of deposit,
(iii) loan participations, (iv) repurchase agreements, (v) securities owned but
subject to a repurchase agreement and (vi) currency, interest rate and commodity
swaps.
5. The Buyer is familiar with Rule 144A and understands that each of
the parties to which this certification is made are relying and will continue to
rely on the statements
C-7
<PAGE>
made herein because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.
6. The undersigned will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice, the Buyer's purchase of Rule 144A Securities will constitute
a reaffirmation of this certification by the undersigned as of the date of such
purchase.
____________________________
Print Name of Buyer
By:_________________________
Name:____________________
Title:___________________
IF AN ADVISER:
____________________________
Print Name of Buyer
Date:_______________________
C-8
<PAGE>
EXHIBIT D
CERTIFICATE OF NON-FOREIGN STATUS
This Certificate of Non-Foreign Status ("certificate") is delivered
pursuant to Section 3.03 of the Trust Agreement, dated as of _________, ____
(the "Trust Agreement"), between IMH Assets Corp., as depositor and
______________________, as Owner Trustee, in connection with the acquisition of,
transfer to or possession by the undersigned, whether as beneficial owner (the
"Beneficial Owner"), or nominee on behalf of the Beneficial Owner of the
Collateralized Mortgage Certificates, Series 199_-__ (the "Certificate").
Capitalized terms used but not defined in this certificate have the respective
meanings given them in the Trust Agreement.
Each holder must complete Part I, Part II (if the holder is a nominee), and in
all cases sign and otherwise complete Part III. In addition, each holder shall
submit with the Certificate an IRS Form W-9 relating to such holder.
To confirm to the Trust that the provisions of Sections 871, 881 or 1446 of the
Internal Revenue Code (relating to withholding tax on foreign partners) do not
apply in respect of the Certificate held by the undersigned, the undersigned
hereby certifies:
Part I - Complete Either A or B
A. Individual as Beneficial Owner
1. I am (The Beneficial Owner is ) not a non-resident alien
for purposes of U.S. income taxation;
2. My (The Beneficial Owner's) name and home address are:
_____________________
_____________________
_____________________; and
3. My (The Beneficial Owner's) U.S. taxpayer identification
number (Social Security Number) is .
B. Corporate, Partnership or Other Entity as Beneficial Owner
1. _______________ (Name of the Beneficial Owner) is not a
foreign corporation, foreign partnership, foreign trust or
foreign estate (as those terms are defined in the Code and
Treasury Regulations;
2. The Beneficial Owner's office address and place of
incorporation (if applicable) is ; and
C-9
<PAGE>
3. The Beneficial Owner's U.S. employer identification number
is .
Part II - Nominees
If the undersigned is the nominee for the Beneficial Owner, the
undersigned certifies that this certificate has been made in reliance upon
information contained in:
_____ an IRS Form W-9
_____ a form such as this or substantially similar
provided to the undersigned by an appropriate person and (i) the undersigned
agrees to notify the Trust at least thirty (30) days prior to the date that the
form relied upon becomes obsolete, and (ii) in connection with change in
Beneficial Owners, the undersigned agrees to submit a new Certificate of
Non-Foreign Status to the Trust promptly after such change.
Part III - Declaration
The undersigned, as the Beneficial Owner or a nominee thereof, agrees
to notify the Trust within sixty (60) days of the date that the Beneficial Owner
becomes a foreign person. The undersigned understands that this certificate may
be disclosed to the Internal Revenue Service by the Trust and any false
statement contained therein could be punishable by fines, imprisonment or both.
C-10
<PAGE>
Under penalties of perjury, I declare that I have examined this
certificate and to the best of my knowledge and belief it is true, correct and
complete and will further declare that I will inform the Trust of any change in
the information provided above, and, if applicable, I further declare that I
have the authority* to sign this document.
__________________________________
Name
__________________________________
Title (if applicable)
__________________________________
Signature and Date
*Note: If signed pursuant to a power of attorney, the power of attorney must
accompany this certificate.
C-11
<PAGE>
EXHIBIT E
FORM OF INVESTMENT LETTER [NON-RULE 144A]
[DATE]
[Certificate Registrar]
Re: Imperial CMB Trust Series 199_-_
Collateralized Mortgage Certificates,
SERIES 199_-__, (THE "CERTIFICATES")
------------------------------------
Ladies and Gentlemen:
In connection with our acquisition of the above-captioned Certificates,
we certify that (a) we understand that the Certificates are not being registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws and are being transferred to us in a transaction that is exempt
from the registration requirements of the Act and any such laws, (b) we are an
"accredited investor," as defined in Regulation D under the Act, and have such
knowledge and experience in financial and business matters that we are capable
of evaluating the merits and risks of investments in the Certificates, (c) we
have had the opportunity to ask questions of and receive answers from the
Depositor concerning the purchase of the Certificates and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Certificates, (d) we are not an employee benefit plan that is
subject to the Employee Retirement Income Security Act of 1974, as amended, or a
plan that is subject to Section 4975 of the Internal Revenue Code of 1986, as
amended, nor are we acting on behalf of any such plan, (e) we are acquiring the
Certificates for investment for our own account and not with a view to any
distribution of such Certificates (but without prejudice to our right at all
times to sell or otherwise dispose of the Certificates in accordance with clause
(g) below), (f) we have not offered or sold any Certificates to, or solicited
offers to buy any Certificates from, any person, or otherwise approached or
negotiated with any person with respect thereto, or taken any other action which
would result in a violation of Section 5 of the Act, and (g) we will not sell,
transfer or otherwise dispose of any Certificates unless (1) such sale, transfer
or other disposition is made pursuant to an effective registration statement
under the Act or is exempt from such registration requirements, and if
requested, we will at our expense provide an opinion of counsel satisfactory to
the addressees of this certificate that such sale, transfer or other disposition
may be made pursuant to an exemption from the Act, (2) the purchaser or
transferee of such Certificate has executed and delivered to you a certificate
to substantially the same effect as this certificate, and (3) the purchaser or
transferee has otherwise complied with any conditions for transfer set forth in
the Trust Agreement.
Very truly yours,
F-1
<PAGE>
[TRANSFEREE]
By:__________________
Authorized Officer
F-2
EXHIBIT 4.3
IMPERIAL CMB TRUST SERIES 199_ - __
Issuer
AND
[Name of Indenture Trustee]
INDENTURE TRUSTEE
-----------------------------------------
INDENTURE
Dated as of _____ __, 199_
------------------------------------------
COLLATERALIZED MORTGAGE BONDS
-------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
ARTICLE I
Definitions
<S> <C> <C> <C>
1.01. DEFINITIONS.............................................................................. 2
1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT........................................ 2
1.03. RULES OF CONSTRUCTION.................................................................... 2
ARTICLE II
Original Issuance of Bonds
2.01. FORM..................................................................................... 4
2.02. EXECUTION, AUTHENTICATION AND DELIVERY................................................... 4
ARTICLE III
Covenants
3.01. COLLECTION OF PAYMENTS WITH RESPECT TO THE MORTGAGE LOANS................................ 5
3.02. MAINTENANCE OF OFFICE OR AGENCY.......................................................... 5
3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST; PAYING AGENT..................................... 5
3.04. EXISTENCE................................................................................ 6
3.05. PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST.................................... 6
3.06. PROTECTION OF TRUST ESTATE............................................................... 9
3.07. OPINIONS AS TO TRUST ESTATE.............................................................. 9
3.08. PERFORMANCE OF OBLIGATIONS; SERVICING AGREEMENT.......................................... 10
3.09. NEGATIVE COVENANTS....................................................................... 10
3.10. ANNUAL STATEMENT AS TO COMPLIANCE........................................................ 11
3.11. RECORDING OF ASSIGNMENTS................................................................. 11
3.12. REPRESENTATIONS AND WARRANTIES CONCERNING THE MORTGAGE LOANS............................. 11
3.13. AMENDMENTS TO SERVICING AGREEMENT........................................................ 11
3.14. MASTER SERVICER AS AGENT AND BAILEE OF THE MORTGAGE LOANS HOLDER......................... 12
3.15. INVESTMENT COMPANY ACT................................................................... 12
3.16. ISSUER MAY CONSOLIDATE, ETC.............................................................. 12
3.17. SUCCESSOR OR TRANSFEREE.................................................................. 14
3.18. NO OTHER BUSINESS........................................................................ 14
3.19. NO BORROWING............................................................................. 14
3.20. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES........................................ 14
3.21. CAPITAL EXPENDITURES..................................................................... 14
3.22. [Reserved]............................................................................... 14
3.23. RESTRICTED PAYMENTS...................................................................... 14
3.24. NOTICE OF EVENTS OF DEFAULT.............................................................. 15
3.25. FURTHER INSTRUMENTS AND ACTS............................................................. 15
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
3.26. STATEMENTS TO BONDHOLDERS................................................................ 15
3.27. DETERMINATION OF BOND INTEREST RATE AND CERTIFICATE RATE................................. 15
3.28. PAYMENTS UNDER THE CREDIT ENHANCEMENT INSTRUMENT......................................... 15
3.29. REPLACEMENT CREDIT ENHANCEMENT INSTRUMENT................................................ 16
ARTICLE IV
The Bonds; Satisfaction and Discharge of Indenture
4.01. THE BONDS................................................................................ 17
4.02. REGISTRATION OF AND LIMITATIONS ON TRANSFER AND EXCHANGE OF BONDS;
APPOINTMENT OF CERTIFICATE REGISTRAR..................................................... 17
4.03. MUTILATED, DESTROYED, LOST OR STOLEN BONDS............................................... 18
4.04. PERSONS DEEMED OWNERS.................................................................... 19
4.05. CANCELLATION............................................................................. 19
4.06. BOOK-ENTRY BONDS......................................................................... 19
4.07. NOTICES TO DEPOSITORY.................................................................... 20
4.08. DEFINITIVE BONDS......................................................................... 20
4.09. TAX TREATMENT............................................................................ 21
4.10. SATISFACTION AND DISCHARGE OF INDENTURE.................................................. 21
4.11. APPLICATION OF TRUST MONEY............................................................... 22
4.12. SUBROGATION AND COOPERATION.............................................................. 22
4.13. REPAYMENT OF MONIES HELD BY PAYING AGENT................................................. 23
4.14. TEMPORARY BONDS.......................................................................... 23
ARTICLE V
DEFAULT AND REMEDIES
5.01. EVENTS OF DEFAULT........................................................................ 24
5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT....................................... 24
5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY INDENTURE
TRUSTEE.................................................................................. 25
5.04. REMEDIES; PRIORITIES..................................................................... 27
5.05. OPTIONAL PRESERVATION OF THE TRUST ESTATE................................................ 28
5.06. LIMITATION OF SUITS...................................................................... 29
5.07. UNCONDITIONAL RIGHTS OF BONDHOLDERS TO RECEIVE PRINCIPAL AND
INTEREST................................................................................. 29
5.08. RESTORATION OF RIGHTS AND REMEDIES....................................................... 29
5.09. RIGHTS AND REMEDIES CUMULATIVE........................................................... 30
5.10. DELAY OR OMISSION NOT A WAIVER........................................................... 30
5.11. CONTROL BY BONDHOLDERS................................................................... 30
5.12. WAIVER OF PAST DEFAULTS.................................................................. 31
5.13. UNDERTAKING FOR COSTS.................................................................... 31
5.14. WAIVER OF STAY OR EXTENSION LAWS......................................................... 31
5.15. SALE OF TRUST ESTATE..................................................................... 31
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
5.16. ACTION ON BONDS.......................................................................... 33
ARTICLE VI
THE INDENTURE TRUSTEE
6.01. DUTIES OF INDENTURE TRUSTEE.............................................................. 35
6.02. RIGHTS OF INDENTURE TRUSTEE.............................................................. 36
6.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE................................................... 36
6.04. INDENTURE TRUSTEE'S DISCLAIMER........................................................... 36
6.05. NOTICE OF EVENT OF DEFAULT............................................................... 37
6.06. REPORTS BY INDENTURE TRUSTEE TO HOLDERS.................................................. 37
6.07. COMPENSATION AND INDEMNITY............................................................... 37
6.08. REPLACEMENT OF INDENTURE TRUSTEE......................................................... 37
6.09. SUCCESSOR INDENTURE TRUSTEE BY MERGER.................................................... 38
6.10. APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE INDENTURE TRUSTEE........................ 39
6.11. ELIGIBILITY; DISQUALIFICATION............................................................ 40
6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER......................................... 40
6.13. REPRESENTATION AND WARRANTY.............................................................. 40
6.14. DIRECTIONS TO INDENTURE TRUSTEE.......................................................... 41
6.15. NO CONSENT TO CERTAIN ACTS OF DEPOSITOR.................................................. 41
6.16. INDENTURE TRUSTEE MAY OWN SECURITIES..................................................... 41
ARTICLE VII
BONDHOLDERS' LISTS AND REPORTS
7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF
BONDHOLDERS.............................................................................. 42
7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO BONDHOLDERS............................... 42
7.03. REPORTS BY ISSUER........................................................................ 42
7.04. REPORTS BY INDENTURE TRUSTEE............................................................. 43
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
8.01. COLLECTION OF MONEY...................................................................... 44
8.02. TRUST ACCOUNTS........................................................................... 44
8.03. OFFICER'S CERTIFICATE.................................................................... 45
8.04. TERMINATION UPON DISTRIBUTION TO BONDHOLDERS............................................. 45
8.05. RELEASE OF TRUST ESTATE.................................................................. 45
8.06. SURRENDER OF BONDS UPON FINAL PAYMENT.................................................... 46
</TABLE>
ARTICLE IX
SUPPLEMENTAL INDENTURES
iii
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF BONDHOLDERS................................... 47
9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF BONDHOLDERS...................................... 48
9.03. EXECUTION OF SUPPLEMENTAL INDENTURES..................................................... 49
9.04. EFFECT OF SUPPLEMENTAL INDENTURE......................................................... 50
9.05. CONFORMITY WITH TRUST INDENTURE ACT...................................................... 50
9.06. REFERENCE IN BONDS TO SUPPLEMENTAL INDENTURES............................................ 50
ARTICLE X
MISCELLANEOUS
10.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC................................................ 51
10.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE......................................... 52
10.03. ACTS OF BONDHOLDERS...................................................................... 53
10.04. NOTICES, ETC., TO INDENTURE TRUSTEE, ISSUER, CREDIT ENHANCER AND
RATING AGENCIES.......................................................................... 54
10.05. NOTICES TO BONDHOLDERS; WAIVER........................................................... 54
10.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS.................................................. 55
10.07. CONFLICT WITH TRUST INDENTURE ACT........................................................ 55
10.08. EFFECT OF HEADINGS....................................................................... 55
10.09. SUCCESSORS AND ASSIGNS................................................................... 55
10.10. SEPARABILITY............................................................................. 55
10.11. BENEFITS OF INDENTURE.................................................................... 56
10.12. LEGAL HOLIDAYS........................................................................... 56
10.13. GOVERNING LAW............................................................................ 56
10.14. COUNTERPARTS............................................................................. 56
10.15. RECORDING OF INDENTURE................................................................... 56
10.16. ISSUER OBLIGATION........................................................................ 56
10.17. NO PETITION.............................................................................. 57
10.18. INSPECTION............................................................................... 57
10.19. AUTHORITY OF THE ADMINISTRATOR........................................................... 57
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Signatures and Seals ......................................................................................... 81
Acknowledgments .............................................................................................. 82
</TABLE>
iv
<PAGE>
EXHIBITS
Exhibit A - Form of Bonds
Appendix A Definitions
v
<PAGE>
This Indenture, dated as of ________, between Imperial CMB
Trust Series 199_ -__, a Delaware business trust, as Issuer (the "Issuer"), and
____________________________, a ____________________________, as Indenture
Trustee (the "Indenture Trustee"),
WITNESSETH THAT:
Each party hereto agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders of the Issuer's
Series 199_-_ Collateralized Mortgage Bonds (the "Bonds").
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the
Closing Date, as trustee for the benefit of the Holders of the Bonds, all of the
Issuer's right, title and interest in and to whether now existing or hereafter
created by (a) the Mortgage Loans and the proceeds thereof, (b) all funds on
deposit in the Funding Account, including all income from the investment and
reinvestment of funds therein, (c) all funds on deposit from time to time in the
Collection Account allocable to the Mortgage Loans excluding any investment
income from such funds; (d) all funds on deposit from time to time in the
Payment Account and in all proceeds thereof; (e) the Policy and (f) all present
and future claims, demands, causes and chooses in action in respect of any or
all of the foregoing and all payments on or under, and all proceeds of every
kind and nature whatsoever in respect of, any or all of the foregoing and all
payments on or under, and all proceeds of every kind and nature whatsoever in
the conversion thereof, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, checks, deposit accounts, rights to payment of any and every kind,
and other forms of obligations and receivables, instruments and other property
which at any time constitute all or part of or are included in the proceeds of
any of the foregoing (collectively, the "Trust Estate" or the "Collateral").
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Bonds, equally and ratably without prejudice, priority or distinction, and to
secure compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as trustee on behalf of the Holders of
the Bonds, acknowledges such Grant, accepts the trust under this Indenture in
accordance with the provisions hereof and agrees to perform its duties as
Indenture Trustee as required herein.
<PAGE>
ARTICLE I
Definitions
Section 1.01. DEFINITIONS. For all purposes of this Indenture, except
as otherwise expressly provided herein or unless the context otherwise requires,
capitalized terms not otherwise defined herein shall have the meanings assigned
to such terms in the Definitions attached hereto as Appendix A which is
incorporated by reference herein. All other capitalized terms used herein shall
have the meanings specified herein.
Section 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the Trust Indenture Act (the
"TIA"), the provision is incorporated by reference in and made a part of this
Indenture. The following TIA terms used in this Indenture have the following
meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Bonds.
"indenture security holder" means a Bondholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
have the meaning assigned to them by such definitions.
Section 1.03. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without
limitation;
(v) words in the singular include the plural
and words in the plural include the singular; and
2
<PAGE>
(vi) any agreement, instrument or statute defined or
referred to herein or in any instrument or certificate delivered in
connection herewith means such agreement, instrument or statute as from
time to time amended, modified or supplemented and includes (in the
case of agreements or instruments) references to all attachments
thereto and instruments incorporated therein; references to a Person
are also to its permitted successors and assigns.
3
<PAGE>
ARTICLE II
Original Issuance of Bonds
Section 2.01. FORM. The Bonds, together with the Indenture Trustee's
certificate of authentication, shall be in substantially the form set forth in
Exhibit A, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Bonds, as evidenced by their execution of the Bonds. Any
portion of the text of any Bond may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Bond.
The Bonds shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the Authorized Officers executing such Bonds, as
evidenced by their execution of such Bonds.
The terms of the Bonds set forth in Exhibit A are part of the terms of
this Indenture.
Section 2.02. EXECUTION, AUTHENTICATION AND DELIVERY. The Bonds shall
be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Bonds may be manual or
facsimile.
Bonds bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Bonds or did not hold
such offices at the date of such Bonds.
The Indenture Trustee shall upon Issuer Request authenticate and
deliver Bonds for original issue in an aggregate initial principal amount of
$___________.
Each Bond shall be dated the date of its authentication. The Bonds
shall be issuable as registered Bonds and the Bonds shall be issuable in the
minimum initial Security Balances of $100,000 and in integral multiples of
$1,000 in excess thereof.
No Bond shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Bond a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Bond shall be conclusive
evidence, and the only evidence, that such Bond has been duly authenticated and
delivered hereunder.
4
<PAGE>
ARTICLE III
Covenants
Section 3.01. COLLECTION OF PAYMENTS WITH RESPECT TO THE MORTGAGE
LOANS. The Indenture Trustee shall establish and maintain with itself a trust
account (the "Payment Account") in which the Indenture Trustee shall, subject to
the terms of this paragraph, deposit, on the same day as it is received from the
Master Servicer, each remittance received by the Indenture Trustee with respect
to the Mortgage Loans. The Indenture Trustee shall make all payments of
principal of and interest on the Bonds, subject to Section 3.03 as provided in
Section 3.05 herein from monies on deposit in the Payment Account.
Section 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain
in the [Borough of Manhattan, The City of New York,] an office or agency where,
subject to satisfaction of conditions set forth herein, Bonds may be surrendered
for registration of transfer or exchange, and where notices and demands to or
upon the Issuer in respect of the Bonds and this Indenture may be served. The
Issuer hereby initially appoints the Indenture Trustee to serve as its agent for
the foregoing purposes. If at any time the Issuer shall fail to maintain any
such office or agency or shall fail to furnish the Indenture Trustee with the
address thereof, such surrenders, notices and demands may be made or served at
the Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee
as its agent to receive all such surrenders, notices and demands.
Section 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST; PAYING AGENT. (a)
As provided in Section 3.01, all payments of amounts due and payable with
respect to any Bonds that are to be made from amounts withdrawn from the Payment
Account pursuant to Section 3.01 shall be made on behalf of the Issuer by the
Indenture Trustee or by the Paying Agent, and no amounts so withdrawn from the
Payment Account for payments of Bonds shall be paid over to the Issuer except as
provided in this Section 3.03.
The Issuer will cause each Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee an instrument in which
such Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent it hereby so agrees), subject to the provisions of
this Section 3.03, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts
due with respect to the Bonds in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by
the Issuer of which it has actual knowledge in the making of any
payment required to be made with respect to the Bonds;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee, forthwith
pay to the Indenture Trustee all sums so held in trust by such Paying
Agent;
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(iv) immediately resign as Paying Agent and forthwith
pay to the Indenture Trustee all sums held by it in trust for the
payment of Bonds if at any time it ceases to meet the standards
required to be met by a Paying Agent at the time of its appointment;
and
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on any Bonds of
any applicable withholding taxes imposed thereon and with respect to
any applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Request direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Bond and remaining unclaimed for one year
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer on Issuer Request; and the Holder of such Bond shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and direction of the Issuer cause to be published once, in
an Authorized Newspaper published in the English language, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The Indenture
Trustee may also adopt and employ, at the expense and direction of the Issuer,
any other reasonable means of notification of such repayment (including, but not
limited to, mailing notice of such repayment to Holders whose Bonds have been
called but have not been surrendered for redemption or whose right to or
interest in monies due and payable but not claimed is determinable from the
records of the Indenture Trustee or of any Paying Agent, at the last address of
record for each such Holder).
Section 3.04. EXISTENCE. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Bonds, the Mortgage Loans and each other
instrument or agreement included in the Trust Estate.
Section 3.05. PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST.
(a) On each Payment Date from amounts on deposit in the Payment Account after
making (x) any deposit
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to the Funding Account pursuant to Section 8.02(b) and (y) any deposits to the
Payment Account pursuant to Section 8.02(c)(ii) and Section 8.02(c)(i)(2), the
Indenture Trustee shall pay to the Bondholders, the Certificate Paying Agent, on
behalf of the Certificateholders, and to other Persons the amounts to which they
are entitled as set forth below:
(i) The sum of (x) to the Bondholders the sum of (a)
one month's interest at the Bond Interest Rate on the Security Balances
of Bonds immediately prior to such Payment Date and (b) any previously
accrued and unpaid interest for prior Payment Dates and (y) to the
Certificate Paying Agent, the Certificate Distribution Amount for such
Payment Date;
(ii) if such Payment Date is after the Funding Period,
to the Bondholders and the Certificate Paying Agent as the case may be,
as principal on the Bonds and the Certificates, the applicable Security
Percentage of the Principal Collection Distribution Amount and if such
Payment Date is the first Payment Date following the end of the Funding
Period (if ending due to an Amortization Event) or the Payment Date on
which the Funding Period ends, to the Bondholders and Certificate
Paying Agent as principal on the Bonds and Certificates the applicable
Security Percentage of the amount deposited from the Funding Account in
respect of Security Principal Collections;
(iii) to the Bondholders and the Certificate Paying
Agent, as the case may be, as principal on the Bonds and the
Certificates, pro rata, based on the Security Balances from the amount
remaining on deposit in the Payment Account, up to the applicable
Security Percentage of Liquidation Loss Amounts for the related
Collection Period;
(iv) to the Bondholders and the Certificate Paying
Agent, as the case may be, as principal on the Bonds and the
Certificates, pro rata, based on the Security Balances from the amount
remaining on deposit in the Payment Account, up to the applicable
Security Percentage of Carryover Loss Amounts;
(v) to the Credit Enhancer, in the amount of the
premium for the Credit Enhancement Instrument and for any Additional
Credit Enhancement Instrument;
(vi) to the Credit Enhancer, to reimburse it for prior
draws made on the Credit Enhancement Instrument and on any Additional
Credit Enhancement Instrument (with interest thereon as provided in the
Insurance Agreement);
(vii) to the Bondholders and the Certificate Paying
Agent, as the case may be, as principal on the Bonds and the
Certificates, pro rata, based on the Security Balances from Security
Interest Collections, up to the Special Capital Distribution Amount for
such Payment Date;
(viii) to the Credit Enhancer, any other amounts owed to
the Credit Enhancer pursuant to the Insurance Agreement;
(ix) [Reserved];
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(x) to reimburse the Administrator for expenditures
made on behalf of the Issuer with respect to the performance of its
duties under the Indenture; and
(xi) Any remaining amount, to the Certificate Paying
Agent, on behalf of the Certificates.
PROVIDED, HOWEVER, in the event that on a Payment Date a Credit Enhancer Default
shall have occurred and be continuing then the priorities of distributions
described above will be adjusted such that payments of the Certificate
Distribution Amount and all other amounts to be paid to the Certificate Paying
Agent will not be paid until the full amount of interest and principal in
accordance with clauses (i), (x) and (ii) through (iv) above that are due on the
Bonds on such Payment Date have been paid and PROVIDED, FURTHER, that on the
Final Scheduled Payment Date or other final Payment Date, the amount to be paid
pursuant to clause (ii) above shall be equal to the Security Balances of the
Securities immediately prior to such Payment Date.
On each Payment Date, the Certificate Paying Agent shall deposit in the
Certificate Distribution Account all amounts it received pursuant to this
Section 3.05 for the purpose of distributing such funds to the
Certificateholders.
The amounts paid to Bondholders shall be paid to each Class in
accordance with the Class Percentage as set forth in paragraph (b) below.
Interest will accrue on the Bonds during an Interest Period on the basis of the
actual number of days in such Interest Period and a year assumed to consist of
360 days.
[Any installment of interest or principal, if any, payable on any Bond
or Certificate that is punctually paid or duly provided for by the Issuer on the
applicable Payment Date shall, if such Holder holds Bonds or Certificates of an
aggregate initial Principal Balance of at least $1,000,000, be paid to each
Holder of record on the preceding Record Date, by wire transfer to an account
specified in writing by such Holder reasonably satisfactory to the Indenture
Trustee as of the preceding Record Date or in all other cases or if no such
instructions have been delivered to the Indenture Trustee, by check to such
Bondholder mailed to such Holder's address as it appears in the Bond Register
the amount required to be distributed to such Holder on such Payment Date
pursuant to such Holder's Securities; PROVIDED, HOWEVER, that the Indenture
Trustee shall not pay to such Holders any amount required to be withheld from a
payment to such Holder by the Code.]
(b) The principal of each Bond shall be due and payable in full on the
Final Scheduled Payment Date for such Bond as provided in the form of Bond set
forth in Exhibit A. All principal payments on each Class of Bonds shall be made
to the Bondholders of such Class entitled thereto in accordance with the
Percentage Interests represented by such Bonds. Upon notice to the Indenture
Trustee by the Issuer, the Indenture Trustee shall notify the Person in whose
name a Bond is registered at the close of business on the Record Date preceding
the Final Scheduled Payment Date or other final Payment Date. Such notice shall
be mailed no later than five Business Days prior to such Final Scheduled Payment
Date or other final Payment Date and shall specify that payment of the principal
amount and any interest due with respect to such Bond at the Final Scheduled
Payment Date or other final Payment Date will be payable only upon
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presentation and surrender of such Bond and shall specify the place where such
Bond may be presented and surrendered for such final payment.
Section 3.06. PROTECTION OF TRUST ESTATE. (a) The Issuer will from time
to time execute and deliver all such supplements and amendments hereto and all
such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i) maintain or preserve the lien and security interest
(and the priority thereof) of this Indenture or carry out more
effectively the purposes hereof;
(ii) perfect, publish notice of or protect the validity
of any Grant made or to be made by this Indenture;
(iii) cause the Issuer to enforce any of the Mortgage
Loans; or
(iv) preserve and defend title to the Trust Estate and
the rights of the Indenture Trustee and the Bondholders in such Trust
Estate against the claims of all persons and parties.
(b) Except as otherwise provided in this Indenture, the Indenture
Trustee shall not remove any portion of the Trust Estate that consists of money
or is evidenced by an instrument, certificate or other writing from the
jurisdiction in which it was held at the date of the most recent Opinion of
Counsel delivered pursuant to Section 3.07 (or from the jurisdiction in which it
was held as described in the Opinion of Counsel delivered at the Closing Date
pursuant to Section 3.07(a), if no Opinion of Counsel has yet been delivered
pursuant to Section 3.07(b) unless the Trustee shall have first received an
Opinion of Counsel to the effect that the lien and security interest created by
this Indenture with respect to such property will continue to be maintained
after giving effect to such action or actions.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.06.
Section 3.07. OPINIONS AS TO TRUST ESTATE. (a) On the Closing Date, the
Issuer shall furnish to the Indenture Trustee and the Owner Trustee an Opinion
of Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to the recording and filing of this Indenture, any
indentures supplemental hereto, and any other requisite documents, and with
respect to the execution and filing of any financing statements and continuation
statements, as are necessary to perfect and make effective the lien and security
interest in the Mortgage Loans and reciting the details of such action, or
stating that, in the opinion of such counsel, no such action is necessary to
make such lien and security interest effective.
(b) On or before ___________ in each calendar year, beginning in ____,
the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel at the
expense of the Issuer either stating that, in the opinion of such counsel, such
action has been taken with respect to the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any
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other requisite documents and with respect to the execution and filing of any
financing statements and continuation statements as is necessary to maintain the
lien and security interest in the Mortgage Loans and reciting the details of
such action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest. Such Opinion of Counsel
shall also describe the recording, filing, re-recording and refiling of this
Indenture, any indentures supplemental hereto and any other requisite documents
and the execution and filing of any financing statements and continuation
statements that will, in the opinion of such counsel, be required to maintain
the lien and security interest in the Mortgage Loans until December 31 in the
following calendar year.
Section 3.08. PERFORMANCE OF OBLIGATIONS; SERVICING AGREEMENT. (a) The
Issuer will punctually perform and observe all of its obligations and agreements
contained in this Indenture, the Basic Documents and in the instruments and
agreements included in the Trust Estate.
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Indenture Trustee in an Officer's Certificate of
the Issuer shall be deemed to be action taken by the Issuer. Initially, the
Issuer has contracted with the Administrator to assist the Issuer in performing
its duties under this Indenture.
(c) The Issuer will not take any action or permit any action to be
taken by others which would release any Person from any of such Person's
covenants or obligations under any of the documents relating to the Mortgage
Loans or under any instrument included in the Trust Estate, or which would
result in the amendment, hypothecation, subordination, termination or discharge
of, or impair the validity or effectiveness of, any of the documents relating to
the Mortgage Loans or any such instrument, except such actions as the Master
Servicer is expressly permitted to take in the Servicing Agreement. The
Indenture Trustee, as pledgee of the Mortgage Loans, shall be able to exercise
the rights Issuer and the Mortgage Loans holder, to direct the actions of the
Master Servicer.
(d) The Issuer shall at all times retain an Administrator (approved by
the Credit Enhancer under the Administration Agreement) and may enter into
contracts with other Persons for the performance of the Issuer's obligations
hereunder, and performance of such obligations by such Persons shall be deemed
to be performance of such obligations by the Issuer.
Section 3.09. NEGATIVE COVENANTS. So long as any Bonds are Outstanding,
the Issuer -------------------- shall not:
(i) except as expressly permitted by this Indenture,
sell, transfer, exchange or otherwise dispose of the Trust Estate,
unless directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Bonds (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Bondholder by reason of the
payment of the taxes levied or assessed upon any part of the Trust
Estate;
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(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or
permit any Person to be released from any covenants or obligations with
respect to the Bonds under this Indenture except as may be expressly
permitted hereby, (B) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of this
Indenture) to be created on or extend to or otherwise arise upon or
burden the Trust Estate or any part thereof or any interest therein or
the proceeds thereof or (C) permit the lien of this Indenture not to
constitute a valid first priority security interest in the Trust
Estate; or
(iv) waive or impair, or fail to assert rights under,
the Mortgage Loans, or impair or cause to be impaired the Company's or
the Issuer's interest in the Mortgage Loans, the Mortgage Loan Purchase
Agreement or in any Basic Document, if any such action would materially
and adversely affect the interests of the Bondholders.
Section 3.10. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will
deliver to the Indenture Trustee, within 120 days after the end of each fiscal
year of the Issuer (commencing with the fiscal year ____), an Officer's
Certificate stating, as to the Authorized Officer signing such Officer's
Certificate, that:
(i) a review of the activities of the Issuer during
such year and of its performance under this Indenture has been made
under such Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge,
based on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a default in its compliance with any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
Section 3.11. RECORDING OF ASSIGNMENTS. The Company shall cause the to
exercise its right under the Mortgage Loan Purchase Agreement with respect to
the obligation of the Seller to submit or cause to be submitted for recording
all Assignments of Mortgages on or prior to ______________ with respect to the
Initial Loans and within 60 days following the related Deposit Date with respect
to any Additional Loans.
Section 3.12. REPRESENTATIONS AND WARRANTIES CONCERNING THE MORTGAGE
LOANS. The Indenture Trustee, as pledgee of the Mortgage Loans, has the benefit
of the representations and warranties made by the Seller in Section [____] and
Section [____] of the Mortgage Loan Purchase Agreement concerning the Mortgage
Loans and the right to enforce the remedies against the Seller provided in such
Section [____] or Section [____] to the same extent as though such
representations and warranties were made directly to the Indenture Trustee.
Section 3.13. AMENDMENTS TO SERVICING AGREEMENT. The Issuer covenants
with the Indenture Trustee that it will not enter into any amendment or
supplement to the Servicing Agreement in accordance with Section 8.01 of the
Servicing Agreement without the prior written consent of the Indenture Trustee.
The Indenture Trustee, as pledgee of the Mortgage Loans,
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may, in its discretion, decline to enter into or consent to any such supplement
or amendment if its own rights, duties or immunities shall be adversely
affected.
Section 3.14. MASTER SERVICER AS AGENT AND BAILEE OF THE MORTGAGE LOANS
HOLDER. Solely for purposes of perfection under Section 9-305 of the Uniform
Commercial Code or other similar applicable law, rule or regulation of the state
in which such property is held by the Master Servicer, the Indenture Trustee
hereby acknowledges that the Master Servicer is acting as agent and bailee of
the Mortgage Loans holder in holding amounts on deposit in the Collection
Account pursuant to Section 3.02 of the Servicing Agreement, as well as its
agent and bailee in holding any Related Documents released to the Master
Servicer pursuant to Section 3.06(c) of the Servicing Agreement, and any other
items constituting a part of the Trust Estate which from time to time come into
the possession of the Master Servicer. It is intended that, by the Master
Servicer's acceptance of such agency pursuant to Section 3.02 of the Servicing
Agreement, the Trustee, as a secured party of the Mortgage Loans, will be deemed
to have possession of such Related Documents, such monies and such other items
for purposes of Section 9-305 of the Uniform Commercial Code of the state in
which such property is held by the Master Servicer.
Section 3.15. INVESTMENT COMPANY ACT. The Issuer shall not become an
"investment company" or under the "control" of an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended (or any
successor or amendatory statute), and the rules and regulations thereunder
(taking into account not only the general definition of the term "investment
company" but also any available exceptions to such general definition);
provided, however, that the Issuer shall be in compliance with this Section 3.15
if it shall have obtained an order exempting it from regulation as an
"investment company" so long as it is in compliance with the conditions imposed
in such order.
Section 3.16. ISSUER MAY CONSOLIDATE, ETC. (a) The Issuer shall not
consolidate or merge with or into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America or any state or
the District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Indenture Trustee,
in form reasonably satisfactory to the Indenture Trustee, the due and
punctual payment of the principal of and interest on all Bonds and to
the Certificate Paying Agent, on behalf of the Certificateholders and
the performance or observance of every agreement and covenant of this
Indenture on the part of the Issuer to be performed or observed, all as
provided herein;
(ii) immediately after giving effect to such
transaction, no Event of Default shall have occurred and be continuing;
(iii) the Rating Agencies shall have notified the Issuer
that such transaction shall not cause the rating of the Bonds [or the
Certificates] to be reduced, suspended or withdrawn or to be considered
by either Rating Agency to be below investment grade without taking
into account the Credit Enhancement Instrument;
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(iv) the Issuer shall have received an Opinion of
Counsel (and shall have delivered copies thereof to the Indenture
Trustee) to the effect that such transaction will not have any material
adverse tax consequence to the Issuer, any Bondholder or any
Certificateholder;
(v) any action that is necessary to maintain the lien
and security interest created by this Indenture shall have been taken;
and
(vi) the Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel each stating
that such consolidation or merger and such supplemental indenture
comply with this Article III and that all conditions precedent herein
provided for relating to such transaction have been complied with
(including any filing required by the Exchange Act).
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer
the properties and assets of the Issuer the conveyance or transfer of
which is hereby restricted shall (A) be a United States citizen or a
Person organized and existing under the laws of the United States of
America or any state, (B) expressly assumes, by an indenture
supplemental hereto, executed and delivered to the Indenture Trustee,
in form satisfactory to the Indenture Trustee, the due and punctual
payment of the principal of and interest on all Bonds and the
performance or observance of every agreement and covenant of this
Indenture on the part of the Issuer to be performed or observed, all as
provided herein, (C) expressly agrees by means of such supplemental
indenture that all right, title and interest so conveyed or transferred
shall be subject and subordinate to the rights of Holders of the Bonds,
(D) unless otherwise provided in such supplemental indenture, expressly
agrees to indemnify, defend and hold harmless the Issuer against and
from any loss, liability or expense arising under or related to this
Indenture and the Bonds and (E) expressly agrees by means of such
supplemental indenture that such Person (or if a group of Persons, then
one specified Person) shall make all filings with the Commission (and
any other appropriate Person) required by the Exchange Act in
connection with the Bonds;
(ii) immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing;
(iii) the Rating Agencies shall have notified the Issuer
that such transaction shall not cause the rating of the Bonds or the
Certificates to be reduced, suspended or withdrawn;
(iv) the Issuer shall have received an Opinion of
Counsel (and shall have delivered copies thereof to the Indenture
Trustee) to the effect that such transaction will not have any material
adverse tax consequence to the Issuer or any Bondholder;
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(v) any action that is necessary to maintain the lien
and security interest created by this Indenture shall have been taken;
and
(vi) the Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel each stating
that such conveyance or transfer and such supplemental indenture comply
with this Article III and that all conditions precedent herein provided
for relating to such transaction have been complied with (including any
filing required by the Exchange Act).
Section 3.17. SUCCESSOR OR TRANSFEREE. (a) Upon any consolidation or
merger of the Issuer in accordance with Section 3.16(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.16(b), the Issuer will be released from every
covenant and agreement of this Indenture to be observed or performed on the part
of the Issuer with respect to the Bonds immediately upon the delivery of written
notice to the Indenture Trustee of such conveyance or transfer.
Section 3.18. NO OTHER BUSINESS. The Issuer shall not engage in any
business other than financing, purchasing, owning and selling and managing the
Mortgage Loans and the issuance of the Bonds and Certificates in the manner
contemplated by this Indenture and the Basic Documents and all activities
incidental thereto.
Section 3.19. NO BORROWING. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Bonds.
Section 3.20. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except
as contemplated by this Indenture or the Basic Documents, the Issuer shall not
make any loan or advance or credit to, or guarantee (directly or indirectly or
by an instrument having the effect of assuring another's payment or performance
on any obligation or capability of so doing or otherwise), endorse or otherwise
become contingently liable, directly or indirectly, in connection with the
obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or
agree contingently to do so) any stock, obligations, assets or securities of, or
any other interest in, or make any capital contribution to, any other Person.
Section 3.21. CAPITAL EXPENDITURES. The Issuer shall not make any
expenditure (by long- term or operating lease or otherwise) for capital assets
(either realty or personalty).
Section 3.22. [Reserved]
Section 3.23. RESTRICTED PAYMENTS. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
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in or of the Issuer, (ii) redeem, purchase, retire or otherwise acquire for
value any such ownership or equity interest or security or (iii) set aside or
otherwise segregate any amounts for any such purpose; PROVIDED, HOWEVER, that
the Issuer may make, or cause to be made, (x) distributions to the Owner Trustee
and the Certificateholders as contemplated by, and to the extent funds are
available for such purpose under the Trust Agreement, (y) payments to the Master
Servicer pursuant to the terms of the Servicing Agreement and (z) payments to
the Indenture Trustee pursuant to Section 1(a)(ii) of the Administration
Agreement. The Issuer will not, directly or indirectly, make payments to or
distributions from the Collection Account except in accordance with this
Indenture and the Basic Documents.
Section 3.24. NOTICE OF EVENTS OF DEFAULT. The Issuer shall give the
Indenture Trustee the Credit Enhancer and the Rating Agencies prompt written
notice of each Event of Default hereunder and under the Trust Agreement.
Section 3.25. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Indenture Trustee, the Issuer will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
Section 3.26. STATEMENTS TO BONDHOLDERS. The Indenture Trustee and the
Certificate Registrar shall forward by mail to each Bondholder and
Certificateholder, respectively, the Statement delivered to it pursuant to
Section 4.01 of the Servicing Agreement.
Section 3.27. DETERMINATION OF BOND INTEREST RATE AND CERTIFICATE RATE.
On the second LIBOR Business Day immediately preceding (i) the Closing Date in
the case of the first Interest Period and (ii) the first day of each succeeding
Interest Period, the Indenture Trustee shall determine LIBOR and the Bond
Interest Rate for such Interest Period and shall inform the Issuer, the Master
Servicer and the Depositor at their respective facsimile numbers given to the
Indenture Trustee in writing thereof.
Section 3.28. PAYMENTS UNDER THE CREDIT ENHANCEMENT INSTRUMENT. (a) On
any Payment Date, other than a Dissolution Payment Date, the Indenture Trustee
on behalf of the Bondholders, and in its capacity as Certificate Paying Agent on
behalf of the Certificateholders shall make a draw on the Credit Enhancement
Instrument in an amount if any equal to the sum of (x) the amount by which the
interest accrued at the Bond Interest Rate on the Security Balance of the Bonds
exceeds the amount on deposit in the Payment Account available to be distributed
therefor on such Payment Date and (y) the Guaranteed Principal Payment Amount
(the "Credit Enhancement Draw Amount").
(b) The Indenture Trustee shall submit, if a Credit Enhancement Draw
Amount is specified in any Statement to Holders prepared by the Master Servicer
pursuant to Section 4.01 of the Servicing Agreement, the Notice for Payment (as
defined in the Credit Enhancement Instrument) in the amount of the Credit
Enhancement Draw Amount to the Credit Enhancer no later than 2:00 P.M., New York
City time, on the second Business Day prior to the applicable Payment Date. Upon
receipt of such Credit Enhancement Draw Amount in accordance with the terms of
the Credit Enhancement Instrument, the Indenture Trustee shall deposit such
Credit Enhancement Draw Amount in the Payment Account for distribution to
Holders (and the Certificate Paying Agent on behalf of the Certificates)
pursuant to Section 3.05.
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In addition, a draw may be made under the Credit Enhancement Instrument
in respect of any Avoided Payment (as defined in and pursuant to the terms and
conditions of the Credit Enhancement Instrument) and the Indenture Trustee shall
submit a Notice for Payment with respect thereto together with the other
documents required to be delivered to the Credit Enhancer pursuant to the Credit
Enhancement Instrument in connection with a draw in respect of any Avoided
Payment.
(c) In the event that any Additional Credit Enhancement Instruments are
issued pursuant to Section 4.01 and Section 2.02(B) of the Insurance Agreement,
the Indenture Trustee shall be authorized to make draws thereon subject to the
terms and conditions therein.
Section 3.29. REPLACEMENT CREDIT ENHANCEMENT INSTRUMENT. In the event
of a Credit Enhancer Default or if the claims paying ability rating of the
Credit Enhancer is downgraded and such downgrade results in a downgrading of the
then current rating of the Securities (in each case, a "Replacement Event"), the
Issuer, at its expense, in accordance with and upon satisfaction of the
conditions set forth in the Credit Enhancement Instrument, including, without
limitation, payment in full of all amounts owed to the Credit Enhancer, may, but
shall not be required to, substitute a new surety bond or surety bonds for the
existing Credit Enhancement Instrument or may arrange for any other form of
credit enhancement; PROVIDED, HOWEVER, that in each case the Bonds shall be
rated no lower than the rating assigned by each Rating Agency to the Bonds
immediately prior to such Replacement Event and the timing and mechanism for
drawing on such new credit enhancement shall be reasonably acceptable to the
Indenture Trustee and provided further that the premiums under the proposed
credit enhancement shall not exceed such premiums under the existing Credit
Enhancement Instrument. It shall be a condition to substitution of any new
credit enhancement that there be delivered to the Indenture Trustee (i) an
Opinion of Counsel, acceptable in form to the Indenture Trustee, from counsel to
the provider of such new credit enhancement with respect to the enforceability
thereof and such other matters as the Indenture Trustee may require and (ii) an
Opinion of Counsel to the effect that such substitution would not (a) adversely
affect in any material respect the tax status of the Bonds or (b) cause the
Issuer to be subject to a tax at the entity level. Upon receipt of the items
referred to above and payment of all amounts owing to the Credit Enhancer and
the taking of physical possession of the new credit enhancement, the Indenture
Trustee shall, within five Business Days following receipt of such items and
such taking of physical possession, deliver the replaced Credit Enhancement
Instrument to the Credit Enhancer. In the event of any such replacement the
Issuer shall give written notice thereof to the Rating Agencies.
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ARTICLE IV
The Bonds; Satisfaction and Discharge of Indenture
Section 4.01. THE BONDS. The Bonds shall be registered in the name of a
nominee designated by the Depository. Beneficial Owners will hold interests in
the Bonds through the book-entry facilities of the Depository in minimum initial
Principal Balances of $1,000 and integral multiples of $1,000 in excess thereof.
The Indenture Trustee may for all purposes (including the making of
payments due on the Bonds) deal with the Depository as the authorized
representative of the Beneficial Owners with respect to the Bonds for the
purposes of exercising the rights of Holders of Bonds hereunder. Except as
provided in the next succeeding paragraph of this Section 4.01, the rights of
Beneficial Owners with respect to the Bonds shall be limited to those
established by law and agreements between such Beneficial Owners and the
Depository and Depository Participants. Except as provided in Section 4.08,
Beneficial Owners shall not be entitled to definitive certificates for the Bonds
as to which they are the Beneficial Owners. Requests and directions from, and
votes of, the Depository as Holder of the Bonds shall not be deemed inconsistent
if they are made with respect to different Beneficial Owners. The Indenture
Trustee may establish a reasonable record date in connection with solicitations
of consents from or voting by Bondholders and give notice to the Depository of
such record date. Without the consent of the Issuer and the Indenture Trustee,
no Bond may be transferred by the Depository except to a successor Depository
that agrees to hold such Bond for the account of the Beneficial Owners.
In the event the Depository Trust Company resigns or is removed as
Depository, the Indenture Trustee with the approval of the Issuer may appoint a
successor Depository. If no successor Depository has been appointed within 30
days of the effective date of the Depository's resignation or removal, each
Beneficial Owner shall be entitled to certificates representing the Bonds it
beneficially owns in the manner prescribed in Section 4.08.
The Bonds shall, on original issue, be executed on behalf of the Issuer
by the Owner Trustee, not in its individual capacity but solely as Owner
Trustee, authenticated by the Bond Registrar and delivered by the Indenture
Trustee to or upon the order of the Issuer.
Section 4.02. REGISTRATION OF AND LIMITATIONS ON TRANSFER AND EXCHANGE
OF BONDS; APPOINTMENT OF CERTIFICATE REGISTRAR. The Issuer shall cause to be
kept at its Corporate Trust Office a Bond Register in which, subject to such
reasonable regulations as it may prescribe, the Bond Registrar shall provide for
the registration of Bonds and of transfers and exchanges of Bonds as herein
provided.
Subject to the restrictions and limitations set forth below, upon
surrender for registration of transfer of any Bond at the Corporate Trust
Office, the Indenture Trustee shall execute and the Bond Registrar shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Bonds in authorized initial Security Balances
evidencing the same aggregate Percentage Interests.
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Subject to the foregoing, at the option of the Bondholders, Bonds may
be exchanged for other Bonds of like tenor or, in each case in authorized
initial Principal Balances evidencing the same aggregate Percentage Interests
upon surrender of the Bonds to be exchanged at the Corporate Trust Office of the
Bond Registrar. Whenever any Bonds are so surrendered for exchange, the
Indenture Trustee shall execute and the Bond Registrar shall authenticate and
deliver the Bonds which the Bondholder making the exchange is entitled to
receive. Each Bond presented or surrendered for registration of transfer or
exchange shall (if so required by the Bond Registrar) be duly endorsed by, or be
accompanied by a written instrument of transfer in form reasonably satisfactory
to the Bond Registrar duly executed by, the Holder thereof or his attorney duly
authorized in writing with such signature guaranteed by a commercial bank or
trust company located or having a correspondent located in the city of New York.
Bonds delivered upon any such transfer or exchange will evidence the same
obligations, and will be entitled to the same rights and privileges, as the
Bonds surrendered.
No service charge shall be made for any registration of transfer or
exchange of Bonds, but the Bond Registrar shall require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any registration of transfer or exchange of Bonds.
All Bonds surrendered for registration of transfer and exchange shall
be cancelled by the Bond Registrar and delivered to the Indenture Trustee for
subsequent destruction without liability on the part of either.
The Issuer hereby appoints __________________________________ as
Certificate Registrar to keep at its Corporate Trust Office a Certificate
Register pursuant to Section 3.09 of the Trust Agreement in which, subject to
such reasonable regulations as it may prescribe, the Certificate Registrar shall
provide for the registration of Certificates and of transfers and exchanges
thereof pursuant to Section 3.05 of the Trust Agreement.
__________________________________ hereby accepts such appointment.
Section 4.03. MUTILATED, DESTROYED, LOST OR STOLEN BONDS. If (i) any
mutilated Bond is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Bond, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of notice to the Issuer, the Bond Registrar or
the Indenture Trustee that such Bond has been acquired by a bona fide purchaser,
and provided that the requirements of Section 8-405 of the UCC are met, the
Issuer shall execute, and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Bond, a replacement Bond of the same Class; provided,
however, that if any such destroyed, lost or stolen Bond, but not a mutilated
Bond, shall have become or within seven days shall be due and payable, instead
of issuing a replacement Bond, the Issuer may pay such destroyed, lost or stolen
Bond when so due or payable without surrender thereof. If, after the delivery of
such replacement Bond or payment of a destroyed, lost or stolen Bond pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Bond in lieu of which such replacement Bond was issued presents for payment such
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original Bond, the Issuer and the Indenture Trustee shall be entitled to recover
such replacement Bond (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Bond from such Person to whom such
replacement Bond was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Bond under this Section 4.03, the
Issuer may require the payment by the Holder of such Bond of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Bond issued pursuant to this Section 4.03 in
replacement of any mutilated, destroyed, lost or stolen Bond shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Bond shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Bonds duly issued hereunder.
The provisions of this Section 4.03 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Bonds.
Section 4.04. PERSONS DEEMED OWNERS. Prior to due presentment for
registration of transfer of any Bond, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Bond is registered (as of the day of determination) as the owner of such
Bond for the purpose of receiving payments of principal of and interest, if any,
on such Bond and for all other purposes whatsoever, whether or not such Bond be
overdue, and neither the Issuer, the Indenture Trustee nor any agent of the
Issuer or the Indenture Trustee shall be affected by notice to the contrary.
Section 4.05. CANCELLATION. All Bonds surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Bonds previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Bonds so delivered shall be promptly cancelled by the
Indenture Trustee. No Bonds shall be authenticated in lieu of or in exchange for
any Bonds cancelled as provided in this Section 4.05, except as expressly
permitted by this Indenture. All cancelled Bonds may be held or disposed of by
the Indenture Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Request that they be destroyed or returned to it; provided however, that such
Issuer Request is timely and the Bonds have not been previously disposed of by
the Indenture Trustee.
Section 4.06. BOOK-ENTRY BONDS. The Bonds, upon original issuance, will
be issued in the form of typewritten Bonds representing the Book-Entry Bonds, to
be delivered to The Depository Trust Company, the initial Depository, by, or on
behalf of, the Issuer. Such Bonds shall initially be registered on the Bond
Register in the name of Cede & Co., the nominee of the
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initial Depository, and no Beneficial Owner will receive a Definitive Bond
representing such Beneficial Owner's interest in such Bond, except as provided
in Section 4.08. Unless and until definitive, fully registered Bonds (the
"Definitive Bonds") have been issued to Beneficial Owners pursuant to Section
4.08:
(i) the provisions of this Section 4.06 shall be in full
force and effect;
(ii) the Bond Registrar and the Indenture Trustee shall
be entitled to deal with the Depository for all purposes of this
Indenture (including the payment of principal of and interest on the
Bonds and the giving of instructions or directions hereunder) as the
sole holder of the Bonds, and shall have no obligation to the Owners of
Bonds;
(iii) to the extent that the provisions of this Section
4.06 conflict with any other provisions of this Indenture, the
provisions of this Section 4.06 shall control;
(iv) the rights of Beneficial Owners shall be exercised
only through the Depository and shall be limited to those established
by law and agreements between such Owners of Bonds and the Depository
and/or the Depository Participants. Unless and until Definitive Bonds
are issued pursuant to Section 4.08, the initial Depository will make
book-entry transfers among the Depository Participants and receive and
transmit payments of principal of and interest on the Bonds to such
Depository Participants; and
(v) whenever this Indenture requires or permits actions
to be taken based upon instructions or directions of Holders of Bonds
evidencing a specified percentage of the Security Balances of the
Bonds, the Depository shall be deemed to represent such percentage only
to the extent that it has received instructions to such effect from
Beneficial Owners and/or Depository Participants owning or
representing, respectively, such required percentage of the beneficial
interest in the Bonds and has delivered such instructions to the
Indenture Trustee.
Section 4.07. NOTICES TO DEPOSITORY. Whenever a notice or other
communication to the Bond Holders is required under this Indenture, unless and
until Definitive Bonds shall have been issued to Beneficial Owners pursuant to
Section 4.08, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Bonds to the
Depository, and shall have no obligation to the Beneficial Owners.
Section 4.08. DEFINITIVE BONDS. If (i) the Administrator advises the
Indenture Trustee in writing that the Depository is no longer willing or able to
properly discharge its responsibilities with respect to the Bonds and the
Administrator is unable to locate a qualified successor, (ii) the Administrator
at its option advises the Indenture Trustee in writing that it elects to
terminate the book-entry system through the Depository or (iii) after the
occurrence of an Event of Default, Owners of Bonds representing beneficial
interests aggregating at least a majority of the Security Balances of the Bonds
advise the Depository in writing that the continuation of a book-entry system
through the Depository is no longer in the best interests of the Beneficial
Owners, then the Depository shall notify all Beneficial Owners and the Indenture
Trustee of the occurrence of any such event and of the availability of
Definitive Bonds to Beneficial Owners requesting the same. Upon surrender to the
Indenture Trustee of the typewritten Bonds
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representing the Book-Entry Bonds by the Depository, accompanied by registration
instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate the Definitive Bonds in accordance with the instructions of the
Depository. None of the Issuer, the Bond Registrar or the Indenture Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Bonds, the Indenture Trustee shall recognize the
Holders of the Definitive Bonds as Bondholders.
Section 4.09. TAX TREATMENT. The Issuer has entered into this
Indenture, and the Bonds will be issued, with the intention that, for federal,
state and local income, single business and franchise tax purposes, the Bonds
will qualify as indebtedness of the Issuer. The Issuer, by entering into this
Indenture, and each Bondholder, by its acceptance of its Bond (and each
Beneficial Owner by its acceptance of an interest in the applicable Book-Entry
Bond), agree to treat the Bonds for federal, state and local income, single
business and franchise tax purposes as indebtedness of the Issuer.
Section 4.10. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
shall cease to be of further effect with respect to the Bonds except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Bonds, (iii) rights of Bondholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.06, 3.09,
3.16, 3.18 and 3.19, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.07 and the obligations of the Indenture Trustee under Section 4.11) and (vi)
the rights of Bondholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to the Bonds, when
(A) either
(1) all Bonds theretofore authenticated and delivered (other
than (i) Bonds that have been destroyed, lost or stolen and that have
been replaced or paid as provided in Section 4.03 and (ii) Bonds for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to the
Issuer or discharged from such trust, as provided in Section 3.03) have
been delivered to the Indenture Trustee for cancellation; or
(2) all Bonds not theretofore delivered to the Indenture
Trustee for cancellation
a. have become due and payable,
b. will become due and payable at the Final
Scheduled Payment Date within one year, or
c. have been called for early redemption
pursuant to Section 5.02.
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and the Issuer, in the case of a. or b. above, has irrevocably
deposited or caused to be irrevocably deposited with the Indenture
Trustee cash or direct obligations of or obligations guaranteed by the
United States of America (which will mature prior to the date such
amounts are payable), in trust for such purpose, in an amount
sufficient to pay and discharge the entire indebtedness on such Bonds
and Certificates then outstanding not theretofore delivered to the
Indenture Trustee for cancellation when due on the Final Scheduled
Payment Date;
(B) the Issuer has paid or caused to be paid all other sums
payable hereunder and under the Insurance Agreement by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee and the
Credit Enhancer an Officer's Certificate, an Opinion of Counsel and
each meeting the applicable requirements of Section 10.01 each stating
that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied with
and, if the Opinion of Counsel relates to a deposit made in connection
with Section 4.10(A)(2)b. above, such opinion shall further be to the
effect that such deposit will not have any material adverse tax
consequences to the Issuer, any Bondholders or any Certificateholders.
Section 4.11. APPLICATION OF TRUST MONEY. All monies deposited with the
Indenture Trustee pursuant to Section 4.10 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Bonds and this
Indenture, to the payment, either directly or through any Paying Agent or
Certificate Paying Agent, as the Indenture Trustee may determine, to the Holders
of Securities, of all sums due and to become due thereon for principal and
interest; but such monies need not be segregated from other funds except to the
extent required herein or required by law.
Section 4.12. SUBROGATION AND COOPERATION. (a) The Issuer and the
Indenture Trustee acknowledge that (i) to the extent the Credit Enhancer makes
payments under the Credit Enhancement Instrument on account of principal of or
interest on the Bonds, the Credit Enhancer will be fully subrogated to the
rights of such Holders to receive such principal and interest from the Issuer,
and (ii) the Credit Enhancer shall be paid such principal and interest but only
from the sources and in the manner provided herein and in the Insurance
Agreement for the payment of such principal and interest.
The Indenture Trustee shall cooperate in all respects with any
reasonable request by the Credit Enhancer for action to preserve or enforce the
Credit Enhancer's rights or interest under this Indenture or the Insurance
Agreement without limiting the rights of the Bondholders as otherwise set forth
in the Indenture, including, without limitation, upon the occurrence and
continuance of a default under the Insurance Agreement, a request to take any
one or more of the following actions:
(i) institute Proceedings for the collection of all
amounts then payable on the Bonds, or under this Indenture in respect
to the Bonds and all amounts payable under the Insurance Agreement
enforce any judgment obtained and collect from the Issuer monies
adjudged due;
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(ii) sell the Trust Estate or any portion thereof or
rights or interest therein, at one or more public or private Sales
called and conducted in any manner permitted by law;
(iii) file or record all Assignments that have not
previously been recorded;
(iv) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture; and
(v) exercise any remedies of a secured party under the
Uniform Commercial Code and take any other appropriate action to
protect and enforce the rights and remedies of the Credit Enhancer
hereunder.
Section 4.13. REPAYMENT OF MONIES HELD BY PAYING AGENT. In connection
with the satisfaction and discharge of this Indenture with respect to the Bonds,
all monies then held by any Administrator other than the Indenture Trustee under
the provisions of this Indenture with respect to such Bonds shall, upon demand
of the Issuer, be paid to the Indenture Trustee to be held and applied according
to Section 3.05 and thereupon such Paying Agent shall be released from all
further liability with respect to such monies.
Section 4.14. TEMPORARY BONDS. Pending the preparation of any
Definitive Bonds, the Issuer may execute and upon its written direction, the
Indenture Trustee may authenticate and make available for delivery, temporary
Bonds that are printed, lithographed, typewritten, photocopied or otherwise
produced, in any denomination, substantially of the tenor of the Definitive
Bonds in lieu of which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Bonds may determine, as evidenced by their execution of such Bonds.
If temporary Bonds are issued, the Issuer will cause Definitive Bonds
to be prepared without unreasonable delay. After the preparation of the
Definitive Bonds, the temporary Bonds shall be exchangeable for Definitive Bonds
upon surrender of the temporary Bonds at the office or agency of the Indenture
Trustee, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Bonds, the Issuer shall execute and the Indenture Trustee
shall authenticate and make available for delivery, in exchange therefor,
Definitive Bonds of authorized denominations and of like tenor and aggregate
principal amount. Until so exchanged, such temporary Bonds shall in all respects
be entitled to the same benefits under this Indenture as Definitive Bonds.
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ARTICLE V
DEFAULT AND REMEDIES
Section 5.01. EVENTS OF DEFAULT. "Event of Default," wherever used
herein, shall have the meaning provided in Article I; provided, however, that no
Event of Default will occur under clause (i) or clause (ii) of the definition of
"Event of Default" if the Issuer fails to make payments of principal of and
interest on the Bonds so long as the Credit Enhancer makes payments sufficient
therefore under the Credit Enhancement Instrument.
The Issuer shall deliver to the Indenture Trustee and the Credit
Enhancer, within five days after learning of the occurrence of an Event of
Default, written notice in the form of an Officer's Certificate of any event
which with the giving of notice and the lapse of time would become an Event of
Default under clause (iii) of the definition of "Event of Default", its status
and what action the Issuer is taking or proposes to take with respect thereto.
Section 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an
Event of Default should occur and be continuing or if the Master Servicer shall
purchase all of the Mortgage Loans pursuant to Section 8.08 of the Servicing
Agreement, then and in every such case the Indenture Trustee or the Holders of
Bonds representing not less than a majority of the Security Balances of all
Bonds may declare the Bonds to be immediately due and payable, by a notice in
writing to the Issuer (and to the Indenture Trustee if given by Bondholders),
and upon any such declaration the unpaid principal amount of such Class of
Bonds, together with accrued and unpaid interest thereon through the date of
acceleration, shall become immediately due and payable. Unless the prior written
consent of the Credit Enhancer shall have been obtained by the Indenture
Trustee, the Payment Date upon which such accelerated payment is due and payable
shall not be a Payment Date under the Credit Enhancement Instrument and the
Indenture Trustee shall not be authorized under Section 3.29 to make a draw
therefor.
At any time after such declaration of acceleration of maturity with
respect to an Event of Default has been made and before a judgment or decree for
payment of the money due has been obtained by the Indenture Trustee as
hereinafter in this Article V provided, the Holders of Bonds representing a
majority of the Security Balances of all Bonds, by written notice to the Issuer
and the Indenture Trustee, may waive the related Event of Default and rescind
and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
(A) all payments of principal of and interest on the
Bonds and all other amounts that would then be due hereunder
or upon the Bonds if the Event of Default giving rise to such
acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture
Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its
agents and counsel; and
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(ii) all Events of Default, other than the nonpayment of
the principal of the Bonds that has become due solely by such
acceleration, have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
Section 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
INDENTURE TRUSTEE. (a) The Issuer covenants that if (i) default is made in the
payment of any interest on any Bond when the same becomes due and payable, and
such default continues for a period of five days, or (ii) default is made in the
payment of the principal of or any installment of the principal of any Bond when
the same becomes due and payable, the Issue shall, upon demand of the Indenture
Trustee, pay to it, for the benefit of the Holders of Bonds and of the Credit
Enhancer, the whole amount then due and payable on the Bonds for principal and
interest, with interest upon the overdue principal, and in addition thereto such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an express
trust, subject to the provisions of Section 10.17 hereof may institute a
Proceeding for the collection of the sums so due and unpaid, and may prosecute
such Proceeding to judgment or final decree, and may enforce the same against
the Issuer or other obligor upon the Bonds and collect in the manner provided by
law out of the property of the Issuer or other obligor the Bonds, wherever
situated, the monies adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee subject to the provisions of Section 10.17 hereof may, as more
particularly provided in Section 5.04, in its discretion, proceed to protect and
enforce its rights and the rights of the Bondholders and the Credit Enhancer, by
such appropriate Proceedings as the Indenture Trustee shall deem most effective
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy or legal or
equitable right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Bonds or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Bonds, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Bonds shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
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(i) to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect of the
Bonds and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee
(including any claim for reasonable compensation to the Indenture
Trustee and each predecessor Indenture Trustee, and their respective
agents, attorneys and counsel, and for reimbursement of all expenses
and liabilities incurred, and all advances made, by the Indenture
Trustee and each predecessor Indenture Trustee, except as a result of
negligence or bad faith) and of the Bondholders allowed in such
Proceedings;
(ii) unless prohibited by applicable law and
regulations, to vote on behalf of the Holders of Bonds in any election
of a trustee, a standby trustee or Person performing similar functions
in any such Proceedings;
(iii) to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Bondholders and of the
Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Indenture Trustee or the Holders of Bonds allowed in any
judicial proceedings relative to the Issuer, its creditors and its
property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Bondholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Bondholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Bondholder any plan of reorganization, arrangement, adjustment or
composition affecting the Bonds or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Bondholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Bonds, may be enforced by the Indenture Trustee without the
possession of any of the Bonds or the production thereof in any trial or other
Proceedings relative thereto, and any such action or proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Bonds.
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(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Bonds, and it shall not be necessary to
make any Bondholder a party to any such Proceedings.
Section 5.04. REMEDIES; PRIORITIES. (a) If an Event of Default shall
have occurred and be continuing, the Indenture Trustee subject to the provisions
of Section 10.17 hereof may do one or more of the following (subject to Section
5.05):
(i) institute Proceedings in its own name and as
trustee of an express trust for the collection of all amounts then
payable on the Bonds or under this Indenture with respect thereto,
whether by declaration or otherwise, and all amounts payable under the
Insurance Agreement, enforce any judgment obtained, and collect from
the Issuer and any other obligor upon such Bonds monies adjudged due;
(ii) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture with respect to the
Trust Estate;
(iii) exercise any remedies of a secured party under the
UCC and take any other appropriate action to protect and enforce the
rights and remedies of the Indenture Trustee, the Holders of the Bonds
and the Credit Enhancer; and
(iv) sell the Trust Estate or any portion thereof or
rights or interest therein, at one or more public or private sales
called and conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, unless (A) the
Indenture Trustee obtains the consent of the Holders of 100% of the aggregate
Principal Balances of the Bonds and the Credit Enhancer, which consent will not
be unreasonably withheld, (B) the proceeds of such sale or liquidation
distributable to Holders are sufficient to discharge in full all amounts then
due and unpaid upon the Bonds for principal and interest and to reimburse the
Credit Enhancer for any amounts drawn under the Credit Enhancement Instrument
and any other amounts due the Credit Enhancer under the Insurance Agreement or
(C) the Indenture Trustee determines that the Mortgage Loans will not continue
to provide sufficient funds for the payment of principal of and interest on the
Bonds as they would have become due if the Bonds had not been declared due and
payable, and the Indenture Trustee obtains the consent of the Credit Enhancer,
which consent will not be unreasonably withheld, and of the Holders of a
majority of the aggregate Principal Balances of the Bonds. In determining such
sufficiency or insufficiency with respect to clause (B) and (C), the Indenture
Trustee may, but need not, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose. Notwithstanding the foregoing, so long as an Event of
Servicer Termination has not occurred, any Sale of the Trust Estate shall be
made subject to the continued Servicing of the Mortgage Loans by the Master
Servicer as provided in the Servicing Agreement.
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(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order:
FIRST: to the Indenture Trustee for amounts due under Section
6.07;
SECOND: to each Class of Bondholders for amounts due and
unpaid on the related Class Bonds for interest and to each
Bondholder of such Class in each case, ratably, without
preference or priority of any kind, according to the amounts
due and payable on such Class of Bonds for interest from
amounts available in the Trust Estate for such Bondholders;
THIRD: to Holders of each Class of Bonds for amounts due and
unpaid on the related Class of Bonds for principal, from
amounts available in the Trust Estate for such Bondholders,
and to each Bondholder of such Class in each case ratably,
without preference or priority of any kind, according to the
amounts due and payable on such Class of Bonds for principal,
until the Security Balances of each Class of Bonds is reduced
to zero;
FOURTH: to the Issuer for amounts required to be distributed
to the Certificateholders in respect of interest and principal
pursuant to the Trust Agreement;
FIFTH: To the payment of all amounts due and owing to the
Credit Enhancer under the Insurance Agreement;
SIXTH: to the Issuer for amounts due under Article VIII of the
Trust Agreement; and
SEVENTH: to the payment of the remainder, if any to the Issuer
or any other person legally entitled thereto.
The Indenture Trustee may fix a record date and payment date for any
payment to Bondholders pursuant to this Section 5.04. At least 15 days before
such record date, the Indenture Trustee shall mail to each Bondholder a notice
that states the record date, the payment date and the amount to be paid.
Section 5.05. OPTIONAL PRESERVATION OF THE TRUST ESTATE. If the Bonds
have been declared to be due and payable under Section 5.02 following an Event
of Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to take and maintain
possession of the Trust Estate. It is the desire of the parties hereto and the
Bondholders that there be at all times sufficient funds for the payment of
principal of and interest on the Bonds and other obligations of the Issuer
including payment to the Credit Enhancer, and the Indenture Trustee shall take
such desire into account when determining whether or not to take and maintain
possession of the Trust Estate. In determining whether to take and maintain
possession of the Trust Estate, the Indenture Trustee may, but need not, obtain
and rely upon an opinion of an Independent investment banking or accounting firm
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of national reputation as to the feasibility of such proposed action and as to
the sufficiency of the Trust Estate for such purpose.
Section 5.06. LIMITATION OF SUITS. No Holder of any Bond shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless and subject to the provisions of Section 10.17 hereof:
(i) such Holder has previously given ritten notice to
the Indenture Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Security
Balances of the Bonds have made written request to the Indenture
Trustee to institute such Proceeding in respect of such Event of
Default in its own name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt
of such notice, request and offer of indemnity has failed to
institute such Proceedings; and
(v) no direction inconsistent with such written request
has been given to the Indenture Trustee during such 60-day period by
the Holders of a majority of the Security Balances of the Bonds.
It is understood and intended that no one or more Holders of Bonds shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Bonds or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Bonds,
each representing less than a majority of the Security Balances of the Bonds,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
Section 5.07. UNCONDITIONAL RIGHTS OF BONDHOLDERS TO RECEIVE PRINCIPAL
AND INTEREST. Notwithstanding any other provisions in this Indenture, the Holder
of any Bond shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Bond on or
after the respective due dates thereof expressed in such Bond or in this
Indenture and to institute suit for the enforcement of any such payment, and
such right shall not be impaired without the consent of such Holder.
Section 5.08. RESTORATION OF RIGHTS AND REMEDIES. If the Indenture
Trustee Trustee or any Bondholder has instituted any Proceeding to enforce any
right or remedy under this Indenture and such Proceeding has been discontinued
or abandoned for any reason or has been determined
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adversely to the Indenture Trustee or to such Bondholder, then and in every such
case the Issuer, the Indenture Trustee and the Bondholders shall, subject to any
determination in such Proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Indenture Trustee and the Bondholders shall continue as though no such
Proceeding had been instituted.
Section 5.09. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Bondholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 5.10. DELAY OR OMISSION NOT A WAIVER. No delay or omission of
the Indenture Trustee or any Holder of any Bond to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article V or by law to the Indenture
Trustee or to the Bondholders may be exercised from time to time, and as often
as may be deemed expedient, by the Indenture Trustee or by the Bondholders, as
the case may be.
Section 5.11. CONTROL BY BONDHOLDERS. The Holders of a majority of the
Security Balances of Bonds shall have the right to direct the time, method and
place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Bonds or exercising any trust or power conferred on
the Indenture Trustee; provided that:
(i) such direction shall not be in conflict with any
rule of law or with this Indenture;
(ii) subject to the express terms of Section 5.04, any
direction to the Indenture Trustee to sell or liquidate the Trust
Estate shall be by Holders of Bonds representing not less than 100% of
the Security Balances of Bonds;
(iii) if the conditions set forth in Section 5.05 have
been satisfied and the Indenture Trustee elects to retain the Trust
Estate pursuant to such Section, then any direction to the Indenture
Trustee by Holders of Bonds representing less than 100% of the Security
Balances of Bonds to sell or liquidate the Trust Estate shall be of no
force and effect; and
(iv) the Indenture Trustee may take any other action
deemed proper by the Indenture Trustee that is not inconsistent with
such direction.
Notwithstanding the rights of Bondholders set forth in this Section, subject to
Section 6.01, the Indenture Trustee need not take any action that it determines
might involve it in liability or might materially adversely affect the rights of
any Bondholders not consenting to such action.
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Section 5.12. WAIVER OF PAST DEFAULTS. Prior to the declaration of the
acceleration of the maturity of the Bonds as provided in Section 5.02, the
Holders of Bonds of not less than a majority of the Security Balances of the
Bonds may waive any past Event of Default and its consequences except an Event
of Default (a) with respect to payment of principal of or interest on any of the
Bonds or (b) in respect of a covenant or provision hereof which cannot be
modified or amended without the consent of the Holder of each Bond or (c) the
waiver of which would materially and adversely affect the interests of the
Credit Enhancer or modify its obligation under the Credit Enhancement
Instrument. In the case of any such waiver, the Issuer, the Indenture Trustee
and the Holders of the Bonds shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Event of Default or impair any right consequent thereto.
Upon any such waiver, any Event of Default arising therefrom shall be
deemed to have been cured and not to have occurred, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Event of
Default or impair any right consequent thereto.
Section 5.13. UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Holder of any Bond by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.13 shall not apply to (a) any suit instituted by
the Indenture Trustee, (b) any suit instituted by any Bondholder, or group of
Bondholders, in each case holding in the aggregate more than 10% of the Security
Balances of the Bonds or (c) any suit instituted by any Bondholder for the
enforcement of the payment of principal of or interest on any Bond on or after
the respective due dates expressed in such Bond and in this Indenture.
Section 5.14. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
Section 5.15. SALE OF TRUST ESTATE. (a) The power to effect any sale or
other disposition (a "Sale") of any portion of the Trust Estate pursuant to
Section 5.04 is expressly subject to the provisions of Section 5.05 and this
Section 5.15. The power to effect any such Sale shall not be exhausted by any
one or more Sales as to any portion of the Trust Estate remaining unsold, but
shall continue unimpaired until the entire Trust Estate shall have been sold or
all amounts payable on the Bonds and under this Indenture and under the
Insurance Agreement shall have been paid. The Indenture Trustee may from time to
time postpone any public Sale by public announcement made at the time and place
of such Sale. The Indenture
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Trustee hereby expressly waives its right to any amount fixed by law as
compensation for any Sale.
(b) The Indenture Trustee shall not in any private Sale sell the Trust
Estate, or any portion thereof, unless
(1) the Holders of all Bonds and the Credit Enhancer consent
to or direct the Indenture Trustee to make, such Sale, or
(2) the proceeds of such Sale would be not less than the
entire amount which would be payable to the Bondholders under the Bonds and the
Credit Enhancer in respect of amounts drawn under the Credit Enhancement
Instrument and any other amounts due the Credit Enhancer under the Insurance
Agreement, in full payment thereof in accordance with Section 5.02, on the
Payment Date next succeeding the date of such Sale, or
(3) The Indenture Trustee determines, in its sole discretion,
that the conditions for retention of the Trust Estate set forth in Section 5.05
cannot be satisfied (in making any such determination, the Indenture Trustee may
rely upon an opinion of an Independent investment banking firm obtained and
delivered as provided in Section 5.05), and the Credit Enhancer consents to such
Sale, which consent will not be unreasonably withheld and the Holders
representing at least 66-2/3% of the Security Balances of the Bonds consent to
such Sale.
The purchase by the Indenture Trustee of all or any portion of the Trust Estate
at a private Sale shall not be deemed a Sale or other disposition thereof for
purposes of this Section 5.15(b).
(c) Unless the Holders and the Credit Enhancer have otherwise consented
or directed the Indenture Trustee, at any public Sale of all or any portion of
the Trust Estate at which a minimum bid equal to or greater than the amount
described in paragraph (2) of subsection (b) of this Section 5.15 has not been
established by the Indenture Trustee and no Person bids an amount equal to or
greater than such amount, the Indenture Trustee shall bid an amount at least
$1.00 more than the highest other bid.
(d) In connection with a Sale of all or any portion of the Trust Estate
(1) any Holder or Holders of Bonds may bid for and with the
consent of the Credit Enhancer purchase the property offered for sale, and upon
compliance with the terms of sale may hold, retain and possess and dispose of
such property, without further accountability, and may, in paying the purchase
money therefor, deliver any Bonds or claims for interest thereon in lieu of cash
up to the amount which shall, upon distribution of the net proceeds of such
sale, be payable thereon, and such Bonds, in case the amounts so payable thereon
shall be less than the amount due thereon, shall be returned to the Holders
thereof after being appropriately stamped to show such partial payment;
(2) the Indenture Trustee may bid for and acquire the property
offered for Sale in connection with any Sale thereof, and, subject to any
requirements of, and to the extent permitted by, applicable law in connection
therewith, may purchase all or any portion of the Trust Estate in a private
sale, and, in lieu of paying cash therefor, may make settlement for the
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purchase price by crediting the gross Sale price against the sum of (A) the
amount which would be distributable to the Holders of the Bonds and Holders of
Certificates and amounts owing to the Credit Enhancer as a result of such Sale
in accordance with Section 5.04(b) on the Payment Date next succeeding the date
of such Sale and (B) the expenses of the Sale and of any Proceedings in
connection therewith which are reimbursable to it, without being required to
produce the Bonds in order to complete any such Sale or in order for the net
Sale price to be credited against such Bonds, and any property so acquired by
the Indenture Trustee shall be held and dealt with by it in accordance with the
provisions of this Indenture;
(3) the Indenture Trustee shall execute and deliver an
appropriate instrument of conveyance transferring its interest in any portion of
the Trust Estate in connection with a Sale thereof;
(4) the Indenture Trustee is hereby irrevocably appointed the
agent and attorney-in-fact of the Issuer to transfer and convey its interest in
any portion of the Trust Estate in connection with a Sale thereof, and to take
all action necessary to effect such Sale; and
(5) no purchaser or transferee at such a Sale shall be bound
to ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any monies.
Section 5.16. ACTION ON BONDS. The Indenture Trustee's right to seek
and recover judgment on the Bonds or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee or the Bondholders shall be impaired by the
recovery of any judgment by the Indenture Trustee against the Issuer or by the
levy of any execution under such judgment upon any portion of the Trust Estate
or upon any of the assets of the Issuer. Any money or property collected by the
Indenture Trustee shall be applied in accordance with Section 5.04(b).
Section 5.17. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer in its capacity as holder of the Mortgage
Loans, shall take all such lawful action as the Indenture Trustee may request to
cause the Issuer to compel or secure the performance and observance by the
Seller and the Master Servicer, as applicable, of each of their obligations to
the Issuer under or in connection with the Mortgage Loan Purchase Agreement and
the Servicing Agreement, and to exercise any and all rights, remedies, powers
and privileges lawfully available to the Issuer under or in connection with the
Mortgage Loan Purchase Agreement and the Servicing Agreement to the extent and
in the manner directed by the Indenture Trustee, as pledgee of the Mortgage
Loans, including the transmission of notices of default on the part of the
Seller or the Master Servicer thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Seller or the Master Servicer of each of their obligations under the Mortgage
Loan Purchase Agreement and the Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee, as pledgee of the Mortgage Loans, subject to the rights of
the Credit Enhancer under the Servicing Agreement may, and at the direction
(which direction shall be in writing or by telephone
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(confirmed in writing promptly thereafter)) of the Holders of 66-2/3% of the
Security Balances of the Bonds shall, exercise all rights, remedies, powers,
privileges and claims of the Issuer against the Seller or the Master Servicer
under or in connection with the Mortgage Loan Purchase Agreement and the
Servicing Agreement, including the right or power to take any action to compel
or secure performance or observance by the Seller or the Master Servicer, as the
case may be, of each of their obligations to the Issuer thereunder and to give
any consent, request, notice, direction, approval, extension or waiver under the
Mortgage Loan Purchase Agreement and the Servicing Agreement, as the case may
be, and any right of the Issuer to take such action shall not be suspended.
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ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. DUTIES OF INDENTURE TRUSTEE. (a) If an Event of Default
has occurred and is continuing, the Indenture Trustee shall exercise the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into
this Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the
Indenture Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture; however, the
Indenture Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section 6.01;
(ii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer unless it
is proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it (A) pursuant to Section 5.11
or (B) from the Credit Enhancer, which it is entitled to give under any
of the Basic Documents.
(d) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(e) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Trust Agreement.
(f) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds
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to believe that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
Section 6.02. RIGHTS OF INDENTURE TRUSTEE. (a) The Indenture Trustee
may rely on any document believed by it to be genuine and to have been signed or
presented by the proper person. The Indenture Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Bonds shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
Section 6.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Bonds and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Administrator, Bond
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
Section 6.04. INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Bonds, it shall not be accountable for the
Issuer's use of the proceeds from the Bonds, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Bonds or in the Bonds other than the Indenture
Trustee's certificate of authentication.
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Section 6.05. NOTICE OF EVENT OF DEFAULT. If an Event of Default occurs
and is continuing and if it is known to a Responsible Officer of the Indenture
Trustee, the Indenture Trustee shall give notice thereof to the Credit Enhancer.
The Trustee shall mail to each Bondholder notice of the Event of Default within
90 days after it occurs. Except in the case of an Event of Default in payment of
principal of or interest on any Bond, the Indenture Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Bondholders.
Section 6.06. REPORTS BY INDENTURE TRUSTEE TO HOLDERS. The Indenture
Trustee shall deliver to each Bondholder such information as may be required to
enable such holder to prepare its federal and state income tax returns. In
addition, upon the Issuer's written request, the Indenture Trustee shall
promptly furnish information reasonably requested by the Issuer that is
reasonably available to the Indenture Trustee to enable the Issuer to perform
its federal and state income tax reporting obligations.
Section 6.07. COMPENSATION AND INDEMNITY. The Issuer shall or shall
cause the Administrator to pay to the Indenture Trustee on each Payment Date
reasonable compensation for its services. The Indenture Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall or shall cause the Administrator to reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer shall or shall cause the Administrator to
indemnify the Indenture Trustee against any and all loss, liability or expense
(including attorneys' fees) incurred by it in connection with the administration
of this trust and the performance of its duties hereunder. The Indenture Trustee
shall notify the Issuer and the Administrator promptly of any claim for which it
may seek indemnity. Failure by the Indenture Trustee to so notify the Issuer and
the Administrator shall not relieve the Issuer or the Administrator of its
obligations hereunder. The Issuer shall or shall cause the Administrator to
defend any such claim, and the Indenture Trustee may have separate counsel and
the Issuer shall or shall cause the Administrator to pay the fees and expenses
of such counsel. Neither the Issuer nor the Administrator need reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Indenture Trustee through the Indenture Trustee's own willful misconduct,
negligence or bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section 6.07 shall survive the discharge of this Indenture. When the
Indenture Trustee incurs expenses after the occurrence of an Event of Default
specified in Section 5.01(iv) or (v) with respect to the Issuer, the expenses
are intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable federal or state bankruptcy,
insolvency or similar law.
Section 6.08. REPLACEMENT OF INDENTURE TRUSTEE. No resignation or
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee
may resign at any time by so notifying the Issuer and the Credit Enhancer. The
Holders of a majority of Security Balances of the Bonds may remove the
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Indenture Trustee by so notifying the Indenture Trustee and the Credit Enhancer
and may appoint a successor Indenture Trustee. The Issuer shall remove the
Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section
6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or
insolvent;
(iii) a receiver or other public officer takes charge of
the Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable
of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon, the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Bondholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture Trustee to
the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority of Security Balances
of the Bonds may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Bondholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under Section
6.07 shall continue for the benefit of the retiring Indenture Trustee.
Section 6.09. SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided, that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating
Agencies prior written notice of any such transaction.
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In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Bonds shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Bonds so
authenticated; and in case at that time any of the Bonds shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Bonds either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Bonds or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
Section 6.10. APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE INDENTURE
TRUSTEE. (a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the Bondholders,
such title to the Trust Estate, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Indenture Trustee may consider necessary or desirable. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 6.11 and no notice to Bondholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred
or imposed upon the Indenture Trustee shall be conferred or imposed
upon and exercised or performed by the Indenture Trustee and such
separate trustee or co-trustee jointly (it being understood that such
separate trustee or co-trustee is not authorized to act separately
without the Indenture Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular
act or acts are to be performed the Indenture Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Trust Estate or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Indenture
Trustee;
(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
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its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 6.11. ELIGIBILITY; DISQUALIFICATION. The Indenture Trustee
shall at all times satisfy the requirements of TIA ss. 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least [$50,000,000] as
set forth in its most recent published annual report of condition and it or its
parent shall have a long-term debt rating of [Baa3] or better by [Moody's]. The
Indenture Trustee shall comply with TIA ss. 310(b), including the optional
provision permitted by the second sentence of TIA ss. 310(b)(9); provided,
however, that there shall be excluded from the operation of TIA ss. 310(b)(1)
any indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
Section 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The
Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated.
Section 6.13. REPRESENTATION AND WARRANTY. The Indenture Trustee hereby
represents that:
(i) The Indenture Trustee is duly organized and validly
existing as a corporation in good standing under the laws of the State
of ___________, with power and authority to own its properties and to
conduct its business as such properties are currently owned and such
business is presently conducted.
(ii) The Indenture Trustee has the power and authority to
execute and deliver this Indenture and to carry out its terms; and the
execution, delivery and performance of this Indenture have been duly
authorized by the Indenture Trustee by all necessary corporate action.
(iii) The consummation of the transactions contemplated by
this Indenture and the fulfillment of the terms hereof do not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default
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under, the articles of incorporation or bylaws of the Indenture Trustee
or any agreement or other instrument to which the Indenture Trustee is
a party or by which it is bound
(iv) To the Indenture Trustee's best knowledge, there are no
proceedings or investigations pending or threatened before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Indenture Trustee or its
properties: (A) asserting the invalidity of this Indenture (B) seeking
to prevent the consummation of any of the transactions contemplated by
this Indenture or (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Indenture
Trustee of its obligations under, or the validity or enforceability of,
this Indenture.
Section 6.14. DIRECTIONS TO INDENTURE TRUSTEE. The Indenture Trustee is
hereby directed:
(a) to accept the pledge of the Mortgage Loans and hold the assets of
the Trust in trust for the Bondholders;
(b) to issue, execute and deliver the Bonds substantially in the form
prescribed by Exhibit A in accordance with the terms of this Indenture; and
(c) to take all other actions as shall be required to be taken by the
terms of this Indenture.
[Section 6.15. NO CONSENT TO CERTAIN ACTS OF DEPOSITOR. The Indenture
Trustee shall not consent to any action proposed to be taken by the Depositor
pursuant to Article [_________] of the Depositor's Restated Certificate of
Incorporation.]
Section 6.16. INDENTURE TRUSTEE MAY OWN SECURITIES. The Indenture
Trustee, in its individual or any other capacity may become the owner or pledgee
of Securities with the same rights it would have if it were not Indenture
Trustee.
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ARTICLE VII
BONDHOLDERS' LISTS AND REPORTS
Section 7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES
OF BONDHOLDERS. The Issuer will furnish or cause to be furnished to the
Indenture Trustee (a) not more than five days after each Record Date, a list, in
such form as the Indenture Trustee may reasonably require, of the names and
addresses of the Holders of Bonds as of such Record Date, (b) at such other
times as the Indenture Trustee and the Credit Enhancer may request in writing,
within 30 days after receipt by the Issuer of any such request, a list of
similar form and content as of a date not more than 10 days prior to the time
such list is furnished; provided, however, that so long as the Indenture Trustee
is the Bond Registrar, no such list shall be required to be furnished.
Section 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
BONDHOLDERS. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders of Bonds
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 and the names and addresses of Holders of Bonds received by the
Indenture Trustee in its capacity as Bond Registrar. The Indenture Trustee may
destroy any list furnished to it as provided in such Section 7.01 upon receipt
of a new list so furnished.
(b) Bondholders may communicate pursuant to TIAss. 312(b) with other
Bondholders with respect to their rights under this Indenture or under the
Bonds.
(c) The Issuer, the Indenture Trustee and the Bond Registrar shall have
the protection of TIAss. 312(c).
Section 7.03. REPORTS BY ISSUER. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days
after the Issuer is required to file the same with the Commission,
copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as
the Commission may from time to time by rules and regulations
prescribe) that the Issuer may be required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee, and the Commission
in accordance with rules and regulations prescribed from time to time
by the Commission such additional information, documents and reports
with respect to compliance by the Issuer with the conditions and
covenants of this Indenture as may be required from time to time by
such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Bondholders described in TIA ss.
313(c)) such summaries of any information, documents and reports
required to be filed by the Issuer pursuant to
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clauses (i) and (ii) of this Section 7.03(a) and by rules and
regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
Section 7.04. REPORTS BY INDENTURE TRUSTEE. If required by TIA ss.
313(a), within 60 days after each January 1 beginning with January 1, 199_, the
Indenture Trustee shall mail to each Bondholder as required by TIA ss. 313(c)
and to the Credit Enhancer a brief report dated as of such date that complies
with TIA ss. 313(a). The Indenture Trustee also shall comply with TIA ss.
313(b).
A copy of each report at the time of its mailing to Bondholders shall
be filed by the Indenture Trustee with the Commission and each stock exchange,
if any, on which the Bonds are listed. The Issuer shall notify the Indenture
Trustee if and when the Bonds are listed on any stock exchange.
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ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. COLLECTION OF MONEY. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Trust Estate, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
Section 8.02. TRUST ACCOUNTS. (a) On or prior to the Closing Date, the
Issuer shall cause the Indenture Trustee to establish and maintain, in the name
of the Indenture Trustee, for the benefit of the Bondholders and the Certificate
Paying Agent, on behalf of the Certificateholders and the Credit Enhancer, the
Payment Account as provided in Section 3.01 of this Indenture.
(b) All monies deposited from time to time in the Payment Account
pursuant to the Servicing Agreement and all deposits therein pursuant to this
Indenture are for the benefit of the Bondholders and the Certificate Paying
Agent, on behalf of the Certificateholders and all investments made with such
monies including all income or other gain from such investments are for the
benefit of the Master Servicer as provided by the Servicing Agreement.
On each Payment Date during the Funding Period the Indenture Trustee
shall withdraw Net Principal Collections from the Payment Account and deposit
Net Principal Collections to the Funding Account.
On each Payment Date, the Indenture Trustee shall distribute all
amounts on deposit in the Payment Account (after giving effect to the withdrawal
referred to in the preceding paragraph) to Bondholders in respect of the Bonds
and in its capacity as Certificate Paying Agent to Certificateholders in the
order of priority set forth in Section 3.05 (except as otherwise provided in
Section 5.04(b).
The Master Servicer may direct the Indenture Trustee to invest any
funds in the Payment Account in Eligible Investments maturing no later than the
Business Day preceding each Payment Date and shall not be sold or disposed of
prior to the maturity. Unless otherwise instructed by the Master Servicer, the
Indenture Trustee shall invest all funds in the Payment Account in Eligible
Investments.
(c) On or before the Closing Date the Issuer shall open, at the
Corporate Trust Office, an account which shall be the "Funding Account". The
Master Servicer may direct the Indenture Trustee to invest any funds in the
Funding Account in Eligible Investments maturing
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no later than the Business Day preceding each Payment Date and shall not be sold
or disposed of prior to the maturity. Unless otherwise instructed by the Master
Servicer, the Indenture Trustee shall invest all funds in the Payment Account in
its Corporate Trust Short Term Investment Fund so long as it is an Eligible
Investment. During the Funding Period, any amounts received by the Indenture
Trustee in respect of Net Principal Collections for deposit in the Funding
Account, together with any Eligible Investments in which such monies are or will
be invested or reinvested during the term of the Bonds, shall be held by the
Indenture Trustee in the Funding Account as part of the Trust Estate, subject to
disbursement and withdrawal as herein provided: Amounts on deposit in the
Funding Account in respect of Net Principal Collections may be withdrawn on each
Deposit Date and (1) paid to the Issuer in payment for Additional Loans by the
deposit of such amount to the Collection Account and (2) at the end of the
Funding Period any amounts remaining in the Funding Account after the withdrawal
called for by clause (1) shall be deposited in the Payment Account to be
included in the payment of principal on the Payment Date that is the last day of
the Funding Period.
(d) (i) Any investment in the institution with which the Funding
Account is maintained may mature on such Payment Date and (ii) any other
investment may mature on such Payment Date if the Indenture Trustee shall
advance funds on such Payment Date to the Funding Account in the amount payable
on such investment on such Payment Date, pending receipt thereof to the extent
necessary to make distributions on the Bonds and the Certificates) and shall not
be sold or disposed of prior to maturity.
Section 8.03. OFFICER'S CERTIFICATE. The Indenture Trustee shall
receive at least [seven] days notice when requested by the Issuer to take any
action pursuant to Section 8.05(a), accompanied by copies of any instruments to
be executed, and the Indenture Trustee shall also require, as a condition to
such action, an Officer's Certificate, in form and substance satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with.
Section 8.04. TERMINATION UPON DISTRIBUTION TO BONDHOLDERS. This
Indenture and the respective obligations and responsibilities of the Issuer and
the Indenture Trustee created hereby shall terminate upon the distribution to
Bondholders, Certificate Paying Agent, on behalf of the Certificateholders and
the Indenture Trustee of all amounts required to be distributed pursuant to
Article III; provided, however, that in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the survivor of the
descendants of Joseph P. Kennedy, the late ambassador of the United States to
the Court of St. James, living on the date hereof.
Section 8.05. RELEASE OF TRUST ESTATE. (a) Subject to the payment of
its fees and expenses, the Indenture Trustee may, and when required by the
provisions of this Indenture shall, execute instruments to release property from
the lien of this Indenture, or convey the Indenture Trustee's interest in the
same, in a manner and under circumstances that are not inconsistent with the
provisions of this Indenture. No party relying upon an instrument executed by
the Indenture Trustee as provided in Article VIII hereunder shall be bound to
ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent, or see to the application of any monies.
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(b) The Indenture Trustee shall, at such time as (i) there are no Bonds
Outstanding, (ii) all sums due the Indenture Trustee pursuant to this Indenture
have been paid, and (iii) all sums due the Credit Enhancer have been paid,
release any remaining portion of the Trust Estate that secured the Bonds from
the lien of this Indenture.
[(c) The Indenture Trustee shall release property from the lien of this
Indenture pursuant to this Section 8.05 only upon receipt of an request from the
Issuer accompanied by an [Officers' Certificate], [an Opinion of Counsel,] and a
letter from the Credit Enhancer, stating that the Credit Enhancer has no
objection to such request from the Issuer.]
Section 8.06. SURRENDER OF BONDS UPON FINAL PAYMENT. By acceptance of
any Bond, the Holder thereof agrees to surrender such Bond to the Indenture
Trustee promptly, prior to such Bondholder's receipt of the final payment
thereon.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF BONDHOLDERS.
(a) Without the consent of the Holders of any Bonds but with the consent of the
Credit Enhancer and prior notice to the Rating Agencies and the Credit Enhancer,
the Issuer and the Indenture Trustee, when authorized by an Issuer Request, at
any time and from time to time, may enter into one or more indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any
property at any time subject to the lien of this Indenture, or better
to assure, convey and confirm unto the Indenture Trustee any property
subject or required to be subjected to the lien of this Indenture, or
to subject to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Bonds contained;
(iii) to add to the covenants of the Issuer, for the
benefit of the Holders of the Bonds, or to surrender any right or power
herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture that may be
inconsistent with any other provision herein or in any supplemental
indenture
(vi) to make any other provisions with respect to matters
or questions arising under this Indenture or in any supplemental
indenture; provided, that such action shall not materially and
adversely affect the interests of the Holders of the Bonds;
(vii) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Bonds
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(viii) to modify, eliminate or add to the provisions of
this Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA;
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provided, however, that no such indenture supplements shall be entered into
unless the Indenture Trustee shall have received an Opinion of Counsel that
entering into such indenture supplement will not have any material adverse tax
consequences to the Bondholders.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Request, may, also without the consent of any of the Holders of the Bonds but
with the consent of the Credit Enhancer and prior notice to the Rating Agencies
and the Credit Enhancer, enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Bonds under this Indenture; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel, (i)
adversely affect in any material respect the interests of any Bondholder or (ii)
cause the Issuer to be subject to an entity level tax.
Section 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF BONDHOLDERS. The
Issuer and the Indenture Trustee, when authorized by an Issuer Request, also
may, with prior notice to the Rating Agencies and, with the written consent of
the Credit Enhancer and with the consent of the Holders of not less than a
majority of the Security Balances of each Class of Bonds affected thereby, by
Act of such Holders delivered to the Issuer and the Indenture Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Bonds under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each Bond
affected thereby:
(i) change the date of payment of any installment of
principal of or interest on any Bond, or reduce the principal amount
thereof or the interest rate thereon, change the provisions of this
Indenture relating to the application of collections on, or the
proceeds of the sale of, the Trust Estate to payment of principal of or
interest on the Bonds, or change any place of payment where, or the
coin or currency in which, any Bond or the interest thereon is payable,
or impair the right to institute suit for the enforcement of the
provisions of this Indenture requiring the application of funds
available therefor, as provided in Article V, to the payment of any
such amount due on the Bonds on or after the respective due dates
thereof;
(ii) reduce the percentage of the Security Balances of
the Bonds, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture;
(iii) modify or alter the provisions of the proviso to
the definition of the term "Outstanding" or modify or alter the
exception in the definition of the term "Holder";
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(iv) reduce the percentage of the Security Balances of
the Bonds required to direct the Indenture Trustee to direct the Issuer
to sell or liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section 9.02 except to
increase any percentage specified herein or to provide that certain
additional provisions of this Indenture or the Basic Documents cannot
be modified or waived without the consent of the Holder of each Bond
affected thereby;
(vi) modify any of the provisions of this Indenture in
such manner as to affect the calculation of the amount of any payment
of interest or principal due on any Bond on any Payment Date (including
the calculation of any of the individual components of such
calculation); or
(vii) permit the creation of any lien ranking prior to or
on a parity with the lien of this Indenture with respect to any part of
the Trust Estate or, except as otherwise permitted or contemplated
herein, terminate the lien of this Indenture on any property at any
time subject hereto or deprive the Holder of any Bond of the security
provided by the lien of this Indenture; and provided, further, that
such action shall not, as evidenced by an Opinion of Counsel, cause the
Issuer to be subject to an entity level tax.
The Indenture Trustee may in its discretion determine whether or not
any Bonds would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Bonds, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Bondholders under this Section
9.02 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section 9.02, the Indenture Trustee
shall mail to the Holders of the Bonds to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
Section 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
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Section 9.04. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance therewith
with respect to the Bonds affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the Bonds
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
Section 9.06. REFERENCE IN BONDS TO SUPPLEMENTAL INDENTURES. Bonds
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Bonds so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Bonds.
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ARTICLE X
MISCELLANEOUS
Section 10.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee and to the Credit Enhancer (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and (ii) an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that, in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Indenture, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as to
whether or not such covenant or condition has been complied with;
(4) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with; and
(5) if the Signer of such Certificate or Opinion is required
to be Independent, the Statement required by the definition of the term
"Independent".
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 10.01(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the Issuer
of the Collateral or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the opinion of
any signer thereof as to the matters described in clause (i) above, the Issuer
shall also deliver to the Indenture Trustee an Independent Certificate as to the
same matters, if the fair value to the Issuer of the securities to
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be so deposited and of all other such securities made the basis of any such
withdrawal or release since the commencement of the then-current fiscal year of
the Issuer, as set forth in the certificates delivered pursuant to clause (i)
above and this clause (ii), is 10% or more of the Security Balances of the
Bonds, but such a certificate need not be furnished with respect to any
securities so deposited, if the fair value thereof to the Issuer as set forth in
the related Officer's Certificate is less than $25,000 or less than one percent
of the Security Balances of the Bonds.
(iii) Whenever any property or securities are to be
released from the lien of this Indenture, the Issuer shall also furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the opinion of
each person signing such certificate as to the fair value (within 90 days of
such release) of the property or securities proposed to be released and stating
that in the opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the opinion of
any signer thereof as to the matters described in clause (iii) above, the Issuer
shall also furnish to the Indenture Trustee an Independent Certificate as to the
same matters if the fair value of the property or securities and of all other
property, other than property as contemplated by clause (v) below or securities
released from the lien of this Indenture since the commencement of the
then-current calendar year, as set forth in the certificates required by clause
(iii) above and this clause (iv), equals 10% or more of the Security Balances of
the Bonds, but such certificate need not be furnished in the case of any release
of property or securities if the fair value thereof as set forth in the related
Officer's Certificate is less than $25,000 or less than one percent of the then
Security Balances of the Bonds.
(v) Notwithstanding any provision of this Indenture, the
Issuer may, without compliance with the requirements of the other provisions of
this Section 10.01, (A) collect, sell or otherwise dispose of the Mortgage Loans
as and to the extent permitted or required by the Basic Documents or (B) make
cash payments out of the Payment Account as and to the extent permitted or
required by the Basic Documents [, so long as the Issuer shall deliver to the
Indenture Trustee every six months, commencing _____________, an Officer's
Certificate of the Issuer stating that all the dispositions of Collateral
described in clauses (A) or (B) above that occurred during the preceding six
calendar months were in the ordinary course of the Issuer's business and that
the proceeds thereof were applied in accordance with the Basic Documents].
Section 10.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate
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or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Seller, the Issuer or the Administrator, stating that
the information with respect to such factual matters is in the possession of the
Seller, the Issuer or the Administrator, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
Section 10.03. ACTS OF BONDHOLDERS. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Bondholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Bondholders in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided such action shall become effective when such
instrument or instruments are delivered to the Indenture Trustee, and, where it
is hereby expressly required, to the Issuer. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Bondholders signing such instrument or instruments. Proof
of execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Section
6.01) conclusive in favor of the Indenture Trustee and the Issuer, if made in
the manner provided in this Section 10.03.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Bonds shall be proved by the Bond Registrar.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Bonds shall bind the Holder of every
Bond issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Bond.
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Section 10.04. NOTICES, ETC., TO INDENTURE TRUSTEE, ISSUER, CREDIT
ENHANCER AND RATING AGENCIES. Any request, demand, authorization, direction,
notice, consent, waiver or Act of Bondholders or other documents provided or
permitted by this Indenture shall be in writing and if such request, demand,
authorization, direction, notice, consent, waiver or act of Bondholders is to be
made upon, given or furnished to or filed with:
(i) the Indenture Trustee by any Bondholder or by the
Issuer shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Indenture Trustee at the
Corporate Trust Office. The Indenture Trustee shall promptly transmit
any notice received by it from the Bondholders to the Issuer, or
(ii) the Issuer by the Indenture Trustee or by any
Bondholder shall be sufficient for every purpose hereunder if in
writing and mailed first-class, postage prepaid to the Issuer addressed
to: Imperial CMB Trust Series 199_ - ______, in care of [Name of Owner
Trustee] _________________, __________, ______________, Attention of
_________________________________________ with a copy to the
Administrator at ________________ Attention: __________
__________________________, or at any other address previously
furnished in writing to the Indenture Trustee by the Issuer or the
Administrator. The Issuer shall promptly transmit any notice received
by it from the Bondholders to the Indenture Trustee, or
(iii) the Credit Enhancer by the Issuer, the Indenture
Trustee or by any Bondholders shall be sufficient for every purpose
hereunder to in writing and mailed, first-class postage pre-paid, or
personally delivered or telecopied to: [Name of Credit Enhancer],
________________, ________, _______________, Attention:
_________________, ___________________________, Telephone
______________. Telecopier ______________. The Credit Enhancer shall
promptly transmit any notice received by it from the Issuer, the
Indenture Trustee or the Bondholders to the Issuer or Indenture
Trustee, as the case may be.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally delivered
or mailed by certified mail, return receipt requested, to (i) in the case of
[Moody's], at the following address: [Moody's Investors Service, Inc., ABS
Monitoring Department, 99 Church Street, New York, New York 10007] and (ii) in
the case of [Standard & Poor's], at the following address: [Standard & Poor's
Ratings Group, 26 Broadway (15th Floor), New York, New York 10004, Attention of
Asset Backed Surveillance Department]; or as to each of the foregoing, at such
other address as shall be designated by written notice to the other parties.
Section 10.05. NOTICES TO BONDHOLDERS; WAIVER. Where this Indenture
provides for notice to Bondholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Bondholder affected by such
event, at such Person's as it appears on the Bond Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Bondholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Bondholder shall affect the sufficiency of such notice with
respect to other Bondholders, and any notice that is mailed in the
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manner herein provided shall conclusively be presumed to have been duly given
regardless of whether such notice is in fact actually received.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Bondholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Bondholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute an Event of
Default.
Section 10.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS. Notwithstanding
any provision of this Indenture or any of the Bonds to the contrary, the Issuer
may enter into any agreement with any Holder of a Bond providing for a method of
payment, or notice by the Indenture Trustee or any Administrator to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer shall furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee shall cause payments to be made
and notices to be given in accordance with such agreements.
Section 10.07. CONFLICT WITH TRUST INDENTURE ACT. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA ss.ss. 310 through 317 that impose duties on any
Person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Section 10.08. EFFECT OF HEADINGS. The Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
Section 10.09. SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture and the Bonds by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors, co-trustees and agents.
Section 10.10. SEPARABILITY. In case any provision in this Indenture or
in the Bonds shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
55
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Section 10.11. BENEFITS OF INDENTURE. The Credit Enhancer and its
successors and assigns shall be a third-party beneficiary to the provisions of
this Indenture. Nothing in this Indenture or in the Bonds, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, and the Bondholders, and any other party secured hereunder, and any
other Person with an ownership interest in any part of the Trust Estate, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 10.12. LEGAL HOLIDAYS. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Bonds or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 10.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 10.14. COUNTERPARTS. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 10.15. RECORDING OF INDENTURE. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Bondholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
Section 10.16. ISSUER OBLIGATION. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Bonds or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes of
this Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Article VI, VII and VIII of the Trust Agreement.
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Section 10.17. NO PETITION. The Indenture Trustee, by entering into
this Indenture, and each Bondholder, by accepting a Bond, hereby covenant and
agree that they will not at any time institute against the Depositor or the
Issuer, or join in any institution against the Depositor or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Bonds, this
Indenture or any of the Basic Documents.
Section 10.18. INSPECTION. The Issuer agrees that, on reasonable prior
notice, it shall permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees, and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder.
Section 10.19. AUTHORITY OF THE ADMINISTRATOR. Each of the parties to
this Indenture acknowledges that the Issuer and the Owner Trustee have each
appointed the Administrator to act as its agent to perform the duties and
obligations of the Issuer hereunder. Unless otherwise instructed by the Issuer
or the Owner Trustee, copies of all notices, requests, demands and other
documents to be delivered to the Issuer or the Owner Trustee pursuant to the
terms hereof shall be delivered to the Administrator. Unless otherwise
instructed by the Issuer or the Owner Trustee, all notices, requests, demands
and other documents to be executed or delivered, and any action to be taken, by
the Issuer or the Owner Trustee pursuant to the terms hereof may be executed,
delivered and/or taken by the Administrator pursuant to the Administration
Agreement.
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
their names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.
Imperial CMB Trust Series 199_ - _____,
as Issuer
By:
---------------------------------------
not in its individual capacity
but solely as Owner Trustee
By:
---------------------------------------
Name:
Title:
------------------------------------------,
as Indenture Trustee, as Certificate Paying
Agent and as Bond Registrar
By:
---------------------------------------
Name:
Title:
- ------------------------------------
hereby accepts the appointment as Cer-
tificate Paying Agent pursuant to Sec-
tion 3.03 hereof and as Certificate
Registrar pursuant to Section 4.02
hereof.
- ------------------------------------
By:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of __________, before me personally appeared
______________, to me known, who being by me duly sworn, did depose and say,
that he resides at __________- _______, __________________ _____, that he is the
of the Owner Trustee, one of the corporations described in and which executed
the above instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation; and that he signed his name
thereto by like order.
---------------------------
Notary Public
[NOTARIAL SEAL]
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of __________, before me personally appeared , to me
known, who being by me duly sworn, did depose and say, that he resides at that
he is the ______________ of ________________, as Indenture Trustee, one of the
corporations described in and which executed the above instrument; that he knows
the seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation; and that he signed his name thereto by like order.
---------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of __________, before me personally appeared , to me
known, who being by me duly sworn, did depose and say, that he resides at , that
he is an ________________ of _______________, as Indenture Trustee, one of the
corporations described in and which executed the above instrument; that he knows
the seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation; and that he signed his name thereto by like order.
---------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
APPENDIX A
DEFINITIONS
ADDITIONAL PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Payment
Date, the lesser of (x) the amount remaining in the Payment Account after the
application of funds on deposit therein in accordance with clauses (i) through
(vi) of Section 3.05 of the Indenture and (y) the amount required to bring the
Outstanding Revenue Amount up to the Reserve Amount Target.
ADMINISTRATION AGREEMENT: The Administration Agreement dated as of
_______________ among the Issuer and the Indenture Trustee, as Administrator, as
it may be amended from time to time.
ADMINISTRATOR: [Name of Administrator], as administrator under the
Administration Agreement or any successor Administrator appointed pursuant to
the terms of the Administration Agreement.
AFFILIATE: With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
AGGREGATE SECURITY BALANCE: With respect to any Payment Date, the
aggregate of the Principal Balances of all Securities as of such date.
AMORTIZATION EVENT: [Any one of the following events:
(a) the failure on the part of the Seller (i) to make any
payment or deposit required to be made under the Mortgage Loan Purchase
Agreement within four Business Days after the date such payment or
deposit is required to be made; or (ii) to observe or perform in any
material respect any other covenants or agreements of the Seller set
forth in the Mortgage Loan Purchase Agreement, which failure continues
unremedied for a period of 60 days after written notice and such
failure materially and adversely affects the interests of the
Securityholders or the Credit Enhancer;
(b) if any representation or warranty made by the Seller in
the Mortgage Loan Purchase Agreement proves to have been incorrect in
any material respect when made and which continues to be incorrect in
any material respect for a period of 45 days with respect to any
representation or warranty of the Seller made in Section 3.1(a) of the
Mortgage Loan Purchase Agreement or 90 days with respect to any
representation or warranty made in Section 3.1(b) or 3.2 of the
Mortgage Loan Purchase Agreement after written notice and as a result
of which the interests of the Securityholders or the Credit Enhancer
are materially and adversely affected; PROVIDED, HOWEVER, that an
Amortization
<PAGE>
Event shall not be deemed to occur if the Seller has repurchased or
substituted for the related Mortgage Loans or all Mortgage Loans, if
applicable, during such period (or within an additional 60 days with
the consent of the Indenture Trustee and the Credit Enhancer) in
accordance with the provisions of the Indenture;
(c) The entry against the Seller of a decree or order by a
court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, conservatorship, receivership,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for
a period of 60 consecutive days;
(d) The Seller shall voluntarily go into liquidation, consent
to the appointment of a conservator, receiver, liquidator or similar
person in any insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings of or relating to the Seller or
of or relating to all or substantially all of its property, or a decree
or order of a court, agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator,
receiver, liquidator or similar person in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings,
or for the winding-up or liquidation of its affairs, shall have been
entered against the Seller and such decree or order shall have remained
in force undischarged, unbonded or unstayed for a period of 60 days; or
the Seller shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors or voluntarily suspend payment of its
obligations;
(e) the Issuer becomes subject to regulation by the Commission
as an investment company within the meaning of the Investment Company
Act of 1940, as amended;
(f) an Event of Servicing Termination relating to the Master
Servicer occurs under the Servicing Agreement and the Master Servicer
is the Seller;
In the case of any event described in (a), (b) or (f), an Amortization
Event will be deemed to have occurred only if, after any applicable grace period
described in such clauses, either the Indenture Trustee, the Credit Enhancer or,
with the consent of the Credit Enhancer, Securityholders evidencing not less
than 51% of the Security Balance of each of the Bonds and the Certificates by
written notice to the Seller, the Master Servicer, the Depositor and the Owner
Trustee (and to the Indenture Trustee, if given by the Credit Enhancer or the
Securityholders) may declare that an Amortization Event has occurred as of the
date of such notice. In the case of any event described in clauses (c), (d),
(e), an Amortization Event will be deemed to have occurred without any notice or
other action on the part of the Indenture Trustee, the Securityholders or the
Credit Enhancer immediately upon the occurrence of such event; PROVIDED, that
any Amortization Event may be waived and deemed of no effect with the written
consent of the Credit Enhancer and each Rating Agency, subject to the
satisfaction of any conditions to such waiver.]
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APPRAISED VALUE: The appraised value of a Mortgaged Property based upon
the lesser of (i) the appraisal made at the time of the origination of the
related Mortgage Loan, or (ii) the sales price of such Mortgaged Property at
such time of origination. With respect to a Mortgage Loan the proceeds of which
were used to refinance an existing mortgage loan, the appraised value of the
Mortgaged Property based upon the appraisal (as reviewed and approved by the
Seller) obtained at the time of refinancing.
ASSIGNMENT OF MORTGAGE: An assignment of Mortgage, notice of transfer
or equivalent instrument, in recordable form, which is sufficient under the laws
of the jurisdiction wherein the related Mortgaged Property is located to reflect
of record the sale of the Mortgage, which assignment, notice of transfer or
equivalent instrument may be in the form of one or more blanket assignments
covering Mortgages secured by Mortgaged Properties located in the same county,
if permitted by law.
AUTHORIZED NEWSPAPER: A newspaper of general circulation in the Borough
of Manhattan, The City of New York, printed in the English language and
customarily published on each Business Day, whether or not published on
Saturdays, Sundays or holidays.
AUTHORIZED OFFICER: With respect to the Issuer, any officer of the
Owner Trustee who is authorized to act for the Owner Trustee in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by the Owner Trustee to the Indenture Trustee on the Closing Date (as such list
may be modified or supplemented from time to time thereafter) and, so long as
the Administration Agreement is in effect, any Responsible Officer of the
Administrator who is authorized to act for the Administrator in matters relating
to the Issuer and to be acted upon by the Administrator pursuant to the
Administration Agreement and who is identified on the list of Authorized
Officers delivered by the Administrator to the Indenture Trustee on the Closing
Date (as such list may be modified or supplemented from time to time
thereafter).
BASIC DOCUMENTS: The Trust Agreement, the Certificate of Trust, the
Indenture, the Mortgage Loan Purchase Agreement, the Insurance Agreement, the
Administration Agreement, the Servicing Agreement, the Custodial Agreement and
the other documents and certificates delivered in connection with any of the
above.
BENEFICIAL OWNER: With respect to any Bond, the Person who is the
beneficial owner of such Bond as reflected on the books of the Depository or on
the books of a Person maintaining an account with such Depository (directly as a
Depository Participant or indirectly through a Depository Participant, in
accordance with the rules of such Depository).
BILLING DATE: With respect to any Due Date and Mortgage Loan, the first
day of the month preceding such Due Date on which date the bill is generated for
the amount due and payable on the related Mortgage Loan on such Due Date.
BOND INTEREST RATE: With respect to any Interest Period, a per annum
rate determined by the Master Servicer equal to LIBOR as of the second LIBOR
Business Day prior to the first day of such Interest Period and ____%; PROVIDED
HOWEVER, that in no event shall the
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Bond Interest Rate with respect to any Interest Period exceed the Maximum Rate
for such Interest Period.
BOND OWNER: The Beneficial Owner of a Bond.
BOND PERCENTAGE: With respect to any Payment Date, the ratio expressed
as a percentage of the aggregate of the Principal Balances of all Bonds
immediately prior to such Payment Date to the sum of the Pool Balance on the
first day of the related Collection Period and the amount on deposit in the
Funding Account from Net Principal Collections immediately prior to such Payment
Date.
BOND REGISTER: The register maintained by the Bond Registrar in which
the Bond Registrar shall provide for the registration of Bonds and of transfers
and exchanges of Bonds.
BOND REGISTRAR: The Indenture Trustee, in its capacity as Bond
Registrar.
BONDHOLDER: The Person in whose name a Bond is registered in the Bond
Register, except that, any Bond registered in the name of the Depositor, the
Issuer or the Indenture Trustee or any Affiliate of any of them shall be deemed
not to be outstanding and the registered holder will not be considered a
Bondholder or holder for purposes of giving any request, demand, authorization,
direction, notice, consent or waiver under the Indenture or the Trust Agreement
provided that, in determining whether the Indenture Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Bonds that the Indenture Trustee or the Owner Trustee
knows to be so owned shall be so disregarded. Owners of Bonds that have been
pledged in good faith may be regarded as Holders if the pledgee establishes to
the satisfaction of the Indenture Trustee or the Owner Trustee the pledgee's
right so to act with respect to such Bonds and that the pledgee is not the
Issuer, any other obligor upon the Bonds or any Affiliate of any of the
foregoing Persons.
BONDS: The Bonds designated as the "Bonds" in the Indenture.
BOOK-ENTRY BONDS: Beneficial interests in the Bonds, ownership and
transfers of which shall be made through book entries by the Depository as
described in Section 4.06 of the Indenture.
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday or (ii) a
day on which banking institutions in the State of New York, Delaware or
California are required or authorized by law to be closed.
BUSINESS TRUST STATUTE: Chapter 38 of Title 12 of the Delaware Code, 12
DEL. Codess.ss.3801 ET SEQ., as the same may be amended from time to time.
CARRYOVER LOSS AMOUNT: With respect to any Payment Date, the aggregate
of Loss Amounts (other than Loss Amounts arising during the related Collection
Period) with respect to which either (i) payments of principal have not been
previously made on the Bonds
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and the Certificates or (ii) were not reflected in a reduction (not below zero)
of the Outstanding Reserve Amount.
CERTIFICATE DISTRIBUTION ACCOUNT: The account or accounts created and
maintained pursuant to Section _____ of the Servicing Agreement. The Certificate
Distribution Account shall be an Eligible Account.
CERTIFICATE DISTRIBUTION AMOUNT: With respect to any Payment Date, the
sum of (x) the amount accrued during the related Interest Period on the
Principal Balance of the Certificates at the Certificate Rate for such Interest
Period and (y) any Unpaid Certificate Distribution Amount Shortfall. The amount
available for distribution on any Payment Date shall be allocated first to the
amount in clause (x) above, and second to the amount in clause (y) above.
CERTIFICATE PAYING AGENT: The meaning specified in Section 3.10 of the
Trust Agreement.
CERTIFICATE PERCENTAGE: With respect to any Payment Date, the ratio,
expressed as a percentage, of the aggregate of the Principal Balance of the
Certificates immediately prior to such Payment Date to the sum of the aggregate
of the Principal Balance of the Securities immediately prior to such date.
CERTIFICATE RATE: With respect to any Interest Period, the per annum
rate determined by the Master Servicer equal to the sum of (i) LIBOR and (ii)
0.__% PROVIDED, HOWEVER, that in no event shall the Certificate Rate with
respect to any Interest Period exceed the Maximum Rate.
CERTIFICATE REGISTER: The register maintained by the Certificate
Registrar in which the Certificate Registrar shall provide for the registration
of Certificates and of transfers and exchanges of Certificates.
CERTIFICATE REGISTRAR: Initially, __________________________________,
in its capacity as Certificate Registrar, or any successor to the Indenture
Trustee in such capacity.
CERTIFICATE OF TRUST: The Certificate of Trust filed for the Trust
pursuant to Section 3810(a) of the Business Trust Statute.
CERTIFICATES: The Collateralized Mortgage Certificates, Series ______,
each evidencing undivided beneficial interests in the Issuer and executed by the
Owner Trustee in sub- stantially the form set forth in Exhibit A to the Trust
Agreement.
CERTIFICATEHOLDER: The Person in whose name a Certificate is registered
in the Certificate Register except that, any Certificate registered in the name
of the Issuer, the Owner Trustee or the Indenture Trustee or any Affiliate of
any of them shall be deemed not to be outstanding and the registered holder will
not be considered a Certificateholder or a holder for purposes of giving any
request, demand, authorization, direction, notice, consent or waiver
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under the Indenture or the Trust Agreement provided that, in determining whether
the Indenture Trustee or the Owner Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Certificates that the Indenture Trustee or the Owner Trustee knows to be so
owned shall be so disregarded. Owners of Certificates that have been pledged in
good faith may be regarded as Holders if the pledgee establishes to the
satisfaction of the Indenture Trustee or the Owner Trustee, as the case may be,
the pledgee's right so to act with respect to such Certificates and that the
pledgee is not the Issuer, any other obligor upon the Certificates or any
Affiliate of any of the foregoing Persons.
CLASS PERCENTAGE: With respect to each Class of Bonds and Payment Date,
the ratio, expressed as a percentage, of the aggregate Principal Balance of such
Class of Bonds to the aggregate Principal Balance of the Bonds, in each case
immediately prior to such Payment Date.
CLOSING DATE: ________________.
CODE: The Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
COLLATERAL: The meaning specified in the Granting Clause of the
Indenture.
COLLECTION ACCOUNT: The account or accounts created and maintained
pursuant to Section 3.02(b) of the Servicing Agreement. The Collection Account
shall be an Eligible Account.
COLLECTION PERIOD: With respect to any Mortgage Loan and Payment Date
other than the first Payment Date, the calendar month preceding any such Payment
Date and with respect to the first Payment Date, the period from
________________ through _________________.
COMBINED LOAN-TO-VALUE RATIO: With respect to any Mortgage Loan and any
date, the percentage equivalent of a fraction, the numerator of which is the
Cut-Off Date Principal Balance of such Mortgage Loan and the denominator of
which is the outstanding principal balance as of the date of the origination of
such Mortgage Loan of any mortgage loan or mortgage loans that are secured by
liens on the Mortgaged Property that are senior or subordinate to the Mortgage
and the denominator of which is the Appraised Value of the related Mortgaged
Property.
CORPORATE TRUST OFFICE: With respect to the Indenture Trustee,
Certificate Registrar, Certificate Paying Agent and Paying Agent, the principal
corporate trust office of the Indenture Trustee and Bond Registrar at which at
any particular time its corporate trust business shall be administered, which
office at the date of the execution of this instrument is located at
- ------------------------, ----------, -------, -------------------,
___________________________, except that for purposes of Section 4.02 of the
Indenture and Section 3.09 of the Trust Agreement, such term shall include the
Indenture Trustee's office or agency at ______________, _________, ________,
______________. With respect to the
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Owner Trustee, the principal corporate trust office of the Owner Trustee at
which at any particular time its corporate trust business shall be administered,
which office at the date of the execution of this Trust Agreement is located at
__________________, __________, ______________, Attention:
______________________________.
CREDIT ENHANCEMENT DRAW AMOUNT: As defined in Section 3.32 of the
Indenture.
CREDIT ENHANCEMENT INSTRUMENT: The surety bond number ______, dated as
of the Closing Date, issued by the Credit Enhancer to the Indenture Trustee for
the benefit of the Bondholders.
CREDIT ENHANCER: _____________________________________, a
______________________-domiciled ______________________________________________
insurance company, any successor thereto or any replacement credit enhancer
substituted pur- suant to Section 3.33 of the Indenture.
CREDIT ENHANCER DEFAULT: If the Credit Enhancer fails to make a payment
required under the Credit Enhancement Instrument in accordance with its terms.
CUSTODIAL AGREEMENT: Any Custodial Agreement between the Custodian, the
Indenture Trustee, the Issuer and the Master Servicer relating to the custody of
the Mortgage Loans and the Related Documents.
CUSTODIAN: With respect to the ______ Loans,
___________________________________, a ____________________, and its successors
and assigns, and with respect to the ____________________________Loans,
________________________________________, a ______________, and its successors
and assigns, provided, that in no event shall the Custodian be an Affiliate of
the Seller.
CUT-OFF DATE: With respect to the Initial Loans, ________________.
CUT-OFF DATE PRINCIPAL BALANCE: With respect to any Initial Loan, the
unpaid principal balance thereof as of the opening of business on the last day
of the related Due Period immediately prior to the Cut-Off Date.
DEFAULT: Any occurrence which is or with notice or the lapse of time or
both would become an Event of Default.
DEFINITIVE BONDS: The meaning specified in Section 4.06 of the
Indenture.
DELETED MORTGAGE LOAN: A Mortgage Loan replaced or to be replaced with
an Eligible Substitute Mortgage Loan.
DEPOSIT DATE: The applicable date as of which any Additional Loan is
sold to the Purchaser pursuant to the Mortgage Loan Purchase Agreement.
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DEPOSIT DATE PRINCIPAL BALANCE: With respect to any Additional Loan,
the Principal Balance thereof as of the Deposit Date.
DEPOSITOR: IMH Assets Corp., a California corporation, or its successor
in interest.
DEPOSITORY OR DEPOSITORY AGENCY: The Depository Trust Company or a
successor appointed by the Indenture Trustee with the approval of the Depositor.
Any successor to the Depository shall be an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act and the
regulations of the Securities and Exchange Commission thereunder.
DEPOSITORY PARTICIPANT: A Person for whom, from time to time, the
Depository effects book-entry transfers and pledges of securities deposited with
the Depository.
DETERMINATION DATE: With respect to any Payment Date, the 15th day (or
if such 15th day is not a Business Day, the Business Day immediately preceding
such 15th day) of the month of the related Payment Date.
DISSOLUTION PAYMENT DATE: Following an Event of Default under the
Indenture and an acceleration of the Maturity Date of the Bonds, a date on which
the proceeds of the sale of the Trust Estate are paid to Securityholders.
DUE DATE: The first day of the month of the related Payment Date.
DUE PERIOD: With respect to any Mortgage Loan and Due Date, the period
commencing on the second day of the month preceding the month of such Payment
Date (or, with respect to the first Due Period, the day following the Cut-off
Date) and ending on the related Due Date.
ELIGIBLE ACCOUNT: An account that is any of the following: (i)
maintained with a depository institution the debt obligations of which have been
rated by each Rating Agency in its highest rating available, or (ii) an account
or accounts in a depository institution in which such accounts are fully insured
to the limits established by the FDIC, PROVIDED that any deposits not so insured
shall, to the extent acceptable to each Rating Agency, as evidenced in writing,
be maintained such that (as evidenced by an Opinion of Counsel delivered to the
Indenture Trustee and each Rating Agency) the Indenture Trustee have a claim
with respect to the funds in such account or a perfected first security interest
against any collateral (which shall be limited to Eligible Investments) securing
such funds that is superior to claims of any other depositors or creditors of
the depository institution with which such account is maintained, or (iii) in
the case of the Collection Account, either (A) a trust account or accounts
maintained at the Corporate Trust Department of the Indenture Trustee or (B) an
account or accounts maintained at the Corporate Trust Department of the
Indenture Trustee, as long as its short term debt obligations are rated P-1 by
Moody's and A-1 by Standard & Poor's or the equivalent) or better by each Rating
Agency and its long term debt obligations are rated A2 by Moody's and A by
Standard & Poor's or the equivalent) or better, by each Rating Agency, or (iv)
in the case of the Collection Account and the Payment Account, a trust account
or accounts maintained in the
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corporate trust division of the Indenture Trustee, or (v) an account or accounts
of a depository institution acceptable to each Rating Agency as evidenced in
writing by each Rating Agency that use of any such account as the Collection
Account or the Payment Account will not reduce the rating assigned to any of the
Securities by such Rating Agency below investment grade without taking into
account the Credit Enhancement Instrument.
ELIGIBLE INVESTMENTS: One or more of the following:
(i) obligations of or guaranteed as to principal and interest
by the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United
States;
(ii) repurchase agreements on obligations specified in clause
(i) maturing not more than one month from the date of acquisition
thereof, PROVIDED that the unsecured obligations of the party agreeing
to repurchase such obligations are at the time rated by each Rating
Agency in the highest short-term rating available;
(iii) federal funds, certificates of deposit, demand deposits,
time deposits and bankers' acceptances (which shall each have an
original maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than
365 days or a remaining maturity of more than 30 days) denominated in
United States dollars of any U.S. depository institution or trust
company incorporated under the laws of the United States or any state
thereof or of any domestic branch of a foreign depository institution
or trust company; PROVIDED that the debt obligations of such depository
institution or trust company (or, if the only Rating Agency is Standard
& Poor's, in the case of the principal depository institution in a
depository institution holding company, debt obligations of the
depository institution holding company) at the date of acquisition
thereof have been rated by each Rating Agency in its highest short-term
rating available; and PROVIDED FURTHER that, if the only Rating Agency
is Standard & Poor's and if the depository or trust company is a
principal subsidiary of a bank holding company and the debt obligations
of such subsidiary are not separately rated, the applicable rating
shall be that of the bank holding company; and, PROVIDED FURTHER that,
if the original maturity of such short-term obligations of a domestic
branch of a foreign depository institution or trust company shall
exceed 30 days, the short-term rating of such institution shall be A-1+
in the case of Standard & Poor's if Standard & Poor's is the Rating
Agency;
(iv) commercial paper (having original maturities of not more
than 270 days) of any corporation incorporated under the laws of the
United States or any state thereof which on the date of acquisition has
been rated by each Rating Agency in their highest short-term rating
available; PROVIDED that such commercial paper shall have a remaining
maturity of not more than 30 days;
(v) interests in any money market fund or qualified investment
fund which at the date of acquisition of the interests in such fund and
throughout the time the interest is held in such fund has a rating of
P-1 or Aaa by Moody's and either AAAm
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or AAAm-G by Standard & Poor's or such lower rating as will not result
in the qualification, downgrading or withdrawal of the then-current
rating assigned to the Certificates by each Rating Agency;
(vi) other obligations or securities that are acceptable to
each Rating Agency as an Eligible Investment hereunder and will not
reduce the rating assigned to any Class of Certificates by such Rating
Agency below the lower of the rating then assigned thereto or the
rating assigned at the Closing Date, and which are acceptable to the
Credit Enhancer, as evidenced in writing, PROVIDED that if the Master
Servicer or any other Person controlled by the Master Servicer is the
issuer or the obligor of any obligation or security described in this
clause (vi) such obligation or security must have an interest rate or
yield that is fixed or is variable based on an objective index that is
not affected by the rate or amount of losses on the Mortgage Loans;
PROVIDED, HOWEVER, that each such instrument shall be acquired in an arm's
length transaction and no such instrument shall be a Permitted Investment if it
represents, either (1) the right to receive only interest payments with respect
to the underlying debt instrument or (2) the right to receive both principal and
interest payments derived from obligations underlying such instrument and the
principal and interest payments with respect to such instrument provide a yield
to maturity greater than 120% of the yield to maturity at par of such underlying
obligations.
ELIGIBLE SUBSTITUTE MORTGAGE LOAN: A Mortgage Loan substituted by the
Seller for a Deleted Mortgage Loan which must, on the date of such substitution,
as confirmed in an Officers' Certificate delivered to the Indenture Trustee, (i)
have an outstanding principal balance, after deduction of the principal portion
of the monthly payment due in the month of substitution (or in the case of a
substitution of more than one Mortgage Loan for a Deleted Mortgage Loan, an
aggregate outstanding principal balance, after such deduction), not in excess of
the outstanding principal balance of the Deleted Mortgage Loan (the amount of
any shortfall to be deposited by the Seller in the Collection Account in the
month of substitution); (ii) comply with each representation and warranty set
forth in clauses (ii) through (xxxiv) of Section 3.1(b) of the Mortgage Loan
Purchase Agreement other than clauses (viii), (xiii), (xiv), (xxiv)(B),
(xxv)(B), (xxvi) and (xxvii); (iii) have a Mortgage Rate, Net Mortgage Rate and
Gross Margin no lower than and not more than [1]% per annum higher than the
Mortgage Rate, Net Mortgage Rate and Gross Margin, respectively, of the Deleted
Mortgage Loan as of the date of substitution; (iv) have a Combined Loan-to-Value
Ratio at the time of substitution no higher than that of the Deleted Mortgage
Loan at the time of substitution; (v) have a remaining term to stated maturity
not greater than (and not more than one year less than) that of the Deleted
Mortgage Loan and (vi) not be 30 days or more delinquent.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
EVENT OF DEFAULT: With respect to the Indenture, any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
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(i) a default in the payment of any interest on any Bond when
the same becomes due and payable, and such default shall continue for a
period of five days; or
(ii) a default in the payment of the principal of or any
installment of the principal of any Bond when the same becomes due and
payable; or
(iii) a Credit Enhancer Default shall have occurred and be
continuing and there occurs a default in the observance or performance
of any covenant or agreement of the Issuer made in the Indenture, or
any representation or warranty of the Issuer made in the Indenture or
in any certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material
respect as of the time when the same shall have been made [which has a
material adverse effect on Securityholders], and such default shall
continue or not be cured, or the circumstance or condition in respect
of which such representation or warranty was incorrect shall not have
been eliminated or otherwise cured, for a period of 30 days after there
shall have been given, by registered or certified mail, to the Issuer
by the Indenture Trustee or to the Issuer and the Indenture Trustee by
the Holders of at least 25% of the Outstanding Amount of the Bonds, a
written notice specifying such default or incorrect representation or
warranty and requiring it to be remedied and stating that such notice
is a notice of default hereunder; or
(iv) a Credit Enhancer Default shall have occurred and be
continuing and there occurs the filing of a decree or order for relief
by a court having jurisdiction in the premises in respect of the Issuer
or any substantial part of the Trust Estate in an involuntary case
under any applicable federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Issuer or for any substantial part of the Trust Estate,
or ordering the winding-up or liquidation of the Issuer's affairs, and
such decree or order shall remain unstayed and in effect for a period
of 60 consecutive days; or
(v) a Credit Enhancer Default shall have occurred and be
continuing and there occurs the commencement by the Issuer of a
voluntary case under any applicable federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or the
consent by the Issuer to the entry of an order for relief in an
involuntary case under any such law, or the consent by the Issuer to
the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the assets of the Trust Estate,
or the making by the Issuer of any general assignment for the benefit
of creditors, or the failure by the Issuer generally to pay its debts
as such debts become due, or the taking of any action by the Issuer in
furtherance of any of the foregoing.
EVENT OF SERVICER TERMINATION: With respect to the Servicing Agreement,
an Event of Default as defined in Section 7.01 of the Servicing Agreement.
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EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
EXCLUDED AMOUNT: For any Payment Date on or after the occurrence of an
Amortization Event, with respect to all collections whether interest or
principal (other than any amounts received in respect of a Repurchase Price and
pursuant to Section 3.05(c) of the Servicing Agreement) ("Total Collections") on
all Initial Loans and Additional Loans (collectively, "Total Balances of
Obligors"), an amount equal to the product of (A) Total Collections during the
related Collection Period and (B) a fraction equal to one (1) MINUS a fraction
the numerator of which is (x) the aggregate Principal Balances as of the end of
the last Collection Period and the denominator of which is (y) the Total
Balances of Obligors.
EXPENSES: The meaning specified in Section 7.02 of the Trust Agreement.
FDIC: The Federal Deposit Insurance Corporation or any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, or any successor
thereto.
FINAL SCHEDULED PAYMENT DATE: To the extent not previously paid, the
principal balance of each Class of Bonds will be due on the Payment Date in
____________.
FNMA: The Federal National Mortgage Association, or any successor
thereto.
FORECLOSURE PROFIT: With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Principal Balance (plus accrued and unpaid interest
thereon at the applicable Mortgage Rate from the date interest was last paid
through the date of receipt of the final Liquidation Proceeds) of such
Liquidated Mortgage Loan immediately prior to the final recovery of its
Liquidation Proceeds.
FUNDING ACCOUNT: The trust account created and maintained with the
Indenture Trustee pursuant to Section 8.02 of the Indenture and referred to
therein as the Funding Account. Funds deposited in the Funding Account shall be
held in trust for the uses and purposes set forth in Article VIII of the
Indenture.
FUNDING PERIOD: The period commencing on the Cut-Off Date and ending on
the earlier of (x) the Payment Date in ______________ and (y) the occurrence of
an Amortization Event.
GRANT: Pledge, bargain, sell, warrant, alienate, remise, release,
convey, assign, transfer, create, and grant a lien upon and a security interest
in and right of set-off against, deposit, set over and confirm pursuant to the
Indenture. A Grant of the Collateral or of any other agreement or instrument
shall include all rights, powers and options (but none of the obligations) of
the granting party thereunder, including the immediate and continuing right to
claim for, collect, receive and give receipt for principal and interest payments
in respect of such collateral or other agreement or instrument and all other
moneys payable thereunder, to give and
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receive notices and other communications, to make waivers or other agreements,
to exercise all rights and options, to bring proceedings in the name of the
granting party or otherwise, and generally to do and receive anything that the
granting party is or may be entitled to do or receive thereunder or with respect
thereto.
GROSS MARGIN: With respect to any Mortgage Loan, the percentage set
forth as the "Gross Margin" for such Mortgage Loan on the Mortgage Loan
Schedule, as adjusted from time to time with respect to any ______ Loan in
accordance with the terms of the Servicing Agreement.
GUARANTEED PRINCIPAL PAYMENT AMOUNT: [With respect to any Payment Date,
other than the Dissolution Payment Date, the amount, if any, by which the
Security Balance of the Bonds (after giving effect to all amounts allocable and
distributable to principal on the Bonds on such Payment Date) exceeds the sum of
(A) the Pool Balance PLUS (B) all amounts on deposit in the Funding Account on
such date (after giving effect to all withdrawals therefrom and deposits thereto
pursuant to Sections 8.02(b) and 8.02(c) of the Indenture on such Payment Date).
With respect to the Payment Date in ____________, if such Payment Date is not a
Dissolution Payment Date, the amount, if any, by which the aggregate of the
Security Balances of the Bonds (after giving effect to all amounts allocable and
distributable to principal on the Bonds) exceeds the amount on deposit in the
Payment Account available to be paid as principal on the Bonds (after giving
effect to all amounts allocable and distributable as principal on the Bonds on
such date).
HOLDER: Any of the Bondholders or Certificateholders.
INDEMNIFIED PARTY: The meaning specified in Section 7.02 of the Trust
Agreement.
INDENTURE: The indenture dated as of _______________ between the
Issuer, as debtor, and the Indenture Trustee, as Indenture Trustee.
INDENTURE TRUSTEE: __________________________________, and its
successors and assigns or any successor indenture trustee appointed pursuant to
the terms of the Indenture.
INDEPENDENT: When used with respect to any specified Person, the Person
(i) is in fact independent of the Issuer, any other obligor on the Bonds, the
Seller, the Issuer, the Depositor and any Affiliate of any of the foregoing
Persons, (ii) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, the Seller,
the Issuer, the Depositor or any Affiliate of any of the foregoing Persons and
(iii) is not connected with the Issuer, any such other obligor, the Seller, the
Issuer, the Depositor or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
INDEPENDENT CERTIFICATE: A certificate or opinion to be delivered to
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 10.01 of the Indenture,
made by an Independent appraiser or other
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expert appointed by an Issuer Order and approved by the Indenture Trustee in the
exercise of reasonable care, and such opinion or certificate shall state that
the signer has read the definition of "Independent" in this Indenture and that
the signer is Independent within the meaning thereof.
INDEX: With respect to any Mortgage Loan, the prime rate from time to
time for the adjustment of the Mortgage Rate set forth as such on the related
Mortgage Note.
INITIAL LOANS: All home equity lines of credit sold by the Seller to
the Purchaser on _________________ pursuant to the terms of the Mortgage Loan
Purchase Agreement, as specified in the Mortgage Loan Schedule.
INITIAL PRINCIPAL BALANCE: With respect to the Certificates,
$_________; and the Bonds, $______________.
INITIAL SUBSERVICERS: With respect to the _________ Loans,
______________________. With respect to the ________ Loans,
__________________________. With respect to the ______ Loans,
_________________________.
INSOLVENCY EVENT: With respect to a specified Person, (a) the filing of
a decree or order for relief by a court having jurisdiction in the premises in
respect of such Person or any substantial part of its property in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation of such Person's
affairs, and such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or (b) the commencement by such Person of a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or the consent by such Person to the entry of an
order for relief in an involuntary case under any such law, or the consent by
such Person to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or the making by such
Person of any general assignment for the benefit of creditors, or the failure by
such Person generally to pay its debts as such debts become due or the admission
by such Person in writing (as to which the Indenture Trustee shall have notice)
of its inability to pay its debts generally, or the adoption by the Board of
Directors or managing member of such Person of a resolution which authorizes
action by such Person in furtherance of any of the foregoing.
INSURANCE AGREEMENT: The insurance and reimbursement agreement dated as
of _______________ among the Master Servicer, the Seller, the Depositor, the
Issuer and the Credit Enhancer, including any amendments and supplements
thereto.
INSURANCE PROCEEDS: Proceeds paid by any insurer (other than the Credit
Enhancer) pursuant to any insurance policy covering a Mortgage Loan which are
required to be remitted to the Master Servicer, or amounts required to be paid
by the Master Servicer pursuant to the next to last sentence of Section 3.04 of
the Servicing Agreement, net of any component
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thereof (i) covering any expenses incurred by or on behalf of the Master
Servicer in connection with obtaining such proceeds, (ii) that is applied to the
restoration or repair of the related Mortgaged Property, (iii) released to the
Mortgagor in accordance with the Master Servicer's normal servicing procedures
or (iv) required to be paid to any holder of a mortgage senior to such Mortgage
Loan.
INTEREST COLLECTIONS: With respect to any Payment Date, the sum of all
payments by or on behalf of Mortgagors and any other amounts constituting
interest (including without limitation such portion of Insurance Proceeds, Net
Liquidation Proceeds and Repurchase Prices as is allocable to interest on the
applicable Mortgage Loan) as is paid by the Seller or the Master Servicer or is
collected by the Servicer under the Mortgage Loans, reduced by the Servicing
Fees for the related Collection Period and by any fees (including annual fees)
or late charges or similar administrative fees paid by Mortgagors during the
related Collection Period. The terms of the related Mortgage Note shall
determine the portion of each payment in respect of such Mortgage Loan that
constitutes principal or interest.
INTEREST PERIOD: With respect to any Payment Date other than the first
Payment Date, the period beginning on the preceding Payment Date and ending on
the day preceding such Payment Date, and in the case of the first Payment Date,
the period beginning on the Closing Date and ending on the day preceding the
first Payment Date.
INTEREST RATE ADJUSTMENT DATE: With respect to each Mortgage Loan, the
date or dates on which the Mortgage Rate is adjusted in accordance with the
related Mortgage Note.
ISSUER: The Imperial CMB Trust Series 199_-_, a Delaware business
trust, or its successor in interest.
ISSUER REQUEST: A written order or request signed in the name of the
Issuer by any one of its Authorized Officers and delivered to the Indenture
Trustee.
LIBOR: For any Interest Period other than the first Interest Period,
the rate for United States dollar deposits for one month which appears on the
Telerate Screen Page 3750 as of 11:00 A.M., London time, on the second LIBOR
Business Day prior to the first day of such Interest Period. With respect to the
first Interest Period, the rate for United States dollar deposits for one month
which appears on the Telerate Screen Page 3750 as of 11:00 A.M., [Chicago,
Illinois] time, two LIBOR Business Days prior to the Closing Date. If such rate
does not appear on such page (or such other page as may replace that page on
that service, or if such service is no longer offered, such other service for
displaying LIBOR or comparable rates as may be reasonably selected by the
Indenture Trustee after consultation with the Master Servicer), the rate will be
the Reference Bank Rate. If no such quotations can be obtained and no Reference
Bank Rate is available, LIBOR will be LIBOR applicable to the preceding Payment
Date.
LIBOR BUSINESS DAY: Any day other than (i) a Saturday or a Sunday or
(ii) a day on which banking institutions in the State of New York, Delaware or
California, or in the city of London, England are required or authorized by law
to be closed.
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LIEN: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC (other than
any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing; PROVIDED,
HOWEVER, that any assignment pursuant to Section 6.02 of the Servicing Agreement
shall not be deemed to constitute a Lien.
LIFETIME RATE CAP: With respect to each Mortgage Loan with respect to
which the related Mortgage Note provides for a lifetime rate cap, the maximum
Mortgage Rate permitted over the life of such Mortgage Loan under the terms of
such Mortgage Note, as set forth on the Mortgage Loan Schedule and initially as
set forth on Exhibit A to the Servicing Agreement.
LIQUIDATED MORTGAGE LOAN: With respect to any Payment Date, any
Mortgage Loan in respect of which the Master Servicer has determined, in
accordance with the servicing procedures specified in the Servicing Agreement,
as of the end of the related Collection Period that substantially all
Liquidation Proceeds which it reasonably expects to recover with respect to the
disposition of the related REO have been recovered.
LIQUIDATION EXPENSES: Out-of-pocket expenses (exclusive of overhead)
which are incurred by or on behalf of the Master Servicer in connection with the
liquidation of any Mortgage Loan and not recovered under any insurance policy,
such expenses including, without limitation, legal fees and expenses, any
unreimbursed amount expended (including, without limitation, amounts advanced to
correct defaults on any mortgage loan which is senior to such Mortgage Loan and
amounts advanced to keep current or pay off a mortgage loan that is senior to
such Mortgage Loan) respecting the related Mortgage Loan and any related and
unreimbursed expenditures for real estate property taxes or for property
restoration, preservation or insurance against casualty loss or damage.
LIQUIDATION LOSS AMOUNTS: With respect to any Payment Date and any
Mortgage Loan that became a Liquidated Mortgage Loan during the related
Collection Period, the unrecovered portion of the related Principal Balance
thereof at the end of such Collection Period, after giving effect to the Net
Liquidation Proceeds applied in reduction of the Principal Balance.
LIQUIDATION PROCEEDS: Proceeds (including Insurance Proceeds but not
including amounts drawn under the Credit Enhancement Instrument) received in
connection with the liquidation of any Mortgage Loan or related REO, whether
through trustee's sale, foreclosure sale or otherwise.
MORTGAGE NOTE: With respect to any Mortgage Loan, the credit line
account agreement executed by the related Mortgagor and any amendment or
modification thereof.
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LOAN YEAR: With respect to any Mortgage Loan, the one year period
commencing on the day succeeding the origination of such Mortgage Loan and
ending on the anniversary date of such Mortgage Loan, and each annual period
thereafter.
LOST BOND AFFIDAVIT: With respect to any Mortgage Loan as to which the
original Mortgage Note has been permanently lost or destroyed and has not been
replaced, an affidavit from the Seller or the related Underlying Seller
certifying that the original Mortgage Note has been lost, misplaced or destroyed
(together with a copy of the related Mortgage Note).
MASTER SERVICER: [Name of Master Servicer], a ______ corporation, and
its successors and assigns.
MASTER SERVICING FEE: With respect to any _________ Loan or ________
Loan and any Collection Period, the product of (i) the Master Servicing Fee Rate
divided by 12 and (ii) the aggregate Principal Balance of the _________ Loans or
________ Loans, as applicable, as of the first day of such Collection Period,
and with respect to any ______ Loan and any Collection Period, the product of
(i) the Master Servicing Fee Rate divided by 12 and (ii) the aggregate Principal
Balance of the ______ Loans as of the first day of such Collection Period.
MASTER SERVICING FEE RATE: With respect to any ____ Line Loan or any
_____________, ____% per annum. With respect to any ______ Loan, _____% per
annum.
MAXIMUM POOL BALANCE: As to any Payment Date the highest Pool Balance
at the end of any Collection Period from the Closing Date up to and including
the related Collection Period.
MAXIMUM RATE: With respect to any Interest Period, the Weighted Average
Net Mortgage Rate related to the Due Date in the month preceding the month in
which such Interest Period ends (adjusted to an effective rate reflecting
accrued interest calculated on the basis of the actual number of days in the
Collection Period commencing in the month in which such Interest Period
commences and a year assumed to consist of 360 days).
MINIMUM MONTHLY PAYMENT: With respect to any Mortgage Loan and any
month, the minimum amount required to be paid by the related Mortgagor in that
month.
MONTHLY PAYMENT: With respect to any Mortgage Loan, the scheduled
monthly payment of principal and interest on such Mortgage Loan which is payable
by a Mortgagor from time to time under the related Mortgage Note as originally
executed (after adjustment, if any, for Principal Prepayments occurring prior to
such Due Date, and after any adjustment by reason of any bankruptcy or similar
proceeding or any moratorium or similar waiver or grace period).
MOODY'S: Moody's Investors Service, Inc. or its successor in interest.
MORTGAGE: The mortgage, deed of trust or other instrument creating a
first or second lien on an estate in fee simple interest in real property
securing a Mortgage Loan.
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MORTGAGE FILE: The file containing the Related Documents pertaining to
a particular Mortgage Loan and any additional documents required to be added to
the Mortgage File pursuant to the Mortgage Loan Purchase Agreement or the
Servicing Agreement.
MORTGAGE LOAN GROUP: Any of the _________ Loans, ________ Loans or the
______ Loans.
MORTGAGE LOAN PURCHASE AGREEMENT: The Mortgage Loan Purchase Agreement,
dated as of the Cut-Off Date, between the Seller, as seller, and the Depositor,
as purchaser, with respect to the Mortgage Loans, dated as of _______________.
MORTGAGE LOAN SCHEDULE: With respect to any date, the schedule of
Mortgage Loans held by the Issuer on such date. The initial schedule of Mortgage
Loans as of the Cut-Off Date is the schedule set forth in Exhibit A of the
Servicing Agreement, which schedule sets forth as to each Mortgage Loan
(i) the loan number and name of the Mortgagor;
(ii) the street address, city, state and zip code of the
Mortgaged Property;
(iii) the Mortgage Rate;
(iv) the maturity date;
(v) the original principal balance;
(vi) the first payment date;
(vii) the type of Mortgaged Property;
(viii) the Monthly Payment in effect as of the Cut-off Date;
(ix) the principal balance as of the Cut-off Date;
(x) the occupancy status;
(xi) the purpose of the Mortgage Loan;
(xii) the Appraised Value of the Mortgaged Property;
(xiii) the original term to maturity;
(xiv) the paid-through date of the Mortgage Loan;
(xv) the Loan-to-Value Ratio; and
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(xvi) whether or not the Mortgage Loan was underwritten pursuant
to a limited documentation program.
The Mortgage Loan Schedule shall also set forth the total of the
amounts described under (ix) above for all of the Mortgage Loans. The Mortgage
Loan Schedule will be amended from time to time by annex to reflect Additional
Loans.
MORTGAGE LOANS: At any time, collectively, all Initial Loans and
Additional Loans, that have been sold to the Depositor under the Mortgage Loan
Purchase Agreement, in each case together with the Related Documents, and that
remain subject to the terms thereof.
MORTGAGE NOTE: The note or other evidence of the indebtedness of a
Mortgagor under a Mortgage Loan.
MORTGAGE RATE: With respect to any Mortgage Loan, the annual rate at
which interest accrues on such Mortgage Loan.
MORTGAGE RATE CAP: With respect to each Mortgage Loan, the lesser of
(i) the Lifetime Rate Cap, if any, or (ii) the applicable state usury ceiling,
if any.
MORTGAGED PROPERTY: The underlying property, including real property
and improvements thereon, securing a Mortgage Loan.
MORTGAGOR: The obligor or obligors under a Mortgage Note.
NET LIQUIDATION PROCEEDS: With respect to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses.
NET MORTGAGE RATE: With respect to any _________ Loan and any ________
Loan and any day, the related Mortgage Rate less the related Servicing Fee Rate.
[With respect to any ______ Loan and any day, the Prime Rate then applicable to
the Mortgage Rate plus 1.00%, less the related Master Servicing Fee Rate.]
NET PRINCIPAL COLLECTIONS: With respect to any Distribution Date, the
excess, if any, of Security Principal Collections for the related Collection
Period created during the related Collection Period.
OFFICER'S CERTIFICATE: With respect to the Master Servicer, a
certificate signed by the President, Managing Director, a Director, a Vice
President or an Assistant Vice President, of the Master Servicer and delivered
to the Indenture Trustee. With respect to the Issuer, a certificate signed by
any Authorized Officer of the Issuer, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section [10.01] of the
Indenture, and delivered to the Indenture Trustee. Unless otherwise specified,
any reference in the Indenture to an Officer's Certificate shall be to an
Officer's Certificate of any Authorized Officer of the Issuer.
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OPINION OF COUNSEL: A written opinion of counsel who may be in-house
counsel for the Master Servicer if acceptable to the Indenture Trustee, the
Credit Enhancer and the Rating Agencies or counsel for the Depositor, as the
case may be.
OUTSTANDING: With respect to the Bonds, as of the date of
determination, all Bonds theretofore executed, authenticated and delivered under
this Indenture except:
(i) Bonds theretofore cancelled by the Bond Registrar or
delivered to the Indenture Trustee for cancellation; and
(ii) Bonds in exchange for or in lieu of which other Bonds
have been executed, authenticated and delivered pursuant to the
Indenture unless proof satisfactory to the Indenture Trustee is
presented that any such Bonds are held by a holder in due course;
PROVIDED, HOWEVER, that for purposes of effectuating the Credit Enhancer's right
of subrogation as set forth in Section 4.12 of the Indenture only, all Bonds
that have been paid with funds provided under the Credit Enhancement Instrument
shall be deemed to be Outstanding until the Credit Enhancer has been reimbursed
with respect thereto.
OUTSTANDING RESERVE AMOUNT: With respect to any Payment Date,
the amount by which the sum of (x) the Pool Balance as of the last day of the
related Collection Period and (y) the amount on deposit in the Funding Account
in respect of Net Principal Collections, on such Payment Date exceeds the
Aggregate Security Balance on such Payment Date (after giving effect to all
amounts distributed and allocable to principal on the Securities and deposits to
and withdrawals from the Funding Account that are applied to reduce the Security
Balances on such Payment Date).
OWNER TRUST : The Imperial CMB Trust Series 199_-__ to be created
pursuant to the Trust Agreement.
OWNER TRUST ESTATE: The corpus of the Issuer created by the Trust
Agreement which consists of [the Mortgage Loans.]
OWNER TRUSTEE: ______________________, and its successors and assigns
or any successor owner trustee appointed pursuant to the terms of the Trust
Agreement.
PAYING AGENT: Any paying agent or co-paying agent appointed pursuant to
Section 3.03 of the Indenture, which initially shall be
__________________________________.
PAYMENT ACCOUNT: The account established by the Indenture Trustee
pursuant to Section 8.02 of the Indenture and Section 5.01 of the Servicing
Agreement. The Payment Account shall be an Eligible Account.
PAYMENT DATE: The [25th] day of each month, or if such day is not a
Business Day, then the next Business Day.
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PERCENTAGE INTEREST: With respect to any Bond, the percentage obtained
by dividing the Security Balance of such Bond by the aggregate of the Security
Balances of all Bonds of the same Class. With respect to any Certificate, the
percentage obtained by dividing the denomination specified on such Certificate
by the Initial Principal Balance of the Certificates.
PERSON: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
POOL BALANCE: With respect to any date, the aggregate of the Principal
Balances of all Mortgage Loans as of such date.
PREDECESSOR BOND: With respect to any particular Bond, every previous
Bond evidencing all or a portion of the same debt as that evidenced by such
particular Bond; and, for the purpose of this definition, any Bond authenticated
and delivered under Section 4.03 of the Indenture in lieu of a mutilated, lost,
destroyed or stolen Bond shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Bond.
PRIMARY INSURANCE POLICY: Each primary policy of mortgage guaranty
insurance issued by a Qualified Insurer or any replacement policy therefor.
PRIME RATE: The prime rate for corporate loans at U.S. commercial
banks, as published in THE WALL STREET JOURNAL.
PRINCIPAL BALANCE: With respect to any Mortgage Loan, other than a
Liquidated Mortgage Loan, and as of any day, the related Cut-Off Date Principal
Balance or Deposit Date Principal Balance, MINUS all collections credited as
principal in respect of any such Mortgage Loan in accordance with the related
Mortgage Note (except for any such collections that are allocable to the
Excluded Amount) and applied in reduction of the Principal Balance thereof. For
purposes of this definition, a Liquidated Mortgage Loan shall be deemed to have
an Principal Balance equal to the Principal Balance of the related Mortgage Loan
immediately prior to the final recovery of all related Liquidation Proceeds and
an Principal Balance of zero thereafter.
PRINCIPAL COLLECTION DISTRIBUTION AMOUNT: For any Payment Date, (i) at
any time during the Revolving Period, so long as an Amortization Event has not
occurred, Net Principal Collections and (ii) following an Amortization Event or
at any time after the end of the Revolving Period, Security Principal
Collections; PROVIDED, HOWEVER, on any Payment Date with respect to which the
Outstanding Reserve Amount that would result if determined without regard to
this proviso exceeds the Reserve Amount Target the Principal Collection
Distribution Amount will be reduced by the amount of such excess until the
Outstanding Reserve Amount equals the Reserve Amount Target.
PRINCIPAL COLLECTIONS: With respect to any Payment Date and any
Mortgage Loan, the aggregate of the following amounts:
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(i) the total amount of payments made by or on behalf of the
Mortgagor during the related Due Period, received and applied as
payments of principal on the Mortgage Loan during the related
Collection Period, as reported by the Servicer or the related
Subservicer;
(ii) any Net Liquidation Proceeds, allocable as a recovery of
principal, received in connection with the Mortgage Loan during the
related Collection Period;
(iii) if the Mortgage Loan was purchased by the Master
Servicer pursuant to Section 3.14 of the Servicing Agreement, or was
repurchased by the Seller pursuant to the Mortgage Loan Purchase
Agreement, during the related Collection Period, 100% of the Principal
Balance of the Mortgage Loan as of the date of such purchase or
repurchase; and
(iv) any other amounts received as payments on or proceeds of
the Mortgage Loan during the Collection Period to the extent applied in
reduction of the principal amount thereof;
PROVIDED that Principal Collections shall not include any Foreclosure Profits,
and shall be reduced by any amounts withdrawn from the Collection Account
pursuant to clauses (iii), (iv), (vii) and (viii) of Section 3.03 of the
Servicing Agreement other than any portion of such amounts that are attributable
to the Excluded Amount in respect of any Mortgage Loan that are allocable to
principal of such Mortgage Loan and not otherwise excluded from the amounts
specified in (i) - (iii) above.
PRINCIPAL PREPAYMENT: Any payment of principal made by the Mortgagor on
a Mortgage Loan which is received in advance of its scheduled Due Date and which
is not accompanied by an amount of interest representing scheduled interest due
on any date or dates in any month or months subsequent to the month of
prepayment.
PROCEEDING: Any suit in equity, action at law or other judicial or
administrative proceeding.
PURCHASE PRICE: The meaning specified in Section 2.2(a) of the Mortgage
Loan Purchase Agreement.
PURCHASER: IMH Assets Corp., a California corporation, and its
successors and assigns.
QUALIFIED INSURER: A mortgage guaranty insurance company duly qualified
as such under the laws of the state of its principal place of business and each
state having jurisdiction over such insurer in connection with the insurance
policy issued by such insurer, duly authorized and licensed in such states to
transact a mortgage guaranty insurance business in such states and to write the
insurance provided by the insurance policy issued by it, approved as an insurer
by the Master Servicer and as a FNMA-approved mortgage insurer.
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RATING AGENCY: Any nationally recognized statistical rating
organization, or its successor, that rated the Securities at the request of the
Depositor at the time of the initial issuance of the Securities. Initially,
Moody's or Standard & Poor's. If such organization or a successor is no longer
in existence, "Rating Agency" shall be such nationally recognized statistical
rating organization, or other comparable Person, designated by the Depositor,
notice of which designation shall be given to the Indenture Trustee. References
herein to the highest short term unsecured rating category of a Rating Agency
shall mean A-1 or better in the case of Standard & Poor's and P-1 or better in
the case of Moody's and in the case of any other Rating Agency shall mean such
equivalent ratings. References herein to the highest long-term rating category
of a Rating Agency shall mean "AAA" in the case of Standard & Poor's and "Aaa"
in the case of Moody's and in the case of any other Rating Agency, such
equivalent rating.
REALIZED LOSSES: Any losses incurred on defaulted Mortgage Loans that
have been finally liquidated.
RECORD DATE: With respect to the Bonds and any Payment Date, the
Business Day next preceding such Payment Date and with respect to the
Certificates and any Payment Date, the last Business Day of the month preceding
the month of such Payment Date.
REFERENCE BANK RATE: With respect to any Interest Period, as follows:
the arithmetic mean (rounded upwards, if necessary, to the nearest one sixteenth
of a percent) of the offered rates for United States dollar deposits for one
month which are offered by the Reference Banks as of 11:00 A.M., _______,
________ time, on the second LIBOR Business Day prior to the first day of such
Interest Period to prime banks in the London interbank market for a period of
one month in amounts approximately equal to the sum of the Outstanding Amount of
Bonds and the Certificate Principal Balance; PROVIDED that at least two such
Reference Banks provide such rate. If fewer than two offered rates appear, the
Reference Bank Rate will be the arithmetic mean of the rates quoted by one or
more major banks in New York City, selected by the Depositor after consultation
with the Indenture Trustee, as of 11:00 a.m., _______, [Illinois] time, on such
date for loans in U.S. Dollars to leading European Banks for a period of one
month in amounts approximately equal to the Aggregate Security Balance. If no
such quotations can be obtained, the Reference Bank Rate shall be the Reference
Bank Rate applicable to the preceding Interest Period.
REFERENCE BANKS: [Bank of Tokyo, Barclays Bank PLC, National
Westminster Bank and Bankers Trust Company].
REGISTERED HOLDER: The Person in whose name a Bond is registered in the
Bond Register on the applicable Record Date.
RELATED DOCUMENTS: With respect to each Mortgage Loan, the documents
specified in Section 2.1(c) of the Mortgage Loan Purchase Agreement and any
documents required to be added to such documents pursuant to the Mortgage Loan
Purchase Agreement, the Trust Agreement or the Servicing Agreement.
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REO: A Mortgaged Property that is acquired by the Issuer in foreclosure
or by deed in lieu of foreclosure.
REPURCHASE EVENT: With respect to any Mortgage Loan, either (i) a
discovery that, as of the Closing Date with respect to an Initial Loan, or as of
the related Deposit Date with respect to an Additional Loan, as applicable, the
related Mortgage was not a valid lien on the related Mortgaged Property subject
only to (A) the lien of any prior mortgage indicated on the Mortgage Loan
Schedule, (B) the lien of real property taxes and assessments not yet due and
payable, (C) covenants, conditions, and restrictions, rights of way, easements
and other matters of public record as of the date of recording of such Mortgage
and such other permissible title exceptions as are permitted and (D) other
matters to which like properties are commonly subject which do not materially
adversely affect the value, use, enjoyment or marketability of the related
Mortgaged Property or (ii) with respect to any Mortgage Loan as to which the
Seller delivers an affidavit certifying that the original Mortgage Note has been
lost or destroyed, a subsequent default on such Mortgage Loan if the enforcement
thereof or of the related Mortgage is materially and adversely affected by the
absence of such original Mortgage Note.
REPURCHASE PRICE: With respect to any Mortgage Loan required to be
repurchased on any date pursuant to the Mortgage Loan Purchase Agreement or
purchased by the Master Servicer pursuant to the Servicing Agreement, an amount
equal to the sum of (i) 100% of the Principal Balance thereof (without reduction
for any amounts charged off) and (ii) unpaid accrued interest at the Mortgage
Rate on the outstanding principal balance thereof from the Due Date to which
interest was last paid by the Mortgagor to the first day of the month following
the month of purchase. No portion of any Repurchase Price shall be included in
the Excluded Amount for any Payment Date.
REVOLVING PERIOD: The period commencing on the Closing Date and ending
on ___________________.
RESERVE AMOUNT TARGET: As to any Payment Date prior to the Payment Date
in _____________, 1.5% of the greater of (i) the Pool Balance as of the Cut-Off
Date and (ii) the Maximum Pool Balance as of the end of the Related Collection
Period (the "Initial Reserve Amount Target"). As to any Payment Date on or after
the Payment Date in __________, the greater of (A) the lesser of (x) the Initial
Reserve Amount Target and (y) [3]% of the Pool Balance as of the end of the
related Collection Period and (B) [0.75]% of the greater of (i) the Pool Balance
as of the Cut-Off Date and (ii) the Maximum Pool Balance; provided, any
scheduled reduction to the Reserve Amount Target described above shall not be
made as of any Payment Date unless (i) the outstanding Principal Balance of the
Mortgage Loans delinquent 60 days or more averaged over the last 12 months as a
percentage of the aggregate outstanding Principal Balance of all Mortgage Loans
averaged over the last 12 months does not exceed [2]% (or if the Pool Balance is
less than [40%] of the Maximum Pool Balance, [4]%) and (ii) aggregate Liquidated
Loss Amounts on the Mortgage Loans to date for such Payment Date occurring
during the first two years after the Closing Date or occurring during the 3rd,
4th, 5th, or 6th (or any year thereafter) after the Closing Date, are less than
[.5], [1.0], [1.5], [2.0] or [2.5]% respectively, of the Maximum Pool Balance
and (iii) there has been no draw on the
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Credit Enhancement Instrument. The Reserve Amount Target may be reduced with the
prior written consent of the Credit Enhancer and the Rating Agencies.
RESPONSIBLE OFFICER: With respect to the Indenture Trustee, any officer
of the Indenture Trustee with direct responsibility for the administration of
the Trust Agreement and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
SCHEDULE ANNEX: With respect to any Additional Loans, the schedule
provided by the Seller to the Depositor or its assignee pursuant to Section 2.3
of the Mortgage Loan Purchase Agreement, which shall include all items of
information of the type shown on, and shall be deemed to be incorporated in, the
Mortgage Loan Schedule.
SECURITIES ACT: The Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
SECURITY: Any of the Certificates or Bonds.
SECURITY BALANCE: The Principal Balance of the Bonds or the
Certificates, as the case may be.
SECURITY COLLECTIONS: With respect to any Payment Date, the sum of the
following amounts:
(i) the aggregate of all Security Interest Collections
received during the related Collection Period [plus net investment
earnings or amounts on deposit in the Funding Account];
(ii) Net Principal Collections for such Payment Date; and
(iii) all Substitution Adjustment Amounts to be deposited to
the Payment Account for such Payment Date.
SECURITYHOLDER or HOLDER: Any Bondholder or a Certificateholder.
SECURITY INTEREST COLLECTIONS: With respect to any Payment Date,
Interest Collections during the related Collection Period excluding the portion
thereof allocable to the Excluded Amount.
SECURITY PERCENTAGE: With respect to any Payment Date and Security, the
percentage equivalent of a fraction the numerator of which is the Security
Balance of such Security immediately prior to such Payment Date and the
denominator of which is the aggregate of the Security Balances of all Securities
as of such date.
25
<PAGE>
SECURITY PRINCIPAL COLLECTIONS: With respect to any Payment Date,
Principal Collections during the related Collection Period excluding the portion
thereof allocable to the Excluded Amount.
SELLER: [Name of Seller], a _______ corporation, and its successors and
assigns.
SELLER'S AGREEMENT: With respect to each _________ Loan, the agreement
between the Seller, as purchaser, and the related Seller, as seller.
SERVICING AGREEMENT: The Servicing Agreement dated as of
_______________ between __________________________________, as Indenture
Trustee, and the Master Servicer, as master servicer.
SERVICING CERTIFICATE: A certificate completed and executed by a
Servicing Officer on behalf of the Master Servicer in accordance with Section
4.01 of the Servicing Agreement.
SERVICING FEE: With respect to any Mortgage Loan, the sum of the
related Master Servicing Fee and the related Subservicing Fee.
SERVICING FEE RATE: With respect to any Mortgage Loan, the sum of the
related Master Servicing Fee Rate and the related Subservicing Fee Rate.
SERVICING OFFICER: Any officer of the Master Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished to
the Indenture Trustee (with a copy to the Credit Enhancer) by the Master
Servicer, as such list may be amended from time to time.
SINGLE CERTIFICATE: A Certificate in the denomination of $1,000.
SINGLE BOND: A Bond in the amount of $1,000.
STANDARD & POOR'S: Standard & Poor's Ratings Group or its successor in
interest.
SUBSERVICER: Any Person with whom the Master Servicer has entered into
a Subservicing Agreement as a Subservicer by the Master Servicer, including the
Initial Subservicers.
SUBSERVICING ACCOUNT: An Eligible Account established or maintained by
a Sub- servicer as provided for in Section 3.02(c) of the Servicing Agreement.
SUBSERVICING AGREEMENT: The written contract between the Master
Servicer and any Subservicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.01 of the Servicing Agreement.
SUBSERVICING FEE: With respect to any _________ Loan and any Collection
Period, the fee retained monthly by the Subservicer (or, in the case of a
nonsubserviced
26
<PAGE>
Mortgage Loan, by the Master Servicer) equal to the product of (i) the
Subservicing Fee Rate divided by 12 and (ii) the aggregate Principal Balance of
the _________ Loans as of the first day of such Collection Period. With respect
to any ________ Loan and any Collection Period, the fee retained monthly by the
Subservicer (or, in the case of a nonsubserviced Mortgage Loan, by the Master
Servicer) equal to the product of (i) the Subservicing Fee Rate divided by 12
and (ii) the aggregate Principal Balance of the ________ Loans as of the first
day of such Collection Period. With respect to any ______ Loan and any
Collection Period, the fee retained monthly by the Subservicer (or, in the case
of a nonsubserviced Mortgage Loan, by the Master Servicer) equal to (i) the
weighted average of the applicable Subservicing Fee Rates divided by 12 and (ii)
the aggregate Principal Balance of the ______ Loans as of the first day of such
Collection Period.
SUBSERVICING FEE RATE: With respect to ___________ Loan, 0.50% per
annum.
SUBSTITUTION ADJUSTMENT AMOUNTS: With respect to any Eligible
Substitute Mortgage Loan, the amount as defined in Section 3.1(b) of the
Mortgage Loan Purchase Agreement.
TEASER LOAN: With respect to the Additional Loans, any Mortgage Loan
which provides for an initial period during which the Mortgage Rate is less than
the sum of the current Index plus the applicable Gross Margin.
TELERATE SCREEN PAGE 3750: The display designated as page 3750 on the
Telerate Service (or such other page as may replace page 3750 on that service
for the purpose of displaying London interbank offered rates of major banks). If
such rate does not appear on such page (or such other page as may replace that
page on that service, or if such service is no longer offered, such other
service for displaying LIBOR or comparable rates as may be selected by the
Issuer after consultation with the Indenture Trustee), the rate will be the
Reference Bank Rate.
TREASURY REGULATIONS: Regulations, including proposed or temporary
Regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
TRUST AGREEMENT: The Trust Agreement dated as of ________________
between the Owner Trustee and the Depositor.
TRUST ESTATE: The meaning specified in the Granting Clause of the
Indenture.
TRUST INDENTURE ACT OR TIA: The Trust Indenture Act of 1939, as amended
from time to time, as in effect on any relevant date.
UCC: The Uniform Commercial Code, as amended from time to time, as in
effect in any specified jurisdiction.
27
<PAGE>
UNDERLYING SELLER: With respect to the ________ Loans, ________. With
respect to the ______ Loans, ____.
UNPAID CERTIFICATE DISTRIBUTION AMOUNT SHORTFALL: With respect to any
Payment Date, the aggregate amount, if any, of Certificate Distribution Amount
that was accrued in respect of a prior Payment Date and has not been distributed
to Certificateholders.
WEIGHTED AVERAGE NET MORTGAGE RATE: With respect to the Mortgage Loans
in the aggregate, and any Due Date, the average of the Net Mortgage Rate for
each Mortgage Loan as of the last day of the related Due Period weighted on the
basis of the related Principal Balances outstanding as of the last day of the
related Due Period for each Mortgage Loan as determined by the Master Servicer
in accordance with the Master Servicer's normal servicing procedures.
28
EXHIBIT 5.1, 8.1 AND 23.1
June 21, 1996
IMH Assets Corp.
20371 Irvine Avenue, Suite 200
Santa Ana Heights, California 92707
Re: IMH Assets Corp.
Collateralized Mortgage Bonds
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have acted as special counsel to IMH Assets Corp., a
California corporation (the "Registrant") in connection with the registration
under the Securities Act of 1933, as amended (the "Act"), of Collateralized
Mortgage Bonds (the "Bonds"), and the related preparation and filing of a
Registration Statement on Form S-3 (the "Registration Statement"). The Bonds are
issuable in series under separate indentures (each such agreement, an
"Indenture"), between an issuer and an indenture trustee, each to be identified
in the prospectus supplement for such series of Bonds. Each Indenture will be
substantially in the respective form filed as an Exhibit to the Registration
Statement.
In connection with rendering this opinion letter, we have
examined the form of the Indenture contained as an Exhibit in the Registration
Statement, the Registration Statement and such records and other documents as we
have deemed necessary. As to matters of fact, we have examined and relied upon
representations or certifications of officers of the Registrant or public
officials. We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of natural
persons and the conformity to the
<PAGE>
IMH Assets Corp.
June 21, 1996 Page 2.
originals of all documents. We have assumed that all parties, other than the
Registrant, had the corporate power and authority to enter into and perform all
obligations thereunder, and, as to such parties, we also have assumed the due
authorization by all requisite corporate action and the enforceability of such
documents.
In rendering this opinion letter, we express no opinion as to
the laws of any jurisdiction other than the laws of the State of New York and
the corporate laws of the State of Delaware, nor do we express any opinion,
either implicitly or otherwise, on any issue not expressly addressed below. In
rendering this opinion letter, we have not passed upon and do not pass upon the
application of "doing business" or the securities laws of any jurisdiction. This
opinion letter is further subject to the qualification that enforceability may
be limited by (i) bankruptcy, insolvency, liquidation, receivership, moratorium,
reorganization or other laws affecting the enforcement of the rights of
creditors generally and (ii) general principles of equity, whether enforcement
is sought in a proceeding in equity or at law.
Based on the foregoing, we are of the opinion that:
1. When an Indenture for a series of Bonds has been duly
authorized by all necessary action and duly executed and delivered by the
parties thereto, such Indenture will be a legal and valid obligation of the
applicable issuer.
2. When an Indenture for a series of Bonds has been duly
authorized by all necessary action and duly executed and delivered by the
parties thereto, and when the Bonds of such series have been duly executed and
authenticated in accordance with the provisions of that Indenture, and issued
and sold as contemplated in the Registration Statement and the prospectus and
prospectus supplement delivered in connection therewith, such Bonds will be
legally and validly issued and outstanding, fully paid and non-assessable, and
will be binding obligations of the applicable issuer, and the holders of such
Bonds will be entitled to the benefits of that Indenture.
3. The description of federal income tax consequences
appearing under the heading "Certain Federal Income Tax Consequences" in the
prospectus relating to the Bonds contained in the Registration Statement, while
not purporting to discuss all possible federal income tax consequences of an
investment in the Bonds, is accurate with respect to those tax consequences
which are discussed.
We hereby consent to the filing of this opinion letter as an
Exhibit to the Registration Statement, and to the use of our name in the
prospectus and prospectus supplement relating to the Bonds included in the
Registration Statement under the heading "Legal Matters", and in the prospectus
relating to the Bonds included in the Registration Statement under the heading
"Certain Federal Income Tax Consequences", without admitting that we are
"experts"
<PAGE>
IMH Assets Corp.
June 21, 1996 Page 3.
within the meaning of the Act, and the rules and
regulations thereunder, with respect to any part of the Registration Statement,
including this Exhibit.
Very truly yours,
THACHER PROFFITT & WOOD
By /s/ Thacher Proffitt & Wood
---------------------------
Thacher Proffitt & Wood
EXHIBIT 24.1
IMH ASSETS CORP.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints any of William Ashmore, Richard Johnson
or Lee Bromiley as his true and lawful attorney-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities (including his capacity as director and/or
officer of IMH Assets Corp.), to sign any or all amendments (including
post-effective amendments) to the Registration Statement on Form S-3, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming that said attorney-in-fact and agent, or
his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
SIGNATURE TITLE DATE
/s/ William Ashmore
- -----------------------
William Ashmore Director and Chief June 21, 1996
Executive Officer
(Principal Executive
Officer)
/s/ Richard Johnson
- -----------------------
Richard Johnson Director, Chief June 21, 1996
Financial Officer and
Secretary (Principal
Financial and Principal
Accounting Officer)
/s/ Lee Bromiley
- -----------------------
Lee Bromiley Director June 21, 1996
